SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
CONSOLIDATED GRAPHICS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1. Title of each class of securities to which transaction applies:______
2. Aggregate number of securities to which transaction applies:_________
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:__________________________________
4. Proposed maximum aggregate value of transaction:_____________________
5. Total fee paid:______________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form of Schedule and the date of its filing.
1. Amount Previously Paid:______________________________________________
2. Form, Schedule or Registration Statement No.:________________________
3. Filing Party:________________________________________________________
4. Date Filed:__________________________________________________________
<PAGE>
June 30, 1999
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders to
be held in the Boardroom of Chase Bank of Texas, 707 Travis Street, Houston,
Texas 77002, on Wednesday, July 28, 1999 at 5:00 p.m., Central Daylight Time.
For those of you who cannot be present at this Annual Meeting, we urge that you
participate by indicating your choices on the enclosed proxy and completing and
returning it at your earliest convenience. If you sign and return your proxy
card without specifying your choices, it will be understood you wish to have
your shares voted in accordance with the Board of Directors' recommendations.
This booklet includes the Notice of Annual Meeting of Shareholders and the
Proxy Statement, which contains details of the business to be conducted at the
Annual Meeting. The Company's 1999 Annual Report to Shareholders, which is not
part of the Proxy Statement, is also enclosed and provides additional
information regarding the financial results of the Company for the fiscal year
ended March 31, 1999.
It is important that your shares are represented at the meeting, whether or
not you are able to attend personally. Accordingly, please sign, date and mail
promptly the enclosed proxy in the envelope provided.
On behalf of the Board of Directors, thank you for your cooperation and
continued support.
/s/ JOE R. DAVIS
Joe R. Davis
CHAIRMAN
AND CHIEF EXECUTIVE OFFICER
<PAGE>
CONSOLIDATED GRAPHICS, INC.
5858 WESTHEIMER, SUITE 200
HOUSTON, TEXAS 77057
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD WEDNESDAY, JULY 28, 1999
To the Shareholders:
The Annual Meeting of Shareholders of Consolidated Graphics, Inc. (the
"Company") will be held in the Boardroom at Chase Bank of Texas, 707 Travis
Street, Houston, Texas 77002, on Wednesday, July 28, 1999 at 5:00 p.m., Central
Daylight Time, for the following purposes:
1. To elect seven directors to serve until the next Annual Meeting of
Shareholders or until their successors are elected and qualified.
2. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only shareholders of record as of the close of business on June 30, 1999
are entitled to receive notice of and to vote at the meeting and any
adjournments thereof. A list of such shareholders shall be open to the
examination of any shareholder during ordinary business hours, for a period of
ten days prior to the meeting, at the principal executive offices of the
Company, 5858 Westheimer, Suite 200, Houston, Texas 77057 and shall also be open
to examination at the Annual Meeting and any adjournments thereof.
By Order of the Board of Directors
/s/ G. CHRISTOPHER COLVILLE
G. Christopher Colville
SECRETARY
Houston, Texas
June 30, 1999
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING REGARDLESS OF THE
NUMBER OF SHARES YOU HOLD. PLEASE COMPLETE, SIGN AND MAIL THE ENCLOSED PROXY IN
THE ACCOMPANYING ENVELOPE EVEN IF YOU INTEND TO BE PRESENT AT THE MEETING.
RETURNING THE PROXY WILL NOT LIMIT YOUR RIGHT TO VOTE IN PERSON OR TO ATTEND THE
ANNUAL MEETING, BUT WILL ENSURE YOUR REPRESENTATION IF YOU CANNOT ATTEND. IF YOU
HAVE SHARES IN MORE THAN ONE NAME, OR IF YOUR STOCK IS REGISTERED IN MORE THAN
ONE WAY, YOU MAY RECEIVE MORE THAN ONE COPY OF THE PROXY MATERIAL. IF SO, SIGN
AND RETURN EACH OF THE PROXY CARDS YOU RECEIVE SO THAT ALL OF YOUR SHARES MAY BE
VOTED. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO ITS USE.
<PAGE>
CONSOLIDATED GRAPHICS, INC.
5858 WESTHEIMER, SUITE 200
HOUSTON, TEXAS 77057
------------------------
PROXY STATEMENT
------------------------
INTRODUCTION
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Consolidated Graphics, Inc., a Texas corporation (the "Company"),
for use only at the Annual Meeting of Shareholders (the "Annual Meeting") to
be held in the Boardroom at Chase Bank of Texas, 707 Travis Street, Houston,
Texas 77002, on Wednesday, July 28, 1999 at 5:00 p.m., Central Daylight Time,
and at any adjournments thereof. The approximate date on which this Proxy
Statement and accompanying proxy will first be given or sent to shareholders is
July 2, 1999.
