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Consolidated Graphics Lowers Guidance, Davis Cites Harsh Economic Conditions

Press release from the issuing company

March 13, 2003--Consolidated Graphics today announced revised guidance for its fourth quarter ending March 31, 2003. The Company expects net income for the quarter to be between $1.5 and $2.1 million, or between $.11 and $.15 per diluted share, before any impairment of goodwill which may result from the Company's annual test for impairment as of March 31. This compares with $.36 per diluted share adjusted for goodwill amortization a year ago, and $.42 per diluted share in the December quarter. Revenue in the March quarter is expected to decline by 10% from the December quarter to approximately $168 million. Operating income is expected to be between $4.6 and $5.5 million, or 2.7% and 3.3% of revenue. The Company attributes the revised performance outlook to a sharp decline in industry conditions this quarter as broad U.S. economic uncertainties continue to persist. These economic uncertainties further weakened the local economies and adversely impacted print spending by customers in certain industries at many of the Company's locations. "We are disappointed with the projected results for the fourth quarter; however, they reflect the impact of fragile economic conditions on a cyclical industry with overcapacity," commented Joe R. Davis, Chairman and Chief Executive Officer. "Since founding the Company in 1985, I have not seen a worse overall business environment for commercial printing than we have experienced this quarter. While we believe we continue to gain, or at least maintain, market share, we are facing unprecedented pressure on margins from an extremely competitive marketplace. Many of our major customers have further cut their print budgets, in response to sustained economic weakness. This includes very large companies in certain depressed industries as well as state agencies and organizations such as colleges and universities. We have been successful in replacing much of this business with new customers but at lower margins. " Mr. Davis continued, "Our strategy has not changed with regard to how we are managing our business during these tough times. We remain focused on providing our customers with the service and responsiveness of a local printing company, combined with the economic and geographic advantages of a large national printer. We have historically generated better margins than our competitors, due, in part, to our scale and technology advantages. We are focused on continuing to use these advantages to maintain market share while controlling costs throughout the organization and further strengthening our balance sheet, already one of the strongest in the industry. Nevertheless, we are developing and will implement plans to further scale back the scope of certain operations as appropriate in the event that current industry conditions persist over the next few months."