American Reprographics Company (ARC or the Company) is the leading reprographics company in the United States providing business-to-business document management services to the architectural, engineering and construction industry, or AEC industry. ARC also provides these services to companies in non-AEC industries, such as aerospace, technology, financial services, retail, entertainment, and food and hospitality that require sophisticated document management services. The Company conducts its operations through its wholly-owned operating subsidiary, American Reprographics Company, L.L.C., a California limited liability company (Opco), and its subsidiaries.

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and in conformity with the requirements of the Securities and Exchange Commission. As permitted under those rules, certain footnotes or other financial information required by GAAP for complete financial statements have been condensed or omitted. In management’s opinion, the interim consolidated financial statements presented herein reflect all adjustments of a normal and recurring nature that are necessary to fairly present the interim consolidated financial statements. All material intercompany accounts and transactions have been eliminated in consolidation. The operating results for the three and six months ended March 31,June 30, 2008, are not necessarily indicative of the results that may be expected for the year ending December 31, 2008.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We evaluate ourThe Company evaluates its estimates and assumptions on an ongoing basis and relyrelies on historical experience and various other factors that we believeit believes to be reasonable under the circumstances to determine such estimates. Actual results could differ from those estimates and such differences may be material to the consolidated financial statements.

These interim consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes included in the Company’s 2007 Annual Report on Form 10-K. The accounting policies used in preparing these interim consolidated financial statements are the same as those described in our 2007 Annual Report on Form 10-K, except for the adoption of SFAS 157, which is further described in Note 7, “Fair Value Measurements” and SFAS 159, which is further described in Note 12, “Recent Accounting Pronouncements”.

The Company reclassified certain amounts in the prior year financial statements to conform to the current presentation. These reclassifications had no effect on the Consolidated Statement of Income, as previously reported. The Company reclassified $1,135, the long-term portion of the interest rate swap liability at December 31, 2007, from accrued expenses to other long-term liabilities, to conform to the current presentation. ThisThe reclassification had no effect on the Consolidated Statementcash flow statement consisted of Incomeidentifying net borrowings (repayments) under the revolving credit facility separately from borrowings and Consolidated Statement of Cash Flows, as previously reported.repayments under long-term debt agreements, and identifying the allowance for doubtful accounts separately from other non-cash items.

The American Reprographics Company 2005 Stock Plan (the “Stock Plan”) provides for the grant of incentive and non-statutory stock options, stock appreciation rights, restricted stock purchase awards, restricted stock awards, and restricted stock units to employees, directors and consultants of the Company. The Stock Plan authorizes the Company to issue up to 5,000,000 shares of common stock. The maximum amount of authorized shares under the Stock Plan will automatically increase annually on the first day of the Company’s fiscal year, from 2006 through and including 2010, by the lesser of (i) 1.0% of the Company’s outstanding shares on the date of the increase; (ii) 300,000 shares; or (iii) such smaller number of shares determined by the Company’s board of directors. At March 31,June 30, 2008, 2,925,8932,538,393 shares remain available for grant under the Stock Plan.

The impact of the stock based compensation to the Consolidated Statements of Income for the three months ended March 31,June 30, 2008 and 2007, before income taxes was $0.9$1.1 million and $0.6$1.0 million, respectively.

The impact of the stock based compensation to the Consolidated Statements of Income for the six months ended June 30, 2008 and 2007, before income taxes was $2.0 million and $1.6 million, respectively.

As of March 31,June 30, 2008, total unrecognized compensation cost related to unvested shares-based payments totaled $11.3$13.3 million and is expected to be recognized over a weighted-average period of 3.03.4 years.

In connection with its acquisitions, the Company has applied the provisions of SFAS No. 141Business Combinations, using the purchase method of accounting. The assets and liabilities assumed were recorded at their estimated fair values. The excess purchase price over the fair value of net tangible assets and identifiable intangible assets acquired was recorded as goodwill.