Each proxy executed and returned by a shareholder may be revoked at any
time before it is voted at the Annual Meeting by filing a written instrument
revoking it with the Secretary at the Company's executive offices, by execution
and return of a later-dated proxy, or by appearing at the Annual Meeting and
voting in person. The executive offices of the Company are located at 5858
Westheimer, Suite 200, Houston, Texas 77057.
Proxies in the accompanying form will be voted in accordance with the
specifications made thereon and, where no specifications are given, such proxies
will be voted FOR the election as directors of the nominees named herein and if
any one or more of such nominees should become unavailable for election for any
reason, then FOR the election of any substitute nominee that management of the
Company may propose.
In the discretion of the proxy holders, the proxies will also be voted FOR
or AGAINST such other matters as may properly come before the meeting.
Management of the Company is not aware of any other matters to be presented for
action at the meeting.
RECORD DATE AND VOTING SECURITIES
The Board of Directors has fixed the close of business on June 30, 1999 as
the record date for the determination of shareholders entitled to receive notice
of and to vote at the Annual Meeting and any adjournments thereof. The issued
and outstanding stock of the Company on June 30, 1999 consisted of 15,536,364
shares of Common Stock, each of which is entitled to one vote. Under the
Company's Restated By-Laws as well as the Texas Business Corporation Act, the
holders of a majority of the total issued and outstanding shares of Common
Stock, present in person or represented by proxy, will constitute a quorum for
the transaction of business at the meeting.
If there are insufficient shares present in person or represented by proxy
at the meeting to constitute a quorum, the meeting may be adjourned until such
time and place as determined by a vote of the holders of a majority of the
shares present in person or represented by proxy at the meeting to permit
further solicitation of proxies by the Company. Proxies given pursuant to this
solicitation and not revoked will be voted at any postponement or adjournment of
the Annual Meeting in the manner set forth above.
The affirmative vote of a majority of the shares represented in person or
by proxy at the meeting at which a quorum is present, is required for the
election of directors. Abstentions and "broker nonvotes" (i.e., shares held by
a broker or nominee as to which instructions have not been received from the
beneficial owners or persons entitled to vote) will be treated as shares that
are present and entitled to vote for purposes
1
<PAGE>
of determining the presence of a quorum. In determining the results of voting on
the election of directors, abstentions and broker nonvotes will have the same
effect as a vote against the nominated director since approval of that director
requires the affirmative vote of a majority of the shares represented in person
or by proxy at the meeting at which a quorum is present.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of June 25, 1999 information with respect
to beneficial ownership of shares of Common Stock by (i) the chief executive
officer and each of the other executive officers of the Company, (ii) each of
the directors and nominees, (iii) all persons known to the Company to be the
beneficial owners of 5% or more thereof and (iv) all officers and directors as a
group. All persons listed have sole voting and investment power with respect to
their shares unless otherwise indicated.
AMOUNT OF
BENEFICIAL OWNERSHIP(1)
-------------------------
PERCENTAGE
NUMBER OF OF
NAME OF BENEFICIAL OWNER SHARES(2) CLASS(3)
- ---------------------------------------- ----------- ----------
Joe R. Davis(4)......................... 1,317,000 8.5%
Pilgrim, Baxter & Associates, Ltd.(5)... 1,277,100 8.2%
Jeffrey N. Vinik, Michael S. Gordon and
Mark D. Hostetter(6).................. 1,227,500 7.9%
Hugh N. West............................ 175,000 1.1%
James H. Limmer......................... 107,500 *
Brady F. Carruth........................ 53,405 *
Gary L. Forbes.......................... 46,548 *
Larry J. Alexander...................... 8,000 *
Clarence C. Comer....................... 36,100 *
G. Christopher Colville................. 32,228 *
All directors and executive officers as
a group (8 persons, including the
directors and executive officers named
above)................................ 1,775,781 11.4%
- ------------
* Less than 1%.
