Courier Corporation (Nasdaq: CRRC), one of America�s leading book
manufacturers and specialty publishers, today announced results for
the quarter ended December 30, 2006, the first quarter of its 2007
fiscal year. A slowdown in textbook demand during the early fall
and a lackluster start to the holiday season at major retail chains
dampened Courier�s sales growth and cut into earnings, but
continued share gains and strong December orders led management to
maintain its previous guidance for record full-year results.
Revenues for the quarter were $64.3 million, up 11% from last
year�s first-quarter sales of $57.7 million, with the increase
largely attributable to results from Courier�s April 2006
acquisition of Creative Homeowner. Net income for the quarter was
$4.0 million, down 10% from prior-year results of $4.5 million. Net
income per diluted share was $.32, versus $.36 in the first quarter
of fiscal 2006. Sales in both of Courier�s business segments
reflected the uneven environment that prevailed across the
industry. Book manufacturing revenues were up 4% on modest growth
in textbook sales and several large orders from specialty trade
publishers. Sales in Courier�s specialty book publishing segment
rose 53% on solid performance by Creative Homeowner and continued
sales growth at Research & Education Association (REA). These
gains were partly offset by a 13% sales decline at Dover
Publications. Yet while Dover�s trade sales were down, retail sales
of Dover books to consumers were up at leading chains, outpacing
overall retail sales and indicating strong underlying demand for
Dover products. �A pause in textbook orders in the early fall and a
cautious holiday retail environment put pressure on both sides of
our business this quarter,� said Courier Chairman and Chief
Executive Officer James F. Conway III. �Yet a closer look at our
performance reveals grounds for optimism about the next several
quarters. With healthy year-end order flow and the completion of
our plant expansion in Kendallville, Indiana, our book
manufacturing segment is ready to capitalize on share gains with
four-color textbook publishers throughout the remainder of the
year. In our publishing segment, Dover sales to retailers were off,
but retailers� inventory of Dover books sold well to consumers,
confirming that our products are on target and our new
merchandising programs are working as planned. With increased sales
and better-than-expected profitability at Creative Homeowner, plus
a stellar quarter at REA, we look forward to strong growth for the
remainder of our 2007 fiscal year.� Book manufacturing sales up 4%
Courier�s book manufacturing segment had first-quarter sales of
$50.0 million, up 4% from last year�s first quarter. Pretax income
for the segment was down 4% in the quarter to $5.9 million or $.30
per diluted share, versus $6.2 million or $.32 per diluted share in
2006. Gross profit in the segment also fell 4% to $13.1 million,
decreasing as a percentage of sales to 26.1% from 28.1% in 2006,
reflecting lower sales growth, a less favorable product mix and a
very competitive marketplace. The book manufacturing segment
focuses on three publishing markets: education, religion, and
specialty trade. Sales to the education market rose 2% in the
quarter, primarily driven by sales of college textbooks. Sales to
the religious market were down 3% from last year�s first quarter,
reflecting normal fluctuations related to order timing. Sales to
the specialty trade market were up 14% from fiscal 2006, helped by
several large one-time orders. During the quarter, Courier
completed a major plant expansion in Kendallville, Indiana, adding
a third MAN Roland four-color press and enlarging its bindery with
new equipment. This added capacity became available just in time
for the increased order flow at the end of the quarter, with the
new press running almost at full capacity within its first few
weeks of operation. �Our Kendallville expansion could not have come
at a better time,� said Mr. Conway. �For the last few years,
textbook publishers have been turning to Courier for an increasing
share of their four-color production, and the trend has accelerated
since our installation of new sewing systems last spring. When
sales of textbooks slowed in the early fall, our manufacturing
margins were affected. But as the quarter progressed, we received
indications of a sharp upturn in textbook orders for 2007,
particularly in the elementary and high school market. Then as
college orders surged at the end of the quarter, we were able to
handle the increased workflow thanks to the flawless startup and
superb print quality of our latest MAN Roland press. We expect our
expanded Kendallville plant to run at full capacity during the busy
textbook season, more than making up for the first quarter�s slower
growth.� Specialty publishing gains from Creative Homeowner sales
Courier�s specialty 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 (since April 2006) Creative Homeowner, a publisher and
distributor of books on home design, decorating, landscaping and
gardening, as well as complete home plans and blueprints.
