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 SEPTEMBER 30, 1999
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 (I.R.S. 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) 787-0977
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 October 31, 1999 was 15,760,068.
<PAGE>
CONSOLIDATED GRAPHICS, INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Part I -- Financial Information
Item 1 -- Financial Statements
Consolidated Balance Sheets at September 30, 1999 and March 31, 1999 ...... 1
Consolidated Income Statements for the Three and Six Months Ended
September 30, 1999 and 1998 ............................................. 2
Consolidated Statements of Cash Flows for the Six Months Ended
September 30, 1999 and 1998 ............................................. 3
Notes to Consolidated Financial Statements ................................ 4
Item 2 -- Management's Discussion and Analysis of Financial Condition and
Results of Operations .................................................. 6
Item 3 -- Quantitative and Qualitative Disclosure About Market Risk .......... 13
Part II -- Other Information
Item 1 -- Legal Proceedings .................................................. 14
Item 2 -- Changes in Securities and Use of Proceeds .......................... 14
Item 3 -- Defaults upon Senior Securities .................................... 14
Item 4 -- Submission of Matters to a Vote of Security Holders ................ 14
Item 5 -- Other Information .................................................. 14
Item 6 -- Exhibits and Reports on Form 8-K ................................... 15
Signatures ...................................................................... 16
</TABLE>
i
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED GRAPHICS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1999 1999
---------------- -------------
ASSETS (UNAUDITED) (AUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents .................................. $ 7,346 $ 6,538
Accounts receivable, net ................................... 107,781 92,653
Inventories ................................................ 30,154 27,345
Prepaid expenses ........................................... 3,784 3,983
-------- --------
Total current assets ................................. 149,065 130,519
PROPERTY AND EQUIPMENT, net ....................................... 270,998 230,733
GOODWILL, net ..................................................... 182,553 121,744
OTHER ASSETS ...................................................... 6,424 6,658
-------- --------
$609,040 $489,654
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt .......................... $ 3,902 $ 2,869
Accounts payable ........................................... 40,753 36,920
Accrued liabilities ........................................ 36,926 38,028
Income taxes payable ....................................... 5,891 2,941
-------- --------
Total current liabilities ........................... 87,472 80,758
LONG-TERM DEBT, net of current portion ............................ 207,241 170,574
DEFERRED INCOME TAXES ............................................. 29,115 23,868
COMMITMENTS AND CONTINGENCIES ..................................... -- --
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value; 100,000,000 shares authorized;
15,725,468 and 14,649,885 issued and outstanding ........ 157 146
Additional paid-in capital ................................. 185,779 136,488
Retained earnings .......................................... 99,276 77,820
-------- --------
Total shareholders' equity .......................... 285,212 214,454
-------- --------
$609,040 $489,654
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
CONSOLIDATED GRAPHICS, INC.
CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
SALES ............................................... $152,886 $103,270 $298,715 $188,370
COST OF SALES ....................................... 105,294 70,869 205,446 128,883
-------- -------- -------- --------
Gross profit ................................. 47,592 32,401 93,269 59,487
SELLING EXPENSES .................................... 14,820 10,172 28,911 18,463
GENERAL AND ADMINISTRATIVE EXPENSES ................. 11,817 7,923 22,917 14,542
-------- -------- -------- --------
Operating income ............................. 20,955 14,306 41,441 26,482
INTEREST EXPENSE .................................... 3,017 2,002 5,682 3,473
-------- -------- -------- --------
Income before income taxes ................... 17,938 12,304 35,759 23,009
PROVISION FOR INCOME TAXES .......................... 7,175 4,800 14,303 8,975
-------- -------- -------- --------
NET INCOME .......................................... $ 10,763 $ 7,504 $ 21,456 $ 14,034
======== ======== ======== ========
BASIC EARNINGS PER SHARE ............................ $ .69 $ .56 $ 1.40 $ 1.06
======== ======== ======== ========
DILUTED EARNINGS PER SHARE .......................... $ .68 $ .54 $ 1.37 $ 1.03
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
CONSOLIDATED GRAPHICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
----------------------------
1999 1998
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ..................................................................... $ 21,456 $ 14,034
Adjustments to reconcile net income to net cash provided by operating
activities--
Depreciation and amortization ............................................. 15,186 8,498
Deferred tax provision .................................................... 1,206 1,505
Changes in assets and liabilities, net of effects of acquisitions--
Accounts receivable ................................................... (3,298) 2,529
Inventories ........................................................... 2 369
Prepaid expenses ...................................................... 575 71
Other assets .......................................................... 912 (203)
Accounts payable and accrued liabilities .............................. (10,044) (4,998)
Income taxes payable .................................................. 3,093 1,747
--------- ---------
Net cash provided by operating activities ......................... 29,088 23,552
--------- ---------
INVESTING ACTIVITIES:
Acquisitions of businesses, net of cash acquired ............................... (39,130) (72,984)
Purchases of property and equipment ............................................ (11,223) (10,720)
Proceeds from disposition of assets ............................................ 558 185
--------- ---------
Net cash used in investing activities ............................. (49,795) (83,519)
--------- ---------
FINANCING ACTIVITIES:
Proceeds from revolving credit facilities ...................................... 238,542 184,267
Payments on revolving credit facilities ........................................ (215,143) (122,949)
Payments on other long-term debt ............................................... (2,195) (1,473)
Proceeds from exercise of stock options and other .............................. 311 723
--------- ---------
Net cash provided by financing activities ......................... 21,515 60,568
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS ............................................. 808 601
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ...................................... 6,538 5,268
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............................................ $ 7,346 $ 5,869
========= =========
</TABLE>
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 subsidiaries (collectively with its
subsidiaries referred to as "the Company"). All intercompany accounts and
transactions have been eliminated. Such 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 and six months ended September 30, 1999 are not
necessarily indicative of future operating results. Balance sheet information as
of March 31, 1999 has been derived from the 1999 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
1999. Certain reclassifications have been made to fiscal 1999 amounts to conform
to the current year presentation.
