SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
CONSOLIDATED GRAPHICS, INC.
(Name of Registrant as Specified in its Charter)
_____________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
<PAGE>
[CONSOLIDATED GRAPHICS LETTERHEAD]
July 9, 1997
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders to
be held in the Boardroom of Texas Commerce Bank, 707 Travis Street, Houston,
Texas 77002, on Wednesday, July 30, 1997 at 5:00 p.m., Central Daylight Time.
For those of you who cannot be present at this Annual Meeting, we urge that you
participate by indicating your choices on the enclosed proxy and completing and
returning it at your earliest convenience. If you sign and return your proxy
card without specifying your choices, it will be understood you wish to have
your shares voted in accordance with the Board of Directors' recommendations.
This booklet includes the Notice of Annual Meeting of Shareholders and the
Proxy Statement, which contains details of the business to be conducted at the
Annual Meeting. The Company's 1997 Annual Report to Stockholders and Form 10-K
for the fiscal year ended March 31, 1997, which are not part of the Proxy
Statement, are also enclosed and provide additional information regarding the
financial results of the Company for the fiscal year ended March 31, 1997.
It is important that your shares are represented at the meeting, whether or
not you are able to attend personally. Accordingly, please sign, date and mail
promptly the enclosed proxy in the envelope provided.
On behalf of the Board of Directors, thank you for your cooperation and
continued support.
/s/ JOE R. DAVIS
Joe R. Davis
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
<PAGE>
[CONSOLIDATED GRAPHICS LOGO]
2210 WEST DALLAS STREET
HOUSTON, TEXAS 77019
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD WEDNESDAY, JULY 30, 1997
To the Shareholders:
The Annual Meeting of Shareholders of Consolidated Graphics, Inc. (the
"Company") will be held in the Boardroom at Texas Commerce Bank, 707 Travis
Street, Houston, Texas 77002 on Wednesday, July 30, 1997 at 5:00 p.m., Central
Daylight Time, for the following purposes:
1. To elect nine directors to serve until the next Annual Meeting of
Shareholders or until their successors are elected and qualified.
2. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only shareholders of record as of the close of business on June 13, 1997
are entitled to receive notice of and to vote at the meeting and any
adjournments thereof. A list of such shareholders shall be open to the
examination of any shareholder during ordinary business hours, for a period of
ten days prior to the meeting, at the principal executive offices of the
Company, 2210 West Dallas Street, Houston, Texas 77019 and shall also be open to
examination at the Annual Meeting and any adjournments thereof.
By Order of the Board of Directors
/s/ MARY K. COLLINS
Mary K. Collins
SENIOR VICE PRESIDENT AND SECRETARY
Houston, Texas
July 9, 1997
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING REGARDLESS OF THE
NUMBER OF SHARES YOU HOLD. PLEASE COMPLETE, SIGN AND MAIL THE ENCLOSED PROXY IN
THE ACCOMPANYING ENVELOPE EVEN IF YOU INTEND TO BE PRESENT AT THE MEETING.
RETURNING THE PROXY WILL NOT LIMIT YOUR RIGHT TO VOTE IN PERSON OR TO ATTEND THE
ANNUAL MEETING, BUT WILL ENSURE YOUR REPRESENTATION IF YOU CANNOT ATTEND. IF YOU
HAVE SHARES IN MORE THAN ONE NAME, OR IF YOUR STOCK IS REGISTERED IN MORE THAN
ONE WAY, YOU MAY RECEIVE MORE THAN ONE COPY OF THE PROXY MATERIAL. IF SO, SIGN
AND RETURN EACH OF THE PROXY CARDS YOU RECEIVE SO THAT ALL OF YOUR SHARES MAY BE
VOTED. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO ITS USE.
