Courier Starts Strong in New Fiscal Year

  Courier Starts Strong in New Fiscal Year

Gains in Education and Religious Markets; Digital Expanding into New Facility

Business Wire

NORTH CHELMSFORD, Mass. -- January 22, 2013

Courier Corporation (Nasdaq: CRRC), one of America’s leading innovators in
book manufacturing, publishing and content management, today announced results
for the quarter ended December 29, 2012, the first quarter of its 2013 fiscal
year. Revenues for the quarter were $64.8 million, up 3% from last year’s
first-quarter sales of $62.9 million. Net income for the quarter was $2.4
million or $.21 per diluted share, up from $1.5 million or $.12 per diluted
share in the first quarter of fiscal 2012, which included charges related to
severance and post-retirement benefits and a gain from asset sales; excluding
those items, net income for fiscal 2012’s first quarter was $.17 per diluted
share. Details of those items can be found in the tables at the end of this

While the revenue increase was modest overall, larger gains were achieved in
religious sales and at Courier Digital Solutions, which produces customized,
offset-equivalent four-color academic textbooks and other short-run books
using HP digital inkjet technology. During the quarter Courier announced plans
to open a second digital facility in Indiana.

“It was a solid quarter in our book manufacturing business, led by Courier
Digital Solutions,” said Courier Chairman and Chief Executive OfficerJames F.
Conway III.“Our investments in content management software and four-color
digital inkjet technology have strengthened our leadership in the education
market and brought us new business in specialty trade as well.

“In anticipation of further growth, we have begun work in preparation for the
April startup of a second fully-integrated digital operation at our four-color
offset facility in Kendallville, Indiana. The result will be to offer
customers unprecedented flexibility in matching their print strategies to
their inventory requirements across the full life cycle of every title, while
facilitating nationwide distribution.

“In our publishing segment, revenues were down from last year, but the
segment’s operating loss was smaller due to the effects of cost-cutting
measures, several well-received new titles, and consumers’ positive response
to our growing offering of e-books.

“Throughout the quarter, we continued to enjoy strong cash flow, which enabled
us to reduce our debt by$5 millionduring the quarter. In November Courier’s
Board of Directors authorized a new $10-million stock repurchase program and
reaffirmed its commitment to the dividend based on its confidence in the
company’s balance sheet, cash flow and business prospects. And today I am
pleased to report that the Board has declared a dividend of$.21 per share,
the same as last quarter.”

Book manufacturing: gains in education and religious markets

Courier’s book manufacturing segment reported first-quarter sales of$57.5
million, up 3% from$56.0 millionin last year’s first quarter. The segment’s
operating income was$5.5 million, up from$5.1 millionin fiscal 2012,
excluding last year’s severance and post-retirement benefit expenses.

Gross profit in the segment was$13.1 millionor 22.7% of sales in the
quarter, versus$12.5 millionor 22.3% of sales a year ago, as a favorable
sales mix and continuing benefits from last year’s cost-reduction measures
offset a competitive pricing environment and reduced recycling income.

The book manufacturing segment focuses on three markets: education, religion,
and specialty trade. Sales to theeducationmarket were$25 millionin the
first quarter, up 16% from the same period last year, due to increased sales
of college textbooks. Sales to thereligiousmarket were up 6% to$17
millionin the quarter, with sales to Courier’s largest religious customer up
9%. Sales to thespecialty trademarket were down 13% to$15 million,
reflecting tight inventory management among publishers and the impact of
e-book sales on certain titles.

Revenues rose more than 40% at Courier Digital Solutions on continued growth
of customized versions of college textbooks as well as increased use of
digital printing among specialty trade publishers. With its current digital
facilities running close to capacity, inOctober Courierannounced plans to
add a new HP Indigo cover press inMassachusettsand a new digital production
facility inKendallville, Indiana. The Indiana facility will include a wide
format HP press and new HP Indigo press together with finishing equipment.
This is expected to bring the company’s total investment in digital print to
approximately $40 million.

