CRRC (MM)

Courier Corporation (Nasdaq:CRRC), one of America's leading book manufacturers and specialty publishers, today announced record results for the fiscal year ending September 24, 2005. Concluding the year with the best quarter in its history, the company recorded an all-time high in annual revenues and its ninth straight year of record income. Simultaneously with the release of the company's operating results, Courier's Board of Directors announced a 20% increase in its quarterly common stock dividend. This marked the ninth consecutive year of double-digit increases in Courier's dividend, and followed a 50% dividend increase six months ago. Fourth quarter net income was $8.0 million, or $.64 per diluted share, up 5% from $7.6 million, or $.61 per diluted share, in the fourth quarter of fiscal 2004. Revenue for the quarter was $63.5 million, up 7% from $59.2 million in last year's fourth quarter. For fiscal 2005 as a whole, net income rose to $22.1 million, up 8% from $20.5 million in 2004. Net income per diluted share was $1.77, an increase of 6% over last year's earnings of $1.67. Revenue for the year was $227 million, up 8% from $211 million a year ago. (Prior-year earnings per share have been adjusted to reflect a three-for-two stock split on May 27, 2005.) "Our book manufacturing business had a terrific year," said Courier Chairman and Chief Executive Officer James F. Conway III. "We continued to take advantage of a strong education market, using our increased four-color printing capacity to capture a greater share of business from textbook publishers on top of the growth in the market itself. As always, we continued to invest in technology and service, and as a result we were able to deliver for customers in a manner that has prepared the way for further gains in the future. "Results in our specialty publishing segment were not what we would have liked, as major initiatives in sales and marketing, distribution and information technology reduced both sales and income.Yet as we approach the completion of these initiatives, we expect to see significant improvements starting in fiscal 2006. In addition, we are encouraged by the initial response by retailers to our rollout of new merchandising programs at Dover Publications, and by the continued growth and development of Research & Education Association (REA). "Beyond record sales and income, fiscal 2005 was notable by several other measures. We increased our dividend twice, completed a three-for-two stock split, and outperformed the S&P 500 for the eighth year out of the last nine. And despite nearly $20 million in capital investments, we ended the year with $34 million in cash, $10 million more than last year." Book manufacturing Courier's book manufacturing segment had fourth-quarter sales of $54.8 million, up 11% from last year's fourth quarter. Pretax earnings for the segment rose 23% in the fourth quarter to $11.2 million or $.58 per diluted share versus $9.1 million or $.48 per diluted share in 2004. For the full year, book manufacturing sales were $193.6 million, up 9% from $177.2 million in fiscal 2004. Pretax earnings for the year were $30.8 million or $1.60 per diluted share, an increase of 22% from last year's $25.2 million or $1.34 per diluted share. Gross profit as a percentage of the year's sales increased to 29.5% from 27.9% in 2004, reflecting increased sales volume, improved plant productivity, and a higher-value product mix as a result of publishers' growing emphasis on four-color production. The book manufacturing segment focuses on three publishing markets: education, religion, and specialty trade. Sales to the education market rose 14% in the fourth quarter and 15% for the full year, driven by strong sales at all levels, from elementary and high school through college. In the religious market, sales were up 3% in the fourth quarter but flat for the year as a whole, reflecting an earlier decision to discontinue certain low-priced work. Sales to the specialty trade market were up 18% in the fourth quarter and up 7% for the full year. "For several years Courier has been capturing a greater share of the four-color textbook market, and this year was everything we hoped it would be," said Mr. Conway. "Our new ManRoland press ran at capacity, giving publishers the quality and timely service needed to capitalize on an extended wave of growth in textbook orders. With a second identical press currently being installed, we will be ready for the additional volume we expect. "Meanwhile, we are expanding our service capabilities in other ways as well. Shortly after the conclusion of the fiscal year, we tripled our in-house cover printing capacity with the acquisition of Moore Langen, an Indianapolis-based firm known throughout the industry for innovative book cover production techniques. Also, in response to customer requests, we are expanding our array of sewing and binding options, which will enable us to qualify for a sizable volume of work which was previously closed to us. Disciplined investment and collaboration with customers are at the heart of our success in all our markets, and will continue to be a positive differentiator for Courier as we build on our 2005 accomplishments." Specialty publishing Courier's specialty publishing segment reported fourth-quarter sales of $10.3 million, down 8% from $11.2 million