CONSOLIDATED GRAPHICS INC /TX/
10-Q, 1998-08-14
COMMERCIAL PRINTING
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                                    UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                      FORM 10-Q

                                   (MARK ONE)

                 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998

                                       OR

                [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

              FOR THE TRANSITION PERIOD FROM ___________ TO ___________

                         COMMISSION FILE NUMBER 0-24068

                             CONSOLIDATED GRAPHICS, INC.
                (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                 TEXAS                                 76-0190827
    (STATE OR OTHER JURISDICTION OF          (IRS EMPLOYER IDENTIFICATION NO.)
    INCORPORATION OR ORGANIZATION)

              5858 WESTHEIMER ROAD, SUITE 200, HOUSTON, TEXAS 77057
              (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)       (ZIP CODE)

          Registrant's telephone number, including area code: (713) 797-0977

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                 Yes [X] No [ ]

The number of shares of Common Stock, par value $.01 per share, of the
Registrant outstanding at July 31, 1998 was 13,293,726.
<PAGE>
                             CONSOLIDATED GRAPHICS, INC.
                FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998

                                        INDEX
                                                                            PAGE
Part I -- Financial Information

      Item 1 -- Financial Statements

            Consolidated Balance Sheets at,
            June 30, 1998 and March 31, 1998............................       1

            Consolidated Income Statements for the
            Three Months Ended June 30, 1998 and 1997...................       2

            Consolidated Statements of Cash Flows for the
            Three Months Ended June 30, 1998 and 1997...................       3

            Notes to Consolidated Financial Statements..................       4

      Item 2 -- Management's Discussion and Analysis of
             Financial Condition and Results of Operations..............       6

Part II -- Other Information

      Item 1 -- Legal Proceedings.......................................      10

      Item 2 -- Changes in Securities and Use of Proceeds...............      10

      Item 3 -- Defaults upon Senior Securities ........................      10

      Item 4 -- Submission of Matters to a Vote of Security Holders.....      10

      Item 5 -- Other Information.......................................      10

      Item 6 -- Exhibits and Reports on Form 8-K........................      11

Signatures..............................................................      12

                                       i
<PAGE>
                             CONSOLIDATED GRAPHICS, INC.
                             CONSOLIDATED BALANCE SHEETS
                   (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

                                                           JUNE 30,    MARCH 31,
                                                             1998         1998
                                                           --------     --------
      ASSETS                                              (UNAUDITED)  (AUDITED)

CURRENT ASSETS:
      Cash and cash equivalents ......................     $  6,238     $  5,268
      Accounts receivable, net .......................       65,308       51,008
      Inventories ....................................       20,094       13,074
      Prepaid expenses ...............................        2,873        2,129
                                                           --------     --------
         Total current assets ........................       94,513       71,479

PROPERTY AND EQUIPMENT, net ..........................      172,349      135,892

GOODWILL, net ........................................       42,961       28,157

OTHER ASSETS .........................................        1,841        2,117
                                                           --------     --------
                                                           $311,664     $237,645
                                                           ========     ========
      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

      Current portion of long-term debt ..............     $  2,649     $  2,438
      Accounts payable ...............................       20,786       22,276
      Accrued liabilities ............................       28,153       18,863
      Income taxes payable ...........................        3,028           33
                                                           --------     --------
         Total current liabilities ...................       54,616       43,610

LONG-TERM DEBT, net of current portion ...............      111,176       73,030

DEFERRED INCOME TAXES ................................       20,363       15,673

COMMITMENTS AND CONTINGENCIES ........................         --           --

SHAREHOLDERS' EQUITY:
      Common stock, $.01 par value;
      20,000,000 shares authorized; 13,288,626
      and 12,959,932 issued and outstanding ..........          132          129
      Additional paid-in capital .....................       73,302       59,658
      Retained earnings ..............................       52,075       45,545
                                                           --------     --------
         Total shareholders' equity ..................      125,509      105,332
                                                           --------     --------
                                                           $311,664     $237,645
                                                           ========     ========

          See accompanying notes to consolidated financial statements.

                                       1
<PAGE>
                             CONSOLIDATED GRAPHICS, INC.
                         CONSOLIDATED INCOME STATEMENTS
                        (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                     (UNAUDITED)

                                                           THREE MONTHS ENDED
                                                                  JUNE 30
                                                          ----------------------
                                                           1998           1997
                                                          -------        -------
SALES ............................................        $85,100        $50,675

COST OF SALES ....................................         58,014         34,745
                                                          -------        -------
   Gross profit ..................................         27,086         15,930

SELLING EXPENSES .................................          8,291          4,931

GENERAL AND ADMINISTRATIVE EXPENSES ..............          6,619          3,880
                                                          -------        -------
   Operating income ..............................         12,176          7,119

INTEREST EXPENSE .................................          1,471            894
                                                          -------        -------
   Pretax income .................................         10,705          6,225

INCOME TAXES .....................................          4,175          2,365
                                                          -------        -------
NET INCOME .......................................        $ 6,530        $ 3,860
                                                          =======        =======
BASIC EARNINGS PER SHARE .........................        $   .50        $   .31
                                                          =======        =======
DILUTED EARNINGS PER SHARE .......................        $   .48        $   .30
                                                          =======        =======

             See accompanying notes to consolidated financial statements.

                                       2
<PAGE>
                             CONSOLIDATED GRAPHICS, INC.
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                     (UNAUDITED)


                                                           THREE MONTHS ENDED
                                                                 JUNE 30
                                                          ----------------------
                                                            1998        1997
                                                          ---------    --------
OPERATING ACTIVITIES:
Net income ............................................   $   6,530    $  3,860
Adjustments to reconcile net income to net cash
provided by operating activities --
      Depreciation and amortization ...................       3,573       2,046
      Deferred tax provision ..........................       1,092         122
      Changes in assets and liabilities, net of
       effects of acquisitions--
         Accounts receivable ..........................       1,958      (3,509)
         Inventories ..................................      (1,201)      2,669
         Prepaid expenses .............................        (356)        261
         Other assets .................................         490        (341)
         Accounts payable and accrued liabilities .....      (1,377)        267
         Income taxes payable .........................       3,063       1,914
                                                          ---------    --------
           Net cash provided by operating activities ..      13,772       7,289
                                                          ---------    --------
INVESTING ACTIVITIES:
      Acquisitions of businesses, net of cash
       acquired .......................................     (42,521)     (7,633)
      Purchases of property and equipment .............      (6,054)     (3,219)
      Proceeds from disposition of assets .............          41         948
                                                          ---------    --------
           Net cash used in investing activities ......     (48,534)     (9,904)
                                                          ---------    --------
FINANCING ACTIVITIES:
      Proceeds from revolving credit agreement ........     106,483      49,865
      Payments on revolving credit agreement ..........     (70,588)    (46,813)
      Payments on long-term debt ......................        (665)       (671)
      Proceeds from exercise of stock options and
       other ..........................................         502         114
                                                          ---------    --------
           Net cash provided by financing activities ..      35,732       2,495
                                                          ---------    --------
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS ...         970        (120)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ......       5,268       3,636
                                                          ---------    --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............   $   6,238    $  3,516
                                                          =========    ========

             See accompanying notes to consolidated financial statements.