(1) In accordance with the Securities and Exchange Commission ("SEC")
regulations, shares are deemed to be "beneficially owned" by a person if
such person directly or indirectly has or shares the power to vote or
dispose of the shares, regardless of whether such person has any economic
interest in the shares. In addition, a person is deemed to own beneficially
any shares of which such person has the right to acquire beneficial
ownership within 60 days, including upon exercise of a stock option or
conversion of a convertible security. Unless otherwise noted, all persons
have sole voting and investment power with respect to all their shares.
(2) Shares shown do not include shares held through the Company's 401(k) plan.
The shares beneficially owned include options to purchase shares of the
Company's Common Stock exercisable within 60 days of June 25, 1999, as
follows: Mr. Davis, 12,700 shares; Mr. Forbes, 22,000 shares; Mr. Colville,
11,000 shares; and Mr. Alexander, 6,000 shares.
(3) The percentage of securities of the class owned by each person has been
calculated using the 15,536,064 shares outstanding at June 25, 1999 plus any
shares issuable upon exercise of options owned by such person exercisable
within 60 days and deemed to be outstanding pursuant to Rule 13d-3(d)(1) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
(4) The address of Mr. Davis is 5858 Westheimer, Suite 200, Houston, Texas
77057.
(5) Based on a Schedule 13F for the quarter ended March 31, 1999, filed with the
SEC on May 11, 1999. The Schedule 13F indicates that Pilgrim Baxter &
Associates had sole voting authority with respect to 1,145,400 shares of
Common Stock and no voting authority over 131,700 shares of Common Stock.
The address of Pilgrim, Baxter & Associates, Ltd. ("Pilgrim") is 825
Duportail Road, Wayne, Pennsylvania 19087.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
2
<PAGE>
(6) Based on a Schedule 13F for the quarter ended March 31, 1999, filed with the
SEC on May 17, 1999. The Schedule 13F indicates that voting authority with
respect to such shares was shared between Jeffrey N. Vinik, Michael S.
Gordon, Mark D. Hostetter, VGH Partners and Vinik Asset Management, L.P. A
Schedule 13G/A that was filed with the SEC on February 16, 1999, suggests
that the shares may be held by a number of related entities, including VGH
Partners and Vinik Asset Management, L.P., and that the listed individuals
share the voting and dispositive power over such shares. Representatives of
the foregoing parties have informed the Company that some of the above
listed shares have been sold, but have not provided the Company with any
further information on such matter. The address of each of the listed
individuals is 260 Franklin Street, Boston, Massachusetts 02110.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who own more than 10% of a registered class of
the Company's equity securities to file with the SEC and The New York Stock
Exchange initial reports of ownership and reports of changes in ownership of
Common Stock. Officers, directors and greater than 10% shareholders are required
by SEC regulation to furnish the Company with copies of all such forms they
file. Based solely on a review of the copies of such reports furnished to the
Company and written representations that no other reports were required, the
Company believes that, except as set forth below, all of its directors and
executive officers during fiscal 1999 complied on a timely basis with all
applicable filing requirements under Section 16(a) of the Exchange Act. Mr. W.
D. Hawkins, a former director, failed to timely file a Form 4 during that fiscal
year. Mr. Hawkins subsequently filed the appropriate report.
ELECTION OF DIRECTORS
Unless contrary instructions are set forth in the proxy card, it is
intended that the persons named in the proxy will vote all shares of Common
Stock represented by the proxy for the election of the persons listed below as
directors, all of whom are presently members of the Board of Directors of the
Company. The seven directors elected at the meeting will each serve for a term
expiring on the date of the Annual Meeting in 2000. Directors of the Company are
elected annually and hold office until their successors have been elected and
qualified or their earlier resignation or removal. Should any nominee become
unavailable for election, the Board of Directors of the Company may designate
another nominee, in which case the persons acting under the duly executed
proxies will vote for the election of the replacement nominee. Management is
currently unaware of any circumstances likely to render any nominee unavailable
for election. A shareholder may, in the manner set forth in the enclosed proxy
card, instruct the proxy holder not to vote that shareholder's shares for one or
more of the named nominees.
The Company's Restated By-Laws provide for a Board of Directors of eleven
persons, but the size of the Board of Directors has been fixed at seven by
resolution of the Board of Directors. Seven persons currently serve on the Board
and are expected to continue to serve until the Annual Meeting. The proxies
solicited hereby cannot be voted for a number of persons greater than the number
of nominees named below.
