Consolidated Graphics, Inc.

5858 Westheimer, Suite 200
Houston, Texas 77057
U.S.A.

Telephone: (713) 787-0977
Fax: (713) 787-5013
Web site: http://www.consolidatedgraphics.com; http://www.cgx.com

Public Company
Incorporated: 1985 as Joe R. Davis, Inc.
Employees: 4,800
Sales: $708.06 million (2004)
Stock Exchanges: New York
Ticker Symbol: CGX
NAIC: 323110 Commercial Lithographic Printing; 323115 Digital Printing; 323119 Other Commercial Printing

Consolidated Graphics, Inc. (CGX) is one of the largest commercial printing groups in the United States, and a leader in the sheet-fed and half-web markets. CGX is a leading consolidator in the United States' commercial printing industry, and has acquired 65 printers in 25 states. CGX seeks out well-run printing companies to acquire. After purchase it usually leaves the existing management in place. The company also grooms its own executives through a unique training program.

Origins

Consolidated Graphics, Inc. was started in Houston in February 1985 by Joe R. Davis. Davis was a veteran of International Paper Company as well as accounting firms Price Waterhouse and Arthur Anderson (where he became partner). He believed the huge, highly fragmented commercial printing industry was ripe for consolidation as it crept through a slow growth period.

Davis told the trade journal Printing Impressions that he had picked up a service-driven mentality as a child helping out at his parents' farm and general store in Ogden, Arkansas. He began stocking shelves with bread at the tender age of six, according to the Houston Business Journal, which reported the store was still standing in 1999. According to Forbes, his father, J.B. Davis, had over the course of his career managed to parlay a trade as a barber into a small rural business empire.

Davis had studied accounting at the University of Arkansas. He became interested in the printing business in 1981 when he helped find financing for a neighbor's print shop, Superb Printing. Davis received 8 percent of the equity, according to Printing Impressions; unfortunately, this enterprise languished due to high costs.

With backing from family and investors, Davis formed Consolidated to acquire Western Lithograph Company in 1985. According to Forbes, the cost was $2.6 million. In business since the 1960s, Western had 50 employees and sales of $5 million a year.

A second acquisition, Grover/Houston Litho, followed in 1987. The first out-of-state buy, Tewell's Printing of Denver, came in 1988. Four years later, it was merged with newly acquired Warren Graphics. The neighbor's print shop that had got Davis started in the business also was acquired. Consolidated entered the financial printing market in 1990 by buying the Houston operations of Chas. P. Young.

Launching a Management Training Program in 1991

To recruit and train management talent, CGX started its unique Leadership Development Program in 1991. According to Graphic Arts Monthly, the three-year program was similar to those at financial services companies. CGX hired candidates from college, then rotated them around each part of the printing business before bringing them into management. By the end of the 1990s, the program had produced several presidents, under age 30, for CGX's subsidiaries. According to American Printer, CGX preferred to recruit liberal arts, business, and engineering graduates.

In the early 1990s, Consolidated bought another Houston printer, Gulf Printing Company, for $30 million to become the area's market leader. Gulf had been founded in 1916. Unlike most of CGX's later acquisitions, Gulf was a web-fed printing operation. It also was losing $5 million a year (on sales of $30 million), according to the Houston Chronicle —from then on CGX made it a point to buy thriving companies only.

Gulf had a huge telephone directory contract from Southwestern Bell, its owner, which financed the acquisition, Davis later told Printing News. In 1993 Gulf lost the contract and its operations were merged with Western Lithograph two years later. CGX also moved into Gulf's headquarters.

Going Public in 1994

Another half-dozen printing companies were acquired in the early 1990s, extending Consolidated's reach to Colorado. In June 1994, the company went public, raising about $20 million.

Sales were $57 million in fiscal 1995, with a net income of $4.5 million. CGX had about 700 employees. Annualized revenues for the fiscal year ending March 1996 were about $100 million.

The pace of acquisitions stepped up after the initial public offering. A dozen buys in 1995 and 1996 brought Consolidated into Arizona, Iowa, Oklahoma, Virginia, California, Washington, and Oregon. Consolidated bought another ten businesses in 1997 alone.

CGX displayed its buying power in a 1996 order for 210 printing units from Komori America Corp. The deal was potentially worth more than $50 million and was called the largest U.S. purchase of sheetfed presses to date.

