UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO ___________
COMMISSION FILE NUMBER 0-24068
CONSOLIDATED GRAPHICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 76-0190827
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
5858 WESTHEIMER ROAD, SUITE 200, HOUSTON, TEXAS 77057
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (713) 797-0977
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of Common Stock, par value $.01 per share, of the
Registrant outstanding at July 31, 1998 was 13,293,726.
CONSOLIDATED GRAPHICS, INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
INDEX
PAGE
Part I -- Financial Information
Item 1 -- Financial Statements
Consolidated Balance Sheets at,
June 30, 1998 and March 31, 1998............................ 1
Consolidated Income Statements for the
Three Months Ended June 30, 1998 and 1997................... 2
Consolidated Statements of Cash Flows for the
Three Months Ended June 30, 1998 and 1997................... 3
Notes to Consolidated Financial Statements.................. 4
Item 2 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations.............. 6
Part II -- Other Information
Item 1 -- Legal Proceedings....................................... 10
Item 2 -- Changes in Securities and Use of Proceeds............... 10
Item 3 -- Defaults upon Senior Securities ........................ 10
Item 4 -- Submission of Matters to a Vote of Security Holders..... 10
Item 5 -- Other Information....................................... 10
Item 6 -- Exhibits and Reports on Form 8-K........................ 11
Signatures.............................................................. 12
i
CONSOLIDATED GRAPHICS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
JUNE 30, MARCH 31,
1998 1998
-------- --------
ASSETS (UNAUDITED) (AUDITED)
CURRENT ASSETS:
Cash and cash equivalents ...................... $ 6,238 $ 5,268
Accounts receivable, net ....................... 65,308 51,008
Inventories .................................... 20,094 13,074
Prepaid expenses ............................... 2,873 2,129
-------- --------
Total current assets ........................ 94,513 71,479
PROPERTY AND EQUIPMENT, net .......................... 172,349 135,892
GOODWILL, net ........................................ 42,961 28,157
OTHER ASSETS ......................................... 1,841 2,117
-------- --------
$311,664 $237,645
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt .............. $ 2,649 $ 2,438
Accounts payable ............................... 20,786 22,276
Accrued liabilities ............................ 28,153 18,863
Income taxes payable ........................... 3,028 33
-------- --------
Total current liabilities ................... 54,616 43,610
LONG-TERM DEBT, net of current portion ............... 111,176 73,030
DEFERRED INCOME TAXES ................................ 20,363 15,673
COMMITMENTS AND CONTINGENCIES ........................ -- --
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value;
20,000,000 shares authorized; 13,288,626
and 12,959,932 issued and outstanding .......... 132 129
Additional paid-in capital ..................... 73,302 59,658
Retained earnings .............................. 52,075 45,545
-------- --------
Total shareholders' equity .................. 125,509 105,332
-------- --------
$311,664 $237,645
======== ========
See accompanying notes to consolidated financial statements.
1
CONSOLIDATED GRAPHICS, INC.
CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED
JUNE 30
----------------------
1998 1997
------- -------
SALES ............................................ $85,100 $50,675
COST OF SALES .................................... 58,014 34,745
------- -------
Gross profit .................................. 27,086 15,930
SELLING EXPENSES ................................. 8,291 4,931
GENERAL AND ADMINISTRATIVE EXPENSES .............. 6,619 3,880
------- -------
Operating income .............................. 12,176 7,119
INTEREST EXPENSE ................................. 1,471 894
------- -------
Pretax income ................................. 10,705 6,225
INCOME TAXES ..................................... 4,175 2,365
------- -------
NET INCOME ....................................... $ 6,530 $ 3,860
======= =======
BASIC EARNINGS PER SHARE ......................... $ .50 $ .31
======= =======
DILUTED EARNINGS PER SHARE ....................... $ .48 $ .30
======= =======
See accompanying notes to consolidated financial statements.