<PAGE>
[CONSOLIDATED GRAPHICS LOGO]
2210 WEST DALLAS STREET
HOUSTON, TEXAS 77019
------------------------
PROXY STATEMENT
------------------------
INTRODUCTION
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Consolidated Graphics, Inc., a Texas corporation (the "Company"),
for use only at the Annual Meeting of Shareholders (the "Annual Meeting") to
be held in the Boardroom at Texas Commerce Bank, 707 Travis Street, Houston,
Texas 77002, on Wednesday, July 30, 1997 at 5:00 p.m., Central Daylight Time,
and at any adjournments thereof. The approximate date on which this Proxy
Statement and accompanying proxy will first be given or sent to shareholders is
July 9, 1997.
Each proxy executed and returned by a shareholder may be revoked at any
time before it is voted at the meeting by filing an instrument revoking it with
the Secretary, by execution and return of a later-dated proxy, or by appearing
at the meeting and voting in person.
Proxies in the accompanying form will be voted in accordance with the
specifications made and, where no specifications are given, such proxies will be
voted FOR the election as directors of the nominees named herein and if any one
or more of such nominees should become unavailable for election for any reason,
then FOR the election of any substitute nominee that management of the Company
may propose.
In the discretion of the proxy holders, the proxies will also be voted FOR
or AGAINST such other matters as may properly come before the meeting.
Management of the Company is not aware of any other matters to be presented for
action at the meeting.
RECORD DATE AND VOTING SECURITIES
The Board of Directors has fixed the close of business on June 13, 1997 as
the record date for the determination of shareholders entitled to receive notice
of and to vote at the Annual Meeting and any adjournments thereof. The issued
and outstanding stock of the Company on June 13, 1997 consisted of 12,464,615
shares of Common Stock, par value $.01 per share, of the Company (the "Common
Stock"), each of which is entitled to one vote. Under the Company's By-Laws as
well as the Texas Business Corporation Act, the holders of a majority of the
total issued and outstanding shares of Common Stock, whether present in person
or represented by proxy, will constitute a quorum for the transaction of
business at the meeting.
If there are not sufficient shares represented in person or by proxy at the
meeting to constitute a quorum, the meeting may be adjourned until such time and
place as determined by a vote of the holders of a majority of the shares
represented in person or by proxy at the meeting to permit further solicitation
of proxies by the Company. Proxies given pursuant to this solicitation and not
revoked will be voted at any postponement or adjournment of the Annual Meeting
in the manner set forth above.
The affirmative vote of a plurality of the votes entitled to be cast by the
outstanding shares of Common Stock present, in person or by proxy, and entitled
to vote at the meeting, is required for the election of directors.
1
<PAGE>
Abstentions and "broker nonvotes" (i.e., shares held by a broker or
nominee as to which instructions have not been received from the beneficial
owners or persons entitled to vote) will be treated as shares that are present
and entitled to vote for purposes of determining the presence of a quorum. In
determining the results of voting on the election of directors, abstentions and
broker nonvotes have no effect since only a plurality vote is required for
approval.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of June 13, 1997 information with respect
to beneficial ownership of shares of Common Stock by (i) the chief executive
officer and each of the other executive officers of the Company, (ii) each of
the directors and nominees, (iii) all persons known to the Company to be the
beneficial owners of 5% or more thereof and (iv) all officers and directors as a
group. All persons listed have sole voting and investment power with respect to
their shares unless otherwise indicated.
AMOUNT OF
BENEFICIAL OWNERSHIP(1)
------------------------
PERCENTAGE
NUMBER OF OF
NAME OF BENEFICIAL OWNER SHARES(2) CLASS(3)
- ------------------------------------- --------- ----------
Joe R. Davis(4)...................... 2,000,300 15.7%
The Vinik Group(5)................... 1,219,700 9.6
Pilgrim Baxter & Associates(6)....... 1,045,400 8.2
Hugh N. West......................... 205,000 1.6
James H. Limmer...................... 138,500 1.1
Brady F. Carruth..................... 62,660 *
Gary L. Forbes....................... 34,548 *
Mary K. Collins...................... 33,000 *
G. Christopher Colville.............. 24,000 *
Clarence C. Comer.................... 16,000 *
Thomas E. Smith...................... 13,000 *
W. D. Hawkins........................ 5,980 *
Larry J. Alexander................... 4,000 *
All directors and executive officers
as a group (11 persons, including
the directors and executive
officers named above).............. 2,536,988 19.9
- ------------
* Less than 1%.
