Courier Reports Record Earnings, Sixth Consecutive Year of EPS Growth
Press release from the issuing company
NORTH CHELMSFORD, Mass.--Nov. 7, 2002--Courier Corporation, one of America's leading book manufacturers and specialty publishers, today announced results for the fiscal year ending September 28, 2002. Despite a slight decline in revenues, the company achieved record earnings for the sixth straight year, paid off its revolving debt and ended the year with cash of over $5 million. Earnings per diluted share were up 20% to $3.04 in 2002 compared to $2.54 last year.
Simultaneously with the release of the company's operating results, Courier's Board of Directors announced a 12.5% increase in its quarterly common stock dividend. This marked the sixth consecutive year of double-digit percentage increases in Courier's dividend.
Strong fourth-quarter results helped make this performance possible. Highlights included continued sales growth in Courier's Dover Publications subsidiary and increasing evidence that last year's slowdown in the book manufacturing market may have about bottomed out. All three of Courier's operating segments (specialty book publishing, book manufacturing and customized education) reported year-over-year earnings increases for both the quarter and the year as a whole.
"Our performance this year confirms the value of our strong customer focus and consistent execution," said Courier Chairman and Chief Executive Officer, James F. Conway III. "It also reaffirms the wisdom and timeliness of our acquisition of Dover Publications two years ago. In an environment that has been difficult for printers and publishers everywhere, we made the most of our opportunities and achieved significant improvements in profitability. We brought the Dover brand to new audiences around the world, strengthened the synergies between our book publishing and manufacturing businesses, and were able to partially offset a tough year for trade booksellers with gains in the religious market. The combination of loyal customers, growing market share and continued earnings growth has been very gratifying, and I am especially pleased that our investors have reaped their share of the rewards as well."
Net income for fiscal 2002 rose to $16.2 million, or $3.04 per diluted share, from $13.5 million, or $2.60 per diluted share for fiscal 2001 (after the adjustments noted in the table below). Revenue for fiscal 2002 was $202 million, down 4.6% from $212 million in fiscal 2001.
Fourth quarter net income was $6.6 million, or $1.24 per diluted share, up 21% from $5.5 million, or $1.04 per diluted share, in the fourth quarter of fiscal 2001 (after the adjustments noted in the table below). Revenue for the quarter was $56.2 million, down 1% from $56.9 million in last year's fourth quarter.
Solid growth in specialty book publishing
Courier's specialty book publishing segment comprises Dover Publications, which Courier acquired in September 2000. Dover's sales for fiscal 2002 were $36 million, an increase of 8% over fiscal 2001's $33 million. Sales for the fourth quarter were $10.1 million, up 2% from fiscal 2001. Dover's fiscal 2001 was a 53-week fiscal year, with a 14-week fourth quarter. Adjusting Dover's fiscal 2001 results to a comparable 52-week basis, sales for fiscal 2002 were up approximately 10% for the fourth quarter and 11% for the fiscal year as a whole.
Dover's pretax income rose dramatically over fiscal 2001. Fourth-quarter pretax income of $2.2 million, or $.26 per diluted share, was up 100% over the $1.1 million, or $.12 per diluted share, recorded in the fourth quarter last year. For the full year, Dover's pretax income of $4.9 million, or $.58 per diluted share, was up 250% from $1.4 million, or $.17 per diluted share in fiscal 2001, with gross profit increasing by $2.3 million to 49% of sales, versus 46% in fiscal 2001.
"We have always been confident that Dover and Courier would be a potent combination," said Mr. Conway. "We are now starting to see the fulfillment of the promise that drew us together. Fiscal 2002 brought significant accomplishments across the board in editorial, marketing and production. Dover published over 500 new books this year, making our new titles catalog the largest and richest in the company's history. I am especially proud of our new imprint, Dover Phoenix Editions, which gives new life to high-value scholarly books prized by scientists and mathematicians. Marketing highlights included the launch of a business-to-business website, www.DoverDirect.com, the introduction of a download center where consumers can sample Dover content for free, growing relationships with non-traditional retail outlets and a substantial increase in Dover's international representation. On the production side, we have brought an increasing amount of Dover's book manufacturing in-house, producing gains in quality, efficiency and profitability."