2
CONSOLIDATED GRAPHICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
JUNE 30
----------------------
1998 1997
--------- --------
OPERATING ACTIVITIES:
Net income ............................................ $ 6,530 $ 3,860
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation and amortization ................... 3,573 2,046
Deferred tax provision .......................... 1,092 122
Changes in assets and liabilities, net of
effects of acquisitions--
Accounts receivable .......................... 1,958 (3,509)
Inventories .................................. (1,201) 2,669
Prepaid expenses ............................. (356) 261
Other assets ................................. 490 (341)
Accounts payable and accrued liabilities ..... (1,377) 267
Income taxes payable ......................... 3,063 1,914
--------- --------
Net cash provided by operating activities .. 13,772 7,289
--------- --------
INVESTING ACTIVITIES:
Acquisitions of businesses, net of cash
acquired ....................................... (42,521) (7,633)
Purchases of property and equipment ............. (6,054) (3,219)
Proceeds from disposition of assets ............. 41 948
--------- --------
Net cash used in investing activities ...... (48,534) (9,904)
--------- --------
FINANCING ACTIVITIES:
Proceeds from revolving credit agreement ........ 106,483 49,865
Payments on revolving credit agreement .......... (70,588) (46,813)
Payments on long-term debt ...................... (665) (671)
Proceeds from exercise of stock options and
other .......................................... 502 114
--------- --------
Net cash provided by financing activities .. 35,732 2,495
--------- --------
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS ... 970 (120)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ...... 5,268 3,636
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............ $ 6,238 $ 3,516
========= ========
See accompanying notes to consolidated financial statements.
3
CONSOLIDATED GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements include the
accounts of Consolidated Graphics, Inc. and its wholly owned subsidiaries (the
"Company"). All intercompany accounts and transactions have been eliminated.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and the
Securities and Exchange Commission's rules and regulations for reporting interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation of
the accompanying unaudited consolidated financial statements have been included.
Operating results for the three months ended June 30, 1998 are not necessarily
indicative of future operating results. Balance sheet information as of March
31, 1998 has been derived from the 1998 annual audited consolidated financial
statements of the Company. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Form 10-K
filed with the Securities and Exchange Commission in June 1998.
Basic earnings per share are calculated by dividing net income by the
weighted average number of common shares outstanding. For the three months ended
June 30, 1998 and 1997, the basic weighted average shares outstanding were
13,051,965 and 12,454,675. Diluted earnings per share reflect net income divided
by the weighted average number of common shares and include the dilutive effect
of stock options outstanding. For the three months ended June 30, 1998 and 1997,
the diluted weighted average number of common shares and stock options
outstanding were 13,493,581 and 12,949,018.
The consolidated statements of cash flows provide information about the
sources and uses of cash and exclude the effects of non-cash transactions.
Significant non-cash transactions primarily include the issuance of common stock
and the issuance or assumption of debt in connection with the acquisition of
certain printing businesses (see Note 3 Acquisitions). Additionally, equipment
capital expenditures financed by the Company, totaling $3,050 for the three
months ended June 30, 1998, and the effect of accounts payable totaling $3,306
and $2,300 as of June 30,1998 and 1997, related to the purchase of certain
printing presses, have been eliminated from the accompanying consolidated
statements of cash flows. The following is a summary of total cash paid for
interest and income taxes (net of refunds).
THREE MONTHS ENDED
JUNE 30
-------------------------
CASH PAID (RECEIVED) FOR: 1998 1997
------- ----
Interest ............................... $ 1,259 $800
Taxes (i) .............................. ($1,780) $208
(i) Reflects a federal tax refund of $1,800 pertaining to a tax benefit
resulting from the exercise of employee stock options in fiscal 1998 and
1997.