The changes in the carrying amount of goodwill from December 31, 2007 through March 31,June 30, 2008, are summarized as follows:

Long-term debt consists of the following:

In September 2006, the FASB issued SFAS 157Fair Value Measurements, which is effective for fiscal years beginning after November 15, 2007. Relative to SFAS 157, the FASB issued FASB Staff Positions (FSP) 157-1 and 157-2. FSP 157-1 amends SFAS 157 to exclude SFAS No. 13, “AccountingAccounting for Leases” (SFAS 13), and its related interpretive accounting pronouncements that address leasing transactions, while FSP 157-2 delays the effective date of the application of SFAS 157 to fiscal years beginning after November 15, 2008 for all nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. The Company adopted SFAS 157 as of January 1, 2008, with the exception of the application of the statement to non-recurring nonfinancial assets and nonfinancial liabilities. Non-recurring nonfinancial assets and nonfinancial liabilities for which we havethe Company has not applied the provisions of SFAS 157 include those measured at fair value in goodwill impairment testing, and those initially measured at fair value in a business combination.

SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, and establishes a framework for measuring fair value. SFAS 157 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

Operating Leases.We haveThe Company has entered into various non-cancelable operating leases primarily related to facilities, equipment and vehicles used in the ordinary course of our business.

Contingent Transaction Consideration.The Company entered into earnout agreements in connection with prior acquisitions. If the acquired businesses generate sales and/or operating profits in excess of predetermined targets, the Company is obligated to make additional cash payments in accordance with the terms of such earnout agreements. As of March 31,June 30, 2008, the Company has potential future earnout obligations aggregating to approximately $8.6$7.5 million through 2010 if the sales and/or operating profits exceed the predetermined targets. Earnout payments are recorded as additional purchase price (as goodwill) when the contingent payments are earned and become payable.

Chinese Joint Venture Agreement.We haveThe Company has entered into a joint venture agreement with UnisplendourUnisplendor Corporation Limited, a Chinese high-technology manufacturer and retailing company, to form a reprographics company in China. Upon approval of the joint venture by all applicable Chinese regulatory authorities, which we hadthe Company did not receivedreceive as of March 31,June 30, 2008, wethe joint venture will be obligated to contribute approximately $13.3formed. The Company has established a bank account in China and deposited $13.5 million (92,800,000 Chinese Renminbi), and wein US dollars into the account. Such money is restricted for the formation of the joint venture, of which the Company will own a 65% controlling interest in the joint venture company.interest.

FIN 48 Liability.AsThe Company has a result of the adoption of FIN 48 we have a $1.3$1.0 million contingent liability for uncertain tax positions. We are not updating the disclosures in our long-term contractual obligations table presented in our 2007 Form 10-K becausepositions as of the difficulty in making reasonably reliable estimates of the timing of cash settlements with the respective taxing authorities.June 30, 2008.

Basic and diluted earnings per share were calculated using the following common shares for the three and six months ended March 31,June 30, 2008 and 2007:

American Reprographics Company is the leading reprographics company in the United States. We provide business-to-business document management services to the architectural, engineering and construction industry, or AEC industry, through a nationwide network of independently-branded service centers. The majority of our customers know us as a local reprographics provider, usually with a local brand and a long history in the community. We also serve a variety of clients and businesses outside the AEC industry in need of sophisticated document management services.

Our services apply to time-sensitive and graphic-intensive documents, and fall into four primary categories:

We deliver these services through our specialized technology, more than 980 sales and customer service employees interacting with our customers every day, and more than 4,8505,100 on-site services facilities at our customers’ locations. All of our local service centers are connected by a digital infrastructure, allowing us to deliver services, products, and value to more than 140,000 companies throughout North America.

A significant component of our growth has been from acquisitions. In the first threesix months of 2008, we paid $4.8$5.3 million in connection with fourfive new business acquisitions. In 2007, we acquired 19 businesses for $146.3 million. Each acquisition was accounted for using the purchase method, and as such, our consolidated income statements reflect sales and expenses of acquired businesses only for post-acquisition periods. All acquisition amounts include acquisition-related costs.

As part of our growth strategy, we sometimes open or acquire branch or satellite service centers in contiguous markets, which we view as a low cost, rapid form of market expansion. Our branch openings require modest capital expenditures and are expected to generate operating profit within 12 months from opening.

In the following pages, we offer descriptions of how we manage and measure financial performance throughout the Company. Our comments in this report represent our best estimates of current business trends and future trends that we think may affect our business. Actual results, however, may differ from what is presented here.

Evaluating our Performance.We evaluate our success in delivering value to our shareholders by striving for the following:

Primary Financial Measures.We use net sales, costs and expenses, EBIT, EBITDA and operating cash flow to operate and assess the performance of our business.

