By Jan Stoddard of Raine Consulting April 23rd, 2003 -- Consolidated Graphics, Inc. (NYSE:CGX) Houston, TX, today announced results for its fourth quarter and year-ended March 31st, 2003. With 65 companies in 25 states, Consolidated Graphics is the largest sheetfed and half-web commercial printer in the United States. The fourth quarter ended in a loss but the company still managed to report record year-end revenues. Earlier on March 13th, 2003, the company revised earnings projection for the fourth quarter to range from $1.5 million to $2.1 million, or $0.11 to $0.15 cents per share with revenue of $168 million. (Note: In comparison, this was well below the average estimate of analysts polled by Thomson First Call for a profit of $0.41 cents per share.) Today's actual results for the fourth quarter were mixed with $0.15 cents per share and revenue reporting at $166.1 million. Today's earnings call offered further insights into Consolidated's most impacted markets. The company maintains that the challenging economy proves to be advantageous; as an increasing number of severely depressed companies plays into Consolidated's acquisition strategy. Mr. Joe R. Davis, Chairman and Chief Executive Officer, and Mr.Christopher Colville, Executive Vice President and Chief Financial Officer, conducted the investor relations call. Mr. Davis reviewed the previous revised earnings forecast. Mr. Davis noted that the fourth quarter continued to suffer from economic challenges stating that in his opinion the current industry conditions are an "unprecedented" worst since he joined the business in 1985. Topics: * Financial Summary * Chairman Comments * Future Guidance * Q&A Financial Summary Revenues for the fourth quarter were $166.1 million, compared to $186.3 million in the third quarter and $165.6 million in the fourth quarter a year ago. Net loss for the fourth quarter was $29.1 million, or loss of $2.13 per diluted share, compared to net income of $5.7 million, or $0.42 per diluted share, in the third quarter and $3.7 million, or $0.28 per diluted share, in same quarter a year ago. Impacting this quarter's loss was a pre-tax impairment of goodwill of $38.0 million ($31.2 million after-tax, or $2.28 per diluted share) pursuant to the Company's annual impairment test under SFAS 142 as of March 31st, 2003. Mr. Davis noted that "CGX is maximizing the amount of impairment charges in our turnaround companies". For the year-ended March 31st, 2003, revenues were $710.3 million compared to $643.9 million in 2002. Net loss was $87.3 million, or $6.47 per diluted share, versus net income of $16.7 million, or $1.25 per diluted share, a year ago. Chairman Comments In reviewing the financial results, Mr. Davis highlighted: * Consolidated has a strong balance sheet with $2.8 million in free cash flow, up 37% from last year. There has been a 31% reduction in debt for the year. * There has been a 3% percent reduction in overall headcount and wage freezes continue. There are contingency plans for further reductions if economic conditions do not improve. * Consolidated Graphics has been able to maintain and improve on its' technology advantage through a $5.2 million investment in capital expenditures to upgrade the equipment and technology in their 2002 acquisitions. These same acquisitions are now classified as "turnarounds." * According to CGX, the number of severely depressed companies is signaling a major downturn for the commercial printing industry. This allows the company to continue to evaluate acquisition opportunities for the future. * A major restructuring of the sales force has been completed with 150 new hires and regional CGX Sales teams. Additionally, over 173 associates have completed the leadership development program, which Davis notes is essential to the long-term success of company. Future Guidance Revenues are expected to be in-line with the prior year (3.8% increase) and operating margins to be slightly improved from the fourth quarter, resulting in earnings of $0.22 per diluted share. "However, industry conditions remain challenging, and although we saw seasonal improvement in March, we continue to have a cautious outlook pending further indications of an improving U.S. economy." Q & A Session: 1. When asked to provide additional market and environment information by region, Mr. Davis commented that: * The most impacted market is around the Boston area (due to the technology, dotcom's, and financial industries all suffering) where CGX plants are doing a little better than break even. * Southern and Northern CA have more diversified economies and are not as impacted. * The mid-Atlantic region (including Washington, D.C. and Baltimore) remains fairly positive. * Chicago/Milwaukee also remains strong. * Houston (impacted by large companies e.g., Enron) is in a tough economy, while the Dallas area remains decent. 2. When asked why the industry has not "snapped-back" post-Iraq, Mr. Davis pointed out that the expectation is for a seasonal revenue increase in the April to June timeframe. However, even if there were a rebound from the January - March downturn, it would still only return to the same levels of November - December 2003; in which the economy was still not robust. Any large upturn is dependent on a significant positive change in the overall economy. Mr. Davis also commented, "If the economy stays tough for an extended period of time, we are going to see a lot less competitors. We will see a lot of companies having difficult times in next 3-6 months and in the long term that will benefit us." 3. When asked what the response has been to mitigate business downturns and maintain market position, Mr. Davis pointed to the de-centralized business structure of Consolidated Graphics where individual companies, and their respective Presidents, are given a lot of responsibility. The Corporate Team performs a great deal of data analysis (benchmarking and best practices against metrics including cash flow, accounts receivables, and sales revenue). The Presidents, attending an upcoming Regional President's meeting, will review the past year's operations as well as plans for 2003 (i.e. hiring, headcount, strategies). 4. In light of the current market, will the company still meet their historical performance of double-digit operating income? Mr. Davis stated that there would be no fundamental changes with the company's markets or business plans. The company still has a lot of advantages over its' competition (noting a strong balance sheet, significant buying power, economies of scale, and its' leadership training). He believes that double-digits can still be achieved with a little help from the economy. 5. When asked if Consolidated Graphics will diversify into other print segments (e.g., segments that are commercially competitive and more stable than advertising dependent segments), Mr. Davis stated he does not see any radical change in the business model and pointed to the fact that Consolidated already has: a. Digital printing in 15 locations b. 20 fulfillment centers 6. Consolidated is moving forward with a new procurement strategy under the direction of its' new VP of Procurement, anticipating quite a bit of improvement going forward based on his expertise. (New programs to be announced at the Regional President's meetings.)