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Courier Announces Slim Profit, Increase in four-color textbook orders

Press release from the issuing company

NORTH CHELMSFORD, Mass. --  Courier Corporation, one of America’s leading book manufacturers and specialty publishers, today announced results for the quarter ended June 27, 2009, the third quarter of its 2009 fiscal year. With the nationwide recession continuing to dampen sales in both of Courier’s business segments, consolidated third-quarter revenues were $61.4 million, down from $73.4 million in last year’s third quarter. Yet by the end of the quarter, an increase in four-color textbook orders, combined with other market factors, suggest a stronger finish to the fiscal year. Net income for the third quarter was $1.6 million or $.14  per diluted share, versus a loss of $12.4 million or $1.01 per diluted share in the third quarter of fiscal 2008, though the fiscal 2008 results included the effect of a non-cash impairment charge of $23.9 million or $1.27 per diluted share. Excluding that impairment charge, net income in fiscal 2008’s third quarter was $3.1 million or $.26 per diluted share.

For the first nine months of fiscal 2009, Courier sales were $180.4 million, down from $204.0 million in 2008. Net loss through nine months was $8.9 million or $.75 per diluted share, versus a loss of $7.6 million or $.61 per diluted share a year ago. The year-to-date loss in fiscal 2009 reflects $19.4 million in restructuring and impairment charges taken earlier in the year. Excluding these restructuring and impairment charges, net income for the first nine months of fiscal 2009 was $3.6 million or $.31 per diluted share. Excluding the 2008 impairment charge referred to above, net income for the first nine months of fiscal 2008 was $7.9 million or $.64 per diluted share.

With consumer spending down and book retailers managing inventory tightly, Courier’s third-quarter publishing sales were down, but less so than earlier in the year, with a single-digit decline at Dover Publications and sales at Research & Education Association (REA) essentially flat from 2008. While Creative Homeowner sales were down 38%, most of that decline was the result of the winding-down of its book distribution services earlier in the year.

Revenues were also down in Courier’s book manufacturing segment, reflecting declines in all three of the company’s principal book markets. Despite the late surge in four-color orders, education, religious and specialty trade sales were all below fiscal 2008 levels as a result of the weak economy and its impact on school budgets, consumer spending and fundraising by religious organizations. Net income for the segment was off significantly from a year ago but up from the prior quarter, largely as a result of the completion of earlier cost-reduction measures.

“Our third-quarter performance inevitably reflected macroeconomic trends across the country and around the world,” said Courier Chairman and Chief Executive Officer James F. Conway III. “Faced with the challenging economy, we continued to take pains to operate as efficiently as possible while distinguishing ourselves competitively by helping customers weather similar storms in their own businesses. As a result, we came through the quarter with our financial position still solid and our key relationships stronger than ever. While challenges remain across the board, as the quarter progressed several trend lines turned less negative than we had seen in months. We were particularly pleased to end the quarter with our plant in Kendallville, Indiana operating at capacity and with continued strong cash flow, which enabled us to reduce our debt by $3.6 million from a year ago. And as always, we were pleased to serve our investors with this morning’s declaration of a quarterly dividend of $.21 per share, the same as last quarter.”

Book manufacturing: managing through the cycle

Courier’s book manufacturing segment had third-quarter sales of $52.7 million, down from $63.2 million in last year’s third quarter, with operating income of $3.7 million, versus $8.1 million a year ago. Gross profit in the segment was $9.9 million, or 19% of sales, down from $15.7 million, or 25% of sales, in the third quarter of fiscal 2008. The decline reflected the recession’s broad impact on sales, pricing pressure and capacity utilization, as well as a decline in revenue from recycled paper.

For the first nine months of fiscal 2009, book manufacturing sales were $153.5 million, down 8% from the first nine months of fiscal 2008. The segment’s operating income through nine months was $6.7 million, including restructuring costs of $3.3 million nearly all of which was incurred in the second quarter. For the first nine months of fiscal 2008, operating income was $15.8 million. Gross profit through the first nine months of fiscal 2009 was $26.5 million or 17% of sales, down from $38.8 million or 23% of sales last year.

The book manufacturing segment focuses on three markets: education, religion, and specialty trade. Sales to the education market were down 18% in the quarter and down 8% for the fiscal year to date, with growth in higher education sales offset by continued weakness at the elementary and high school levels, as local and state governments continued to wrestle with budget shortfalls. Sales to the religious market were also down 18% from last year’s third quarter and were down 10% through nine months, reflecting a difficult fundraising environment. Sales to the specialty trade market were down 10% from last year’s third quarter, but flat through the first nine months of fiscal 2009. Even sales of four-color books, normally a Courier strength, were off during the quarter, reflecting the breadth and depth of the recession, though on a year-to-date basis they remained ahead of fiscal 2008.

