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8-K - FORM 8-K - CONSOLIDATED GRAPHICS INC /TX/c95444e8vk.htm
Exhibit 99.1
         
 
  FOR:   Consolidated Graphics, Inc.
 
       
 
  CONTACT:   Jon C. Biro
 
      Executive Vice President/
FOR IMMEDIATE RELEASE
      Chief Financial Officer
 
      Consolidated Graphics, Inc.
 
      (713) 787-0977 
 
       
 
      Christine Mohrmann/Alexandra Tramont
 
      FD
 
      (212) 850-5600 
CONSOLIDATED GRAPHICS REPORTS FINANCIAL RESULTS FOR THE
QUARTER ENDED DECEMBER 2009
HOUSTON, TEXAS — February 3, 2010 — Consolidated Graphics, Inc. (NYSE: CGX) today announced financial results for the quarter ended December 31, 2009.
Revenue for the December quarter was $276.4 million, down 12.5% compared to the same quarter last year. The decline was due to lower election-related business and, as a result of the current economic environment, lower same-store sales of 6.8%.
Adjusted Operating Income for the December 2009 quarter was $23.0 million or 8.3% of revenue compared to $25.4 million or 8.0% of revenue for the same quarter last year. Despite the impact of lower revenues, continued cost reduction efforts in 2009 allowed for a modest improvement in Adjusted Operating Margin. Adjusted Net Income for the December 2009 quarter was $14.1 million, or $1.23 Adjusted Diluted Earnings Per Share compared to Adjusted Net Income of $13.7 million, or $1.21 Adjusted Diluted Earnings Per Share for the prior year quarter.
Operating income of $18.6 million in the December 2009 quarter included charges of $3.1 million primarily related to the impairment of certain production equipment and lease termination charges. The $55.5 million operating loss in the December 2008 quarter included charges totaling $79.5 million for the impairment of goodwill, the impairment of certain production equipment and litigation. Net income for the December 2009 quarter was $11.4 million, or $1.00 diluted earnings per share.
The Company generated $16.0 million in Free Cash Flow for the current quarter, compared to $23.5 million for the same quarter in the prior year. Adjusted EBITDA was $41.8 million for the December 2009 quarter, compared to $42.4 million for the same quarter in the prior year. For the nine months ended December 31, 2009, the Company produced Free Cash Flow of $101.7 million and Adjusted EBITDA of $90.7 million. As of December 31, 2009, total debt was $221.1 million; $93.1 million or 30% lower than the debt balance at March 31, 2009.
Joe R. Davis, Chairman and Chief Executive Officer of Consolidated Graphics, commented, “We are pleased with our performance in the December 2009 quarter in what continues to be a challenging environment. Even though quarterly same-store revenues declined 6.8% from last year, the rate of decline has slowed in each of the last three quarters as customer demand in many of our markets appears to have stabilized. During the quarter, we continued to focus on delivering an industry-leading offering that meets the changing needs of our customers, and on aggressively managing our costs, which ultimately allowed us to improve profitability over both the year ago and September 2009 quarters. We were able to achieve these results despite an $18 million decline in election-related business compared to the prior year quarter. Going forward, we will continue to monitor and appropriately manage our costs while at the same time investing in the future, building on our best-in-class capabilities and leveraging our advantages of technology, scale and financial strength to take advantage of the opportunities we see in the marketplace.”

 

 


 