The Company identifies operating segments based on the various business activities that earn revenue and incur expense, whose operating results are reviewed by management. Based on the fact that operating segments have similar products and services, class of customers, production process and performance objectives, the Company is deemed to operate as a single reportable business segment. Please refer to our 2007 Annual Report on Form 10-K for more information regarding our primary financial measures.

Other Common Financial Measures.We also use a variety of other common financial measures as indicators of our performance, including:

In addition to using these financial measures at the corporate level, we monitor some of them daily and location-by-location through use of our proprietary company intranet and reporting tools. Our corporate operations staff also conducts a monthly variance analysis on the income statement, balance sheet, and cash flows of each operating division.

We believe our current customer segment mix has approximately 80% of our revenues generated from the AEC market, while 20% is generated from non-AEC sources. We believe this mix is optimal because it offers us the advantages of diversification without diminishing our focus on our core competencies.

When we acquire businesses, our management typically uses the previous year’s sales figures as an informal basis for estimating future revenues for the Company. We do not use this approach for formal accounting or reporting purposes but as an internal benchmark with which to measure the future effect of operating synergies, best practices and sound financial management on the acquired entity.

We also use previous year’s sales figures to assist us in determining how the acquired company will be integrated into the overall management structure of the Company. We categorize newly acquired businesses in one of two ways:

Economic Factors Affecting Financial Performance.We estimate that sales to the AEC market accounted for 80% of our net sales, with the remaining 20% consisting of sales to non-AEC markets (based on a compilation of approximately 80% of revenues from our divisions and designating revenues using certain assumptions as derived from either AEC or non-AEC based customers). As a result, our operating results and financial condition can be significantly affected by economic factors that influence the AEC industry, such as non-residential and residential construction spending, GDP growth, interest rates, employment rates, office vacancy rates, and government expenditures. Similar to the AEC industry, the reprographics industry typically lags a recovery in the broader economy.

EBIT and EBITDA and related ratios presented in this report are supplemental measures of our performance that are not required by or presented in accordance with GAAP. These measures are not measurements of our financial performance under GAAP and should not be considered as alternatives to net income, income from operations, or any other performance measures derived in accordance with GAAP or as an alternative to cash flow from operating, investing or financing activities as a measure of our liquidity.

EBIT represents net income before interest and taxes. EBITDA represents net income before interest, taxes, depreciation and amortization. Amortization does not include $0.9$1.1 million and $0.6$1.0 million of stock based compensation expense, for the three months ended March 31,June 30, 2008 and 2007, respectively and $2.0 million and $1.6 million of stock based compensation expense, for the six months ended June 30, 2008 and 2007, respectively. EBIT margin is a non-GAAP measure calculated by dividing EBIT by net sales. EBITDA margin is a non-GAAP measure calculated by dividing EBITDA by net sales.

We present EBIT and EBITDA and related ratios because we consider them important supplemental measures of our performance and liquidity. We believe investors may also find these measures meaningful, given how our management makes use of them. The following is a discussion of our use of these measures.

We use EBIT to measure and compare the performance of our operating segments. Our operating segments’ financial performance includes all of the operating activities except for debt and taxation which are managed at the corporate level. As a result, EBIT is the best measure of divisional profitability and the most useful metric by which to measure and compare the performance of our operating segments. We also use EBIT to measure performance for determining operating division-level compensation and use EBITDA to measure performance for determining consolidated-level compensation. We also use EBITDA as a metric to manage cash flow from our operating segments to the corporate level and to determine the financial health of each operating segment. As noted above, since debt and taxation are managed at the corporate level, the cash flow from each operating segment should be approximately equal to the corresponding EBITDA of each operating segment, assuming no other changes to an operating segment’s balance sheet. As a result, we reconcile EBITDA to cash flow monthly as one of our key internal controls. We also use EBIT and EBITDA to evaluate potential acquisitions and to evaluate whether to incur capital expenditures.

EBIT, EBITDA and related ratios have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are as follows:

Because of these limitations, EBIT, EBITDA, and related ratios should not be considered as measures of discretionary cash available to us to invest in business growth or to reduce our indebtedness. We compensate for these limitations by relying primarily on our GAAP results and using EBIT and EBITDA only as supplements. For more information, see our consolidated financial statements and related notes elsewhere in this report. Additionally, please refer to our 2007 Annual Report on FormForm 10-K.