(1) In accordance with the Securities and Exchange Commission ("SEC")
regulations, shares are deemed to be "beneficially owned" by a person if
such person directly or indirectly has or shares the power to vote or
dispose of the shares, regardless of whether such person has any economic
interest in the shares. In addition, a person is deemed to own
beneficially any shares of which such person has the right to acquire
beneficial ownership within 60 days, including upon exercise of a stock
option or conversion of a convertible security. Unless otherwise noted,
all persons have sole voting and investment power with respect to all
their shares.
(2) Share numbers have been adjusted for the two-for-one split of the Common
Stock effected January 1997. Shares shown do not include shares held
through the Company's 401(k) plan. The shares beneficially owned include
options to purchase shares of the Company's Common Stock exercisable
within 60 days of June 13, 1997, as follows: Mr. Davis, 200 shares; Mr.
Forbes, 10,000 shares; Ms. Collins, 31,800 shares; Mr. Colville, 15,200
shares; Mr. Comer, 16,000 shares; Mr. Smith, 13,000 shares; and Mr.
Alexander, 2,000 shares.
(3) The percentage of class owned by each person has been calculated using the
12,464,615 shares outstanding at June 13, 1997 plus the 275,165 shares
issuable upon exercise of options
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
2
<PAGE>
exercisable within 60 days and deemed to be outstanding pursuant to Rule
13d-3(d)(1) of the Securities Exchange Act of 1934.
(4) The address of Mr. Davis is 2210 West Dallas Street, Houston, Texas 77019.
(5) Based on a Form 13F, dated as of March 31, 1997, filed with the Commission
by Jeffrey N. Vinik, whose address is 260 Franklin Street, Boston,
Massachusetts 02110.
(6) The address of Pilgrim Baxter & Associates is 1255 Drummers Lane, Suite
300, Wayne, Pennsylvania 19087-1590 based on Schedule 13G dated February
14, 1997.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers to
file with the SEC and The New York Stock Exchange initial reports of ownership
and reports of changes in ownership of Common Stock. Based solely on a review of
the copies of such reports furnished to the Company and written representations
that no other reports were required, the Company believes that all of its
directors and executive officers during fiscal 1997 complied on a timely basis
with all applicable filing requirements under Section 16(a) of the Exchange Act
except that Mr. Alexander, Mr. Forbes, Mrs. Collins and Mr. Colville filed Form
4's relating to the October 7, 1996 option grant on December 10, 1996.
ELECTION OF DIRECTORS
Unless contrary instructions are set forth in the proxy card, it is
intended that the persons named in the proxy will vote all shares of Common
Stock represented by the proxy for the election of the persons listed below as
directors, all of whom are presently members of the Board of Directors of the
Company. The nine directors elected at the meeting will each serve for a term
expiring on the date of the Annual Meeting in 1998. Directors of the Company are
elected annually and hold office until their successors have been elected and
qualified or their earlier resignation or removal. Should any nominee become
unavailable for election, the Board of Directors of the Company may designate
another nominee, in which case the persons acting under the duly executed
proxies will vote for the election of the replacement nominee. Management is
currently unaware of any circumstances likely to render any nominee unavailable
for election. A shareholder may, in the manner set forth in the enclosed proxy
card, instruct the proxy holder not to vote that shareholder's shares for one or
more of the named nominees.
The Company's By-Laws currently provide for a Board of Directors of nine
persons. Nine persons currently serve on the Board and are expected to continue
to serve until the Annual Meeting. The proxies solicited hereby cannot be voted
for a number of persons greater than the number of nominees named below.
