Summary of CONSOLIDATED GRAPHICS INC /TX/

ITEM 2.02 - RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The information in this Current Report is being furnished pursuant to Item 2.02 of Form 8-K and, according to general instruction B.2. thereunder, shall not be deemed "filed" with the Securities and Exchange Commission (the "SEC") for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement filed by Consolidated Graphics, Inc. (the "Company") under the Securities Act of 1933, as amended, and will not be so incorporated by reference into any future registration statement unless specifically identified as being incorporated by reference.
On November 4, 2009, the Company announced its fiscal 2010 second quarter results. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. The attached press release may contain forward-looking statements, as described in the press release. Readers are cautioned that such statements involve known and unknown risks, uncertainties and other factors that could cause actual results to materially differ from the results, performance or other expectations expressed or implied by these forward-looking statements.
The Company will hold a conference call today at 10:00 a.m. Central Time/11:00 a.m. Eastern Time to discuss the Company's financial results for the second quarter ended September 30, 2009. A live webcast and subsequent archive of the conference call, as well as a copy of this Current Report and attached press release, can be accessed at www.cgx.com under the Investor Relations page. A rebroadcast of the call will be available by dialing 866-286-8010 or 617-801-6888 by entering the Conference ID "76059411." The rebroadcast will be available from November 4 until midnight November 11, 2009.
During today's conference call, management's discussion of the Company's financial results may include references to certain non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with United States generally accepted accounting principles ("GAAP"). Pursuant to the rules adopted by the SEC relating to the use of such financial measures in filings with the SEC, other disclosures of financial information and press releases, the Company provides the following qualitative and quantitative reconciliations regarding the non-GAAP financial measures to which management may refer. In addition, the sum of quarterly amounts in the accompanying tables may not equal full year amounts due to rounding differences.
The Company defines Adjusted EBITDA as our net income before interest, income taxes, depreciation and amortization, non-cash goodwill and other long-lived asset impairment charges, litigation charges, share-based compensation expense, non-cash foreign currency transaction gains and losses and net losses/gains from asset dispositions. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by sales. The Company uses Adjusted EBITDA and Adjusted EBITDA Margin both as a liquidity and performance measure when evaluating its business and operations. We believe Adjusted EBITDA and Adjusted EBITDA Margin may be useful to an investor in evaluating our liquidity and/or operating performance because:

• it is widely used by investors in our industry to measure a company's operating performance without regard to items such as interest, depreciation, non-cash currency transactions, impairments and amortization expenses, litigation charges and long-term non-cash share-based compensation expense, which can vary substantially from company to company depending upon accounting policies and book value of assets, capital structure and the method by which assets were acquired;

• it helps investors more meaningfully evaluate and compare the results of our operations from period to period by removing the impact of our capital structure (primarily interest charges on our outstanding debt), asset base (primarily depreciation and amortization expense and goodwill impairment charges), non-cash gains/losses from foreign currency transactions, and long-term non-cash share-based incentive plans from our operating results; and

• it helps investors to assess compliance with financial ratios and covenants included in our primary bank facility.

Adjusted EBITDA should not be considered as an alternative to any measure of operating results as promulgated under GAAP (such as operating income, net income or cash flow from operating activities), nor should it be considered as an indicator of our overall financial performance or our ability to satisfy current or future obligations and fund or finance future business opportunities. Adjusted EBITDA does not fully consider the impact of investing or financing transactions as it specifically excludes depreciation and interest expense, amortization and impairment of intangible and other long-lived assets, including goodwill, as well as the net gain or loss from non-cash foreign currency transactions, long-term share-based compensation expense, litigation charges and the net loss/(gain) from asset dispositions, all of which should also be considered in the overall evaluation of the Company's results and liquidity.

                             Fiscal                                Fiscal 2009                                   Fiscal 2010
($MM)                 2008           2009           Q1           Q2           Q3           Q4           Q1           Q2           YTD
Sales                 1,095.3        1,145.2        285.2        297.0        315.8        247.2        225.9        251.6        477.5

Net
Income/(Loss)            59.3          (39.6 )        9.6         10.3        (43.6 )      (15.9 )       (0.3 )        2.1          1.8
Income taxes             29.0           (5.9 )        6.1          7.2        (16.1 )       (3.1 )       (1.3 )        2.2          0.9
Interest
expense, net             12.0           15.0          4.2          3.9          4.1          2.8          2.5          2.3          4.8
Depreciation and
amortization             52.3           66.6         15.8         16.2         16.7         17.9         17.6         17.8         35.4
Goodwill
impairment
charge                      -           83.3            -            -         62.5         20.8            -            -            -
Litigation and
other charges               -           17.3            -            -         17.0          0.3            -          2.6          2.6
Non-Cash foreign
currency
transaction net
(gain)/loss              (3.1 )         (0.8 )          -         (0.3 )       (0.4 )       (0.1 )          -          0.2          0.2
Share-based
compensation
expense                   2.1            6.9          1.6          1.8          1.7          1.8          1.5          1.2          2.7
Net loss
(gain) from
asset
dispositions*             1.6            0.6          0.3          0.3          0.2         (0.1 )        0.1          0.3          0.4

Adjusted EBITDA         153.2          143.4         37.6         39.4         42.1         24.4         20.1         28.7         48.8
Adjusted EBITDA
Margin                   14.0 %         12.5 %       13.2 %       13.3 %       13.3 %        9.9 %        8.9 %       11.4 %       10.2 %

* Included in depreciation and amortization in the Company's Consolidated Statements of Cash Flows

The Company defines Free Cash Flow as net cash provided by operating activities less capital expenditures plus proceeds from asset dispositions. The Company considers Free Cash Flow to be an important indicator of our operating flexibility and is a representative measure of our ability to satisfy current and future obligations and fund or finance future business opportunities and believes it may be similarly useful to investors.

