Courier Reports Solid Third Quarter Digital Sales Continue to Grow; Courier to Add Second HP Press in Kendallville Business Wire NORTH CHELMSFORD, Mass. -- August 1, 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 June 29, 2013, the third quarter of its 2013 fiscal year. Revenues were $64.1 million, up 9% from last year’s third-quarter revenues of $58.9 million. Net income for the quarter was $1.7 million or $.15 per diluted share, up from $1.6 million or $.13 per diluted share in last year’s third quarter. For the first nine months of fiscal 2013, Courier revenues were $190.7 million, up 4% from $184.2 million in fiscal 2012. Net income for the year to date was $4.4 million or $.39 per diluted share, versus $3.5 million or $.29 per diluted share for the first nine months 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 nine months of fiscal 2012 was $4.2 million or $.35 per diluted share. Details can be found in the tables at the end of this release. In Courier’s book manufacturing segment, third-quarter sales were up in all three of its principal markets, with the largest gains in the education market, led by increased sales of customized textbooks at the college and university levels. Sales to the religious market were also up in keeping with long-term trends, while trade sales rose on increases in both digital and four-color books. In Courier’s publishing segment, sales were down slightly, but the segment’s operating losses narrowed for both the quarter and the year to date. “The second half of our fiscal year is typically much stronger than the first half, and so far we are on track to repeat that pattern in fiscal 2013,” said Courier Chairman and Chief Executive Officer James F. Conway III. “As a book manufacturer and content management partner, we had a very good quarter as we continued to capitalize on growing demand for customized college textbooks. At the same time, we continued to expand our share of work on behalf of our largest religious customer in support of its long-term program of international Scripture distribution. In our publishing segment, while overall sales were down slightly, we continued to trim the segment’s operating losses, helped by healthy growth in ebook sales. “We head into our fourth quarter with a strong order flow for both our digital and offset manufacturing facilities. Our new digital plant in Kendallville, Indiana ramped up smoothly in time for the peak season in the education market, and is now working hard alongside its offset counterpart to handle virtually any combination of product formats and run lengths. Anticipating further growth, we are preparing our Kendallville facility for the addition of a second digital press. Meanwhile, our integration of our April acquisition of FastPencil, a provider of self-publishing and workflow solutions, is proceeding according to plan. “Once again I am pleased to announce that our Board has approved our regular quarterly dividend of $.21 per share.” Book manufacturing: digital + offset combination powers gains Courier’s book manufacturing segment had third-quarter sales of $58.1 million, up 11% from $52.4 million in the same period last year. For fiscal 2013 to date, book manufacturing sales were $171.5 million, up 5% from $163.9 million in the first nine months of fiscal 2012. The segment’s third-quarter operating income was $4.2 million, versus $4.0 million a year ago. On a year-to-date basis, operating income was $11.1 million, up from $10.5 million for the same period last year, which included the first-quarter items mentioned above. Gross profit for the third quarter was $11.9 million or 20.4% of sales, versus $10.2 million or 19.5% of sales last year. Gross profit for the first nine months of fiscal 2013 was $33.3 million, compared to $31.9 million in fiscal 2012, and as percentage of sales was 19.4% in both periods. The margin improvement in the third quarter reflected a favorable sales mix and increased capacity utilization, which more than offset the effects of a competitive pricing environment and reduced recycling income. The book manufacturing segment focuses on three markets: education, religious, and specialty trade. Sales to the education market were up 18% in the quarter and up 9% for the year to date, with the largest proportion of sales at the college and university levels. Sales to the religious market were up 7% in the third quarter and up 4% for the first nine months of the year, driven by growth in sales to our largest religious customer. Sales to the specialty trade market were up 4% in the third quarter, but down 1% for the first nine months 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. “It was a great quarter in the education market,” said Mr. Conway. “The ongoing shift toward customized versions of college textbooks continues to fuel growth at our two digital facilities, and we had good utilization in our offset print facilities as well. Meanwhile, demand for four-color digital has also increased across many specialty trade categories as publishers work to manage inventory and obsolescence costs. Our combination of digital and offset print, content management