UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): NOVEMBER 2, 2011
CONSOLIDATED GRAPHICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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TEXAS |
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001-12631 |
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76-0190827 |
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(STATE OR OTHER JURISDICTION |
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(COMMISSION FILE NUMBER) |
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(I.R.S. EMPLOYER |
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OF INCORPORATION) |
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|
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IDENTIFICATION NO.) |
5858 WESTHEIMER, SUITE 200
HOUSTON, TEXAS 77057
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 787-0977
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02 — RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The information in this Current Report is being furnished pursuant to Item 2.02 of Form 8-K and, according to general instruction B.2. thereunder, shall not be deemed “filed” with the Securities and Exchange Commission (the “SEC”) for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement filed by Consolidated Graphics, Inc. (the “Company”) under the Securities Act of 1933, as amended, and will not be so incorporated by reference into any future registration statement unless specifically identified as being incorporated by reference.
On November 2, 2011, the Company announced its results for the quarter ended September 30, 2011. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. The attached press release may contain forward-looking statements, as described in the press release. Readers are cautioned that such statements involve known and unknown risks, uncertainties and other factors that could cause actual results to materially differ from the results, performance or other expectations expressed or implied by these forward-looking statements.
The Company will hold a conference call today at 10:00 a.m. Central Time/11:00 a.m. Eastern Time to discuss the Company’s financial results for the second quarter ended September 30, 2011. A live webcast and subsequent archive of the conference call, as well as a copy of this Current Report and attached press release, can be accessed at www.cgx.com under the Investor Relations page. A rebroadcast of the call will be available by dialing 888-286-8010 or 617-801-6888 by entering the Conference ID “28841868.” The rebroadcast will be available from November 2 until midnight November 9, 2011.
During today’s conference call, management’s discussion of the Company’s financial results may include references to certain non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with United States generally accepted accounting principles (“GAAP”). Pursuant to the rules adopted by the SEC relating to the use of such financial measures in filings with the SEC, other disclosures of financial information and press releases, the Company provides the following qualitative and quantitative reconciliations regarding the non-GAAP financial measures to which management may refer. In addition, the sum of quarterly amounts in the accompanying tables may not equal full year amounts due to rounding differences. The total for each period in the accompanying tables may also not equal the sum of the components due to rounding differences.
The Company defines Adjusted EBITDA as our net income before interest, income taxes, depreciation and amortization, goodwill impairment charges, impairment and other charges, share-based compensation expense, non-cash foreign currency transaction gains and losses and net losses and gains from asset dispositions. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by sales. The Company uses Adjusted EBITDA and Adjusted EBITDA Margin both as a liquidity and performance measure when evaluating its business and operations. We believe Adjusted
EBITDA and Adjusted EBITDA Margin may be useful to an investor in evaluating our liquidity and/or operating performance because:
· it is widely used by investors in our industry to measure a company’s operating performance without regard to items such as interest, depreciation, non-cash currency transactions, impairments and amortization expenses, impairment and other charges and long-term non-cash share-based compensation expense, which can vary substantially from company to company depending upon accounting policies and book value of assets, capital structure and the method by which assets were acquired;
· it helps investors more meaningfully evaluate and compare the results of our operations from period to period by removing the impact of our capital structure (primarily interest charges on our outstanding debt), asset base (primarily depreciation and amortization expense and goodwill impairment charges), non-cash gains and losses from foreign currency transactions, and long-term non-cash share-based incentive plans from our operating results; and
· it helps investors to assess compliance with financial ratios and covenants included in our primary bank facility.
Adjusted EBITDA should not be considered as an alternative to any measure of operating results as promulgated under GAAP (such as operating income, net income or cash flow from operating activities), nor should it be considered as an indicator of our overall financial performance or our ability to satisfy current or future obligations and fund or finance future business opportunities. Adjusted EBITDA does not fully consider the impact of investing or financing transactions as it specifically excludes depreciation and interest expense, amortization and impairment of intangible and other long-lived assets, including goodwill, as well as the net gain or loss from non-cash foreign currency transactions, long-term share-based compensation expense, impairment and other charges and the net loss and gain from asset dispositions, all of which should also be considered in the overall evaluation of the Company’s results and liquidity.
