Net Income Rises, Company Announces Stock Repurchase
Courier Corporation (Nasdaq: CRRC), one of America's leading book
manufacturers and specialty publishers, today announced results for the
quarter ended March 24, 2012, the second quarter of its 2012 fiscal
year. Revenues were $62.4 million, down slightly from last year's
second-quarter revenues of $62.7 million. However, the company's
second-quarter net income of $440,000 or $.04 per diluted share
represented an improvement over last year's second-quarter net loss of
$4.8 million or $.40 per diluted share, which included restructuring
costs associated with the closing of a plant in Stoughton,
Massachusetts, and the write-down of $750,000 in receivables following
the bankruptcy of Borders Group Inc. Excluding the restructuring costs
and bad-debt provision, last year's second-quarter net income was
$342,000 or $.03 per diluted share.
For the first six months of fiscal 2012, Courier revenues were $125.3
million, up from $123.8 million in fiscal 2011. Net income for the year
to date was $1.9 million or $.16 per diluted share, including a
first-quarter pretax charge of $1.5 million related to severance and
post-retirement benefit costs and a first-quarter pretax gain of $0.6
million from the sale of certain non-operating assets. For the first six
months of fiscal 2011, the company's net loss was $3.2 million or $.26
per diluted share, including the second-quarter restructuring costs and
bad-debt provision. Excluding those items for both periods, net income
for the first six months of fiscal 2012 was $2.5 million or $.21 per
diluted share, compared to $2.0 million or $.17 per diluted share for
the corresponding period last year. Details for these items can be found
in the tables at the end of this release.
The second quarter of Courier's fiscal year has traditionally been its
slowest, a phenomenon compounded by this year's unusually early
quarterly close on March 24, in advance of traditional spring publishing
promotions and normal seasonal increases in activity in the education
market. In the company's book manufacturing segment, second-quarter
sales were up in both the specialty trade and education markets, but off
in the religious market against an exceptionally strong second quarter
last year. For the year to date, book manufacturing sales were up in all
three markets, with the largest gains in specialty trade. In Courier's
publishing segment, second-quarter sales were up at Dover Publications
but down elsewhere, while six-month sales remained down throughout the
segment.
"Last year both of our business segments were hit hard in the second
quarter by the collapse of Borders," said Courier Chairman and Chief
Executive Officer James F. Conway III. "This year we saw some positive
signs that consumers are starting to turn to other book retailers, as
shown by our solid growth in book manufacturing sales to the specialty
trade market through both the quarter and the first half of the year.
"Nonetheless, we continue to manage costs carefully, aligning our
resources with changing markets and seasonal demand patterns. To that
end we made further consolidations both in book manufacturing and in our
publishing businesses. Helped by these prudent measures and by our
continuing strong cash flow, our financial condition remains as strong
as ever, with our debt down by $5 million since the start of fiscal 2012
and our $100-million credit facility extended through March 2016.
"In keeping with these achievements, I am pleased to announce that our
Board of Directors has approved not only our regular quarterly dividend
but also a $10 million stock repurchase program. With our reduced cost
structure, our expanding array of digital offerings and our typical
pattern of seasonal sales growth, I look forward to a stronger second
half of the year."
Book manufacturing: trade rebound continues
Courier's book manufacturing segment had second-quarter sales of $55.5
million, comparable to the same period last year. For fiscal 2012 to
date, book manufacturing sales were $111.5 million, up 3% from fiscal
2011. As previously mentioned, the first-quarter results for fiscal 2012
included restructuring costs for severance and post-retirement benefits,
while last year's second-quarter results included plant closing costs.
Excluding these restructuring costs, the segment's second-quarter
operating income was $2.3 million, versus $2.4 million a year ago. On a
year-to-date basis, operating income was $7.5 million, up 20% from $6.2
million for the first six months of last year. Again excluding
restructuring costs, gross profit for the second quarter was $9.1
million or 16.5% of sales, versus $8.9 million or 16.1% of sales last
year. Gross profit for the first half of fiscal 2012 was $21.6 million
or 19.4% of sales compared to $20.3 million or 18.7% of sales. This
improvement in gross profit margins in a competitive pricing environment
reflects a favorable 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,
religious, and specialty trade. Sales to the education market
were up 2% in the quarter and up 3% for the year to date, with the
largest proportion of sales at the college and university levels. Sales
to the religious market were down 4% from fiscal 2011 in the
second quarter, but up 1% for the first six months of the year, driven
by 4% growth in sales to our largest religious customer. Sales to the specialty
trade market were up 8% from last year for both the second quarter
and the first half of the fiscal year, reflecting increased four-color
work, increased orders at Courier Digital Solutions, and a return to
more traditional ordering patterns as the marketplace continues to
assimilate the loss of Borders.