in last year's fourth quarter. The segment's pretax income was $1.3 million or $.06 per diluted share for the quarter, compared to $2.6 million or $.13 per diluted share last year. For the full year, specialty publishing sales were $40.3 million, down 1% from $40.8 million in fiscal 2004. Full-year pretax income for the segment was $3.8 million, compared to $6.5 million a year earlier. The segment includes two businesses: Research & Education Association (REA), a publisher of test preparation books and study guides, and Dover Publications, a niche publisher with thousands of titles in dozens of specialty trade markets. REA sales were $1.7 million in the fourth quarter, up 15% from fiscal 2004. For the year, REA sales totaled $5.6 million, in line with expectations. Dover sales were down 11% to $8.6 million in the fourth quarter, and off 6% to $34.7 million for the full year. The declines reflected soft sales to trade retailers as well as fourth-quarter shipment delays in conjunction with a previously announced warehouse consolidation and enterprise-wide information system conversion to SAP. Both of these tasks are due to be completed in the current quarter along with the reconfiguration of sales and marketing begun last spring. Dover's direct-to-consumer sales continued to increase as they have every year, rising 9% in the fourth quarter and 12% for the year. Overall, the segment's gross profit as a percentage of sales declined to 44.3% in the fourth quarter versus 50.1% a year earlier, and 45.9% for the full year, versus 47.9% for fiscal 2004. This decline reflected the reduced sales volume at Dover and costs related to the warehousing and information technology projects. "This has been a challenging period for our publishing segment," said Mr. Conway. "We started the year with an ambitious agenda for upgrading Dover's organization and infrastructure, and we have made tremendous progress toward our goals. Yet the fourth quarter caught us midstream in our information technology and warehouse conversions, compounding reduced sales with shipping delays. I am confident that once the new systems are fully implemented, they will improve our efficiency and enhance our service. In the meantime, we have rolled out a series of innovative merchandising programs that have been well received by trade retailers and should help us turn the corner and start recapturing the growth Dover is capable of. Factor in the continuing strong performance at REA, and I remain as enthusiastic as ever about our publishing prospects." Outlook for fiscal 2006 "Trends in the education market remain very favorable for our book manufacturing business," said Mr. Conway. "We look forward to continuing our growth in fiscal 2006 and beyond, extending our gains in volume and market share as demand for four-color textbooks continues to rise. In the religious market, our decision to focus on core accounts and higher-value work has improved our financial performance and service levels. While specialty trade sales were uneven over the past year, we hope to build on the upturn we experienced in the fourth quarter. And the acquisition of Moore Langen, a $15-million cash transaction completed on October 17, should add approximately $12 million to our sales for the year and be modestly accretive to fiscal 2006 earnings after allocating interest expense on the acquisition price against these earnings. "In our specialty publishing segment, we expect Dover's excellent product offering, revitalized sales and marketing organization, state-of-the-art infrastructure and strong focus on the needs of retailers to drive renewed revenue growth as the year progresses, while REA continues on its leadership track in test preparation, student proficiency and teacher certification. "Throughout both of our businesses, we will continue to work hard to deliver the best service in the industry while maximizing operating efficiency. The results of these efforts point to another record year. "For fiscal 2006 overall, we expect to achieve sales growth of 14% to 16% (which includes the benefit of a 53-week year in fiscal 2006), resulting in total sales of between $258 and $263 million, which would be another record high for Courier. And we expect earnings per share to grow even faster, reaching $2.00 to $2.10 for fiscal 2006, prior to the effect of a change in stock option accounting. This represents an increase of between 13% and 19% from this year's earnings of $1.77 per diluted share, and would also set a new company record." New stock option accounting rules, which require expensing the value of stock options, become effective at the beginning of fiscal year 2006. The impact of this change is expected to reduce fiscal 2006 earnings by $.06 per diluted share. The new rule will be applied retrospectively resulting in a reduction in fiscal 2005 earnings of $.10 per diluted share. After the effect of the change, fiscal 2006 earnings are expected to be between $1.94 and $2.04 per diluted share, compared to $1.67 per diluted share for fiscal 2005, an increase of between 16% and 22%. About Courier Corporation Courier Corporation publishes, prints and sells books. Headquartered in North Chelmsford, Massachusetts, Courier has two business segments, full-service book manufacturing and specialty publishing. For more information, visit www.courier.com. This news release includes forward-looking statements. 