Consolidated Graphics Reports Financial Results For The Quarter Ended September 2009
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HOUSTON, Nov. 4 /PRNewswire-FirstCall/ -- Consolidated Graphics, Inc. (NYSE: CGX) today announced financial results for the quarter ended September 30, 2009.
Revenue for the September quarter was $251.6 million, down 15% compared to the same quarter last year. The revenue decline was primarily due to a year-over-year same-store revenue decline caused by the current economic environment and lower election-related business. Operating income for the September 2009 quarter of $6.6 million included charges of $2.6 million related to litigation and the impairment of certain production equipment. Adjusted operating income was $9.4 million or 3.7% of revenue compared to $21.1 million or 7.1% of revenue for the September 2008 quarter. Adjusted operating margin declined due to lower sales which caused certain costs, such as depreciation and various overhead expenses, to increase as a percentage of revenues. Adjusted net income for the September 2009 quarter was $3.8 million, or $.34 diluted earnings per share compared to adjusted net income of $10.1 million, or $.88 diluted earnings per share for the prior year quarter. Net income during the quarter ended September 30, 2009 was $2.1 million or $.18 diluted earnings per share.
On a sequential basis revenue increased 11.4% compared to the first quarter of 2009 and operating income and earnings per share also improved significantly.
The Company continued its strong cash flow performance in the September 2009 quarter, generating free cash flow of $55.8 million, compared to free cash flow of $29.8 million in the June 2009 quarter. Adjusted EBITDA for the September 2009 quarter was $28.7 million compared to $39.3 million for the same quarter of the prior year. As of September 30, 2009 total debt was $232.7 million, a reduction of $81.5 million, or 26%, from March 31, 2009.
Joe R. Davis, Chairman and Chief Executive Officer of Consolidated Graphics, commented, "During the quarter, demand remained soft across our markets, and while the economy continued to adversely impact our business and affect our profitability, we continued our focus on managing costs. In addition, we benefited from our strategic sales and from our position as the leader in digital print services, as digital print sales declined only slightly despite overall market conditions. The quarter also saw us continue to improve our balance sheet, as we utilized our strong free cash flow to further reduce our debt levels."
Mr. Davis added, "Going forward, we remain focused on building upon our leadership position in the market place, prudent management of our cost structure, and leveraging our strong financial position to invest in our business for our future. Visibility remains very limited, but based on current market conditions we expect the December quarter revenue to be in the range of $250-265 million representing a same store sales decline of 10-15%, excluding election-related business. Achieving revenues within this range should allow us to at least generate break-even Adjusted Net Income for the quarter ending in December."
A reconciliation of the non-GAAP financial measures, Adjusted EBITDA, Adjusted Operating Income, Adjusted Operating Margin, Adjusted Net Income and Free Cash Flow is included in the attached tables and in the Current Report on Form 8-K filed today, as well as the basis for management's use of the non-GAAP financial measures.
Consolidated Graphics, Inc. will host a conference call today, Wednesday, November 4, 2009, at 11:00 a.m. Eastern Time, to discuss its second quarter fiscal 2010 results. The conference call will be simultaneously broadcast live over the Internet on our website (www.cgx.com) and a subsequent archive of such call will also be available on our website.
Consolidated Graphics, Inc. (CGX), headquartered in Houston, Texas, is one of North America's leading general commercial printing companies. With 70 printing businesses strategically located across 27 states, Canada, and in Prague, we offer an unmatched geographic footprint, unsurpassed capabilities, and unparalleled levels of convenience, efficiency and service. With locations in or near virtually every major U.S. market, CGX provides 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 largest integrated digital footprint of any commercial printer in the U.S. By coupling North America's most comprehensive printing capabilities with strategically located fulfillment centers and industry-leading technology, CGX delivers solutions that create a spectrum of value for customers. CGX offers the unique ability to respond to all printing-related needs no matter how large, small, specialized or complex. 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 depend 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, continuing weakness in the economy, the growth of its digital printing business, seasonality of election-related business, its ability to adequately manage 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.
This press release also contains references to the non-GAAP financial measures of earnings, or net income, before interest, income taxes, depreciation and amortization, share-based compensation expense, non-cash foreign currency transaction gains and losses and net losses/gains from asset dispositions, or Adjusted EBITDA, operating income before litigation and other charges and non-cash foreign currency translation net (gain)/loss, or Adjusted Operating Income, Adjusted Operating Income divided by sales or Adjusted Operating Margin, net income before litigation and other charges net of tax, non-cash foreign currency transaction net (gain)/loss net of tax, or Adjusted Net Income and net cash provided by operating activities less capital expenditures plus proceeds from assets dispositions, or Free Cash Flow. Reconciliations of these non-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.
