HOUSTON, Nov. 6, 2013 /PRNewswire/ -- Consolidated
Graphics, Inc. (NYSE: CGX) today announced financial results
for its second quarter ended September 30,
2013.
Revenue for the September 2013
quarter was $256.1 million, compared
to $263.6 million for the same
quarter last year. The 2.9% decline in revenue was primarily caused
by an expected decline in election related business. Adjusted
Operating Income was $15.7 million or
6.1% of revenue for the quarter, compared to $14.7 million or 5.6% of revenue for the same
period last year. Adjusted Net Income increased 48% or $4.0 million and was $12.3
million for the September quarter, compared to $8.3 million in the prior year quarter. Adjusted
Diluted Earnings Per Share for the September quarter increased 49%
to $1.25, compared to $.84 last year. Adjusted EBITDA was $32.0 million for the quarter and Free Cash Flow
was $13.7 million.
Operating income for the September
2013 quarter was $13.0 million
and included other charges of $1.8
million, primarily related to $.9
million in costs incurred in connection with the recently
announced transaction with R. R.
Donnelley & Sons Company, accretion of the discount of
liability attributable to our withdrawal from certain
multi-employer pension plans and the impairment of certain
equipment. Operating income for the prior year quarter was
$12.1 million and included
$2.3 million in other charges,
primarily related to relocating certain production facilities and
related asset impairments. Net income for the September 2013 quarter was $10.6 million or $1.09 diluted earnings per share, compared to net
income of $6.7 million or
$.68 diluted earnings per share last
year. Net income for the September
2013 quarter included $2.2
million in benefits for tax reserve credits due to the
settlement of certain tax audits.
Joe R. Davis, Chairman and Chief
Executive Officer of Consolidated Graphics, commented on the
reported results and the recently announced transaction: "Our
results improved again during the second quarter.
Consolidated Graphics' success this quarter and over the long-term
has been due to our outstanding employees and their ability to
provide the service and responsiveness of a local printing company
while offering customers the flexible solutions and competitive
pricing available from our wide network. The recently announced
signing of a definitive agreement by which RR Donnelley will
acquire Consolidated Graphics will enable our customers and
employees to benefit significantly from RR Donnelley's broad range
of printing capabilities and our combined geographic footprint. RR
Donnelley's customers will benefit from the planned adoption of
Consolidated Graphics' local service model for all of its
commercial printing group."
A reconciliation of the non-GAAP financial measures, Adjusted
EBITDA, Free Cash Flow, Adjusted Operating Income, Adjusted
Operating Margin, Adjusted Net Income and Adjusted Diluted Earnings
Per Share to the most directly comparable GAAP financial measures
are included in the attached tables and in the related Current
Report on Form 8-K filed with the Securities and Exchange
Commission. The Form 8-K also includes the basis for management's
use of these non-GAAP financial measures.
The transaction with RR Donnelley is expected to close in the
first calendar quarter of 2014 and is subject to customary closing
conditions, including regulatory approval and approval of
Consolidated Graphics' shareholders.
Consolidated Graphics, Inc. (CGX), headquartered in Houston, Texas, is one of North America's leading general commercial
printing companies. With 70 printing businesses strategically
located across 26 states, Toronto,
Prague, and Gero, Japan, CGX offers an unmatched geographic
footprint, unsurpassed capabilities, and unparalleled levels of
convenience, efficiency and service. With locations in or near
virtually every major U.S. market, CGX provides the service and
responsiveness of a local printer enhanced by the economic,
geographic and technological advantages of a large national
organization.
Consolidated Graphics' vast and technologically advanced
sheetfed and web printing capabilities are complemented by the
world's largest integrated digital footprint. By coupling
North America's most comprehensive
printing capabilities with strategically located fulfillment
centers and industry-leading technology, CGX delivers end-to-end
print production and management solutions that are based on the
needs of our customers to improve their results. For more
information, visit www.cgx.com.