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, changes in raw material costs, pricing actions by competitors, consolidation among customers and competitors, success in the integration of acquired businesses, unanticipated changes in operating expenses, changes in technology, difficulties in the start up of new equipment or information technology systems, changes in copyright laws, changes in tax regulations, and general changes in economic conditions, including currency fluctuations and changes in interest rates. 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. -0- *T COURIER CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share amounts) QUARTER ENDED YEAR ENDED ----------------------- ----------------------- September September September September 24, 25, 24, 25, 2005 2004 2005 2004 ----------- ----------- ----------- ----------- Net sales $63,517 $59,208 $227,039 $211,179 Cost of sales 40,800 39,143 151,853 142,609 ----------- ----------- ----------- ----------- Gross profit 22,717 20,065 75,186 68,570 Selling and administrative expenses 10,607 8,414 41,338 37,292 Interest (income) expense, net (206) 3 (388) (23) Gain on real estate sale - - - 250 ----------- ----------- ----------- ----------- Income before taxes 12,316 11,648 34,236 31,551 Provision for income taxes 4,320 4,065 12,102 11,011 ----------- ----------- ----------- ----------- Net income $7,996 $7,583 $22,134 $20,540 =========== =========== =========== =========== Net income per diluted share $0.64 $0.61 $1.77 $1.67 =========== =========== =========== =========== Cash dividends declared per share $0.10 $0.058 $0.333 $0.233 =========== =========== =========== =========== Wtd. average diluted shares outstanding 12,535 12,351 12,490 12,332 SEGMENT INFORMATION: Net sales: --------------------- Book Manufacturing $54,836 $49,625 $193,623 $177,225 Specialty Publishing 10,311 11,202 40,254 40,787 Intersegment sales (1,630) (1,619) (6,838) (6,833) ----------- ----------- ----------- ----------- Total $63,517 $59,208 $227,039 $211,179 Income before taxes: --------------------- Book Manufacturing $11,166 $9,104 $30,812 $25,186 Specialty Publishing 1,268 2,592 3,836 6,475 Intersegment profit and other (118) (48) (412) (110) ----------- ----------- ----------- ----------- Total $12,316 $11,648 $34,236 $31,551 Net income per diluted share: --------------------- Book Manufacturing $0.58 $0.48 $1.60 $1.34 Specialty Publishing 0.06 0.13 0.19 0.33 Intersegment profit and other (0.01) - (0.02) (0.01) ----------- ----------- ----------- ----------- Total $0.64 $0.61 $1.77 $1.67 Shares outstanding and per share amounts have been retroactively adjusted to reflect a three-for-two stock split effected on May 27, 2005. COURIER CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (Dollars in thousands) Sept. 24, Sept. 25, ASSETS 2005 2004 ---------------------------------------------------------- ---------- Current assets: Cash and cash equivalents $34,038 $23,965 Accounts receivable 34,207 34,072 Inventories 25,451 25,108 Deferred income taxes 2,945 2,852 Other current assets 962 840 ----------- ---------- Total current assets 97,603 86,837 Property, plant and equipment, net 59,115 48,482 Goodwill 33,255 33,255 Prepublication costs 5,399 5,127 Other assets 1,593 1,498 ----------- ---------- Total assets $196,965 $175,199 =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY ----------------------------------------------- Current liabilities: Current maturities of long-term debt $85 $83 Accounts payable 10,534 10,059 Accrued taxes 5,770 5,735 Other current liabilities 14,273 13,664 ----------- ---------- Total current liabilities 30,662 29,541 Long-term debt 425 510 Deferred income taxes 6,924 7,528 Other liabilities 3,020 2,630 ----------- ---------- Total liabilities 41,031 40,209 ----------- ---------- Total stockholders' equity 155,934 134,990 ----------- ---------- Total liabilities and stockholders' equity $196,965 $175,199 =========== ========== COURIER CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) For the Years Ended ----------------------- September September 24, 25, 2005 2004 ---------- ------------ Operating Activities: Net income $22,134 $20,540 Adjustments to reconcile net income to cash provided from operating activities: Depreciation and amortization 11,660 10,929 Deferred income taxes (697) 2,293 Changes in working capital 519 (4,558) Tax benefits of stock option activity 1,064 562 Gain on real estate sale - (163) Other, net 320 (1,271) ---------- ------------ Cash provided from operating activities 35,000 28,332 ---------- ------------ Investment Activities: Capital expenditures (19,683) (13,416) Prepublication costs (2,867) (2,818) Business acquisition - (11,850) Proceeds from real estate sale - 1,664 ---------- ------------ Cash used for investment activities (22,550) (26,420) ---------- ------------ Financing Activities: Repayments of debt, net (83) (81) Cash dividends (4,066) (2,794) Proceeds from stock plans 1,772 1,104 ---------- ------------ Cash used for financing activities (2,377) (1,771) ---------- ------------ Increase in cash and cash equivalents 10,073 141 Cash and cash equivalents at the beginning of the period 23,965 23,824 ---------- ------------ Cash and cash equivalents at the end of the period $34,038 $23,965 ========== ============ *T