Courier Reports Second-Quarter Results

  Courier Reports Second-Quarter Results

      Quarter Reflects Seasonal Pattern; Net Income Up 46% Year-to-Date

Business Wire

NORTH CHELMSFORD, Mass. -- May 01, 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 March 30, 2013, the second quarter of its 2013 fiscal
year. Revenues were $61.8 million, slightly below last year’s second-quarter
revenues of $62.4 million. Net income for the quarter was $336,000 or $.03 per
diluted share, versus $440,000 or $.04 per diluted share in last year’s second

For the first six months of fiscal 2013, Courier revenues were $126.5 million,
up from $125.3 million in fiscal 2012. Net income for the year to date was
$2.8 million or $.24 per diluted share, versus $1.9 million or $.16 per
diluted share for the first half of last year, which included first-quarter
charges related to severance and post-retirement benefits and a gain from
asset sales; excluding those items, net income for the first half of fiscal
2012 was $2.5 million or $.21 per diluted share. Details can be found in the
tables at the end of this release.

The second quarter of Courier’s fiscal year is usually its slowest, coming in
between the traditional busy seasons in the education market. In the company’s
book manufacturing segment, second-quarter sales were up from a year ago
overall, led by increased sales in the specialty trade market. Sales were flat
in the religious market and down in the education market, where the number of
textbook orders was up, but print quantities were lower. For the year to date,
education and religious sales were up, but trade sales marginally lower. In
Courier’s publishing segment, sales were down slightly for both the quarter
and the year to date.

“In many respects it was a typical second quarter for us,” said Courier
Chairman and Chief Executive Officer James F. Conway III. “We had good results
with key customers, but revenues hovered at essentially the same level as a
year ago. We maintained our pattern of steady growth with our largest
religious customer, and we completed the buildout of our new digital printing
facility in Kendallville, Indiana. On the publishing side, we were able to
reduce losses substantially, and Creative Homeowner actually turned a small

“As we head into the busier part of our fiscal year, we are ready for the
increased demand we foresee. With our second four-color digital facility up
and running alongside our Kendallville offset plant, we can be more responsive
to our customers in the education and trade markets, with state-of-the-art
technology to handle virtually any combination of run lengths. Meanwhile,
consumers’ positive response to our initial e-book offerings is helping to
improve our publishing segment’s performance.

“Last fall, our Board of Directors authorized the repurchase of an additional
$10 million worth of Courier stock. Of that $10-million authorization, we
still have approximately $8 million available.

“Once again I am pleased to announce that our Board has approved our regular
quarterly dividend of $.21 per share.

“Finally, yesterday we announced the acquisition of FastPencil, Inc., a
California-based developer of end-to-end, cloud-based content management
technology. FastPencil’s products serve both traditional publishers and the
rapidly expanding universe of self-publishers. We are excited by the synergy
between FastPencil’s technology and our other content management offerings,
and expect our customers will be as well.”

Book manufacturing: second four-color digital inkjet plant opens

Courier’s book manufacturing segment had second-quarter sales of $55.9
million, up slightly from $55.5 million in the same period last year. For
fiscal 2013 to date, book manufacturing sales were $113.4 million, up from
$111.5 million in the first half of fiscal 2012. The segment’s second-quarter
operating income was $1.4 million, versus $2.3 million a year ago. On a
year-to-date basis, operating income was $6.9 million, up 5% from $6.6 million
for the same period last year, which included the first-quarter items
mentioned above. Gross profit for the second quarter was $8.4 million or 15.0%
of sales, versus $9.1 million or 16.5% of sales last year. Gross profit for
the first half of fiscal 2013 was $21.4 million or 18.9% of sales, compared to
$21.6 million or 19.4% of sales in fiscal 2012. The decline in gross profit
reflected a competitive pricing environment, reduced recycling income and
startup costs related to the new digital production facility in Kendallville,

The book manufacturing segment focuses on three markets: education, religious,
and specialty trade. Sales to the education market were down 8% in the
quarter, but up 4% for the year to date, with the largest proportion of sales
at the college and university levels. Sales to the religious market were flat
in the second quarter, but up 3% for the first six months of the year, driven
by growth in sales to our largest religious customer. Sales to the specialty
trade market were up 11% in the second quarter, but down 2% for the first half
of the fiscal year. Sales at Courier Digital Solutions continued to account
for a growing percentage of total book manufacturing sales in both education
and specialty trade.

“While working through what is traditionally the slowest quarter of our fiscal
year, we continued to push forward with capacity and technology to help our
customers succeed in today’s dynamic competitive environment,” said Mr.
Conway. “Today many publishers are moving to multi-print strategies to
maximize the lifespan of every title, capture short-term opportunities and
reduce inventory costs. With the April completion of our second Courier
Digital Solutions facility, fully integrated with our other operations in
Massachusetts and Indiana, we can make that process a lot easier.”