The following is a reconciliation of cash flows provided by operating activities to EBIT, EBITDA, and net income:

The following is a reconciliation of net income margin to EBIT margin and EBITDA margin:

Net sales increased by 17.0%4.0% for the three months ended March 31,June 30, 2008, compared to the three months ended March 31,June 30, 2007. Net sales increased by 10.2% for the six months ended June 30, 2008 compared to the same period in 2007.

In the three months ended March 31,June 30, 2008, approximately 14.8% of the 17.0% net sales increase was relatedprimarily due to sales growth of 8.8% from our standalone acquisitions acquired in 2007. This increase in net sales for the period was offset, however, by lower sales performance in our existing divisions primarily due to the softening economy and a general slow down in the construction market.

In the six months ended June 30, 2008, net sales increase was primarily due to our standalone acquisitions acquired in 2007. See Item 2 “Acquisitions” of this report for an explanation of acquisition type.2007 as they contributed approximately 11.7% to our sales growth and new sales acquired through our Premier Accounts program. The increase in sales due to standalone acquisitions was partially offset by a drop in sales as explained above.

Reprographics services.Net sales during the three and six months ended March 31,June 30, 2008, increased by $22.7$5.9 million and $28.7 million, respectively, compared to the same periodperiods in 2007, due primarily to the expansion of our market share through acquisitions, and an increase in our digital sales. We acquired 19 businesses at various times throughout the year in 2007, and fourfive businesses in the first quartersix months of 2008 each with a primary focus on reprographics services. These acquired businesses added sales from their preexisting customers to our own, and in some cases, also allowed us to aggregate regional work from larger clients. AlsoOur Premier Accounts program also added significant new sales, contributing more than $1.0 million and $4.5 million of revenue from new non-AEC customers in the three and six months ended June 30, 2008, respectively, compared to the same periods in 2007. Overall reprographics services sales nationwide were negatively affected by the general softness in the economy and slow down in the construction market, which partially offset the sales increases described above. The largest impact affecting reprographics serviceservices sales was the decrease in our Southern California region reprographics services sales of approximately $4.1$3.5 million and $5.6 million for the three and six months ended June 30, 2008, respectively, resulting primarily from the downturn in residential construction in Southern California. The decrease in sales resulting from the residential construction downturn was offset in part by the addition of significant new sales acquired through our Premier Accounts program, which contributed more than $4.0 million of new sales from non-AEC customers in the first quarter of 2008 compared to the same period in 2007.

While most of our customers in the AEC industry still prefer paper plans, we have seen an increase in our digital service revenue, presumably due to the greater efficiency digital document workflows bring to our customers’ businesses.businesses, but also due to greater consistency in the way that we charge for these services as they become more widely accepted throughout the construction industry. During the three and six months ended March 31,June 30, 2008 digital services revenue increased by $4.5$3.3 million and $7.8 million, respectively, over the same periodperiods in 2007.

Facilities management. On-site, or facilities management services, continued to post solid dollar volume and period-over-period percentage gains in the three and six months ended March 31,June 30, 2008. Specifically, sales for the three months ended March 31,June 30, 2008, compared to the same period in 2007 increased by $3.3$2.2 million or 12.5%7.6%. As a percentage of overall revenue, however, FM services decreased slightly dueSales for the six months ended June 30, 2008, compared to the dilutive effects of acquisitions which had smallsame period in 2007 increased by $5.5 million or non-existent FM programs of their own pre-acquisition.9.9%. FM revenue is derived from a single cost per-square-foot of printed material, similar to our “Reprographics services” revenue. As convenience and speed continue to characterize our customers’ needs, and as printing equipment continues to become smaller and more affordable, the trend of placing equipment (and sometimes staff) in an architectural studio or construction company office remains strong, as evidenced by an increase of approximately 1,500250 and 500 facilities management accounts since March 31, 2007,during the three and six months ended June 30, 2008, respectively, bringing our total FM accounts to approximately 4,8505,100 as of March 31,June 30, 2008. By placing such equipment on-site and billing on a per use and per project basis, the invoice continues to be issued by us, just as if the work was produced in one of our centralized production facilities. The resulting benefit is the convenience of on-site production with a pass-through or reimbursable cost of business that many customers continue to find attractive. We believe this service segment will continue to have strong sales growth in the foreseeable future.

