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Courier Corporation Reports Double-Digit Gains

Thursday, January 19, 2006

Press release from the issuing company

NORTH CHELMSFORD, Mass.--Jan. 18, 2006-- Courier Corporation, one of America's leading book manufacturers and specialty publishers, today announced results for the quarter ended December 24, 2005, the first quarter of its 2006 fiscal year. Continuing its pattern of higher sales to the education market, the company reported $57.7 million in revenues for the quarter, up 13% from last year's first-quarter sales of $51.3 million. Net income for the quarter was $4.5 million, an increase of 18% over prior-year results of $3.8 million. Net income per diluted share was $.36, up 16% from $.31 in fiscal 2005. First-quarter 2006 results include Moore Langen, an Indiana-based printer specializing in book covers and packaging, acquired by the company in October. Excluding Moore Langen, first-quarter sales were up 10%. Net income and income per share results also reflect Courier's adoption during the quarter of FAS 123R, a new accounting rule requiring the expensing of stock options. This accounting change reduced first-quarter net income by approximately $200,000 in fiscal 2006 and $300,000 in fiscal 2005. Both of the company's operating segments reported increased sales. Book manufacturing revenues were up 12% on higher textbook sales and the Moore Langen acquisition. Sales in Courier's specialty book publishing segment were up 6%, reflecting growth in domestic and international trade sales and the completion of technology and distribution upgrades begun last year. "Our new fiscal year is off to a very solid start," said Courier Chairman and Chief Executive Officer James F. Conway III. "We continued to benefit from our investments in four-color production, as textbook demand continued to grow in line with our expectations. The Moore Langen acquisition tripled our capacity in book cover production and should serve us well as textbook publishers increasingly seek innovative cover solutions. Sales in our publishing segment were also up as we turned the corner on last year's challenging infrastructure projects and began rolling out new initiatives in trade retailing. "It was a good quarter by other measures as well. We took delivery of our second ManRoland four-color press, which went into operation in December with an especially smooth startup. And in November, we raised the dividend on Courier stock by 20%, just six months after a 50% increase last spring." Strong quarter in book manufacturing Courier's book manufacturing segment had first-quarter sales of $48.2 million, up 12% from last year's first quarter. Pretax income for the segment rose 10% in the quarter to $6.2 million or $.32 per diluted share, versus $5.6 million or $.29 per diluted share in 2005. Gross profit in the segment rose 14% to $13.6 million, increasing as a percentage of sales to 28.1% from 27.8% in 2005, reflecting higher capacity utilization and a favorable sales mix, though these were partly offset by increases in utility and medical costs. The book manufacturing segment focuses on three publishing markets: education, religion, and specialty trade. Sales to the education market rose 14% in the quarter, with growth greatest in four-color elementary and high school textbooks. Sales to the religious market were down 3% from last year's first quarter, in keeping with expectations following a decision last year to discontinue certain low-priced religious trade work. Sales to the specialty trade market were up 12% from fiscal 2005, with a few large one-time orders contributing most of the increase. "Textbook publishers continued to drive much of our growth this quarter, but we also performed well for our other customers," said Mr. Conway. "Our first ManRoland press has been fully booked for some time so we were delighted with the on-time startup of our second one and have recently ordered a third for delivery in late 2006. Our integration of Moore Langen also proceeded smoothly, revealing capabilities that stand to benefit both Courier and its customers in the high-growth textbook market. We continued to operate in a challenging competitive environment, but held our own thanks to our continuing investments in new technology and proven ability to deliver the service our customers need." Specialty publishing sales up as new systems take hold Courier's specialty publishing segment includes two businesses: Dover Publications, which publishes thousands of titles spanning a broad range of niche markets, and Research & Education Association (REA), a publisher of test preparation books, CD-ROMs and study guides. First-quarter sales for the segment were $10.9 million, up 6% from $10.3 million in last year's first quarter. Pretax income was $1.1 million or $.06 per diluted share for the quarter, about equal to fiscal 2005. Gross profit was 44.7% of sales, down from 49.0% a year ago, reflecting costs incurred to complete major information technology and warehouse consolidation projects begun last year. "Last year's hard work in our publishing segment began to bear fruit in this quarter," said Mr. Conway. "Our new SAP information systems are up and running throughout Dover, and our warehouse consolidation is complete, giving us our strongest infrastructure and best service levels ever. At the same time, we closed some important deals with retailers that validate our revitalized approaches to marketing, merchandising and trade relationships. With both of our publishing businesses continuing to produce outstanding new editorial content and retailers positioned to reap increasing benefits, we look forward to more revenue and earnings growth throughout the segment." Outlook "One quarter into our new fiscal year, we remain confident about our prospects for the rest of the year," said Mr. Conway. "Competition is fierce in some markets, but we are well positioned to meet it and win. This spring we will be adding capabilities in book manufacturing that will qualify us for a larger share of textbook business in time for the coming school year. And we expect our publishing businesses to realize greater gains from our marketing, technology and distribution initiatives as the year progresses. "For fiscal 2006 overall, we are maintaining our earlier guidance which anticipates sales growth of 14% to 16% (which includes the benefit of a 53-week year in fiscal 2006), resulting in total sales of between $258 and $263 million--a record high for Courier. We also continue to expect full-year net income per diluted share to be between $1.94 and $2.04. This range would represent an increase of between 16% and 22% from fiscal 2005 earnings of $1.67 per diluted share, and would also set a new company record. As stated earlier, this guidance and prior-year comparison reflect our adoption of new stock option accounting rules under FAS 123R, which are expected to reduce fiscal 2006 earnings by approximately $.06 per diluted share and fiscal year 2005 earnings by $.10 per diluted share."




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