                                       3
<PAGE>
                             CONSOLIDATED GRAPHICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                     (UNAUDITED)

1.  BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

      The accompanying unaudited consolidated financial statements include the
accounts of Consolidated Graphics, Inc. and its wholly owned subsidiaries (the
"Company"). All intercompany accounts and transactions have been eliminated.

      The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and the
Securities and Exchange Commission's rules and regulations for reporting interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation of
the accompanying unaudited consolidated financial statements have been included.
Operating results for the three months ended June 30, 1998 are not necessarily
indicative of future operating results. Balance sheet information as of March
31, 1998 has been derived from the 1998 annual audited consolidated financial
statements of the Company. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Form 10-K
filed with the Securities and Exchange Commission in June 1998.

      Basic earnings per share are calculated by dividing net income by the
weighted average number of common shares outstanding. For the three months ended
June 30, 1998 and 1997, the basic weighted average shares outstanding were
13,051,965 and 12,454,675. Diluted earnings per share reflect net income divided
by the weighted average number of common shares and include the dilutive effect
of stock options outstanding. For the three months ended June 30, 1998 and 1997,
the diluted weighted average number of common shares and stock options
outstanding were 13,493,581 and 12,949,018.

      The consolidated statements of cash flows provide information about the
sources and uses of cash and exclude the effects of non-cash transactions.
Significant non-cash transactions primarily include the issuance of common stock
and the issuance or assumption of debt in connection with the acquisition of
certain printing businesses (see Note 3 Acquisitions). Additionally, equipment
capital expenditures financed by the Company, totaling $3,050 for the three
months ended June 30, 1998, and the effect of accounts payable totaling $3,306
and $2,300 as of June 30,1998 and 1997, related to the purchase of certain
printing presses, have been eliminated from the accompanying consolidated
statements of cash flows. The following is a summary of total cash paid for
interest and income taxes (net of refunds).
 
                                                        THREE MONTHS ENDED
                                                               JUNE 30
                                                      -------------------------
CASH PAID (RECEIVED) FOR:                              1998               1997
                                                      -------             ----
Interest ...............................              $ 1,259             $800
Taxes (i) ..............................              ($1,780)            $208

      (i) Reflects a federal tax refund of $1,800 pertaining to a tax benefit
      resulting from the exercise of employee stock options in fiscal 1998 and
      1997.

2.  LONG-TERM DEBT

      The following is a summary of the Company's long-term debt as of:

                                                     JUNE 30,          MARCH 31,
                                                      1998               1998
                                                    ---------          --------
Revolving credit agreement ................         $  90,777          $ 54,881
Term equipment notes ......................            16,482            12,997
Other .....................................             6,566             7,590
                                                    ---------          --------
                                                      113,825            75,468
Less current portion ......................            (2,649)           (2,438)
                                                    ---------          --------
                                                    $ 111,176          $ 73,030
                                                    =========          ========

                                       4
<PAGE>
                             CONSOLIDATED GRAPHICS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
                   (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                     (UNAUDITED)

      In June 1997, the Company entered into a $100 million revolving credit
agreement (the "Credit Agreement") with a six-member banking group. The Credit
Agreement, scheduled to mature on May 31, 2000, was increased on August 4, 1998,
to $200 million and the maturity date was extended until July 31, 2001.
Borrowings outstanding under the Credit Agreement are unsecured and accrue
interest at a variable rate (an average of 6.3% per annum on June 30, 1998). The
Company is also required to pay under the Credit Agreement a commitment fee on
available but unused amounts ranging from .10% to .35% per annum.

3.  ACQUISITIONS

      The Company completed the following acquisitions during the three months
ended June 30, 1998:

                COMPANY                 PRIMARY MARKET           DATE
          -------------------     --------------------------   ----------
          Tursack, Inc.           Philadelphia, Pennsylvania   April 1998
          Image Systems           Milwaukee, Wisconsin         May 1998
          Printing, Inc.          Wichita, Kansas              June 1998
          Graphic Communications  San Diego, California        June 1998
          Wetzel Brothers         Milwaukee, Wisconsin         June 1998

      To complete the aforementioned acquisitions, in the aggregate, the Company
paid cash of $42,521 and issued 248,210 shares of its common stock valued at
$12,962.

      Subsequent to June 30, 1998, the Company completed the acquisition of two
printing businesses and signed non-binding letters of intent to acquire eight
additional companies.

                                       5
<PAGE>
                             CONSOLIDATED GRAPHICS, INC.
                       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                    FINANCIAL CONDITION AND RESULTS OF OPERATIONS

      THE FOLLOWING DISCUSSIONS CONTAIN FORWARD-LOOKING INFORMATION. READERS ARE
CAUTIONED THAT SUCH INFORMATION INVOLVES RISKS AND UNCERTAINTIES, INCLUDING
THOSE CREATED BY GENERAL MARKET CONDITIONS, COMPETITION AND THE POSSIBILITY THAT
EVENTS MAY OCCUR WHICH LIMIT THE ABILITY OF THE COMPANY TO MAINTAIN OR IMPROVE
ITS OPERATING RESULTS OR EXECUTE ITS PRIMARY GROWTH STRATEGY OF ACQUIRING
ADDITIONAL PRINTING BUSINESSES. ALTHOUGH THE COMPANY BELIEVES THAT THE
ASSUMPTIONS UNDERLYING THE FORWARD-LOOKING STATEMENTS ARE REASONABLE, ANY OF THE
ASSUMPTIONS COULD BE INACCURATE, AND THERE CAN THEREFORE BE NO ASSURANCE THAT
THE FORWARD-LOOKING STATEMENTS INCLUDED HEREIN WILL PROVE TO BE ACCURATE. THE
INCLUSION OF SUCH INFORMATION SHOULD NOT BE REGARDED AS A REPRESENTATION BY THE
COMPANY OR ANY OTHER PERSON THAT THE OBJECTIVES AND PLANS OF THE COMPANY WILL BE
ACHIEVED.