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Fiscal |
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Fiscal 2011 |
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Fiscal 2012 |
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($MM) |
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2010 |
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2011 |
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Q1 |
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Q2 |
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Q3 |
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Q4 |
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Q1 |
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Q2 |
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YTD |
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LTM |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Sales |
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990.9 |
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1,054.0 |
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236.7 |
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260.1 |
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299.1 |
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258.1 |
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243.4 |
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267.4 |
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510.8 |
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1,068.0 |
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|
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|
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|
|
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|
|
|
|
|
|
|
|
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— |
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Net income |
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14.1 |
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41.4 |
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6.8 |
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8.1 |
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17.6 |
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8.9 |
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1.6 |
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7.5 |
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9.1 |
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35.6 |
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Income taxes |
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3.9 |
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23.9 |
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4.0 |
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5.3 |
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8.9 |
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5.7 |
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0.4 |
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4.7 |
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5.1 |
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19.7 |
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Interest expense, net |
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9.6 |
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7.6 |
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2.0 |
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2.1 |
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1.8 |
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1.7 |
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1.6 |
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1.6 |
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3.2 |
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6.7 |
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Depreciation and amortization |
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69.7 |
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68.9 |
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17.3 |
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17.0 |
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17.0 |
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17.6 |
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17.4 |
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17.7 |
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35.1 |
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69.7 |
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Goodwill impairment charge |
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6.1 |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Impairment and other charges |
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7.2 |
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(2.0 |
) |
(4.2 |
) |
0.7 |
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1.0 |
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0.5 |
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4.6 |
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0.6 |
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5.2 |
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6.7 |
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Share-based compensation expense |
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5.0 |
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3.3 |
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1.0 |
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0.8 |
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0.8 |
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0.8 |
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0.6 |
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0.5 |
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1.1 |
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2.7 |
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Non-Cash foreign currency transaction loss |
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0.4 |
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0.2 |
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— |
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0.1 |
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0.2 |
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— |
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0.1 |
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0.2 |
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0.3 |
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0.5 |
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Net loss (gain) from asset dispositions* |
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1.6 |
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(0.1 |
) |
0.1 |
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(0.2 |
) |
(0.1 |
) |
— |
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(0.1 |
) |
(0.2 |
) |
(0.3 |
) |
(0.4 |
) |
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Adjusted EBITDA |
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117.7 |
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143.2 |
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27.1 |
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33.8 |
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47.2 |
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35.2 |
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26.2 |
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32.6 |
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58.8 |
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141.2 |
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Adjusted EBITDA Margin |
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11.9 |
% |
13.6 |
% |
11.4 |
% |
13.0 |
% |
15.8 |
% |
13.6 |
% |
10.8 |
% |
12.2 |
% |
11.5 |
% |
13.2 |
% |
* Included in depreciation and amortization in the Company’s Consolidated Statements of Cash Flows
The Company defines Free Cash Flow as net cash provided by operating activities less capital expenditures plus proceeds from asset dispositions. The Company considers Free Cash Flow to be an important indicator of our operating flexibility and a representative measure of our ability to satisfy current and future obligations and fund or finance future business opportunities and believes it may be similarly useful to investors.
