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
(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:
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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:
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4. Date Filed:
<PAGE>
July 6, 1998
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders to
be held in the Boardroom of Chase Bank of Texas, 707 Travis Street, Houston,
Texas 77002, on Wednesday, July 29, 1998 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 1998 Annual Report to Stockholders, which is not
part of the Proxy Statement, is also enclosed and provides additional
information regarding the financial results of the Company for the fiscal year
ended March 31, 1998.
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.
Joe R. Davis
CHAIRMAN
AND CHIEF EXECUTIVE OFFICER
<PAGE>
CONSOLIDATED GRAPHICS
5858 WESTHEIMER, SUITE 200
HOUSTON, TEXAS 77057
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD WEDNESDAY, JULY 29, 1998
To the Shareholders:
The Annual Meeting of Shareholders of Consolidated Graphics, Inc. (the
"Company") will be held in the Boardroom at Chase Bank of Texas, 707 Travis
Street, Houston, Texas 77002, on Wednesday, July 29, 1998 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 approve an amendment of the Company's Restated Articles of
Incorporation to increase the number of authorized shares of Common Stock
from 20,000,000 to 100,000,000.
3. To adopt the Second Amendment to the Consolidated Graphics, Inc.
Long-Term Incentive Plan (the "Incentive Plan") and the related
reservation of an additional 1,500,000 shares of Common Stock to be
available for issuance as provided for under the Incentive Plan.
4. 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 22, 1998
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, 5858 Westheimer, Suite 200, Houston, Texas 77057 and shall also be open
to examination at the Annual Meeting and any adjournments thereof.
By Order of the Board of Directors
G. Christopher Colville
SECRETARY
Houston, Texas
July 6, 1998
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
5858 WESTHEIMER, SUITE 200
HOUSTON, TEXAS 77057
------------------------
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 Chase Bank of Texas, 707 Travis Street, Houston,
Texas 77002, on Wednesday, July 29, 1998 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 6, 1998.
Each proxy executed and returned by a shareholder may be revoked at any
time before it is voted at the Annual Meeting by filing a written instrument
revoking it with the Secretary at the Company's executive offices, by execution
and return of a later-dated proxy, or by appearing at the Annual Meeting and
voting in person. The executive offices of the Company are located at 5858
Westheimer, Suite 200, Houston, Texas 77057.
Proxies in the accompanying form will be voted in accordance with the
specifications made thereon and, where no specifications are given, such proxies
will be voted (i) 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, (ii) FOR the amendment to the Company's Restated
Articles of Incorporation to increase the number of authorized shares of Common
Stock, par value $.01 per share, of the Company ("Common Stock") from
20,000,000 to 100,000,000, and (iii) FOR the adoption of the Second Amendment to
the Consolidated Graphics, Inc. Long-Term Incentive Plan (the "Incentive
Plan") and the related reservation of an additional 1,500,000 shares of Common
Stock to be available for issuance as provided for under the Incentive Plan.
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 22, 1998 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 22, 1998 consisted of 13,213,058
shares of 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.
1
<PAGE>
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. The proposed
amendment to the Company's Restated Articles of Incorporation will require the
affirmative vote of two-thirds of the shares of the Company's outstanding Common
Stock. The proposed amendment to the Company's Incentive Plan will require the
affirmative vote of a majority 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. 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 on director elections since only
a plurality vote is required for approval but will have the same effect as a
vote against the proposed amendment to the Company's Restated Articles of
Incorporation since approval of that amendment requires approval by two-thirds
of the Company's outstanding Common Stock and against the proposed amendment to
the Company's Incentive Plan since approval of that amendment requires approval
by a majority of the shares represented in person or by proxy and entitled to
vote at the meeting.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of June 22, 1998 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)......................... 1,454,500 11.0%
Jeffrey N. Vinik, Michael S. Gordon and
Mark D. Hostetter(5).................. 1,258,900 9.5
Pilgrim, Baxter & Associates, Ltd.(6)... 1,202,700 9.1
Hugh N. West. .......................... 185,000 1.4
James H. Limmer......................... 128,500 *
Brady F. Carruth. ...................... 53,770 *
Gary L. Forbes. ........................ 40,548 *
G. Christopher Colville................. 29,000 *
Clarence C. Comer....................... 20,000 *
Thomas E. Smith......................... 16,000 *
W. D. Hawkins........................... 5,980 *
Larry J. Alexander. .................... 6,000 *
All directors and executive officers as
a group (11 persons, including the
directors and executive officers named
above)................................ 1,939,298 14.6
- ------------
* 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
<PAGE>
(2) 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 22, 1998, as
follows: Mr. Davis, 200 shares; Mr. Forbes, 16,000 shares; Mr. Colville,
6,200 shares; Mr. Smith, 16,000 shares; and Mr. Alexander, 4,000 shares.