Faced with the market's continuing shift from one- to four-color book
production, in early April Courier moved some one-color work from
Westford, Massachusetts to its Kendallville, Indiana plant, which had
redundant one-color capacity. This consolidation resulted in the loss of
34 positions in Westford. The company expects the consolidation to
provide annualized pre-tax savings of approximately $1 million.
"We continue to benefit from the cost savings achieved through last
year's closing of our one-color plant in Stoughton, Massachusetts," said
Mr. Conway. "With the recent reductions at our Westford facility, we
have gained additional savings without compromising our ability to
deliver for our customers. At the same time, Westford will continue to
have an important role within our overall manufacturing operations.
Equally important, we expect to find new opportunities for some of our
former Westford employees at our nearby Courier Digital Solutions
facility as it prepares for growing demand in the upcoming summer season.
"In other ways it was a typical second quarter given the seasonality of
many of our markets. We continue to enjoy excellent relationships with
our largest customers in the education and religious markets, backed by
multi-year agreements that position us well for long-term growth. And we
continue to offer a distinctive, state-of-the-art combination of digital
and offset technologies to help all our customers reach their markets as
effectively as possible."
Publishing: adjusting to a post-Borders environment
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.
Second-quarter revenues for the segment were $9.6 million, down 5% from
$10.1 million in last year's second quarter. The segment's operating
loss for the quarter was $1.1 million, compared to a loss of $2.0
million last year including a $750,000 bad-debt provision related to
Borders. For fiscal 2012 to date, segment sales were $19.1 million,
versus $20.9 million for the first half of last year. The segment's
operating loss through six months was $3.0 million, versus $2.8 million
for the corresponding period last year.
Of the three Courier publishing businesses, REA alone was profitable
during the quarter, though sales were down 5% as it continued to adjust
to the absence of Borders, which had been one of its largest customers
prior to the chain's closing. At Dover, sales rose 5%, helped by a sharp
increase in sales to online retailers, enabling it to reduce its
quarterly loss from a year earlier. Meanwhile Creative Homeowner,
despite a sales decline of 34%, also narrowed its quarterly loss as
Courier Publishing continued to achieve cost savings by consolidating
certain publishing functions.
Positive developments in the quarter included the continuing rollout of
e-book titles, the March signing of an agreement with Amazon which will
make these titles available to a significantly wider audience on the
Kindle platform, and preparations for the spring launch of
DoverPictura.com, Dover's new online image store.
"Our publishing segment had another challenging quarter," said Mr.
Conway. "At the same time, the uptick in sales at Dover provides further
support to our belief that consumers have finally begun to move on from
the loss of Borders and seek out fresh content from other retailers,
particularly online.
"Equally important, we are poised to reap the benefit of several
exciting new product initiatives. This spring marks the AP test season
debut of REA's new All-Access program, which offers students a
comprehensive combination of academic content and diagnostic tools for
use anytime, anywhere. With the launch of DoverPictura.com, consumers
everywhere will soon be able to obtain hundreds of thousands of unique
historic and contemporary images in convenient digital form. And while
they're online, they can also obtain more than 3,000 Dover, REA and
Creative Homeowner titles in e-book form through an expanded array of
sales channels including Amazon, Apple and Google."
Outlook
"Our long-term strengths in technology and service continue to help us
amidst a challenging economic environment," said Mr. Conway. "As we
expand the services we provide for our largest customers, we believe our
efforts will be rewarded with increased volume. At the same time, our
growing array of digital offerings is opening up new opportunities both
in book manufacturing and in publishing. And we continue to seek
additional ways to improve efficiency across our printing and publishing
operations.
"For the full fiscal year we expect capital expenditures of between $8
million and $10 million, versus $16 million in fiscal 2011. We will also
benefit from the consolidation of one-color printing capacity and other
cost-reduction measures taken over the last year in both of our business
segments. In addition, we expect to benefit from normal seasonal peaks
in the education market, which traditionally drive stronger financial
performance in the second half of our fiscal year.