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Fiscal |
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Fiscal 2011 |
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Fiscal 2012 |
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($MM) |
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2010 |
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2011 |
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Q1 |
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Q2 |
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Q3 |
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Q4 |
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Q1 |
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Q2 |
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YTD |
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LTM |
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Net cash provided by operating activities |
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156.8 |
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101.2 |
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20.5 |
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9.7 |
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21.7 |
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49.3 |
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28.4 |
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10.1 |
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38.5 |
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109.5 |
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Capital expenditures* |
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(24.2 |
) |
(68.8 |
) |
(11.8 |
) |
(13.8 |
) |
(25.6 |
) |
(17.6 |
) |
(17.3 |
) |
(11.8 |
) |
(29.1 |
) |
(72.3 |
) |
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Proceeds from asset dispositions |
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7.2 |
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3.9 |
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1.0 |
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1.7 |
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0.2 |
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1.0 |
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0.3 |
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0.5 |
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0.8 |
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2.0 |
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Free Cash Flow |
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139.8 |
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36.3 |
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9.7 |
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(2.4 |
) |
(3.7 |
) |
32.7 |
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11.4 |
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(1.2 |
) |
10.2 |
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39.2 |
|
* Capital expenditures include all expenditures for property, plant and equipment, including those that are directly financed.
The Company defines Adjusted Operating Income as operating income before goodwill impairment charges, impairment and other charges, share-based compensation expense and non-cash foreign currency transaction gains and losses. The Company defines Adjusted Operating Margin as Adjusted Operating Income divided by sales. Adjusted Operating Income is an important performance measure used by the Company to analyze and compare post-acquisition financial trends and results of its various operations. The Company believes this non-GAAP financial measure may help investors better understand our operating results by eliminating goodwill impairment charges, long-lived asset impairment charges, impairment and other charges, share-based compensation expense, and the non-cash net losses and gains from foreign currency transactions pursuant to the revaluation of certain transactions denominated in currencies other than of the Company’s functional currency.
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Fiscal |
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Fiscal 2011 |
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Fiscal 2012 |
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($MM) |
|
2010 |
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2011 |
|
Q1 |
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Q2 |
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Q3 |
|
Q4 |
|
Q1 |
|
Q2 |
|
YTD |
|
LTM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Sales |
|
990.9 |
|
1,054.0 |
|
236.7 |
|
260.1 |
|
299.1 |
|
258.1 |
|
243.4 |
|
267.4 |
|
510.8 |
|
1,068.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
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Operating income |
|
27.6 |
|
73.0 |
|
12.9 |
|
15.4 |
|
28.2 |
|
16.4 |
|
3.6 |
|
13.9 |
|
17.5 |
|
62.1 |
|
|
Goodwill impairment charge |
|
6.1 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
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— |
|
— |
|
|
Impairment and other charges |
|
7.2 |
|
(2.0 |
) |
(4.2 |
) |
0.7 |
|
1.0 |
|
0.5 |
|
4.6 |
|
0.6 |
|
5.2 |
|
6.7 |
|
|
Share-based compensation expense |
|
5.0 |
|
3.3 |
|
1.0 |
|
0.8 |
|
0.8 |
|
0.8 |
|
0.6 |
|
0.5 |
|
1.1 |
|
2.7 |
|
|
Non-cash foreign currency transaction loss |
|
0.4 |
|
0.2 |
|
— |
|
0.1 |
|
0.2 |
|
— |
|
0.1 |
|
0.2 |
|
0.3 |
|
0.5 |
|
|
Adjusted Operating Income |
|
46.3 |
|
74.5 |
|
9.7 |
|
17.0 |
|
30.2 |
|
17.7 |
|
8.9 |
|
15.2 |
|
24.1 |
|
72.0 |
|
|
Adjusted Operating Margin |
|
4.7 |
% |
7.1 |
% |
4.1 |
% |
6.5 |
% |
10.1 |
% |
6.9 |
% |
3.7 |
% |
5.7 |
% |
4.7 |
% |
6.7 |
% |
The Company defines Adjusted Net Income as net income before goodwill impairment charges, impairment and other charges, share-based compensation expense and non-cash foreign currency transaction gains and losses, all net of tax. The Company believes this non-GAAP financial measure may help investors better understand our ongoing operating results by eliminating goodwill impairment charges, long-lived asset impairment charges, impairment and other charges, share-based compensation expense and the non-cash net losses and gains from foreign currency transactions, all net of taxes.
