Courier Corporation (Nasdaq: CRRC), one of America�s leading
book manufacturers and specialty publishers, today announced
results for the quarter ended June 27, 2009, the third quarter of
its 2009 fiscal year. With the nationwide recession continuing to
dampen sales in both of Courier�s business segments, consolidated
third-quarter revenues were $61.4 million, down from $73.4 million
in last year�s third quarter. Yet by the end of the quarter, an
increase in four-color textbook orders, combined with other market
factors, suggest a stronger finish to the fiscal year. Net income
for the third quarter was $1.6 million or $.14 per diluted share,
versus a loss of $12.4 million or $1.01 per diluted share in the
third quarter of fiscal 2008, though the fiscal 2008 results
included the effect of a non-cash impairment charge of $23.9
million or $1.27 per diluted share. Excluding that impairment
charge, net income in fiscal 2008�s third quarter was $3.1 million
or $.26 per diluted share.
For the first nine months of fiscal 2009, Courier sales were
$180.4 million, down from $204.0 million in 2008. Net loss through
nine months was $8.9 million or $.75 per diluted share, versus a
loss of $7.6 million or $.61 per diluted share a year ago. The
year-to-date loss in fiscal 2009 reflects $19.4 million in
restructuring and impairment charges taken earlier in the year.
Excluding these restructuring and impairment charges, net income
for the first nine months of fiscal 2009 was $3.6 million or $.31
per diluted share. Excluding the 2008 impairment charge referred to
above, net income for the first nine months of fiscal 2008 was $7.9
million or $.64 per diluted share.
With consumer spending down and book retailers managing
inventory tightly, Courier�s third-quarter publishing sales were
down, but less so than earlier in the year, with a single-digit
decline at Dover Publications and sales at Research & Education
Association (REA) essentially flat from 2008. While Creative
Homeowner sales were down 38%, most of that decline was the result
of the winding-down of its book distribution services earlier in
the year.
Revenues were also down in Courier�s book manufacturing segment,
reflecting declines in all three of the company�s principal book
markets. Despite the late surge in four-color orders, education,
religious and specialty trade sales were all below fiscal 2008
levels as a result of the weak economy and its impact on school
budgets, consumer spending and fundraising by religious
organizations. Net income for the segment was off significantly
from a year ago but up from the prior quarter, largely as a result
of the completion of earlier cost-reduction measures.
�Our third-quarter performance inevitably reflected
macroeconomic trends across the country and around the world,� said
Courier Chairman and Chief Executive Officer James F. Conway III.
�Faced with the challenging economy, we continued to take pains to
operate as efficiently as possible while distinguishing ourselves
competitively by helping customers weather similar storms in their
own businesses. As a result, we came through the quarter with our
financial position still solid and our key relationships stronger
than ever. While challenges remain across the board, as the quarter
progressed several trend lines turned less negative than we had
seen in months. We were particularly pleased to end the quarter
with our plant in Kendallville, Indiana operating at capacity and
with continued strong cash flow, which enabled us to reduce our
debt by $3.6 million from a year ago. And as always, we were
pleased to serve our investors with this morning�s declaration of a
quarterly dividend of $.21 per share, the same as last
quarter.�
Book manufacturing: managing through the cycle
Courier�s book manufacturing segment had third-quarter sales of
$52.7 million, down from $63.2 million in last year�s third
quarter, with operating income of $3.7 million, versus $8.1 million
a year ago. Gross profit in the segment was $9.9 million, or 19% of
sales, down from $15.7 million, or 25% of sales, in the third
quarter of fiscal 2008. The decline reflected the recession�s broad
impact on sales, pricing pressure and capacity utilization, as well
as a decline in revenue from recycled paper.
For the first nine months of fiscal 2009, book manufacturing
sales were $153.5 million, down 8% from the first nine months of
fiscal 2008. The segment�s operating income through nine months was
$6.7 million, including restructuring costs of $3.3 million nearly
all of which was incurred in the second quarter. For the first nine
months of fiscal 2008, operating income was $15.8 million. Gross
profit through the first nine months of fiscal 2009 was $26.5
million or 17% of sales, down from $38.8 million or 23% of sales
last year.
The book manufacturing segment focuses on three markets:
education, religion, and specialty trade. Sales to the education
market were down 18% in the quarter and down 8% for the fiscal year
to date, with growth in higher education sales offset by continued
weakness at the elementary and high school levels, as local and
state governments continued to wrestle with budget shortfalls.
Sales to the religious market were also down 18% from last year�s
third quarter and were down 10% through nine months, reflecting a
difficult fundraising environment. Sales to the specialty trade
market were down 10% from last year�s third quarter, but flat
through the first nine months of fiscal 2009. Even sales of
four-color books, normally a Courier strength, were off during the
quarter, reflecting the breadth and depth of the recession, though
on a year-to-date basis they remained ahead of fiscal 2008.