2. LONG-TERM DEBT
The following is a summary of the Company's long-term debt as of:
JUNE 30, MARCH 31,
1998 1998
--------- --------
Revolving credit agreement ................ $ 90,777 $ 54,881
Term equipment notes ...................... 16,482 12,997
Other ..................................... 6,566 7,590
--------- --------
113,825 75,468
Less current portion ...................... (2,649) (2,438)
--------- --------
$ 111,176 $ 73,030
========= ========
4
CONSOLIDATED GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
In June 1997, the Company entered into a $100 million revolving credit
agreement (the "Credit Agreement") with a six-member banking group. The Credit
Agreement, scheduled to mature on May 31, 2000, was increased on August 4, 1998,
to $200 million and the maturity date was extended until July 31, 2001.
Borrowings outstanding under the Credit Agreement are unsecured and accrue
interest at a variable rate (an average of 6.3% per annum on June 30, 1998). The
Company is also required to pay under the Credit Agreement a commitment fee on
available but unused amounts ranging from .10% to .35% per annum.
3. ACQUISITIONS
The Company completed the following acquisitions during the three months
ended June 30, 1998:
COMPANY PRIMARY MARKET DATE
------------------- -------------------------- ----------
Tursack, Inc. Philadelphia, Pennsylvania April 1998
Image Systems Milwaukee, Wisconsin May 1998
Printing, Inc. Wichita, Kansas June 1998
Graphic Communications San Diego, California June 1998
Wetzel Brothers Milwaukee, Wisconsin June 1998
To complete the aforementioned acquisitions, in the aggregate, the Company
paid cash of $42,521 and issued 248,210 shares of its common stock valued at
$12,962.
Subsequent to June 30, 1998, the Company completed the acquisition of two
printing businesses and signed non-binding letters of intent to acquire eight
additional companies.
5
CONSOLIDATED GRAPHICS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSIONS CONTAIN FORWARD-LOOKING INFORMATION. READERS ARE
CAUTIONED THAT SUCH INFORMATION INVOLVES RISKS AND UNCERTAINTIES, INCLUDING
THOSE CREATED BY GENERAL MARKET CONDITIONS, COMPETITION AND THE POSSIBILITY THAT
EVENTS MAY OCCUR WHICH LIMIT THE ABILITY OF THE COMPANY TO MAINTAIN OR IMPROVE
ITS OPERATING RESULTS OR EXECUTE ITS PRIMARY GROWTH STRATEGY OF ACQUIRING
ADDITIONAL PRINTING BUSINESSES. ALTHOUGH THE COMPANY BELIEVES THAT THE
ASSUMPTIONS UNDERLYING THE FORWARD-LOOKING STATEMENTS ARE REASONABLE, ANY OF THE
ASSUMPTIONS COULD BE INACCURATE, AND THERE CAN THEREFORE BE NO ASSURANCE THAT
THE FORWARD-LOOKING STATEMENTS INCLUDED HEREIN WILL PROVE TO BE ACCURATE. THE
INCLUSION OF SUCH INFORMATION SHOULD NOT BE REGARDED AS A REPRESENTATION BY THE
COMPANY OR ANY OTHER PERSON THAT THE OBJECTIVES AND PLANS OF THE COMPANY WILL BE
ACHIEVED.
GENERAL
Consolidated Graphics, Inc. (the "Company"), headquartered in Houston,
Texas, is one of the fastest growing commercial printing companies in the United
States. As a leading printing industry consolidator and the largest sheetfed
commercial printer in the United States, the Company has expanded its operations
to include 38 printing companies nationwide as of July 31, 1998. Each printing
business has an established operating history (ranging from 11-120 years),
experienced management, solid customer relationships and a reputation for
providing quality service and product. The Company's printing businesses sell to
over 8,000 customers, including many major corporations, most of which are
headquartered in the markets in which the Company operates.
The Company's sales are derived from the production and sale of customized
printed materials by its printing businesses. All of the printing businesses
provide general commercial printing services relating to the production of
annual reports, training manuals, product and capability brochures, direct mail
pieces, catalogs and other promotional material, all of which tend to be
recurring in nature. One operation also provides transaction-oriented financial
printing services. Each printing business has its own sales, estimating,
customer service, prepress, production, postpress and accounting departments.