"In line with our past practice, today's guidance, including comparisons
to prior performance, excludes impairment and restructuring charges. It
also excludes the non-recurring items from this year's first quarter
related to severance and post-retirement benefit costs and the gain from
the sale of non-operating assets, as well as the Borders receivable
write-off in last year's second quarter. Overall, we expect fiscal 2012
sales of between $271 million and $282 million, an increase over fiscal
2011 of between 5% and 9% (which includes the benefit of a 53-week year
in fiscal 2012). And we expect earnings per diluted share of between
$.80 and $1.05, which compares with our fiscal 2011 earnings of $.89 per
diluted share.
"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 fiscal 2012, we expect EBITDA to be
between $40 million and $45 million, compared to $39 million in fiscal
2011, excluding last year's impairment and restructuring charges and
this year's severance and post-retirement benefit costs and the gain
from the sale of non-operating assets.
"Factors not incorporated into our guidance include the possibility of
future impairment or restructuring charges."
About Courier Corporation
Courier Corporation prints, publishes and sells books. Headquartered in
North Chelmsford, Massachusetts, Courier has two operating 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 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, insolvency of key customers or vendors,
changes in the Company's labor relations, 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 CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
QUARTER ENDED
SIX MONTHS ENDED
March 24,
March 26,
March 24,
March 26,
2012
2011
2012
2011
Net sales
$62,388
$62,662
$125,324
$123,814
Cost of sales
50,190
57,488
97,528
103,335
Gross profit
12,198
5,174
27,796
20,479
Selling and administrative expenses
11,317
12,589
24,942
25,111
Operating income (loss)
881
(7,415
)
2,854
(4,632
)
Interest expense, net
193
248
453
451
Other income
-
-
(587
)
-
Income (loss) before taxes
688
(7,663
)
2,988
(5,083
)
Income tax provision (benefit)
248
(2,856
)
1,094
(1,932
)
Net income (loss)
$440
($4,807
)
$1,894
($3,151
)
Net income (loss) per diluted share
$0.04
($0.40
)
$0.16
($0.26
)
Cash dividends declared per share
$0.21
$0.21
$0.42
$0.42
Wtd. average diluted shares outstanding
12,160
11,978
12,131
11,969
SEGMENT INFORMATION:
Net sales:
Book Manufacturing
$55,454
$55,587
$111,450
$108,630
Specialty Publishing
9,635
10,136
19,087
20,888
Elimination of intersegment sales
(2,701
)
(3,061
)
(5,213
)
(5,704
)
Total
$62,388
$62,662
$125,324
$123,814
Operating income (loss):
Book Manufacturing
$2,349
($5,092
)
$6,555
($1,251
)
Specialty Publishing
(1,136
)
(1,986
)
(2,963
)
(2,795
)
Stock based compensation
(345
)
(368
)
(767
)
(706
)
Intersegment profit
13
31
29
120
Total
$881
($7,415
)
$2,854
($4,632
)
COURIER CORPORATION
SEGMENT RESULTS OF OPERATIONS (Unaudited)
(In thousands)
BOOK MANUFACTURING SEGMENT
QUARTER ENDED
SIX MONTHS ENDED
March 24,
March 26,
March 24,
March 26,
2012
2011
2012
2011
Net sales
$55,454
$55,587
$111,450
$108,630
Cost of sales
46,306
53,711
89,815
95,365
Gross profit
9,148
1,876
21,635
13,265
Selling and administrative expenses
6,799
6,968
15,080
14,516
Operating income (loss)
$2,349
($5,092
)
$6,555
($1,251
)
SPECIALTY PUBLISHING SEGMENT
QUARTER ENDED
SIX MONTHS ENDED
March 24,
March 26,
March 24,
March 26,
2012
2011
2012
2011
Net sales
$9,635
$10,136
$19,087
$20,888
Cost of sales
6,596
6,867
12,953
13,793
Gross profit
3,039
3,269
6,134
7,095
Selling and administrative expenses
4,175
5,255
9,097
9,890
Operating loss
($1,136
)
($1,986
)
($2,963
)
($2,795
)
COURIER CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
(In thousands)
March 24,
September 24,
ASSETS
2012
2011
Current assets:
Cash and cash equivalents
$84
$104
Investments
1,366
1,141
Accounts receivable
32,026
35,320
Inventories
39,212
