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Courier Reports Higher Sales and Earnings

Press release from the issuing company

NORTH CHELMSFORD, Mass.--April 14, 2005-- Courier Corporation, one of America's leading book manufacturers and specialty publishers, today announced results for the quarter ending March 26, 2005, the second quarter of its 2005 fiscal year. Helped by robust sales to the education market, Courier posted the highest second-quarter revenues and net income in its history. Revenues for the quarter were $53.5 million, up 8% from last year's second-quarter sales of $49.7 million. Net income for the quarter was $4.2 million or $.50 per diluted share, an increase of 8% over prior-year results of $3.9 million or $.47 per diluted share. For the first six months of Courier's 2005 fiscal year, net income was $8.3 million or $1.00 per diluted share, up 7% from $7.8 million or $.95 per diluted share for the first half of fiscal 2004. Six-month sales for fiscal 2005 were $104.8 million, up 9% from $96.5 million in the first half of last year. The gains in the quarter were concentrated in Courier's book manufacturing segment, where sales rose 10% over last year's second quarter, reflecting continued growth in demand for the company's expanded capabilities in four-color textbook production. Second-quarter sales in Courier's specialty book publishing segment were down 4% overall despite a 19% gain at the segment's newest business, Research & Education Association (REA). "Our book manufacturing business delivered another very gratifying quarter," said Courier Chairman and Chief Executive Officer James F. Conway III. "Our repeated investments in service, technology and capacity have enabled us to grow our textbook business faster than the overall market, as key customers rely on us to produce a growing share of their books. "In specialty publishing, while we achieved double-digit gains at REA, sales at Dover Publications did not meet expectations. As a result, during the quarter we initiated significant changes in Dover's sales and marketing organizations to create a stronger foundation for long-term sales growth. With product quality and consumer satisfaction higher than ever at both Dover and REA, we remain bullish about the segment's long-term prospects. "Another milestone during the quarter was our March 10 announcement of a three-for-two split in Courier common stock, which will take the form of a 50% stock dividend to be issued on May 27, 2005 to shareholders of record on May 6. At the same time, we announced that our quarterly cash dividend will remain at its current level of $.10 per share after the split, resulting in an effective dividend increase of 50%." Book manufacturing sparked by 33% gain in education Courier's book manufacturing segment had second-quarter sales of $45.3 million, up 10% from last year's second quarter. Pretax income for the segment rose 17% in the quarter to $5.8 million or $.45 per diluted share, versus $4.9 million or $.39 per diluted share in 2004. For the first six months of the fiscal year, book manufacturing sales were up 9% to $88.2 million, with pretax income up 16% to $11.3 million. Gross profit in the segment rose 8% to $11.9 million in the quarter, but decreased as a percentage of sales to 26.2% from 26.8% in 2004, reflecting pricing pressure associated with market share increases. The book manufacturing segment focuses on three publishing markets: education, religion, and specialty trade. Sales to the education market rose 33% in the quarter, with gains split equally between the elementary/high school and college markets. For the year to date, education sales were up 22% over fiscal 2004, with slightly larger gains at the elementary/high school level. Sales to the religious market were down 16% for the quarter and 5% for the first six months of the year, reflecting order timing issues as well as a decision to discontinue certain types of low-priced manufacturing work. Sales to the specialty trade market were up 5% for the second quarter and 6% for the first six months of the fiscal year, as this diverse market continued its gradual recovery from the sharp declines of previous years. "One full year after the startup of our new four-color press in Kendallville, Indiana, we have clearly proven our ability to deliver superior quality at higher volumes than ever before," said Mr. Conway. In response, textbook publishers have repeatedly increased our share of their new title and reprint business, enabling us to grow well ahead of the education market as a whole. In addition, the market itself has continued to gain strength along with the recovering economy. With a second identical new press due to be installed at the end of this year, we will be in a position to capture even more of that growth. At the same time, our highly trained workforce and expertise in process management have enabled us to use our technology with increasing effectiveness. Continuing productivity gains and outstanding customer service remain fundamental to our approach and key to our competitive edge in all our book manufacturing markets." Specialty book publishing begins sales force integration Courier's specialty publishing segment includes two businesses: Research & Education Association (REA), a publisher of test preparation books and study guides, and Dover Publications, which publishes thousands of titles spanning a broad range of niche markets. Overall, the segment reported second-quarter sales of $9.7 million, down 4% from $10.1 million in last year's second quarter. Second-quarter sales at REA were $1.4 million, up 19% from $1.1 million in 2004. At Dover, second-quarter sales were $8.4 million, down 7% from $9.0 million a year earlier. Direct-to-consumer sales were up 20% in the quarter, but sales to bookstore chains and non-bookstore retailers such as gift shops and crafts stores were down. The segment's pretax income was $0.8 million or $.06 per diluted share for the quarter, down from $1.1 million or $.08 per diluted share in fiscal 2004. Gross profit as a percentage of sales rose to 47.0% from 45.4% a year ago, with REA realizing modest gains and Dover benefiting from an improved sales mix tied to growth in direct-to-consumer sales. For the first six months, specialty publishing sales were $20 million, up 4% from $19.2 million last year, with Dover sales down 3% while REA added $1.4 million of growth. Pre-tax income for the segment was $1.9 million or $.14 per diluted share for the first half compared to $2.4 million or $.18 per diluted share last year. "REA had an excellent quarter, with new products and direct marketing initiatives complementing healthy sales in existing lines and channels," said Mr. Conway. "Dover did not--despite distinctive editorial content that we have been increasingly successful in selling directly to a large and loyal reader base. What has been needed is a stronger and more proactive relationship with the retailers who also serve that base. We are therefore restructuring our publishing sales resources into a single, integrated organization with the customer-centered attitude that has worked so well for our book manufacturing business. With a unified vision and an organization to match, both Dover and REA will be better positioned not only to gain new business, but also to serve current customers more effectively. "In addition, we have continued the work begun earlier in the year to reconfigure Dover's warehousing operations and replace old information systems at both Dover and REA with a new integrated solution. These two ongoing investments should lead to gains in marketing, production, distribution and service starting in fiscal 2006. Along with an improved sales organization, I am confident that they will fuel renewed revenue growth at Dover and increased profitability throughout the segment." Outlook "Our book manufacturing business is performing at its best level ever, and we are gearing up for further growth," said Mr. Conway. "At the same time, we know the work we have to do in specialty publishing, and we are doing it--while building on the great strengths our two publishing businesses already have. "As in past years, we expect the second half of our fiscal year to be stronger than the first. Nonetheless, we are adjusting our full-year guidance to reflect Dover's underperformance in the first half. We now expect full-year sales growth of 6% to 8%, resulting in total sales of between $223 and $228 million, which will still represent a record high for Courier. And we expect full-year earnings per diluted share in the range of $2.60 to $2.75, an increase of between 4% and 10% from fiscal 2004 earnings of $2.50 per diluted share, and another company record. As we stated at the end of the first quarter, this guidance excludes the impact of recently adopted stock option accounting rules, which are presently scheduled to become effective in our fourth quarter and would reduce earnings by approximately $.11 per diluted share." All per share amounts are before the recently announced three-for-two stock split.