Education Gains Boost Courier Results Customized Textbooks Continue to Lead Sales Growth Business Wire NORTH CHELMSFORD, Mass. -- November 21, 2013 Courier Corporation (Nasdaq: CRRC), one of America’s leading innovators in book manufacturing, publishing and content management, today announced fourth-quarter and full-year results for its fiscal year ended September 28, 2013. Courier’s 2013 fiscal year had 52 weeks. Its 2012 fiscal year had 53 weeks, with the extra week included in the fourth quarter. Fourth-quarter revenues in fiscal 2013 were $84 million, up 9% from $77 million in the fourth quarter of fiscal 2012. Net income in this year’s fourth quarter was $6.8 million or $.59 per diluted share, up from $5.7 million or $.50 per diluted share in last year’s fourth quarter, which included restructuring costs of $1.5 million or $.08 per diluted share primarily related to the writedown of an unutilized one-color press. Excluding those costs, fourth-quarter net income in fiscal 2012 was $6.6 million or $.58 per diluted share. For the full year of fiscal 2013, Courier sales were $275 million, up 5% from $261 million for the 53 weeks of fiscal 2012. Net income was $11.2 million or $.98 per diluted share, up from $9.2 million or $.77 per diluted share last year, which included restructuring costs of $3.3 million or $.17 per diluted share as well as a first-quarter pretax gain of $0.6 million from the sale of certain non-operating assets. Excluding those items, net income for fiscal 2012 was $10.9 million or $.91 per diluted share. Details of last year’s restructuring costs and other items can be found in the tables at the end of this release. The principal contributor to the sales increase, both for the quarter and for the year, was growing demand from educational publishers. Sales of textbooks for elementary and high schools rose, reversing several years of slower sales, while sales of college textbooks grew by a larger amount, led by sales of textbooks customized to the needs of individual professors, courses, institutions and geographic regions. “We finished a very good year in the education market with a banner quarter in which total textbook sales rose more than 25%,” said Courier Chairman and Chief Executive Officer James F. Conway III. “Between our industry-leading textbook customization technology and our combination of four-color offset and digital inkjet printing capabilities, we are producing top-quality textbooks at a variety of run lengths to meet highly specific needs for publishers and educators alike. This past spring, we opened a second digital facility near our four-color offset plant in Kendallville, Indiana, to help meet demand throughout the United States. In addition, shortly after the close of the fiscal year we entered into new relationships which will enable us to extend the benefits of our technology to millions of students in Brazil. “As always, we worked hard to help our customers succeed, and we continued to grow our share with our largest customers in both the education and religious markets. Our manufacturing and distribution relationship with our largest religious customer spans more than 100 countries and plays an expanding role in helping our customer deliver Scriptures to tens of millions of people each year. At the same time, we took an important step in a very different market with our April acquisition of California-based startup FastPencil, provider of a collaborative content management application as well as a self-publishing software platform that has been used by more than 50,000 content creators. “Our publishing segment reported sales essentially even with last year, but cut its operating loss nearly in half as ebook sales passed the million-dollar mark and started to contribute significantly to profitability. Well over 4,000 print titles, representing all three of our publishing brands, are now available as ebooks on all the major retail platforms. Also, consumers can now obtain Dover’s entire ebook offering via direct download from a newly redesigned www.doverpublications.com website. “Pleased as we were with our sales gains in book manufacturing, operating margins were under pressure from the combined effects of a very competitive pricing environment and lower recycling revenues. But cash flow remained strong, and while our debt at year-end was up by $10 million as a result of our investments in expanded digital capacity and FastPencil, we enter fiscal 2014 in solid financial condition. Confirming this judgment, Courier’s Board of Directors has once again declared a dividend of $.21 per share, the same as last quarter. In addition, following the expiration of the stock repurchase program authorized last year, the Board has issued a new authorization for the repurchase of up to $10 million in Courier stock.” Book manufacturing: custom textbooks continue to outperform Courier’s book manufacturing segment had fourth-quarter sales of $76 million, up 10% from $69 million last year. Fourth-quarter