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|
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Fiscal |
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Fiscal 2011 |
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Fiscal 2012 |
|
|
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|
($MM) |
|
2010 |
|
2011 |
|
Q1 |
|
Q2 |
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Q3 |
|
Q4 |
|
Q1 |
|
Q2 |
|
YTD |
|
LTM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net income |
|
14.1 |
|
41.4 |
|
6.8 |
|
8.1 |
|
17.6 |
|
8.9 |
|
1.6 |
|
7.5 |
|
9.1 |
|
35.6 |
|
|
Goodwill impairment charge |
|
6.1 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
Tax benefit of goodwill impairment charge |
|
(2.4 |
) |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
Impairment and other charges |
|
7.2 |
|
(2.0 |
) |
(4.2 |
) |
0.7 |
|
1.0 |
|
0.5 |
|
4.6 |
|
0.7 |
|
5.3 |
|
6.8 |
|
|
Taxes on impairment and other charges |
|
(2.8 |
) |
0.8 |
|
1.7 |
|
(0.3 |
) |
(0.5 |
) |
(0.2 |
) |
(1.7 |
) |
(0.3 |
) |
(2.0 |
) |
(2.7 |
) |
|
Share-based compensation expense, net of tax |
|
3.1 |
|
2.0 |
|
0.6 |
|
0.5 |
|
0.5 |
|
0.5 |
|
0.4 |
|
0.3 |
|
0.7 |
|
1.7 |
|
|
Non-Cash foreign currency transaction loss, net of tax |
|
0.2 |
|
0.2 |
|
— |
|
— |
|
0.1 |
|
— |
|
— |
|
0.1 |
|
0.1 |
|
0.2 |
|
|
Adjusted Net Income |
|
25.5 |
|
42.4 |
|
4.9 |
|
9.0 |
|
18.7 |
|
9.7 |
|
4.9 |
|
8.3 |
|
13.2 |
|
41.6 |
|
The Company defines Adjusted Diluted Earnings per Share as Adjusted Net Income divided by diluted weighted average number of common shares outstanding.
|
|
|
2010 |
|
2011 |
|
Q1 |
|
Q2 |
|
Q3 |
|
Q4 |
|
Q1 |
|
Q2 |
|
YTD |
|
LTM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
1.23 |
|
3.57 |
|
0.59 |
|
0.69 |
|
1.50 |
|
0.78 |
|
0.14 |
|
0.69 |
|
0.82 |
|
3.11 |
|
|
Goodwill impairment charge |
|
0.54 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
Tax benefit of goodwill impairment charge |
|
(0.21 |
) |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
Impairment and other charges |
|
0.63 |
|
(0.17 |
) |
(0.36 |
) |
0.06 |
|
0.08 |
|
0.05 |
|
0.41 |
|
0.06 |
|
0.48 |
|
0.60 |
|
|
Taxes on impairment and other charges |
|
(0.25 |
) |
0.07 |
|
0.15 |
|
(0.02 |
) |
(0.03 |
) |
(0.02 |
) |
(0.15 |
) |
(0.02 |
) |
(0.18 |
) |
(0.22 |
) |
|
Share-based compensation expense, net of tax |
|
0.27 |
|
0.17 |
|
0.05 |
|
0.04 |
|
0.04 |
|
0.04 |
|
0.03 |
|
0.03 |
|
0.06 |
|
0.14 |
|
|
Non-Cash foreign currency transaction net loss, net of tax |
|
0.02 |
|
0.01 |
|
— |
|
— |
|
0.01 |
|
— |
|
— |
|
0.01 |
|
0.01 |
|
0.02 |
|
|
Adjusted Diluted Earnings per Share |
|
2.23 |
|
3.65 |
|
0.43 |
|
0.77 |
|
1.60 |
|
0.85 |
|
0.43 |
|
0.76 |
|
1.19 |
|
3.65 |
|
ITEM — 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d) EXHIBITS
The following exhibit is filed herewith:
99.1 Press release of the Company dated November 2, 2011, announcing the Company’s results for the quarter ended September 30, 2011.