BOARD RECOMMENDATION
The Board believes that the election of the persons listed below as
directors of the Company is in the best interest of the Company and its
shareholders. THE BOARD THEREFORE RECOMMENDS A VOTE FOR THE NOMINEES AND IT IS
INTENDED THAT THE PROXIES NOT MARKED TO THE CONTRARY WILL BE SO VOTED. The
Restated Articles of Incorporation of the Company, as amended to date, do not
permit cumulative voting. A plurality of the holders of the outstanding shares
of Common Stock of the Company represented at a meeting at which a quorum is
present may elect directors.
The following sets forth information concerning each of the nominees for
election to the Board of Directors, including the name, age, principal
occupation or employment during at least the past five years and the period
during which such person has served as a director of the Company.
3
<PAGE>
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR A ONE YEAR TERM EXPIRING AT THE ANNUAL MEETING IN 1998
JOE R. DAVIS has been the President, Chief Executive Officer and Chairman
of the Board of the Company since he founded it in 1985. Prior to forming the
Company, Mr. Davis was Vice President of Finance and Administration for a
division of International Paper Company. Prior thereto, he served as a partner
with Arthur Andersen LLP, an accounting firm, where he was active in the mergers
and acquisition practice. Mr. Davis is a certified public accountant. Mr. Davis
serves on the Executive Committee and is 54 years of age.
LARRY J. ALEXANDER retired from the San Antonio Spurs in May 1996, where he
was the Vice President -- Administration and Communications since August 1994.
Prior to joining the Spurs, he spent 27 years with SBC Communications Inc. in
various positions including Senior Vice President -- External Affairs from July
1993 to July 1994 and Senior Vice President -- Corporate Communications from
December 1990 to July 1993. Prior to that, he served as Vice President -- Public
Relations for Southwestern Bell Telephone's Texas Division and Vice
President -- Advertising and Communications for Southwestern Bell Telephone in
St. Louis, Missouri. From 1990 to 1994, Mr. Alexander served on the board of
directors of several Southwestern Bell subsidiaries, including Southwestern Bell
Printing Company. Mr. Alexander has been a director since May 1995, and is 55
years of age.
BRADY F. CARRUTH has been President of Gulf Coast Capital Corporation, a
commercial landscaping business, since 1987. He also serves on the board of
directors of American General Corporation, a diversified insurance company. Mr.
Carruth has been a director of the Company since 1985 and serves on the Audit
Committee. Mr. Carruth is 39 years of age.
CLARENCE C. COMER has served as President and Chief Executive Officer of
Southdown, Inc., a cement and ready-mix concrete producer, since February 1987.
He is also a director of Southdown, Inc. Mr. Comer has been a director of the
Company since 1993 and serves on the Audit Committee. Mr. Comer is 49 years of
age.
GARY L. FORBES has been a Vice President and a director of Equus Capital
Corporation since November 1991. He also has been a Vice President and director
of Equus Capital Management Corporation and a Vice President of Equus II
Incorporated, a public investment company, since 1991. Mr. Forbes was President
of Coal & Timber, Inc., a natural resource investment company, from January 1991
to November 1991. From 1988 to 1990, Mr. Forbes was Vice President and the Chief
Financial Officer of Elders Resources North America, Inc., a United States-based
subsidiary of an Australian public company that made investments in natural
resources. Mr. Forbes also serves on the board of directors of NCI Building
Systems, Inc., a manufacturer of prefabricated metal buildings and Drypers
Corporation, a manufacturer of disposable diapers and related products. Mr.
Forbes is a certified public accountant and has been a director of the Company
since 1993. He serves on the Executive Committee and is 53 years of age.
W. D. HAWKINS, a private investor since 1980, founded Industrial Towel &
Uniform Co., a company which he developed through acquisitions into a major
industrial laundry in Texas. The company was sold to Cintas Corporation in 1980.
Mr. Hawkins has been a director of the Company since 1985 and serves on the
Compensation Committee. Mr. Hawkins is 84 years of age.
JAMES H. LIMMER has been a partner with the law firm of Tekell, Book,
Matthews & Limmer, L.L.P., in Houston, Texas, which specializes in all phases of
insurance defense, since July 1973. Mr. Limmer has been a director of the
Company since 1985 and serves on the Compensation Committee. Mr. Limmer is 55
years of age.