                          Fiscal                              Fiscal 2009                                 Fiscal 2010
($MM)               2008         2009          Q1          Q2           Q3           Q4           Q1          Q2          YTD
Net cash
provided by
operating
activities           110.2        141.1        36.6          7.7         44.9         51.9        33.9        62.5         96.4
Capital
expenditures*        (82.4 )      (76.9 )      (8.0 )      (26.5 )      (21.5 )      (20.9 )      (4.5 )      (6.9 )      (11.4 )
Proceeds from
asset
dispositions           2.0          1.4         0.9          0.2          0.1          0.2         0.4         0.2          0.6

Free Cash Flow        29.8         65.6        29.5        (18.6 )       23.5         31.2        29.8        55.8         85.6

* Capital expenditures include all expenditures for property, plant and equipment, including those that are directly financed.

The Company defines Adjusted Operating Income as Operating Income less goodwill impairment charges, long-lived asset impairment charges, litigation charges and non-cash foreign currency transactions. The Company defines Adjusted Operating Margin as Adjusted Operating Income divided by Sales. Adjusted Operating Income is an important performance measure used by the Company to analyze and compare post-acquisition financial trends and results of its various operations. The Company believes this non-GAAP financial measure may help investors better understand our operating results by eliminating goodwill impairment charges, long-lived asset impairment charges, litigation charges and non-cash net gain from foreign currency transactions pursuant to the revaluation of certain transactions denominated in currencies other than of the Company's functional currency.

                             Fiscal                                Fiscal 2009                                   Fiscal 2010
($MM)                 2008           2009           Q1           Q2           Q3           Q4           Q1           Q2           YTD
Sales                 1,095.3        1,145.2        285.2        297.0        315.8        247.2        225.9        251.6        477.5

Operating
income/(loss)           100.3          (30.3 )       20.0         21.4        (55.5 )      (16.2 )        0.9          6.6          7.5
Goodwill
impairment
charge                      -           83.3            -            -         62.5         20.8            -            -            -
Litigation and
other charges               -           17.3            -            -         17.0          0.3            -          2.6          2.6
Non-Cash foreign
currency
transaction net
(gain)/loss              (3.1 )         (0.8 )          -         (0.3 )       (0.4 )       (0.1 )       (0.1 )        0.2          0.1

Adjusted
Operating Income         97.2           69.5         20.0         21.1         23.6          4.8          0.8          9.4         10.2
Adjusted
Operating Margin          8.9 %          6.1 %        7.0 %        7.1 %        7.5 %        1.9 %        0.4 %        3.7 %        2.1 %

The Company defines Adjusted Net Income as Net Income less goodwill impairment charges, long-lived asset impairment charges, litigation charges and non-cash foreign currency transactions all net of taxes. The Company believes this non-GAAP financial measure may help investors better understand our ongoing operating results by eliminating goodwill impairment, long-lived asset impairment charges, and litigation charges and the non-recurring non-cash net gain and loss from foreign currency transactions.

                         Fiscal                             Fiscal 2009                               Fiscal 2010
($MM)               2008        2009         Q1          Q2          Q3           Q4           Q1          Q2         YTD

Net
Income/(Loss)        59.3        (39.6 )      9.6        10.3        (43.6 )      (15.9 )      (0.3 )       2.1         1.8
Goodwill
impairment
charge                  -         83.3          -           -         62.5         20.8           -           -           -
Tax benefit of
goodwill
impairment
charge                  -        (20.1 )        -           -        (16.5 )       (3.6 )         -           -           -
Litigation and
other charges           -         17.3          -           -         17.0          0.3           -         2.6         2.6
Tax benefit of
litigation and
other charges           -         (6.7 )        -           -         (6.6 )       (0.1 )         -        (1.0 )      (1.0 )
Non-Cash
foreign
currency
transaction net
(gain)/loss,
net of tax           (1.9 )       (0.5 )        -        (0.2 )       (0.2 )       (0.1 )         -         0.1         0.1

Adjusted Net
Income               57.4         33.7        9.6        10.1         12.6          1.4        (0.3 )       3.8         3.5

The Company defines Adjusted Diluted Earnings per Share as Diluted Earnings/Loss per Share, less goodwill impairment charges, long-lived asset impairment charges, litigation charges and non-cash foreign currency gains and losses all net of taxes.

                          Fiscal                              Fiscal 2009                                  Fiscal 2010
($MM)               2008         2009          Q1          Q2           Q3           Q4           Q1           Q2           YTD

Diluted
earnings per
. . .