BOARD RECOMMENDATION; VOTE REQUIRED
The Board of Directors has appointed a Nominating Committee to select and
nominate a slate of directors for election at the Annual Meeting. The Nominating
Committee believes that the election of the seven persons listed below as
directors of the Company is in the best interest of the Company and its
shareholders. THE BOARD THEREFORE RECOMMENDS A VOTE FOR ALL OF THE NOMINEES OF
THE NOMINATING COMMITTEE AND IT IS INTENDED THAT THE PROXIES NOT MARKED TO THE
CONTRARY WILL BE SO VOTED. The Restated Articles of Incorporation of the
Company, as amended to date, do not permit cumulative voting. A majority of the
holders of the outstanding shares of Common Stock of the Company, present in
person or represented by proxy, at a meeting at which a quorum is present is
required to elect directors.
3
<PAGE>
The following sets forth information concerning each of the nominees for
election to the Board of Directors, including the name, age, principal
occupation or employment during at least the past five years and the period
during which such person has served as a director of the Company.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR A ONE YEAR TERM EXPIRING AT THE ANNUAL MEETING IN 2000
JOE R. DAVIS has been the President, Chief Executive Officer and Chairman
of the Board of the Company since he founded it in 1985. Prior to forming the
Company, Mr. Davis was Vice President of Finance and Administration for a
division of International Paper Company. Prior thereto, he served as a partner
with Arthur Andersen LLP, an accounting firm, where he was active in the mergers
and acquisition practice. Mr. Davis is a certified public accountant. Mr. Davis
serves on the Executive Committee and the Nominating Committee and is 56 years
of age.
LARRY J. ALEXANDER retired from the San Antonio Spurs Professional
Basketball Team in May 1996, where he was the Vice President -- Administration
and Communications since August 1994. Prior to joining the Spurs, he spent 27
years with SBC Communications Inc. in various positions, most recently as Senior
Vice President -- External Affairs from July 1993 to July 1994. Mr. Alexander
has been a director of the Company since May 1995 and is 57 years of age.
BRADY F. CARRUTH has been President of Gulf Coast Capital Corporation, a
commercial landscaping business, since 1987. He also serves on the board of
directors of American General Corporation, a diversified insurance company. Mr.
Carruth has been a director of the Company since 1985 and serves on the Audit
Committee and the Nominating Committee. Mr. Carruth is 41 years of age.
CLARENCE C. COMER has served as President and Chief Executive Officer of
Southdown, Inc., a cement and ready-mix concrete producer, since February 1987.
He is also a director of Southdown, Inc. Mr. Comer has been a director of the
Company since 1993 and serves on the Audit Committee. Mr. Comer is 51 years of
age.
GARY L. FORBES has been a Vice President of Equus II Incorporated, a public
investment company, since 1991. Mr. Forbes currently serves on the board of
directors of NCI Building Systems, Inc., a manufacturer of prefabricated metal
buildings, Drypers Corporation, a manufacturer of disposable diapers and
Advanced Technical Products, Inc., a manufacturer of high-performance composite
parts for the aerospace industry. Mr. Forbes is a certified public accountant
and has been a director of the Company since 1993. He serves on the Executive
Committee and is 55 years of age.
JAMES H. LIMMER has been a partner with the law firm of Tekell, Book,
Matthews & Limmer, L.L.P., in Houston, Texas, which specializes in all phases of
insurance defense, since July 1973. Mr. Limmer has been a director of the
Company since 1985 and serves on the Compensation Committee and the Nominating
Committee. Mr. Limmer is 57 years of age.
DR. HUGH N. WEST, M.D., was in private practice in Houston, Texas in the
field of diagnostic radiology until his retirement in 1996. Dr. West has been a
director of the Company since 1985 and serves on the Compensation Committee. Dr.
West is 53 years of age.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
During the fiscal year ended March 31, 1999, the Board held meetings and/or
acted by unanimous consent 10 times. Each of the directors attended at least 75%
of the meetings of the Board and of each committee on which he served.
The Board of Directors of the Company has established an Executive
Committee, an Audit Committee, a Compensation Committee and a Nominating
Committee. The Executive Committee reviews and develops strategies and policies
of the Company and recommends changes thereto. During the fiscal year ended
March 31, 1999, the Executive Committee held meetings and/or acted by unanimous
consent 19 times. The Executive Committee currently consists of Mr. Davis and
Mr. Forbes.
4
<PAGE>
The Audit Committee's functions include recommending to the Board of
Directors the engagement of the Company's independent public accountants,
reviewing with such accountants the plans for and the results and scope of their
auditing engagement and certain other matters, including the independence of
such accountants. The Audit Committee is composed solely of independent
directors. During the fiscal year ended March 31, 1999, the Audit Committee held
meetings and/or acted by unanimous consent three times. The Audit Committee
currently consists of Mr. Carruth and Mr. Comer.