(3) The percentage of class owned by each person has been calculated using the
13,213,058 shares outstanding at June 22, 1998 plus any shares issuable upon
exercise of options owned by such person exercisable within 60 days and
deemed to be outstanding pursuant to Rule 13d-3(d)(1) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
(4) The address of Mr. Davis is 5858 Westheimer, Suite 200, Houston, Texas
77057.
(5) Based on a Schedule 13G filed with the SEC as of April 2, 1998. The address
of each of the listed individuals is 260 Franklin Street, Boston,
Massachusetts 02110. Vinik Partners L.P., a Delaware limited partnership
("Vinik Partners"), owns 565,900 shares of Common Stock. VGH Partners,
L.L.C., a Delaware limited liability company ("VGH"), is the general
partner of Vinik Partners and as such may be deemed to beneficially own the
shares owned by Vinik Partners. Vinik Overseas Fund Ltd. owns 693,000 shares
of Common Stock. Pursuant to an investment management agreement, Vinik Asset
Management, L.L.C., a Delaware limited liability company ("VAM LLC"), as
general partner of Vinik Asset Management, L.P. ("VAM LP"), has investment
authority over such 693,000 shares of Common Stock and as such VAM LLC and
VAM LP may be deemed to beneficially own such shares of Common Stock.
Jeffrey N. Vinik is the senior managing member of VGH and VAM LLC, and
Michael S. Gordon and Mark D. Hostetter are managing members of such
entities, and as such those individuals share the voting and dispositive
power over such shares and may be deemed to beneficially own such shares.
(6) Based on a Schedule 13F dated as of May 13, 1998. The address of Pilgrim
Baxter & Associates, Ltd. ("Pilgrim") is 825 Duportail Road, Wayne,
Pennsylvania 19087.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who own more than 10% of a registered class of
the Company's equity securities to file with the SEC and The New York Stock
Exchange initial reports of ownership and reports of changes in ownership of
Common Stock. Officers, directors and greater than 10% stockholders are required
by SEC regulation to furnish the Company with copies of all such forms they
file. 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.
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 1999. 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.
3
<PAGE>
BOARD RECOMMENDATION; VOTE REQUIRED
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 ALL OF 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 is required to 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.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR A ONE YEAR TERM EXPIRING AT THE ANNUAL MEETING IN 1999
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 55 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 56
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 40 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 50 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 54 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
4
<PAGE>
Cintas Corporation in 1980. Mr. Hawkins has been a director of the Company since
1985 and serves on the Compensation Committee. Mr. Hawkins is 85 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 56
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 40 years of age.
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 52 years of age.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
During the fiscal year ended March 31, 1998, the Board held meetings and
acted by unanimous consent six 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, 1998, the
Executive Committee held meetings and acted by unanimous consent 13 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, 1998, the Audit Committee had
three 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, 1998, the Compensation Committee met or acted by unanimous consent six
times. The Compensation Committee currently consists of Mr. Hawkins, Mr. Limmer
and Dr. West.
5
<PAGE>
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, 1998, 1997 and
1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
ANNUAL COMPENSATION -----------------------
NAME AND ------------------------------- SHARES UNDERLYING
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS
- ------------------------------------- --------- -------- ------- -----------------------
<S> <C> <C> <C>
Joe R. Davis......................... 1998 $228,000 $ -- --
President and Chief 1997 228,000 -- --
Executive Officer 1996 228,000 -- --
G. Christopher Colville.............. 1998 101,250 100,000 15,000
Executive Vice President -- Mergers 1997 82,832 80,000 30,000
and Acquisitions, Chief Financial 1996 70,528 50,000 15,000
and Accounting Officer and
Secretary(1)
Mary K. Collins(2)................... 1998 49,583 -- 10,000
Senior Vice President 1997 82,832 50,000 20,000
and Secretary 1996 75,000 50,000 16,000
Harold E. Gaubert, Jr.(2)............ 1998 72,271 -- 15,000
Executive Vice President -- Finance
and Administration, Chief Financial
and Accounting Officer and
Secretary
- ------------
</TABLE>
(1) Mr. Colville was appointed Chief Financial and Accounting Officer and
Secretary in April 1998.
