Acquisition of Jackson Group

On December 31, 2010, CGX completed the acquisition of The Jackson Group. Please see the press release below:

Consolidated Graphics Acquires The Jackson Group

HOUSTON, Jan. 3, 2011 /PRNewswire via COMTEX/ -- Consolidated Graphics, Inc. (NYSE: CGX)announced today that it has acquired The Jackson Group, including Jackson Press, Inc. and Total Response, Inc. (together, "The Jackson Group"), headquartered in Indianapolis, Indiana. Terms of the transaction were not disclosed.

The Jackson Group was founded in 1961 by Ron Jackson initially as an art studio, but evolved into one of Indianapolis' leading full service printing, mailing, fulfillment and technology companies. The Jackson Group offers sheetfed and digital printing, extremely sophisticated fulfillment and mailing solutions as well as state of the art data analytics and online technology solutions for their customers.

Commenting on the acquisition, Joe R. Davis, Chairman and Chief Executive Officer of Consolidated Graphics, Inc., stated, "Ron Jackson and his wife Kathy have established an impressive track record in serving their customers over the last 50 years. With the resources of Consolidated Graphics behind The Jackson Group, including the world's largest and most sophisticated digital printing network as well as our best in class technology, I expect a great future for this company."

Jim Cohen, Executive Vice President of Mergers & Acquisitions at Consolidated Graphics, added, "This was an attractive acquisition opportunity for us because Ron and Kathy had the vision to develop the business into a full service technology and marketing solutions provider, essentially a smaller version of what Consolidated Graphics offers its own customers. Increasing our existing presence in the vibrant Indianapolis market was an additional benefit."

Also commenting on the announcement, Mr. Jackson said, "When I was first approached by Consolidated Graphics, what appealed to me most were the resources they could bring to bear in our market as well as their commitment to technology and state of the art solutions for their customers." Mrs. Jackson added, "Preserving the legacy that Ron created was important to us, and I'm looking forward to seeing The Jackson Group grow and prosper."

Consolidated Graphics also announced that it has promoted Patsy Koepke to President of The Jackson Group. Patsy, a native of Indianapolis, began her career in commercial printing with The Graphic Arts Center in Indianapolis in 1999. In 2004, she moved to Atlanta to join Consolidated Graphics as a Vice President of National Sales. In 2006, Patsy joined Graphcom, a Consolidated Graphics company located in Atlanta, as the Vice President of Business Development where she has been recognized as one of the leading salespeople in Consolidated Graphics. Mr. Davis commented, "Patsy has already achieved an impressive track record of success within Consolidated Graphics, and I expect great things from her at The Jackson Group."

Consolidated Graphics, Inc. (CGX), headquartered in Houston, Texas, is one of North America's leading general commercial printing companies. With 70 printing businesses strategically located across 27 states, Toronto, and Prague, and a presence in Asia, CGX offers an unmatched geographic footprint, unsurpassed capabilities, and unparalleled levels of convenience, efficiency and service. With locations in or near virtually every major U.S. market, CGX provides the service and responsiveness of a local printer enhanced by the economic, geographic and technological advantages of a large national organization.

Consolidated Graphics' vast and technologically advanced sheetfed and web printing capabilities are complemented by the world's largest integrated digital footprint. By coupling North America's most comprehensive printing capabilities with strategically located fulfillment centers and industry-leading technology, CGX delivers end-to-end print production and management solutions that are based on the needs of our customers to improve their results. For more information, visit http://www.cgx.com/.

I recently did an interview for CGX's main blog which is on http://www.cgx.com/. Click on the link below, and it should take you to it. I have been too busy to post much recently, but this interview is hot off the press!
http://www.consolidatedgraphics.blogspot.com/2010/12/we-spoke-with-jim-cohen-executive-vice.html

CGX Cover Story in Printing Impressions Magazine

Consolidated Graphics made the cover of Printing Impressions magazine this month. Check it out to learn more about what we are up to. Might not be what you'd expect.

Is there more M&A going on in the Great Recession or less?

We’ve certainly been just as active in spite of the economy, but in a different way. Initially (at the start of the recession), we were slower to pull the trigger because we were busy evaluating the chaos that was occurring. We looked at hundreds of potential transactions and didn’t do any of them. We are pretty conservative so we wanted to understand what was happening around us and to the industry in general before we made any moves. Over the past year, we’ve made several acquisitions, and most were distressed in one way or another and we had to be creative in terms of how we structured those transactions so that it was a win-win for both seller and buyer. Today, we are very active and continue to evaluate hundreds of opportunities. We expect to continue to be very active on the acquisition front this year. We still have the strongest balance sheet in the industry, and we have ample cash flow to fund our acquisitions.

As for what others are doing in our industry, I would say that there is, as a general matter, much less acquisition activity because most other buyers have to finance their acquisitions and either can’t raise the capital or simply don’t want to because they are busy licking their own wounds. Or they can't afford to take the risk that a distressed acquisition can be turned around.

What is attractive to buyers today?

I'm often asked: "What is attractive to you as a buyer?" Some thoughts:

· History of earnings growth

· Potential for continued earnings growth (notwithstanding this, we do find distressed companies to be, in certain circumstances, attractive acquisition candidates).

· History of reinvestment in the business rather than stripping out all earnings (i.e., capex has not been delayed).

· Good customer base and potential to grow sales at each

· Strong management team

· Good employees

· Reputation in the marketplace

Again, in the current economy, we have been and will continue to make acquisitions of distressed companies so it is important for owners to realize that we might have an interest in their business even if some of the above criteria aren’t satisfied.