Basic earnings per share are calculated by dividing net income by the
weighted average number of common shares outstanding. For the three months ended
September 30, 1999 and 1998, the basic weighted average shares outstanding were
15,662,548 and 13,397,348. For the six months ended September 30, 1999 and 1998,
the basic weighted average shares outstanding were 15,364,259 and 13,226,510.
Diluted earnings per share reflect net income divided by the weighted average
number of common shares and dilutive stock options outstanding. For the three
months ended September 30, 1999 and 1998, the weighted average number of common
shares and dilutive stock options outstanding were 15,936,963 and 13,802,957.
For the six months ended September 30, 1999 and 1998, the weighted average
number of common shares and dilutive stock options outstanding were 15,644,338
and 13,637,272.
The consolidated statements of cash flows provide information about the
Company's sources and uses of cash and exclude the effects of non-cash
transactions. Significant non-cash transactions during the six months ended
September 30, 1999 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) and an accrual totaling $12,175 related to
the purchase of printing presses. Additionally, the Company issued term
equipment notes totaling $9,032 (see Note 2. Long-Term Debt) during the six
months ended September 30, 1999 to satisfy certain accrued liabilities totaling
$8,732 as of March 31, 1999 related to the purchase of printing presses and to
acquire equipment for $300. The following is a summary of total cash paid for
interest and income taxes (net of refunds).
SIX MONTHS ENDED
SEPTEMBER 30,
---------------------
1999 1998
-------- --------
CASH PAID FOR:
Interest..................... $ 5,283 $ 2,893
Taxes ....................... 10,008 3,923
4
<PAGE>
CONSOLIDATED GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
2. LONG-TERM DEBT
The following is a summary of the Company's long-term debt as of:
SEPTEMBER 30, MARCH 31,
1999 1999
------------- -----------
Revolving credit facilities .............. $ 171,796 $ 148,397
Term equipment notes ..................... 34,857 19,966
Other .................................... 4,490 5,080
--------- ---------
211,143 173,443
Less current portion ..................... (3,902) (2,869)
--------- ---------
$ 207,241 $ 170,574
--------- ---------
The Company's primary revolving credit facility (the "Credit Agreement")
was obtained from a syndicate of commercial banks and, as amended in September
1999, has a maximum borrowing capacity of $245,000, of which $161,796 was
outstanding at September 30, 1999. The Credit Agreement will mature July 31,
2001, at which time all amounts outstanding thereunder will be due. Borrowings
outstanding under the Credit Agreement are unsecured and accrue interest at a
variable rate (a weighted average of 6.06% on September 30, 1999). In addition,
the Company maintains an auxiliary revolving credit facility (the "Auxiliary
Facility") with a commercial bank which provides for a maximum borrowing
capacity of $10,000, of which the maximum amount was outstanding at September
30, 1999. The interest rate applicable to all borrowings under the Auxiliary
Facility at September 30, 1999 was 6.00%.
The Company's term equipment notes primarily consist of notes payable
pursuant to a printing press purchasing and financing agreement with a major
manufacturer. As of September 30, 1999, the Company was obligated on term notes
related to such agreement totaling $27,074. These term notes are secured by the
purchased presses and provide for fixed monthly principal and interest payments
over ten years. The weighted average interest rate on such notes at September
30, 1999 was 7.07%.
3. ACQUISITIONS
The Company completed the following acquisitions during the six months
ended September 30, 1999:
<TABLE>
<CAPTION>
COMPANY PRIMARY MARKET DATE
--------- ---------------- ------
<S> <C>
Wentworth Printing Columbia, South Carolina April 1999
The Printery Milwaukee, Wisconsin April 1999
The Graphics Group Dallas, Texas June 1999
Westland Printers Baltimore, Maryland June 1999
H&N Printing Baltimore, Maryland June 1999
T/O Printing Thousand Oaks, California June 1999
Multiple Images Chicago, Illinois August 1999
Apple Graphics Hollywood, California August 1999
Maryland Composition.com Baltimore, Maryland September 1999
</TABLE>
To complete the aforementioned acquisitions, in the aggregate, the Company
paid cash of $16,197, issued 1,032,407 shares of its common stock, and
discharged debt and paid other liabilities of the acquired businesses totaling
$22,933. Additionally, debt of the acquired businesses totaling $7,322 remained
outstanding following the acquisitions.