Additional Information and Where To Find It
This press
release relates to a proposed transaction between RR Donnelley and
Consolidated Graphics, which will become the subject of a
registration statement on Form S-4 and proxy statement/prospectus
forming a part thereof, to be filed with the SEC by RR Donnelley
and Consolidated Graphics. This press release is not a
substitute for the registration statement and proxy
statement/prospectus that RR Donnelley and Consolidated Graphics
will file with the SEC or any other documents that RR Donnelley or
Consolidated Graphics may file with the SEC or send to shareholders
of Consolidated Graphics in connection with the proposed
transaction. BEFORE MAKING ANY VOTING DECISION, INVESTORS AND
SECURITY HOLDERS OF CONSOLIDATED GRAPHICS ARE URGED TO READ THE
REGISTRATION STATEMENT, PROXY STATEMENT/PROSPECTUS AND ALL OTHER
RELEVANT DOCUMENTS FILED OR THAT WILL BE FILED BY RR DONNELLEY OR
CONSOLIDATED GRAPHICS WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY
WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION AND RELATED
MATTERS. Investors and security holders will be able to
obtain free copies of the registration statement, the proxy
statement/prospectus (when available) and other relevant documents
filed or that will be filed by RR Donnelley or Consolidated
Graphics with the SEC through the website maintained by the SEC at
http://www.sec.gov. Copies of the registration statement,
proxy statement/prospectus and other relevant documents filed by RR
Donnelley with the SEC will be available free of charge on RR
Donnelley's internet website at
http://investor.rrd.com/sec.cfm or by contacting RR
Donnelley's Investor Relations Department at (800) 742-4455.
Copies of the proxy statement/prospectus and other relevant
documents filed by Consolidated Graphics with the SEC will be
available free of charge on Consolidated Graphics' internet website
at
http://investors.cgx.com/phoenix.zhtml?c=78535&p=irol-sec or
by contacting Consolidated Graphics' Investor Relations Department
at (713) 787-0977.
No Offer Or Solicitation
This press release
does not constitute an offer to sell, or an invitation to subscribe
for, purchase or exchange, any securities or the solicitation of
any vote or approval in any jurisdiction, nor shall there be any
sale, issuance, exchange or transfer of the securities referred to
in this announcement in any jurisdiction in contravention of
applicable law.
Participants in the Solicitation
RR Donnelley,
Consolidated Graphics, and their respective directors and executive
officers may be considered participants in the solicitation of
proxies from shareholders of Consolidated Graphics in connection
with the proposed transaction. Information about the
directors and executive officers of Consolidated Graphics is set
forth in its proxy statement for its 2013 annual meeting of
shareholders, which was filed with the SEC on July 9,
2013. Information about the directors and executive officers
of RR Donnelley is set forth in its proxy statement for its 2013
annual meeting of stockholders, which was filed with the SEC on
April 15, 2013. Other information regarding the
participants in the proxy solicitation and a description of their
direct and indirect interests, by security holdings or otherwise,
will be contained in the proxy statement/prospectus and other
relevant materials to be filed with the SEC when they become
available.
Forward-Looking Statements
This press release includes certain "forward-looking
statements" within the meaning of, and subject to the safe harbor
created by, Section 21E of the Securities Exchange Act of 1934, as
amended, with respect to the business, strategy and plans of
Consolidated Graphics, its expectations relating to the proposed
transaction with RR Donnelley and its future financial condition
and performance. Statements that are not historical facts,
including statements about Consolidated Graphics' management's
beliefs and expectations, are forward-looking statements. You can
generally identify forward-looking statements by the appearance in
such a statement of words like "anticipate," "believe," "continue,"
"could," "estimate," "expect," "intend," "may," "might," "plan,"
"potential," "predict," "forecast," "project," "should" or "will"
or other comparable words or the negative of such words. The
accuracy of Consolidated Graphics' assumptions, expectations,
beliefs and projections depends on events or conditions that change
over time and are thus susceptible to change based on actual
experience, new developments and known and unknown risks, including
those created by general market conditions, competition and the
possibility that events may occur beyond Consolidated Graphics'
control, which may limit its ability to maintain or improve its
operating results or financial condition. Consolidated Graphics
gives no assurance that the forward-looking statements will prove
to be correct. Consolidated Graphics' actual future results might
differ from the forward-looking statements made in this press
release for a variety of reasons, which include, among others, the
volatility and disruption of the capital and credit markets, and
adverse changes in the economy; financial stability of its
customers; the sustained growth of its digital printing business;
seasonality of election-related business; factors that affect
customer demand, including changes in postal rates and postal
regulations, changes in advertising markets, customers' budgetary
constraints and customers' changes in short-range and long-range
plans; its ability to adequately manage business expenses,
including labor costs; the unfavorable outcome of legal
proceedings; the lack of or adequacy of insurance coverage for its
operations; the continued availability of raw materials at
affordable prices; retention of its key management and operating
personnel; satisfactory labor relations; the potential for
additional goodwill impairment charges; charges related to its
withdrawal from multi-employer pension plans; changes in tax laws
or interpretations that could increase consolidated tax
liabilities; the successful completion of the proposed transaction
with RR Donnelley; the receipt of required regulatory approvals for
the proposed transaction (including the approval of antitrust
authorities necessary to complete the proposed transaction);
competitive pressures in all markets in which Consolidated Graphics
operates; and such other risks and uncertainties detailed in
Consolidated Graphics' periodic public filings with the SEC,
including but not limited to those discussed under "Risk Factors"
in Consolidated Graphics' Form 10-K for the fiscal year ended
March 31, 2013, in Consolidated
Graphics' subsequent filings with the SEC and in other investor
communications of Consolidated Graphics from time to time.