Condensed Consolidated Income Statements
(In thousands, except per share amounts and unaudited)
Three Months Ended Six Months Ended
September 30, September 30,
------------------------------- --------------------------------
2009 2008 Change 2009 2008 Change
------- -------- ------------- -------- -------- --------------
$ % $ %
------- --- -------- ---
Sales 51,626 $296,951 (45,325) (15) $477,487 $582,145 (104,658) (18)
Cost of
Sales 196,183 224,365 (28,182) (13) 377,215 438,919 (61,704) (14)
------- ------- ------- ------- ------- -------
Gross
Profit 55,443 72,586 (17,143) (24) 100,272 143,226 (42,954) (30)
Selling
Expenses 23,584 26,779 (3,195) (12) 46,375 55,183 (8,808) (16)
General and
Admin-
istrative
Expenses(1)22,426 24,717 (2,291) (9) 43,639 46,994 (3,355) (7)
Litigation
and Other
Charges 2,633 - 2,633 nm 2,633 - 2,633 nm
Other
(Income)
Expense, net 218 (257) 475 nm 164 (252) 416 nm
--- ---- --- --- ---- ---
Operating
Income 6,582 21,347 (14,765) (69) 7,461 41,301 (33,840) (82)
Interest
Expense,
net 2,347 3,852 (1,505) (39) 4,831 8,063 (3,232) (40)
----- ----- ------ ----- ----- ------
Income
before
Taxes 4,235 17,495 (13,260) (76) 2,630 33,238 (30,608) (92)
Income Taxes 2,153 7,192 (5,039) (70) 862 13,319 (12,457) (94)
----- ------ ------- --- ------ -------
Net
Income $2,082 $10,303 (8,221) (80) $1,768 $19,919 (18,151) (91)
====== ======= ====== ====== ======= =======
Earnings Per
Share
Basic $.19 $.92 $.16 $1.79
Diluted $.18 $.90 $.16 $1.74
Weighted
Average
Shares
Outstanding
Basic 11,163 11,147 11,161 11,129
Diluted 11,377 11,430 11,355 11,445
Effective
Income Tax
Rate 50.8% 41.1% 32.8% 40.1%
------------
(1) Share
based
compensation
included
in these
expenses $1,209 $1,751 $2,753 $3,395
CONSOLIDATED GRAPHICS, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts and unaudited)
September 30, March 31,
2009 2009
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $11,047 $9,762
Accounts receivable, net 170,364 173,501
Inventories 53,002 52,737
Prepaid expenses 12,912 17,340
Deferred income taxes 18,652 18,909
------ ------
Total current assets 265,977 272,249
PROPERTY AND EQUIPMENT, net 407,157 430,519
GOODWILL 29,436 29,436
OTHER INTANGIBLE ASSETS, net 23,521 24,691
OTHER ASSETS 7,757 8,313
----- -----
$733,848 $765,208
======== ========
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $22,769 $27,026
Accounts payable 88,635 48,519
Accrued liabilities 90,420 86,718
Income taxes payable 166 553
--- ---
Total current liabilities 201,990 162,816
LONG-TERM DEBT, net of current portion 209,960 287,164
OTHER LIABILITIES 15,839 14,794
DEFERRED INCOME TAXES 50,730 49,970
------ ------
Total liabilities 478,519 514,744
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, $.01 par value;
100,000,000 shares authorized;
11,162,667 and 11,152,875 issued
and outstanding 111 111
Additional paid-in capital 165,884 163,131
Retained earnings 89,574 87,806
Accumulated other comprehensive loss (240) (584)
---- ----
Total shareholders' equity 255,329 250,464
------- -------
$733,848 $765,208
======== ========
Total debt $232,729 $314,190
Debt-to-total capitalization 48% 56%
CONSOLIDATED GRAPHICS, INC.
Reconciliations of Non-GAAP Performance Measures
(In thousands and unaudited)
Three Months Ended
September 30,
-------------------
2009 2008
---- ----
Net income $2,082 $10,303
Income taxes 2,153 7,192
Interest expense, net 2,347 3,852
Depreciation and amortization 17,756 16,211
Litigation and other charges 2,633 -
Share-based compensation expense 1,209 1,751
Non-cash foreign currency
transaction net (gain)/loss 218 (257)
Net loss from asset dispositions 341 256
--- ---
Adjusted EBITDA $28,739 $39,308
======= =======
Net cash provided by operating
activities $62,543 $7,680
Capital expenditures (6,904) (26,536)
Proceeds from asset dispositions 180 213
--- ---
Free Cash Flow $55,819 $(18,643)
======= ========
Operating income $6,582 $21,347
Litigation and other charges 2,633 -
Non-cash foreign currency
translation net (gain)/loss 218 (257)
--- ----
Adjusted Operating Income $9,433 $21,090
====== =======
Adjusted Operating Margin 3.7% 7.1%
=== ===
Net income $2,082 $10,303
Litigation and other charges 2,633 -
Tax benefit of litigation and other
charges (1,027) -
Non-cash foreign currency
transaction net (gain)/loss net of
taxes 133 (157)
--- ----
Adjusted Net Income $3,821 $10,146
====== =======
Diluted earnings per share $.18 $.90
Litigation and other charges .23 -
Tax benefit of litigation and other
charges (.09) -
Non-cash foreign currency
transaction net (gain)/loss net of
taxes .02 (.02)
--- ----
Adjusted Diluted Earnings Per Share $.34 $.88
---- ----
Three Months Ended
June 30, 2009
------------------
Net cash provided by operating
activities $33,861
Capital expenditures (4,476)
Proceeds from asset dispositions 450
---
Free Cash Flow $29,835
=======
SOURCE Consolidated Graphics, Inc.
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