NORTH CHELMSFORD, Mass.--July 17, 2003-- Courier Corporation, one of America's leading book manufacturers and specialty publishers, today announced the best third-quarter and nine-month earnings results in its history. For the period ending June 28, 2003, the third quarter of the company's 2003 fiscal year, Courier reported income from continuing operations of $4.8 million, or $.88 per diluted share, an increase of 15% over corresponding third-quarter results in the prior year of $4.1 million, or $.77 per diluted share. Sales from continuing operations were $51.1 million for the quarter, off 1% from third-quarter sales of $51.7 million in fiscal 2002.
For the first nine months of Courier's 2003 fiscal year, earnings from continuing operations were up 26% to a record $12.3 million or $2.28 per diluted share, from $9.7 million or $1.83 per diluted share for the first nine months of fiscal 2002. Nine-month sales were $148.5 million, up 2% from the first nine months of fiscal 2002. These figures do not include results from Courier Custom Publishing, which was sold by Courier in December 2002 and has since been accounted for as a discontinued operation.
"Our third-quarter results demonstrate our continuing ability to boost productivity and profitability in a tight economy," said Courier Chairman and Chief Executive Officer James F. Conway III. "In book manufacturing, we overcame an adverse sales environment to post double-digit increases in pretax income and earnings per share. Our specialty publishing segment had an even better quarter, turning modest 5% sales growth into increases of 34% in pretax income and 27% in earnings per share. At the same time, we continued to benefit from conservative financial management, finishing the quarter with $20 million in cash, an increase of $7 million during the quarter and $14.4 million year to date."
Results by segment
Courier's book manufacturing segment reported third-quarter pretax income of $6.3 million, up 16% from a year earlier. Book manufacturing sales for the quarter were $43.6 million, down 2.5% from fiscal 2002's third quarter. For the first nine months of fiscal 2003, book manufacturing pretax income was up 29%, while sales were up 2.5%.
As a book manufacturer, Courier serves publishers in three markets: education, religious and specialty trade. Sales to the education market were up 5% for the third quarter and 8% for the fiscal year to date, as Courier continued to increase its share of that market. Sales in higher education (which represents the majority of Courier's education sales) were up 22% for the quarter and 19% for the first nine months of fiscal 2003, reflecting strong growth in demand for four-color textbooks, increasingly a Courier specialty. In the elementary/high school market, sales were down 13% for the third quarter and 12% year to date, with many states delaying new textbook purchases because of budget deficits.
Sales to the religious market were down 10% in the third quarter, and 1% for the first nine months of the fiscal year. In 2003, sales of religious trade books suffered from reductions in the number of new titles released as publishers worked to control costs in the slow economy. Sales to the specialty trade market were up 14% in the third quarter, and up 10% year to date, bouncing back from depressed sales in fiscal 2002 as booksellers began renewing depleted inventories. Sales were also helped by market share gains and continued rising demand for game books.
"Our book manufacturing business has continued to excel in difficult circumstances," said Mr. Conway. "With economic uncertainty compounded by the war in Iraq, sales were under pressure throughout the quarter. There was good news in June, as retail book sales rose sharply, boding well for the remainder of the year. But for the most part, we had to make our own good news through hard work and improved efficiency. We succeeded in growing our gross profit percentage in book manufacturing by 290 basis points to 29.5% for the third quarter, and by 260 basis points to 28.5% year to date. This performance reflects the continued investments in equipment and training that have enabled us to offer outstanding service to customers while steadily increasing efficiency."
Dover Publications, Courier's specialty book publishing segment, reported pretax income of $1.2 million for the quarter, an increase of 34% over fiscal 2002's third-quarter figure of $0.9 million. Sales for the quarter were $8.9 million, up 5% from $8.5 million in last year's third quarter. Much of the gain came from increased sales to large bookstore chains, which had been down earlier in the year, as well as a 46% increase in international sales. Other recent accomplishments included the introduction of several new product lines for fall distribution and the launch of DoverDirect.co.uk and SalesPartner-UK, a new business-to-business website and trade marketing program targeting British retailers.
"Dover pushed hard in the face of the slow economy, achieving dramatic improvements in operating efficiency while laying the groundwork for greater growth as the economy improves," said Mr. Conway. "An example is SalesPartner-UK, an electronic direct marketing program launched in cooperation with our U.K. distributor and representing a first in the publishing industry. We believe this program will not only strengthen demand in the U.K., but also provide a model for use in other markets.
"We also continue to be pleased by Dover's increasing profitability. The segment's gross margin percentage rose by 410 basis points to 47.2% for the quarter, thanks to a combination of price increases, operating efficiencies and declining product costs related to the sale of inventory from the original acquisition. Year to date, Dover's gross profit percentage is up by 310 basis points to 46.3%."
"Three-quarters of the way through fiscal 2003, we remain confident that we will reach our earnings goals for the year," said Mr. Conway. "We anticipate a busy season in the education market, as states have begun releasing funds to support new textbook purchases. The outlook in specialty trade is also hopeful, with book retailers benefiting from the summer of 'Harry and Hillary.' Dover continues to find new ways to exploit specialized opportunities and strengthen its connection to readers, both domestically and internationally. And we continue to invest in state-of-the-art equipment, with emphasis on four-color production, where our demand has been strongest. In fact, we have recently purchased a new ultra-high capacity four-color press, to be installed next spring in time for the 2004 textbook season.
"For fiscal year 2003 as a whole, we expect Courier's sales from continuing operations to be in the range of $205 to $208 million, compared to $201 million last year. We expect earnings per diluted share from continuing operations to be in the range of $3.50 to $3.60, up approximately 14% to 18% from last year's comparable earnings of $3.06 per diluted share. Given today's economic environment, we are excited at the prospect of completing yet another year of double-digit earnings growth."
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