CONSOLIDATED GRAPHICS REPORTS FINANCIAL RESULTS FOR DECEMBER 2009 QUARTER   PAGE -2
Mr. Davis added, “While the economy and our market appear to be stabilizing, it remains difficult to project our future revenues and earnings. Nevertheless, based on current market conditions, we expect the March quarter revenue to be in the range of $245 — $260 million representing same-store sales growth of up to 5%, excluding election-related revenue. This should allow us to achieve Adjusted Net Income growth in the March 2010 quarter compared to the prior year period.”
A reconciliation of the non-GAAP financial measures, Adjusted EBITDA, Free Cash Flow, Adjusted Operating Income, Adjusted Operating Margin, Adjusted Net Income and Adjusted Diluted Earnings Per Share are included in the attached tables and in the Current Report on Form 8-K filed today. The Form 8-K also includes the basis for management’s use of the non-GAAP financial measures.
Consolidated Graphics, Inc. will host a conference call today, Wednesday, February 3, 2010, at 11:00 a.m. Eastern Time, to discuss its third quarter fiscal 2010 results. The conference call will be simultaneously broadcast live over the Internet on our website (www.cgx.com) and a subsequent archive of such call will also be available on our website.
Consolidated Graphics, Inc. (CGX), headquartered in Houston, Texas, is one of North America’s leading general commercial printing companies. With 70 printing businesses strategically located across 27 states, Toronto, and Prague, we offer an unmatched geographic footprint, unsurpassed capabilities, and unparalleled levels of convenience, efficiency and service. With locations in or near virtually every major U.S. market, CGX provides the service and responsiveness of a local printer enhanced by the economic, geographic and technological advantages of a large national organization.
Consolidated Graphics’ vast and technologically advanced sheetfed and web printing capabilities are complemented by the world’s largest integrated digital footprint. By coupling North America’s most comprehensive printing capabilities with strategically located fulfillment centers and industry-leading technology, CGX delivers end-to-end print production and management solutions that are based on the needs of our customers to improve their results. For more information, visit www.cgx.com.

 

 


 

CONSOLIDATED GRAPHICS REPORTS FINANCIAL RESULTS FOR DECEMBER 2009 QUARTER   PAGE -3
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, in which the Company discusses factors it believes may affect its performance or results in the future. Forward-looking statements are all statements other than historical facts, such as statements regarding assumptions, expectations, beliefs and projections about future events or conditions. You can generally identify forward-looking statements by the appearance in such a statement of words like “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “forecast,” “project,” “should” or “will” or other comparable words or the negative of such words. The accuracy of the Company’s assumptions, expectations, beliefs and projections depends on events or conditions that change over time and are thus susceptible to change based on actual experience, new developments and known and unknown risks, including those created by general market conditions, competition and the possibility that events may occur beyond the Company’s control, which may limit its ability to maintain or improve its operating results or financial condition or acquire additional printing businesses. The Company gives no assurance that the forward-looking statements will prove to be correct and does not undertake any duty to update them. The Company’s actual future results might differ from the forward-looking statements made in this press release for a variety of reasons, which include continuing weakness in the economy, financial stability of its customers, the sustained growth of its digital printing business, seasonality of election-related business, its ability to adequately manage business expenses, including labor costs, the unfavorable outcome of legal proceedings, the lack of or adequacy of insurance coverage for its operations, the continued availability of raw materials at affordable prices, retention of its key management and operating personnel, satisfactory labor relations, the potential for additional goodwill impairment charges, its ability to identify new acquisition opportunities, negotiate and finance such acquisitions on acceptable terms and successfully absorb and manage such acquisitions in a timely and efficient manner, as well as other risks described under the heading “Risk Factors” of our Annual Report on Form 10-K/A and the risk factors and cautionary statements described in the other documents the Company files or furnishes from time to time with the Securities and Exchange Commission, including its Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Should one or more of the foregoing risks or uncertainties materialize, or should the Company’s underlying assumptions, expectations, beliefs or projections prove incorrect, the Company’s actual results may vary materially from those anticipated in its forward-looking statements, and its business, financial condition and results of operations could be materially and adversely affected.
This press release also contains references to the non-GAAP financial measures of Adjusted EBITDA, which we define as earnings, or net income, before interest, income taxes, depreciation and amortization, goodwill impairment charges, litigation and other charges, share-based compensation expense, non-cash foreign currency transaction gains and losses and net losses/gains from asset dispositions, Free Cash Flow, which we define as net cash provided by operating activities less capital expenditures plus proceeds from assets dispositions, Adjusted Operating Income, which we define as operating income before goodwill charges, litigation and other charges, share based compensation expense, and non-cash foreign currency translation net (gain)/loss, Adjusted Operating Margin, which we define as Adjusted Operating Income divided by sales, Adjusted Net Income, which we define as net income before goodwill charges, litigation and other charges, share based compensation expense, non-cash foreign currency transaction net (gain)/loss, all net of tax, and Adjusted Diluted Earnings Per Share, which we define as Adjusted net Income divided by diluted weighted average number of common shares outstanding. Reconciliations of these non-GAAP financial measures to comparable GAAP financial measures are provided in the tables below. Management’s opinion regarding the usefulness of these non-GAAP financial measures to investors and a description of the ways in which management used such measures can be found in the Current Report on Form 8-K we filed today with the Securities and Exchange Commission.
(Tables to follow)
# # #