Publishing: e-books contribute to improved performance

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

Second-quarter revenues for the segment were $9.4 million, down 3% from $9.6
million in last year’s second quarter. The segment’s operating loss for the
quarter was $368,000, compared to a loss of $1.1 million last year. For fiscal
2013 to date, segment sales were $18.5 million, versus $19.1 million for the
first half of last year. The segment’s operating loss through six months was
$1.5 million, versus $3.0 million for the corresponding period last year.

Of the three Courier publishing businesses, Creative Homeowner was profitable
during the quarter, though sales remained down from the prior year. Dover,
with flat sales overall but a growing contribution from e-books, cut its loss
by 50% from last year’s second quarter. REA ran close to breakeven but on
smaller sales, though its AP test prep line continued to perform well.

“Our publishing segment continues to reduce costs and sharpen its focus,” said
Mr. Conway. “Dover’s new Creative Haven series has been well received, and the
past year’s e-book conversions are proving their value as we bring a vast
array of content to new audiences at minimal production cost through an
expanded array of sales channels including Amazon, Apple, Barnes & Noble and


“As we enter the busiest part of our fiscal year, we are well positioned to
serve our customers more effectively than ever,” said Mr. Conway. “Educational
and trade publishers increasingly appreciate our distinctive combination of
digital and offset capacity and end-to-end content management expertise. With
our April acquisition of FastPencil, our content management capabilities now
reach out to even broader constituencies among traditional publishers as well
as self-publishers.

“We expect capital expenditures, which were$10 millionin fiscal 2012, to
total 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 now have the additional digital capacity inKendallvilleto meet the
demand we expect.

“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 $266 million and $281 million, an increase
of between 2% and 8% over the 53-week period of fiscal 2012. We also expect
earnings per diluted share of between$.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 America’s third largest book manufacturer 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)
                               QUARTER ENDED           SIX MONTHS ENDED
                               March 30,   March 24,   March 30,    March 24,
                               2013        2012        2013         2012
Net sales                      $61,778     $62,388     $126,534     $125,324
Cost of sales                  49,774     50,190     98,530      97,528   
Gross profit                   12,004      12,198      28,004       27,796
Selling and
administrative                 11,281     11,317     23,249      24,942   
Operating income               723         881         4,755        2,854
Interest expense, net          191         193         381          453
Other income                   -          -          -           (587     )
Income before taxes            532         688         4,374        2,988
Income tax provision           196        248        1,618       1,094    
Net income                     $336       $440       $2,756      $1,894   
Net income per diluted         $0.03      $0.04      $0.24       $0.16    
Cash dividends                 $0.21      $0.21      $0.42       $0.42    
declared per share
Wtd. average diluted           11,405      12,160      11,430       12,131
shares outstanding
Net sales:
Book Manufacturing             $55,919     $55,454     $113,400     $111,450
Publishing                     9,353       9,635       18,487       19,087
Elimination of                 (3,494  )   (2,701  )   (5,353   )   (5,213   )
intersegment sales
Total                          $61,778     $62,388     $126,534     $125,324
Operating income
Book Manufacturing             $1,395      $2,349      $6,894       $6,555
Publishing                     (368    )   (1,136  )   (1,504   )   (2,963   )
Stock based                    (331    )   (345    )   (672     )   (767     )
Intersegment profit            27         13         37          29       
Total                          $723        $881        $4,755       $2,854

(In thousands)
                               March 30,   March 24,   March 30,    March 24,
                               2013        2012        2013         2012
Net sales                      $55,919     $55,454     $113,400     $111,450
Cost of sales                  47,526     46,306     91,956      89,815   
Gross profit                   8,393       9,148       21,444       21,635
Selling and
administrative                 6,998      6,799      14,550      15,080   
Operating income               $1,395     $2,349     $6,894      $6,555   
                               March 30,   March 24,   March 30,    March 24,
                               2013        2012        2013         2012
Net sales                      $9,353      $9,635      $18,487      $19,087
Cost of sales                  5,769      6,596      11,964      12,953   
Gross profit                   3,584       3,039       6,523        6,134
Selling and
administrative                 3,952      4,175      8,027       9,097    
Operating loss                 ($368   )   ($1,136 )   ($1,504  )   ($2,963  )