Subsequent to September 30, 1999, the Company completed the acquisition of
one printing business and as of October 31, 1999 had signed non-binding letters
of intent to acquire six other printing businesses.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING DISCUSSION CONTAINS 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.
THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND PERFORMANCE OF THE
COMPANY SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL STATEMENTS
INCLUDED HEREIN AND THE CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES AND
OTHER DETAILED INFORMATION REGARDING THE COMPANY INCLUDED IN THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED MARCH 31, 1999 AND OTHER
REPORTS FILED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION.
OPERATING RESULTS FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 1999 ARE NOT
NECESSARILY INDICATIVE OF THE RESULTS TO BE EXPECTED FOR THE ENTIRE FISCAL YEAR
ENDING MARCH 31, 2000 OR ANY PERIODS THEREAFTER.
GENERAL
The Company is a leading consolidator in the highly fragmented commercial
printing industry and is recognized as one of the fastest-growing commercial
printing companies in the United States. The Company is headquartered in
Houston, Texas and has locally managed printing operations in 25 states as of
September 30, 1999. The Company's printing businesses provide a full range of
traditional printing services, complemented at certain locations by a variety of
digital media and fulfillment services.
PRINTING SERVICES - The majority of the Company's sales are derived from
traditional printing services, which include electronic prepress, printing,
finishing, storage and delivery of printed materials and other products
requested by its customers and produced to their specifications. Examples of
such documents include high-quality multicolor product and capability brochures,
shareholder communications, catalogs, reference materials, training manuals and
direct mail pieces. The Company has continually invested in the latest
electronic prepress, press and postpress technology to increase capacity and
operating efficiencies at its printing businesses and expand the types of
printing-related services offered to its customers.
DIGITAL/ELECTRONIC MEDIA AND FULFILLMENT SERVICES - Because the Company's
printing businesses operate in a digital and electronic media environment, the
Company is able to help customers maximize the use of their digital and
electronic information. Many of the Company's printing businesses capitalize on
their expertise in digital processes to offer a wide range of capabilities,
including digital data asset management (such as maintaining, repurposing and
archiving digital media), CD-ROM production, development of online ordering
systems and Web page design and Web site hosting. The Company's printing
businesses also serve their customers by providing a broad array of fulfillment
services, whereby they assemble, package, store and distribute promotional,
educational or training documents on behalf of their customers. Many
corporations utilize these fulfillment services to manage their inventory of
printed products and various assembly materials (such as binders and product
samples) and provide "just-in-time" assembly and delivery of customized
materials to operating locations or other end-users. Orders for fulfillment
services are frequently received from customers via the Internet or through
order-entry and inventory management systems maintained by the Company.
MARKETING AND SALES
The Company's printing businesses serve a diverse and growing base of
national and locally-based customers in a broad cross section of industries.
Because the printing industry is service-oriented, the Company's primary
marketing focus is on responding rapidly to customer requirements and producing
high quality printed materials at competitive prices. The majority of the
Company's print jobs consist of individual orders for custom designed marketing
materials which are generated by commissioned sales personnel and, to a lesser
extent, through orders received via the Internet or pursuant to long-term
contracts. As a result, continued engagement of the Company by its customers for
successive jobs is primarily dependent upon, among other things, the customer's
satisfaction with the services provided. As such, the Company is unable to
accurately predict, for more than a few weeks in advance, the number, size and
profitability of print jobs it expects to produce.
6
<PAGE>
BUSINESS STRATEGY
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 management expertise, greater purchasing power, access to technology
and capital and a commitment to training through a unique, comprehensive
management development program. As a result, operating 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 operating
strategies and strengths are fully implemented.
RESULTS OF OPERATIONS
The following tables set forth the Company's historical income statements
for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------------ ------------------------
1999 1998 1999 1998
------ ------ ------ ------
(in millions) (in millions)
<S> <C> <C> <C> <C>
Sales ................................................. $152.9 $103.3 $298.7 $188.4
Cost of sales ......................................... 105.3 70.9 205.4 128.9
------ ------ ------ ------
Gross profit .................................... 47.6 32.4 93.3 59.5
Selling expenses ...................................... 14.8 10.2 28.9 18.5
General and administrative expenses ................... 11.8 7.9 22.9 14.5
------ ------ ------ ------
Operating income ................................ 21.0 14.3 41.5 26.5
Interest expense ...................................... 3.0 2.0 5.7 3.5
------ ------ ------ ------
Income before income taxes ...................... 18.0 12.3 35.8 23.0
Provision for income taxes ............................ 7.2 4.8 14.3 9.0
------ ------ ------ ------
Net income ...................................... $ 10.8 $ 7.5 $ 21.5 $ 14.0
====== ====== ====== ======
</TABLE>
The following tables set forth the components of income expressed as a
percentage of sales for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
----------------------- -----------------------
1999 1998 1999 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Sales ................................................. 100.0% 100.0% 100.0% 100.0%
Cost of sales ......................................... 68.9 68.6 68.8 68.4
----- ----- ----- -----
Gross profit .................................... 31.1 31.4 31.2 31.6
Selling expenses ...................................... 9.7 9.8 9.7 9.8
General and administrative expenses ................... 7.7 7.7 7.7 7.7
----- ----- ----- -----
Operating income ................................ 13.7 13.9 13.8 14.1
Interest expense ...................................... 2.0 2.0 1.9 1.8
----- ----- ----- -----
Income before income taxes ...................... 11.7 11.9 11.9 12.3
Provision for income taxes ............................ 4.7 4.6 4.7 4.8
----- ----- ----- -----
Net income ...................................... 7.0% 7.3% 7.2% 7.5%
===== ===== ===== =====
</TABLE>
Acquisitions in fiscal 1999 and 2000 are the primary causes of the
absolute increases in revenues and expenses since September 30, 1998. Each of
the Company's acquisitions in fiscal 1999 and 2000 were 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.
