Sales, Income Up in Courier’s First Quarter

  Sales, Income Up in Courier’s First Quarter

          Double-Digit Gains in Education, Religious and Trade Sales

Business Wire

NORTH CHELMSFORD, Mass. -- January 21, 2014

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 28, 2013, the first quarter of its 2014 fiscal
year. Revenues for the quarter were $72.8 million, up 12% from $64.8 million
in last year’s first quarter. Net income for the quarter was $2.6 million, up
9% over fiscal 2013. Net income per diluted share was $.23, up 10% from last

Courier reported strong sales growth in all three of its principal book
manufacturing markets of education, religious and specialty trade. Revenues
were up in both digital and offset production at the company’s Massachusetts
and Indiana plants. In Courier’s publishing segment, first-quarter sales were
even with last year, and the segment’s operating loss was cut nearly in half.

“Once again we began the year with a solid quarter, helped by strong
performance in our major markets and continued sales growth at our digital
facilities,” said Courier Chairman and Chief Executive OfficerJames F. Conway
III.“It was also a busy quarter at our Kendallville offset plant, which ran
close to capacity to meet rising four-color demand in the education market.
For the second quarter in a row, textbook sales rose not only at the college
level but also at the elementary and high school level, providing further
indication that the elementary and high school market may finally be
recovering as the economy improves and schools return to higher funding

“Customized textbooks continued to be an important component of our education
business. Several years of sustained growth have proven not only their value
to students, but also the merits of producing them through our combination of
proprietary software and HP digital inkjet technology. After successfully
replicating our Massachusetts-based manufacturing model in Indiana last
spring, we began investigating ways to leverage our technology and expertise
in other promising markets. Our October announcement of a three-way
partnership with Santillana and Digital Page, leaders in digital textbook
publishing and digital print in Brazil, signals our impending entry into the
largest education market in Latin America.

“Meanwhile, our publishing segment continued to turn out appealing new
products with a lean organization focused on core strengths and promising
opportunities. Several well-received new titles and good growth in online
sales helped offset continued attrition in bricks-and-mortar sales channels.
With revenues virtually unchanged from last year, the segment still managed to
reduce its operating loss by 47%.

“With strong cash flow throughout the quarter, we continued to invest in new
markets and technologies, adding another digital press in Kendallville and
pursuing opportunities in Brazil. Today I am pleased to report that once again
our Board of Directors has declared a dividend of$.21 per share, the same as
last quarter.”

Book manufacturing: strong sales across the board

Courier’s book manufacturing segment reported first-quarter sales of$65.6
million, up 14% from$57.5 millionin last year’s first quarter. The segment’s
operating income was$5.3 million, down slightly from$5.5 milliona year ago,
reflecting a tight pricing environment as well as increased depreciation,
amortization and other costs associated with investments in FastPencil, Brazil
and the expansion of the Kendallville digital facility.

The book manufacturing segment focuses on three markets: education, religion,
and specialty trade. Sales to theeducationmarket were$28 millionin the
first quarter, up 14% from a year earlier, primarily due to increased sales of
college textbooks, but with gains at the elementary and high school level as
well. Sales to thereligiousmarket were up 14% to$19 millionin the quarter,
with sales to Courier’s largest religious customer up 8%, with some of the
increase related to the timing of orders. Sales to this customer have often
varied widely from quarter to quarter within a long-term pattern of
single-digit growth. Sales to thespecialty trademarket were up 12% to$17
million, largely reflecting increased demand for digital printing and
four-color books.

“All our manufacturing facilities performed well this quarter,” said Mr.
Conway. “We had a significant rise in four-color work, helped by higher
volumes in specialty trade as well as in textbooks. With the recovering
economy and the move to Common Core curricula in most states, we are hopeful
that the growth in elementary and high school textbook sales over the last two
quarters will continue as the year progresses. In addition, we had a strong
quarter in the religious market, as we continued to provide our long-time
customer with manufacturing and distribution services that bring scriptures
into more than 100 countries. And we continue to be excited about the growth
opportunities represented by our investments in FastPencil and our developing
partnerships in Brazil.”

Publishing reports improved results

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, even with last
year’s first quarter, with sales up at Dover but lower at our other two
publishing companies. The segment’s operating loss for the quarter
was$600,000, versus $1.1 millionfor the first quarter of fiscal 2013,
largely driven by improvements at Dover, which broke even in the quarter.

“Dover’s performance continues to improve,” said Mr. Conway. “Sales were up in
the quarter, helped by the availability of titles in ebook form as well as the
growing popularity of our Creative Haven line of adult coloring books and a
strong showing by Tudor Roses, a Calla Edition Original celebrating
hand-knitted designs inspired by history. However, REA and Creative Homeowner
continued to suffer from the loss of many of their traditional
bricks-and-mortar sales channels. During the quarter we took action to reduce
overhead at REA and focus new product investment on key test preparation
markets such as AP, CLEP and GED.

“A positive sign was the segment’s increase in online sales. Ebooks, now
approaching 5,000 titles, accounted for part of this growth, but print sales
through online retailers were also up. Our in-house digital print resources
continue to prove their value as we bring more and more out-of-print titles
back into circulation at quantities that would have been unsustainable with
offset production alone.”