GENERAL

      Consolidated Graphics, Inc. (the "Company"), headquartered in Houston,
Texas, is one of the fastest growing commercial printing companies in the United
States. As a leading printing industry consolidator and the largest sheetfed
commercial printer in the United States, the Company has expanded its operations
to include 38 printing companies nationwide as of July 31, 1998. Each printing
business has an established operating history (ranging from 11-120 years),
experienced management, solid customer relationships and a reputation for
providing quality service and product. The Company's printing businesses sell to
over 8,000 customers, including many major corporations, most of which are
headquartered in the markets in which the Company operates.

      The Company's sales are derived from the production and sale of customized
printed materials by its printing businesses. All of the printing businesses
provide general commercial printing services relating to the production of
annual reports, training manuals, product and capability brochures, direct mail
pieces, catalogs and other promotional material, all of which tend to be
recurring in nature. One operation also provides transaction-oriented financial
printing services. Each printing business has its own sales, estimating,
customer service, prepress, production, postpress and accounting departments.
The Company's headquarters provides its printing businesses with certain
administrative services, such as purchasing and human resources support, and
maintains centralized risk management, treasury, investor relations and
consolidated financial reporting activities.

      The Company's strategy is to generate growth in sales and profits through
an aggressive acquisition program, coupled with internal growth and operational
improvements at its existing businesses. The Company provides its acquired
businesses cost savings through master purchasing arrangements, access to
technology and capital, strategic counsel and a commitment to training through a
unique, comprehensive management development program. As a result, operating
income margins and efficiencies of newly acquired businesses, which may be lower
than those being achieved by the Company's other businesses, typically improve
as the Company's operational strategies are fully implemented.

      The Company's consolidated financial results in a given period may be
affected by the timing and magnitude of acquisitions. The Company's consolidated
operating income margins in the periods following a significant acquisition (or
series of acquisitions) may be lower than historically reported consolidated
margins depending upon the timing and extent to which an acquired business is
able to adapt to and implement the Company's management practices.

                                       6
<PAGE>
RESULTS OF OPERATIONS

      The following table sets forth the Company's historical income statements
and certain percentage relationships for the periods indicated:
                                                                      AS A
                                                                   PERCENTAGE
                                                                    OF SALES
                                                                 --------------
                                                 THREE MONTHS     THREE MONTHS
                                                 ENDED JUNE 30    ENDED JUNE 30
                                                 -------------   --------------
                                                  1998   1997    1998      1997
                                                 -----   -----   -----    -----
                                                  (In millions)
Sales ........................................   $85.1   $50.7   100.0%   100.0%
Cost of sales ................................    58.0    34.8    68.2     68.6
                                                 -----   -----   -----    -----
      Gross profit ...........................    27.1    15.9    31.8     31.4
Selling expenses .............................     8.3     4.9     9.7      9.7
General and administrative expenses ..........     6.6     3.9     7.8      7.7
                                                 -----   -----   -----    -----
      Operating income .......................    12.2     7.1    14.3     14.0
Interest expense .............................     1.5      .9     1.7      1.7
                                                 -----   -----   -----    -----
      Pretax income ..........................    10.7     6.2    12.6     12.3
Income taxes .................................     4.2     2.3     4.9      4.7
                                                 -----   -----   -----    -----
      Net income .............................   $ 6.5   $ 3.9     7.7%     7.6%
                                                 =====   =====   =====    =====

      Acquisitions in fiscal 1998 and 1999 are the primary causes of the
increases in revenues and expenses since June 30, 1997. Each of the Company's
acquisitions in fiscal 1998 and 1999 have been accounted for under the purchase
method of accounting; accordingly, the Company's consolidated income statements
reflect revenues and expenses of acquired businesses only for post-acquisition
periods.
      The following table sets forth the Company's 1998 and 1999 acquisitions
(collectively the "1998/99 Acquired Businesses") and indicates the period in
which each business was acquired.

      FISCAL 1998 ACQUISITIONS:
                Tucker Printers               April 1997
                The Etheridge Company         July 1997
                Georges and Shapiro           August 1997
                Austin Printing               September 1997
                Geyer Printing                October 1997
                Superior Color Graphics       October 1997
                The Otto Companies            October 1997
                Walnut Circle Press           November 1997
                Columbia Color                January 1998
                StorterChilds Printing        January 1998
                Heath Printers                January 1998
                Fittje Bros. Printing         February 1998
                Courier Printing              March 1998

      FISCAL 1999 ACQUISITIONS:
                Tursack, Inc.                 April 1998
                Image Systems                 May 1998
                Printing, Inc.                June 1998
                Graphic Communications        June 1998
                Wetzel Brothers               June 1998

      For more information regarding the fiscal 1998 acquisitions, refer to
"Notes to Consolidated Financial Statements" included in the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1998. For more
information regarding the fiscal 1999 acquisitions, refer to the accompanying
"Notes to Consolidated Financial Statements" included elsewhere herein.

                                       7
<PAGE>
THREE MONTHS ENDED JUNE 30, 1998 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1997.

      Sales increased 68% to $85.1 million for the three months ended June 30,
1998, from $50.7 million for the three months ended June 30, 1997. This increase
is due to the addition of the 1998/99 Acquired Businesses and internal growth at
the Company's other businesses. The internal growth resulted primarily from the
Company's ongoing capital investments in new equipment and technology, which has
added production capacity at certain locations, and in some cases, expanded the
range of services available to meet customer needs.

      Gross profit increased 70% to $27.1 million for the three months ended
June 30, 1998, from $15.9 million for the three months ended June 30, 1997,
primarily due to the addition of the 1998/99 Acquired Businesses. Gross profit
as a percentage of sales increased to 31.8% for the three months ended June 30,
1998, from 31.4% in the corresponding period of the prior year. This improvement
generally reflects increased operating efficiencies from investments in
equipment and technology and cost savings generated by the Company's national
purchasing advantages.

      Selling expenses increased 68% to $8.3 million for the three months ended
June 30, 1998, from $4.9 million for the three months ended June 30,1997, due to
the increased sales levels as discussed above. Selling expenses as a percentage
of sales remained consistent at 9.7% when compared to the corresponding period
of the prior year.