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED HEREUNTO DULY AUTHORIZED.
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|
CONSOLIDATED GRAPHICS, INC. | |
|
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(Registrant) | |
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| |
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| |
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By: |
/s/ Jon C. Biro |
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|
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Jon C. Biro |
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Executive Vice President and |
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|
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Chief Financial and Accounting Officer |
Date: November 2, 2011
Exhibit 99.1
|
FOR: |
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Consolidated Graphics, Inc. |
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CONTACT: |
|
Jon C. Biro |
|
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|
Executive Vice President/ |
|
|
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Chief Financial Officer |
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Consolidated Graphics, Inc. |
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(713) 787-0977 |
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|
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|
Christine Mohrmann/Alexandra Tramont |
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FTI Consulting, Inc. |
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(212) 850-5600 |
CONSOLIDATED GRAPHICS REPORTS FINANCIAL RESULTS FOR THE
QUARTER ENDED SEPTEMBER 2011
Year-over-Year Quarterly Highlights:
· Revenue increased 3% to $267.4 million
· Adjusted Operating Income was $15.2 million, or 6% of revenues
· Adjusted Diluted Earnings Per Share were $.76
HOUSTON, TEXAS — November 2, 2011 — Consolidated Graphics, Inc. (NYSE: CGX) today announced financial results for the quarter ended September 30, 2011.
Revenue for the September quarter increased $7.3 million, or 2.8%, to $267.4 million, compared to the prior year quarter. The year-over-year revenue increase was due to growth in same-store sales of 1.7% and acquisitions, partially offset by a decline in election-related business. Adjusted Operating Income for the September 2011 quarter was $15.2 million or 5.7% of revenue, compared to $17.0 million or 6.5% of revenue last year. Adjusted Net Income was $8.3 million, or $.76 per diluted share for the quarter, compared to Adjusted Net Income of $9.0 million or $.77 per diluted share for the prior year quarter.
Operating income was $13.9 million for the September 2011 quarter and included $.6 million in charges. Operating income during the September 2010 quarter was $15.4 million and included $.7 million in charges primarily related to lease termination expenses and certain asset impairments. Net income for the September 2011 quarter was $7.5 million or $.69 diluted earnings per share, compared to $8.1 million or $.69 diluted earnings per share last year.
Joe R. Davis, Chairman and Chief Executive Officer of Consolidated Graphics, commented, “Considering the fact that we are in a non-election year, the results for the September quarter compare favorably to the prior quarter. Growth in our technology business, including digital print, and acquisitions contributed to the results.”
Mr. Davis concluded, “Based on current market conditions and the usual seasonal improvements, we expect the December quarter’s revenue to be in the range of $297 - $310 million which assumes year-over-year same-store sales growth of up to 5%, as well as incremental revenue from current year acquisitions, offset by the impact of lower election-related business. We expect Adjusted Diluted Earnings Per Share in the December 2011 quarter will improve compared to the prior year, excluding the impact of lower election-related business. We estimate that lower election-
related business in the December quarter will have a negative $.22 - $.25 per diluted share impact, compared to the prior year.”
Share Repurchase Program Update
The Company is authorized to purchase up to an aggregate of $100 million of the Company’s common shares pursuant to a share repurchase program that expires March 31, 2013. During the quarter, the Company purchased 520,436 shares of its common stock for $18.9 million pursuant to its share repurchase program. Since beginning the share repurchase program in November 2010, the Company has purchased 1,292,093 shares of its common stock (11.0% of shares outstanding) for $58.2 million, leaving $41.8 million available under the repurchase program. As of September 30, 2011 the Company had 10,434,284 common shares outstanding.
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 to the most directly comparable GAAP financial measures are included in the attached tables and in the Current Report on Form 8-K filed today with the Securities and Exchange Commission. The Form 8-K also includes the basis for management’s use of these non-GAAP financial measures.