7
<PAGE>
The following table sets forth the Company's fiscal 1999 and 2000
acquisitions (collectively the "1999/2000 Acquired Businesses") and indicates
the period in which each business was acquired.
FISCAL 1999 ACQUISITIONS
Tursack, Inc................................. April 1998
Image Systems................................ May 1998
Printing, Inc................................ June 1998
Wetzel Brothers.............................. June 1998
Graphic Communications....................... June 1998
Paragraphics................................. July 1998
Pride Printers............................... July 1998
Lincoln Printing............................. August 1998
Ironwood Litho............................... August 1998
Rush Press................................... September 1998
Printing Corp. of America.................... September 1998
Metropolitan Printing........................ October 1998
Graphic Technology of Maryland............... November 1998
McKay Press.................................. November 1998
Mount Vernon Printing........................ December 1998
Automated Graphics........................... February 1999
Mercury Printing ............................ March 1999
CMI......................................... March 1999
Maxwell Graphic Arts......................... March 1999
FISCAL 2000 ACQUISITIONS
Wentworth Printing........................... April 1999
The Printery................................. April 1999
The Graphics Group........................... June 1999
Westland Printers............................ June 1999
H&N Printing................................. June 1999
T/O Printing................................. June 1999
Multiple Images.............................. August 1999
Apple Graphics............................... August 1999
Maryland Composition.com..................... September 1999
For more information regarding the fiscal 1999 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, 1999. For more
information regarding the fiscal 2000 acquisitions, refer to the accompanying
"Notes to Consolidated Financial Statements" included elsewhere herein.
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
30, 1998
Sales increased 48% to $152.9 million for the three months ended September
30, 1999, from $103.3 million for the three months ended September 30, 1998. The
incremental revenue contribution of the 1999/2000 Acquired Businesses
substantially accounted for this increase, partially offset by lower revenues at
certain operating locations due to business disruptions caused by Hurricane
Floyd in September 1999, local management issues at three facilities (see below)
and management's decision to exit from a lower margin segment of its book
printing operations.
Gross profit increased 47% to $47.6 million for the three months ended
September 30, 1999, from $32.4 million for the three months ended September 30,
1998, primarily due to the incremental profit contribution of the 1999/2000
Acquired Businesses. Gross profit as a percentage of sales decreased to 31.1%
for the three months
8
<PAGE>
ended September 30, 1999, from 31.4% in the corresponding period of the prior
year. This decrease resulted primarily from the effect of the overall lower
operating margins of the 1999/2000 Acquired Businesses (consistent with the
Company's expectation that gross profit margins at recently acquired businesses
will be lower than the Company's historical margins, then are likely to improve
as the full benefit of the Company's operating strengths and strategies takes
effect) and the effect of losses incurred at three historically profitable
facilities. The Company believes these losses occurred as a result of local
management issues which have been addressed and that these facilities will
return to profitable operations in the next three to six months. The impact on
the Company's gross profit margin percentage for the three months ended
September 30, 1999 as a result of Hurricane Floyd's impact on the Company's
revenue was substantially offset by the elimination of a lower margin segment of
the Company's book printing operations as discussed above.
Selling expenses increased 45% to $14.8 million for the three months ended
September 30, 1999, from $10.2 million for the three months ended September 30,
1998, primarily due to the increased sales levels noted above. Selling expenses
as a percentage of sales decreased slightly to 9.7% in the current quarter from
9.8% in the corresponding period of the prior year.
General and administrative expenses increased 49% to $11.8 million for the
three months ended September 30, 1999, from $7.9 million for the three months
ended September 30, 1998. This increase is due primarily to the addition of the
1999/2000 Acquired Businesses. General and administrative expenses as a
percentage of sales remained constant at 7.7%.
Interest expense increased to $3.0 million for the three months ended
September 30, 1999, from $2.0 million for the three months ended September 30,
1998, due to a net increase in borrowings under the Company's revolving credit
facilities used to finance the purchase of the 1999/2000 Acquired Businesses and
the addition of term equipment notes related to the purchase of printing
presses.
Effective income tax rates reflect an increase to 40% for the three months
ended September 30, 1999, from 39% for the three months ended September 30,
1998, due primarily to the effect of nondeductible goodwill incurred in
connection with certain of the acquisitions completed since the prior period.
