Consolidated Graphics Reports Financial Results for the Quarter Ended September 30, 2012

Nov 07, 2012, 07:30 ET from Consolidated Graphics, Inc.

HOUSTON, Texas, Nov. 7, 2012 /PRNewswire/ -- Consolidated Graphics, Inc. (NYSE: CGX) today announced financial results for its second quarter ended September 30, 2012.

Revenue for the September quarter was $263.6 million, a $3.8 million or 1.4% decline, compared to the prior year.  The revenue decline was caused by lower same-store sales, partially offset by an increase in election-related revenue. Adjusted Operating Income for the September 2012 quarter was $14.7 million or 5.6% of revenue, compared to $15.2 million or 5.7% of revenue last year. Adjusted Net Income was $8.3 million or $.84 per diluted share for the quarter, compared to Adjusted Net Income of $8.4 million or $.77 per diluted share for the prior year quarter. (As a result of our share repurchase program, weighted average diluted shares outstanding in the September 2012 quarter declined 9.1% relative to the September 2011 quarter.) Adjusted EBITDA was $33.1 million for the September 2012 quarter, compared to $32.6 million for the same quarter of the prior year.

Operating income during the September 2012 quarter was $12.1 million and included other charges of $2.3 million primarily related to relocating certain production facilities and related asset impairments. Operating income for the prior year quarter was $13.9 million and included $.6 million in other charges due to withdrawing from certain multi-employer pension plans. Net income for the September 2012 quarter was $6.7 million or $.68 diluted earnings per share, compared to net income of $7.5 million or $.69 diluted earnings per share last year.

Joe R. Davis, Chairman and Chief Executive Officer of Consolidated Graphics, commented, "While we experienced increased demand from many of our clients, the decline in sales this quarter was primarily caused by lower demand from a handful of our large customers. We expect much of this business to return in the future. Election printing grew this quarter, compared to last year, and we are confident that election printing will grow again in the December quarter.  We continue to invest in our industry leading capabilities and continue to see a high level of interest in these capabilities. Due to these investments, we expect to generate profitable revenue growth as the economy improves."

Share Repurchase Program Update

During the September 2012 quarter, the Company purchased 367,442 shares of its common stock for $9.8 million (average cost of $26.61 per share) pursuant to a share repurchase program authorizing the Company to purchase up to an aggregate of $170.0 million of the Company's common shares. Since beginning the share repurchase program in November 2010, the Company has purchased 2,222,816 shares of its common stock (19% of shares outstanding) for $89.3 million. As of September 30, 2012, the Company had 9,658,811 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 related Current Report on Form 8-K filed 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 7, 2012, at 11:00 a.m. Eastern Time, to discuss its second quarter fiscal 2013 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, Prague, and Gero, Japan, 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, other charges and accretion of pension liability, 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 impairment charges, other charges and accretion of pension liability, share-based compensation expense, and non-cash foreign currency transaction net gains and losses, Adjusted Operating Margin, which we define as Adjusted Operating Income divided by sales, Adjusted Net Income, which we define as net income before goodwill impairment charges, other charges and accretion of pension liability, share-based compensation expense,  non-cash foreign currency transaction net gain and losses, 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 related Current Report on Form 8-K we filed with the Securities and Exchange Commission.

(Tables to follow)

 

 

 

CONSOLIDATED GRAPHICS, INC.

Condensed Consolidated Income Statements

(In thousands, except per share amounts, and unaudited)

Three Months Ended

Six Months Ended

September 30,

September 30,

2012

2011

Change

2012

2011

Change

$

%

$

%

Sales

$263,633

$267,401

(3,768)

(1)

$501,943

$510,753

(8,810)

(2)

Cost of Sales

202,706

205,944

(3,238)

(2)

390,674

395,155

(4,481)

(1)

Gross Profit

60,927

61,457

(530)

(1)

111,269

115,598

(4,329)

(4)

Selling Expenses

22,292

22,660

(368)

(2)

46,091

45,262

829

2

General and Administrative Expenses

24,430

24,145

285

1

48,933

47,427

1,506

3

Other Charges

2,293

640

1,653

nm

3,962

5,281

(1,319)

(25)

Other Expense (Income)

(150)

158

(308)

nm

(273)

191

(464)

nm

Operating Income

12,062

13,854

(1,792)

(13)

12,556

17,437

(4,881)

(28)

Interest Expense

1,335

1,597

(262)

(16)

2,835

3,155

(320)

(10)

Income  before Taxes

10,727

12,257

(1,530)

(12)

9,721

14,282

(4,561)

(32)

Income Tax Expense

4,018

4,722

(704)

(15)

3,460

5,162

(1,702)