“Our book manufacturing business continued to prove its resilience in response
to changing market conditions,” said Mr. Conway. “Our standard textbook print
runs are getting shorter but more frequent as publishers opt to carry smaller
inventories and spread production throughout the academic year. The result is
both a larger number of orders and more flexibility to handle the customized
work that constitutes an increasing percentage of the total. To support this
evolving workload, we are continuing on a path of investing in
state-of-the-art equipment to handle the full spectrum of offset and digital

“The same approach is also working well at National Publishing Company, our
Philadelphia subsidiary that serves the religious market. With new binding
systems in place to meet expanding needs internationally, we achieved a
healthy increase in volume for our largest religious customer.”

Publishing segment trims loss despite sales decline

Courier’s publishing segment includes three businesses:Dover Publications, a
publisher with thousands of titles in dozens of specialty trade
markets;Research & Education Association (REA), a publisher of test
preparation books and study guides; and Creative Homeowner, which publishes
books and plans on home design, decorating, landscaping and gardening.

First-quarter revenues for the segment were$9.1 million, down 3% from last
year’s first quarter, with the decline spread among all three businesses. The
segment’s operating loss for the quarter was$1.1 million, versus $1.3
millionfor the first quarter of fiscal 2012, excluding last year’s severance
and post-retirement benefit expenses.

“Our publishing businesses continued to face a challenging sales environment,”
said Mr. Conway. “In addition, when we were hit by Hurricane Sandy, all of our
publishing operations closed for several days, while generators were hauled
into service to bring operations back until power was restored several weeks

“However, we continued to offer a growing range of titles online in both
printed and e-book form, with more than 3,500 titles now available as e-books
through Amazon, Apple, Barnes & Noble and Google. While e-book sales have
risen, consumers are still in the process of discovering the wealth of
material that has been converted. Meanwhile, print is still unmatched for
certain kinds of books such as our new line of Creative Haven adult coloring
books, which have been well received in craft stores nationwide.

“Helped by increased e-book sales and resolute cost containment, our
publishing segment continued to trim its losses during the quarter. We look
forward to further expansion of our online offerings, both direct to consumers
and through large and small online retailers.”


“With a solid quarter behind us, our debt down and our improved efficiency, we
are well positioned to take advantage of the continuing evolution of the
markets we serve,” said Mr. Conway. “As a book manufacturer, we expect to
continue to outpace the overall education market with our integrated solutions
for customized textbook production, capture additional short-run opportunities
among trade publishers, and extend our international role on behalf of our
largest religious customer. As a publisher, while we remain cautious about
consumer spending, we expect to benefit from our investments in e-books and
other digital content to complement our print offerings.

“We expect capital expenditures, which were$10 millionin fiscal 2012, to
increase to between$17 million and $19 millionin fiscal 2013, with
approximately$13 milliondedicated to expanding our digital capabilities.

“As in the past, we expect our performance in fiscal 2013 to follow a seasonal
pattern, with the larger portion of our earnings coming in the second half.
And we expect to have the additional digital capacity
inKendallvilleavailable in time for the busiest part of the year.

“In line with our past practice, today’s guidance, including comparisons to
prior performance, excludes impairment and restructuring charges. Overall, we
expect fiscal 2013 sales of between $268 million and $283 million, an increase
of between 2% and 8% over the 53-week period of fiscal 2012. We also expect
earnings per diluted share of between$.75 and $1.05, which compares with our
fiscal 2012 earnings of $.91per diluted share.

“In addition to measuring our performance by generally accepted accounting
principles, we also track several non-GAAP measures including EBITDA (earnings
before interest, taxes, depreciation and amortization) as an additional
indicator of the company's operating cash flow performance. This measure
should be considered in addition to, not a substitute for or superior to,
measures of financial performance prepared in accordance with GAAP. In fiscal
2013, we expect EBITDA to be between$39 million and $45 million, compared
to$42 millionin fiscal 2012, excluding restructuring charges.

Factors not incorporated into this guidance include the possibility of future
impairment or restructuring charges.