THOMAS E. SMITH has been President of High Island Oil Corp., an oil and gas
exploration and production company, since 1992. He has also served as a Vice
President of Smith Investments, an investment company with interests in mortgage
banking, oil and gas, and other businesses, since 1986. Mr. Smith has been a
director of the Company since 1993 and serves on the Audit Committee. Mr. Smith
is 39 years of age.
4
<PAGE>
DR. HUGH N. WEST, M.D., retired from his radiology practice in 1996. For
more than the prior five years he was a partner in Heights Radiology Associates
and a member of the Heights Hospital staff, both located in Houston, Texas. Dr.
West has been a director of the Company since 1985 and serves on the
Compensation Committee. Dr. West is 51 years of age.
COMMITTEES
During the fiscal year ended March 31, 1997, the Board held meetings and
acted by unanimous consent eight times. Each of the directors attended at least
75% of the meetings of the Board and of each committee on which he served.
The Board of Directors of the Company has established an Executive
Committee, an Audit Committee and a Compensation Committee. The Executive
Committee reviews and develops strategies and policies of the Company and
recommends changes thereto. During the fiscal year ended March 31, 1997, the
Executive Committee acted by unanimous consent three times. The Executive
Committee currently consists of Mr. Davis and Mr. Forbes.
The Audit Committee's functions include recommending to the Board of
Directors the engagement of the Company's independent public accountants,
reviewing with such accountants the plans for and the results and scope of their
auditing engagement and certain other matters, including the independence of
such accountants. The Audit Committee is composed solely of independent
directors. During the fiscal year ended March 31, 1997, the Audit Committee had
two meetings. The Audit Committee currently consists of Mr. Carruth, Mr. Comer
and Mr. Smith.
The Compensation Committee determines the compensation of directors,
executive officers and key employees and is composed solely of independent
directors. It also administers the Incentive Plan. During the fiscal year ended
March 31, 1997, the Compensation Committee met or acted by unanimous consent
five times. The Compensation Committee currently consists of Mr. Hawkins, Mr.
Limmer and Dr. West.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth certain
information regarding the compensation earned by or awarded to the Chief
Executive Officer ("CEO") of the Company and the other executive officers of
the Company for each of the three fiscal years ended March 31, 1997, 1996 and
1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
ANNUAL COMPENSATION ----------------------
NAME AND ---------------------------- SHARES UNDERLYING
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(1)
- ------------------------------------- ---- ----------- ------- ----------------------
<S> <C> <C> <C> <C>
Joe R. Davis......................... 1997 $ 228,000 $ - -
President and Chief 1996 228,000 - -
Executive Officer 1995 228,000 - 200
Mary K. Collins...................... 1997 82,832 50,000 20,000
Senior Vice President 1996 75,000 50,000 16,000
and Secretary 1995 75,000 40,000 18,200
G. Christopher Colville.............. 1997 82,832 80,000 30,000
Vice President -- Mergers and 1996 70,528 50,000 15,000
Acquisitions, Chief
Financial and Accounting Officer 1995 36,193 - 200
</TABLE>
- ------------
(1) Share numbers have been adjusted for the two-for-one split of the Common
Stock effected January 1997.
5
<PAGE>
STOCK OPTION GRANTS TABLE. The following table shows information
concerning the grant of stock options pursuant to the Incentive Plan during the
fiscal year ended March 31, 1997, to the executive officers named in the Summary
Compensation Table.
OPTIONS GRANTED IN FISCAL 1997(1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK PRICE
SHARES TOTAL OPTIONS EXERCISE OR APPRECIATION FOR OPTION
UNDERLYING GRANTED TO BASE PRICE TERM(2)
OPTIONS EMPLOYEES IN PER SHARE EXPIRATION ------------------------
NAME GRANTED FISCAL 1997 ($/SHARE)(3) DATE 5% 10%
- ------------------------------------- ---------- ------------- ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Mary K. Collins...................... 20,000 3.98% $12.25 10/7/2001 $ 67,688 $ 149,574
G. Christopher Colville.............. 30,000 5.98 12.25 10/7/2001 101,533 224,362
</TABLE>
- ------------
(1) Share numbers and related information have been adjusted for the
two-for-one split of Common Stock effected January 1997.