(In thousands)
                                                   March 30,   September 29,
ASSETS                                             2013        2012
Current assets:
Cash and cash equivalents                          $90         $64
Investments                                        824         765
Accounts receivable                                31,572      35,152
Inventories                                        33,653      36,364
Deferred income taxes                              4,209       4,273
Other current assets                               2,387       950
Total current assets                               72,735      77,568
Property, plant and equipment, net                 89,333      89,952
Goodwill and other intangibles                     17,653      17,880
Prepublication costs                               6,761       7,135
Deferred income taxes                              3,245       3,451
Other assets                                       1,381       1,374
Total assets                                       $191,108    $197,360
Current liabilities:
Current maturities of long-term debt               $1,907      $1,872
Accounts payable                                   9,904       11,364
Accrued taxes                                      925         3,857
Other current liabilities                          15,826      15,777
Total current liabilities                          28,562      32,870
Long-term debt                                     15,302      13,696
Other liabilities                                  5,567       6,283
Total liabilities                                  49,431      52,849
Total stockholders' equity                         141,677     144,511
Total liabilities and stockholders' equity         $191,108    $197,360

(In thousands)
                                               For the Six Months Ended
                                               March 30,         March 24,
                                               2013              2012
Operating Activities:
Net income                                     $2,756            $1,894
Adjustments to reconcile net
income to
cash provided from operating
Depreciation and                               11,638            11,944
Stock-based compensation                       672               767
Deferred income taxes                          270               610
Gain on disposition of                         -                 (587      )
Changes in other working                       746               1,119
Other long-term, net                           (726      )       (1,304    )
Cash provided from operating                   15,356           14,443    
Investment Activities:
Capital expenditures                           (8,793    )       (2,353    )
Prepublication costs                           (1,643    )       (2,301    )
Proceeds on disposition of                     -                 587
Short-term investments                         (59       )       (225      )
Cash used for investment                       (10,495   )       (4,292    )
Financing Activities:
Long-term debt borrowings                      1,641             (4,924    )
(repayments), net
Cash dividends                                 (4,839    )       (5,139    )
Proceeds from stock plans                      166               167
Stock repurchases                              (1,568    )       -
Other                                          (235      )       (275      )
Cash used for financing                        (4,835    )       (10,171   )
Increase (decrease) in cash                    $26              ($20      )
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                                     $2,756            $1,894
Income tax provision                           1,618             1,094
Interest expense, net                          381               453
Depreciation and                               11,638            11,944
Severance-related                              -                 1,579
Other income                                   -                (587      )
EBITDA                                         $16,393          $16,377   

(In thousands, except per share amounts)
                          Quarter Ended March 24, 2012                     Six Months Ended March 24, 2012
                                                               Net                                                 Net Income
                          Income   Income      Net             Income      Income     Income       Net             per
                          Before   Tax         Income          per         Before     Tax          Income          Diluted
                          Taxes    Provision                   Diluted     Taxes      Provision                    Share
GAAP basis                $688     $248        $440            $0.04       $2,988     $1,094       $1,894          $0.16
Severance and
post-retirement   (1)     87       30          57              0.00        1,579      578          1,001           0.08
Other income      (2)     -        -          -              -          (587   )   (215     )   (372      )     (0.03    )
Non-GAAP                  $775     $278       $497           $0.04      $3,980    $1,457      $2,523         $0.21    
MANUFACTURING                      Quarter Ended March 24, 2012                       Six Months Ended March 24, 2012
                                   GAAP        Non-Recurring   Non-GAAP               GAAP Basis   Non-Recurring   Non-GAAP
                                   Basis       Items (1)       Measures               Measures     Items (1)       Measures
Net sales                          $55,454                     $55,454                $111,450                     $111,450
Cost of sales                      46,306     0              46,306                89,815      0              89,815   
Gross profit                       9,148       -               9,148                  21,635       -               21,635
Selling and
administrative                     6,799      -              6,799                 15,080      (938      )     14,142   
Operating                          $2,349     $0             $2,349                $6,555      $938           $7,493   
PUBLISHING                         Quarter Ended March 24, 2012                       Six Months Ended March 24, 2012
                                   GAAP        Non-Recurring   Non-GAAP               GAAP Basis   Non-Recurring   Non-GAAP
                                   Basis       Items (1)       Measures               Measures     Items (1)       Measures
Net sales                          $9,635                      $9,635                 $19,087                      $19,087
Cost of sales                      6,596                     6,596                 12,953                     12,953   
Gross profit                       3,039       -               3,039                  6,134        -               6,134
Selling and
administrative                     4,175      (87      )      4,088                 9,097       (641      )     8,456    
Operating loss                     ($1,136 )   $87            ($1,049 )              ($2,963  )   $641           ($2,322  )

(1) During the first six months of the prior year, cost reduction measures
were taken in both of the Company's operating segments. Related severance and
post-retirement benefit expenses were $87,000 in the second quarter and $1.6
million in the first six months.

(2)During the first quarter of last year, the Company recorded a $0.6 million
gain associated with the sale 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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