(2) Ms. Collins resigned from the Company in October, 1997 and Mr. Gaubert
resigned from the Company in February 1998.
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, 1998 to the executive officers named in the Summary
Compensation Table.
OPTIONS GRANTED IN FISCAL 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SHARES TOTAL OPTIONS EXERCISE OR PRICE APPRECIATION FOR
UNDERLYING GRANTED TO BASE PRICE OPTION TERM(1)
OPTIONS EMPLOYEES IN PER SHARE EXPIRATION ----------------------
NAME GRANTED FISCAL 1998 ($/SHARE)(2) DATE 5% 10%
- ------------------------------------- ---------- -------------- ------------ ----------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
G. Christopher Colville.............. 15,000 5.9% $37.13 12/17/02 $ 171,300 $ 383,700
Mary K. Collins(3)................... 10,000 3.9 37.13 12/17/02 114,200 255,800
Harold E. Gaubert, Jr.(3)............ 15,000 5.9 48.50 3/18/03 223,950 501,450
</TABLE>
- ------------
(1) 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 the life of the option, 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.
(2) 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.
(3) Such options were forfeited upon Ms. Collins' and upon Mr. Gaubert's
resignation from the Company.
6
<PAGE>
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 stock options exercised during the fiscal year ended
March 31, 1998 and the unexercised options to purchase Common Stock granted
under the Incentive Plan and held as of March 31, 1998.
OPTION EXERCISES IN FISCAL 1998
AND VALUE OF OPTIONS AT MARCH 31, 1998
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS
SHARES MARCH 31, 1998 AT MARCH 31, 1998(1)
ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C>
Joe R. Davis............................ -- $ -- 200 -- $10,450 --
Mary K. Collins......................... 35,800 1,501,951 -- -- -- --
G. Christopher Colville................. 21,000 890,250 200 39,000 10,450 1,443,750
- ------------
</TABLE>
(1) 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, 1998 ($57.88).
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 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, of which 623,442
shares were available for issuance pursuant to the Incentive Plan as of June 22,
1998. The Board of Directors has adopted, subject to approval by the
shareholders of the Company, an amendment to the Incentive Plan to increase the
number of shares that can be issued pursuant to the Incentive Plan by 1,500,000.
See "Amendment to 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.
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 six times during fiscal 1998.
7
<PAGE>
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).
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. Two grants of stock options were made to executive officers and
directors in fiscal 1998. The grants were made on June 20, 1997 and September
19, 1997, at an exercise price of $37.125 and $48.50, respectively, the market
price per share on the date of each grant. Pursuant to the stock option
agreements, 20% of the options become exercisable on each anniversary date of
the grant until 100% vested.
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
1998. The factors considered by the Compensation Committee included, but were
not limited to, the Company's acquisition of 13 companies during fiscal 1998 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
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<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, 1998. 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]
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Consolidated Graphics, Inc. ......... 100.00 97.87 146.81 487.23 985.11
S&P 500 Stock Index.................. 100.00 112.26 148.31 177.71 263.00
Media General Printing............... 100.00 110.68 130.96 140.55 163.30
Company Index...................
</TABLE>
CERTAIN TRANSACTIONS
None
9
<PAGE>
AMENDMENT TO RESTATED
ARTICLES OF INCORPORATION
DESCRIPTION OF PROPOSED CHARTER AMENDMENT
On June 16, 1998, the Board of Directors unanimously adopted resolutions
approving a proposal to amend Article IV of the Company's Restated Articles of
Incorporation (the "Charter Amendment") in order to increase the aggregate
number of shares which the Company is authorized to issue from 25,000,000 to
105,000,000. Currently, the Company is authorized to issue 20,000,000 shares of
Common Stock and 5,000,000 shares of preferred stock, par value $1.00 per share
("Preferred Stock"). If the Charter Amendment is effected, the Company will be
authorized to issue 100,000,000 shares of Common Stock and 5,000,000 shares of
Preferred Stock. The first sentence of Article IV of the Restated Articles of
Incorporation, as proposed to be amended, would read as follows: "The aggregate
number of shares of capital stock which the Corporation shall have authority to
issue is 105,000,000, of which 100,000,000 shares are classified as Common
Stock, par value $.01 per share ("Common Stock"), and 5,000,000 shares are
classified as Preferred Stock, par value $1.00 per share ("Preferred
Stock")."