On the Big Board in 1997

CGX shares migrated from NASDAQ to the New York Stock Exchange in January 1997. In the 1997 fiscal year, CGX had 1,417 employees, sales of $144 million, and net income of $10 million. The headquarters had just 15 employees, remarked American Printer, reflecting on the company's decentralized structure. The 20 operating companies had 93 presses between them.

CGX was the fastest-growing printing company in the United States. More than two dozen companies were acquired in 1998 and 1999, and another 40 deals were still in the pipeline. According to trade journals, CGX was responsible for starting an industry trend toward consolidation, and spawned several copycats.

CGX's more than 50 subsidiaries operated as independent businesses. In 1998, Davis told Printing News that of the 37,000 commercial printing companies in the United States, about 7,400 constituted his target market. CGX focused on sheet-fed operations, choosing companies with up to 150 employees and annual sales of $2 million to $25 million. According to Printing Impressions, Davis believed that company presidents could have a feel for all departments in operations of this size.

CGX chose well-run businesses to acquire, and typically retained their managers after purchase. The firms benefited from CGX handling administrative tasks. The company also could tap its considerable purchasing power and technological advancement. CGX focused on major metropolitan areas, buying several printers in each city as it expanded across the United States.

Most of the printers CGX bought were about two dozen years old. In 1998, the company acquired one that had been formed in 1885, Wetzel Brothers Inc. The company's owner when it was sold, Arthur Wetzel, told the Milwaukee Journal Sentinel that keeping up with technology was a deciding factor in the sale. "I used to buy a press for $7,000, and now you'll pay $2 million or $3 million," said Wetzel. He and his wife had run the business for 60 years. "They left a great foundation," said Davis. Other Consolidated acquisitions had history behind them, such as John C. Otto Co. of East Longmeadow, Massachusetts, which was founded in 1880.

Digital After 2000

Revenues were $625 million in fiscal 2000, while net income was $38.5 million. The company had 5,000 employees. CGX had been investing heavily in digital printing technology. By 2004, all of its companies offered computer-to-plate services. As Electronic Publishing noted, CGX also was offering its customers Internet tools.

CGX posted net income of $20 million on sales of $708 million in fiscal 2004. The company had 4,800 employees at the time. A slowing printing industry was working to CGX's advantage by lowering asking prices for acquired companies.

Principal Subsidiaries

AGS Custom Graphics, Inc.; American Lithographers, Inc.; Apple Graphics, Inc.; Austin Printing Company, Inc.; Automated Graphic Imaging/Copy Center, Inc.; Automated Graphic Systems, LLC; Bridgetown Printing Co.; Byrum Lithographing Co.; CGML General Partner, Inc.; CGML, LLC; CGXmedia, Inc.; Chas. P. Young Company, Inc.; Clear Visions, Inc.; Columbia Color, Inc.; Consolidated Carqueville Printing Company; Consolidated Graphics California; Consolidated Graphics Development Company; Consolidated Graphics Development LLC; Consolidated Graphics Management, Ltd.; Consolidated Graphics Properties II, Inc.; Consolidated Graphics Properties, Inc.; Consolidated Graphics Services, Inc.; Consolidated Paragraphics, Inc.; Copy-Mor, Inc.; Courier Printing Company; Digital Direct, Inc.; Direct Color, Inc.; Eagle Press, Inc.; Eastwood Printing Corporation; Emerald City Graphics, Inc.; Fittje Bros. Printing Co.; Frederic Printing Company; Garner Printing Company; Georges & Shapiro Lithograph, Inc.; Geyer Printing Company, Inc.; Gilliland Printing, Inc.; Graphic Communications, Inc.; Graphic Technology of Maryland, Inc.; Graphion, Inc.; Gritz-Ritter Graphics, Inc.; Grover Printing Company; Gulf Printing Company; H&N Printing & Graphics, Inc.; Heath Printers, Inc.; Heritage Graphics, Inc.; Image Systems, Inc.; Ironwood Lithographers, Inc.; Keys Printing Company; Lincoln Printing Corporation; Maryland Composition.com, Inc.; Maxwell Graphic Arts, Inc.; McKay Press, Inc.; Mercury Printing Company, Inc.; Mercury Web Printing, Inc.; Metropolitan Printing Services, Inc.; Mobility, Inc.; Mount Vernon Printing Company; Multiple Images Printing, Inc.; Piccari Press, Inc.; Precision Litho, Inc.; Pride Printers, Inc.; Printing Corporation of America; Printing, Inc.; Rush Press, Inc.; S & S Graphics, LLC; S & S Graphics Property, LLC; Serco Forms, LLC; StorterChilds Printing Co., Inc.; Superb Printing Company; Superior Colour Graphics, Inc.; Tewell Warren Printing Company; The Etheridge Company; The Graphics Group, Inc.; The Jarvis Press, Inc.; The John C. Otto Company, Inc.; The Printery, Inc.; Theo. Davis Sons, Incorporated; Thousand Oaks Printing and Specialties, Inc.; Tucker Printers, Inc.; Tulsa Litho Company; Tursack Incorporated; Walnut Circle Press, Inc.; Web Graphics, Inc.; Wentworth Corporation; Western Lithograph Company; Westland Printers, Inc.; Wetzel Brothers, LLC; Woodridge Press, Inc.

