WALNUT CREEK, CA, – ARC, one of the nation's leading document solutions companies, today reported its financial results for the second quarter ended June 30, 2011.

"It is clear that macro-economic conditions have stalled the U.S. economic recovery. Given current market sentiment, we must assume that the recovery will remain challenged for the rest of the year," said K. "Suri" Suriyakumar, Chairman, President and CEO of ARC. "While the outlook for the AEC industry is weak in the near term, ARC's performance remains strong."

Mr. Suriyakumar noted that despite the lack of demand in the marketplace, ARC's gross margin experienced a sequential improvement from 31.3% in the first quarter to 32.6% in the second quarter, and adjusted net income for the period was $0.2 million or $0.00 per diluted share, a meaningful improvement over the adjusted loss of $0.05 per diluted share in the first quarter. He also pointed out that the sequential revenue increase of $3.1 million in the second quarter produced an even greater adjusted EBITDA increase of $3.4 million in the same period, and that sequential adjusted EBITDA margin increased from 13.9% in the first quarter to 16.7% in the second quarter. "This clearly demonstrates that the steps we are taking to reduce costs and reorganize the management of the company have gained immediate traction. We will continue to restructure the organization until we optimize our operational and management structure for the current size of the market, and for the ongoing technology transition occurring in our industry."

Net revenue for the second quarter of 2011 was $109.6 million. ARC's net loss for the second quarter was $84.6 million or a loss of $1.87 per diluted share, primarily due to the recording of a goodwill impairment charge in the amount of $23.3 million and a deferred tax asset valuation allowance of $64.3 million. Excluding these non-cash charges, as well as the previously-disclosed accelerated amortization related to trade names and interest rate swap-related items, adjusted net income for the second quarter was $0.2 million or $0.00 per diluted share. Quarterly cash from operating activities for the period ending June 30, 2011 was $7.3 million.

Net revenue for the first six months of 2011 was $216.1 million. The Company's gross margin was 32.0% for the same period. ARC's net loss for the first six months of 2011 was $88.3 million, or a loss of $1.95 per diluted share, caused primarily by the non-cash charges mentioned above. Excluding these non-cash charges, ARC's adjusted net loss for the first six months of 2011 was $1.9 million, or a loss of $0.04 per diluted share. Cash from operating activities for the same period was $11.9 million.

As noted in the first quarter, ARC continues to restructure its business operations to meet the changing needs of the marketplace. By reorganizing operations, addressing selective staff reductions, and reducing the size of its branch network outside of major metropolitan markets, the Company's efforts are currently expected to yield annualized savings of approximately $26 million, and realized savings of approximately $17 million in 2011.

Goodwill Impairment and Deferred Tax Valuation Allowance In the second quarter, ARC recorded a goodwill impairment charge of $23.3 million and a deferred tax asset valuation allowance of approximately $64.3 million.

On June 30, 2011, the Company felt that there were sufficient indicators to trigger an interim goodwill impairment analysis. The indicators included: (1) the current economic environment; (2) the performance against plan of reporting units which previously had goodwill impairment; and (3) revised forecasted future earnings. The results of the Company's analysis indicated that six of its reporting units, all of which are located in the United States, had a goodwill impairment, and the Company recorded a pretax, non-cash charge for the three and six months ended June 30, 2011 to reduce the carrying value of goodwill by $23.3 million.

The deferred tax asset valuation assessment is a GAAP-accounting triggered event caused by goodwill impairments and other charges the Company has taken over the past three years. The effect of the assessment resulted in a reserve of $64.3 million against certain deferred tax assets on ARC's balance sheet. The valuation allowance represents a non-cash tax expense on our Statement of Operations. The deferred tax assets remain available to the Company for use in future profitable quarters.

Outlook In the face of weak macro-economic drivers and the resulting prolonged weakness in the AEC market, the Company revised its 2011 annual adjusted EPS forecast to a range of $(0.02) to $0.05 on a fully-diluted basis from its previous forecast of a range of $0.01 to $0.15, and projected annual cash flow from operating activities in the range of $35 million to $50 million, down from a range of $40 million to $60 million.

Teleconference and Webcast American Reprographics Company will host a conference call and audio webcast today at 2:00 P.M. Pacific Time (5:00 P.M. Eastern Time) to discuss results for the Company's second quarter 2011 and business outlook. The conference call can be accessed by dialing 877-402-8179. The conference ID number is 82265595.

A replay of this call will be available approximately one hour after the call for seven days following the call's conclusion. To access the replay, dial 800-642-1687. The conference ID number is 82265595.

A Web archive will be made available at http://www.e-arc.com for approximately 90 days following the call's conclusion.