operating income in the segment was $10.8 million, versus $10.2 million last year including restructuring costs. Excluding those costs, the segment’s fourth-quarter operating income in fiscal 2012 was $11.7 million. For the full year, book manufacturing sales were $247 million, up 6% from $233 million in fiscal 2012. The segment’s full-year operating income was $22.0 million, versus $20.7 million last year, including restructuring costs. Excluding those costs, fiscal 2012 operating income in the segment was $23.4 million. The segment’s gross profit was $20.6 million or 27.1% of sales in the fourth quarter, versus $19.6 million or 28.4% of sales in last year’s fourth quarter excluding restructuring costs. Gross profit for fiscal 2013 was $53.9 million or 21.8% of sales, versus fiscal 2012 gross profit of $51.7 million or 22.2% of sales excluding restructuring costs. The reduction in gross profit margins resulted from intense price competition, reduced recycling income, and increased expense associated with the LIFO method of accounting for certain inventories. Other factors affecting the segment’s overall profitability included increased performance-based compensation costs and transaction costs related to the FastPencil acquisition and our pending investment in Brazil. The book manufacturing segment focuses on three markets: education, religion, and specialty trade. Sales to the education market were $39 million in the fourth quarter, up 26% over the previous year. For the year, education sales were $112 million, up 14% from fiscal 2012, with most of the growth related to sales of college textbooks, but also renewed growth in sales of elementary and high school textbooks. Sales to the religious market were $19 million in the quarter, down 3% from last year; for fiscal 2013 as a whole, religious sales were $69 million, up 2% over fiscal 2012, in line with historical trends. Fourth-quarter sales to the specialty trade market were $16 million, down 4% from an exceptionally strong quarter last year; for the full year, specialty trade sales were $59 million, down 2% from fiscal 2012, reflecting tight inventory management leading to smaller print quantities. Digital sales increased both in the fourth quarter and for the year as a whole, reflecting escalating demand for customized versions of college textbooks. With its Massachusetts digital facility running close to capacity, in April Courier opened a second digital production facility in Kendallville, Indiana, and utilization was high at both facilities through the balance of the year. “The education market continues to deliver for us—as we do for our customers,” said Mr. Conway. “Our consistent policy of customer-focused investment is helping publishers and educators reach today’s students more effectively than ever with materials that provide a powerful, integrated learning experience. With our combination of offset and digital capacity, we can meet course-specific deadlines while producing efficiently at every scale across the full life cycle of every title. This capability is a key factor driving the continued expansion of our relationship with our major customer in the education market. “Having successfully replicated our Massachusetts digital operations at our new Indiana facility, it was only natural for us to investigate other markets suitable for our technology and approach. Earlier this year we began discussions with leaders in Brazil’s education market, the largest in Latin America. In October we entered into a pair of agreements with Digital Page Gráfica E Editora, a Sao Paulo-based digital printing firm, and Santillana, the largest Spanish/Portuguese educational publisher in the world. We expect both agreements to close by the end of this calendar year. Under these agreements, through the combination of our customization technology and Digital Page’s manufacturing facilities, Santillana will become the first publisher in Brazil to offer textbooks customized to the needs of individual schools—while Courier takes a position as 40% owner of Digital Page. “Sales to the religious market were down in the fourth quarter but up slightly for the full year, in keeping with our long history of quarter-to-quarter fluctuations with our largest religious customer. The decline in specialty trade sales reflects continued tight management of inventories and associated utilization to digital printing for certain titles. Though overall order flow in specialty trade remained consistent, we expect the pattern of tight inventory management to continue. “Finally, our April acquisition of FastPencil and its popular self-publishing software platform brought us a ground-floor position in one of the industry’s fastest-growing segments. FastPencil’s workflow technology, licensing expertise and Premiere publishing imprint also offer significant benefits for established authors, particularly in combination with our digital print capabilities.” Publishing: ebook sales making a difference Courier’s publishing