The Company's headquarters provides its printing businesses with certain
administrative services, such as purchasing and human resources support, and
maintains centralized risk management, treasury, investor relations and
consolidated financial reporting activities.
The Company's strategy is to generate growth in sales and profits through
an aggressive acquisition program, coupled with internal growth and operational
improvements at its existing businesses. The Company provides its acquired
businesses cost savings through master purchasing arrangements, access to
technology and capital, strategic counsel and a commitment to training through a
unique, comprehensive management development program. As a result, operating
income margins and efficiencies of newly acquired businesses, which may be lower
than those being achieved by the Company's other businesses, typically improve
as the Company's operational strategies are fully implemented.
The Company's consolidated financial results in a given period may be
affected by the timing and magnitude of acquisitions. The Company's consolidated
operating income margins in the periods following a significant acquisition (or
series of acquisitions) may be lower than historically reported consolidated
margins depending upon the timing and extent to which an acquired business is
able to adapt to and implement the Company's management practices.
6
RESULTS OF OPERATIONS
The following table sets forth the Company's historical income statements
and certain percentage relationships for the periods indicated:
AS A
PERCENTAGE
OF SALES
--------------
THREE MONTHS THREE MONTHS
ENDED JUNE 30 ENDED JUNE 30
------------- --------------
1998 1997 1998 1997
----- ----- ----- -----
(In millions)
Sales ........................................ $85.1 $50.7 100.0% 100.0%
Cost of sales ................................ 58.0 34.8 68.2 68.6
----- ----- ----- -----
Gross profit ........................... 27.1 15.9 31.8 31.4
Selling expenses ............................. 8.3 4.9 9.7 9.7
General and administrative expenses .......... 6.6 3.9 7.8 7.7
----- ----- ----- -----
Operating income ....................... 12.2 7.1 14.3 14.0
Interest expense ............................. 1.5 .9 1.7 1.7
----- ----- ----- -----
Pretax income .......................... 10.7 6.2 12.6 12.3
Income taxes ................................. 4.2 2.3 4.9 4.7
----- ----- ----- -----
Net income ............................. $ 6.5 $ 3.9 7.7% 7.6%
===== ===== ===== =====
Acquisitions in fiscal 1998 and 1999 are the primary causes of the
increases in revenues and expenses since June 30, 1997. Each of the Company's
acquisitions in fiscal 1998 and 1999 have been accounted for under the purchase
method of accounting; accordingly, the Company's consolidated income statements
reflect revenues and expenses of acquired businesses only for post-acquisition
periods.
The following table sets forth the Company's 1998 and 1999 acquisitions
(collectively the "1998/99 Acquired Businesses") and indicates the period in
which each business was acquired.
FISCAL 1998 ACQUISITIONS:
Tucker Printers April 1997
The Etheridge Company July 1997
Georges and Shapiro August 1997
Austin Printing September 1997
Geyer Printing October 1997
Superior Color Graphics October 1997
The Otto Companies October 1997
Walnut Circle Press November 1997
Columbia Color January 1998
StorterChilds Printing January 1998
Heath Printers January 1998
Fittje Bros. Printing February 1998
Courier Printing March 1998
FISCAL 1999 ACQUISITIONS:
Tursack, Inc. April 1998
Image Systems May 1998
Printing, Inc. June 1998
Graphic Communications June 1998
Wetzel Brothers June 1998
For more information regarding the fiscal 1998 acquisitions, refer to
"Notes to Consolidated Financial Statements" included in the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1998. For more
information regarding the fiscal 1999 acquisitions, refer to the accompanying
"Notes to Consolidated Financial Statements" included elsewhere herein.
7
THREE MONTHS ENDED JUNE 30, 1998 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1997.
Sales increased 68% to $85.1 million for the three months ended June 30,
1998, from $50.7 million for the three months ended June 30, 1997. This increase
is due to the addition of the 1998/99 Acquired Businesses and internal growth at
the Company's other businesses. The internal growth resulted primarily from the
Company's ongoing capital investments in new equipment and technology, which has
added production capacity at certain locations, and in some cases, expanded the
range of services available to meet customer needs.
