NORTH CHELMSFORD, Mass., July 19 Courier Corporation, a leading book manufacturer and specialty publisher, today announced that net income for the third quarter ended June 30, 2001 increased 18% to $3.0 million, or $0.85 per diluted share, from $2.5 million, or $0.75 per diluted share, for the same period last year. Revenue for the third quarter increased 6% to $49.8 million from $47.2 million for the third quarter of fiscal 2000. Courier also reported today a three-for-two stock split to be effected in the form of a 50% stock dividend. Per share amounts have not been adjusted to reflect the effect of the split. For the nine-month period ended June 30, 2001, Courier reported net income of $8.1 million, or $2.33 per diluted share, compared with $7.0 million, or $2.10 per diluted share, for the first nine months of fiscal 2000. Included in the year-to-date results is an after-tax gain of $550,000 or $.16 per diluted share from the sale of real estate in the first quarter of this year. Revenue for the first nine months of fiscal 2001 rose 11% to $152.1 million from $136.8 million for the same period last year. Results for both fiscal 2001 periods include Dover Publications, Inc., a publishing house Courier acquired in September 2000. * Results at a Glance * Third quarter fiscal 2001 * Sales of $49.8 million, up 6% * Net income of $3.0 million compared with $2.5 million last year * EPS of $.85 versus $.75 * First nine months of fiscal 2001 * Sales of $152.1 million, up 11% * Net income of $8.1 million versus $7.0 million * EPS of $2.33 compared with $2.10 * Earnings in 2001 include real estate gain of $.16 per diluted share and gain of $.06 per diluted share from sale of The Home School Specialty Publishing Segment Results The company's new specialty publishing segment, Dover Publications, Inc., contributed $8.0 million and $23.3 million, respectively, in sales for the third quarter and first nine months of fiscal 2001. Pre-tax income for the segment was $377,000, or $.06 per diluted share, for the third quarter after goodwill amortization and interest expense which totaled approximately $650,000. "Dover's performance this quarter exceeded our expectations,'' said James F. Conway III, Courier Chairman and Chief Executive Officer. "We are executing a strategic plan to create an end-to-end publishing model and it is producing results faster than we anticipated,'' he continued. Dover's new website, www.doverpublications.com, has had more than 500,000 visitors and has sold books to over 10,000 customers since its March 8th launch. "Our website is making it easier for readers to find more of the Dover books they want. Over ninety percent of the company's titles have sold through the site and the average web order is 35% larger than those placed through our mail order catalogs. This pattern has significant implications for the value of Dover's huge backlist,'' Conway said. "Our web initiatives are driving sales through all channels,'' continued Conway. Third quarter direct-to-consumer sales, which include web and mail order catalogs, increased 40% over the same period last year. "Our end-to-end strategy enables us to vertically integrate operations, resulting in significant operating efficiencies,'' Conway said. Today, all of Dover's new titles are being digitized which streamlines the process and enables the company to move manufacturing of more titles into Courier owned plants. Additionally, the company has been able to leverage combined purchasing volumes in transportation and paper costs that will result in annual savings of over $500,000. "All of this activity is helping to improve Dover's margins and fuels our desire to aggressively expand Dover, a business that is becoming an increasingly important part of Courier,'' Conway noted. Book Manufacturing Segment Results Book manufacturing segment sales declined 8% for the quarter to $42.8 million, with net income of $3.0 million, or $0.87 per diluted share, in comparison with sales of $46.6 million and net income of $3.0 million, or $0.89 per diluted share, for the same period last year. Segment sales for the first nine months of fiscal 2001 totaled $130.7 million, with net income of $8.0 million, or $2.30 per diluted share, versus sales of $135.3 million and net income of $8.5 million, or $2.54 per diluted share, for the corresponding 2000 period. Conway said, "Sales in this segment were weaker than we had anticipated this quarter in all three of our target markets -- religious, education, and specialty trade publishing.'' Religious sales were off 10% after a very strong first half so that, after nine months, sales are up a modest 3%. "We believe third quarter sales to be an issue of timing as this market has continued to grow at low single digits,'' stated Conway. Sales to educational publishers grew 3% for the quarter, primarily due to a strong market for elementary and high school texts. Sales to the specialty publishing market continue to run well below last year's levels due to softness in consumer demand for books on topics such as investing, general business and computer applications. "The slowdown in the economy has made publishers more cautious. While they have continued to develop and promote their 'frontlist' titles aggressively, they have held back on reprinting backlist titles to reduce inventories,'' Conway said. "This year has been a fight for all of us in the book manufacturing sector, but we believe that by this fall publisher inventory levels will be in balance resulting in a strengthening of demand for our manufacturing services.'' He added that orders from specialty publishers were beginning to pick up for the fall in anticipation of the release of two new game platforms from Nintendo and Microsoft, as well as the publication of consumer guides related to the recently passed Tax Relief Act of 2001. Conway noted that despite the 8% drop in sales, income in this segment was flat. Margins improved through aggressive cost management and gains in productivity, which offset higher energy costs and depreciation on new capacity added in the last two years. Customized Education Segment Results Revenue for Courier's customized education segment, which is now comprised solely of Courier Custom Publishing, was $95,000 for the third quarter of fiscal 2001 down from $602,000 for the same period last year, reflecting the March 2001 sale of The Home School, Inc. The segment reported an after-tax loss for the quarter of $138,000, or $0.04 per diluted share, versus a loss of $509,000, or $0.15 per diluted share, for the third quarter of fiscal 2000. For the nine months ended June 30, 2001, the segment reported sales of $1.0 million and an after-tax loss of $345,000, or $0.10 per diluted share, versus sales of $1.5 million and an after-tax loss of $1.5 million, or $0.45 per diluted share, for the corresponding fiscal 2000 period. Courier Custom Publishing, which manufactures custom course packs and markets and sells special brands directly to professors and students, posted a 13% increase in sales for the quarter and a 21% increase for the year-to-date period with a corresponding improvement in year-over-year earnings. However, most of the improvement in earnings in this segment is related to The Home School. Last fall the company closed the retail store and took other steps to significantly reduce expenses and then, in March, sold all of the remaining assets of The Home School. This sale resulted in an after-tax gain of approximately $200,000, or $.06 per diluted share, in our second quarter. Fiscal 2001 Outlook Regarding the outlook for the year, Conway said, "We expect to achieve top-line growth of approximately 10%, or sales of about $207 million for fiscal 2001, with earnings per share growth of 8%-10%, or in the range of $3.40 to $3.50 per diluted share, excluding the first-quarter real estate gain of $.16 per diluted share. We are confident that we are taking the steps necessary to continue building the value of Courier.''