Courier Reports Q3 Results: Sales, Net Income and EPS All Up as Forecast
Friday, July 19, 2002
NORTH CHELMSFORD, Mass.--July 18, 2002--Courier Corporation, one of America's leading book manufacturers and specialty publishers, today announced results for the quarter ending June 29, 2002, the third quarter of the company's 2002 fiscal year. Sales, net income and earnings per share all rose in accordance with company expectations and previous guidance for the balance of the year. Sales for the quarter were $51.8 million, up 2% from a year earlier, reversing the declines of the past two quarters and reflecting renewed strength in Courier's book manufacturing segment as well as continued growth in the company's Dover Publications subsidiary. Net income and earnings per diluted share were up substantially from fiscal 2001, marking the company's second consecutive quarter of improved earnings. Third quarter net income was $4.1 million or $.76 per diluted share, an increase of 27% from prior year net income of $3.2 million or $.62 per diluted share (adjusted for the adoption of a new accounting pronouncement on goodwill amortization- see table below). For the first nine months of Courier's 2002 fiscal year, sales were $146 million, a decline of 6% from the corresponding period in fiscal 2001. Net income for the first nine months of fiscal 2002 was $9.6 million or $1.80 per diluted share, up 19% from $8.1 million or $1.55 per diluted share for the first nine months of fiscal 2001. All these comparative figures for fiscal 2001 reflect adjustments for the adoption of the new accounting pronouncement and gains from the sale of real estate and The Home School. (dollars in thousands) Third Quarter Nine Months Net Income EPS Net Income EPS Prior year as reported $2,966 $0.57 $8,051 $1.55 Gains from asset sales - - ($750) ($0.14) Goodwill amortization(A) $250 $0.05 $750 $0.14 Adjusted prior year results $3,216 $0.62 $8,051 $1.55 Current year results $4,080 $0.76 $9,566 $1.80 (A) Effective September 30, 2001, the company ceased amortizing goodwill as required by Statement of Financial Accounting Standard No. 142 "Goodwill and Other Intangible Assets". Goodwill amortization of approximately $250,000 and $750,000 (net of tax) was recorded in the third quarter and first nine months of fiscal 2001, respectively. "The turnaround in our book manufacturing business provides solid evidence that our expectations for improvement in the second half of the current fiscal year were on target," said Courier Chairman and Chief Executive Officer, James F. Conway III. "While we have yet to see an across-the-board recovery in all our markets, the trends are increasingly positive. In the meantime, we have been able to achieve healthy earnings growth despite the challenging environment, and we continue to be pleased by the growth and prospects of our Dover Publications business. As the overall economic climate improves, so will the upside potential for all our businesses." Results by segment Book Manufacturing -- Book manufacturing sales for the third quarter of fiscal 2002 were $44.7 million, up 2% from a year earlier. This sales growth followed five quarters of decreased sales, indicating a gradual improvement in market conditions. The segment serves three primary publishing markets: religious, educational and specialty trade. Sales to the religious market were up 22% over 2001 in the third quarter and 6% year to date, reflecting strong order flow and a growing return on prior-year investments in new equipment. Sales to the educational market, which had declined 13% in the first half of the fiscal year, rose 2% in the third quarter, suggesting that publishers' inventory pressures have begun to abate. Sales to the specialty trade market remained below 2001 levels, but the 16% decline in the third quarter represented an improvement over the 22% decline for the first half of the year. Continued productivity improvements and aggressive cost controls enabled the company to achieve solid increases in both pretax income and earnings per share. Third-quarter pretax income in the book manufacturing segment was $5.4 million, up 17% from a year earlier, and earnings per diluted share were $.68, also an increase of 17% over fiscal 2001. Through the first nine months of the fiscal year, book manufacturing sales were $123.5 million, down 8% from the first nine months of fiscal 2001. Pretax income for the first nine months was $12.2 million, equal to the prior year. Earnings per diluted share were $1.55 for the first nine months of fiscal 2002, versus $1.53 in same period in fiscal 2001. "We are pleased to see our book manufacturing business finally turn the corner in sales," said Conway. "With specialty trade continuing to lag our other markets, it has been a challenge. But we have continued to hammer away at internal efficiency while maintaining the highest possible service levels, and the results reflect the efforts. While enjoying sales growth in the religious and educational markets, we also continued to increase gross profit as a percentage of sales across our book manufacturing operations, reaching 27% in the third quarter. We look for further improvement in both sales and earnings as publishers' inventories bottom out and specialty trade starts to climb back from its depressed state." Specialty Publishing -- Courier's specialty publishing segment consists of Dover Publications, a leading provider of proprietarycontent in a variety of niches including children's books, music scores, art books and scientific texts. While Dover's third-quarter sales of $8.5 million were up 6% over a year earlier, the underlying order rate was up 14%, in line with expectations and previous guidance. For the first nine months of the year, Dover's sales were $25.9 million, up 11% from the first nine months of last year. Pretax income in the quarter was approximately $900,000, or $.11 per diluted share, versus prior-year pretax income of $377,000, or $.04 per diluted share. For the first nine months of fiscal 2002, Dover's pretax income was $2.7 million, or $.32 per diluted share, compared to $0.4 million or $.04 per diluted share for the same period in fiscal 2001. "Dover turned in another strong quarter, with consistent growth in orders," said Conway. "Dover's story is increasingly an international one. Much of Dover's content is international in appeal, and Dover is now represented in many markets where it has never been before. Despite a temporary setback in Canada due to distributor issues, Dover's international sales were up 9% through the first nine months of the year. "Another highlight of Dover's spring quarter was the May launch of www.doverdirect.com, a business-to-business Web site that complements Dover's consumer site with numerous features designed to build business with and for retailers. At the same time, we released the first titles in our Phoenix series of classic hardcover math and science books, taking advantage of our expertise in short-run production to serve a worldwide academic community with high-value content no one else offers." Customized Education -- Courier's small customized education segment continued to narrow its losses from a year earlier. For the quarter ended June 29, 2002, the segment lost $.01 per diluted share, versus $.03 per diluted share in fiscal 2001. Outlook "Heading into our fiscal fourth quarter, we remain confident in our previous earnings estimates for the year," observed Conway. "While our sales environment is still far from easy, it has improved from earlier in the year due to a combination of improving economic conditions and the gradual reduction in publisher inventories. At the same time, we have continued to work hard at the fundamentals. Over the first nine months of the fiscal year, we paid down $15 million in debt. During the last twelve months, we reduced debt by $25 million, leaving only $1.3 million of debt at the end of June. We have also been diligent at pursuing productivity improvements and have seen continued increases in gross profit as a percentage of sales. Dover continues to perform well, and is still only beginning to take advantage of some of the opportunities we feel are available. "Overall, we expect full-year sales of between $202 and $206 million, off slightly from the fiscal 2001 figure of $212 million due primarily to the weakness in the first half. But in earnings per diluted share, we expect to achieve full-year results in the range of $2.80 to $2.90, which will represent a substantial advance over last year's performance as well as a new earnings record for Courier. Fiscal 2001 earnings were $2.40 per diluted share, excluding last year's gains of $.14 per diluted share from asset sales and including $.20 per diluted share of goodwill amortization. In coming quarters, we hope for even better results if the economy continues to improve. In fact, given a favorable economy I expect us not only to continue our steady earnings growth, but also recapture the sales momentum we had before the recession, and reach additional new heights with the help of Dover."