      General and administrative expenses increased 71% to $6.6 million for the
three months ended June 30, 1998, from $3.9 million for the three months ended
June 30,1997. This increase is due to the addition of the 1998/99 Acquired
Businesses and an increase in the corporate infrastructure to manage the
Company's accelerated acquisition program. General and administrative expenses
as a percentage of sales increased slightly to 7.8% for the three months ended
June 30, 1998, as compared to 7.7% in the corresponding period of the prior
year.

      Interest expense increased to $1.5 million for the three months ended June
30, 1998, from $.9 million for the three months ended June 30,1997, primarily
due to a net increase in borrowings under the Company's revolving credit
facility to finance the cash portions of the purchase price of the 1998/99
Acquired Businesses.

      Effective income tax rates reflect an increase to 39% for the three months
ended June 30, 1998, from 38% in the prior year due, to the Company's growth by
acquisition into states with higher income tax rates than those states in which
the Company previously operated.

LIQUIDITY AND CAPITAL RESOURCES

      The Company's primary uses of cash are for capital expenditures,
acquisitions and payments on long-term debt incurred to finance certain
equipment purchases or assumed in connection with certain acquisitions. Cash
utilized for capital expenditures, which relate primarily to the purchase of new
equipment, was $6.1 million for the three months ended June 30, 1998. Cash
utilized to complete acquisitions totaled $42.5 million for the three months
ended June 30, 1998. Payments on long-term debt totaled $.7 million for the
three months ended June 30, 1998.

      The Company financed its capital requirements through internally generated
funds and borrowings under its revolving credit facility (see below). Cash flow
generated from operations (net income plus depreciation, amortization, and
deferred tax provision) was $11.2 million for the three months ended June 30,
1998. Net incremental borrowings under the revolving credit facility were $35.9
million and debt incurred directly to finance equipment purchases was $3.1
million for the three months ended June 30, 1998.

      In June 1997, the Company entered into a $100 million revolving credit
agreement (the "Credit Agreement") with a six-member banking group. The Credit
Agreement, scheduled to mature on May 31, 2000, was increased on August 4, 1998,
to $200 million and the maturity date was extended to July 31, 2001. Borrowings
outstanding under the Credit Agreement, which totaled $90.8 million at June 30,
1998, are unsecured and accrue interest at a variable rate (an average of 6.3%
per annum on June 30, 1998). The Company is also required to pay a commitment
fee on available but unused amounts under the Credit Agreement ranging from .10%
to .35% per annum.

      The Company is subject to certain covenants and restrictions and must meet
certain financial tests pursuant to and as defined in the Credit Agreement. The
Company believes that these restrictions do not adversely affect its acquisition
or operating strategies, and that it was in compliance with such financial tests
and other covenants at June 30, 1998.

                                       8
<PAGE>
      In 1996 the Company entered into an arrangement with Komori America
Corporation (the "Komori Agreement"), pursuant to which the Company may, but is
not obliged to, purchase up to $50 million of printing presses over its term.
The Komori Agreement provides certain volume purchase incentives and long-term
financing options. As of June 30, 1998, the Company was obligated on term notes
related to the Komori Agreement totaling $15.1 million. These term notes provide
a fixed monthly principal and interest payments through 2008 at an average
interest rate of 7.7%, and are secured by the purchased presses. The Company is
not subject to any significant financial covenants or restrictions in connection
with these obligations.

      The Company's remaining debt obligations generally consist of mortgages,
capital leases, promissory notes, an industrial revenue bond and two $5 million
auxiliary revolving credit agreements, some of which contain financial covenants
and restrictions. The most significant of these place certain restrictions on
future borrowing and acquisitions above specified levels. The Company believes
these restrictions do not adversely affect its acquisition and operating
strategies.

      In May 1998, the Company agreed to purchase 12 new printing presses for an
aggregate of $19 million, net of trade-in allowances, pursuant to the Komori
Agreement. The Company expects to make additional equipment capital expenditures
in fiscal 1999 using cash flow from operations and borrowings under the Credit
Agreement.

      During the three months ended June 30, 1998, the Company acquired five
printing businesses. To complete these acquisitions, in the aggregate, the
Company issued 248,210 shares of its common stock and paid cash of $42.5
million. Subsequent to June 30, 1998, the Company completed the acquisition of
two printing businesses and signed non-binding letters of intent to acquire
eight additional companies.

        The Company intends to continue to actively pursue acquisition
opportunities, utilizing cash flow from operations, borrowings under the Credit
Agreement or the issuance of it's common stock. There can be no
assurance that the Company will be able to acquire additional businesses on
acceptable terms in the future. In addition, there can be no assurance that the
Company will be able to establish, maintain or increase the profitability of an
acquired business.

YEAR 2000 COMPLIANCE

      The Company has made a preliminary assessment of the impact of "Year 2000"
issues related to its operational and financial computer systems. While
additional review is required, the Company believes that the substantial
majority of its operating and financial software has, or will have in the near
future, versions which are "Year 2000" compliant that the Company can implement
without significant impact on its consolidated financial position or
consolidated results of operations. 

RECENT ACCOUNTING PRONOUNCEMENTS

      During the first quarter of fiscal 1999, the Company was required to adopt
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," which requires that all changes in the Company's
equity during the reporting period, including all net income and charges
directly to equity that are excluded from net income, be presented in the
Company's consolidated financial statements. SFAS No. 130 does not have a
material effect on the Company's consolidated financial position or consolidated
results of operations.