The Compensation Committee determines the compensation of directors,
executive officers and key employees and is composed solely of independent
directors. It also administers the Company's Long-Term Incentive Plan (as
amended, the "Incentive Plan"). During the fiscal year ended March 31, 1999,
the Compensation Committee held meetings and/or acted by unanimous consent three
times. The Compensation Committee currently consists of Mr. Limmer and Dr. West.
The Nominating Committee was formed to select and recommend nominees for
election to the Company's Board of the Directors at Annual Meetings. The
Nominating Committee held one meeting to discuss and designate the nominees for
this year's Annual Meeting. The Nominating Committee currently consists of
Messrs. Davis, Limmer and Carruth. The Nominating Committee will give
appropriate consideration to qualified persons recommended by shareholders for
nomination as Directors in future years provided that such recommendation is
timely made and is accompanied by information sufficient to enable the
Nominating Committee to evaluate the qualifications of the nominee.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth certain
information regarding the compensation earned by or awarded to the Chief
Executive Officer ("CEO") of the Company and the other executive officers of
the Company for each of the three fiscal years ended March 31, 1999, 1998 and
1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
ANNUAL COMPENSATION -----------------------
NAME AND -------------------------------- SHARES UNDERLYING
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS
- ------------------------------------- --------- -------- -------- -----------------------
<S> <C> <C> <C> <C>
Joe R. Davis......................... 1999 $228,000 $ -- 250,000
President and Chief 1998 228,000 -- --
Executive Officer 1997 228,000 -- --
G. Christopher Colville.............. 1999 150,000 100,000 100,000
Executive Vice President -- Mergers
and 1998 101,250 100,000 15,000
Acquisitions, Chief Financial and 1997 82,232 80,000 30,000
Accounting Officer and Secretary(1)
Randall D. Keys(2)................... 1999 45,514 -- 10,000
Vice President -- Finance,
Chief Financial Officer and
Assistant Secretary
</TABLE>
- ------------
(1) Mr. Colville has held various executive positions with the Company since he
joined the Company in September 1994.
(2) Mr. Keys resigned from the Company in November 1998.
5
<PAGE>
STOCK OPTION GRANTS TABLE. The following table shows information
concerning the grant of stock options pursuant to the Incentive Plan during the
fiscal year ended March 31, 1999 to the executive officers named in the Summary
Compensation Table.
OPTIONS GRANTED IN FISCAL 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATES OF
SHARES TOTAL OPTIONS EXERCISE OR STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO BASE PRICE OPTION TERM(1)
OPTIONS EMPLOYEES IN PER SHARE EXPIRATION ----------------------------
NAME GRANTED FISCAL 1999 ($/SHARE)(2) DATE 5% 10%
- ------------------------------------- ---------- -------------- ------------ ----------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Joe R. Davis......................... 250,000(3) 32% $53.25 (4) $ 8,907,500 $ 22,902,500
G. Christopher Colville.............. 100,000(3) 13% 53.25 (4) 3,563,000 9,161,000
Randall D. Keys(5)................... 10,000 2% 53.1875 (5) 163,725 366,524
</TABLE>
- ------------
(1) The potential realizable value through the expiration date of options has
been determined on the basis of the per share market price at the time the
options were granted, compounded annually over the life of the option, net
of the exercise price. These values have been determined based upon assumed
rates of appreciation and are not intended to forecast the possible future
appreciation, if any, of the price or value of the Company's Common Stock.
(2) The exercise price per share for all options granted is equal to the market
price of the underlying Common Stock as of the date of grant.
(3) Each option becomes exercisable on each anniversary date of the grant until
100% vested as follows: 5% on each of the first six anniversary dates, 10%
on each of the seventh and eighth anniversary dates, 20% on the ninth
anniversary date and 30% on the tenth and final anniversary date.
(4) Such options expire six (6) months after the earlier to occur of (a)
termination of such individual's employment with the Company for any reason
or (b) July 27, 2008.
(5) These options had an expiration date of six (6) months after the earlier to
occur of (a) termination of such individual's employment with the Company
for any reason or (b) December 15, 2003. However, the options, which were
unvested at the time, were forfeited upon Mr. Keys' resignation from the
Company.