(2) The potential realizable value through the expiration date of options has
been determined on the basis of the per share market price at the time the
options were granted, compounded annually over ten years, net of the
exercise price. These values have been determined based upon assumed rates
of appreciation and are not intended to forecast the possible future
appreciation, if any, of the price or value of the Company's Common Stock.
(3) The exercise price per share for all options granted is equal to the
market price of the underlying Common Stock as of the date of grant.
STOCK OPTION EXERCISES AND YEAR-END VALUES TABLE. The following table
shows, as to the executive officers named in the Summary Compensation Table,
information with respect to the unexercised options to purchase Common Stock
granted under the Incentive Plan and held as of March 31, 1997.
OPTION EXERCISES IN FISCAL 1997
AND VALUE OF OPTIONS AT MARCH 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS
SHARES MARCH 31, 1997(1) AT MARCH 31, 1997(2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joe R. Davis......................... - $ - 200 - $ 4,600 $ -
Mary K. Collins...................... - - 28,600 25,600 626,649 479,200
G. Christopher Colville.............. - - 12,200 33,000 238,600 596,625
</TABLE>
- ------------
(1) Share numbers and related information have been adjusted for the
two-for-one split of Common Stock effected January 1997.
(2) Options are "in-the-money" if the closing market price of the Company's
Common Stock exceeds the exercise price of the options. The value of
unexercised options represents the difference between the exercise price
of such options and the closing market price of the Company's Common Stock
on March 31, 1997 ($28.625).
INCENTIVE PLAN
In March 1994, the Board of Directors and the shareholders of the Company
approved the adoption of the Incentive Plan. Pursuant to the Incentive Plan,
employees of the Company and directors who are not serving on the Compensation
Committee are eligible to receive awards consisting of stock options, stock
appreciation rights ("SARS"), restricted or nonrestricted stock, cash or any
combination of the foregoing. Stock options granted pursuant to the Incentive
Plan may either be
6
<PAGE>
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or nonqualified stock options.
To date, long-term incentive compensation has been awarded only in the form of
stock options. An aggregate of 1,935,000 shares of Common Stock have been
reserved for issuance pursuant to the Incentive Plan. At June 13, 1997, 822,600
shares were available for issuance pursuant to the Incentive Plan.
Options forfeited or expired revert to shares available under the Plan.
The Incentive Plan is administered by the Compensation Committee of the
Board of Directors. Subject to the provisions of the Incentive Plan, the
Compensation Committee is authorized to determine the type or types of awards
made to each participant and the terms, conditions and limitations applicable to
each award. In addition, the Compensation Committee has the exclusive power to
interpret the Incentive Plan, to grant waivers of restrictions thereunder and to
adopt such rules and regulations as it may deem necessary or appropriate in
keeping with the objectives of the Incentive Plan.
DIRECTOR COMPENSATION
Each director who is not an employee of the Company is paid $250 for each
meeting attended and is reimbursed for expenses incurred in attending meetings
of the Board of Directors and committee meetings of the Board of Directors.
Directors who are not members of the Compensation Committee are eligible to
receive grants under the Incentive Plan. On October 7, 1996, Mr. Forbes and Mr.
Alexander were each granted options to purchase 10,000 shares (adjusted to
reflect the two-for-one split of the Common Stock effected January 1997) of
Common Stock under the Incentive Plan. On April 4, 1997, 20% of each such option
became exercisable and an additional 20% will become exercisable on each
anniversary of the date of grant. The options expire on October 7, 2001.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Members of the Compensation Committee of the Board of Directors are Mr.
Hawkins, Mr. Limmer and Dr. West, all of whom are non-employee directors.