PURPOSE AND EFFECT OF THE PROPOSED CHARTER AMENDMENT
At June 22, 1998, 13,213,058 shares of Common Stock were issued and
outstanding and 1,935,000 shares of Common Stock were reserved for issuance
under the Incentive Plan. The proposed Charter Amendment would provide an
additional 84,851,942 shares of Common Stock for future issuance.
The Board of Directors is of the opinion that the proposed increase in the
number of authorized shares of Common Stock is in the best interest of the
Company and its shareholders. The Board of Directors believes that the Company
should have sufficient authorized but unissued shares for issuance in connection
with stock splits and stock dividends, implementation of employee benefit plans,
offer of shares for cash, mergers and acquisitions, and other proper business
purposes. In many such situations, prompt action may be required which would not
permit seeking shareholder approval to authorize additional shares for the
specific transaction on a timely basis. The Board of Directors believes that it
is important to have the flexibility to act promptly in the best interests of
shareholders. Other than with respect to the proposed amendment to the Incentive
Plan increasing the number of shares available for issuance thereunder by
1,500,000, the Board of Directors has no immediate plans, understandings,
agreements or commitments to issue additional Common Stock for any purposes.
Once the Charter Amendment is effected, the Board of Directors may issue
the additional shares without further shareholder approval, unless such approval
is required by applicable law or the rules of any stock exchange on which the
Company's securities may be listed. The New York Stock Exchange, for example,
requires specific shareholder approval as a prerequisite to listing shares in
several instances, including an acquisition transaction where the present or
potential issuance of shares could result in an increase of 20% or more in the
number of shares of Common Stock outstanding. Under the Company's Restated
Articles of Incorporation, the Company's shareholders do not have preemptive
rights with respect to Common Stock. Thus, should the Board of Directors elect
to issue additional shares of Common Stock, the existing shareholders would not
have any preferential rights to purchase such shares. In addition, if the Board
of Directors elects to issue additional shares of Common Stock, such issuance
could have a dilutive effect on the earnings per share, voting power and
shareholdings of current shareholders. The availability for issuance of
additional shares of Common Stock could enable the Board of Directors to render
more difficult or discourage an attempt to obtain control of the Company by
issuing shares of Common Stock and thereby diluting the voting power of a party
attempting to obtain control of the Company. The Company is not aware of any
pending or threatened efforts to obtain control of the Company.
BOARD RECOMMENDATION; VOTE REQUIRED
The Board of Directors believes that the Charter Amendment is in the best
interest of the Company and its shareholders. THE BOARD THEREFORE RECOMMENDS A
VOTE FOR APPROVAL OF THE CHARTER AMENDMENT
10
<PAGE>
AND IT IS INTENDED THAT PROXIES NOT MARKED TO THE CONTRARY WILL BE SO VOTED.
Approval of the Charter Amendment requires a vote FOR approval by two-thirds of
the outstanding shares of Common Stock.
AMENDMENT TO INCENTIVE PLAN
EXISTING LONG-TERM INCENTIVE PLAN
In March 1994, the shareholders of the Company approved the adoption of the
Incentive Plan, which provides for the granting to employees of the Company and
its participating subsidiaries and to non-employee directors of the Company
other than directors serving as members of the Compensation Committee of
incentive awards in the form of stock options, SARs, restricted and unrestricted
stock and cash. The Compensation Committee of the Board of Directors has
discretion to select the individuals to be granted awards, to determine the
type, size and terms of such awards, and to determine the time when awards will
be granted and to prescribe the form of the instruments evidencing awards made
under the Incentive Plan.