�It was a challenging quarter across the board,� said Mr.
Conway. �With the recession hitting nearly every sector of the
economy, customers in all of our book manufacturing markets were
affected, and we were along with them. There were some positive
developments, including continued sales growth in the higher
education market and an end-of-quarter upsurge in orders in
anticipation of the coming school year. Also, while sales to the
religious market were down, our long experience and strong
relationships in this market give us confidence that they will
return to historical levels before long.
�In managing through past recessions, we have been helped
greatly by our passionate commitment to customers and proven
ability to meet their needs in demanding circumstances. These
traits have served us well again this year, as we have worked
closely with customers to deliver outstanding quality on short
notice across a wide range of run lengths. Equally important, once
again we have shown ourselves willing to invest across economic
cycles in innovations that will help our customers going forward.
Starting in the depths of the last recession, we invested heavily
in four-color capacity at our Kendallville plant; this quarter we
committed to investing in state-of-the-art digital printing through
a relationship with HP. At the same time, we have continued to
attract growing attention from environmentally responsible
publishers with our Green Edition capabilities. By operating
efficiently, investing prudently and continuing to provide
exceptional service, I�m confident we will not only get through the
recession, but become a stronger competitor in the process.�
Specialty publishing: offering value to cautious
consumers
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 Creative Homeowner, which publishes books on
home design, decorating, landscaping and gardening.
Third-quarter revenues for the segment were $11.3 million, down
15% from $13.4 million in last year�s third quarter. Creative
Homeowner sales were down 38%, but mostly due to its cessation of
book distribution activities earlier in the year; its operating
loss was $581,000, versus a loss of $3.1 million in last year�s
third quarter. Dover sales were down 8% in the quarter, though the
decline was less than in the previous two quarters. REA sales were
virtually unchanged from last year, also a significant improvement
over the sales declines of the previous quarters. Overall, the
segment�s third-quarter operating loss was $624,000, versus a loss
of $2.5 million last year. Gross profit was $4.2 million or 37% of
sales, versus $3.3 million or 25% of sales in last year�s third
quarter.
For the first nine months of fiscal 2009, specialty publishing
sales were $34.9 million, down 23% from $45.4 million in fiscal
2008. The segment�s year-to-date operating loss was $3.1 million
including approximately $500,000 in severance costs, versus a loss
of $1.4 million last year. Of the current-year loss, Creative
Homeowner accounted for $2.5 million.
�Our publishing businesses did their best to fend off the
combined effects of a shrinking economy, weak consumer confidence
and the continuing trough in the housing sector,� said Mr. Conway.
�Dover expanded its children�s line with several well-received
titles. Creative Homeowner continued to win awards for editorial
quality while reaching for a broader audience with value-priced
SmartGuides. And REA gained increased shelf presence and
sell-through with the relaunch of its Advanced Placement Test Prep
series. All these initiatives were valuable and will continue. Yet
we know that the biggest boost will come when consumers and book
retailers feel renewed confidence in their financial prospects. In
the meantime, we are operating with more focus and efficiency than
ever to capture the opportunities that are out there and build our
brands for the better times to come.�
Outlook
�With three tough quarters behind us, we are cautiously
optimistic about the fourth,� said Mr. Conway. �We have no
illusions about the depth of the current recession and the
continuing challenges faced by companies and consumers everywhere.
Fortunately, we face them with solid finances, an exceptionally
efficient infrastructure and a reputation that continues to open
doors for us every day. Past recessions have taught us to combine
discipline with continued innovation, and we are doing that this
time, too. Over the course of the year we have repeatedly taken
steps to bring costs in line with market conditions, and we will
continue to benefit from these measures when the economy turns. In
the meantime, we are well positioned to maximize our share of
business through superior service.
�While forecasting remains difficult, we expect fourth-quarter
performance to be our strongest of the year, as schools and
colleges prepare for the new academic year and retailers prepare to
make the most of their fall and holiday seasons. At the same time,
we believe our sales outlook reflects the realities of today�s
economy and conditions in our industry.
�For the remainder of fiscal 2009, we expect sales of between
$69 million and $72 million, with earnings per diluted share of
$.50 to $.60, excluding restructuring and impairment charges,
compared to $.59 last year. For fiscal 2009 overall, we project
total sales of between $249 million and $252 million, versus $280
million in fiscal 2008. And we expect full-year earnings per share
of $.81 to $.91, excluding the restructuring and impairment
charges, compared to net income of $1.22 per diluted share in
fiscal 2008, excluding last year�s impairment charge.
�Factors not incorporated into our guidance include the
potential impact of continued weakness in the credit markets on
customers, competitors and vendors in both of our business
segments, and the possibility of future impairment or 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. Courier�s
EBITDA, excluding restructuring and impairment charges, was $22.3
million, for the first nine months of fiscal 2009, compared to
$30.2 million last year. For the full year, we expect EBITDA to be
between $37 million and $39 million, compared to $46 million last
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.
