Courier's Revenues, Net Income Rebound in First Quarter

NORTH CHELMSFORD, MA—January 20, 2010—Courier Corp. (Nasdaq: CRRC), one of America’s leading book manufacturers and specialty publishers, today announced improved sales and earnings for the quarter ended December 26, 2009, the first quarter of its 2010 fiscal year, reflecting improvements in both of the company’s business segments. Revenues for the quarter were $63.1 million, up 6% from last year’s first-quarter sales of $59.6 million. Net income for the quarter was $2.8 million, compared to $0.7 million in the first quarter of fiscal 2009. Net income per diluted share for the quarter was $.23, versus $.06 in the first quarter of fiscal 2009.

Among Courier’s publishing businesses, sales were up at both Dover Publications and Research & Education Association (REA). Sales at Creative Homeowner were down, though the prior-year comparison included book distribution revenues from a service the company no longer offers. In the company’s book manufacturing segment, gains were strongest in religious scriptures and college textbooks.

“We worked hard to make this quarter happen,” said Courier Chairman and Chief Executive Officer James F. Conway III. “We had help from key customers, and from a modest improvement in consumer confidence as the recession started to ease. But it was still tough going for many publishers and retailers. Our answer, as always, was to go the extra mile for every customer and every situation. While weak sales at home centers continued to hamper performance at Creative Homeowner, Dover and REA both profited from their strong product launches and ramped-up consumer marketing. In book manufacturing, it was particularly gratifying to see a rebound in religious sales after three down quarters, not to mention our continued strong performance in the college textbook market.

“We had other achievements in the quarter as well. Preparations for our installation of a new digital printing system continued, on time and on budget, at our home base in North Chelmsford, Massachusetts. Finally, between leaner operations and improved results, we were able to bring our debt down by another $5 million to under $9 million, leaving us well positioned for future growth.”

Book manufacturing earnings up 59% on 8% sales gain

Courier’s book manufacturing segment had first-quarter sales of $54.8 million, up 8% from $50.9 million in last year’s first quarter. The segment’s operating income was $5.7 million, up 59% from $3.6 million a year ago. Gross profit in the segment rose to $13.1 million from $10.6 million in fiscal 2009, and rose as a percentage of sales to 23.8% from last year’s figure of 20.9%.

The book manufacturing segment focuses on three publishing markets: education, religion, and specialty trade. Sales to the education market were up 15% in the quarter due to increased sales of four-color textbooks for colleges and universities. Sales to the specialty trade market were flat from a year ago, though four-color trade sales were up. Sales to the religious market were up 12% from last year’s first quarter.

“We welcomed the return of a healthy order flow from our largest religious customer,” said Mr. Conway. “On top of that, we had continued growth in sales of college textbooks. Our margins were helped by increased capacity utilization as well as the cost reductions achieved last year. But the largest factor continued to be our success at attracting more four-color work from both new and existing customers. Overall, it was a very good way to end the old calendar year and start off a more promising fiscal year.”

Growth at Dover and REA drives improved publishing performance

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.

First-quarter revenues for the segment were $11.6 million, up slightly from $11.5 million in last year’s first quarter. Sales were up 18% at Dover and up 48% at REA, spurred by strong sales of Dover books in several categories and REA’s largest quarterly launch of new titles ever. Creative Homeowner sales were down 61%, reflecting continued weakness in store traffic at home centers, the company’s largest sales channel. This decrease in sales also reflected the company’s cessation of its book distribution services in early January 2009, which contributed approximately $1.2 million of revenue in last year’s first quarter. Overall, the segment lost $514,000 in the quarter, versus a loss of $1.9 million a year ago. This improvement reflects both the revenue growth at Dover and REA and the effects of cost reduction measures implemented in fiscal 2009.

“Facing an uncertain holiday season, some retailers ordered cautiously and worked down their book inventories,” said Mr. Conway. “REA overcame this effect with its outstanding list of new releases, while Dover did well with its value-priced strategy in areas ranging from arts, crafts and math to children’s books. Slow sales to home improvement centers hurt Creative Homeowner, though its sales through other channels rose modestly. With inventories increasingly depleted and the economy gradually improving, we expect an uptick for Creative Homeowner in anticipation of spring home and garden promotions. Meanwhile, all three of our publishing businesses are getting increasingly positive responses from retailers as they continue to implement a more agile, market-driven approach to editorial content, branding and pricing.”

Outlook

“We are pleased to have gotten off to such a strong start in fiscal 2010,” said Mr. Conway. “At the same time, the challenges are far from over. Consumers are still worried about the economy, retailers are still ordering cautiously, and price competition remains intense. State and local governments are still strapped, and many school districts are deferring spending. In response, we are playing to our strengths in healthier market segments while working to differentiate ourselves everywhere through technology, productivity and service on the manufacturing side, and editorial quality and market focus on the publishing side.

“Meanwhile, we continue to seek out ways to serve both new and current customers better. On January 15, we acquired Highcrest Media LLC, a provider of Web-based software that streamlines the production of customized textbooks used in colleges, universities and businesses. Together with our forthcoming installation of digital printing technology, this acquisition will strengthen our capabilities in the highest-growth segment of the textbook market. For the balance of the year, we do not expect Highcrest to have an appreciable impact on Courier earnings; however, as previously noted, startup costs associated with the digital print operation will likely reduce fiscal 2010 income by between $.05 and $.10 per share. These costs have been factored into our fiscal 2010 guidance.

“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.

“For fiscal 2010 overall, we expect to achieve total sales of between $255 million and $266 million. We expect earnings per diluted share of between $.75 and $1.00, versus our fiscal 2009 earnings of $.86 per diluted share, excluding restructuring and impairment 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 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. We expect EBITDA in fiscal 2010 to be between $37 million and $42 million, compared to $37 million, excluding impairment and restructuring charges, in fiscal 2009.”

About Courier Corp.
Courier Corp. prints, publishes and sells books. Headquartered in North Chelmsford, MA, Courier has two business segments, full-service book manufacturing and specialty book publishing. For more information, visit www.courier.com.