First-quarter sales for the segment were $16.8 million, up 53% from
$10.9 million in last year�s first quarter, with the increase
attributable to the addition of Creative Homeowner and sales growth
at REA. Sales at Dover Publications, the segment�s largest
business, were down 13% following an exceptionally strong fourth
quarter in fiscal 2006. However, many retailers reported increased
sales of Dover books during the period, leaving lower inventories
likely to be replenished in the coming quarters. Sales to two of
Dover�s largest customers were down 19% in the first quarter, yet
their sales of Dover books to their customers was up 8% on average.
Sales to smaller retailers were down 6% in the quarter, but orders
received from these retailers were up 11%, reflecting healthy
consumer demand. Pretax income for the publishing segment was $0.8
million or $.04 per diluted share for the quarter, down from $1.1
million or $.06 per diluted share in fiscal 2006. Gross profit was
41.8% of sales, down from 44.7% a year ago, due in part to the
impact of Creative Homeowner�s lower-margin distribution business.
�Dover�s results for the quarter were less than we had hoped, but
better than the prior-year comparison suggests,� said Mr. Conway.
�Sales in the fall of 2005 were boosted by a $600,000 reduction in
backlog following the completion of our SAP infrastructure
conversion. This past fall we saw cautious ordering by trade
retailers, but Dover books performed well in stores, in some cases
significantly surpassing broader indicators of comparable-store
sales. Dover�s combination of attractive titles and innovative
merchandising is working well for retailers, and during the quarter
we placed hundreds of new displays in smaller stores around the
country. Meanwhile, REA extended last year�s growth with a 17%
increase in first-quarter sales, while the addition of Creative
Homeowner strengthened our top line and contributed to
profitability. As a result, despite the quarter�s challenges, we
remain confident that full-year results will confirm the
effectiveness of Dover�s retail trade programs and the vitality of
our entire publishing segment.� Outlook �We expect the momentum we
gained in December to build as we move further into our 2007 fiscal
year,� said Mr. Conway. �In book manufacturing, we enter the second
quarter with our business even stronger than it was at this time
last year, which was our best year ever. We expect continued strong
performance through the remainder of the year, with particular
success in the education market. In specialty publishing, we expect
Dover sales to resume their healthy growth, and we look forward to
continued gains at REA and Creative Homeowner. �For fiscal 2007
overall, we are maintaining our earlier guidance indicating sales
growth of 13% to 16%, resulting in total sales of between $304 and
$311 million, which would be a new record high for Courier. We
expect earnings per share to grow as well, reaching $2.20 to $2.30
for fiscal 2007. This represents an increase of between 13% and 18%
from fiscal 2006 earnings of $1.95 per diluted share, excluding the
effect of the reversal of a tax reserve, which added $.30 to
fourth-quarter and full-year earnings in 2006. �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 the
first quarter of fiscal 2007, Courier's EBITDA was $11.0 million,
up 8% from the same quarter in 2006. For the full year of 2007 we
expect EBITDA to be between $65 million and $67 million. This would
represent an increase of 22% to 26% for the year.� About Courier
Corporation Courier Corporation prints, publishes and sells books.
Headquartered in North Chelmsford, Massachusetts, Courier has two
business segments, full-service book manufacturing and specialty
book 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 and availability,
pricing actions by competitors, consolidation among customers and
competitors, success in the integration of acquired businesses,
changes in operating expenses including energy costs, changes in
technology, difficulties in the start up of new equipment or
information technology systems, changes in copyright laws, changes
in tax regulations, changes in the Company�s effective income tax
rate, 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.