Should one or more of the foregoing risks or uncertainties
materialize, or should Consolidated Graphics' underlying
assumptions, expectations, beliefs or projections prove incorrect,
Consolidated Graphics' actual results may vary materially from
those anticipated in its forward-looking statements, and its
business, financial condition and results of operations could be
materially and adversely affected. Consolidated Graphics does
not undertake to and specifically declines any obligation to
publicly release the results of any revisions to these
forward-looking statements that may be made to reflect future
events or circumstances after the date of such statement or to
reflect the occurrence of anticipated or unanticipated
events.
Regulation G Reconciliation
This press release also contains references to the non-GAAP
financial measures of Adjusted EBITDA, which we define as earnings,
or net income, before interest, income taxes, depreciation and
amortization, goodwill impairment charges, other charges and
accretion of pension liability, share-based compensation expense,
non-cash foreign currency transaction gains and losses and net
losses/gains from asset dispositions, Free Cash Flow, which we
define as net cash provided by operating activities less capital
expenditures plus proceeds from assets dispositions, Adjusted
Operating Income, which we define as operating income before
goodwill impairment charges, other charges and accretion of pension
liability, share-based compensation expense, and non-cash foreign
currency transaction net gains and losses, Adjusted Operating
Margin, which we define as Adjusted Operating Income divided by
sales, Adjusted Net Income, which we define as net income before
goodwill impairment charges, other charges and accretion of pension
liability, share-based compensation expense, non-cash foreign
currency transaction net gain and losses, all net of tax, and
Adjusted Diluted Earnings Per Share, which we define as Adjusted
Net Income divided by diluted weighted average number of common
shares outstanding. Reconciliations of these non-GAAP financial
measures to the most directly comparable GAAP financial measures
are provided in the tables below. Management's opinion regarding
the usefulness of these non-GAAP financial measures to investors
and a description of the ways in which management used such
measures can be found in the related Current Report on Form 8-K we
filed with the Securities and Exchange Commission.
(Tables to
follow)
|
|
|
CONSOLIDATED
GRAPHICS, INC.