Consolidated Graphics, Inc. will host a conference call today, Wednesday, November 2, 2011, at 11:00 a.m. Eastern Time, to discuss its second quarter fiscal 2012 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, and a presence in Asia, CGX offers 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.
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 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 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.
Regulation G Reconciliation
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 transaction 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 (loss) 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 the most directly 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, INC.
Consolidated Income Statements
(In thousands, except per share amounts, and unaudited)
|
|
|
Three Months Ended |
|
Six Months Ended |
| ||||||||||||||||
|
|
|
September 30, |
|
September 30, |
| ||||||||||||||||
|
|
|
2011 |
|
2010 |
|
Change |
|
2011 |
|
2010 |
|
Change |
| ||||||||
|
|
|
|
|
|
|
$ |
|
% |
|
|
|
|
|
$ |
|
% |
| ||||
|
Sales |
|
$ |
267,401 |
|
$ |
260,106 |
|
7,295 |
|
3 |
|
$ |
510,753 |
|
$ |
496,823 |
|
13,930 |
|
3 |
|
|
Cost of Sales |
|
204,056 |
|
197,952 |
|
6,104 |
|
3 |
|
391,649 |
|
380,218 |
|
11,431 |
|
3 |
| ||||
|
Gross Profit |
|
63,345 |
|
62,154 |
|
1,191 |
|
2 |
|
119,104 |
|
116,605 |
|
2,499 |
|
2 |
| ||||
|
Selling Expenses |
|
22,660 |
|
22,300 |
|
360 |
|
2 |
|
45,262 |
|
45,607 |
|
(345 |
) |
(1 |
) | ||||
|
General and Administrative Expenses |
|
26,033 |
|
23,682 |
|
2,351 |
|
10 |
|
50,933 |
|
46,098 |
|
4,835 |
|
10 |
| ||||
|
Impairment and Other Charges |
|
640 |
|
718 |
|
(78 |
) |
nm |
|
5,281 |
|
(3,466 |
) |
8,747 |
|
nm |
| ||||
|
Other Expense |
|
158 |
|
38 |
|
120 |
|
nm |
|
191 |
|
57 |
|
134 |
|
nm |
| ||||
|
Operating Income |
|
13,854 |
|
15,416 |
|
(1,562 |
) |
(10 |
) |
17,437 |
|
28,309 |
|
(10,872 |
) |
(38 |
) | ||||
|
Interest Expense |
|
1,597 |
|
2,096 |
|
(499 |
) |
(24 |
) |
3,155 |
|
4,099 |
|
(944 |
) |
(23 |
) | ||||
|
Income before Taxes |
|
12,257 |
|
13,320 |
|
(1,063 |
) |
(8 |
) |
14,282 |
|
24,210 |
|
(9,928 |
) |
(41 |
) | ||||
|
Income Taxes |
|
4,722 |
|
5,266 |
|
(544 |
) |
(10 |
) |
5,162 |
|
9,315 |
|
(4,153 |
) |
(45 |
) | ||||
|
Net Income |
|
$ |
7,535 |
|
$ |
8,054 |
|
(519 |
) |
(6 |
) |
$ |
9,120 |
|
$ |
14,895 |
|
(5,775 |
) |
(39 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Earnings Per Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Basic |
|
$ |
.70 |
|
$ |
.70 |
|
|
|
|
|
$ |
.84 |
|
$ |
1.30 |
|
|
|
|
|
|
Diluted |
|
$ |
.69 |
|
$ |
.69 |
|
|
|
|
|
$ |
.82 |
|
$ |
1.28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Weighted Average Shares Outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Basic |
|
10,761 |
|
11,547 |
|
|
|
|
|
10,903 |
|
11,437 |
|
|
|
|
| ||||
|
Diluted |
|
10,890 |
|
11,742 |
|
|
|
|
|
11,098 |
|
11,635 |
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Effective Income Tax Rate |
|
38.5 |
% |
39.5 |
% |
|
|
|
|
36.1 |
% |
38.5 |
% |
|
|
|
| ||||
nm- not meaningful
CONSOLIDATED GRAPHICS, INC.