segment includes three businesses: Dover Publications, a niche 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. Fourth-quarter revenues for the segment were $10.3 million, up 2% over last year’s 14-week fourth quarter. Overall, the segment’s fourth-quarter operating income was $324,000, versus a loss of $426,000 in fiscal 2012. For the year as a whole, publishing sales were $37.6 million, down 2% from $38.4 million in fiscal 2012. The segment’s operating loss for fiscal 2013 was $2.1 million, much improved from a fiscal 2012 loss of $4.4 million including restructuring costs, or $3.7 million excluding those costs. The improved performance reflected the continuation of stringent cost-control measures, reduced inventory obsolescence costs and increased ebook revenues. “Dover continues to look better each quarter,” said Mr. Conway. “Our investment in ebooks is starting to generate a larger audience as well as improved profitability. In addition, the revamped website combines a refreshing new look with a host of new features including an improved shopping cart and the ability to bundle print and ebook purchases. Meanwhile, our other publishing brands continue to offer excellent content through a channel network still compromised by the loss of Borders and Home Depot. Yet with attentive management and increasingly effective use of digital print to minimize obsolescence costs, we have continued to bring the segment’s losses down as we pursue additional sales and distribution opportunities.” Outlook “We enter fiscal 2014 with exciting prospects, but also continuing challenges,” said Mr. Conway. “We continue to reap the benefits of our investments in customization and content management, and we are adding to those investments in order to expand our opportunities, both domestically and internationally. Yet at the same time, we face the same pressures on print pricing as the rest of the industry. As a result, while we expect revenues to continue to outpace the overall U.S. education market and maintain their growth pace with our largest religious customer, we expect growth in net income to be constrained by those continuing pressures, even as EBITDA rises. “As in the past, we expect our performance in fiscal 2014 to follow a seasonal pattern, with the larger portion of our earnings coming in the second half. “Overall, we expect fiscal 2014 sales of between $275 million and $295 million, compared to $275 million in fiscal 2013. We expect earnings per diluted share of between $.70 and $1.00, which compares with our fiscal 2013 earnings of $.98 per 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 2014, we expect EBITDA to be between $41 million and $46 million, compared to $42 million in fiscal 2013. “Factors not incorporated into this guidance include the possibility of future impairment or restructuring charges.” About Courier Corporation Courier Corporation is 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 in North 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 2014, expansion into e-books and digital content offerings, and the Company’s financial expectations for fiscal year 2014, 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 and contingent consideration, 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 YEAR ENDED September September September September 28, 29, 28, 29, 2013 2012 (1) 2013 2012 (1) Net sales $84,242 $77,100 $274,919 $261,320 Cost of sales 59,317 55,721 207,162 199,113 Gross profit 24,925 21,379 67,757 62,207 Selling and administrative 14,080 11,910 49,142 47,137 expenses Operating 10,845 9,469 18,615 15,070 income Interest 97 196 803 895 expense, net Other income - - - (587 ) Income before 10,748 9,273 17,812 14,762 taxes Income tax 3,963 3,564 6,590 5,595 provision Net income $6,785 $5,709 $11,222 $9,167 Net income per $0.59 $0.50 $0.98 $0.77 diluted share Cash dividends declared per $0.21 $0.21 $0.84 $0.84 share Wtd. average diluted shares 11,438 11,446 11,431 11,928 outstanding SEGMENT INFORMATION: Net sales: Book $75,946 $69,177 $247,406 $233,040 Manufacturing Publishing 10,330 10,141 37,635 38,355 Elimination of intersegment (2,034 ) (2,218 ) (10,122 ) (10,075 ) sales Total $84,242 $77,100 $274,919 $261,320 Operating income (loss): Book $10,814 $10,176 $21,953 $20,713 Manufacturing Publishing 324 (426 ) (2,069 ) (4,364 ) Stock based (346 ) (331 ) (1,348 ) (1,429 ) compensation Intersegment 53 50 79 150 profit Total $10,845 $9,469 $18,615 $15,070 (1) Fiscal year 2012 was a 53-week period; the additional week was included in the fourth quarter. COURIER CORPORATION SEGMENT RESULTS OF OPERATIONS (Unaudited) (In thousands) BOOK MANUFACTURING QUARTER ENDED YEAR ENDED SEGMENT September September September September 28, 29, 28, 29, 2013 2012 (1) 2013 2012 (1) Net sales $75,946 $69,177 $247,406 $233,040 Cost of sales 55,334 51,071 193,499 183,079 Gross profit 20,612 18,106 53,907 49,961 Selling and administrative 9,798 7,930 31,954 29,248 expenses Operating $10,814 $10,176 $21,953 $20,713 income