Turning the corner in book manufacturing
Courier's core book manufacturing segment had fourth-quarter sales of $46.9 million, down 1% from fiscal 2001's fourth quarter. Pretax earnings for the segment rose 17% in the fourth quarter despite the drop in sales, reaching $7.6 million, or $.98 per diluted share, versus $6.5 million, or $.86 per diluted share in 2001. For the full year, book manufacturing segment sales were $170 million, down approximately 6% from $181 million in fiscal 2001. Despite the decline in sales, gross profits as a percentage of sales increased from 25.8% to 27.5%, from tight cost controls and gains in productivity from investments in equipment and training. Pretax earnings for the year were $19.8 million, or $2.53 per diluted share, an increase of 6% over last year.
The book manufacturing segment focuses on three markets: religion, education and specialty trade. Sales to the religious market were down 6% in the fourth quarter after rising 22% in the third quarter. For the full year, sales to the religious market were up 3%, reflecting modest, steady market growth. Sales to the education market rose 8% in the fourth quarter, the second consecutive quarter of positive growth after previous declines. For the year, education sales were down 3%. In the specialty trade market, fourth-quarter sales were flat compared with the previous year, but this performance represented a sharp turnaround from the double-digit sales declines of the first three quarters of the year. For the full year, specialty trade sales were down 15%.
"I am very pleased with our performance in difficult circumstances in the book manufacturing business," said Mr. Conway. "The specialty trade market was hit hard this year due to the soft economic recovery and publishers' determination to pare inventories to a bare minimum. The education market was down slightly for the year, with a slight gain in College offset by softness in Elementary/High School due to reduced adoption activity in 2002. Our fourth quarter results suggest that these markets may be headed for recovery. The religious market saw modest growth for the year, and helped balance the effect of the other markets. In the meantime, faced with these conditions we also worked hard to maximize efficiency, making prudent equipment investments and leaving no stone unturned, at every level of the company, to give customers the best service in the industry. This has always been a great strength of Courier's, and it remains fundamental to our success in growing margins and market share at the same time."
Customized education reaches profitability
Courier's customized education segment passed a significant milestone in the fourth quarter of fiscal 2002, when it achieved profitability for the first time, with pretax earnings of approximately $100,000 or $.01 per diluted share on sales of $544,000. This compared with a loss of $26,000 on sales of $471,000 in the fourth quarter of 2001. This segment, which publishes custom books and coursepacks for the college market, remains a very small business following the sale of The Home School in March of 2001. For the full year, customized education reported a pretax loss of approximately $200,000 or $.02 per diluted share versus a fiscal 2001 loss of $850,000 or $.11 per diluted share.
Outlook for fiscal 2003
"We have come through a difficult period in book manufacturing in excellent condition," said Mr. Conway. "This accomplishment bodes well for our prospects for fiscal 2003, when we expect a gradual return to healthier education and specialty trade markets and overall sales growth. In book manufacturing, we expect a slow recovery with full-year sales up 3% to 5%, to between $175 and $179 million, with earnings growing by 9% to 13%, to between $2.75 and $2.85 per diluted share versus this year's $2.53 per diluted share. At the same time, we look for Dover's sales growth to continue at double-digit rates of 10% to 15%, to a total of about $40 to $42 million. And we expect Dover's pretax earnings to rise at a faster rate, reaching $6 to $6.5 million, with earnings per diluted share of $.70 to $.75, up approximately 20% to 30% from $.58 per diluted share this year.
"Overall, we expect Courier to achieve fiscal 2003 sales of $210 to $216 million, which represents 4% to 7% growth. And we expect earnings per diluted share of $3.35 to $3.50, an increase of 10% to 15% from this year's earnings of $3.04 per diluted share.
"Looking back on the recent slowdown, the good news was that we continued to raise the bar in both efficiency and service. As we head into better times, these improvements will serve us well. I look forward to renewed growth in sales and continued double-digit growth in earnings."
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