Condensed
Consolidated Income Statements
(In thousands,
except per share amounts, and unaudited)
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
|
September
30,
|
|
September
30,
|
|
|
|
2013
|
|
2012
|
|
Change
|
|
2013
|
|
2012
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
%
|
|
|
|
|
|
$
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
$256,089
|
|
$263,633
|
|
(7,544)
|
|
(3)
|
|
$492,759
|
|
$501,943
|
|
(9,184)
|
|
(2)
|
|
Cost of
Sales
|
194,026
|
|
202,706
|
|
(8,680)
|
|
(4)
|
|
375,395
|
|
390,674
|
|
(15,279)
|
|
(4)
|
|
|
Gross
Profit
|
62,063
|
|
60,927
|
|
1,136
|
|
2
|
|
117,364
|
|
111,269
|
|
6,095
|
|
5
|
|
Selling
Expenses
|
22,480
|
|
22,292
|
|
188
|
|
1
|
|
45,930
|
|
46,091
|
|
(161)
|
|
nm
|
|
General and
Administrative Expenses
|
24,483
|
|
24,430
|
|
53
|
|
nm
|
|
48,311
|
|
48,933
|
|
(622)
|
|
(1)
|
|
Other
Charges
|
1,824
|
|
2,293
|
|
(469)
|
|
(20)
|
|
2,957
|
|
3,962
|
|
(1,005)
|
|
(25)
|
|
Other Expense
(Income)
|
300
|
|
(150)
|
|
450
|
|
nm
|
|
274
|
|
(273)
|
|
547
|
|
nm
|
|
|
Operating
Income
|
12,976
|
|
12,062
|
|
914
|
|
8
|
|
19,892
|
|
12,556
|
|
7,336
|
|
58
|
|
Interest
Expense
|
444
|
|
1,335
|
|
(891)
|
|
(67)
|
|
1,524
|
|
2,835
|
|
(1,311)
|
|
(46)
|
|
|
Income before
Taxes
|
12,532
|
|
10,727
|
|
1,805
|
|
17
|
|
18,368
|
|
9,721
|
|
8,647
|
|
89
|
|
Income Tax
Expense
|
1,902
|
|
4,018
|
|
(2,116)
|
|
(53)
|
|
4,138
|
|
3,460
|
|
678
|
|
20
|
|
|
Net Income
|
$10,630
|
|
$6,709
|
|
3,921
|
|
58
|
|
$14,230
|
|
$6,261
|
|
7,969
|
|
127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per
Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$1.10
|
|
$.68
|
|
|
|
|
|
1.47
|
|
$.62
|
|
|
|
|
|
|
Diluted
|
$1.09
|
|
$.68
|
|
|
|
|
|
1.46
|
|
$.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Shares Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
9,679
|
|
9,863
|
|
|
|
|
|
9,658
|
|
10,018
|
|
|
|
|
|
|
Diluted
|
9,784
|
|
9,899
|
|
|
|
|
|
9,731
|
|
10,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective Income Tax
Rate
|
15.2%
|
|
37.5%
|
|
|
|
|
|
22.5%
|
|
35.6%
|
|
|
|
|
|
________________________________
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
nm- not
meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED
GRAPHICS, INC.
Condensed
Consolidated Balance Sheets
(In thousands,
except share and per share amounts, and unaudited)
|
|
|
|
|
|
|
|
September
30, 2013
|
|
March 31,
2013
|
ASSETS
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
16,043
|
|
$
|
12,217
|
Accounts receivable,
net
|
|
169,161
|
|
164,647
|
Inventories
|
|
62,992
|
|
55,389
|
Prepaid
expenses
|
|
13,000
|
|
15,877
|
Deferred income
taxes
|
|
11,737
|
|
10,215
|
Total current
assets
|
|
272,933
|
|
258,345
|
PROPERTY AND
EQUIPMENT, net
|
|
322,280
|
|
343,832
|
GOODWILL
|
|
23,776
|
|
23,870
|
OTHER INTANGIBLE
ASSETS, net
|
|
10,254
|
|
11,936
|
OTHER
ASSETS
|
|
5,048
|
|
6,660
|
|
|
$
|
634,291
|
|
$
|
644,643
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
Current portion of
long-term debt
|
|
$
|
14,459
|
|
$
|
20,550
|
Accounts
payable
|
|
86,857
|
|
83,578
|
Accrued
liabilities
|
|
70,457
|
|
71,974
|
Income taxes
payable
|
|
2,158
|
|
0
|
Total current
liabilities
|
|
173,931
|
|
176,102
|
LONG-TERM DEBT, net
of current portion
|
|
83,085
|
|
103,134
|
OTHER
LIABILITIES
|
|
41,655
|
|
44,255
|
DEFERRED INCOME
TAXES, net
|
|
39,208
|
|
42,778
|
Total liabilities
|
|
337,879
|
|
366,269
|
COMMITMENTS AND
CONTINGENCIES
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
Common stock, $.01
par value; 100,000,000 shares
authorized; 9,637,642 and 9,633,475 issued and
outstanding
|
|
97
|
|
96
|
Additional paid-in
capital
|
|
157,777
|
|
154,657
|
Retained
earnings
|
|
138,369
|
|
124,139
|
Accumulated other
comprehensive income (loss)
|
|
169
|
|
(518)
|
Total shareholders'
equity
|
|
296,412
|
|
278,374
|
|
|
$
|
634,291
|
|
$
|
644,643
|
|
|
|
|
|
|
|
Total debt
|
|
$
|
97,544
|
|
$
|
123,684
|
Debt-to-total
capitalization
|
|
|
25%
|
|
|
31%
|
CONSOLIDATED
GRAPHICS, INC.