39,353
Deferred income taxes
4,406
4,431
Other current assets
2,211
1,443
Total current assets
79,305
81,792
Property, plant and equipment, net
93,262
100,523
Goodwill and other intangibles
18,100
18,327
Prepublication costs
7,478
7,334
Deferred income taxes
3,187
3,772
Other assets
1,277
1,278
Total assets
$202,609
$213,026
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt
$1,838
$1,804
Accounts payable
10,066
12,061
Accrued taxes
840
2,185
Other current liabilities
16,950
15,433
Total current liabilities
29,694
31,483
Long-term debt
14,760
19,718
Other liabilities
6,537
7,502
Total liabilities
50,991
58,703
Total stockholders' equity
151,618
154,323
Total liabilities and stockholders' equity
$202,609
$213,026
COURIER CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
For the Six Months Ended
March 24,
March 26,
2012
2011
Operating Activities:
Net income (loss)
$1,894
($3,151
)
Adjustments to reconcile net income (loss) to
cash provided from operating activities:
Depreciation and amortization
11,944
11,575
Stock-based compensation
767
706
Deferred income taxes
610
(434
)
Gain on disposition of assets
(587
)
-
Changes in other working capital
1,119
(429
)
Other long-term, net
(1,304
)
3,549
Cash provided from operating activities
14,443
11,816
Investment Activities:
Capital expenditures
(2,353
)
(6,079
)
Prepublication costs
(2,301
)
(2,175
)
Proceeds on disposition of assets
587
-
Short-term investments
(225
)
(128
)
Cash used for investment activities
(4,292
)
(8,382
)
Financing Activities:
Long-term debt borrowings (repayments), net
(4,924
)
1,762
Cash dividends
(5,139
)
(5,069
)
Proceeds from stock plans
167
219
Other
(275
)
-
Cash used for financing activities
(10,171
)
(3,088
)
Increase (decrease) in cash and cash equivalents
($20
)
$346
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 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.
Non-GAAP reconciliation - EBITDA:
Net income (loss)
$1,894
($3,151
)
Income tax provision (benefit)
1,094
(1,932
)
Interest expense, net
453
451
Depreciation and amortization
11,944
11,575
Severance-related expense/restructuring
1,579
7,272
Other income
(587
)
-
EBITDA
$16,377
$14,215
COURIER CORPORATION
OTHER RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES (Unaudited)
(In thousands, except per share amounts)
Quarter Ended March 24, 2012
Six Months Ended March 24, 2012
Income
Income
Net Income
Income
Income
Net Income
Before
Tax
Net
per Diluted
Before
Tax
Net
per Diluted
Taxes
Provision
Income
Share
Taxes
Provision
Income
Share
GAAP basis measures
$688
$248
$440
$0.04
$2,988
$1,094
$1,894
$0.16
Severance and post-
retirement benefits
(1
)
87
30
57
0.00
1,579
578
1,001
0.08
Other income
(2
)
-
-
-
-
(587
)
(215
)
(372
)
(0.03
)
Non-GAAP measures
$775
$278
$497
$0.04
$3,980
$1,457
$2,523
$0.21
Quarter Ended March 26, 2011
Six Months Ended March 26, 2011
Income
Income
Net Income
Income
Income
Net Income
(Loss)
Tax
Net
(Loss)
(Loss)
Tax
Net
(Loss)
Before
Provision
Income
per Diluted
Before
Provision
Income
per Diluted
Taxes
(Benefit)
(Loss)
Share
Taxes
(Benefit)
(Loss)
Share
GAAP basis measures
($7,663
)
($2,856
)
($4,807
)
($0.40
)
($5,083
)
($1,932
)
($3,151
)
($0.26
)
Restructuring costs
(3
)
7,472
2,793
4,679
0.39
7,472
2,787
4,685
0.39
Bad-debt provision
(4
)
750
280
470
0.04
750
285
465
0.04
Non-GAAP measures
$559
$217
$342
$0.03
$3,139
$1,140
$1,999
$0.17
(1)
During the first quarter of this fiscal year, the Company's Chief
Operating Officer announced his retirement. In addition, during the
first six months cost reduction measures were taken in the Company's
specialty publishing segment. Related severance and post-retirement
benefit expenses were $87,000 in the second quarter and $1.6 million
for the first six months.
(2)
In the first quarter of fiscal 2012, the Company recorded a $0.6
million gain associated with the sale of its interests in
non-operating real property relating to cell towers.