Consolidated Balance Sheets
(In thousands, except share and per share amounts, and unaudited)
|
|
|
September 30, |
|
March 31, |
| ||
|
ASSETS |
|
|
|
|
| ||
|
|
|
|
|
|
| ||
|
CURRENT ASSETS |
|
|
|
|
| ||
|
Cash and cash equivalents |
|
$ |
3,680 |
|
$ |
3,710 |
|
|
Accounts receivable, net |
|
183,375 |
|
171,779 |
| ||
|
Inventories |
|
56,757 |
|
50,888 |
| ||
|
Prepaid expenses |
|
15,649 |
|
13,447 |
| ||
|
Deferred income taxes |
|
13,934 |
|
10,787 |
| ||
|
Total current assets |
|
273,395 |
|
250,611 |
| ||
|
PROPERTY AND EQUIPMENT, net |
|
386,144 |
|
388,681 |
| ||
|
GOODWILL |
|
26,512 |
|
27,124 |
| ||
|
OTHER INTANGIBLE ASSETS, net |
|
17,210 |
|
19,376 |
| ||
|
OTHER ASSETS |
|
10,210 |
|
12,691 |
| ||
|
|
|
$ |
713,471 |
|
$ |
698,483 |
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
| ||
|
|
|
|
|
|
| ||
|
CURRENT LIABILITIES |
|
|
|
|
| ||
|
Current portion of long-term debt |
|
$ |
21,359 |
|
$ |
15,911 |
|
|
Accounts payable |
|
99,043 |
|
90,100 |
| ||
|
Accrued liabilities |
|
71,411 |
|
81,501 |
| ||
|
Total current liabilities |
|
191,813 |
|
187,512 |
| ||
|
LONG-TERM DEBT, net of current portion |
|
170,132 |
|
154,161 |
| ||
|
OTHER LIABILITIES |
|
22,434 |
|
13,820 |
| ||
|
DEFERRED INCOME TAXES, net |
|
50,879 |
|
45,629 |
| ||
|
Total liabilities |
|
435,258 |
|
401,122 |
| ||
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
| ||
|
SHAREHOLDERS’ EQUITY |
|
|
|
|
| ||
|
Common stock, $.01 par value; 100,000,000 shares authorized; 10,434,284 and 11,072,053 issued and outstanding |
|
104 |
|
110 |
| ||
|
Additional paid-in capital |
|
162,387 |
|
170,547 |
| ||
|
Retained earnings |
|
113,850 |
|
123,990 |
| ||
|
Accumulated other comprehensive income |
|
1,872 |
|
2,714 |
| ||
|
Total shareholders’ equity |
|
278,213 |
|
297,361 |
| ||
|
|
|
$ |
713,471 |
|
$ |
698,483 |
|
|
|
|
|
|
|
| ||
|
Total debt |
|
$ |
191,491 |
|
$ |
170,072 |
|
|
Debt-to-total capitalization |
|
41 |
% |
36 |
% | ||
CONSOLIDATED GRAPHICS, INC.
