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 release. 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 work. “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 later. “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.” Outlook “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 www.courier.com. 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. COURIER CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited) (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 SEGMENT INFORMATION: 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 COURIER CORPORATION SEGMENT RESULTS OF OPERATIONS (Unaudited) (In thousands) BOOK MANUFACTURING SEGMENT FIRST QUARTER ENDED 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 PUBLISHING SEGMENT FIRST QUARTER ENDED 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 ) COURIER CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (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 LIABILITIES AND STOCKHOLDERS' EQUITY 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 equity COURIER CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (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 amortization Stock-based compensation 341 422 Deferred income taxes 165 313 Gain on disposition of - (587 ) assets Changes in other working 1,289 162 capital 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 ) activities 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 ) activities 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 - EBITDA: Net income $2,420 $1,454 Income tax provision 1,422 846 Interest expense, net 190 260 Depreciation and 5,833 5,968 amortization Severance-related expense - 1,492 Other income - (587 ) EBITDA $9,865 $9,433 COURIER CORPORATION OTHER RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES (Unaudited) (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 SEGMENT 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 expenses 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 expenses Operating income ($1,827 ) $554 ($1,273 ) (loss) 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. Contact: Courier Corporation James F. Conway III, 978-251-6000 Chairman, President and Chief Executive Officer or Peter M. Folger, 978-251-6000 Senior Vice President and Chief Financial Officer www.courier.com
Courier Starts Strong in New Fiscal Year
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