REPORT OF COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors reviews compensation
of directors and executive officers and also administers the Incentive Plan. The
Compensation Committee consists of three non-employee directors who met or acted
by unanimous consent five times during 1997.
At current compensation levels, the Committee does not expect Internal
Revenue Service regulations regarding maximum deductibility of executive
compensation to have any application to the Company.
COMPENSATION PHILOSOPHY AND COMPONENTS. The Company's executive
compensation philosophy is to employ, retain and reward executives capable of
leading the Company in creating and preserving strong financial performance,
increasing the assets of the Company through acquisitions, positioning the
Company's assets and business operations in geographic markets offering
long-term growth opportunities, and enhancing shareholder value. The executive
compensation program is intended to provide an overall level of compensation
that the Compensation Committee believes, based on its own judgment and
experience, is competitive with levels of compensation provided by other
companies in the industry. The companies used for comparisons of compensation
levels are not necessarily the same companies included within the printing
company index reflected in the Performance Graph because certain of those
companies are not comparable with the Company or its subsidiaries for
compensation purposes due to their size and operating philosophy. The companies
which the Company considers to be comparable for compensation purposes are
generally printing companies or other companies in similar industries, most of
which are not public companies. The primary components of the Company's
executive compensation program are annual cash compensation (salary and bonuses)
and long-term incentive compensation (stock options).
7
<PAGE>
CASH COMPENSATION. The cash compensation of executives is based on the
amount recommended to the Compensation Committee by the CEO based on his
subjective evaluation, including his perception of the individual's performance.
The CEO generally determines his recommendations by considering the potential
impact of the individual on the Company and its performance, the executive's
performance as a team member, the skills and experiences required by the
position and the overall performance of the Company. No one of the above factors
is considered to be more important than the others in all cases. Compensation
for executives is maintained at levels that the Compensation Committee believes,
based upon its own judgment and experience, are competitive in the industry.
LONG-TERM INCENTIVE COMPENSATION. Long-term incentives may be provided in
the form of stock options, stock appreciation rights, restricted or
nonrestricted stock, cash or any combination of the foregoing. To date,
long-term incentive compensation has been awarded only in the form of stock
options. One grant of stock options was made to executive officers and directors
in fiscal 1997. The grant was made to certain key employees on October 7, 1996,
at an exercise price of $12.25, the market price per share on the date of the
grant (as adjusted for the two-for-one stock split effected January 1997). On
November 6, 1996, 20% of the options became exercisable and an additional 20% of
the options become exercisable on each anniversary date of the grant.
Grants of stock options are made by the Compensation Committee. The
Compensation Committee considers all factors the members deem relevant,
including recommendations to the Committee by the CEO based on his subjective
evaluation and perception of the individual's performance. The CEO generally
determines his recommendations by considering the executive's contribution
toward Company performance and expected contribution toward meeting the
Company's long-term objectives and increasing value to shareholders. The value
received by the executives from option grants depends completely on increases in
the market price of the Company's Common Stock over the option exercise price.
Thus, this component of compensation is aligned directly with increases in value
to shareholders.
CHIEF EXECUTIVE OFFICER COMPENSATION. The Compensation Committee
considered a number of factors in approving the CEO's compensation for fiscal
1997. The factors considered by the Compensation Committee included, but were
not limited to, the Company's acquisitions of six companies in six new markets
as well as improving the Company's sales, income from operations and operating
cash flow. The CEO's cash compensation was judged by the Compensation Committee
to be fair and appropriate for the CEO taking into account a number of factors,
including the level of compensation paid to other executive officers of the
Company and the performance of the Company.
W. D. Hawkins
James H. Limmer
Hugh N. West
8
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the Company's Common Stock against the cumulative total return (change in stock
price plus reinvested dividends) of (i) the S&P 500 Stock Index and (ii) the
Industry Index for Printing Companies published by Media General Financial
Services for the period commencing June 9, 1994 (the date of the Company's
initial public offering) and ending March 31, 1997. The historical performance
of the Company's Common Stock reflected below is not necessarily indicative of
the Common Stock's future performance.
