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Courier Corporation Reports Strong Second Quarter - Sales, Earnings Up in Both Segments

Friday, April 14, 2006

Press release from the issuing company

NORTH CHELMSFORD, Mass.--April 13, 2006-- Courier Corporation, one of America's leading book manufacturers and specialty publishers, today announced results for the quarter ending March 25, 2006, the second quarter of its 2006 fiscal year. Helped by robust sales to the education market, the company reported $57.5 million in revenues for the quarter, up 8% from last year's second-quarter sales of $53.5 million. Net income for the quarter was $4.4 million, an increase of 15% over prior-year results of $3.8 million. Net income per diluted share was $.35, up 13% from $.31 in fiscal 2005. For the first six months of Courier's 2006 fiscal year, net income was $8.9 million or $.71 per diluted share, up 16% from $7.6 million or $.61 per diluted share for the first half of fiscal 2005. Six-month sales for fiscal 2006 were $115.2 million, up 10% from $104.8 million in the first half of last year. Second-quarter and six-month results include Moore Langen, an Indiana-based printer specializing in educational book covers, acquired by the company last fall. Results also reflect Courier's adoption earlier this year of FAS 123, a new accounting rule requiring the expensing of stock options. This accounting change reduced second-quarter net income by approximately $200,000 in fiscal 2006 and $330,000 in fiscal 2005. Both of the company's operating segments reported increased sales. Book manufacturing revenues for the quarter were up 9% on higher textbook sales and the Moore Langen acquisition. Sales in Courier's specialty publishing segment were up 5%, reflecting gains at both of the segment's businesses, Dover Publications and Research & Education Association (REA). "It was a quarter of significant accomplishments that sets the stage for further gains in the future," said Courier Chairman and Chief Executive Officer James F. Conway III. "Our book manufacturing business continued to exploit the growth in textbook demand, with four-color sales up 33% and our second MAN Roland press in full production mode. In specialty publishing, we had our second straight quarter of year-over-year revenue gains, as Dover continued to strengthen its sales operations and REA enjoyed excellent response to its growing line of titles in teacher certification and high-stakes testing. "Two other achievements are also worth noting. Moore Langen, acquired last October, is now fully integrated into our book manufacturing segment and has performed very well. In addition, between a favorable sales mix in book manufacturing and the effects of last year's warehouse consolidation projects in specialty publishing, we were able to overcome dramatic increases in utility costs and improve our operating margins in both segments." Textbook sales drive book manufacturing growth Courier's book manufacturing segment had second-quarter sales of $49.4 million, up 9% from last year's second quarter. Pretax income for the segment also rose 9% in the quarter to $6.3 million, versus $5.8 million in 2005. Earnings per share rose 10% to $.33 per diluted share, versus $.30 a year ago. Gross profit in the segment rose 11% to $13.2 million, increasing as a percentage of sales to 26.6% from 26.2% in 2005. For the first six months of the fiscal year, book manufacturing sales were up 11% to $97.7 million, with pretax income up 9% to $12.5 million. Gross profit through six months rose 12% to $26.7 million, also increasing as a percentage of sales to 27.4% from 27.0% in 2005. Increasing sales volume, a favorable mix of work and productivity gains overcame utility cost increases of approximately $600,000, or $.03 per diluted share, for the second quarter, and $1.1 million, or $.06 per diluted share, on a year -to-date basis. The book manufacturing segment focuses on three publishing markets: education, religion, and specialty trade. Sales to the education market rose 14% in the quarter and 14% year-to-date, primarily due to growth in four-color elementary and high school textbook sales. Sales to the religious market were down 2% for both the quarter and the first six months, reflecting a decision to discontinue certain low-priced work. Sales to the specialty trade market were up 2% in the quarter, with six-month sales up 8% as a result of a few large one-time orders in the preceding quarter. "Textbook demand continued to drive healthy growth in our book manufacturing business," said Mr. Conway. "Fortunately, we were ready for it. Our second MAN Roland four-color press is producing excellent results. Our new McCain and Smyth sewing systems also went into operation during the quarter, which opens new opportunities for even more elementary and high school textbook business. And we continue to invest in preparation for further growth. This summer we'll be expanding the bindery at our Kendallville, Indiana plant, and later in the fall we'll be installing a third new MAN Roland four-color press. We are grateful to our publishing customers for their continued confidence in Courier's ability to deliver the quality, volume and service they need." Specialty publishing sales up at Dover and REA 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. Second-quarter sales for the segment were $10.3 million, up 5% from $9.7 million in last year's second quarter. Pretax income was $1.1 million or $.05 per diluted share for the quarter, up 32% from fiscal 2005. Gross profit was 47.7% of sales, up from 47.0% a year ago, reflecting cost reductions resulting from a warehouse consolidation completed last fall. For the first six months, specialty publishing sales were $21.2 million, up 6% from $20.0 million last year. Six-month pre-tax income for the segment was $2.1 million, up 15% from $1.9 million in fiscal 2005. Six-month net income was $.11 per diluted share, up 22% from $.09 per diluted share last year. "REA had an excellent quarter, and we are encouraged by the positive response to Dover's new trade sales and marketing programs," said Mr. Conway. "With the hiring of Jay Melton as vice president of Dover sales, we expect this momentum to accelerate. Jay's highly regarded skills and deep industry knowledge will be important assets as we continue to roll out innovative, effective ways to help retailers maximize their revenues from Dover content. Between state-of-the-art technology, more efficient distribution than ever and this reinvigorated organization, we look forward to more sales growth through the remainder of 2006 and beyond." Outlook "Halfway through our fiscal year, we're pleased with our results and excited by our prospects for the rest of the year," said Mr. Conway. "Our book manufacturing business is producing outstanding work to meet escalating needs in key publishing markets. Our process management and customer service continue to set new standards, steadily raising the bar against our competition. Meanwhile, our publishing businesses are positioned to reap growing benefits from targeted product development, increasingly sophisticated marketing and the best service they've ever offered. "For fiscal 2006 overall, we are maintaining our earlier guidance indicating 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 represents 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 123, which are expected to reduce fiscal 2006 earnings by approximately $.06 per diluted share and will reduce fiscal year 2005 earnings by $.10 per diluted share."




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