NORTH CHELMSFORD, Mass. April 16, 2008 --  Courier Corporation, one of America's leading book manufacturers and specialty publishers, today announced results for the quarter ended March 29, 2008, the second quarter of its 2008 fiscal year. A combination of industry factors and the sluggish national economy resulted in a down quarter in sales and net income versus fiscal 2007 results, though performance was up from fiscal 2008's first quarter. Revenues for the quarter were $67.8 million, down 11% from last year's second-quarter sales of $76.3 million. Net income for the quarter was $3.4 million, compared to $5.6 million in the second quarter of fiscal 2007. Net income per diluted share for the quarter was $.27, versus $.44 in the second quarter of fiscal 2007.

For the first six months of fiscal 2008, Courier sales were $130.7 million, down 7% from $140.6 million in 2007. Net income through six months was $4.8 million, down from $9.6 million a year ago. Net income per diluted share for the period was $.38, compared to $.76 in fiscal 2007.

Second quarter performance in Courier's book manufacturing segment reflected both a tight competitive environment and a slower-than-usual start to the spring textbook season, reducing capacity utilization. Overall, book manufacturing revenues were down 12%, with declines in all three of the company's principal manufacturing markets of education, religion and specialty trade. Revenues in Courier's specialty book publishing segment were down 8%, with weak sales at Dover Publications and Creative Homeowner, and only modest growth at Research & Education Association (REA).

"It was a tough quarter for our company and our industry," said Courier Chairman and Chief Executive Officer James F. Conway III. "In book manufacturing, while underlying indicators in the education market are still strong, reprint order flow was slow, reflecting structural changes and caution among textbook publishers. And in our own publishing segment, with the housing recession increasingly threatening other sectors in the economy, slow retail traffic hurt not only Creative Homeowner, but also both Dover and REA.

"It is clear from these past two quarters that we are working our way through challenging conditions both at the macro level of the national economy and at the industry level, where consolidation and turbulence have yet to settle out. In such an environment, we are doing what we know best: leaving no stone unturned to maximize internal efficiency and the caliber of service we deliver to customers. This behavior is not only habitual for Courier, but key to our continuing success in gaining market share among our customers and being ready to make the most of the larger opportunities we expect to see in the second half of the year."

Book manufacturing sales down on education shortfall

Courier's book manufacturing segment had second-quarter sales of $53.4 million, down 12% from last year's second quarter. Pretax income for the segment was down in the quarter to $5.5 million, versus $7.9 million in last year's second quarter. Gross profit in the segment fell to $12.8 million from $15.7 million, decreasing as a percentage of sales to 24.0% from 25.9% in the second quarter of fiscal 2007. This decrease reflected a $300,000 increase in depreciation costs as a result of last year's investments in additional capacity, as well as underutilization of that increased capacity during the current slowdown. For the year to date, book manufacturing sales were $103.1 million, down 7% from fiscal 2007. Year-to-date pretax income in the segment was $8.0 million, down 42% from $13.8 million in 2007.

The book manufacturing segment focuses on three publishing markets: education, religion, and specialty trade. Sales to the education market were up from the first quarter but down 17% from a year earlier, hurt by lower-than-expected orders for textbook reprints, with publishers managing inventories carefully in the uncertain economy and tight credit markets, as well as industry consolidation resulting in the elimination of certain titles. Orders for new four-color elementary and high school textbooks were slow early in the quarter, but picked up sharply toward the end. For the first six months of fiscal 2008, education sales were down 9%. Sales to the religious market were down 15% from an unusually strong second quarter last year, and down 6% on a year-to-date basis, largely due to order timing. Overall, religious sales are consistent with expected full-year growth in the low single digits. Sales to the specialty trade market were off 2% in the quarter and 5% for the first six months of fiscal 2008, reflecting both the current softness in retail sales and several large one-time orders last year.

During the quarter, Courier completed the installation of a new press incorporating advanced, exclusive technology to serve the religious market at its Philadelphia plant. Work continued on the installation of new bindery equipment in the same plant, a project expected to be completed this summer. Both improvements are part of a major technology upgrade in support of a key customer's global scripture distribution program.