Reconciliations of Non-GAAP Financial Measures
(In thousands, except per share amounts, and unaudited)
|
|
|
Three Months Ended |
|
Six Months Ended |
| ||||||||
|
|
|
September 30, |
|
September 30, |
| ||||||||
|
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net income |
|
$ |
7,535 |
|
$ |
8,054 |
|
$ |
9,120 |
|
$ |
14,895 |
|
|
Income taxes |
|
4,722 |
|
5,266 |
|
5,162 |
|
9,315 |
| ||||
|
Interest expense, net |
|
1,597 |
|
2,096 |
|
3,155 |
|
4,099 |
| ||||
|
Depreciation and amortization |
|
17,718 |
|
16,990 |
|
35,111 |
|
34,286 |
| ||||
|
Impairment and other charges |
|
640 |
|
718 |
|
5,281 |
|
(3,466 |
) | ||||
|
Share-based compensation expense |
|
506 |
|
792 |
|
1,143 |
|
1,775 |
| ||||
|
Non-cash foreign currency transaction loss |
|
158 |
|
38 |
|
191 |
|
57 |
| ||||
|
Net (gain) loss from asset dispositions |
|
(292 |
) |
(151 |
) |
(394 |
) |
(96 |
) | ||||
|
Adjusted EBITDA |
|
$ |
32,584 |
|
$ |
33,803 |
|
$ |
58,769 |
|
$ |
60,865 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net cash provided by operating activities |
|
$ |
10,065 |
|
$ |
9,682 |
|
$ |
38,428 |
|
$ |
30,184 |
|
|
Capital expenditures |
|
(11,770 |
) |
(13,809 |
) |
(29,103 |
) |
(25,589 |
) | ||||
|
Proceeds from asset dispositions |
|
524 |
|
1,692 |
|
899 |
|
2,651 |
| ||||
|
Free Cash Flow |
|
$ |
(1,181 |
) |
$ |
(2,435 |
) |
$ |
10,224 |
|
$ |
7,246 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Operating income |
|
$ |
13,854 |
|
$ |
15,416 |
|
$ |
17,437 |
|
$ |
28,309 |
|
|
Impairment and other charges |
|
640 |
|
718 |
|
5,281 |
|
(3,466 |
) | ||||
|
Share-based compensation expense |
|
506 |
|
792 |
|
1,143 |
|
1,775 |
| ||||
|
Non-cash foreign currency transaction loss |
|
158 |
|
38 |
|
191 |
|
57 |
| ||||
|
Adjusted Operating Income |
|
$ |
15,158 |
|
$ |
16,964 |
|
$ |
24,052 |
|
$ |
26,675 |
|
|
Adjusted Operating Margin |
|
5.7 |
% |
6.5 |
% |
4.7 |
% |
5.4 |
% | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net income |
|
$ |
7,535 |
|
$ |
8,054 |
|
$ |
9,120 |
|
$ |
14,895 |
|
|
Impairment and other charges |
|
640 |
|
718 |
|
5,281 |
|
(3,466 |
) | ||||
|
Tax benefit of impairment and other charges |
|
(250 |
) |
(280 |
) |
(1,987 |
) |
1,352 |
| ||||
|
Share-based compensation expense, net of taxes |
|
309 |
|
483 |
|
697 |
|
1,083 |
| ||||
|
Non-cash foreign currency transaction loss, net of taxes |
|
96 |
|
23 |
|
117 |
|
35 |
| ||||
|
Adjusted Net Income |
|
$ |
8,330 |
|
$ |
8,998 |
|
$ |
13,228 |
|
$ |
13,899 |
|
CONSOLIDATED GRAPHICS, INC.
Reconciliations of Non-GAAP Financial Measures
(In thousands, except per share amounts, and unaudited)
|
|
|
Three Months Ended |
|
Six Months Ended |
| ||||||||
|
|
|
September 30, |
|
September 30 |
| ||||||||
|
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Diluted earnings per share |
|
$ |
.69 |
|
$ |
.69 |
|
$ |
.82 |
|
$ |
1.28 |
|
|
Impairment and other charges |
|
.06 |
|
.06 |
|
.48 |
|
(.30 |
) | ||||
|
Tax benefit of Impairment and other charges |
|
(.02 |
) |
(.02 |
) |
(.18 |
) |
.12 |
| ||||
|
Share-based compensation expense, net of taxes |
|
.03 |
|
.04 |
|
.06 |
|
.09 |
| ||||
|
Non-cash foreign currency transaction loss, net of taxes |
|
.01 |
|
— |
|
.01 |
|
— |
| ||||
|
Adjusted Diluted Earnings Per Share |
|
$ |
.76 |
|
$ |
.77 |
|
$ |
1.19 |
|
$ |
1.19 |
|