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Education Sales Fuel Third-Quarter Growth at Courier

Press release from the issuing company

Wednesday July 18 -- NORTH CHELMSFORD, Mass.-- Courier Corporation, one of America's leading book manufacturers and specialty publishers, today announced results for the quarter ended June 30, 2007, the third quarter of its 2007 fiscal year. Sales grew in both of Courier's business segments, enabling the company to post record third-quarter revenues of $73.4 million, up 4% from last year's third-quarter sales of $70.4 million. Key contributors to the increase were strong education sales and the inclusion of full quarterly results from Creative Homeowner, acquired by Courier partway through last year's third quarter. Net income for the quarter was $6.7 million, up 10% from prior-year results of $6.1 million. Net income per diluted share was $.53, up 10% from $.48 in the third quarter of fiscal 2006.
For the first nine months of fiscal 2007, Courier sales were $214.1 million, up 15% from $185.6 million in 2006. Net income through nine months was $16.3 million, up 9% from $14.9 million from a year ago. Net income per diluted share for the period was $1.29, up 8% from $1.19 in fiscal 2006.
Book manufacturing sales increased modestly in the quarter, with robust growth in the education and specialty trade markets partly offset by a slow quarter in religious sales. Third-quarter sales in Courier's specialty book publishing segment rose 18%, in part due to the inclusion of full-quarter results at Creative Homeowner.
"Once again, our balanced portfolio and disciplined approach served us well across a variety of market conditions," said Courier Chairman and Chief Executive Officer James F. Conway III. "In book manufacturing, our sizable investment in four-color capacity for the education market continued to pay dividends, with our new presses running at capacity for much of the quarter and Moore Langen performing superbly to meet rising demand from textbook publishers, offsetting a shortfall in religious sales. In publishing, we faced a challenging environment for booksellers as well as continued softness in the home improvement market served by Creative Homeowner. At the same time, a strong market for test-preparation materials enabled REA to post an 18% sales increase in the quarter. All told, both sides of our business were able to offset weakness in specific markets by taking advantage of strength in others, resulting in a 10% profit improvement across the company."
Book manufacturing gains from record sales in education
Courier's book manufacturing segment reported third-quarter sales of $58.5 million, up slightly from last year's third quarter. Pretax income for the segment was up 16% in the quarter to $10.1 million, from $8.7 million in fiscal 2006. Gross profit in the segment rose 11% to $17.2 million, increasing as a percentage of sales to 29.5% from 27.0% a year earlier, primarily due to productivity gains, high capacity utilization and the efficiency of Courier's four-color MAN Roland presses. For the year to date, book manufacturing sales were $168.9 million, up 9% from fiscal 2006. Year-to-date pretax income in the segment was $23.9 million, up 13% from $21.2 million in 2006.
The book manufacturing segment focuses on three publishing markets: education, religion, and specialty trade. Sales to the education market rose 23% in the quarter, driven by increasing demand for four-color textbooks. For the first nine months of the fiscal year, education sales were up 18%. Sales to the religious market were down 27% in the third quarter following a 22% increase in the second quarter, reflecting timing issues as well as reduced orders from a key customer. For the year to date, religious sales were down 5%. Sales to the specialty trade market were up 26% in the third quarter, and up 22% for the year to date, reflecting a combination of one-time orders, new customer relationships and increases in share with existing customers.
"Our investments in our Kendallville, Indiana plant and Moore Langen's book cover production capabilities have increasingly established Courier as the four-color service leader for the education market," said Mr. Conway. "Despite a slowdown in scripture sales this past quarter, we continue to expect solid growth in the religious market, where we have been a global leader for 75 years. With this growth in mind, we continue to invest in additional capacity and improved efficiency at our Philadelphia religious printing plant. With the industry's best equipment, best workforce and a customer base second to none, we look forward to sustained growth in all our book manufacturing markets."
Soft housing sector dampens specialty publishing results
Courier's specialty publishing segment includes three businesses: Dover Publications, a publisher with thousands of titles in dozens of specialty trade markets; Research & Education Association (REA), a publisher of test preparation books and study guides; and (since April 2006) Creative Homeowner, a publisher and distributor of books on home design, home improvement, gardening and crafts.
Third-quarter sales for the segment were $17.9 million, up 18% from $15.2 million in last year's third quarter. Year-to-date sales were $52.8 million, an increase of 45% over the first nine months of fiscal 2006. Of these totals, Creative Homeowner contributed $6.8 million in the third quarter and $21.0 million through nine months. Last year Creative Homeowner contributed $4.4 million in third-quarter sales, representing the two months following its acquisition by Courier on April 28, 2006. On a comparable 13-week and year-to-date basis, Creative Homeowner sales were down from 2006, reflecting a soft housing sector and reduced traffic at home improvement centers, which constitute the company's largest sales channel. Sales at Dover Publications were comparable to last year's third quarter, with strong sales to smaller retailers offset by uneven ordering from large booksellers. Sales at REA were up 18% on the growing success of its high-stakes test preparation books.
Third-quarter pretax income for the segment was $0.8 million, down 25% from $1.1 million in fiscal 2006, with a $600,000 pretax loss at Creative Homeowner offsetting a 22% increase in pretax income across Courier's other publishing businesses. Through nine months, pretax income was $3.0 million, down 8% from $3.3 million in 2006 as a result of the loss at Creative Homeowner. Similarly, the segment's gross profit in the third quarter was 40.1% of sales, down from 43.7% a year ago, reflecting the impact of Creative Homeowner results.
"New Fun Kits, innovative merchandising and strong sell-through helped Dover combat a soft retailing environment, but not enough to maintain the momentum from the previous quarter," said Mr. Conway. "Creative Homeowner had success expanding its crafts line, but faced the headwind of reduced traffic at home improvement centers. On the other hand, REA's quarter was positive from beginning to end. With a strong flow of new products and continued merchandising innovation from all three businesses, I look forward to a busy fall season."
"Three-quarters of the way through our 2007 fiscal year, we are running ahead of last year and poised for a strong finish," said Mr. Conway. "We are, however, adjusting our guidance to reflect the past quarter's performance. As we look to the close of the year, we are as excited as ever about the opportunities in our key markets and our ability to reach out to new customers and new readers. Our book manufacturing segment continues to win business through quality and service while setting new standards for operating efficiency. Our publishing businesses are delivering attractive, targeted products and traffic-building programs of proven effectiveness.
"For the fourth quarter of fiscal 2007, we expect sales of $89 million to $93 million, an increase of 7% to 11% over last year's 14-week fourth quarter. And we expect fourth-quarter earnings of $.86 to $.91 per diluted share, an increase of 13% to 20% over last year. As a result, for fiscal 2007 overall, we expect total sales of between $303 million and $307 million, representing sales growth of 13% to 14% over the previous 53-week year. And we expect fiscal 2007 earnings per share of between $2.15 and $2.20, an increase of between 10% and 13% from earnings of $1.95 per diluted share in fiscal 2006, excluding the effect of the reversal of a tax accrual, which added $.30 to fourth-quarter and full-year earnings in 2006.
"In addition to measuring our performance by generally accepted accounting principles, we also track several non-GAAP measures including EBITDA (earnings before interest, taxes, depreciation and amortization) to provide additional insight into the company's operating cash flow performance. This measure should be considered in addition to, not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. For the first nine months of fiscal 2007, Courier's EBITDA was $41.3 million, up 21% from the same period in 2006. For the full year of 2007 we expect EBITDA to be between $64 million and $65 million. This would represent an increase of 21% to 23% for the year."