"Between increasing caution in the current economy and tighter financial controls in the wake of industry consolidation, orders from educational publishers remained slower than we had hoped in the second quarter," said Mr. Conway. "Fortunately, the pace accelerated in March, and we ended the quarter with our four-color capacity nearly sold out for the third quarter, in keeping with longer-term expectations. Religious sales reflected the pattern of quarterly fluctuations we have seen in recent years, but the long-term trend remains positive and our relationship with our key customer is stronger than ever, with a new generation of technology coming online that will enable a breakthrough in scripture productivity. In specialty trade, we believe our soft second quarter is simply an echo of the challenges faced by retailers everywhere in the current economy. Our answer to all these conditions is to operate efficiently, continue to outserve the competition, and work closely with customers to help them succeed and seize new opportunities."

Specialty publishing results reflect continued home-center weakness

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, a publisher and distributor of books on home design, decorating, landscaping and gardening, as well as complete home plans and blueprints.

Second-quarter sales for the segment were $16.8 million, down 8% from $18.2 million in last year's second quarter. With the nationwide housing recession continuing, store traffic at home improvement centers remained down, reducing sales of Creative Homeowner books. Sales for the rest of the segment also mirrored the larger economy, with Dover sales down by nearly $1 million and REA sales up only 2%, ending a string of ten consecutive quarters of double-digit REA sales gains. For the first six months of fiscal 2008, specialty publishing sales were $32.0 million, down 8% from fiscal 2007. Pretax income in the segment reflected these sales results. Pretax income was $202,000 in the quarter, versus $1.4 million last year, with income down at Dover and REA, while Creative Homeowner recorded a loss of $775,000, including charges totaling approximately $350,000 to increase inventory reserves and to write down investment in titles that have not performed up to expectations. Year-to-date pretax income in the segment was $251,000, versus $2.2 million in fiscal 2007.

"With the effects of the weak housing sector spilling throughout the economy, our publishing businesses were all affected," said Mr. Conway. "We feel the charges taken by Creative Homeowner in the quarter are prudent in these economic conditions.

"There was good news in the segment, as Creative Homeowner published two new 'green' titles that sold well into a variety of channels. Creative also gained share among mass merchant retailers with significant orders for home improvement and gardening titles during the second quarter. Dover has also made promising inroads into these channels, which we expect to drive sales in the second half of the year. Dover also introduced a major new product line targeting the craft channel, which will begin shipping in the third quarter, and prepared for the launch of another new product line that is expected to begin shipping in the fourth quarter.

"This was also the quarter in which we brought the manufacturing of Creative Homeowner books back home to our own facilities in the United States, a major advance environmentally as well as financially. And we completed our SAP technology installation at Creative Homeowner, resulting in a unified, state-of-the-art infrastructure that will strengthen collaboration and efficiency throughout our publishing segment going forward. "

Outlook

"With strong bookings in hand for the third quarter and positive indications for the fourth, we expect the second half of fiscal 2008 to be substantially better than the first," said Mr. Conway. "Yet even after last year's investments in capacity, our ability to make up for the first two quarters' revenue shortfall in book manufacturing will be capacity-bound. And on the publishing side, while we expect growth at Dover and REA, we expect Creative Homeowner results will continue to be hampered by nationwide weakness in housing and home improvement sales. As a result, we are reducing our full-year guidance.

"For the remainder of fiscal 2008, we expect sales growth of 7% to 10%, resulting in earnings per share of $1.32 to $1.42, versus earnings of $1.27 for the last six months of fiscal 2007. For fiscal 2008 overall, we project total sales of between $296 and $301 million, versus $295 million in fiscal 2007. We expect full-year earnings per share of $1.70 to $1.80 for fiscal 2008, compared to $2.03 per diluted share in fiscal 2007.

"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. For the first six months of fiscal 2008, Courier's EBITDA was $19 million, compared to $25 million for the same period last year. For the full year, we expect EBITDA to be between $57 million and $59 million, versus $61 million for fiscal 2007."