COMPARISON OF CUMULATIVE TOTAL RETURN
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
FISCAL YEAR ENDING
------------------------------------
COMPANY 1994 1995 1996 1997
- ------- ------ ------ ------ ------
CGX .................................. 100.00 97.87 146.81 487.23
BROAD MARKET ......................... 100.00 112.26 148.31 177.71
INDUSTRY INDEX ....................... 100.00 110.68 130.96 140.55
CERTAIN TRANSACTIONS
None
INDEPENDENT PUBLIC ACCOUNTANTS
The Company has selected Arthur Andersen LLP as the Company's independent
public accountants to audit the Company's financial statements for the fiscal
year ending March 31, 1998. Representatives of Arthur Andersen LLP are expected
to be present at the Annual Meeting, with the opportunity to make a statement if
they desire to do so, and are expected to be available to respond to appropriate
questions.
SHAREHOLDER PROPOSALS
Shareholders may present proposals for inclusion in the Company's 1998
proxy statement provided they are received by the Company no later than March
11, 1998, and are otherwise in compliance with applicable SEC regulations.
9
<PAGE>
GENERAL
Management does not intend to bring any business before the meeting other
than the matters referred to in the accompanying notice. If, however, any other
matters properly come before the meeting, it is intended that the persons named
in the accompanying proxy will vote pursuant to the proxy in accordance with
their best judgment on such matters.
OTHER INFORMATION
The cost of solicitation of proxies will be borne by the Company. Proxy
cards and materials will also be distributed to beneficial owners of Common
Stock through brokers, custodians, nominees and other like parties, and the
Company expects to reimburse such parties for their charges and expenses.
A COPY OF THE COMPANY'S MOST RECENT ANNUAL REPORT ON FORM 10-K WILL BE MADE
AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO: CONSOLIDATED GRAPHICS, INC.,
ATTENTION: INVESTOR RELATIONS, 2210 WEST DALLAS STREET, HOUSTON, TEXAS 77019.
MARY K. COLLINS
SENIOR VICE PRESIDENT AND
SECRETARY
<PAGE>
CONSOLIDATED GRAPHICS, INC.
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD WEDNESDAY, JULY 30, 1997
The undersigned hereby appoints Joe R. Davis and Mary K. Collins, jointly
and severally, proxies with full power of substitution and resubstitution and
with discretionary authority to represent and to vote, in accordance with the
instructions set forth on the reverse, all shares of Common Stock which the
undersigned is entitled to vote at the 1997 Annual Meeting of Shareholders of
Consolidated Graphics, Inc. and any adjournments thereof. In their discretion,
the proxies may vote for the election of directors (other than any for whom
authority to vote is withheld on the reverse), and upon such other business as
may properly come before the meeting.
IMPORTANT: SIGNATURE REQUIRED ON REVERSE SIDE
<PAGE>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
CONSOLIDATED GRAPHICS, INC.
JULY 30, 1997
PLEASE DETACH AND MAIL IN ENVELOPE PROVIDED
- --------------------------------------------------------------------------------
PLEASE MARK YOUR
[X] VOTE AS IN THIS
EXAMPLE
FOR all nominees
listed at right WITHHOLD AUTHORITY
except as marked to vote for all
to the contrary. nominees listed at right.
[ ] [ ]
1. Election of
Directors
Nominees: Joe R. Davis
(INSTRUCTIONS: To withhold Larry J. Alexander
authority to vote for any Brady F. Carruth
individual nominee strike a line Clarence C. Comer
through the nominee's name at Gary L. Forbes
right.) W. D. Hawkins
James H. Limmer
Thomas E. Smith
Hugh N. West
UNLESS A CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE DIRECTORS
LISTED AT LEFT AND FOR ALL OTHER PROPOSALS.
SIGNATURE_________________________________ ___________________________________
SIGNATURE IF HELD JOINTLY
Dated ____________ , 1997
NOTE: (If signing as Attorney, Administrator, Executor, Guardian, Trustee or
Corporate Officer, please give your title as such.)