Principal Competitors

Cenveo, Inc.; Nationwide Graphics, Inc.; Quebecor World; R.R. Donnelley & Sons Company; St Ives US Division.

Further Reading

Appin, Rick, "M&A Colors Commercial Printing Sector: Deal Flow Increasingly Finds Its Way onto the Pages of Fragmented Industry," Mergers & Acquisitions Report, September 20, 1999.

Apte, Angela, "Power Behind the Presses: Joe Davis' National Consolidation Efforts Have Changed the Face of Commercial Printing," Houston Business Journal, April 30, 1999, pp. 14ff.

Boisseau, Charles, "Printer Trying to Reproduce Strategy of Consolidation," Houston Chronicle, Bus. Sec., February 13, 1995, p. 6.

Cross, Lisa, "Chief Consolidators Make Acquisition News," Graphic Arts Monthly, April 1, 1999, p. 56.

——, "Grooming Management Talent," Graphic Arts Monthly, September 1, 1999, p. 93.

Dresang, Joel, "Nearly 100, Longtime Milwaukee Printer Surveys Changing Industry," Milwaukee Journal Sentinel, July 20, 2003.

Greer, Jim, "Printing Powerhouse Acquiring Again," Houston Business Journal, April 5, 2002, pp. 1f.

Hamilton, Alex, "A Distinctive Approach; Plans to Acquire Printing Companies and to Build a Group in Major Metropolitan Areas," Printing Impressions, February 1, 1995, p. 22.

Hassell, Greg, "On a Roll; Printer Presses Ahead with Acquisitions," Houston Chronicle, Bus. Sec., February 4, 1997, p. 1.

Hitchcock, Nancy A., "Top 20 Printing Firms That Inspire the Industry," Electronic Publishing, September 2004, pp. 14ff.

Hurtado, Robert, "A Font of Good Fortune for a Business Printer," New York Times, Sec. 3, March 8, 1998, p. 5.

——, "Printer Makes Its Mark with Acquisition Strategy," International Herald Tribune, March 7, 1998, p. 19.

"A Mentor, An Advisor, A Leader," Printing Impressions, October 1, 1998, p. 22.

Palmer, Joel, "A Happy Marriage," Des Moines Business Record, February 22, 1999, pp. 12f.

Palmeri, Christopher, and Fleming Meeks, "Better Late Than Never," Forbes, November 21, 1994, pp. 192f.

Pybus, Kenneth R., "Printing Entrepreneur Taking Empire Public," Houston Business Journal, April 25, 1994, pp. 1f.

Roberts, Ricardo, "M&A Pro Returns to Consolidated After a Stint as a Banker," Mergers & Acquisitions Report, March 11, 2002.

Sharples, Hadley, "Progress Starts with People [John C. Otto Co.]," Graphic Arts Monthly, January 1998, pp. S2f.

Shelby, Thomas Hart, "The Merger Merchant," Graphic Arts Monthly, December 1997, p. 44.

Stapleton, Cy, "The Man With a Plan: Consolidated's Davis Says Full Speed Ahead," Printing News, March 9, 1998, p. 1.

Tolliver, Heidi, "Komori Reports a Record Sale of More Than 200 Press Units," PrintingNews East, August 5, 1996, p. 6.

"Winning Acquisitions; Consolidated Graphics Leverages Its Buying Power to Stimulate Growth in 20 Partner Companies," American Printer, June 1997, p. 44.

—Frederick C. Ingram