Equipment and supplies sales.During the three month period ended March 31,June 30, 2008, our equipment and supplies sales increaseddecreased by $1.3$1.0 million or 9.2%6.5% as compared to the same period in 2007. In the six month period ending June 30, 2008, equipment and supplies sales increased slightly by $0.3 million or 1.0% as compared to the same period in 2007. Several of our recent acquisitions possess a strongan equipment and supplies business unit. Specifically, stand alonestandalone acquisitions completed in the last twelve monthssince March 31, 2007 have contributed approximately $2.4$2.2 million and $4.6 million to the increase in equipment and supplies sales for the three and six months ended June 30, 2008, respectively, which were partially offset by a decrease in existing divisions’ equipment and supplies sales. The facilities management sales programs have made steady progress against the outright sale of equipment and supplies by converting such sales contracts to on-site service accounts. Excluding the impact of acquisitions, we do not anticipate high growth in equipment and supplies sales as we are placing more focus on facilities management sales programs.

The increase in revenue explained above was the primary factor for the dollar volume increase in gross profit during the three and six months ended March 31,June 30, 2008. Comparing the three and six months ended March 31,June 30, 2008 with the same periodperiods last year, gross margins were favorably impacted by approximately 100140 and 115 basis points, respectively, due to a change in the product mix, price increases, and production efficiencies. Specifically, higher margin digital sales and lower margin equipment and supply sales comprised 7.2%7.8% and 8.2%7.9%, respectively, of total sales for the three months ended March 31,June 30, 2008 compared to 5.6%6.2% and 8.7%, respectively, for the same period in 2007. For the six months ended June 30, 2008 digital sales and equipment and supply sales comprised 7.5% and 8.0%, respectively, of total sales compared to 5.9% and 8.8%, respectively, for the same period in 2007. The increase in gross margins was partly offset by the significant portion of our sales increases that were driven by acquisitions which carry lower gross margins than existing operating divisions. Until our typical performance standards can be applied, such acquisitions temporarily depress gross margins, as do new branch openings and fold-in acquisitions. Specifically, stand aloneStandalone acquisitions completed after March 31, 2007 negatively impacted the gross profit marginmargins for the three and six months ended June 30, 2008 by approximately 8070 and 75 basis points.points, respectively.

Selling, general and administrative expenses increased by $5.3$5.0 million or 15.5%14.5% during the firstsecond quarter of 2008 over the same period in 2007.

Selling, general and administrative expenses increased by $10.3 million or 15.0% during the six months ended June 30, 2008 over the same period in 2007.

Increases during the three and six month period ended March 31,June 30, 2008, are primarily attributable to the increase in our sales volume and acquisitions explained above. Specifically, the largest increases wereexpenses increased in administrative compensation and sales personnel compensationsalaries and commissions of $1.4$1.0 million and $1.7$4.2 million respectively that accompany acquisitionsaccompanied the sales growth and sales growth. Stock-basedan increase in stock based compensation expense also contributed toof $0.1 million and $0.5 million for the increase in generalthree and administrative expenses as stock-based compensation increased by $0.3 million primarily due to the full quarter impact of stock options granted in March of 2007.six months ended June 30, 2008, respectively. Additionally, during the three and six months ended March 31,June 30, 2008 compared to the same period in 2007 we incurred an increase in bad debt expenses of approximately $0.8$0.6 million and $1.5 million, respectively, primarily related to the recent financial concerns regarding some of our home builder customers and some general customers. Also contributing to the increase in selling, general and administrative expense was a $3.3 million favorable settlement of two related lawsuits in the second quarter of 2007. Excluding costs related to that litigation, which included legal fees and compensation payments related to the settlement, the settlement returned a $2.2 million and $1.7 million benefit to the company for the three and six months ended June 30, 2007, respectively. For more information on the details of these lawsuits and settlement, please refer to Note 7 “Commitments and Contingencies” to our consolidated financial statements included in our 2007 Annual Report on Form 10-K.

Selling, general and administrative expenses as a percentage of net sales decreasedincreased from 21.4%19.4% in the firstsecond quarter of 2007 to 21.1%21.4% in the firstsecond quarter of 2008 and from 20.3% in the six months ended June 30, 2007 to 21.2% in the same period in 2008 primarily due to a decreasethe financial benefit in legal expenses2007 of approximately $0.6 million or 0.3% of sales as we settled two litigation matters in the second half of 2007, and our focus on cost reduction initiatives.law suit settlement described above.