STOCK OPTION EXERCISES AND YEAR-END VALUES TABLE. The following table
shows, as to the executive officers named in the Summary Compensation Table,
information with respect to stock options exercised during the fiscal year ended
March 31, 1999 and the unexercised options to purchase Common Stock granted
under the Incentive Plan and held as of March 31, 1999.
OPTION EXERCISES IN FISCAL 1999
AND VALUE OF OPTIONS AT MARCH 31, 1999
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS
SHARES MARCH 31, 1999 AT MARCH 31, 1999(1)
ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joe R. Davis............................ -- $ -- 200 250,000 $10,425 $ 1,125,000
G. Christopher Colville................. 12,200 336,803 -- 127,000 -- $ 1,398,750
</TABLE>
- ------------
(1) Options are "in-the-money" if the closing market price of the Company's
Common Stock exceeds the exercise price of the options. The value of
unexercised options represents the difference between the exercise price of
such options and the closing market price of the Company's Common Stock on
March 31, 1999 ($57.75).
INCENTIVE PLAN
In March 1994, the Board of Directors and the shareholders of the Company
approved the adoption of the Incentive Plan. Pursuant to the Incentive Plan, as
subsequently amended, employees of the Company
6
<PAGE>
and directors who are not serving on the Compensation Committee are eligible to
receive awards consisting of stock options, stock appreciation rights
("SARS"), restricted or nonrestricted stock, cash or any combination of the
foregoing. Stock options granted pursuant to the Incentive Plan may either be
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or nonqualified stock options.
To date, long-term incentive compensation has been awarded only in the form of
stock options. An aggregate of 3,435,000 shares of Common Stock have been
reserved for issuance pursuant to the Incentive Plan, of which 1,378,203 shares
were available for future stock option awards pursuant to the Incentive Plan as
of June 30, 1999.
OPTIONS FORFEITED OR EXPIRED REVERT TO SHARES AVAILABLE UNDER THE PLAN.
The Incentive Plan is administered by the Compensation Committee of the
Board of Directors. Subject to the provisions of the Incentive Plan, the
Compensation Committee is authorized to determine the type or types of awards
made to each participant and the terms, conditions and limitations applicable to
each award. In addition, the Compensation Committee has the exclusive power to
interpret the Incentive Plan, to grant waivers of restrictions thereunder and to
adopt such rules and regulations as it may deem necessary or appropriate in
keeping with the objectives of the Incentive Plan.
DIRECTOR COMPENSATION
Each director who is not an employee of the Company is paid $250 for each
meeting attended and is reimbursed for expenses incurred in attending meetings
of the Board of Directors and committee meetings of the Board of Directors.
Directors who are not members of the Compensation Committee are eligible to
receive grants under the Incentive Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee during the fiscal year ended March 31, 1999,
consisted of Mr. Limmer, Dr. West and Mr. Hawkins, and currently consists of Mr.
Limmer and Dr. West. No member of the Compensation Committee was, during fiscal
1999, an officer or employee of the Company or any of its subsidiaries, nor was
any member of the Compensation Committee formerly an officer of the Company or
any of its subsidiaries. Also, during that year, no executive officer of the
Company served (i) as a member of the compensation committee or board of
directors of another entity, one of whose executive officers served on the
Compensation Committee or (ii) as a member of the compensation committee of
another entity, one of whose executive officers served on the Board of Directors
of the Company.
REPORT OF COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors reviews compensation
of directors and executive officers and also administers the Incentive Plan. The
Compensation Committee consists entirely of non-employee directors.
At current compensation levels, the Committee does not expect Internal
Revenue Service regulations regarding maximum deductibility of executive
compensation to have any application to the Company.
COMPENSATION PHILOSOPHY AND COMPONENTS. The Company's executive
compensation philosophy is to employ, retain and reward executives capable of
leading the Company in creating and preserving strong financial performance,
increasing the assets of the Company through acquisitions, positioning the
Company's assets and business operations in geographic markets offering
long-term growth opportunities, and enhancing shareholder value. The executive
compensation program is intended to provide an overall level of compensation
that the Compensation Committee believes, based on its own judgment and
experience, is competitive with levels of compensation provided by other
companies in the industry. The companies used for comparisons of compensation
levels are not necessarily the same companies included within the printing
company index reflected in the Performance Graph because certain of those
companies are not comparable with the Company or its subsidiaries for
compensation purposes due to their size and operating philosophy. The companies
which the Company considers to be comparable for compensation purposes are
generally publicly traded companies of similar size and growth strategy. The
primary components of the Company's
7
<PAGE>
executive compensation program are annual cash compensation (salary and bonuses)
and long-term incentive compensation (stock options).