 

 


 

CONSOLIDATED GRAPHICS REPORTS FINANCIAL RESULTS FOR DECEMBER 2009 QUARTER   PAGE -4
CONSOLIDATED GRAPHICS, INC.
Condensed Consolidated Income Statements

(In thousands, except per share amounts and unaudited)
                                                 
    Three Months Ended  
    December 31,  
    2009     2008     Change  
            %             %     $     %  
Sales
  $ 276,374       100.0     $ 315,815       100.0       (39,441 )     (12.5 )
Cost of Sales
    209,770       75.9       241,055       76.3       (31,285 )     (13.0 )
 
                                     
Gross Profit
    66,604       24.1       74,760       23.7       (8,156 )     (10.9 )
Selling Expenses
    22,678       8.2       26,153       8.3       (3,475 )     (13.3 )
General and Administrative Expenses(1)
    22,117       8.0       24,981       7.9       (2,864 )     (11.5 )
Goodwill Impairment Charge
          0.0       62,524       19.8       (62,524 )   nm  
Litigation and Other Charges
    3,138       1.1       17,000       5.4       (13,862 )     (81.5 )
Other (Income) Expense, net
    48       0.0       (386 )     (0.1 )     434     nm  
 
                                     
Operating Income (loss)
    18,623       6.7       (55,512 )     (17.6 )     74,135     nm  
Interest Expense, net
    2,616       0.9       4,108       1.3       (1,492 )     (36.3 )
 
                                     
Income (loss) before Taxes
    16,007       5.8       (59,620 )     (18.9 )     75,627     nm  
Income Taxes
    4,568       1.7       (16,054 )     (5.1 )     20,622     nm  
 
                                     
Net Income (loss)
  $ 11,439       4.1     $ (43,566 )     (13.8 )     55,005     nm  
 
                                     
 
                                               
Earnings (loss) Per Share
                                               
Basic
    1.02               (3.91 )                        
Diluted
    1.00               (3.91 )                        
 
                                               
Weighted Average Shares Outstanding
                                               
Basic
    11,164               11,147                          
Diluted
    11,458               11,147                          
 
                                               
Effective Income Tax Rate
    28.5 %             26.9 %                        
 
                                                 
(1) Share based compensation included in these expenses
  $ 1,196             $ 1,725                          
     
nm =  
not meaningful

 

 


 

CONSOLIDATED GRAPHICS REPORTS FINANCIAL RESULTS FOR DECEMBER 2009 QUARTER   PAGE -5
CONSOLIDATED GRAPHICS, INC.
Condensed Consolidated Income Statements

(In thousands, except per share amounts and unaudited)
                                                 
    Nine Months Ended  
    December 31,  
    2009     2008     Change  
            %             %     $     %  
Sales
  $ 753,861       100.0     $ 897,960       100.0       (144,099 )     (16.0 )
Cost of Sales
    586,985       77.9       679,974       75.7       (92,989 )     (13.7 )
 
