Consolidated Graphics Reports $55 Million Loss
Friday, February 06, 2009
HOUSTON -- Consolidated Graphics, Inc.today announced financial results for its third quarter ended December 31, 2008.
Record revenue for the December quarter was $315.8 million, up 9% compared to a year ago. Revenue increased compared to the same period a year ago due to the prior year acquisitions and strong election-related printing, partially offset by lower same-store sales. Operating income for the December 2008 quarter included a pre-tax litigation charge of $17.0 million ($10.4 million after tax or $0.92 diluted loss per share) in connection with certain litigation involving the Company, as described below and in a Current Report on Form 8-K filed today. Additionally, we recognized a pre-tax, non-cash goodwill impairment charge of $62.5 million ($46.1 million after tax or $4.06 diluted loss per share). Excluding the charges and foreign currency gains, Adjusted Operating Income was $23.6 million or 7.5% of revenues and Adjusted Net Income was $12.6 million or $1.11 per diluted share. In the prior year quarter, Adjusted Operating Income was $27.1 million or 9.3% of revenues and Adjusted Net Income was $19.2 million or $1.56 diluted earnings per share. For the December 2008 quarter reported operating loss was $55.5 million and net loss was $43.6 million or $3.91 diluted loss per share. Reported net income for the prior year quarter was $19.4 million or $1.58 diluted earnings per share. A reconciliation of the non-GAAP financial measures, Adjusted Operating Income, Adjusted Net Income and Adjusted Diluted Earnings Per Share, to the most directly comparable GAAP financial measures is included in the attached tables and in the Current Report on Form 8-K to be filed today, as well as the basis for management's use of the non-GAAP financial measures.
For the nine months ended December 31, 2008, revenue was $898.0 million, up 11% compared to $807.9 million for the same period a year ago due to acquisitions and election-related printing, partially offset by lower same-store sales. Excluding the goodwill impairment, litigation charges, and foreign currency gains, Adjusted Operating Income was $64.7 million or 7.2% of revenues, and Adjusted Net Income for the nine months ended December 31, 2008 was $32.4 million or $2.84 diluted earnings per share. For the same period of the prior year, reported net income was $46.2 million or $3.48 diluted earnings per share. Reported net loss for the nine months ended December 31, 2008 was $23.6 million or $2.12 diluted loss per share.
Within the past week, a jury rendered a verdict for compensatory and punitive damages against the Company due to a lawsuit involving an isolated dispute between the Company and the former employer of an existing sales employee. As a result of this judgment, a pre-tax litigation charge of $17.0 million has been recognized in the December 2008 financial statements. The judge may award additional exemplary and punitive damages and the plaintiff has requested an award of $3.2 million. The Company intends to continue its defense of this matter at the trial court level and, if unsuccessful, intends to appeal the judgment, as well as pursue potential insurance reimbursement, which has previously been denied.
Due to the recent decline in our stock price, current economic conditions and our near-term outlook, we performed an interim assessment of goodwill impairment. This goodwill impairment assessment resulted in a $62.5 million pre-tax, non-cash charge to the income statement during the December quarter. We will perform our required annual goodwill impairment test in connection with the preparation of our fiscal year ended March 31, 2009 financial statements and this may result in another non-cash goodwill impairment charge.
Joe R. Davis, Chairman and Chief Executive Officer of Consolidated Graphics commented, "We are pleased to announce record revenues for the second consecutive quarter. During the quarter, we benefited from our recent acquisitions, strong election-related sales and strong seasonal digital print business. Excluding these parts of our business, we were clearly impacted by the very challenging economic environment we are now experiencing. Fortunately, our company presidents did a good job adjusting operating expenses to protect our profit margins, excluding the goodwill impairment and litigation charges."
Mr. Davis continued, "Looking forward to the March quarter we expect revenues of $255 - $275 million and diluted earnings per share of between $.35 and $.55. This forecast assumes lower year-over-year acquisition revenue growth, a same-store sales decline of between 12% and 18%, no election-related revenue, and continued economic headwinds. More details regarding our forecast assumptions will be provided during our earnings conference call. Over the longer-term we believe we are well positioned, with the leadership, financial strength and industry leading product offerings to manage through the current economic crisis and succeed in the recovery."