Options are rights to purchase a specified number of shares of Common Stock
with cash or other shares of Common Stock owned by the optionee or both. Options
are exercisable at such time and upon such terms as are determined by the
Compensation Committee and may constitute either incentive stock options within
the meaning of Section 422 of the Code or nonqualified options. SARs are rights
to receive, without payment to the Company, cash or shares of Common Stock or
both in lieu of the purchase of shares of Common Stock under the related stock
options to which the SARs are attached. A restricted stock award is an award of
shares of Common Stock that may be subject to a restriction against transfer
during a period set by the Compensation Committee. During such period, the
participant generally has the right to vote and receive dividends on the shares
covered by the restricted stock awards.
The Incentive Plan currently provides for the issuance of up to a total of
1,935,000 shares of the Company's Common Stock. Awards under the Incentive Plan
are subject to adjustment in the event of a stock dividend, stock split,
recapitalization or combination of the Common Stock. In the event of certain
mergers, consolidations, plans of exchange or other reorganizations of the
Company, outstanding awards under the Incentive Plan are subject to adjustment
to reflect the terms of such transaction.
Awards under the Incentive Plan are not transferable except by will or by
the laws of descent and distribution or pursuant to a qualified domestic
relations order. The Incentive Plan allows for the satisfaction of a
participant's tax withholding in respect of an award by the withholding of cash
or shares of Common Stock issuable pursuant to the award or the delivery by the
participant of previously owned shares of Common Stock, in either case valued at
the fair market value thereof.
The Incentive Plan may be amended by the Board of Directors, except that no
amendment may be made without shareholder approval to the extent such approval
is then required pursuant to Rule 16b-3 of the Securities Exchange Act of 1934,
as amended, in order to preserve the applicability of any exemption provided by
such rule to any award then outstanding (unless the holder of such award
consents) or to the extent shareholder approval is otherwise required, and no
amendment that adversely affects any right of a participant with respect to any
award previously granted may be made without the consent of the participant.
PROPOSED PLAN AMENDMENT
As noted above, the Incentive Plan currently provides for the issuance of
up to 1,935,000 shares of Common Stock. As of June 22, 1998, a total of 502,510
shares had been issued under the Incentive Plan and awards covering an
additional 809,048 shares are outstanding, leaving 623,442 shares available for
future awards. On June 16, 1998, the Board of Directors approved a proposed
amendment to the Incentive Plan that would increase the number of shares of
Common Stock subject to the plan by 1,500,000 (the "Plan Amendment "). The
proposed Plan Amendment will permit additional awards to be granted to encourage
the acquisition of Common Stock by employees and non-employee directors and to
strengthen the Company's ability to attract, motivate and retain employees and
non-employee directors with appropriate experience and ability. Awards would be
granted to enhance the recruitment and retention of highly
11
<PAGE>
qualified employees and non-employee directors and to strengthen the commonality
of interest among employees, directors and shareholders.
The Board believes that the proposed Plan Amendment is in the best interest
of the Company and its shareholders. THE BOARD THEREFORE RECOMMENDS A VOTE FOR
THE PROPOSED PLAN AMENDMENT AND IT IS INTENDED THAT THE PROXIES NOT MARKED TO
THE CONTRARY WILL BE SO VOTED. The affirmative vote of the holders of a majority
of the outstanding shares of Common Stock present, in person or by proxy, and
entitled to vote at the meeting is required to approve the proposed Plan
Amendment.
CERTAIN TAX CONSEQUENCES
Options granted under the Incentive Plan may constitute either "incentive
stock options" within the meaning of Section 422 of the Code or nonqualified
options. In certain instances, the tax treatment under the Code of stock options
qualifying as incentive stock options is more favorable to employees than the
tax treatment accorded nonqualified options. Generally, upon the exercise of an
incentive stock option, the optionee will recognize no income for federal income
tax purposes. The difference between the exercise price of the incentive stock
option and the fair market value of the Common Stock at the time of purchase is,
however, an adjustment to alternative minimum taxable income that may require
payment of an alternative minimum tax. On the sale of the shares acquired by
exercise of an incentive stock option (assuming that the sale does not occur
within two years from the date of grant of the option or within one year from
the date of exercise), any gain will be taxed to the optionee as capital gain.
The Company will not be entitled to a tax deduction upon the grant or exercise
of an incentive stock option, except to the extent an optionee recognizes
ordinary income as a result of the disposition of the shares prior to the
expiration of the required holding period.
