Consolidated Graphics, Inc. (CGX) announced financial results for its second quarter ended September 30, 2006. Revenue was $234.2 million, up 6%. Net income was $13.7 million compared to net income of $9.3 million a year ago, resulting in a 48% increase in diluted earnings per share.

How does a company that is known for buying traditional offset printing companies increase revenue and earnings? Execute a savvy acquisition and digital strategy. CEO Joe Davis and CFO Chris Colville held a conference call to discuss Consolidated Graphics' results.

Observations from the conference call:

- Revenue was up 6% - 2% from internal growth and 4% from acquisitions. The company expects 8% growth in the 3rd quarter - 4% from internal and 4% from acquisitions. Digital initiatives and election printing was noted as reasons for the projected sales increase. Currently the company is reviewing acquisitions of companies totaling over $500 million in annual sales - a few are in the late stages of due diligence.

- The company is on track to spend $35 million on capital equipment this fiscal year.

- CGX sees digital as the key to organic growth. The executives provided several examples of customers using their digital equipment for print-on-demand and variable data applications. Two of these customers will soon be "top 10 clients for CGX".

- Joe Davis praised the Nexpress, iGen3 and HP Indigo 5000 presses as reasons the company has succeeded with digital. Among the company's staggering total of 89 digital presses, CGX has 10 iGen3 presses and 11 Nexpress presses.

Insider Selling:

Despite the good results, CGX's stock got hammered falling 9.78% yesterday. CGX missed expected numbers from at least one analyst. Plus traders got nervous on news that CGX execs have been selling their stock in the company. CEO Joe Davis sold 750,000 shares in August for around $45 million. In the last six months, insiders have unloaded 906,020 shares.