                                     
Gross Profit
    166,876       22.1       217,986       24.3       (51,110 )     (23.4 )
Selling Expenses
    69,053       9.2       81,336       9.1       (12,283 )     (15.1 )
General and Administrative Expenses(1)
    65,756       8.7       71,975       8.0       (6,219 )     (8.6 )
Goodwill Impairment Charge
          0.0       62,524       7.0       (62,524 )   nm  
Litigation and Other Charges
    5,771       0.8       17,000       1.9       (11,229 )     (66.1 )
Other (Income) Expense, net
    212       0.0       (638 )     (0.1 )     850     nm  
 
                                     
Operating Income (loss)
    26,084       3.5       (14,211 )     (1.6 )     40,295     nm  
Interest Expense, net
    7,447       1.0       12,171       1.4       (4,724 )     (38.8 )
 
                                     
Income (loss) before Taxes
    18,637       2.5       (26,382 )     (2.9 )     45,019     nm  
Income Taxes
    5,430       0.7       (2,735 )     (0.3 )     8,165     nm  
 
                                     
Net Income (loss)
  $ 13,207       1.8     $ (23,647 )     (2.6 )     36,854     nm  
 
                                     
 
                                               
Earnings (loss) Per Share
                                               
Basic
    1.18               (2.12 )                        
Diluted
    1.16               (2.12 )                        
 
                                               
Weighted Average Shares Outstanding
                                               
Basic
    11,162               11,135                          
Diluted
    11,390               11,135                          
 
                                               
Effective Income Tax Rate
    29.1 %             10.4 %                        
 
                                                 
(1) Share based compensation included in these expenses
  $ 3,949             $ 5,119                          
     
nm =  
not meaningful

 

 


 

CONSOLIDATED GRAPHICS REPORTS FINANCIAL RESULTS FOR DECEMBER 2009 QUARTER   PAGE -6
CONSOLIDATED GRAPHICS, INC.
Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts and unaudited)
                 
    December 31,     March 31,  
    2009     2009  
 
               
ASSETS
               
 
               
CURRENT ASSETS
               
Cash and cash equivalents
  $ 8,070     $ 9,762  
Accounts receivable, net
    193,269       173,501  
Inventories
    49,782       52,737  
Prepaid expenses
    11,399       17,340  
Deferred income taxes
    17,861       18,909  
 
           
Total current assets
    280,381       272,249  
PROPERTY AND EQUIPMENT, net
    395,551       430,519  
GOODWILL
    29,436       29,436  
OTHER INTANGIBLE ASSETS, net
    22,636       24,691  
OTHER ASSETS
    7,552       8,313  
 
           
 
  $ 735,556     $ 765,208  
 
           
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
 
               
CURRENT LIABILITIES
               
Current portion of long-term debt
  $ 22,505     $ 27,026  
Accounts payable
    94,602       48,519  
Accrued liabilities
    90,229       86,718  
Income taxes payable
    385       553  
 
           
Total current liabilities
    207,721       162,816  
LONG-TERM DEBT, net of current portion
    198,564       287,164  
OTHER LIABILITIES
    14,254       14,794  
DEFERRED INCOME TAXES
    50,273       49,970  
 
           
Total liabilities
    470,812       514,744  
COMMITMENTS AND CONTINGENCIES
               
SHAREHOLDERS’ EQUITY
               
Common stock, $.01 par value; 100,000,000 shares authorized; 11,167,667 and 11,152,875 issued and outstanding
    111       111  
Additional paid-in capital
    163,813       163,131  
Retained earnings
    101,013       87,806  
Accumulated other comprehensive loss
    (193 )     (584 )
 
           
Total shareholders’ equity
    264,744       250,464  
 
           
 
  $ 735,556     $ 765,208  
 
           
 
               
Total debt
  $ 221,069     $ 314,190  
Debt-to-total capitalization
    46 %     56 %

 

 


 

CONSOLIDATED GRAPHICS REPORTS FINANCIAL RESULTS FOR DECEMBER 2009 QUARTER   PAGE -7
CONSOLIDATED GRAPHICS, INC.
Reconciliations of Non-GAAP Financial Measures
(In thousands, except per share amounts, and unaudited)
                                 