COURIER CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share amounts) � FIRST QUARTER ENDED
December 30, December 24, 2006� 2005� � Net sales $64,312� $57,684�
Cost of sales 44,168� 39,153� � Gross profit 20,144� 18,531� �
Selling and administrative expenses 13,501� 11,680� Interest
expense (income), net 222� (148) � Income before taxes 6,421�
6,999� � Provision for income taxes 2,398� 2,512� � Net income
$4,023� $4,487� � Net income per diluted share $0.32� $0.36� � Cash
dividends declared per share $0.18� $0.12� � Wtd. average diluted
shares outstanding 12,656� 12,551� � SEGMENT INFORMATION: � Net
sales: Book Manufacturing $49,962� $48,234� Specialty Publishing
16,758� 10,921� Intersegment sales (2,408) (1,471) Total $64,312�
$57,684� � Income before taxes: Book Manufacturing $5,891� $6,163�
Specialty Publishing 807� 1,085� Stock based compensation (363)
(336) Intersegment profit 86� 87� Total $6,421� $6,999� � Net
income per diluted share: Book Manufacturing $0.30� $0.32�
Specialty Publishing 0.04� 0.06� Stock based compensation (0.02)
(0.02) Intersegment profit -� -� Total $0.32� $0.36� COURIER
CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
(Dollars in thousands) � � December 30, September 30, ASSETS 2006�
2006� � Current assets: Cash and cash equivalents $1,506� $1,483�
Accounts receivable 42,337� 46,002� Inventories 33,534� 29,565�
Deferred income taxes 3,701� 3,703� Other current assets 936�
1,110� Total current assets 82,014� 81,863� � Property, plant and
equipment, net 90,007� 85,248� Goodwill and other intangibles
68,896� 69,097� Prepublication costs 9,668� 9,327� Other assets
1,679� 1,653� � Total assets $252,264� $247,188� � � LIABILITIES
AND STOCKHOLDERS' EQUITY � Current liabilities: Current maturities
of long-term debt $88� $88� Accounts payable 17,650� 15,778�
Accrued taxes 2,312� 3,362� Other current liabilities 14,050�
16,462� Total current liabilities 34,100� 35,690� � Long-term debt
20,948� 17,222� Deferred income taxes 9,481� 8,913� Other
liabilities 2,791� 3,037� � Total liabilities 67,320� 64,862� �
Total stockholders' equity 184,944� 182,326� � Total liabilities
and stockholders' equity $252,264� $247,188� COURIER CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands) � � For the Three Months Ended December 30,
December 24, 2006� 2005� � Operating Activities: Net income $
4,023� $ 4,487� Adjustments to reconcile net income to cash
provided from operating activities: Depreciation and amortization
4,405� 3,370� Stock based compensation 363� 336� Deferred income
taxes 570� 159� Changes in working capital (1,720) 1,307� Other,
net (252) 82� � Cash provided from operating activities 7,389�
9,741� � Investment Activities: Capital expenditures (7,895)
(7,408) Business acquisition, net of cash acquired -� (14,163)
Prepublication costs (1,405) (777) � Cash used for investment
activities (9,300) (22,348) � Financing Activities: Long-term
borrowings, net 3,726� (21) Cash dividends (2,242) (1,479) Proceeds
from stock plans 475� 161� Excess tax benefits from stock based
compensation (25) -� � Cash provided from (used for) financing
activities 1,934� (1,339) � Increase (decrease) in cash and cash
equivalents 23� (13,946) � Cash and cash equivalents at the
beginning of the period 1,483� 34,038� � Cash and cash equivalents
at the end of the period $ 1,506� $ 20,092� � Non-GAAP measures -
EBITDA: Net income $ 4,023� $ 4,487� Provision for income taxes
2,398� 2,512� Interest expense (income), net 222� (148)
Depreciation and amortization 4,405� 3,370� EBITDA $ 11,048� $
10,221�
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