Gross profit increased 70% to $27.1 million for the three months ended
June 30, 1998, from $15.9 million for the three months ended June 30, 1997,
primarily due to the addition of the 1998/99 Acquired Businesses. Gross profit
as a percentage of sales increased to 31.8% for the three months ended June 30,
1998, from 31.4% in the corresponding period of the prior year. This improvement
generally reflects increased operating efficiencies from investments in
equipment and technology and cost savings generated by the Company's national
purchasing advantages.
Selling expenses increased 68% to $8.3 million for the three months ended
June 30, 1998, from $4.9 million for the three months ended June 30,1997, due to
the increased sales levels as discussed above. Selling expenses as a percentage
of sales remained consistent at 9.7% when compared to the corresponding period
of the prior year.
General and administrative expenses increased 71% to $6.6 million for the
three months ended June 30, 1998, from $3.9 million for the three months ended
June 30,1997. This increase is due to the addition of the 1998/99 Acquired
Businesses and an increase in the corporate infrastructure to manage the
Company's accelerated acquisition program. General and administrative expenses
as a percentage of sales increased slightly to 7.8% for the three months ended
June 30, 1998, as compared to 7.7% in the corresponding period of the prior
year.
Interest expense increased to $1.5 million for the three months ended June
30, 1998, from $.9 million for the three months ended June 30,1997, primarily
due to a net increase in borrowings under the Company's revolving credit
facility to finance the cash portions of the purchase price of the 1998/99
Acquired Businesses.
Effective income tax rates reflect an increase to 39% for the three months
ended June 30, 1998, from 38% in the prior year due, to the Company's growth by
acquisition into states with higher income tax rates than those states in which
the Company previously operated.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary uses of cash are for capital expenditures,
acquisitions and payments on long-term debt incurred to finance certain
equipment purchases or assumed in connection with certain acquisitions. Cash
utilized for capital expenditures, which relate primarily to the purchase of new
equipment, was $6.1 million for the three months ended June 30, 1998. Cash
utilized to complete acquisitions totaled $42.5 million for the three months
ended June 30, 1998. Payments on long-term debt totaled $.7 million for the
three months ended June 30, 1998.
The Company financed its capital requirements through internally generated
funds and borrowings under its revolving credit facility (see below). Cash flow
generated from operations (net income plus depreciation, amortization, and
deferred tax provision) was $11.2 million for the three months ended June 30,
1998. Net incremental borrowings under the revolving credit facility were $35.9
million and debt incurred directly to finance equipment purchases was $3.1
million for the three months ended June 30, 1998.
In June 1997, the Company entered into a $100 million revolving credit
agreement (the "Credit Agreement") with a six-member banking group. The Credit
Agreement, scheduled to mature on May 31, 2000, was increased on August 4, 1998,
to $200 million and the maturity date was extended to July 31, 2001. Borrowings
outstanding under the Credit Agreement, which totaled $90.8 million at June 30,
1998, are unsecured and accrue interest at a variable rate (an average of 6.3%
per annum on June 30, 1998). The Company is also required to pay a commitment
fee on available but unused amounts under the Credit Agreement ranging from .10%
to .35% per annum.
The Company is subject to certain covenants and restrictions and must meet
certain financial tests pursuant to and as defined in the Credit Agreement. The
Company believes that these restrictions do not adversely affect its acquisition
or operating strategies, and that it was in compliance with such financial tests
and other covenants at June 30, 1998.
8
In 1996 the Company entered into an arrangement with Komori America
Corporation (the "Komori Agreement"), pursuant to which the Company may, but is
not obliged to, purchase up to $50 million of printing presses over its term.