Forward-Looking
Information:
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 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, 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 STATEMENTS OF
OPERATIONS (Unaudited) (In thousands, except per share amounts) �
QUARTER ENDED NINE MONTHS ENDED June 27, June 28, June 27, June 28,
2009 2008 2009 2008 � Net sales $61,390 $73,378 $180,397 $204,028
Cost of sales 47,313 � 54,364 � 141,269 � 148,904 � � Gross profit
14,077 19,014 39,128 55,124 � Selling and administrative expenses
11,305 13,600 36,462 41,490 Impairment charge (1) - � 23,850 �
15,607 � 23,850 � � Operating income (loss) 2,772 (18,436 ) (12,941
) (10,216 ) � Interest expense, net 153 � 322 � 574 � 889 � �
Income (loss) before taxes 2,619 (18,758 ) (13,515 ) (11,105 ) �
Income tax provision (benefit) 1,007 � (6,386 ) (4,657 ) (3,532 ) �
Net income (loss) $1,612 � ($12,372 ) ($8,858 ) ($7,573 ) � Net
income (loss) per diluted share $0.14 � ($1.01 ) ($0.75 ) ($0.61 )
� Cash dividends declared per share $0.21 � $0.20 � $0.63 � $0.60 �
� Wtd. average diluted shares outstanding 11,861 12,252 11,844
12,397 � SEGMENT INFORMATION: �
Net
sales:
Book Manufacturing $52,691 $63,187 $153,472 $166,253 Specialty
Publishing 11,327 13,362 34,888 45,376 Elimination of intersegment
sales (2,628 ) (3,171 ) (7,963 ) (7,601 ) Total $61,390 $73,378
$180,397 $204,028 �
Operating income
(loss):
Book Manufacturing $3,740 $8,104 $6,676 $15,801 Specialty
Publishing (624 ) (2,516 ) (3,117 ) (1,389 ) Impairment charge (1)
- (23,850 ) (15,607 ) (23,850 ) Stock based compensation (347 )
(213 ) (1,072 ) (955 ) Intersegment profit 3 � 39 � 179 � 177 �
Total $2,772 ($18,436 ) ($12,941 ) ($10,216 ) � � (1) In the second
quarter of this fiscal year, the Company recorded a $15.6 million
non-cash pre-tax impairment charge related to Dover Publications,
Inc., which on an after-tax basis, was $10.1 million, or $0.86 per
diluted share. In the prior year's third quarter, the Company
recorded a $23.9 million non-cash pre-tax impairment charge related
to Creative Homeowner, which on an after-tax basis was $15.5
million, or $1.27 per diluted share. � � � � � � � COURIER
CORPORATION SEGMENT RESULTS OF OPERATIONS (Unaudited) (In
thousands) � �
BOOK MANUFACTURING SEGMENT
QUARTER ENDED NINE MONTHS ENDED June 27, June 28, June 27, June 28,
2009 2008 2009 2008 � Net sales $52,691 $63,187 $153,472 $166,253
Cost of sales 42,824 � 47,536 � 126,964 � 127,415 � � Gross profit
9,867 15,651 26,508 38,838 � Selling and administrative expenses
6,127 � 7,547 � 19,832 � 23,037 � � Operating income $3,740 �
$8,104 � $6,676 � $15,801 � � � � � � �
SPECIALTY PUBLISHING SEGMENT
QUARTER ENDED NINE MONTHS ENDED June 27, June 28, June 27, June 28,
2009 2008 2009 2008 � Net sales $11,327 $13,362 $34,888 $45,376
Cost of sales 7,120 � 10,041 � 22,447 � 29,268 � � Gross profit
4,207 3,321 12,441 16,108 � Selling and administrative expenses
4,831 � 5,837 � 15,558 � 17,497 � � Operating loss ($624 ) ($2,516
) ($3,117 ) ($1,389 ) � � � � COURIER CORPORATION CONSOLIDATED
CONDENSED BALANCE SHEETS (Unaudited) (In thousands) � � June 27,
September 27,
ASSETS
2009 2008 � Current assets: Cash and cash equivalents $127 $178
Investments 892 820 Accounts receivable 36,117 45,626 Inventories
39,545 37,166 Deferred income taxes 4,581 4,680 Other current
assets 3,869 1,528 Total current assets 85,131 89,998 � Property,
plant and equipment, net 88,810 95,692 Goodwill and other
intangibles 28,075 43,832 Prepublication costs 9,001 9,595 Other
assets 1,619 1,381 � Total assets $212,636 $240,498 � �
LIABILITIES AND STOCKHOLDERS' EQUITY
� Current liabilities: Current maturities of long-term debt $93 $93
Accounts payable 10,174 16,966 Accrued taxes 730 3,560 Other
current liabilities 12,653 12,557 Total current liabilities 23,650
33,176 � Long-term debt 24,524 23,646 Deferred income taxes 775