AboutCourier Corporation

Courier Corporationis among America’s leading book manufacturers and a leader
in content management and customization in new and traditional media. It also
publishes books under three brands offering award-winning content and
thousands of titles. Founded in 1824, Courier is headquartered inNorth
Chelmsford, Massachusetts. For more information, visit

This news release includes forward-looking statements, including statements
relating to the continuation of the Company’s dividend for fiscal year 2013,
expansion into e-books and digital content offerings, and the Company’s
financial expectations for fiscal year 2013, including sales, EBITDA, earnings
per share and capital expenditures.Statements that describe future
expectations, plans or strategies are considered “forward-looking statements”
as that term is defined under the Private Securities Litigation Reform Act of
1995 and releases issued by the Securities and Exchange Commission.The words
“believe,” “expect,” “anticipate,” “intend,” “estimate” and other expressions
which are predictions of or indicate future events and trends and which do not
relate to historical matters identify forward-looking statements.Such
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those currently anticipated.Factors that
could affect actual results include, among others, changes in customers’
demand for the Company’s products, including seasonal changes in customer
orders and shifting orders to lower cost regions, changes in market growth
rates, changes in raw material costs and availability, pricing actions by
competitors and other competitive pressures in the markets in which the
Company competes, consolidation among customers and competitors, insolvency of
key customers or vendors, changes in the Company’s labor relations, changes in
obligations of multiemployer pension plans, success in the execution of
acquisitions and the performance and integration of acquired businesses
including carrying value of intangible assets, restructuring and impairment
charges required under generally accepted accounting principles, changes in
operating expenses including medical and energy costs, changes in technology
including migration from paper-based books to digital, difficulties in the
start up of new equipment or information technology systems, changes in
copyright laws, changes in consumer product safety regulations, changes in
environmental regulations, changes in tax regulations, changes in the
Company’s effective income tax rate and general changes in economic
conditions, including currency fluctuations, changes in interest rates,
changes in consumer confidence, changes in the housing market, and tightness
in the credit markets. Although the Company believes that the assumptions
underlying the forward-looking statements are reasonable, any of the
assumptions could be inaccurate, and therefore, there can be no assurance that
the forward-looking statements will prove to be accurate.The forward-looking
statements included herein are made as of the date hereof, and the Company
undertakes no obligation to update publicly such statements to reflect
subsequent events or circumstances.

(In thousands, except per share amounts)
                                                FIRST QUARTER ENDED
                                                December 29,   December 24,
                                                2012          2011      
Net sales                                       $64,756        $62,936
Cost of sales                                   48,756        47,338    
Gross profit                                    16,000         15,598
Selling and administrative expenses             11,968        13,625    
Operating income                                4,032          1,973
Interest expense, net                           190            260
Other income                                    -             (587      )
Income before taxes                             3,842          2,300
Income tax provision                            1,422         846       
Net income                                      $2,420        $1,454    
Net income per diluted share                    $0.21         $0.12     
Cash dividends declared per share               $0.21         $0.21     
Wtd. average diluted shares outstanding         11,424         12,103
Net sales:
Book Manufacturing                              $57,481        $55,996
Publishing                                      9,134          9,452
Elimination of intersegment sales               (1,859    )    (2,512    )
Total                                           $64,756        $62,936
Operating income (loss):
Book Manufacturing                              $5,499         $4,206
Publishing                                      (1,136    )    (1,827    )
Stock based compensation                        (341      )    (422      )
Intersegment profit                             10            16        
Total                                           $4,032         $1,973

(In thousands)
                                            December 29,   December 24,
                                            2012          2011      
Net sales                                   $57,481        $55,996
Cost of sales                               44,430        43,509    
Gross profit                                13,051         12,487
Selling and administrative expenses         7,552         8,281     
Operating income                            $5,499        $4,206    
                                            December 29,   December 24,
                                            2012          2011      
Net sales                                   $9,134         $9,452
Cost of sales                               6,195         6,357     
Gross profit                                2,939          3,095
Selling and administrative expenses         4,075         4,922     
Operating loss                              ($1,136   )    ($1,827   )