CHIEF EXECUTIVE OFFICER CASH COMPENSATION. The Compensation Committee
considered a number of factors in approving the CEO's compensation for fiscal
1999. The factors considered by the Compensation Committee included, but were
not limited to, the Company's acquisition of 19 companies during fiscal 1999 as
well as improving the Company's sales, income from operations and operating cash
flow. The CEO's cash compensation was judged by the Compensation Committee to be
fair and appropriate for the CEO taking into account a number of factors,
including the level of compensation paid to other executive officers of the
Company and the performance of the Company.
CASH COMPENSATION OF OTHER EXECUTIVES. The cash compensation of other
executives is based on the amount recommended to the Compensation Committee by
the CEO based on his subjective evaluation, including his perception of the
individual's performance. The CEO generally determines his recommendations by
considering the potential impact of the individual on the Company and its
performance, the executive's performance as a team member, the skills and
experiences required by the position and the overall performance of the Company.
No one of the above factors is considered to be more important than the others
in all cases. Compensation for executives is maintained at levels that the
Compensation Committee believes, based upon its own judgment and experience, are
competitive in the marketplace.
LONG-TERM INCENTIVE COMPENSATION. Long-term incentives may be provided in
the form of stock options, stock appreciation rights, restricted or
nonrestricted stock, cash or any combination of the foregoing. To date,
long-term incentive compensation has been awarded only in the form of stock
options.
GRANTS OF STOCK OPTIONS ARE MADE BY THE COMPENSATION COMMITTEE. The
Compensation Committee considers all factors the members deem relevant,
including recommendations to the Committee by the CEO based on his subjective
evaluation and perception of the individual's performance. The CEO generally
determines his recommendations by considering the executive's contribution
toward Company performance and expected contribution toward meeting the
Company's long-term objectives and increasing value to shareholders. The value
received by the executives from option grants depends completely on increases in
the market price of the Company's Common Stock over the option exercise price.
Thus, this component of compensation is aligned directly with increases in value
to shareholders.
FISCAL 1999 GRANTS TO EXECUTIVE OFFICERS. In one of its meetings, the
Compensation Committee discussed the value to the Company of the services
provided by Messrs. Davis and Colville and explored additional forms of
compensation that could be provided to them to ensure their continuing
commitment to and active participation in the Company. Thus, after careful
consideration, the Compensation Committee determined that rewarding the two
executive officers with the grants discussed above would provide such
individuals with the long term incentives necessary to encourage their
continuing commitment to the future financial success and growth of the Company.
Additionally, the Compensation Committee approved a grant of options to Mr. Keys
in connection with his initial employment by the Company.
James H. Limmer
Hugh N. West
8
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the Company's Common Stock against the cumulative total return (change in stock
price plus reinvested dividends) of (i) the S&P 500 Stock Index and (ii) the MG
Group Index published by Media General Financial Services for the period
commencing June 10, 1994 (the date following the Company's initial public
offering) and ending March 31, 1999. The historical performance of the Company's
Common Stock reflected below is not necessarily indicative of the Common Stock's
future performance.
COMPARISON OF CUMULATIVE TOTAL RETURN*
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Consolidated Graphics................ 100.00 97.87 146.81 487.23 985.11 982.98
MG Group Index....................... 100.00 116.93 140.16 153.51 223.27 161.87
S&P Composite........................ 100.00 112.26 148.31 177.71 263.00 311.55
</TABLE>
* Assumes an initial investment of $100.
** The MG Group Index is a published industry or line of business index prepared
by Media General Financial Services. The MG Group Index contains companies
that offer printing and typesetting, photocopy and graphic design services,
as well as companies that offer other general commercial and business
services. The Industry Index for Printing Companies published last year by
Media General Financial Services, and previously referenced in the Company's
proxy statements, is no longer available.
CERTAIN TRANSACTIONS
Other than option grants discussed herein, there were no transactions with
related parties.
9
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The Company has selected Arthur Andersen LLP as the Company's independent
public accountants to audit the Company's financial statements for the fiscal
year ending March 31, 2000. Representatives of Arthur Andersen LLP are expected
to be present at the Annual Meeting, with the opportunity to make a statement if
they desire to do so, and are expected to be available to respond to appropriate
questions.