SIX MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH SIX MONTHS ENDED SEPTEMBER 30,
1998
Sales increased 59% to $298.7 million for the six months ended September
30, 1999, from $188.4 million for the six months ended September 30, 1998. This
increase is substantially due to the incremental revenue contribution of the
1999/2000 Acquired Businesses, partially offset by the operational issues
discussed above.
Gross profit increased 57% to $93.3 million for the six months ended
September 30, 1999, from $59.5 million for the six months ended September 30,
1998, primarily due to the incremental profit contribution of the 1999/2000
Acquired Businesses. Gross profit as a percentage of sales decreased to 31.2%
for the six months ended September 30, 1999, from 31.6% in the corresponding
period of the prior year, due primarily to the effect of the operational issues
discussed above.
Selling expenses increased 56% to $28.9 million for the six months ended
September 30, 1999, from $18.5 million for the six months ended September 30,
1998, primarily due to the increased sales levels noted above. Selling expenses
as a percentage of sales decreased slightly to 9.7% for the six months ended
September 30, 1999, from 9.8% in the corresponding period of the prior year.
General and administrative expenses increased 58% to $22.9 million for the
six months ended September 30, 1999, from $14.5 million for the six months ended
September 30, 1998. This increase is due primarily to the addition of the
1999/2000 Acquired Businesses. General and administrative expenses as a
percentage of sales remained constant at 7.7%.
9
<PAGE>
Interest expense increased to $5.7 million for the six months ended
September 30, 1999, from $3.5 million for the six months ended September 30,
1998, due to a net increase in borrowings under the Company's revolving credit
facilities used to finance the purchase of the 1999/2000 Acquired Businesses and
the addition of term equipment notes related to the purchase of printing
presses.
Effective income tax rates reflect an increase to 40% for the six months
ended September 30, 1999, from 39% for the six months ended September 30, 1998,
due primarily to the Company's expansion into states with proportionately higher
income tax rates and the effect of nondeductible goodwill incurred in connection
with certain of the acquisitions completed since the prior period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash uses are for acquisitions, capital expenditures
and payments on long-term debt incurred to finance certain equipment purchases
or assumed in connection with certain acquisitions. Cash utilized to complete
acquisitions totaled $39.1 million in the six months ended September 30, 1999.
Cash utilized for capital expenditures, which relate primarily to the purchase
of new electronic prepress and bindery equipment, was $11.2 million in the six
months ended September 30, 1999. Principal payments on long-term debt totaled
$2.2 million in the six months ended September 30, 1999. In total, cash
requirements for acquisitions, capital expenditures and debt service were $52.5
million in the six months ended September 30, 1999.
The Company financed its capital requirements through internally generated
funds and borrowings under its revolving credit facilities (see below). Cash
flow generated from operations (net income plus depreciation, amortization and
deferred tax provision) was $37.8 million in the six months ended September 30,
1999.
The Company's primary revolving credit facility (the "Credit Agreement")
was obtained from a syndicate of commercial banks and, as amended in September
1999, has a maximum borrowing capacity of $245 million, of which $161.8 million
was outstanding at September 30, 1999. Borrowings outstanding under the Credit
Agreement are unsecured and accrue interest, at the Company's option, at (1) the
London Interbank Offered Rate (LIBOR) plus .50% to 1.50% based upon the
Company's Debt to Pro Forma EBITDA ratio as defined, redetermined quarterly, or
(2) an alternate base rate based upon the agent bank's prime lending rate or
Federal Funds effective rate. The Credit Agreement also provides for a
commitment fee on available but unused amounts ranging from .10% to .35% per
annum. The Credit Agreement will mature July 31, 2001, at which time all amounts
outstanding thereunder are due. Borrowings outstanding under the Credit
Agreement were subject to a weighted average interest rate of 6.06% at September
30, 1999. In addition, the Company maintains an auxiliary revolving credit
facility (the "Auxiliary Facility") with a commercial bank which provides for a
maximum borrowing capacity of $10 million, of which the maximum amount was
outstanding at September 30, 1999. The interest rate applicable to all
borrowings under the Auxiliary Facility at September 30, 1999 was 6.00%.
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 September 30, 1999.
The Company has agreements with certain printing press manufacturers
(collectively, the "Press Purchase Agreements") pursuant to which the Company
receives certain volume purchase incentives and long-term financing options with
respect to the purchase of printing presses. As of September 30, 1999, the
Company was obligated on term notes related to the Press Purchase Agreements
totaling $27.1 million. These term notes are secured by the purchased presses
and provide for fixed monthly principal and interest payments over ten years.
The weighted average interest rate on such notes at September 30, 1999 was
7.07%. The Company is not subject to any significant
10
<PAGE>
financial covenants or restrictions in connection with these obligations. As of
September 30, 1999, the Company had accepted delivery of additional printing
presses for a total purchase price of $14.2 million, which amount is included in
accounts payable in the accompanying consolidated financial statements and is
expected to be financed under terms of the Press Purchase Agreements. Debt
incurred directly to finance printing press purchases was $8.7 million in the
six months ended September 30, 1999.
The Company expects to make additional equipment capital expenditures in
fiscal 2000 using cash flow from operations and borrowings under its revolving
credit facilities and/or the Press Purchase Agreements.