(33)

Net Income

$6,709

$7,535

(826)

(11)

$6,261

$9,120

(2,859)

(31)

Earnings Per Share

Basic

$.68

$.70

$.62

$.84

Diluted

$.68

$.69

$.62

$.82

Weighted Average Shares Outstanding

Basic

9,863

10,761

10,018

10,903

Diluted

9,899

10,890

10,075

11,098

Effective Income Tax Rate

37.5%

38.5%

35.6%

36.1%

________________________________

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CONSOLIDATED GRAPHICS, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts, and unaudited)

September 30,

 2012

March 31, 2012

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$

8,166

$

6,065

Accounts receivable, net

179,612

162,093

Inventories

59,216

54,129

Prepaid expenses

12,230

14,976

Deferred income taxes

10,268

16,552

Total current assets

269,492

253,815

PROPERTY AND EQUIPMENT, net

372,343

377,055

GOODWILL

25,072

24,847

OTHER INTANGIBLE ASSETS, net

13,900

15,623

OTHER ASSETS

7,633

10,569

LIABILITIES AND SHAREHOLDERS' EQUITY

$      688,440

$                  681,909

CURRENT LIABILITIES

Current portion of long-term debt

$        21,102

$                  23,596

Accounts payable

96,558

90,392

Accrued liabilities

78,358

68,496

Total current liabilities

196,018

182,484

LONG-TERM DEBT, net of current portion

146,056

140,150

OTHER LIABILITIES

37,773

31,523

DEFERRED INCOME TAXES, net

44,708

54,051

           Total liabilities

424,555

408,208

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY

Common stock, $.01 par value; 100,000,000 shares authorized; 9,658,811 and 10,239,819 issued and outstanding

96

102

Additional paid-in capital

153,836

161,914

Retained earnings

108,603

109,832

Accumulated other comprehensive income

1,350

1,853

Total shareholders' equity

263,885

273,701

$     688,440

$            681,909

Total debt

$     167,158

$             163,746

Debt-to-total capitalization

39%

37%

 

 

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,

2012

2011

2012

2011

Net income 

 

$                  6,709

$

7,535

$           6,261

$                   9,120

Income tax expense

4,018

4,722

3,460

5,162

Interest expense, net

1,335

1,597

2,835

3,155

Depreciation and amortization

18,417

17,718

36,923

35,111

Other charges and accretion of pension liability

2,293

688

3,962

5,361

Share-based compensation expense

476

506

1,183

1,143

Non-cash foreign currency transaction (gain) loss

(146)

158

(213)

191

Net (gain) loss from asset dispositions

(26)

(292)

68

(394)

Adjusted EBITDA

$

33,076

$

32,632

$

54,479

$

58,849

Net cash provided by operating activities

$

19,763

$

10,065

$

41,800

$

38,428

Capital expenditures

(11,919)

(11,770)

(27,197)

(29,103)

Proceeds from asset dispositions

577

524

782

899

Free Cash Flow

$

8,421

$

(1,181)

$

15,385

$

10,224

Operating income

$

12,062

$

13,854

$

12,556

$

17,437

Other charges and accretion of pension liability

2,293

688

3,962

5,361

Share-based compensation expense

476

506

1,183

1,143

Non-cash foreign currency transaction (gain) loss

(146)

158

(213)

191

Adjusted Operating Income

$

14,685

$

15,206

$

17,488

$

24,132

Adjusted Operating Margin

5.6%

5.7%

3.5%

4.7%

Net income

$

6,709

$

7,535

$

6,261

$

9,120

Other charges and accretion of pension liability

2,293

688

3,962

5,361

Tax benefit of other charges and accretion of pension 

       liability

(894)

(269)

(1,545)

(2,018)

Share-based compensation expense, net of taxes

290

309

721

697

Non-cash foreign currency transaction (gain) loss, net of

       taxes

(89)

96

(130)

117

Adjusted Net Income

$

8,309

$

8,359

$

9,269

$

13,277

 

 

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,

2012

2011

2012

2011

Diluted earnings per share

$

.68

$

.69

$

.62

$

.82

Other charges and accretion of pension liability

.23

.06

.39

.48

Tax benefit of other charges and accretion of pension liability

(.09)

(.02)

(.15)

(.17)

Share-based compensation expense, net of taxes

.03

.03

.07

.06

Non-cash foreign currency  transaction (gain) loss, net of taxes

(.01)

.01

(.01)

.01

Adjusted Diluted Earnings Per Share

$

.84

$

.77

$

.92

$

1.20

 

 

 

SOURCE Consolidated Graphics, Inc.



RELATED LINKS

http://www.cgx.com