PUBLISHING QUARTER ENDED YEAR ENDED SEGMENT September September September September 28, 29, 28, 29, 2013 2012 (1) 2013 2012 (1) Net sales $10,330 $10,141 $37,635 $38,355 Cost of sales 6,069 6,919 23,864 26,259 Gross profit 4,261 3,222 13,771 12,096 Selling and administrative 3,937 3,648 15,840 16,460 expenses Operating $324 ($426 ) ($2,069 ) ($4,364 ) income (loss) (1) Fiscal year 2012 was a 53-week period; the additional week was included in the fourth quarter. COURIER CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (In thousands) September 28, September 29, ASSETS 2013 2012 Current assets: Cash and cash equivalents $57 $64 Investments 1,012 765 Accounts receivable 43,837 35,152 Inventories 35,086 36,364 Deferred income taxes 3,954 4,273 Other current assets 2,579 950 Total current assets 86,525 77,568 Property, plant and equipment, net 93,051 89,952 Goodwill and other intangibles 25,853 17,880 Prepublication costs 6,717 7,135 Deferred income taxes 2,827 3,451 Other assets 2,021 1,374 Total assets $216,994 $197,360 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term $1,125 $1,872 debt Accounts payable 13,699 11,364 Accrued taxes 3,117 3,857 Other current liabilities 18,033 15,777 Total current liabilities 35,974 32,870 Long-term debt 24,583 13,696 Other liabilities 10,393 6,283 Total liabilities 70,950 52,849 Total stockholders' equity 146,044 144,511 Total liabilities and $216,994 $197,360 stockholders' equity COURIER CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) For the Years Ended September 28, September 29, 2013 2012 Operating Activities: Net income $11,222 $9,167 Adjustments to reconcile net income to cash provided from operating activities: Depreciation and 23,526 25,060 amortization Stock-based 1,348 1,429 compensation Deferred income 746 479 taxes Gain on disposition - (587 ) of assets Change in fair value of contingent 275 100 consideration Changes in other (3,707 ) 5,244 working capital Other long-term, net (1,272 ) (1,909 ) Cash provided from 32,138 38,983 operating activities Investment Activities: Capital expenditures (22,168 ) (9,934 ) Business acquisition, net of (5,000 ) - cash acquired Prepublication costs (3,421 ) (4,069 ) Proceeds on disposition of 166 587 assets Investments (747 ) 376 Cash used for investment (31,170 ) (13,040 ) activities Financing Activities: Long-term debt borrowings 10,140 (5,954 ) (repayments), net Cash dividends (9,651 ) (10,098 ) Stock repurchases (1,568 ) (10,000 ) Proceeds from stock 339 344 plans Other (235 ) (275 ) Cash used for (975 ) (25,983 ) financing activities Decrease in cash and ($7 ) ($40 ) 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 $11,222 $9,167 Income tax provision 6,590 5,595 Interest expense, 803 895 net Depreciation and 23,526 25,060 amortization Change in fair value of contingent 275 100 consideration Restructuring costs - 1,892 Other income - (587 ) EBITDA $42,416 $42,122 COURIER CORPORATION OTHER RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES (Unaudited) (In thousands, except per share amounts) Quarter Ended September 29, 2012 Year Ended September 29, 2012 Income Income Net Income Income Net Income Income Before Tax Net per Before Tax Net per Diluted Diluted Taxes Provision Income Share Taxes Provision Income Share GAAP basis measures $9,273 $3,564 $5,709 $0.50 $14,762 $5,595 $9,167 $0.77 Restructuring (1 ) 1,511 580 931 0.08 3,325 1,260 2,065 0.17 costs Other income (2 ) - - - - (587 ) (222 ) (365 ) (0.03 ) Non-GAAP measures $10,784 $4,144 $6,640 $0.58 $17,500 $6,633 $10,867 $0.91 BOOK MANUFACTURING Quarter Ended September 29, 2012 Year Ended September 29, 2012 SEGMENT GAAP Non-Recurring Non-GAAP GAAP Basis Non-Recurring Non-GAAP Basis Measures Items (1) Measures Measures Items (1) Measures Net sales $69,177 $69,177 $233,040 $233,040 Cost of sales 51,071 (1,511 ) 49,560 183,079 (1,723 ) 181,356 Gross profit 18,106 1,511 19,617 49,961 1,723 51,684 Selling and administrative 7,930 - 7,930 29,248 (961 ) 28,287 expenses Operating $10,176 $1,511 $11,687 $20,713 $2,684 $23,397 income PUBLISHING SEGMENT Quarter Ended September 29, 2012 Year Ended September 29, 2012 GAAP Non-Recurring Non-GAAP GAAP Basis Non-Recurring Non-GAAP Basis Measures Items (1) Measures Measures Items (1) Measures Net sales $10,141 $10,141 $38,355 $38,355 Cost of sales 6,919 6,919 26,259 26,259 Gross profit 3,222 - 3,222 12,096 - 12,096 Selling and administrative 3,648 - 3,648 16,460 (641 ) 15,819 expenses Operating loss ($426 ) $0 ($426 ) ($4,364 ) $641 ($3,723 ) (1 ) During the prior year, cost reduction measures were taken in both of the Company's operating segments. Related severance and post-retirement benefit expenses were $1.9 million, while accelerated depreciation associated with a reduction in the Company's one-color offset press capacity of $1.4 million was recorded in the fourth quarter of last year. (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
Education Gains Boost Courier Results
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