The Komori Agreement provides certain volume purchase incentives and long-term
financing options. As of June 30, 1998, the Company was obligated on term notes
related to the Komori Agreement totaling $15.1 million. These term notes provide
a fixed monthly principal and interest payments through 2008 at an average
interest rate of 7.7%, and are secured by the purchased presses. The Company is
not subject to any significant financial covenants or restrictions in connection
with these obligations.
The Company's remaining debt obligations generally consist of mortgages,
capital leases, promissory notes, an industrial revenue bond and two $5 million
auxiliary revolving credit agreements, some of which contain financial covenants
and restrictions. The most significant of these place certain restrictions on
future borrowing and acquisitions above specified levels. The Company believes
these restrictions do not adversely affect its acquisition and operating
strategies.
In May 1998, the Company agreed to purchase 12 new printing presses for an
aggregate of $19 million, net of trade-in allowances, pursuant to the Komori
Agreement. The Company expects to make additional equipment capital expenditures
in fiscal 1999 using cash flow from operations and borrowings under the Credit
Agreement.
During the three months ended June 30, 1998, the Company acquired five
printing businesses. To complete these acquisitions, in the aggregate, the
Company issued 248,210 shares of its common stock and paid cash of $42.5
million. Subsequent to June 30, 1998, the Company completed the acquisition of
two printing businesses and signed non-binding letters of intent to acquire
eight additional companies.
The Company intends to continue to actively pursue acquisition
opportunities, utilizing cash flow from operations, borrowings under the Credit
Agreement or the issuance of it's common stock. There can be no
assurance that the Company will be able to acquire additional businesses on
acceptable terms in the future. In addition, there can be no assurance that the
Company will be able to establish, maintain or increase the profitability of an
acquired business.
YEAR 2000 COMPLIANCE
The Company has made a preliminary assessment of the impact of "Year 2000"
issues related to its operational and financial computer systems. While
additional review is required, the Company believes that the substantial
majority of its operating and financial software has, or will have in the near
future, versions which are "Year 2000" compliant that the Company can implement
without significant impact on its consolidated financial position or
consolidated results of operations.
RECENT ACCOUNTING PRONOUNCEMENTS
During the first quarter of fiscal 1999, the Company was required to adopt
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," which requires that all changes in the Company's
equity during the reporting period, including all net income and charges
directly to equity that are excluded from net income, be presented in the
Company's consolidated financial statements. SFAS No. 130 does not have a
material effect on the Company's consolidated financial position or consolidated
results of operations.
9
CONSOLIDATED GRAPHICS, INC.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time the Company is involved in litigation relating to claims
arising in the normal course of business. The Company maintains insurance
coverage against potential claims in an amount that it believes to be adequate.
Currently, the Company is not aware of any legal proceedings or claims pending
against the Company that management believes will have a material adverse effect
on its consolidated financial position or consolidated results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the three months ended June 30,1998, the Company issued 248,210
shares of its common stock valued at approximately $13.0 million to certain
shareholders of Printing, Inc., Graphics Communications, Inc. and Wetzel
Brothers, Inc. as partial consideration in connection with the acquisition
thereof, and also issued 13,334 shares pursuant to an earnout agreement entered
into in connection with a prior year acquisition. The issuance of such common
stock was exempt from registration pursuant to Section 4(2) of the Securities
Act of 1933 as a transaction by the issuer not involving a public offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 29, 1998, the Company held its Annual Meeting of Shareholders. The
following items were submitted to a vote of shareholders through the
solicitation of proxies:
(a) ELECTION OF DIRECTORS
The following persons were elected to serve on the Board of Directors
until the 1999 annual meeting of shareholders or until their successors
have been duly elected and qualified. The Directors received the votes set
forth opposite their respective names:
NAME FOR AGAINST ABSTENTIONS
---- --- ------- -----------
Joe R. Davis....................... 12,272,204 63,486 0
Larry J. Alexander................. 12,272,204 63,486 0
Brady F. Carruth................... 12,272,204 63,486 0
Clarence C. Comer.................. 12,272,204 63,486 0
Gary L. Forbes..................... 12,272,204 63,486 0
W. D. Hawkins...................... 12,272,204 63,486 0
James H. Limmer.................... 12,272,204 63,486 0
Thomas E. Smith.................... 12,272,204 63,486 0
Hugh N. West....................... 12,272,204 63,486 0
(b) The shareholders of the Company were requested to approve an amendment to
the Company's Restated Articles of Incorporation to increase the number of
authorized shares of common stock from 20,000,000 to 100,000,000. Such
amendment was approved by the shareholders, who voted 10,199,174 in favor
and 2,131,110 against, with 5,406 who abstained or withheld authority to
vote.
