By Trevor Shackelford November 7, 2005 -- Consolidated Graphics Inc., (NYSE: CGX) announced their second quarter results today. Total revenue for the quarter was $221 million, 16% higher than the $191.1 million reported for the same period in the last year. Net income for the quarter was $9.3 million, a 23% increase from $7.6 million reported for the same period last year. Earnings for the quarter were $0.66 per diluted share, compared to $0.53 per diluted share reported for the same period last year. The revenue results this quarter were at a record level and ahead of the company’s expectations. Consolidated Graphics cited the Kelmscott acquisitions for driving the growth. Contents of this Summary Quarter Highlights Guidance Raine Radar Q & A Quarter Highlights The company announced that, it had entered into non-binding letter of intent to acquire GraphCom, Inc., in Atlanta, Georgia. The company hired Jim Cohen, an experienced mergers and acquisitions executive into its acquisition team. Operating margin for the quarter was 7.4%, an improvement of 30 basis points compared to the prior year (7.1%). Contribution from acquisitions for the second quarter was $30.6 million, the majority coming from Kelmscott. EBITDA for the quarter was $28.04 million, an increase of $4.4 million, or 19% from a year ago. National sales represented 7% of total sales in the second quarter. Year-to-date growth in national sales was 39%, compared to the prior year. The company repurchased 164,100 shares of company’s common stock at an average purchase price of $39.07 per share, to a total of $6.4 million The company invested $8.7 million in new technology and equipment. Debt outstanding reduced by $1.5 million. Total debt at the end of September, 2005 was $105.8 million. Debt to capital ratio was 26% Free cash flow for the quarter was $6.4 million, which includes approximately $2 million of adverse impact from payroll cycles. Guidance For the third quarter, which ends in December, the company is forecasting revenues of $225 million, which would be an 8% increase over the same period last year, excluding election related revenue. Expected growth in sales is 15% with 2% from internal growth. Overall the company expects to report earnings of $0.68 per diluted share. The company also expects: EBITDA to be basically flat year over year at $28 million. Estimated free cash flow for the fourth quarter to be around $14 to 16 million. Estimated operating margin for the fourth quarter to be 7.4% Finally the above stated projections did not include any contributions from the pending GraphCom, Inc. acquisition or any other acquisition in the fourth quarter. Raine Radar M&A looks like it will be stepping up again for CGX, with the recently hired acquisition expert coming into the company as well as the announcement of the letter of intent to acquire GraphCom. The company’s success with an amalgamation of small commercial printers, whose local and regional business make up 93% of revenues, shows how much profit (if not growth) can be made in commercial print if costs are kept under control. The company has set high goals for itself for the rest of the year, but if they can maintain their current pace, it should be attainable. Q & A The company’s expected 2% internal growth in the coming quarter would be the same sales growth year over year, excluding election related revenues. The company expects to close the acquisition of GraphCom during the fourth quarter, and the company expects to get the first real contribution from this acquisition in January 2006, or slightly before. Consolidated Graphics believes they have a lot of opportunities to improve gross margin, particularly on the procurement side, as the company intends to negotiate deals with vendors at the corporate level. Organic revenue growth for the second quarter was 2.2% Most of the internal growth in this quarter was the pick up of national sales; the rest of the company’s business was just better than flat. Consolidated Graphics made a significant investment in its sales training program, which is already resulting in increased growth. The company intends to recruit sales people with the expectation of improving internal sales growth for the year. Consolidated Graphics said that it will continue to make evaluations on a day-to-day basis for investing its free cash flows either in the form of acquisitions or repayment of debt or repurchase of stock.