Courier Corporation Reports Q1 Results: Earnings Up 4%
Press release from the issuing company
NORTH CHELMSFORD, Mass.--Jan. 15, 2004-- Courier Corporation, one of America's leading book manufacturers and specialty publishers, today announced results for the quarter ended December 27, 2003, the first quarter of the company's 2004 fiscal year. Courier reported income from continuing operations of $3.9 million, or $.48 per diluted share, for the first quarter of fiscal 2004, up 4% from last year's $3.7 million, or $.46 per diluted share. Sales from continuing operations were $46.8 million for the quarter,
These results reflect the unevenness of the economic recovery in the book publishing industry, as Courier's book manufacturing sales were down 5% from the prior year while sales in its specialty publishing segment were up 8%. A more profitable overall sales mix contributed to the earnings improvement, despite the shortfall in sales. The results do not include a discontinued operation, Courier Custom Publishing, which was sold by Courier in December 2002 resulting in an after-tax gain of $.10 per share in last year's first quarter. Including discontinued operations, net income for this year's first quarter was $.48 per diluted share versus $.56 per diluted share last year. (Prior-year earnings per share have been adjusted to reflect a three-for-two stock split on December 5, 2003.)
"Given continued pressure on education budgets and the uneven retail environment for most of 2003, our publishing customers were still managing cautiously this fall," said Courier Chairman and Chief Executive Officer James F. Conway III. "Both new title and reprint orders were off the pace we had hoped for, leading to a single-digit sales decline in our book manufacturing segment. Nonetheless, we were able to post a modest increase in pretax income for the segment as a result of continued improvements in manufacturing efficiency and tight cost controls. Meanwhile, stronger sales at Dover Publications enabled a substantially larger increase in pretax income for our specialty publishing segment. Indications from customers in both segments point to improving sales over the balance of the fiscal year."
Results by segment
Book manufacturing sales for the first quarter of fiscal 2004 were $39.7 million, a decrease of $2.2 million, or 5% from fiscal 2003's first quarter. First quarter pretax income for the segment was $4.8 million, up 2% from a year earlier. As a book manufacturer, Courier serves publishers in three markets: education, religion, and specialty trade. Sales to the education market were down 3%, with small decreases at the elementary, high school and college levels. Sales to the religious market were up 1%, despite soft demand among religious trade publishers. Sales to the specialty trade publishing market were down 9%, as publishers remained cautious about inventory levels in an uncertain economy.
"Our book manufacturing business mirrored the up-and-down state of our markets," said Mr. Conway. "The good news was that despite a difficult sales quarter, we were once again able to achieve gains in both gross profit and pretax income, as our gross profit percentage rose to 28.6% from 27.8% a year ago. Equally important, we increased our share of business with several education customers and landed significant new accounts among religious trade publishers. Both of these achievements are encouraging indicators for coming quarters. In addition, customers are showing considerable interest in our expanding four-color capabilities as we prepare for the installation of a major new press at our Kendallville, Indiana facility this spring."
Dover Publications, Courier's specialty book publishing segment, reported pretax income of $1.3 million for the quarter, up 24% over the fiscal 2003 figure of $1.1 million. Sales for the quarter were $9.1 million, up 8% from fiscal 2003's first-quarter sales of $8.4 million. Sales increases to major booksellers drove a 7% gain in sales to domestic retailers compared to last year. International sales rose 29% in the same period.
"Dover once again provided some of the best news of the quarter," said Mr. Conway. "A strong flow of new titles, growing experience in electronic marketing, and an improving retail environment all helped the company achieve solid sales growth this quarter. At the same time, the higher sales volume, combined with operating efficiencies and price increases enabled us to boost our gross profit percentage from 46.4% to 48.6%.
"The segment made additional news in December when we announced our intention to acquire Research & Education Association (REA), a highly regarded publisher of test preparation and study guide materials. This acquisition, which was completed early in January, we expect will add approximately $6 million a year to Courier's specialty publishing revenues, and its results will be integrated into the segment's financial reporting beginning with the second quarter. REA's editorial excellence, brand presence and strikingly similar business model make it a valuable complement to our Dover operations, and we are pleased to welcome REA into the Courier family."
"While first-quarter book manufacturing sales were disappointing, we are confident that we have laid the foundation for significant improvement as the year progresses," said Mr. Conway. "Increasing business with existing customers, the addition of several new customers, and the high level of interest in our expanding four-color capabilities are just three of the factors suggesting stronger sales over the remainder of our 2004 fiscal year. In addition, continued improvement in manufacturing efficiency should enable us to translate increased sales into solid earnings gains.
"We also believe Dover is on track to build on its first-quarter performance and deliver double-digit increases in sales and earnings for the fiscal year. The acquisition of REA will provide a further increase in specialty publishing sales, as well as in the segment's percentage of total Courier revenues. We expect REA to be neutral to fiscal 2004 earnings and to contribute positively in 2005 and beyond.
"For fiscal year 2004 as a whole, we expect Courier's sales from continuing operations to be in the range of $216 to $221 million, representing an increase of 7% to 9% over fiscal 2003 sales. This includes anticipated sales from REA of approximately $4 million over the balance of the fiscal year. Overall, we continue to expect fiscal 2004 earnings per diluted share to be in the range of $2.57 to $2.67, up approximately 8% to 13% from last year's $2.37 per diluted share."
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