                                       9
<PAGE>
                             CONSOLIDATED GRAPHICS, INC.
                          PART II -- OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

      From time to time the Company is involved in litigation relating to claims
arising in the normal course of business. The Company maintains insurance
coverage against potential claims in an amount that it believes to be adequate.
Currently, the Company is not aware of any legal proceedings or claims pending
against the Company that management believes will have a material adverse effect
on its consolidated financial position or consolidated results of operations.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

      During the three months ended June 30,1998, the Company issued 248,210
shares of its common stock valued at approximately $13.0 million to certain
shareholders of Printing, Inc., Graphics Communications, Inc. and Wetzel
Brothers, Inc. as partial consideration in connection with the acquisition
thereof, and also issued 13,334 shares pursuant to an earnout agreement entered
into in connection with a prior year acquisition. The issuance of such common
stock was exempt from registration pursuant to Section 4(2) of the Securities
Act of 1933 as a transaction by the issuer not involving a public offering.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

      None

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      On July 29, 1998, the Company held its Annual Meeting of Shareholders. The
following items were submitted to a vote of shareholders through the
solicitation of proxies:

(a)   ELECTION OF DIRECTORS
      The following persons were elected to serve on the Board of Directors
      until the 1999 annual meeting of shareholders or until their successors
      have been duly elected and qualified. The Directors received the votes set
      forth opposite their respective names:

                       NAME                     FOR      AGAINST   ABSTENTIONS
                       ----                     ---      -------   -----------
       Joe R. Davis.......................  12,272,204    63,486       0
       Larry J. Alexander.................  12,272,204    63,486       0
       Brady F. Carruth...................  12,272,204    63,486       0
       Clarence C. Comer..................  12,272,204    63,486       0
       Gary L. Forbes.....................  12,272,204    63,486       0
       W. D. Hawkins......................  12,272,204    63,486       0
       James H. Limmer....................  12,272,204    63,486       0
       Thomas E. Smith....................  12,272,204    63,486       0
       Hugh N. West.......................  12,272,204    63,486       0

(b)   The shareholders of the Company were requested to approve an amendment to
      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. Such
      amendment was approved by the shareholders, who voted 10,199,174 in favor
      and 2,131,110 against, with 5,406 who abstained or withheld authority to
      vote.

(c)   The shareholders of the Company were requested to approve 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 the Company's common stock to be available for issuance as
      provided for under the Incentive Plan. Such amendment was approved by the
      shareholders, who voted 7,942,725 in favor and 2,764,190 against, with
      1,628,775 who abstained or withheld authority to vote.

ITEM 5.  OTHER INFORMATION

      None

                                       10
<PAGE>
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

(A)   EXHIBITS

3.1   Articles of Amendment to the Restated Articles of Incorporation of the 
      Company dated as of July 29, 1998.

10.1  First Amendment to the Revolving Credit Agreement among Consolidated
      Graphics, Inc. and Chase Bank of Texas as Agent and BankOne of Texas, NA
      as Co-Agent, dated as of August 4, 1998.

27    Edgar financial data schedules.

(B)   REPORTS ON FORM 8-K:

(1)   Form 8-K, filed April 3, 1998 in connection with the press release
      announcing the signing of a letter of intent to acquire Pride Printers,
      Inc.
(2)   Form 8-K, filed April 10, 1998 in connection with the press release
      announcing the completion of the acquisition of Tursack Incorporated.
(3)   Form 8-K, filed April 24, 1998 in connection with the press release
      announcing the signing of a letter of intent to acquire Paragraphics, Inc.
(4)   Form 8-K, filed May 1, 1998 in connection with the press release
      announcing the Company's fiscal 1998 fourth quarter results.
(5)   Form 8-K, filed May 12, 1998 in connection with the press release
      announcing the completion of the acquisition of Image Systems, Inc.
(6)   Form 8-K, filed May 28, 1998 in connection with the press releases
      announcing the signing of a letter of intent to acquire Ironwood
      Lithographers, Inc.
(7)   Form 8-K, filed June 12, 1998 in connection with the press releases
      announcing the completion of the acquisition of Printing , Inc and the
      signing of a letter of intent to acquire Lincoln Printing, Inc.
(8)   Form 8-K, filed June 19, 1998 in connection with the press release
      announcing the acquisition of Wetzel Brothers, Inc.
(9)   Form 8-K, filed June 24, 1998 in connection with the press release
      announcing the completion of the acquisition of Graphic Communications,
      Inc.
(10)  Form 8-K, filed July 2, 1998 in connection with the press release
      announcing the signing of a letter of intent to acquire Automated Graphic
      Systems, Inc.
(11)  Form 8-K, filed July 9, 1998 in connection with the press releases
      announcing the completion of the acquisition of Paragraphics, Inc. and the
      signing of a letter of intent to acquire Rush Press and Arts & Crafts
      Press.
(12)  Form 8-K, filed July 21, 1998 in connection with the press release
      announcing the completion of the acquisition of Pride Printers, Inc.
(13)  Form 8-K, filed July 29, 1998 in connection with the press release
      announcing the Company's fiscal 1999 first quarter results and the
      increase of the Company's revolving credit facility to $200 million.
(14)  Form 8-K, filed July 31, 1998 in connection with the press release
      announcing the signing of a letter to acquire four independent, commercial
      printing companies.

                                       11
<PAGE>
                                   SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT, HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED.


                                      CONSOLIDATED GRAPHICS, INC.
                                      (Registrant)

Dated:   August 14, 1998                  BY:/S/RANDALL D. KEYS
                                                Randall D. Keys
                                                Vice President -- Finance,
                                                Chief Financial and Accounting 
                                                Officer

                                       12

                                                                     EXHIBIT 3.1

                             ARTICLES OF AMENDMENT
                   TO THE RESTATED ARTICLES OF INCORPORATION
                                      OF
                          CONSOLIDATED GRAPHICS, INC.

      Pursuant to the provision of Article 4.04 of the Texas Business
Corporation Act, Consolidated Graphics, Inc., a Texas corporation (the
"Corporation"), adopts the following amendment to the Restated Articles of
Incorporation of the Corporation:


                                     FIRST

      The name of the Corporation is Consolidated Graphics, Inc.

                                    SECOND

      The following amendment to the Restated Articles of Incorporation was
adopted by the shareholders of the Corporation on July 29, 1998.

      The first paragraph of ARTICLE IV of the Corporation's Restated Articles
of Incorporation is deleted in its entirety and replaced with the following:


            The aggregate number of shares which the corporation shall have
      authority to issue is 105,000,000 shares, of which 100,000,000 shares are
      classified as Common Stock, par value of $.01 per share ("Common Stock"),
      and 5,000,000 shares are classified as Preferred Stock, par value $1.00
      per share ("Preferred Stock").

                                     THIRD

      The number of shares of the Corporation outstanding and entitled to vote
at the time of the foregoing amendment was 13,213,058 shares; and the number of
shares voted was 12,335,690.

      The designation and number of outstanding shares of each class or series
entitled to vote thereon as a class were as follows:


            CLASS OR SERIES                   NUMBER OF SHARES OUTSTANDING
                                                  AND ENTITLED TO VOTE
            ---------------                   ----------------------------
                Common                                 13,213,058
<PAGE>
                                    FOURTH

      The holders of 10,199,174 shares, at least two-thirds of the issued and
outstanding shares of the Corporation, entitled to vote on the foregoing
amendment approved and adopted such amendment, and the holders of 2,131,110
shares entitled to vote on the foregoing amendment voted against such amendment.