and distribution expertise makes us a versatile, economical partner to publishers of all sizes, and our new strategic relationship with Ingram Content Group gives our customers even more options for efficient print distribution and fulfillment. All these factors played into our decision to order a second HP T-410 wide-body digital inkjet press for our Kendallville plant, with the installation expected to be completed in October.” Publishing: ebooks 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. Third-quarter revenues for the segment were $8.8 million, down 3% from $9.1 million in last year’s third quarter. The segment’s operating loss for the quarter was $889,000, versus a loss of $975,000 last year. For fiscal 2013 to date, segment sales were $27.3 million, versus $28.2 million for the first nine months of last year. The segment’s operating loss through nine months was $2.4 million, versus a loss of $3.9 million for the corresponding period last year. Within the segment, third-quarter and year-to-date sales were both up modestly at Dover, helped by growing ebook sales and higher sales to large retailers, but down at REA and Creative Homeowner. Creative Homeowner, with its reduced cost structure, was slightly profitable during the quarter despite the sales decline. “Our publishing segment continues to adapt to a challenging book retail environment,” said Mr. Conway. “Through careful management, we are steadily chipping away at the operating losses that have troubled the segment in the soft economy of the last few years. Part of this process includes narrowing Creative Homeowner’s focus to concentrate on products with predictable, positive cash flow. At the same time, Dover continues to press forward with ebooks and other new titles suited to today’s consumers, as well as the use of an expanded range of channels to reach them. Ebook sales for the year to date have passed the million-dollar mark, and on the print side, Dover’s Creative Haven adult coloring book line continues to grow and attract new fans each month.” Outlook “We start our fourth quarter exceptionally well positioned to serve our customers in today’s economy,” said Mr. Conway. “We have carved out a distinctive profile as a complete, state-of-the-art resource for publishers in all of our principal markets, with capabilities tailored to their evolving content, process and distribution needs. Our ability to deliver customized versions in any quantity continues to help us grow share in the education and trade markets, while our expanding role on behalf of our largest religious customer is enabling it to reach more people in more countries than ever. “We continue to expect our performance in fiscal 2013 to reflect our customary seasonal pattern, with the largest portion of our earnings coming in our fourth quarter. With our digital capacity inKendallvillealready squeezed, we are moving quickly to install a second HP T-410 digital inkjet press alongside the first one, to begin production in the first quarter of fiscal 2014. The total cost of this digital expansion will be approximately $12 million, of which we will be paying approximately half in the current fiscal year and half next year. “As a result, we now expect capital expenditures, which were$10 millionin fiscal 2012, to total between$23 million and $25 millionin fiscal 2013, with approximately$20 milliondedicated to expanding our digital capabilities. “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 $269 million and $278 million, an increase of between 3% and 6% over the 53-week period of fiscal 2012. We also expect earnings per diluted share of between$.80 and $1.00, which compares with our fiscal 2012 earnings of $.91per diluted share, excluding restructuring charges. “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$40 million and $44 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 www.courier.com. This news release includes forward-looking statements, including statements relating to 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) QUARTER ENDED NINE MONTHS ENDED June 29, June 23, June 29, June 23, 2013 2012 2013 2012 Net sales $ 64,143 $ 58,896 $ 190,677 $ 184,220 Cost of sales 49,315 45,864 147,845 143,392 Gross profit 14,828 13,032 42,832 40,828 Selling and administrative 11,813 10,285 35,062 35,227 expenses Operating 3,015 2,747 7,770 5,601 income Interest 325 246 706 699 expense, net Other income - - - (587 ) Income before 2,690 2,501 7,064 5,489 taxes Income tax 1,009 937 2,627 2,031 provision Net income $ 1,681 $ 1,564 $ 4,437 $ 3,458 Net income per $ 0.15 $ 0.13 $ 0.39 $ 0.29 diluted share Cash dividends declared per $ 0.21 $ 0.21 $ 0.63 $ 0.63 share Wtd. average diluted shares 11,382 12,026 11,415 12,093 outstanding SEGMENT INFORMATION: Net sales: Book $ 58,060 $ 52,413 $ 171,460 $ 163,863 Manufacturing Publishing 8,818 9,127 27,305 28,214 Elimination of intersegment (2,735 ) (2,644 ) (8,088 ) (7,857 ) sales Total $ 64,143 $ 58,896 $ 190,677 $ 184,220 Operating income (loss): Book $ 4,245 $ 3,982 $ 11,139 $ 10,537 Manufacturing Publishing (889 ) (975 ) (2,393 ) (3,938 ) Stock based (330 ) (331 ) (1,002 ) (1,098 ) compensation