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Courier Reports Record Results, Fifth Consecutive Year of Growth

Press release from the issuing company

NORTH CHELMSFORD, Mass., Nov. 8 -- Courier Corporation, one of America's leading book manufacturers and specialty publishers, today announced record sales and earnings for the fiscal year ending September 29, 2001. This marked Courier's fifth straight year of revenue and earnings increases as well as the best year in the company's 177-year history. Key contributors to Courier's performance included strong fourth-quarter sales to the religious market, improved margins in book manufacturing, and excellent performance by the company's Dover Publications unit since its acquisition in September 2000. Results at a glance Fourth quarter fiscal 2001: * Sales of $57 million, up 17% * Net income of $5.2 million, up 44% * Earnings per diluted share of $0.99, up 41% Fiscal year 2001: * Sales of $212 million, up 12% * Net income of $13.2 million, up 24% (17% excluding 2001 gains) * Earnings per diluted share of $2.54, up 21% (14% excluding gains) * After-tax gains for 2001 totaled $750,000 or $.14 per diluted share from real estate sale ($.10 per share) and the sale of The Home School ($.04 per share) Note: Earnings per share amounts have been adjusted to reflect a three-for-two stock split effected in the form of a 50% stock dividend in August 2001. "I am particularly proud of Courier's performance this year,'' said Chairman and Chief Executive Officer James F. Conway III. "In the face of difficult economic conditions, we proved the value of outstanding service, continued innovation, and our end-to-end vision of the business of book manufacturing and specialty publishing. I am also pleased that we continued to perform as well for investors as we did for customers. In addition to outperforming the S&P 500 index, we executed a three-for-two stock split in August. Today we are pleased to announce an 11% increase in our dividend, which marks our fifth straight year of double-digit dividend increases.'' Net income for fiscal 2001 rose to $13.2 million, or $2.54 per diluted share, from $10.6 million, or $2.10 per diluted share for fiscal 2000. Revenue increased to $212 million, up from $192 million last year, which included 53 weeks of operating results. Comparable 52-week sales last year were $189 million. Fourth quarter net income was $5.2 million, or $0.99 per diluted share, up from $3.6 million, or $0.70 per diluted share, in the corresponding period in fiscal 2000. Revenue for the quarter was $57 million, up from $53 million in the fourth quarter of 2000, which included 14 weeks. Comparable 13-week sales last year were $49 million. Fiscal 2001 results included after-tax gains totaling $750,000 or $.14 per diluted share from the sale of real estate ($.10 per diluted share in the first quarter) and the sale of The Home School ($.04 per diluted share in the second quarter). Excluding these gains, net income in 2001 was $12.5 million, up 17% over the prior year, and earnings per diluted share rose 14% to $2.40. The company adopted a new accounting standard for shipping and handling fees for fiscal 2001 which requires classification of shipping and handling fees billed to customers as sales. The impact of the adoption increased sales by $3.8 million and $3.9 million in fiscal years 2001 and 2000, and $900,000 and $1.0 million for the fourth quarters of 2001 and 2000. Adoption of the new standard had no effect on net income. Strong growth in specialty publishing Courier has three business segments: specialty publishing, book manufacturing and customized education. The specialty publishing segment is comprised of Dover Publications, which Courier acquired in September 2000. This segment grew well above initial post-acquisition projections, producing pretax income of $1.4 million, or $.17 per diluted share, on revenue of $33 million. A strong fourth quarter contributed significantly to these results, as the effects of infrastructure improvements, a restructured sales organization and a new online sales channel took hold. Fourth-quarter results for Dover included pretax income of $1.1 million, or $.12 per diluted share, on revenue of $9.9 million. "We had expected breakeven performance from Dover for this first full year after the acquisition,'' commented Mr. Conway. "In fact, after a breakeven first half, our business accelerated as we began implementing a range of new programs to capitalize on Dover's strong brand and loyal customer base. Following the launch of Dover's online store, direct-to-customer sales rose 40%. All other sales channels enjoyed increased sales as well, from gift shops to superstores. At the same time, we more than met our first-year integration goals, with $500,000 in annualized savings attributable to combined in-house operations.'' Book manufacturing slowdown offset by efficiency gains Courier's core book manufacturing segment focuses on three markets: religion, education and specialty trade publishing. Adjusting for the additional week last year, sales to the religious market rose 