(In thousands)
                                                  December 29,   September 29,
ASSETS                                            2012           2012
Current assets:
Cash and cash equivalents                         $147           $64
Investments                                       766            765
Accounts receivable                               31,937         35,152
Inventories                                       36,015         36,364
Deferred income taxes                             4,186          4,273
Other current assets                              1,030          950
Total current assets                              74,081         77,568
Property, plant and equipment, net                86,743         89,952
Goodwill and other intangibles                    17,766         17,880
Prepublication costs                              6,867          7,135
Deferred income taxes                             3,373          3,451
Other assets                                      1,376          1,374
Total assets                                      $190,206       $197,360
Current liabilities:
Current maturities of long-term debt              $1,890         $1,872
Accounts payable                                  10,890         11,364
Accrued taxes                                     1,689          3,857
Other current liabilities                         16,224         15,777
Total current liabilities                         30,693         32,870
Long-term debt                                    8,497          13,696
Other liabilities                                 6,208          6,283
Total liabilities                                 45,398         52,849
Total stockholders' equity                        144,808        144,511
Total liabilities and stockholders'               $190,206       $197,360

(In thousands)
                                           For the Three Months Ended
                                           December 29,        December 24,
                                           2012               2011       
Operating Activities:
Net income                                 $2,420              $1,454
Adjustments to reconcile
net income to
cash provided from
operating activities:
Depreciation and                           5,833               5,968
Stock-based compensation                   341                 422
Deferred income taxes                      165                 313
Gain on disposition of                     -                   (587       )
Changes in other working                   1,289               162
Other long-term, net                       (114       )        (445       )
Cash provided from                         9,934              7,287      
operating activities
Investment Activities:
Capital expenditures                       (1,505     )        (1,148     )
Prepublication costs                       (743       )        (1,120     )
Proceeds on disposition                    -                   587
of assets
Short-term investments                     (1         )        (117       )
Cash used for investment                   (2,249     )        (1,798     )
Financing Activities:
Long-term debt                             (5,181     )        (2,955     )
repayments, net
Cash dividends                             (2,421     )        (2,566     )
Cash used for financing                    (7,602     )        (5,521     )
Increase (decrease) in                     $83                ($32       )
cash and cash equivalents
In addition to measuring our performance by generally accepted accounting
principles, we also track several non-GAAP measures including EBITDA (earnings
before interest, taxes, depreciation and amortization) as additional
indicators of the company's operating cash flow performance. These measures
should be considered in addition to, not a substitute for or superior to,
measures of financial performance prepared in accordance with GAAP.
Non-GAAP reconciliation -
Net income                                 $2,420              $1,454
Income tax provision                       1,422               846
Interest expense, net                      190                 260
Depreciation and                           5,833               5,968
Severance-related expense                  -                   1,492
Other income                               -                  (587       )
EBITDA                                     $9,865             $9,433     

(In thousands, except per share amounts)
                         First Quarter Ended December 24, 2011
                                                                   Net Income
                         Income       Income Tax   Net             per
                         Before       Provision    Income         Diluted
                         Taxes                                     Share
GAAP basis measures      $2,300       $846         $1,454          $0.12
Severance and post-
retirement benefits (1 ) 1,492        549          943             0.08
Other income        (2 ) (587    )    (216     )   (371      )     (0.03    )
Non-GAAP measures        $3,205      $1,179      $2,026         $0.17    
BOOK MANUFACTURING                    First Quarter Ended December 24, 2011
                                      GAAP Basis   Non-Recurring   Non-GAAP
                                      Measures     Item (1)        Measures
Net sales                             $55,996                      $55,996
Cost of sales                         43,509                     43,509   
Gross profit                          12,487       -               12,487
Selling and
administrative                        8,281       (938      )     7,343    
Operating income                      $4,206      $938           $5,144   
PUBLISHING SEGMENT                    First Quarter Ended December 24, 2011
                                      GAAP Basis   Non-Recurring   Non-GAAP
                                      Measures     Item (1)        Measures
Net sales                             $9,452                       $9,452
Cost of sales                         6,357                      6,357    
Gross profit                          3,095        -               3,095
Selling and
administrative                        4,922       (554      )     4,368    
Operating income                      ($1,827  )   $554           ($1,273  )

      During the first quarter of the prior year, cost reduction measures were
(1)  taken in both of the Company's operating segments. Related severance and
      post-retirement benefit expenses were $1.5 million.
      During the first quarter of fiscal 2012, the Company recorded a $0.6
(2)   million gain associated with the sales of its interests in non-operating
      real property relating to cell towers.


Courier Corporation
James F. Conway III, 978-251-6000
Chairman, President and Chief Executive Officer
Peter M. Folger, 978-251-6000
Senior Vice President and Chief Financial Officer
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