What Determines Value?

Someone recently asked me: "What determines value?" Here's the short answer (short but still too long for Twitter):

Value is determined by many factors. In no particular order:

§ Earnings growth
§ Strength of management team
§ Customer base and concentration issues if any
§ History of reinvestment in the business
§ Reputation
§ Caliber of employees
§ Age of equipment

Current Trends

Over the last two years, the printing industry has been hit hard by the recession. Most companies have experienced revenue declines of anywhere from 15 to 50 percent, and as a result their earnings have been wiped out. In many cases, printing companies have no positive cash flow and are in various degrees of covenant default (if not payment default) on their credit lines. Many have had to restructure their equipment leases as well. Banks were initially slow to pursue their remedies because they were busy licking their own wounds, dealing with bigger problems and not eager to take any additional write offs. That is changing and banks are beginning to focus more on their printing industry credits so I expect even more company failures to occur over the next 18 months as creditors tighten the screws on their poor performers. This is bad news for printers that are in distress but good news for the survivors as excess capacity (and below cost pricing) will be wrung out of the system. What this means for the M&A landscape is that there will be even more opportunities for white knights to rescue distressed companies, something we have been doing quite a bit of.

Completed another transaction last month. Hickory Printing Solutions in Conover and High Point, North Carolina. Press Release is below:

CONSOLIDATED GRAPHICS SUBSIDIARY
ACQUIRES CERTAIN ASSETS OF THE HICKORY PRINTING GROUP, INC.

Conover, NC and High Point, NC – June 1, 2010 -- Consolidated Graphics, Inc. (NYSE: CGX) announced today that Hickory Printing Solutions, a Consolidated Graphics company, has acquired certain assets of The Hickory Printing Group headquartered in Conover, North Carolina. Hickory Printing was founded in 1917 and grew to be one of the largest commercial printers in the southeastern United States. Terms of the transaction were not disclosed.

Hickory Printing Solutions offers web and sheetfed printing, mailing and fulfillment, variable printing, interactive services and packaging and operates out of two facilities located in Conover and High Point, NC.

Commenting on the acquisition, Joe R. Davis, Chairman and Chief Executive Officer of Consolidated Graphics, Inc., stated, “Hickory Printing Solutions offers first class quality and service to its customers. With the additional resources of Consolidated Graphics, including the world’s largest and most sophisticated digital printing network, behind it and its dedicated employees, Hickory Printing Solutions will continue to exceed every customer expectation.”

Stephen Patton, former President of Electric City Printing, a Consolidated Graphics company in Williamston, SC, is the President of Hickory Printing Solutions. Mr. Patton commented, “I am looking forward to applying all that I have learned at Consolidated Graphics to help Hickory Printing Solutions continue its world class printing reputation.”

George B. Glisan and Jeffrey A. Hale, formerly CEO and CFO, respectively, of The Hickory Printing Group have been hired to serve as CEO and CFO of Hickory Printing Solutions. Mr. Glisan said, “I have always admired the Consolidated Graphics business model and am looking forward to having the financial strength and resources of Consolidated Graphics behind us.”

Consolidated Graphics, Inc. (CGX), headquartered in Houston, Texas, is one of North America’s leading general commercial printing companies. With 70 printing businesses strategically located across 27 states, Toronto, and Prague, we offer an unmatched geographic footprint, unsurpassed capabilities, and unparalleled levels of convenience, efficiency and service. With locations in or near virtually every major U.S. market, CGX provides the service and responsiveness of a local printer enhanced by the economic, geographic and technological advantages of a large national organization.

Consolidated Graphics’ vast and technologically advanced sheetfed and web printing capabilities are complemented by the world’s largest integrated digital footprint. By coupling North America's most comprehensive printing capabilities with strategically located fulfillment centers and industry-leading technology, CGX delivers end-to-end print production and management solutions that are based on the needs of our customers to improve their results. For more information, visit www.cgx.com.

I really have to apologize for not posting anything in such a long time. We have been absolutely swamped looking at opportunities in the printing industry. Just completed the acquisition of Modern International Graphics and Modern Logistics in Cleveland, Ohio (see our press release on that). Despite a very challenging economic environment for printers across the country, we are still able to structure transactions that are mutually beneficial. Our balance sheet is as strong as ever so we are actively pursuing acquisitions of all types and sizes. The challenge is finding the right opportunities. The truth is that the next 12 months are still uncertain, and many printers are looking at a very precarious future. My own view is that the printing industry is going to lag in the economic recovery behind almost everyone else except maybe home builders.

The decimation that I have seen in our industry over the last year and a half is staggering. Most printers I've looked at (and I've looked at hundreds) are experiencing revenue declines in the neighborhood of 20-40%, and with this decline comes a lot of red ink as you'd expect. Many printers have no cash flow and negative working capital to boot. These printers will not be around in a year. But surprisingly, they are hanging on longer than you think but that is mostly because their banks don't want to take the write offs yet and frankly don't have enough qualified personnel (i.e., experienced workout and restructuring professionals) to deal with them. So this is good news in the short term for the struggling printer but obviously in the long run this is not sustainable. The bad news for other printers out in the marketplace is that you will continue to find yourself facing ridiculous pricing pressure b/c of the printers that are hemorraging cash. They are doing whatever it takes to keep work in their shops - even if it means a 1% gross margin. We, like many other printers, have to compete with this, and it isn't fun. Fortunately, it is a short term problem.