Reconciliations of
Non-GAAP Financial Measures
(In thousands,
except per share amounts, and unaudited)
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
Net
income
|
$
|
10,630
|
|
$
|
6,709
|
|
$
|
14,230
|
|
$
|
6,261
|
Income tax
expense
|
1,902
|
|
4,018
|
|
4,138
|
|
3,460
|
Interest expense,
net
|
444
|
|
1,335
|
|
1,524
|
|
2,835
|
Depreciation and
amortization
|
16,336
|
|
18,417
|
|
32,972
|
|
36,923
|
Other
charges
|
1,824
|
|
2,293
|
|
2,957
|
|
3,962
|
Share-based
compensation expense
|
644
|
|
476
|
|
1,386
|
|
1,183
|
Non-cash foreign
currency transaction (gain) loss
|
233
|
|
(146)
|
|
167
|
|
(213)
|
Net (gain) loss from
asset dispositions
|
(42)
|
|
(26)
|
|
(377)
|
|
68
|
Adjusted
EBITDA
|
$
|
31,971
|
|
$
|
33,076
|
|
$
|
56,997
|
|
$
|
54,479
|
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
$
|
19,877
|
|
$
|
19,763
|
|
$
|
37,022
|
|
$
|
41,800
|
Capital
expenditures
|
(6,256)
|
|
(11,919)
|
|
(11,864)
|
|
(27,197)
|
Proceeds from asset
dispositions
|
101
|
|
577
|
|
2,991
|
|
782
|
Free Cash
Flow
|
$
|
13,722
|
|
$
|
8,421
|
|
$
|
28,149
|
|
$
|
15,385
|
|
|
|
|
|
|
|
|
Operating
income
|
$
|
12,976
|
|
$
|
12,062
|
|
$
|
19,892
|
|
$
|
12,556
|
Other
charges
|
1,824
|
|
2,293
|
|
2,957
|
|
3,962
|
Share-based
compensation expense
|
644
|
|
476
|
|
1,386
|
|
1,183
|
Non-cash foreign
currency transaction (gain) loss
|
233
|
|
(146)
|
|
167
|
|
(213)
|
Adjusted Operating
Income
|
$
|
15,677
|
|
$
|
14,685
|
|
$
|
24,402
|
|
$
|
17,488
|
Adjusted Operating
Margin
|
6.1%
|
|
5.6%
|
|
5.0%
|
|
3.5%
|
|
|
|
|
|
|
|
|
Net income
|
$
|
10,630
|
|
$
|
6,709
|
|
$
|
14,230
|
|
$
|
6,261
|
Other
charges
|
1,824
|
|
2,293
|
|
2,957
|
|
3,962
|
Tax benefit of other
charges
|
(711)
|
|
(894)
|
|
(1,153)
|
|
(1,545)
|
Share-based
compensation expense, net of taxes
|
393
|
|
290
|
|
846
|
|
721
|
Non-cash foreign
currency transaction (gain) loss, net of
taxes
|
142
|
|
(89)
|
|
102
|
|
(130)
|
Adjusted Net
Income
|
$
|
12,278
|
|
$
|
8,309
|
|
$
|
16,982
|
|
$
|
9,269
|
CONSOLIDATED
GRAPHICS, INC.
Reconciliations of
Non-GAAP Financial Measures
(In thousands,
except per share amounts, and unaudited)
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
Diluted earnings
(loss) per share
|
$
|
1.09
|
|
.68
|
|
$
|
1.46
|
|
$
|
.62
|
Other
charges
|
.19
|
|
.23
|
|
.30
|
|
.39
|
Tax benefit of other
charges
|
(.07)
|
|
(.09)
|
|
(.12)
|
|
(.15)
|
Share-based
compensation expense, net of taxes
|
.04
|
|
.03
|
|
.09
|
|
.07
|
Non-cash foreign
currency transaction (gain) loss, net of taxes
|
-
|
|
(.01)
|
|
.01
|
|
(.01)
|
Adjusted Diluted
Earnings Per Share
|
$
|
1.25
|
|
$
|
.84
|
|
$
|
1.75
|
|
$
|
.92
|
SOURCE Consolidated Graphics, Inc.