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Courier Reports Year-End: Revenue Up 5%; EBITDA Comparable to Last Year

Press release from the issuing company

NORTH CHELMSFORD, Mass. - Courier Corporation, one of America’s leading innovators in book manufacturing, publishing and content management, today announced fourth-quarter and full-year results for its fiscal year ended September 27, 2014.

Fourth-quarter revenues in fiscal 2014 were $84 million, up marginally from $83 million in last year’s fourth quarter. Income from continuing operations was $7.2 million or $.63 per diluted share, compared to $6.8 million or $.60 per diluted share in last year’s fourth quarter. During the quarter, Courier sold its Creative Homeowner publishing business; as a result, Creative Homeowner is accounted for in both periods as a discontinued operation.

For the full year of fiscal 2014, sales were $283 million, up 5% from $271 million for fiscal 2013. Income from continuing operations was $8.7 million or $.76 per diluted share. Fiscal 2014 results include non-cash impairment charges of $6.0 million related to FastPencil, a California software startup Courier acquired last year, partially offset by a reduction in the related contingent consideration liability of $4.1 million. Excluding this net impairment charge of $1.9 million or $.13per diluted share, income from continuing operations was $10.2 million or $.89 per diluted share, compared to $11.5 million or $1.00 per diluted share in fiscal 2013. This year’s earnings decline was primarily attributable to operating losses at FastPencil.

Details of the net impairment charge and other items, including reconciliations of non-GAAP measures to GAAP, can be found in the tables at the end of this release. One such non-GAAP measure is EBITDA (earnings before interest, taxes, depreciation and amortization), an additional indicator of the company’s operating cash flow performance. Courier’s EBITDA, adjusted for the net impairment charge, was $42 million for both fiscal year 2014 and 2013.

Apart from FastPencil, trends were positive in both of Courier’s business segments. In book manufacturing, sales for the year were up in all three of the company’s principal markets of education, religion and trade. In publishing, fourth-quarter profits were up at both Dover Publications and Research & Education Association (REA), which helped the segment reduce its full-year operating loss by nearly 90% from last year, to less than $200,000.

“We finished the year in very good shape in our traditional businesses, even as the marketplace continues to change,” said Courier Chairman and Chief Executive Officer James F. Conway III.“Unfortunately, the combination of high development costs and slow sales at FastPencil cut into our earnings in book manufacturing throughout the year. In addition, we continued to face intense pricing pressure among key customers, for which increases in volume and share only partly compensated.

“During the quarter we continued to serve our North American customers well, running close to capacity in four-color, both offset and digital, as we maintained our leading position in customized college textbooks and benefited from growing demand at the elementary and high school levels. At the same time, we continued to pursue related opportunities in South America’s education market. Earlier this week, we completed our acquisition of a 60% interest in Digital Page Grafica e Editora, a digital printer based in Sao Paulo, Brazil.

“We also had both a good quarter and a good year in service to our largest religious customer, coupling our unique Scripture manufacturing capabilities with a distribution operation that reaches across more than 100 countries to tens of millions of people each year. And our publishing segment showed solid year-over-year improvement, helped by the higher profitability of ebooks, positive consumer response to new products, and continued vigilance about costs.

“While operating margins remained under pressure, our cash flow remained strong, and we enter fiscal 2015 in solid financial condition. Confirming this judgment, on November 12th Courier’s Board of Directors not only declared our regular quarterly dividend of $.21 per share, but also approved a new authorization for the repurchase of up to $10 million in Courier stock.”

Book manufacturing sales gains offset by FastPencil results

Courier’s book manufacturing segment reported fourth-quarter sales of $77 million, up slightly from $76 million last year. For the full year, book manufacturing sales were $259 million, up 5% from $247 million in fiscal 2013. Fourth-quarter operating income in the segment was $10.6 million, versus $10.8 million last year. Full-year operating income was $18.2 million, versus $22.0 million last year. While operating losses at FastPencil were the principal factor affecting year-over-year results, other factors impacting both the quarter and the year included pricing pressures, depreciation expense associated with the expansion of digital capacity, and foreign exchange and other costs associated with company operations in Brazil.

The book manufacturing segment focuses on three markets: education, religion, and trade. Sales to the education market were $39 million in the fourth quarter, down 1% from the previous year. For the year, education sales were $118 million, up 5% from fiscal 2013, driven by growth in sales of elementary and high school textbooks. Sales to the religious market were $19 million in the quarter, up 2% from last year. For fiscal 2014 as a whole, religious sales were $72 million, up 4% over fiscal 2013. Sales to the trade market were $17 million in the quarter and $61 million for the year, up 3% from last year.

Digital print sales were up by double digits both in the fourth quarter and for the year as a whole, reflecting demand for customized textbooks and the appeal of offset-quality digital print for other shorter run orders. The company also continued to benefit from its concentration of offset and digital capabilities at a single distribution point in Kendallville, Indiana.

“Overall, it was a year of many accomplishments for Courier as we continued to deliver exceptional service to our customers,” said Mr. Conway. “Unfortunately, our investment in FastPencil and its self-publishing platform has yet to deliver as planned.

“We continue to lead the field in producing customized textbooks and related materials that provide powerful, course-specific learning experiences for students. And our combination of offset and digital capacity enables us to serve publishers efficiently at every scale across the full life cycle of every title.”

Publishing segment cuts loss by nearly 90%

Courier’s publishing segment includes two businesses: Dover Publications, a niche publisher with thousands of titles in dozens of specialty trade markets, and Research & Education Association(REA), a publisher of test preparation books and study guides. During the quarter Courier sold Creative Homeowner and, as a discontinued operation, Creative Homeowner is not included in the publishing segment results.

Fourth-quarter revenues for the segment were $9.0 million, down 4% from $9.4 million in last year’s fourth quarter. For the year as a whole, publishing sales were $33.4 million, down slightly from $33.7 million in fiscal 2013. Operating income in the fourth quarter was $391,000, up from$343,000 last year. The segment’s full-year operating loss was $187,000, much improved from a loss of $1.8 million last year. The improved performance reflected increased revenues and profits from ebooks, the continuing success of Dover’s Creative Haven product line, and cost containment measures.

“After several difficult years, our publishing segment continues to improve,” said Mr. Conway. “Our investment in ebooks is starting to generate a larger audience as well as improved profitability, and we continue to demonstrate an ability to introduce new products combining excellent editorial quality with strong consumer appeal. By managing costs attentively and leveraging digital print to minimize obsolescence, the segment was profitable in the quarter and close to breakeven for the year.”


“We enter fiscal 2015 in a marketplace that continues to change, but for which we are well positioned,” said Mr. Conway. “As consumers continue to reaffirm the value of print, we continue to work together with our customers to capture additional opportunities through innovations in technology and service. At the same time, we continue to face a tight pricing environment. We also expect some continuing impact from FastPencil, but we are taking steps to align its cost structure with projected sales. As in the past, we expect our performance in fiscal 2015 to follow a seasonal pattern, with the larger portion of our earnings coming in the second half.

“Overall, we expect fiscal 2015 sales of between $300 million and $318 million, compared to $283 million in fiscal 2014. We expect earnings per diluted share of between $.70 and $1.00, which compares with our fiscal 2014 earnings from continuing operations of $.89 per diluted share, excluding the net impairment charge related to FastPencil.

“In fiscal 2015, we expect EBITDA to be between $38 million and $43 million, compared to $42 million in fiscal 2014.

“Factors not incorporated into this guidance include the possibility of future impairment or restructuring charges.”


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