(c) The shareholders of the Company were requested to approve the Second
Amendment to the Consolidated Graphics, Inc. Long-Term Incentive Plan (the
"Incentive Plan") and the related reservation of an additional 1,500,000
shares of the Company's common stock to be available for issuance as
provided for under the Incentive Plan. Such amendment was approved by the
shareholders, who voted 7,942,725 in favor and 2,764,190 against, with
1,628,775 who abstained or withheld authority to vote.
ITEM 5. OTHER INFORMATION
None
10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS
3.1 Articles of Amendment to the Restated Articles of Incorporation of the
Company dated as of July 29, 1998.
10.1 First Amendment to the Revolving Credit Agreement among Consolidated
Graphics, Inc. and Chase Bank of Texas as Agent and BankOne of Texas, NA
as Co-Agent, dated as of August 4, 1998.
27 Edgar financial data schedules.
(B) REPORTS ON FORM 8-K:
(1) Form 8-K, filed April 3, 1998 in connection with the press release
announcing the signing of a letter of intent to acquire Pride Printers,
Inc.
(2) Form 8-K, filed April 10, 1998 in connection with the press release
announcing the completion of the acquisition of Tursack Incorporated.
(3) Form 8-K, filed April 24, 1998 in connection with the press release
announcing the signing of a letter of intent to acquire Paragraphics, Inc.
(4) Form 8-K, filed May 1, 1998 in connection with the press release
announcing the Company's fiscal 1998 fourth quarter results.
(5) Form 8-K, filed May 12, 1998 in connection with the press release
announcing the completion of the acquisition of Image Systems, Inc.
(6) Form 8-K, filed May 28, 1998 in connection with the press releases
announcing the signing of a letter of intent to acquire Ironwood
Lithographers, Inc.
(7) Form 8-K, filed June 12, 1998 in connection with the press releases
announcing the completion of the acquisition of Printing , Inc and the
signing of a letter of intent to acquire Lincoln Printing, Inc.
(8) Form 8-K, filed June 19, 1998 in connection with the press release
announcing the acquisition of Wetzel Brothers, Inc.
(9) Form 8-K, filed June 24, 1998 in connection with the press release
announcing the completion of the acquisition of Graphic Communications,
Inc.
(10) Form 8-K, filed July 2, 1998 in connection with the press release
announcing the signing of a letter of intent to acquire Automated Graphic
Systems, Inc.
(11) Form 8-K, filed July 9, 1998 in connection with the press releases
announcing the completion of the acquisition of Paragraphics, Inc. and the
signing of a letter of intent to acquire Rush Press and Arts & Crafts
Press.
(12) Form 8-K, filed July 21, 1998 in connection with the press release
announcing the completion of the acquisition of Pride Printers, Inc.
(13) Form 8-K, filed July 29, 1998 in connection with the press release
announcing the Company's fiscal 1999 first quarter results and the
increase of the Company's revolving credit facility to $200 million.
(14) Form 8-K, filed July 31, 1998 in connection with the press release
announcing the signing of a letter to acquire four independent, commercial
printing companies.
11
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT, HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
CONSOLIDATED GRAPHICS, INC.
(Registrant)
Dated: August 14, 1998 BY:/S/RANDALL D. KEYS
Randall D. Keys
Vice President -- Finance,
Chief Financial and Accounting
Officer
12