Pursuant to earnout agreements entered into in connection with certain
acquisitions, as of September 30, 1999, the Company was contingently obligated
at certain times and under certain circumstances through 2005 to issue up to
165,460 shares of its common stock and to make additional cash payments of up to
$19.8 million for all periods in the aggregate.
During the six months ended September 30, 1999, the Company acquired nine
printing businesses. To complete these acquisitions, in the aggregate, the
Company paid cash of $16.2 million, issued 1,032,407 shares of its common stock,
and discharged debt and paid other liabilities of the acquired businesses
totaling $22.9 million. Additionally, debt of the acquired businesses totaling
$7.3 million remained outstanding following the acquisitions. As of October 31,
1999, the Company had completed one additional acquisition and had executed
non-binding letters of intent to acquire six other printing businesses.
The Company intends to continue to actively pursue acquisition
opportunities. To finance its acquisitions, the Company intends to utilize cash
flow from operations and borrowings under the Credit Agreement. The Company may
also issue shares of its authorized common stock from time to time in connection
with its acquisitions. Because of its current market price, the Company does not
expect to issue shares in connection with any acquisitions which are currently
pending or under consideration. 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 any acquired business.
YEAR 2000 COMPLIANCE
The Year 2000 issue results from the historical use in computer software
programs of a two-digit abbreviation in date fields to represent the year.
Certain computer programs, including programs imbedded in various equipment, may
fail to properly function when confronted with dates which contain the two-digit
year "00". These processing errors have the potential to cause system failures
or disrupt normal operations.
The Company has reviewed and is continuing to review its business risks
associated with the Year 2000 issue. It has established a Year 2000 Readiness
Program and a Year 2000 Readiness Team with the responsibility for its
execution. The Year 2000 Readiness Team initially developed a schedule for
evaluating the Company's information technology assets and conducting risk
reviews of non-information technology assets and operational practices.
The Company has completed its evaluation of its information technology
assets, including its management information systems and equipment used in its
printing operations, and has substantially completed all necessary upgrades,
conversions or replacements identified as a result of its evaluation. The
Company has also substantially completed the testing and validation phase of its
Year 2000 Readiness Program with respect to its information technology assets.
Because the majority of its management information systems operate on
broadly available hardware platforms and employ software specifically designed
for the printing industry and perpetually supported by its developers, the
Company has not encountered any significant difficulty in completing the
portions of its Year 2000 Readiness Program pertaining to its information
technology assets, nor has it had to accelerate the replacement or upgrade of,
or incur costs materially in excess of its recurring investment in, its
management information systems.
11
<PAGE>
Although no assurances can be given, the Company believes, as a result of the
procedures discussed above, that it will not suffer any material disruptions to
its operations as a result of the impact of the Year 2000 issue on its
information technology assets.
The Company's Year 2000 Readiness Team has also substantially completed
its evaluation of, and has developed contingency plans it believes will be
adequate to minimize, the Company's exposure to business disruptions as a result
of the impact of the Year 2000 issue on its non-information technology assets,
operational policies, and major suppliers and customers, including with respect
to the "worst case" scenario described below. Because of its many locations, if
certain of the Company's printing facilities were to be adversely affected by
the impact of the Year 2000 issue, the Company expects that it will likely be
able to use other operable printing facilities to complete critical
time-sensitive projects for its customers. Accordingly, the principal component
of the Company's contingency plan consists of immediate evaluation of the
operating capability of each facility on January 1, 2000 and, to the extent
feasible, redistribution of customer projects from inoperable to operable
facilities.
Like many manufacturing companies, the Company's operations depend upon
the operation of many other businesses, the disruption of any one or even a
number of which as a result of the Year 2000 issue would not have a material
effect on the business of the Company. However, in a "worst case" Year 2000
scenario, a significant number of such businesses could suffer disruptions as a
result of the Year 2000 issue and the Company's operations could be adversely
affected. In the case of a systemic failure, such as prolonged
telecommunications or electrical failures, or a general disruption in United
States or global business activities that could result in a significant economic
downturn, the primary business risks of the Company would include, but not be
limited to, loss of customers or orders, increased operating costs, inability to
obtain supplies and inventory on a timely basis, disruptions in production
shipments or other business interruptions of a material nature, any of which
could have a material, adverse effect on the Company's business, results of
operations and financial condition. A prolonged industry-wide decline in
printing orders as affected businesses focus on operational requirements more
essential to their survival than printing needs would have a significant adverse
effect on the Company. In addition, although the Company is not aware of any
contractual relationship it has which exposes the Company to any potentially
material liability in the event the Company suffers a business disruption as a
result of the Year 2000 issue, it is possible that claims of mismanagement,
misrepresentation or breach of contract could nevertheless be made against the
Company.
There are many suppliers of paper, ink and other materials used in
printing operations. Thus, the Company believes that it is not materially
dependent on any one supplier. The Company's Year 2000 Readiness Team has orally
communicated with, and in some cases received written communications from or
conducted site visits to, many of the Company's more significant suppliers
regarding such supplier's Year 2000 readiness. Based on information and
representations received to date, the Company believes that it will be able to
obtain materials necessary to continue its operations without significant
disruption due to Year 2000 issues.