                                             CONSOLIDATED GRAPHICS, INC.



                                             By:/s/ G. CHRISTOPHER COLVILLE
                                                    G. Christopher Colville, 
                                                    Executive Vice President - 
                                                    Mergers & Acquisitions

                                                                    EXHIBIT 10.1

                           AMENDMENT TO LOAN AGREEMENT


      THIS AMENDMENT TO LOAN AGREEMENT (this "AMENDMENT") is made and entered
into as of August 4, 1998 by and among CONSOLIDATED GRAPHICS, INC., a Texas
corporation (the "BORROWER"); each of the Lenders which is or may from time to
time become a party to the Loan Agreement (as defined below) (individually, a
"LENDER" and, collectively, the "LENDERS"), BANKONE, TEXAS, N.A., as Co-Agent,
COMERICA BANK-TEXAS, as Co-Agent, FIRST UNION NATIONAL BANK, as Co-Agent, and
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, a national banking association
(previously known as Texas Commerce Bank National Association), acting as agent
for the Lenders (in such capacity, together with its successors in such
capacity, the "AGENT").

                                    RECITALS

      A. The Borrower, the Lenders and the Agent executed and delivered that
certain Loan Agreement dated as of June 4, 1997. Said Loan Agreement, as
amended, supplemented and restated, is herein called the "LOAN AGREEMENT". Any
capitalized term used in this Amendment and not otherwise defined shall have the
meaning ascribed to it in the Loan Agreement.

      B.    The Borrower, the Lenders and the Agent desire to amend the Loan
Agreement in certain respects.

      NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations and warranties herein set forth, and further good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower, the Lenders and the Agent do hereby agree as
follows:

      SECTION 1.  AMENDMENTS TO LOAN AGREEMENT.

      (a) The references to "$100,000,000" in the Loan Agreement (other than the
reference in SECTION 8.9(B)(III)) are hereby amended to read "$200,000,000." The
$200,000,000 Revolving Loan Commitment shall be allocated to the Lenders as set
forth opposite their respective signatures hereto.

      (b) The definition of "Revolving Loan Maturity Date" set forth in SECTION
1.1 of the Loan Agreement is hereby amended to read in its entirety as follows:

            REVOLVING LOAN MATURITY DATE means the maturity of the Notes, July
      31, 2001. Upon written request from Borrower at any time after January 31,
      2001 but prior to April 30, 2001 (and thereafter annually within the same
      three month period), Agent shall make request on the Lenders for approval
      to a one (1) year extension of the Revolving Loan Maturity Date; PROVIDED,
      HOWEVER, that no such extension shall be effective without the unanimous
      written

                                      1
<PAGE>
      consent of the Lenders, which may be given or denied in their sole
      discretion, with or without cause.

      (c) A new SECTION 6.18 is hereby added to the Loan Agreement, such new
Section
reading  in its entirety as follows:

            6.18 YEAR 2000. Any reprogramming required to permit the proper
      functioning, in and following the year 2000, of the Borrower's and any of
      its Subsidiaries' (excluding Subsidiaries acquired on or after August 1,
      1998) (i) computer systems and (ii) equipment containing embedded
      microchips and the testing of all such systems and equipment will be
      completed by September 1, 1999. The cost to the Borrower and its
      Subsidiaries of such reprogramming and testing and of reasonably
      foreseeable consequences of year 2000 to the Borrower and its Subsidiaries
      (including, without limitation, reprogramming errors and failure of
      others' systems or equipment) will not result in an Event of Default or a
      Material Adverse Effect. The computer and/or accounting systems of the
      Borrower and its Subsidiaries are and, with ordinary course upgrading and
      maintenance, will continue for the term of this Agreement to be,
      sufficient to permit the Borrower and its Subsidiaries to conduct their
      business without Material Adverse Effect.

      (d) SECTION 7.8(E) of the Loan Agreement is hereby amended to read in its
entirety as follows:

            (e) if Borrower creates, incurs, suffers or permits any Indebtedness
      after the Effective Date in accordance with SECTION 8.1(VI) hereof, and
      such Indebtedness contains terms and conditions which are more restrictive
      upon Borrower than the terms and conditions provided herein, Borrower
      shall promptly provide a copy of the more restrictive terms and conditions
      to Agent and Lenders along with such other information as Agent may
      reasonably request in order to understand such restrictive terms and
      conditions.

      (e) SECTION 8.1 of the Loan Agreement is hereby amended to read in its
entirety as follows:

            8.1 BORROWED MONEY INDEBTEDNESS. Create, incur, suffer or permit to
      exist, or assume or guarantee, directly or indirectly, or become or remain
      liable with respect to any Borrowed Money Indebtedness, whether direct,
      indirect, absolute, contingent or otherwise, except the following:

            (i)   Indebtedness under this Agreement and the other Loan Documents
                  and Indebtedness secured by Liens permitted by SECTION 8.2
                  hereof;

            (ii)  the liabilities existing on the date of this Agreement and
                  disclosed in the financial statements delivered on or prior to
                  the Effective Date pursuant to SECTION 6.2 hereof and set
                  forth on SCHEDULE 8.1, and all renewals, extensions

                                      2
<PAGE>
                  and replacements (but not increases other than increases of
                  the Indebtedness permitted under SECTION 8.2(IX) hereof, which
                  shall be subject to the maximum permitted outstanding amounts
                  set forth in SECTION 8.2(IX)) of any of the foregoing;

            (iii) the Interest Rate Risk Indebtedness;

            (iv)  current liabilities incurred in the ordinary course of
                  business;

            (v)   so long as no Event of Default has occurred which is
                  continuing (or would result as a result of the applicable
                  additional Indebtedness), pre-existing Indebtedness (excluding
                  any Indebtedness incurred at the instigation of Borrower in
                  contemplation of the acquisition of such Subsidiary or
                  business) of any Subsidiary or business acquired after June
                  30, 1998; provided, however, that such Indebtedness must be
                  discharged within five (5) days after the closing of such
                  acquisition and in any event prior to or concurrently with the
                  next borrowing hereunder after the closing of such
                  acquisition;

            (vi)  so long as no Event of Default has occurred which is
                  continuing (or would result as a result of the applicable
                  additional Indebtedness), other unsecured Indebtedness of
                  Borrower or its Subsidiaries;

      PROVIDED, HOWEVER, that the Indebtedness permitted under SECTION 8.1(vi)
      hereof shall be on terms and conditions no more restrictive upon Borrower
      than the terms and conditions provided for herein unless Borrower has
      provided prompt notice thereof in accordance with SECTION 7.8(E), and (A)
      such more restrictive terms and conditions have been incorporated into
      this Agreement by amendment, or (B) the Borrower shall have delivered and
      shall continue to deliver to the Agent and the Lenders a Compliance
      Certificate modified to incorporate such more restrictive covenants.