Upon the exercise of a nonqualified option, the optionee recognizes taxable
income (subject to withholding) in an amount equal to the difference between the
fair market value on the date of exercise of the Common Stock purchased and the
exercise price. Upon any sale of shares acquired upon exercise of a nonqualified
option, any difference between the sales price and the fair market value of the
shares on the date of exercise of the nonqualified option will be treated
generally as capital gain or loss. Upon the exercise of a nonqualified option,
the Company is entitled to a deduction for federal income tax purposes in an
amount equal to the income recognized by the optionee.
The grant of a SAR will produce no U.S. federal tax consequences for the
participant or the Company. The exercise of a SAR results in taxable income to
the participant, equal to the difference between the exercise price of the
shares and the market price of the shares on the date of exercise, and a
corresponding tax deduction to the Company.
A participant under the Incentive Plan who has been granted an award of
restricted shares of Common Stock will not realize taxable income at the time of
the grant, and the Company will not be entitled to a tax deduction at the time
of the grant, unless the participant makes an election to be taxed at that time.
When the restrictions lapse, the participant will recognize taxable income in an
amount equal to the excess of the fair market value of the shares at such time
over the amount, if any, paid for such shares. The Company will be entitled to a
corresponding tax deduction. Any dividends paid to the participant during the
restriction period will be compensation income to the participant and deductible
as such by the Company. The holder of a restricted stock award may elect to be
taxed at the time of the grant of the restricted stock award on the market value
of the shares, in which case (i) the Company will be entitled to a deduction at
the same time and in the same amount, (ii) any dividends paid to the participant
during the restriction period will be taxable as dividends to him and not
deductible by the Company and (iii) there will be no further federal income tax
consequences when the restrictions lapse.
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, 1999. Representatives of
12
<PAGE>
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 1999
proxy statement provided they are received by the Company no later than March 8,
1999, and are otherwise in compliance with applicable SEC regulations.
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, 5858 WESTHEIMER, SUITE 200, HOUSTON, TEXAS 77057.
G. Christopher Colville
SECRETARY
13
<PAGE>
CONSOLIDATED GRAPHICS, INC.
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD WEDNESDAY, JULY 29, 1998
The undersigned hereby appoints Joe R. Davis and Ronald E. Hale, Jr.,
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 1998 Annual Meeting of
Shareholders of Consolidated Graphics, Inc. and any adjournments thereof. Shares
represented by this proxy will be voted as directed by the shareholder. If no
such directions are indicated, the proxies will have authority to vote FOR Item
1 (the election of directors other than any for whom authority to vote is
withheld on the reverse) FOR Item 2 (amendment to Restated Articles of
Incorporation) and FOR Item 3 (amendment to Incentive Plan). In their
discretion, the proxies are authorized to vote upon such other business as may
properly come before the meeting.
IMPORTANT: SIGNATURE REQUIRED ON REVERSE SIDE
<PAGE>
Please mark your
votes as in this
example
1. Election
of
Directors
listed to
right.
FOR all nominees
listed to right
except as marked
to the contrary
WITHHOLD AUTHORITY
to vote for all
nominees listed to right
Nominees: Joe R. Davis
Larry J. Alexander
Brady F. Carruth
Clarence C. Comer
Gary L. Forbes
W.D. Hawkins
James M. Limmer
Thomas E. Smith
Hugh H. West
(Instructions: To withhold authority to vote for any individual nominee strike a
line through the nominee's name at right)
2. Amendment to Restated Articles of Incorporation to increase the number of
authorized shares of Common Stock from 20,000,000 to 100,000,000.
FOR AGAINST ABSTAIN
3. Second Amendment to Incentive Plan and
related reservation of an additional 1,500,000 shares
of Common Stock to be available for issuance thereunder.
THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE
BOARD OF DIRECTORS AND MAY BE REVOKED PRIOR TO ITS
EXERCISE. THE BOARD OF DIRECTORS RECOMMENDS A
VOTE "FOR" PROPOSALS 1, 2 AND 3. THIS PROXY WHEN
PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS MADE IT WILL BE VOTED "FOR" PROPOSALS 1,
2 AND 3.
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING,
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
<PAGE>
Signature
Date: , 1998
NOTE: (If signing as Attorney, Administrator, Executor, Guardian, Trustee or
Corporate Officer, please add your title as such)