25% in the fourth quarter and 9% for the full year. Sales in education were off 5% in the fourth quarter but up 4% for the year as a whole. The specialty trade market remained under pressure in the fourth quarter as it had been all year, due to the weak economy and softness in consumer demand in certain subject areas. Fiscal 2001 fourth-quarter sales to the specialty trade market were 14% below the prior year's fourth quarter, and full-year sales were down 17%. Book manufacturing segment sales for the year were $181 million, off approximately 4% from fiscal 2000, a 53-week period. Pretax earnings in the segment were off 2% for the year to $18.7 million, or $2.38 per diluted share. The combination of increased productivity levels, lower paper costs and aggressive cost controls began to yield significant results by the fourth quarter. As a result, this segment achieved a fourth-quarter pretax earnings gain of 9%, to $6.5 million, while earnings per diluted share rose to $.86, up 5% from the fourth quarter of fiscal 2000. "Fiscal year 2001 represented a triumph of will in Courier's book manufacturing business,'' said Mr. Conway. "We achieved these results by focusing very hard on the markets that offered the best growth, and on internal improvements that would enable us to make the most of every revenue dollar. We continued investing aggressively in equipment and technology to enhance our ability to serve customers. We added new press capacity in anticipation of continued growth in the religious market. And in the face of a difficult economy, we achieved a modest rise in pretax income as a percentage of sales.'' Custom education: divesting for sharper focus Following a loss of $.43 per diluted share in fiscal 2000 in its custom education segment, Courier took decisive action in fiscal 2001 to reduce losses and focus on that portion of the segment with the best prospects for future growth. In March 2001, Courier sold The Home School for a modest after- tax gain of $200,000, or $.04 per diluted share. The Home School divestiture leaves Courier Custom Publishing as the only remaining business in this segment. This business, which provides web-based services including custom books and coursepacks for schools and colleges, lost $.08 per diluted share in fiscal 2001 on revenues of $1.1 million. These results represented a modest improvement from fiscal 2000's loss of $.13 per diluted share on revenues of $1.0 million. "Our experience with The Home School taught us that content was key to success in this segment,'' observed Mr. Conway. "Courier Custom Publishing offers innovative solutions for cost-effective content delivery to markets with attractive growth potential. It has also served Courier as a useful proving ground for e-business concepts which we are applying with growing success at Dover.'' Fiscal 2002 outlook and objectives While acknowledging the uncertainty of the current economic environment, Conway said the company is confident about prospects for fiscal 2002, particularly the second half. "With publishers and retailers managing inventories tightly, the first half of the year looks to be a difficult period for book manufacturers,'' said Mr. Conway. "The good news is that inventories are dropping to levels that will necessitate a ramp-up when consumer demand increases. As a result, while we expect the first half of fiscal 2002 to be below last year, we look forward to a more balanced distribution picture in the second half, bringing with it renewed growth.'' "Also, we are just beginning to realize the benefits of our acquisition of Dover Publications. A year ago we characterized Dover as a gem of a company. Since then we have not only confirmed that initial judgment, but found additional capabilities and potential. Our success at online marketing and a growing list of higher-value titles are just two of the factors leading us to expect double-digit growth in Dover revenues and income during fiscal 2002.'' "For Courier as a whole, these expectations translate into a slow first half followed by a much stronger second half. In fact, we expect our second- half performance to be strong enough to deliver full-year sales in the range of $217 to $222 million. In addition, before the effect of adopting the accounting standard discussed below, we expect fiscal 2002 earnings per diluted share to be in the range of $2.55 to $2.65, which compares positively with our achievement of $2.40 in fiscal 2001, excluding the gains. At the beginning of fiscal 2002, we will adopt Statement of Financial Accounting Standards No. 142 which will eliminate goodwill amortization, increasing fiscal 2002 pretax income by $1.4 million and net income by $1.0 million, or $.20 per diluted share. The expected earnings per diluted share for fiscal 2002 will, therefore, be in the range of $2.75 to $2.85.'' About Courier Corporation Courier Corporation publishes, prints and sells books. Headquartered in North Chelmsford, Mass., Courier has three lines of business: full-service book manufacturing, specialty publishing and customized education. For more information, visit www.courier.com.