      (f) SECTION 8.2(IX) of the Loan Agreement is hereby amended to read in its
entirety as follows:

            (ix)  Liens disclosed to the Lenders in the financial statements
                  delivered on or prior to the Effective Date and set forth on
                  SCHEDULE 8.2 and other Liens created after the Effective Date;
                  PROVIDED, HOWEVER, that the aggregate book value of the
                  Property subject to the Liens permitted under this CLAUSE (IX)
                  shall not exceed 200% of the aggregate amount of the Borrowed
                  Money Indebtedness permitted to be secured by such Liens and
                  PROVIDED FURTHER, HOWEVER, that the aggregate Borrowed Money
                  Indebtedness secured by the Liens permitted under this CLAUSE
                  (IX) shall not exceed $30,000,000;

                                      3
<PAGE>
      (g) SECTION 8.2(X) of the Loan Agreement is hereby amended to read in its
entirety as follows:

               (x)  pre-existing Liens securing pre-existing Borrowed Money
                    Indebtedness covering tangible Property (other than
                    Inventory, except for Liens on Inventory securing
                    Indebtedness permitted under SECTION 8.1(V) hereof which are
                    discharged within five (5) days after the closing of the
                    applicable acquisition) of Subsidiaries or businesses
                    acquired after December 31, 1996 (provided, however, that no
                    such Liens were created and no such Borrowed Money
                    Indebtedness was incurred at the instigation of Borrower in
                    contemplation of the acquisition of such Subsidiary or
                    business); and

      (h) SECTION 8.2(XI) of the Loan Agreement is hereby deleted in its
entirety and CLAUSE (XII) of SECTION 8.2 is hereby restyled as "CLAUSE (XI)".

      (i) SECTION 8.3 of the Loan Agreement is hereby amended to read in its
entirety as follows:

            8.3 CONTINGENT LIABILITIES. Directly or indirectly guarantee the
      performance or payment of, or purchase or agree to purchase, or assume or
      contingently agree to become or be secondarily liable in respect of, any
      obligation or liability of any other Person (other than Subsidiaries)
      except for (a) the endorsement of checks or other negotiable instruments
      in the ordinary course of business; (b) obligations disclosed to Agent in
      the financial statements for the fiscal year ended March 31, 1998
      previously delivered pursuant to SECTION 7.2 hereof (but not increases of
      such obligations after March 31, 1998), (c) those liabilities permitted
      under SECTION 8.1 hereof; (d) earnouts incurred in connection with
      acquisitions, and (e) any such pre-existing liability of a Subsidiary of
      Borrower or a business which is acquired after the date hereof provided
      that (i) neither Borrower nor any Subsidiary of Borrower (other than such
      acquired Subsidiary or the Subsidiary of Borrower acquiring such business)
      shall be liable with respect to such liability, (ii) such liability was
      not incurred at the instigation of Borrower in contemplation of the
      acquisition of such Subsidiary or business and (iii) no Event of Default
      has occurred which is continuing (or would result as a result of the
      applicable acquisition).

      SECTION 2. RATIFICATION. Except as expressly amended by this Amendment,
the Loan Agreement and the other Loan Documents shall remain in full force and
effect. None of the rights, title and interests existing and to exist under the
Loan Agreement are hereby released, diminished or impaired, and the Borrower
hereby reaffirms all covenants, representations and warranties in the Loan
Agreement.

      SECTION 3. EXPENSES. The Borrower shall pay to the Agent all reasonable
fees and expenses of its respective legal counsel (pursuant to Section 11.3 of
the Loan Agreement) incurred in connection with the execution of this Amendment.

                                      4
<PAGE>
      SECTION 4. CERTIFICATIONS. The Borrower hereby certifies that (a) no
material adverse change in the assets, liabilities, financial condition,
business or affairs of the Borrower has occurred since March 31, 1998, and (b)
no uncured Default or uncured Event of Default has occurred and is continuing or
will occur as a result of this Amendment.

      SECTION 5. MISCELLANEOUS. This Amendment (a) shall be binding upon and
inure to the benefit of the Borrower, the Lenders and the Agent and their
respective successors, assigns, receivers and trustees; (b) may be modified or
amended only by a writing signed by the required parties; (c) shall be governed
by and construed in accordance with the laws of the State of Texas and the
United States of America; (d) may be executed in several counterparts by the
parties hereto on separate counterparts, and each counterpart, when so executed
and delivered, shall constitute an original agreement, and all such separate
counterparts shall constitute but one and the same agreement and (e) together
with the other Loan Documents, embodies the entire agreement and understanding
between the parties with respect to the subject matter hereof and supersedes all
prior agreements, consents and understandings relating to such subject matter.
The headings herein shall be accorded no significance in interpreting this
Amendment.

               NOTICE PURSUANT TO TEX. BUS. & COMM. CODE SS.26.02

      THE LOAN AGREEMENT, AS AMENDED BY THIS AMENDMENT, AND ALL OTHER LOAN
DOCUMENTS EXECUTED BY ANY OF THE PARTIES PRIOR HERETO OR SUBSTANTIALLY
CONCURRENTLY HEREWITH CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.


                  REMAINDER OF PAGE LEFT BLANK INTENTIONALLY


                                      5
<PAGE>
      IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have caused
this Amendment to be signed by their respective duly authorized officers,
effective as of the date first above written.