    Three Months Ended     Nine Months Ended  
    December 31,     December 31,  
    2009     2008     2009     2008  
 
                               
Net income (loss)
  $ 11,439     $ (43,566 )   $ 13,207     $ (23,647 )
Income taxes
    4,568       (16,054 )     5,430       (2,735 )
Interest expense, net
    2,616       4,108       7,447       12,171  
Depreciation and amortization
    17,374       16,859       52,779       48,865  
Goodwill impairment charge
          62,524             62,524  
Litigation and other charges
    3,138       17,000       5,771       17,000  
Share-based compensation expense
    1,196       1,725       3,949       5,119  
Non-cash foreign currency transaction net (gain)/loss
    48       (386 )     212       (638 )
Net loss from asset dispositions
    1,426       220       1,859       691  
 
                       
Adjusted EBITDA
  $ 41,805     $ 42,430     $ 90,654     $ 119,350  
 
                       
 
                               
Net cash provided by operating activities
  $ 23,850     $ 44,884     $ 120,254     $ 89,163  
Capital expenditures
    (10,306 )     (21,435 )     (21,686 )     (56,002 )
Proceeds from asset dispositions
    2,476       96       3,106       1,284  
 
                       
Free Cash Flow
  $ 16,020     $ 23,545     $ 101,674     $ 34,445  
 
                       
 
                               
Operating income (loss)
  $ 18,623     $ (55,512 )   $ 26,084     $ (14,211 )
Goodwill impairment charge
          62,524             62,524  
Litigation and other charges
    3,138       17,000       5,771       17,000  
Share-based compensation expense
    1,196       1,725       3,949       5,119  
Non-cash foreign currency transaction net (gain)/loss
    48       (386 )     212       (638 )
 
                       
Adjusted Operating Income
  $ 23,005     $ 25,351     $ 36,016     $ 69,794  
 
                       
Adjusted Operating Margin
    8.3 %     8.0 %     4.8 %     7.8 %
 
                       
 
                               
Net income (loss)
  $ 11,439     $ (43,566 )   $ 13,207     $ (23,647 )
Goodwill impairment charge
          62,524             62,524  
Tax benefit of goodwill impairment charge
          (16,466 )           (16,466 )
Litigation and other charges
    3,138       17,000       5,771       17,000  
Tax benefit of litigation and other charges
    (1,224 )     (6,630 )     (2,251 )     (6,630 )
Share-based compensation expense, net of taxes
    730       1,052       2,409       3,123  
Non-cash foreign currency transaction net (gain)/loss, net of taxes
    29       (235 )     129       (389 )
 
                       
Adjusted Net Income
  $ 14,112     $ 13,679     $ 19,265     $ 35,515  
 
                       

 

 


 

CONSOLIDATED GRAPHICS REPORTS FINANCIAL RESULTS FOR DECEMBER 2009 QUARTER   PAGE -8
CONSOLIDATED GRAPHICS, INC.
Reconciliations of Non-GAAP Financial Measures
(In thousands, except per share amounts, and unaudited)
                                 
    Three Months Ended     Nine Months Ended  
    December 31,     December 31,  
    2009     2008     2009     2008  
Diluted earnings (loss) per share
  $ 1.00     $ (3.91 )   $ 1.16     $ (2.12 )
Goodwill impairment charge
          5.51             5.48  
Tax benefit of goodwill impairment charge
          (1.45 )           (1.44 )
Litigation and other charges
    .27       1.50       .51       1.49  
Tax benefit of litigation and other charges
    (.11 )     (.58 )     (.20 )     (.58 )
Share-based compensation expense, net of taxes
    .06       .09       .21       .27  
Non-cash foreign currency transaction net (gain)/loss, net of taxes
    .01       (.02 )     .01       (.03 )
Adjustment for diluted shares outstanding
          .07             .04  
 
                       
Adjusted Diluted Earnings Per Share
  $ 1.23     $ 1.21     $ 1.69     $ 3.11