By Susan Kelly February 8, 2005 -- In their third quarter earnings call, Consolidated Graphics (NYSE: CGX) reported revenue for the December quarter was $208.6 million, up 9% compared to $191.1 million in the September quarter and up 13% compared to $184.2 million a year ago. Net income for the December quarter was $9.7 million, or $.68 per diluted share, representing increases of 29% and 28% compared to net income of $7.6 million and diluted earnings per share of $0.53 in the September quarter. Compared to the December quarter a year ago, net income increased 78% and diluted earnings per share increased 74%. Overall, December quarter revenues were at a record level for Consolidated Graphics, and operating margins improved to 7.8%. For the nine months ended December 31, 2004, total sales were $581.3 million, up 11% compared to $524.7 million for the comparable period a year ago. Net income for the first nine months of this year was $24.1 million, or $1.70 per diluted share, up 75% and 70% compared to $13.8 million and $1.00 per diluted share last year. Topics of this summary: Chairman’s Comments Financial Summary Guidance Q & A Chairman’s Comments Joe Davis, Chairman and Chief Executive Officer, started the call with his press release "We are very pleased to report third quarter results that significantly exceeded our expectations. In addition to capturing additional market share through internal growth and acquisitions, we benefited from election-related printing that was much more robust than we had projected. Of our 13% quarterly increase in revenue over the year-ago levels, internal growth and acquisitions each contributed 3% and election-related printing contributed 7%. This quarter's results evidence the scale advantages of our industry leading market position and our commitment to drive top-line growth and improve operating margins." Mr. Davis added, "We continue to strengthen our balance sheet, which further increases our ability to grow our business through investments in technology and a disciplined acquisition program. Capital expenditures totaled $8.0 million in the quarter, bringing our year-to-date investment in new technology and equipment to $19.0 million. On the acquisition front, the pending addition of the seven Kelmscott companies will significantly expand our Midwest and West Coast presence. We also continue to evaluate a number of other acquisition opportunities that would complement our national footprint and enhance our customer service offerings." Financial Summary CGX is expecting to spend $25 million for the year. Total debt has been reduced by 22% to $79.3 million. The cash flow for the quarter was $13.9 million. EBITDA was $28.5 million, up 19% from the previous quarter. Guidance For the fourth quarter of 2005, revenues are projected to increase 5% over year-ago levels to $192 million, with diluted earnings per share increasing 30% to $0.57. These numbers do not include the Kelmscott or any other current or potential acquisitions. Raine Radar As usual, the CGX calls are low-energy with very few questions from analysts despite the recent acquisition of Kelmscott. It seems like analysts see this recent acquisition as a continuation of CGX’s historical print roll-up strategy and despite the work CGX has done to improve their financial results, the street is slow to respond. Q & A CGX has not disclosed the purchase price of the Kelmscott acquisition. The Kelmscott companies are comprised of 7 companies in various locations and will fit nicely into the CGX group from a strategy standpoint. The Kelmscott digital capabilities very much mirror the existing digital capabilities of CGX. Kelmscott’s capabilities will not replace the existing CGX opportunities, but offer additional resources to the rising customer demand. CGX is seeing an improvement in demand from their clients, in that their current clients are purchasing more products offered by CGX. Due to the election-based business seen in the December quarter, CGX has increased their market-share. Due to CGX’s strong balance sheet, they are able to spend more dollars in new products and services to better provide for their clients.