(3)
In the second quarter of fiscal 2011, the Company closed its book
manufacturing plant in Stoughton, Massachusetts, due to the impact
of technology and competitive pressures affecting the one-color
paperback books in which the plant specialized. Restructuring
charges included $4.4 million related to severance and pension
withdrawal liabilities and $3.1 million for lease termination and
other facility closure costs.
(4)
In the second quarter of fiscal 2011, the Company recorded a
$750,000 bad-debt provision related to Borders Group, Inc.
COURIER CORPORATION
OTHER RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES (Unaudited)
(In thousands, except per share amounts)
BOOK MANUFACTURING SEGMENT
Quarter Ended March 24, 2012
Six Months Ended March 24, 2012
GAAP Basis
Non-Recurring
Non-GAAP
GAAP Basis
Non-Recurring
Non-GAAP
Measures
Items (1)
Measures
Measures
Items (1)
Measures
Net sales
$55,454
$55,454
$111,450
$111,450
Cost of sales
46,306
46,306
89,815
89,815
Gross profit
9,148
-
9,148
21,635
-
21,635
Selling and administrative expenses
6,799
-
6,799
15,080
(938
)
14,142
Operating income
$2,349
$0
$2,349
$6,555
$938
$7,493
Quarter Ended March 26, 2011
Six Months Ended March 26, 2011
GAAP Basis
Non-Recurring
Non-GAAP
GAAP Basis
Non-Recurring
Non-GAAP
Measures
Items (2)
Measures
Measures
Items (2)
Measures
Net sales
$55,587
$55,587
$108,630
$108,630
Cost of sales
53,711
(7,061
)
46,650
95,365
(7,061
)
88,304
Gross profit
1,876
7,061
8,937
13,265
7,061
20,326
Selling and administrative expenses
6,968
(411
)
6,557
14,516
(411
)
14,105
Operating income (loss)
($5,092
)
$7,472
$2,380
($1,251
)
$7,472
$6,221
SPECIALTY PUBLISHING SEGMENT
Quarter Ended March 24, 2012
Six Months Ended March 24, 2012
GAAP Basis
Non-Recurring
Non-GAAP
GAAP Basis
Non-Recurring
Non-GAAP
Measures
Items (1)
Measures
Measures
Items (1)
Measures
Net sales
$9,635
$9,635
$19,087
$19,087
Cost of sales
6,596
6,596
12,953
12,953
Gross profit
3,039
-
3,039
6,134
-
6,134
Selling and administrative expenses
4,175
(87
)
4,088
9,097
(641
)
8,456
Operating loss
($1,136
)
$87
($1,049
)
($2,963
)
$641
($2,322
)
Quarter Ended March 26, 2011
Six Months Ended March 26, 2011
GAAP Basis
Non-Recurring
Non-GAAP
GAAP Basis
Non-Recurring
Non-GAAP
Measures
Items (3)
Measures
Measures
Items (3)
Measures
Net sales
$10,136
$10,136
$20,888
$20,888
Cost of sales
6,867
6,867
13,793
13,793
Gross profit
3,269
-
3,269
7,095
-
7,095
Selling and administrative expenses
5,255
(750
)
4,505
9,890
(750
)
9,140
Operating loss
($1,986
)
$750
($1,236
)
($2,795
)
$750
($2,045
)
(1)
During the first quarter of this fiscal year, the Company's Chief
Operating Officer announced his retirement. In addition, during the
first six months cost reduction measures were taken in the Company's
specialty publishing segment. Related severance and post-retirement
benefit expenses were $87,000 in the second quarter and $1.6 million
for the first six months.
(2)
In the second quarter of fiscal 2011, the Company closed its book
manufacturing plant in Stoughton, Massachusetts, due to the impact
of technology and competitive pressures affecting the one-color
paperback books in which the plant specialized. Restructuring
charges included $4.4 million related to severance and pension
withdrawal liabilities and $3.1 million for lease termination and
other facility closure costs.
(3)
In the second quarter of fiscal 2011, the Company recorded a
$750,000 bad-debt provision related to Borders Group, Inc.
Courier Corporation James F. Conway III, 978-251-6000 Chairman,
President and Chief Executive Officer or Peter M. Folger,
978-251-6000 Senior Vice President and Chief Financial Officer www.courier.com
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