The Company has a large and diversified customer base comprised of
thousands of customers in locations throughout the United States and is not
dependent on any one customer or group of customers for its revenues. As such,
the Company does not anticipate that the demand for its commercial printing
services would be materially adversely affected as a result of Year 2000 issues
unless such issues have a widespread, catastrophic effect on its customer base.
As part of its ongoing review of the Year 2000 issue, the Company
evaluates and addresses Year 2000 issues for its planned acquisitions and
develops appropriate remedial action and a timetable for such action following
completion of such acquisitions. As a result, the Company does not believe that
any of the Company's recent or pending acquisitions have any exposure to Year
2000 issues greater than that of the Company's other printing facilities.
12
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS
None.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Market risk generally means the risk that losses may occur in the value of
certain financial instruments as a result of movements in interest rates,
foreign currency exchange rates and commodity prices. The Company does not hold
or utilize derivative financial instruments which could expose the Company to
significant market risk. However, the Company is exposed to market risk for
changes in interest rates related primarily to its long-term debt obligations.
As of September 30, 1999, there were no material changes in the Company's market
risk or the estimated fair value of its long-term debt obligations as reported
in the Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1999.
13
<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 out of its operations in the normal course of business. The Company
maintains insurance coverage against potential claims in an amount which 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 six months ended September 30, 1999, the Company issued
1,032,407 shares of its common stock valued at approximately $48.2 million in
connection with the acquisition of certain printing businesses and also issued
13,332 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 28, 1999, the Company held its Annual Meeting of Shareholders. The
following item was submitted to a vote of shareholders through the solicitation
of proxies:
ELECTION OF DIRECTORS
The following persons were elected to serve on the Board of Directors
until the 2000 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:
<TABLE>
<CAPTION>
NAME FOR AGAINST ABSTENTIONS
-------- ---------- ---------- -------------
<S> <C> <C> <C>
Joe R. Davis ................................ 12,715,451 32,454 0
Larry J. Alexander .......................... 12,715,451 32,454 0
Brady F. Carruth ............................ 12,715,451 32,454 0
Clarence C. Comer ........................... 12,715,451 32,454 0
Gary L. Forbes .............................. 12,715,451 32,454 0
James H. Limmer ............................. 12,715,451 32,454 0
Hugh N. West ................................ 12,715,451 32,454 0
</TABLE>
ITEM 5. OTHER INFORMATION.
None
14
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS:
* 3.1 Restated Articles of Incorporation of the Company filed with the
Secretary of State of the State of Texas on July 27, 1994 (Consolidated
Graphics, Inc. Form 10-Q (June 30, 1994) SEC File No. 0-24068, Exhibit
4(a)).
* 3.2 Articles of Amendment to the Restated Articles of Incorporation of
the Company dated as of July 29, 1998 (Consolidated Graphics, Inc. Form
10-Q (June 30, 1998) SEC File No. 0-24068, Exhibit 3.1).
* 3.3 Restated By-Laws of the Company as amended on June 23, 1999
(Consolidated Graphics, Inc. Form 10-Q (June 30, 1999) SEC File No.
0-24068, Exhibit 3.4).
* 4 Specimen Common Stock Certificate (Consolidated Graphics, Inc. Form
10-K (March 31, 1998) SEC File No. 0-24068, Exhibit 4.1).
10.1 Second Amendment to the Revolving Credit Agreement among the Company
and Chase Bank of Texas as Agent and Bank of Texas, N.A. as Co-Agent,
dated September 22, 1999.
27 EDGAR financial data schedule.
* Incorporated by reference
(B) REPORTS ON FORM 8-K:
1) Form 8-K, filed July 6, 1999 in connection with the press releases announcing
completion of the acquisition of H&N Printing and the signing of letters of
intent to acquire Multiple Images Printing, T/O Printing, and Anderson
Printing.
2) Form 8-K, filed July 28, 1999 in connection with the press releases
announcing the Company's fiscal 2000 first quarter results and the
appointment of a new executive vice president position.
3) Form 8-K, filed August 4, 1999 in connection with the press release
announcing completion of the acquisition of T/O Printing.
4) Form 8-K, filed September 2, 1999 in connection with the press release
announcing the signing of a letter of intent to acquire Piccari Press, and
the completion of the acquisitions of Apple Graphics and Multiple Images.
5) Form 8-K, filed September 10, 1999 in connection with the press release
announcing the signing of a letter of intent to acquire Byrum Litho and Keys
Printing.
6) Form 8-K, filed September 23, 1999 in connection with the press release
announcing the signing of a letter of intent to acquire Everett Graphics.
7) Form 8-K, filed September 28, 1999 in connection with the press release
announcing the acquisition of Maryland Composition.com.
8) Form 8-K, filed October 15, 1999 in connection with the press release
announcing the Company's preliminary fiscal 2000 second quarter results.
9) Form 8-K, filed October 27, 1999 in connection with the press release
announcing the Company's fiscal 2000 second quarter results.
15
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT, CONSOLIDATED GRAPHICS, INC., HAS DULY CAUSED THIS REPORT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
CONSOLIDATED GRAPHICS, INC.
