Courier Reports Second-Quarter Results
Friday, May 08, 2015
Press release from the issuing company
NORTH CHELMSFORD, Mass. - Courier Corporation (Nasdaq: CRRC), a leader in digital printing, publishing and content management in the United States, today announced financial results for the quarter ended March 28, 2015, the second quarter of its 2015 fiscal year.
Revenues in the quarter were $61 million, even with last year’s second quarter. For the quarter, the company reported a loss of $15.6 million or $1.37 per diluted share, including transaction costs of approximately $13 million, or $1.14 per diluted share, associated with the pending acquisition of Courier by R.R. Donnelley & Sons Company (Nasdaq: RRD) and the terminated agreement with Quad/Graphics, Inc. These costs include a $10 million termination fee paid to Quad/Graphics for which the company was reimbursed by R.R. Donnelley. For accounting purposes, the $10 million reimbursement will not be recognized in income until the transaction with R.R. Donnelley closes. Results also include $200,000, or $.01 per diluted share, of losses on foreign currency translation associated with a recently acquired Brazilian-based digital printer, as well as a net impairment charge of $434,000, or $.01 per diluted share, related to FastPencil, a business the company sold shortly after the close of the quarter. Excluding these costs, the second quarter loss was $2.4 million or $.21 per diluted share. In fiscal 2014, Courier reported a second-quarter loss from continuing operations of $2.6 million or $.23 per diluted share, which included a net impairment charge for FastPencil of $1.9 million, or $.17 per diluted share.
For the first six months of fiscal 2015, Courier revenues were $127 million, down 4% from $133 millionlast year. The loss for the fiscal year to date was $13.8 million or $1.22 per diluted share, including transaction costs of $13.8 million, or $.1.21 per diluted share, from the pending acquisition of Courier, foreign currency losses of $1.1 million, or $.06 per diluted share, and the second quarter net impairment charge. Excluding those items, year-to-date net income was approximately $800,000 or $.07 per diluted share. For the first six months of fiscal 2014, the company’s income from continuing operations was $263,000 or $.02 per diluted share, which included the net impairment charge of $1.9 million, or $.17per diluted share, recorded in last year’s second quarter.
Details of these and other items, including reconciliations of non-GAAP measures to GAAP, can be found in the tables at the end of this release.
In the company’s book manufacturing segment, the second fiscal quarter has traditionally been its slowest due to seasonal variations in some of its markets. In addition, the timing of orders from several key customers depressed fiscal 2015’s second-quarter sales despite an increase in capacity utilization during the later portion of the quarter. In the company’s book manufacturing segment, sales for the quarter were up in the religious market, but down in the education and trade markets. In Courier’s publishing segment, revenues were down 7% from last year in the second quarter, but off less than 1% for the year to date.
“The second quarter of our fiscal year has often been challenging, and this year’s was no exception,” said Courier Chairman and Chief Executive Officer James F. Conway III. “Sales to the religious market rebounded from a sharp drop in the previous quarter, but not enough to bring year-to-date results up to last year’s level. And in the education market, sales were off at every level from elementary and high school through college.
“There were, however, some positive developments as well. While the quarter was weak overall, business accelerated as the quarter progressed, and the trend continued into the current quarter, with April bookings up sharply from a year ago. In addition, this quarter marked the first time we incorporated results from Digital Page Grafica e Editora, our South American digital print operation, and its contribution was positive to both sales and operating income. And while our publishing segment reported a small loss for the quarter, it remains profitable for the year to date as it continues on the path of recovery from the challenges of the last several years.
“I am also pleased to report that, based on our solid cash flow and balance sheet, on April 29th Courier’s Board of Directors declared our regular quarterly dividend of $.21 per share.
“While continuing to press forward across all our existing areas of business, we are also preparing for new opportunities in conjunction with Courier’s pending acquisition by RR Donnelley under the agreement announced jointly by the two companies in February. We believe the transaction with RR Donnelley provides both superior value to Courier shareholders and important benefits to our customers and employees.”
The completion of the RR Donnelley transaction is subject to customary closing conditions, including approval of Courier’s shareholders. One of the conditions to closing was met on March 23rd with the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. With respect to shareholder approval, the company announced today that it will be holding a Special Meeting of Shareholders on Friday, June 5, 2015 and expects the transaction to close during the second quarter of calendar 2015.
In light of the pending acquisition by RR Donnelley, Courier will not be hosting a conference call in connection with its second-quarter results. In addition, the Company has discontinued its financial guidance, and Courier’s previous guidance for fiscal 2015 should therefore not be relied upon.
Book manufacturing: Order timing impacts sales and operating income
Courier’s book manufacturing segment reported second-quarter sales of $55.2 million, off marginally from $55.4 million last year. The segment’s operating loss was $2.7 million, versus a loss of$718,000 last year, principally due to lower sales in the education market and a less profitable mix of work. For the year to date, book manufacturing sales were $115 million, down 5% from $121 million in the first six months of fiscal 2014. For the first six months, operating income in the segment was $2.6 million, excluding foreign currency losses of $1.1 million, compared with $4.6 million in the same period last year.
The book manufacturing segment focuses on three key U.S. publishing markets: education, religion, and specialty trade. Sales to the education market were $17 million in the quarter, down from $21 million last year, with most of the decline attributable to lower sales of college textbooks. For the first six months of fiscal 2015, education sales were down 6% overall from a year ago, but college textbook sales were up 1%. Sales to the religious market were $18 million in the quarter, up 8% from last year, with sales to the company’s largest religious customer up 18% after an unusually slow first quarter. For the year to date, sales to this customer were down 13%, reflecting both the timing of individual orders and a long-standing pattern of quarter-to-quarter fluctuations. For the religious market as a whole, six-month sales were down 17%. Sales to the specialty trade market were $15 million, down 2% in the quarter and 1% for the year to date.
In addition to U.S. sales, Courier began incorporating revenues from its operations in Brazil into segment results for the quarter. The South American digital print business, which primarily serves the education market, contributed approximately $4 million to sales during the period.
Shortly after the close of the quarter, Courier completed the sale of its FastPencil subsidiary.
Publishing: segment remains profitable for the year despite slower second quarter
Courier’s publishing segment includes two businesses: Dover Publications, a niche publisher with thousands of titles in dozens of specialty trade markets, and Research & Education Association (REA), a publisher of test preparation books and study guides.
Second-quarter revenues for the segment were $7.5 million, down 7% from $8.1 million in last year’s second quarter. Operating loss in the quarter was $141,000, versus income of $211,000 last year. For the first six months of fiscal 2015, publishing sales were $16.6 million, comparable to the same period last year. Despite the second-quarter loss, the segment remained modestly profitable for the year to date, with income of $117,000, versus a loss of $201,000 in the first half of last year. Major factors included previous cost containment measures and the growing success of Dover’s Creative Haven line of adult coloring books.
Dover entered this emerging category in 2013 and is now one of the leading providers, offering dozens of titles for purposes ranging from entertainment to patient therapy. Revenues have risen steadily, with sales doubling in the first six months of fiscal 2015.
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