Amortization of intangibles increased $1.5$0.3 million during the three months ended March 31,June 30, 2008, compared to the same period in 2007 primarily due to an increase in identified amortizable intangible assets such as customer relationships and trade names associated with 2007 acquired businesses. The three acquisitions primarily causing the increase wereacquisition of NGI USA in December of 2007.

Amortization of intangibles increased $1.8 million during the six months ended June 30, 2008 for the same reasons discussed above in addition to having a full six months impact of amortization related to the acquisition of MBC Precision Imaging which was acquired in March of 2007, the acquisition ofand Imaging Technologies Services which was acquired in April 2007 and the acquisition of NGI USA in December of 2007.

Other income of $0.2 million for the six months ended June 30, 2008 is primarily related to the sale of the Auto DeskAutodesk sales department of our Imaging Technologies Services operating segment. The Auto DeskAutodesk sales department was sold in February of 2008 for $0.4 million and resulted in a gain of $0.2 million.

Net interest expense increased to $7.1remained consistent at $6.6 million during the three months ended March 31,June 30, 2008 and 2007. For the six months ended June 30, 2008 compared to $5.2 million during the same period in 2007. Increases were2007, interest expense increased by $1.9 million primarily due to additional borrowings to finance acquisitions and additional capital leases. Specifically, we borrowed $18.0 million and $50.0 million to finance the acquisitions of MBC Precision Imaging and Imaging Technology Services in March 2007 and April 2007, respectively.

Our effective income tax rate increased from 36.8%37.2% and 37.0% for the three and six months ended March 31,June 30, 2007, respectively, to 38.2%37.6% and 37.9% for the three and six months ended March 31, 2008.June 30, 2008, respectively. The increase is primarily due to a higher blended state tax rate and to a Domestic Production Activities Deduction (“DPAD”) in the Company’sour consolidated federal income tax return for the 2006 tax year. A discrete item of $0.5$0.2 million and $0.7 million related to the 2006 DPAD was reflected in the effective income tax rate forin the three and six months ended March 31,June 30, 2007, respectively, due to the Company’sour ability to claim the deduction for 2006 activities based upon a changeactivities. The increase in a tax accounting methodthe three months ended June 30, 2008 compared to the same period in 2007 that was applied retroactivepartially offset by a discrete item of $0.4 million related to 2006.an effectively settled tax position due to the closing of an income tax audit during the three months ended June 30, 2008.

Net income increaseddecreased to $18.5$18.9 million during the three months ended March 31,June 30, 2008, compared to $16.8$19.6 million in the same period in 2007, primarily due to the fact that 2007 second quarter results included a benefit of $1.4 million, net of taxes, related to a favorable settlement of two related lawsuits described above. During the six months ended June 30, 2008, net income increased $0.9 million to $37.4 million compared to $36.5 million for the same period in 2007 primarily due to net profits generated from the increase in sales, and the improved gross margin percentage, partially offset by an increasethe favorable settlement of two related lawsuits in amortization, interest and taxes.the second quarter of 2007.

EBITDA margin increased to 26.3%was 26.5% and 26.4% during the three and six months ended March 31,June 30, 2008, respectively, compared to 26.9% and 26.1% during the same periods in 2007. The EBITDA margins for the three and six months ended June 30, 2008 compared to 25.0% during the same periodperiods in 2007 partly due towere positively impacted by the increaseimproved gross margin percentages, but negatively affected by the 2007 settlement benefit further described in depreciationSelling, General and amortization as a percentage of sales. For a reconciliation of EBITDA to net income, please see “Non-GAAP Measures” above.Administrative Expenses.

Inflation has not had a significant effect on our operations. Price increases for raw materials such as paper and fuel charges typically have been, and we expect will continue to be, passed on to customers in the ordinary course of business.

Our principal sources of cash have been operations and borrowings under our bank credit facilities or debt agreements. Our historical uses of cash have been for acquisitions of reprographics businesses, payment of principal and interest on outstanding debt obligations, and capital expenditures. Supplemental information pertaining to our historical sources and uses of cash is presented as follows and should be read in conjunction with our consolidated statements of cash flows and notes thereto included elsewhere in this report.