Intersegment (11 ) 71 26 100 profit Total $ 3,015 $ 2,747 $ 7,770 $ 5,601 COURIER CORPORATION SEGMENT RESULTS OF OPERATIONS (Unaudited) (In thousands) BOOK MANUFACTURING QUARTER ENDED NINE MONTHS ENDED SEGMENT June 29, June 23, June 29, June 23, 2013 2012 2013 2012 Net sales $ 58,060 $ 52,413 $ 171,460 $ 163,863 Cost of sales 46,209 42,193 138,165 132,008 Gross profit 11,851 10,220 33,295 31,855 Selling and administrative 7,606 6,238 22,156 21,318 expenses Operating $ 4,245 $ 3,982 $ 11,139 $ 10,537 income PUBLISHING QUARTER ENDED NINE MONTHS ENDED SEGMENT June 29, June 23, June 29, June 23, 2013 2012 2013 2012 Net sales $ 8,818 $ 9,127 $ 27,305 $ 28,214 Cost of sales 5,831 6,387 17,795 19,340 Gross profit 2,987 2,740 9,510 8,874 Selling and administrative 3,876 3,715 11,903 12,812 expenses Operating loss ($889 ) ($975 ) ($2,393 ) ($3,938 ) COURIER CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (In thousands) June 29, September 29, ASSETS 2013 2012 Current assets: Cash and cash equivalents $ 193 $ 64 Investments 951 765 Accounts receivable 32,199 35,152 Inventories 37,262 36,364 Deferred income taxes 4,512 4,273 Other current assets 4,173 950 Total current assets 79,290 77,568 Property, plant and equipment, net 90,043 89,952 Goodwill and other intangibles 26,161 17,880 Prepublication costs 6,708 7,135 Deferred income taxes 2,320 3,451 Other assets 1,888 1,374 Total assets $ 206,410 $ 197,360 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 1,599 $ 1,872 Accounts payable 11,938 11,364 Accrued taxes 818 3,857 Other current liabilities 15,740 15,777 Total current liabilities 30,095 32,870 Long-term debt 24,642 13,696 Other liabilities 10,405 6,283 Total liabilities 65,142 52,849 Total stockholders' equity 141,268 144,511 Total liabilities and stockholders' $ 206,410 $ 197,360 equity COURIER CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) For the Nine Months Ended June 29, June 23, 2013 2012 Operating Activities: Net income $ 4,437 $ 3,458 Adjustments to reconcile net income to cash provided from operating activities: Depreciation and 17,823 18,022 amortization Stock-based compensation 1,002 1,098 Deferred income taxes 514 983 Gain on disposition of - (587 ) assets Changes in other working (2,089 ) (79 ) capital Other long-term, net (609 ) (1,003 ) Cash provided from 21,078 21,892 operating activities Investment Activities: Capital expenditures (14,461 ) (4,065 ) Business acquisition, net (5,000 ) - of cash acquired Prepublication costs (2,598 ) (3,171 ) Proceeds on disposition - 587 of assets Investments (686 ) (169 ) Cash used for investment (22,745 ) (6,818 ) activities Financing Activities: Long-term debt borrowings 10,673 (2,479 ) (repayments), net Cash dividends (7,244 ) (7,693 ) Proceeds from stock plans 170 167 Stock repurchases (1,568 ) (4,842 ) Other (235 ) (275 ) Cash provided from (used 1,796 (15,122 ) for) financing activities Increase (decrease) in $ 129 ($48 ) 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 $ 4,437 $ 3,458 Income tax provision 2,627 2,031 Interest expense, net 706 699 Depreciation and 17,823 18,022 amortization Severance-related - 1,814 expense/restructuring Other income - (587 ) EBITDA $ 25,593 $ 25,437 COURIER CORPORATION OTHER RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES (Unaudited) (In thousands, except per share amounts) Quarter Ended June 23, 2012 Nine Months Ended June 23, 2012 Income Income Net Income Income Income Net Income Before Tax Net per Before Tax Net per Diluted Diluted Taxes Provision Income Share Taxes Provision Income Share GAAP basis $ 2,501 $ 937 $ 1,564 $ 0.13 $ 5,489 $ 2,031 $ 3,458 $ 0.29 measures Severance and post- retirement (1 ) 235 87 148 0.01 1,814 671 1,143 0.09 benefits Other income (2 ) - - - - (587 ) (217 ) (370 ) (0.03 ) Non-GAAP $ 2,736 $ 1,024 $ 1,712 $ 0.14 $ 6,716 $ 2,485 $ 4,231 $ 0.35 measures BOOK MANUFACTURING Quarter Ended June 23, 2012 Nine Months Ended June 23, 2012 SEGMENT GAAP Basis Non-Recurring Non-GAAP GAAP Basis Non-Recurring Non-GAAP Measures Items (1) Measures Measures Items (1) Measures Net sales $ 52,413 $ 52,413 $ 163,863 $ 163,863 Cost of sales 42,193 (212 ) 41,981 132,008 (212 ) 131,796 Gross profit 10,220 212 10,432 31,855 212 32,067 Selling and administrative 6,238 (23 ) 6,215 21,318 (961 ) 20,357 expenses Operating $ 3,982 $ 235 $ 4,217 $ 10,537 $ 1,173 $ 11,710 income PUBLISHING Quarter Ended June 23, 2012 Nine Months Ended June 23, 2012 SEGMENT GAAP Basis Non-Recurring Non-GAAP GAAP Basis Non-Recurring Non-GAAP Measures Items (1) Measures Measures Items (1) Measures Net sales $ 9,127 $ 9,127 $ 28,214 $ 28,214 Cost of sales 6,387 6,387 19,340 19,340 Gross profit 2,740 - 2,740 8,874 - 8,874 Selling and administrative 3,715 - 3,715 12,812 (641 ) 12,171 expenses Operating loss ($975 ) $ 0 ($975 ) ($3,938 ) $ 641 ($3,297 ) (1) During the first nine 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 $235,000 in the third quarter and $1.8 million in the first nine 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. 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 Reports Solid Third Quarter
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