Courier Reports Growth in Book Manufacturing Segment

NORTH CHELMSFORD, MA— Jan. 25, 2012—Courier Corp. announced results for the quarter ended Dec. 24, 2011, the first quarter of its 2012 fiscal year. Revenues for the quarter were $62.9 million, up 3 percent from last year’s first-quarter sales of $61.2 million. Net income for the quarter was $1.5 million, compared to $1.7 million in the first quarter of fiscal 2011.

Results in this year’s first quarter included a pretax charge of $1.5 million related to severance and post-retirement benefit costs, as well as a pretax gain of $0.6 million from the sale of certain non-operating assets.

Sales gains were concentrated in Courier’s book manufacturing segment, reflecting the effects of multiyear agreements with key customers in the education and religious markets, with particularly strong growth in Courier Digital Solutions’ customized college textbook business.

Sales in the company’s publishing segment were down from last year’s first quarter, which included nearly $500,000 in sales to Borders Group. Borders filed for bankruptcy in February 2011 and completed the liquidation of its store inventories in September, eliminating a major outlet for books and undercutting sales at other booksellers during this period.

“Our book manufacturing segment got the new fiscal year off to a solid start,” said Courier Chairman and CEO James F. Conway III. “It was particularly gratifying to see positive sales trends in all three of our major markets of education, religion and specialty trade.

“Our publishing segment had a challenging quarter as the industry continued to work through the effects of the Borders liquidation and Creative Homeowner continued to suffer from the troubles in America’s housing sector. However, the segment achieved several important milestones, including the release of over 1,000 titles in e-book format and the launch of REA’s new All Access program, which combines printed study guides, online diagnostics and a mobile flashcard app into a powerful new resource for AP test preparation.

“With our debt level reduced by $3 million during the quarter to less than $19 million, we head into the spring season in a strong financial position—in recognition of which Courier’s Board of Directors once again declared a quarterly dividend of $.21 per share, marking the start of our nineteenth consecutive year of dividend payments,” Conway added.

Book manufacturing grows across all three markets

Courier’s book manufacturing segment had first-quarter sales of $56 million, up 6 percent from $53 million in last year’s first quarter. The segment’s operating income for the quarter was $4.2 million. Excluding severance and post-retirement benefit costs, the segment’s operating income was $5.1 million, up 34 percent from $3.8 million a year ago.

Gross profit in the segment was $12.5 million, or 22.3 percent of sales, up from $11.4 million, or 21.5 percent of sales, in last year’s first quarter—despite a competitive pricing environment, reflecting an improved sales mix, operating efficiencies enabled by recent technology investments, and the closing of a redundant one-color plant last March.

The book manufacturing segment focuses on three markets: education, religion and specialty trade.

• Sales to the education market were up 3 percent in the quarter, helped by growing demand for customized college textbooks and increased sales of books for elementary and high schools.
• Sales to the religious market were up 9 percent from last year’s first quarter, with some of the boost due to the timing of orders from the company’s largest religious customer.
• Sales to the specialty trade market were up 9 percent from a year ago, reflecting increased four-color work, as well as an increase in orders at Courier Digital Solutions.

“Our book manufacturing segment performed well throughout the quarter,” noted Conway. “Courier Digital Solutions continued to reap the benefits of its pioneering capabilities for customized textbook production and the efficiency of its digital inkjet presses. We were also pleased to expand our already strong relationship with Pearson Education.

“At the same time, our other facilities were also busy, with a burst of orders for elementary and high school textbooks at our four-color plant in Kendallville, Indiana and increased production at our Philadelphia Scripture plant in conjunction with our expanding international role on behalf of our largest religious customer. As always, we continued to work closely with all our customers to stay on top of their needs and help them succeed in today’s evolving markets.”

Publishing launches key products in post-Borders marketplace

Courier’s specialty publishing segment includes three businesses: Dover Publications, a niche publisher with thousands of titles in dozens of specialty trade markets; Creative Homeowner, which publishes books on home design, decorating, landscaping and gardening; and Research & Education Association (REA), a publisher of test preparation books and study guides.

First-quarter revenues for the segment were $9.5 million, down 12 percent from last year’s first quarter. Sales were down 6 percent at Dover and down 28 percent at REA, reflecting the loss of Borders as a key customer and, in REA’s case, some sales attrition in advance of the release of its new All Access line of AP test preparation materials. Creative Homeowner sales were down 38 percent, as demand for books on home improvement continued to be depressed amid the weak housing market and the increased availability of information online.

Overall, the segment lost $1.8 million in the quarter. Excluding severance and post-retirement benefits costs, the segment’s loss was $1.3 million, versus a loss of $0.8 million in fiscal 2011. Gross profit in the segment was $3.1 million or 32.7 percent of sales, versus $3.8 million or 35.6 percent of sales in last year’s first quarter, reflecting the impact of lower sales.

“With the Borders liquidation unfolding across the country during the fall, our publishing segment’s weak results were not surprising, particularly in comparison with last year’s first quarter,” said Conway. “In addition to lost sales to Borders itself, we felt the effects of slower sales at other booksellers as consumers snapped up bargains at Borders’ store closing sales.

“Over time, as the market absorbs the former Borders inventory, we expect sales to improve at other bricks-and-mortar retailers. In the meantime, we have already seen healthy growth in online sales—a trend we expect to continue. In addition, we are rapidly converting our physical books into electronic books. By the end of the quarter, over 1,000 titles were available through Apple’s iBookstore, and we are working hard to increase both the number of our e-book titles as well as the number of platforms on which our titles are available.

“Another very positive development has been the release of REA’s unique All Access program, which straddles the line between physical and digital media to offer high school students a more efficient and engaging learning experience as they prepare for the increasingly high-stakes AP exams. With nine AP titles now available in All Access™ form, students can get a great jump on this spring’s testing season while REA gets a jump on its competitors in this key market.”

Outlook

“Once again, our strong customer relationships helped us start the year on a positive note despite the market turbulence caused by the Borders liquidation,” reported Conway. “Our book manufacturing operations are performing well thanks to last year’s equipment investments and the elimination of redundant one-color capacity. Meanwhile, our publishing businesses have responded to adversity with innovative product launches that should help them recover in a post-Borders environment.

“For the full fiscal year we expect capital expenditures of between $10 million and $12 million, versus $16 million in fiscal 2011. We will also benefit from a full year’s worth of cost reductions related to the March 2011 closure of our one-color plant in Stoughton, MA, as well as from cost reductions last fall at Courier Publishing. And as usual, we expect our performance for the remainder of the fiscal year to follow a seasonal pattern, with the larger portion of our earnings coming in the second half.

“Overall, we expect fiscal 2012 sales of between $273 million and $286 million, an increase over fiscal 2011 of between 5 percent and 10 percent (which includes the benefit of a 53-week year in fiscal 2012). And we expect earnings per diluted share of between $.75 and $1.05, which compares with our fiscal 2011 earnings of $.89 per diluted share,” Conway concluded.

About Courier
Courier Corp. prints, publishes and sells books. Headquartered in North Chelmsford, MA, Courier has two operating segments, full-service book manufacturing and specialty book publishing.

Source: Courier.