                                    CONSOLIDATED GRAPHICS, INC,
                                    a Texas corporation


                                    By:/s/ JOE R. DAVIS
                                    Name:  Joe R. Davis
                                    Title: Chairman and Chief Executive Officer


                                      6
<PAGE>
                                    CHASE BANK OF TEXAS,  NATIONAL
                                    ASSOCIATION, as Agent and as a Lender


                                    By:/s/ MARY C. ARNOLD
                                    Name:  Mary C. Arnold
                                    Title: Vice President


Revolving Loan Commitment:

$30,000,000

                                      7
<PAGE>
                                    BANKONE, TEXAS, N.A.,
                                    as Co-Agent and as a Lender


                                    By:/s/ JOHN E. ELAM
                                    Name:  John E. Elam
                                    Title: Vice President

Revolving Loan Commitment:

$30,000,000

                                      8
<PAGE>
                                    COMERICA BANK-TEXAS,
                                    as Co-Agent and as a Lender


                                    By:/s/ ERIC LUNDQUIST
                                    Name:  Eric Lundquist
                                    Title: Vice President

Revolving Loan Commitment:

$30,000,000

                                      9
<PAGE>
                                    FIRST UNION NATIONAL BANK,
                                    as Co-Agent and as a Lender


                                    By:/s/ GEORGE WOOLSEY
                                    Name:  George Woolsey
                                    Title:_____________________________

Revolving Loan Commitment:

$30,000,000

                                      10
<PAGE>
                                   CIBC, INC.


                                    By:/s/ KATHERINE BASS
                                    Name:  Katherine Bass
                                    Title: Executive Director
                                           CIBC Oppenheimer Corp., AS AGENT


Revolving Loan Commitment:

$15,000,000

                                      11
<PAGE>
                                    BANK OF TOKYO-MITSUBISHI, LTD.


                                    By:/s/ JOHN W. MCGHEE
                                    Name:  John W. McGhee
                                    Title: Vice President and Manager

Revolving Loan Commitment:

$15,000,000

                                       12
<PAGE>
                                    NATIONSBANK, N.A.


                                    By:/s/ WILLIAM T. GRIFFIN
                                    Name:  William T. Griffin
                                    Title: Vice President


Revolving Loan Commitment:

$20,000,000

                                      13
<PAGE>
                                    SUNTRUST BANK, ATLANTA


                                    By:/s/ STEVEN J. NEWBY
                                    Name:  Steven J. Newby
                                    Title: Corporate Banking Officer


                                    By:/s/ JOHN A. FIELDS, JR.
                                    Name:  John A. Fields, Jr.
                                    Title: Vice President


Revolving Loan Commitment:

$15,000,000

                                      14
<PAGE>
                                    CREDIT LYONNAIS NEW YORK BRANCH


                                    By:/s/ ROBERT IVOSEVICH
                                    Name:  Robert Ivosevich
                                    Title: Senior Vice President


Revolving Loan Commitment:

$15,000,000

                                      15
<PAGE>
      The undersigned hereby join in this Amendment to evidence their consent to
execution by Borrower of this Amendment, to confirm that each Loan Document now
or previously executed by the undersigned applies and shall continue to apply to
the Loan Agreement, as amended hereby, to acknowledge that without such consent
and confirmation, Lenders would not execute this Amendment and to join in the
notice pursuant to Tex. Bus. & Comm. Code ss.26.02 set forth above.


                                    CONSOLIDATED GRAPHICS, INC.,
                                    a Texas corporation,

                                    PRECISION LITHO, INC.,
                                    a Texas corporation,

                                    CHAS. P. YOUNG COMPANY,
                                    a Texas corporation,

                                    THE JARVIS PRESS, INC.,
                                    a Texas corporation,

                                    CONSOLIDATED GRAPHICS PROPERTIES II,
                                    INC., a Texas corporation,

                                    GARNER PUBLISHING COMPANY,
                                    an Iowa corporation,

                                    EMERALD CITY GRAPHICS, INC.,
                                    a Washington corporation,

                                    WESTERN LITHOGRAPH COMPANY,
                                    a Texas corporation,

                                    FREDERIC PRINTING COMPANY,
                                    a Colorado corporation,

                                    DIRECT COLOR, INC.,
                                    a California corporation,

                                    GULF PRINTING COMPANY,
                                    a Texas corporation,

                                    CLEARVISIONS, INC.,
                                    a Texas corporation,


                                      16
<PAGE>
                                    BRIDGETOWN PRINTING CO.,
                                    a Texas corporation,

                                    TEWELL WARREN PRINTING COMPANY,
                                    a Texas corporation,

                                    CONSOLIDATED EAGLE PRESS, INC.,
                                    a Texas corporation,

                                    HERITAGE GRAPHICS, INC.,
                                    a Texas corporation,

                                    TUCKER PRINTERS, INC.,
                                    a Texas corporation,

                                    GEYER PRINTING COMPANY, INC.,
                                    a Pennsylvania corporation,

                                    THE JOHN C. OTTO COMPANY, INC.,
                                    a Massachusetts corporation,

                                    COURIER PRINTING COMPANY,
                                    a Tennessee corporation


                                    By:/s/ JOE R. DAVIS
                                    Name:  Joe R. Davis
                                    Title: Chairman and Chief Executive Officer

                                      17

<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED JUNE 30,
1998.
</LEGEND>
<MULTIPLIER> 1,000
       
<S>     <C>  
<PERIOD-TYPE>                                       3-MOS
<FISCAL-YEAR-END>                             MAR-31-1999
<PERIOD-END>                                  JUN-30-1998
<CASH>                                              6,238
<SECURITIES>                                            0
<RECEIVABLES>                                      67,019
<ALLOWANCES>                                       (1,711)
<INVENTORY>                                        20,094
<CURRENT-ASSETS>                                   94,513
<PP&E>                                            200,016
<DEPRECIATION>                                    (27,666)
<TOTAL-ASSETS>                                    311,664
<CURRENT-LIABILITIES>                              54,616
<BONDS>                                                 0
                                   0
                                             0
<COMMON>                                              132
<OTHER-SE>                                        125,377
<TOTAL-LIABILITY-AND-EQUITY>                      311,664
<SALES>                                            85,100
<TOTAL-REVENUES>                                   85,100
<CGS>                                              58,014
<TOTAL-COSTS>                                      58,014
<OTHER-EXPENSES>                                   14,910
<LOSS-PROVISION>                                        0
<INTEREST-EXPENSE>                                  1,471
<INCOME-PRETAX>                                    10,705
<INCOME-TAX>                                        4,175
<INCOME-CONTINUING>                                 6,530
<DISCONTINUED>                                          0
<EXTRAORDINARY>                                         0
<CHANGES>                                               0
<NET-INCOME>                                        6,530
<EPS-PRIMARY>                                         .50
<EPS-DILUTED>                                         .48
        

</TABLE>


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