4,687 Other liabilities 2,478 2,765 � Total liabilities 51,427
64,274 � Total stockholders' equity 161,209 176,224 � Total
liabilities and stockholders' equity $212,636 $240,498 � � �
COURIER CORPORATION CONSOLIDATED STATEMENTS OF FREE CASH FLOW
(Unaudited) (In thousands) � For the Nine Months Ended June 27,
June 28, 2009 2008 � Operating Activities: Net loss ($8,858 )
($7,573 ) Adjustments to reconcile net loss to cash provided from
operating activities: � Depreciation and amortization 15,824 16,607
Impairment charge 15,607 23,850 Stock based compensation 1,073 955
Deferred income taxes (3,813 ) (5,098 ) Changes in working capital
(4,737 ) (9,581 ) Other, net (150 ) (855 ) � Cash provided from
operating activities 14,946 18,305 � Investments in organic growth:
Capital expenditures (5,601 ) (7,755 ) Prepublication costs (3,119
) (3,689 ) � Free cash flow 6,226 � 6,861 � � Financing Activities:
Long-term borrowings, net 878 10,755 Cash dividends (7,495 ) (7,469
) Proceeds from stock plans 412 1,269 Stock repurchases - (12,055 )
Other (72 ) 33 � � Cash used for financing activities (6,277 )
(7,467 ) � Decrease in cash and cash equivalents ($51 ) ($606 ) �
RECONCILIATION TO GAAP PRESENTATION � Investing Activities: Capital
expenditures ($5,601 ) ($7,755 ) Prepublication costs (3,119 )
(3,689 ) Other (72 ) - � Cash used for investing activities ($8,792
) ($11,444 ) � Other non-GAAP measures - EBITDA: Net income ($8,858
) ($7,573 ) Provision for income taxes (4,657 ) (3,532 ) Interest
expense, net 574 889 Depreciation and amortization 15,824 16,607
Impairment charge 15,607 23,850 Restructuring costs 3,794 � - �
EBITDA, excluding impairment and restructuring charges $22,284 �
$30,241 � � In addition to measuring our performance by generally
accepted accounting principles, we also track several non-GAAP
measures including Free Cash Flow and 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. � � � � � � � COURIER CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP MEASURES (In thousands) �
Quarter Ended Nine Months Ended
BOOK MANUFACTURING SEGMENT
June 27, 2009 June 27, 2009 GAAP Restruc- Non- GAAP Restruc- Non-
Basis turing GAAP Basis turing GAAP Measures Costs (1) Measures
Measures Costs (1) Measures � Net sales $52,691 $52,691 $153,472
$153,472 Cost of sales 42,824 � (65 ) 42,759 � 126,964 � (2,819 )
124,145 � � Gross profit 9,867 65 9,932 26,508 2,819 29,327 �
Selling and administrative expenses 6,127 � - � 6,127 � 19,832 �
(491 ) 19,341 � � Operating income (loss) $3,740 � $65 � $3,805 �
$6,676 � $3,310 � $9,986 � � � � Quarter Ended Nine Months Ended
SPECIALTY PUBLISHING SEGMENT
June 27, 2009 June 27, 2009 GAAP Restruc- Non- GAAP Restruc- Non-
Basis turing GAAP Basis turing GAAP Measures Costs (1) Measures
Measures Costs (1) Measures � Net sales $11,327 $11,327 $34,888
$34,888 Cost of sales 7,120 � - � 7,120 � 22,447 � (107 ) 22,340 �
� Gross profit 4,207 - 4,207 12,441 107 12,548 � Selling and
administrative expenses 4,831 � - � 4,831 � 15,558 � (377 ) 15,181
� � Operating income (loss) ($624 ) $0 � ($624 ) ($3,117 ) $484 �
($2,633 ) � � (1 ) Restructuring costs include employee severance
expenses related to cost savings initiatives in both of the
Company's segments as well as ceasing Creative Homeowner's
distribution service within the Specialty Publishing segment.
Restructuring costs also include expenses related to closing the
Book-mart Press manufacturing facility within the Book
Manufacturing segment. � Quarter Ended Nine Months Ended June 27,
2009 June 27, 2009 Book Specialty Book Specialty Manufacturing
Publishing Total Manufacturing Publishing Total
Segment Segment Company
Segment Segment Company �
Employee severance expenses $65 $0 $65 $2,819 $484 $3,303 Facility
closure costs - � - � - � 491 � - � 491 � � Total restructuring
costs $65 � $0 � $65 � $3,310 � $484 � $3,794 �
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