“It was a challenging quarter across the board,” said Mr. Conway. “With the recession hitting nearly every sector of the economy, customers in all of our book manufacturing markets were affected, and we were along with them. There were some positive developments, including continued sales growth in the higher education market and an end-of-quarter upsurge in orders in anticipation of the coming school year. Also, while sales to the religious market were down, our long experience and strong relationships in this market give us confidence that they will return to historical levels before long.

“In managing through past recessions, we have been helped greatly by our passionate commitment to customers and proven ability to meet their needs in demanding circumstances. These traits have served us well again this year, as we have worked closely with customers to deliver outstanding quality on short notice across a wide range of run lengths. Equally important, once again we have shown ourselves willing to invest across economic cycles in innovations that will help our customers going forward. Starting in the depths of the last recession, we invested heavily in four-color capacity at our Kendallville plant; this quarter we committed to investing in state-of-the-art digital printing through a relationship with HP. At the same time, we have continued to attract growing attention from environmentally responsible publishers with our Green Edition capabilities. By operating efficiently, investing prudently and continuing to provide exceptional service, I’m confident we will not only get through the recession, but become a stronger competitor in the process.”

Specialty publishing: offering value to cautious consumers

Courier’s specialty publishing segment includes three businesses: Dover Publications, a niche 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 Creative Homeowner, which publishes books on home design, decorating, landscaping and gardening.

Third-quarter revenues for the segment were $11.3 million, down 15% from $13.4 million in last year’s third quarter. Creative Homeowner sales were down 38%, but mostly due to its cessation of book distribution activities earlier in the year; its operating loss was $581,000, versus a loss of $3.1 million in last year’s third quarter. Dover sales were down 8% in the quarter, though the decline was less than in the previous two quarters. REA sales were virtually unchanged from last year, also a significant improvement over the sales declines of the previous quarters. Overall, the segment’s third-quarter operating loss was $624,000, versus a loss of $2.5 million last year. Gross profit was $4.2 million or 37% of sales, versus $3.3 million or 25% of sales in last year’s third quarter.

For the first nine months of fiscal 2009, specialty publishing sales were $34.9 million, down 23% from $45.4 million in fiscal 2008. The segment’s year-to-date operating loss was $3.1 million including approximately $500,000 in severance costs, versus a loss of $1.4 million last year. Of the current-year loss, Creative Homeowner accounted for $2.5 million.

“Our publishing businesses did their best to fend off the combined effects of a shrinking economy, weak consumer confidence and the continuing trough in the housing sector,” said Mr. Conway. “Dover expanded its children’s line with several well-received titles. Creative Homeowner continued to win awards for editorial quality while reaching for a broader audience with value-priced SmartGuides. And REA gained increased shelf presence and sell-through with the relaunch of its Advanced Placement Test Prep series. All these initiatives were valuable and will continue. Yet we know that the biggest boost will come when consumers and book retailers feel renewed confidence in their financial prospects. In the meantime, we are operating with more focus and efficiency than ever to capture the opportunities that are out there and build our brands for the better times to come.”


“With three tough quarters behind us, we are cautiously optimistic about the fourth,” said Mr. Conway. “We have no illusions about the depth of the current recession and the continuing challenges faced by companies and consumers everywhere. Fortunately, we face them with solid finances, an exceptionally efficient infrastructure and a reputation that continues to open doors for us every day. Past recessions have taught us to combine discipline with continued innovation, and we are doing that this time, too. Over the course of the year we have repeatedly taken steps to bring costs in line with market conditions, and we will continue to benefit from these measures when the economy turns. In the meantime, we are well positioned to maximize our share of business through superior service.

“While forecasting remains difficult, we expect fourth-quarter performance to be our strongest of the year, as schools and colleges prepare for the new academic year and retailers prepare to make the most of their fall and holiday seasons. At the same time, we believe our sales outlook reflects the realities of today’s economy and conditions in our industry.

“For the remainder of fiscal 2009, we expect sales of between $69 million and $72 million, with earnings per diluted share of $.50 to $.60, excluding restructuring and impairment charges, compared to $.59 last year. For fiscal 2009 overall, we project total sales of between $249 million and $252 million, versus $280 million in fiscal 2008. And we expect full-year earnings per share of $.81 to $.91, excluding the restructuring and impairment charges, compared to net income of $1.22 per diluted share in fiscal 2008, excluding last year’s impairment charge.

“Factors not incorporated into our guidance include the potential impact of continued weakness in the credit markets on customers, competitors and vendors in both of our business segments, and the possibility of future impairment or restructuring charges.

“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) as an additional indicator of 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. Courier’s EBITDA, excluding restructuring and impairment charges, was $22.3 million, for the first nine months of fiscal 2009, compared to $30.2 million last year. For the full year, we expect EBITDA to be between $37 million and $39 million, compared to $46 million last year.”