“With a solid quarter behind us and increasing signs of economic recovery, we
are well positioned for the year ahead in our major markets,” said Mr. Conway.
“We continue to reap the benefits of our disciplined investments in technology
and service. Yet even as we add to those investments in order to expand our
opportunities, we still face intense pressure on print pricing. As a result,
while we expect revenues to continue to outpace the overall U.S. education
market and maintain their historic growth rate with our largest religious
customer, we expect growth in net income to be constrained by those continuing
factors, 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 $280 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.

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 2014,
expansion into ebooks 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. Some of the
factors that could affect actual results include, among others, pricing
actions by competitors and other competitive pressures in the markets in which
the Company competes, consolidation among customers and competitors, changes
in customers’ demand for the Company’s products, including seasonal changes in
customer orders and shifting orders to lower cost regions, 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, insolvency of key customers or vendors,
changes in technology including migration from paper-based books to digital,
changes in market growth rates, changes in obligations of multiemployer
pension plans 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, changes in
raw material costs and availability, changes in the Company’s labor relations,
changes in operating expenses including medical and energy costs, 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 and changes in the
Company’s effective income tax rate. 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 28,   December 29,
                                          2013          2012      
Net sales                                 $72,796        $64,756
Cost of sales                             54,904        48,756    
Gross profit                              17,892         16,000
Selling and administrative expenses       13,448        11,968    
Operating income                          4,444          4,032
Interest expense, net                     175           190       
Income before taxes                       4,269          3,842
Income tax provision                      1,622         1,422     
Net income                                $2,647        $2,420    
Net income per diluted share              $0.23         $0.21     
Cash dividends declared per share         $0.21         $0.21     
Wtd. average diluted shares outstanding   11,515         11,424
Net sales:
Book Manufacturing                        $65,576        $57,481
Publishing                                9,121          9,134
Elimination of intersegment sales         (1,901    )    (1,859    )
Total                                     $72,796        $64,756
Operating income (loss):
Book Manufacturing                        $5,310         $5,499
Publishing                                (600      )    (1,136    )
Stock based compensation                  (358      )    (341      )
Intersegment profit                       92            10        
Total                                     $4,444         $4,032

(In thousands)
                                      December 28,   December 29,
                                      2013          2012      
Net sales                             $65,576        $57,481
Cost of sales                         51,216        44,430    
Gross profit                          14,360         13,051
Selling and administrative expenses   9,050         7,552     
Operating income                      $5,310        $5,499    
                                      December 28,   December 29,
                                      2013          2012      
Net sales                             $9,121         $9,134
Cost of sales                         5,682         6,195     
Gross profit                          3,439          2,939
Selling and administrative expenses   4,039         4,075     
Operating loss                        ($600     )    ($1,136   )

(In thousands)
                                                 December 28,   September 28,
ASSETS                                           2013           2013
Current assets:
  Cash and cash equivalents                      $146           $57
  Investments                                    960            1,012
  Accounts receivable                            38,659         43,837
  Inventories                                    34,791         35,086
  Deferred income taxes                          4,133          3,954
  Other current assets                           2,721          2,579
    Total current assets                         81,410         86,525
Property, plant and equipment, net               93,933         93,051
Goodwill and other intangibles                   25,610         25,853
Prepublication costs                             6,522          6,717
Deferred income taxes                            2,882          2,827
Other assets                                     6,113          2,021
    Total assets                                 $216,470       $216,994
Current liabilities:
  Current maturities of long-term debt           $3,187         $1,125
  Accounts payable                               11,386         13,699
  Accrued taxes                                  2,099          3,117
  Other current liabilities                      15,823         18,033
    Total current liabilities                    32,495         35,974
Long-term debt                                   26,334         24,583
Other liabilities                                11,012         10,393
    Total liabilities                            69,841         70,950
    Total stockholders' equity                   146,629        146,044
    Total liabilities and stockholders' equity   $216,470       $216,994

(In thousands)
                                    For the Three Months Ended
                                    December 28,             December 29,
                                    2013                    2012        
Operating Activities:
Net income                          $2,647                   $2,420
Adjustments to reconcile net
income to cash provided from
operating activities:
Depreciation and                    6,352                    5,833
Stock-based compensation            358                      341
Deferred income taxes               (234         )           165
Changes in other working            90                       1,289
Change in fair value of             165                      15
contingent consideration
Other long-term, net                523                     (129        )
Cash provided from operating        9,901                   9,934       
Investment Activities:
Capital expenditures                (6,095       )           (1,505      )
Prepublication costs                (713         )           (743        )
Long-term investments               (4,461       )           -
Short-term investments              52                      (1          )
Cash used for investment            (11,217      )           (2,249      )
Financing Activities:
Long-term debt repayments,          3,813                    (5,181      )
Cash dividends                      (2,416       )           (2,421      )
Other                               8                       -           
Cash provided from (used            1,405                   (7,602      )
for) financing activities
Increase in cash and cash           $89                     $83         
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                          $2,647                   $2,420
Income tax provision                1,622                    1,422
Interest expense, net               175                      190
Depreciation and                    6,352                    5,833
Change in fair value of             165                     15          
contingent consideration
EBITDA                              $10,961                 $9,880      


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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