Dated: November 9, 1999 By: /s/ G. CHRISTOPHER COLVILLE
-----------------------------------
G. Christopher Colville
Executive Vice President -
Mergers and Acquisitions,
Chief Financial and Accounting
Officer and Secretary
16
EXHIBIT 10.1
AMENDMENT TO LOAN AGREEMENT
THIS AMENDMENT TO LOAN AGREEMENT (this "AMENDMENT") is made and entered
into as of September 22, 1999 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. AMENDMENT TO LOAN AGREEMENT. The references to "$200,000,000"
in the Loan Agreement are hereby amended to read "$245,000,000." The
$245,000,000 Revolving Loan Commitment shall be allocated to the Lenders as set
forth opposite their respective signatures hereto.
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.
<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
2
<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 OF THE BOARD AND CHIEF
EXECUTIVE OFFICER
3
<PAGE>
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, as Agent and as a Lender
By: /s/ JAMES R. DOLPHIN
Name: JAMES R. DOLPHIN
Title: SVP
Revolving Loan Commitment:
$35,000,000
4
<PAGE>
BANKONE, TEXAS, N.A.,
as Co-Agent and as a Lender
By: /s/ STEVEN C. KRUEGER
Name: STEVEN C. KRUEGER
Title: SENIOR VICE PRESIDENT
Revolving Loan Commitment:
$45,000,000
5
<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
6
<PAGE>
FIRST UNION NATIONAL BANK,
as Co-Agent and as a Lender
By: /s/ GEORGE L. WOOLSEY
Name: GEORGE L. WOOLSEY
Title: VICE PRESIDENT
Revolving Loan Commitment:
$35,000,000
7
<PAGE>
CIBC, INC.
By: /s/ KATHERINE BASS
Name: KATHERINE BASS
Title: EXECUTIVE DIRECTOR
CIBC WORLD MARKETS CORP. AS AGENT
Revolving Loan Commitment:
$15,000,000
8
<PAGE>
BANK OF AMERICA, N.A.
By: /s/ WILLIAM B. BORUS
Name: WILLIAM B. BORUS
Title: VICE PRESIDENT
Revolving Loan Commitment:
$30,000,000
9
<PAGE>
SUNTRUST BANK, ATLANTA
By: /s/ DEBORAH S. ARMSTRONG
Name: DEBORAH S. ARMSTRONG
Title: VICE PRESIDENT
Revolving Loan Commitment:
$25,000,000
10
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ ROBERT IVOSEVICH
Name: ROBERT IVOSEVICH
Title: SENIOR VICE PRESIDENT
Revolving Loan Commitment:
$15,000,000
11
<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.
PRECISION LITHO, INC.,
CHAS. P. YOUNG COMPANY,
THE JARVIS PRESS, INC.,
CONSOLIDATED GRAPHICS PROPERTIES II,
GARNER PUBLISHING COMPANY,
EMERALD CITY GRAPHICS, INC.,
WESTERN LITHOGRAPH COMPANY,
FREDERIC PRINTING COMPANY,
DIRECT COLOR, INC.,
GULF PRINTING COMPANY,
CLEARVISIONS, INC.,
BRIDGETOWN PRINTING CO.,
TEWELL WARREN PRINTING COMPANY,
CONSOLIDATED EAGLE PRESS, INC.,
HERITAGE GRAPHICS, INC.,
TUCKER PRINTERS, INC.,
GEYER PRINTING COMPANY, INC.,
THE JOHN C. OTTO COMPANY, INC.,
COURIER PRINTING COMPANY,
12
<PAGE>
TURSACK, INC.,
SUPERIOR COLOUR GRAPHICS, INC.,
THE ETHERIDGE COMPANY,
IMAGE SYSTEMS, INC.,
WETZEL BROTHERS, INC.,
IRONWOOD LITHOGRAPHERS, INC.,
PRINTING CORPORATION OF AMERICA,
PRIDE PRINTERS, INC.,
RUSH PRESS, INC.,
GROVER PRINTING COMPANY
By: /s/ JOE R. DAVIS
Name: JOE R. DAVIS
Title: CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED SEPTEMBER
30, 1999.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> SEP-30-1999
<CASH> 7,346
<SECURITIES> 0
<RECEIVABLES> 113,069
<ALLOWANCES> (5,288)
<INVENTORY> 30,154
<CURRENT-ASSETS> 149,065
<PP&E> 322,580
<DEPRECIATION> (51,582)
<TOTAL-ASSETS> 609,040
<CURRENT-LIABILITIES> 87,472
<BONDS> 0
0
0
<COMMON> 157
<OTHER-SE> 285,055
<TOTAL-LIABILITY-AND-EQUITY> 609,040
<SALES> 298,715
<TOTAL-REVENUES> 298,715
<CGS> 205,446
<TOTAL-COSTS> 205,446
<OTHER-EXPENSES> 51,828
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,682
<INCOME-PRETAX> 35,759
<INCOME-TAX> 14,303
<INCOME-CONTINUING> 21,456
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,456
<EPS-BASIC> 1.40
<EPS-DILUTED> 1.37
</TABLE>