SHAREHOLDER PROPOSALS
Shareholders may present proposals for inclusion in the Company's 2000
proxy statement provided they are received by the Company no later than March 4,
2000, and are otherwise in compliance with applicable SEC regulations. Any other
proposal that a shareholder wishes to bring before the Company's 2000 Annual
Meeting of Shareholders must be received by the Company no later than May 18,
2000 to be considered timely. All proposals must comply with applicable SEC
regulations and the Company's Restated By-Laws, and must be directed to the
Secretary of the Company at 5858 Westheimer, Suite 200, Houston, Texas 77057.
GENERAL
Management does not intend to bring any business before the meeting other
than the matters referred to in the accompanying notice. If, however, any other
matters properly come before the meeting, it is intended that the persons named
in the accompanying proxy will vote pursuant to the proxy in accordance with
their best judgment on such matters.
OTHER INFORMATION
The cost of solicitation of proxies will be borne by the Company. Proxy
cards and materials will also be distributed to beneficial owners of Common
Stock through brokers, custodians, nominees and other like parties, and the
Company expects to reimburse such parties for their charges and expenses.
Proxies may be solicited on our behalf by our Directors, officers or employees
in person or by telephone, electronic transmission, and facsimile transmission
without additional compensation.
The Annual Report to Shareholders, containing the consolidated financial
statements of the Company for the fiscal year ended March 31, 1999, accompanies
this Proxy Statement.
A COPY OF THE COMPANY'S MOST RECENT ANNUAL REPORT ON FORM 10-K, INCLUDING
THE FINANCIAL STATEMENTS AND SCHEDULES THERETO, WITHOUT THE ACCOMPANYING
EXHIBITS, AS FILED WITH THE SEC WILL BE MADE AVAILABLE WITHOUT CHARGE UPON
WRITTEN REQUEST TO: CONSOLIDATED GRAPHICS, INC., ATTENTION: INVESTOR RELATIONS,
5858 WESTHEIMER, SUITE 200, HOUSTON, TEXAS 77057. A LIST OF EXHIBITS IS INCLUDED
IN THE FORM 10-K, AND EXHIBITS ARE AVAILABLE FROM THE COMPANY UPON THE PAYMENT
TO THE COMPANY OF THE REASONABLE COSTS OF FURNISHING THE SAME.
/s/ G. CHRISTOPHER COLVILLE
G. Christopher Colville
SECRETARY
10
<PAGE>
CONSOLIDATED GRAPHICS, INC.
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD WEDNESDAY, JULY 28, 1999
The undersigned hereby appoints Joe R. Davis and Ronald E. Hale, Jr.,
jointly and severally, proxies with full power of substitution and
resubstitution and with discretionary authority to represent and to vote, in
accordance with the instructions set forth on the reverse, all shares of Common
Stock which the undersigned is entitled to vote at the 1999 Annual Meeting of
Shareholders of Consolidated Graphics, Inc. and any adjournments thereof. Shares
represented by this proxy will be voted as directed by the shareholder. If no
such directions are indicated, the proxies will have authority to vote FOR Item
1 (the election of directors other than any for whom authority to vote is
withheld on the reverse). In their discretion, the proxies are authorized to
vote upon such other business as may properly come before the meeting.
IMPORTANT: SIGNATURE REQUIRED ON REVERSE SIDE
<PAGE>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
CONSOLIDATED GRAPHICS, INC.
JULY 28, 1999
Please Detach and Mail in the Envelope Provided
A |X| Please mark your votes as in this example.
<TABLE>
<CAPTION>
FOR all nominees
listed to right WITHHOLD AUTHORITY
except as marked to vote for all
to the contrary nominees listed to right
<S> <C> <C>
1. Election |_| |_| Nominees: Joe R. Davis
of Larry J. Alexander
Directors Brady F. Carruth
listed to right Clarence C. Comer
Gary L. Forbes
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY James M. Limmer
INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S Hugh N. West
NAME AT RIGHT.)
</TABLE>
THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE
REVOKED PRIOR TO ITS EXERCISE. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
PROPOSAL 1. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS MADE IT WILL BE VOTED "FOR" PROPOSAL 1.
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING, PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE ____________________________________ _________________________________________________ Date:______________________, 1999
Signature if Held Jointly
NOTE: (If signing as Attorney, Administrator, Executor, Guardian, Trustee or Corporate Officer, please add your title as such.)
</TABLE>
