Courier Corp. Reports 2Q Results, Net Income up 34%
Press release from the issuing company
NORTH CHELMSFORD, Mass.--April 18, 2002--Courier Corporation, one of America's leading book manufacturers and specialty publishers, today announced results for the quarter ending March 30, 2002, the second quarter of the company's 2002 fiscal year. Sales for the quarter, at $48.5 million, were off 3% from a year earlier, but net income and earnings per diluted share were both up sharply, reflecting substantial gains in Courier's Dover Publications subsidiary as well as improved productivity and continued cost controls throughout the company. Second quarter net income was $2.9 million, or $.54 per diluted share, a record level for the company's second fiscal quarter and an increase of 31% from prior year net income of $2.2 million or $.42 per diluted share (adjusted for the adoption of a new accounting pronouncement and a gain on the sale of The Home School - see table below).
For the first six months of Courier's 2002 fiscal year, sales were $94.2 million, a decline of 10% from the first half of fiscal 2001. Net income for the first half of fiscal 2002 was $5.5 million or $1.04 per diluted share, up 13% from $4.8 million or $.94 per diluted share for the first half of fiscal 2001 (adjusted for the adoption of a new accounting pronouncement and gains from the sale of The Home School and a real estate sale).
"Given the continuing economic challenges that characterized the quarter, I am particularly proud of Courier's achievements in boosting productivity and growing earnings,"said Courier Chairman and Chief Executive Officer, James F. Conway III. "I am also pleased that the book manufacturing sales declines of previous quarters have started to ease off, suggesting that we appear to be on track toward a recovery. And I continue to be excited at the performance and prospects of our Dover Publications subsidiary, which is growing both domestically and internationally at double-digit rates."
Results by segment
Book Manufacturing -- Book manufacturing sales for the second quarter of fiscal 2002 were $40.5 million, a decrease of $3.2 million or 7% from a year earlier. The segment serves three primary publishing markets: religious, educational and specialty trade. While sales to the religious market were up 5% from the prior year, sales to the other two markets were down, though the declines were less than in the preceding quarter. Sales to the education market were down 4% from 2001, due primarily to publishers' continuing caution in the face of the sluggish economy. Sales to the specialty trade market were down 18% from a year earlier due to similar economic factors, but even this performance represented an improvement over the decline in the preceding quarter. The company continued its aggressive response to these challenging market conditions with a combination of productivity improvements and cost controls. As a result, second-quarter pretax income in the book manufacturing segment was $3.6 million, down less than 2% from a year earlier, and earnings per diluted share were $.46, the same as last year.
For the first six months of the fiscal year, book manufacturing sales were $78.8 million, 12% below the first half of fiscal 2001. Pretax income for the first six months was $6.8 million, a decline of 10% from a year earlier. Earnings per diluted share were $.87 for the first six months of fiscal 2002, versus $.95 in same period in fiscal 2001.
"Our book manufacturing business has once again proved its mettle in the face of adversity,"said Conway. "While economic signs have begun to point to a turnaround, it was still a difficult quarter in education, and even more so in specialty trade. Yet faced with this environment, we more than held our own in terms of market share and our relationships with key customers. At the same time, we were actually able to increase gross profit as a percentage of sales from 24% to 26% compared to the same quarter a year ago -- an achievement which should serve us well as the economy improves."
Specialty Publishing -- Courier's specialty publishing segment consists of Dover Publications, a leading provider of proprietary content across a broad range of specialized niches including children's books, music scores, art books and scientific texts. Dover second quarter sales of $8.9 million were up 31% over fiscal 2001's second quarter, partly due to a shift in quarterly sales patterns. For the first six months of the year, Dover's sales were $17.4 million, up 13% from the first half of last year. This approximates the year-over-year rise in orders received during the second quarter, and is in line with company expectations and previous guidance for the year. Pretax income in the quarter was approximately $900,000, or $.10 per diluted share, versus a prior year quarterly pretax loss of $324,000, or $.04 per diluted share. For the first six months of fiscal 2002, Dover's pretax income was $1.8 million, or $.21 per diluted share, compared to breakeven results for the first half of fiscal 2001.
"Dover's performance continued to provide excellent news for Courier and an excellent model for the industry,"said Conway."Highlights of Dover's quarter included a 27% rise in international orders, a 19% increase in direct-to-consumer orders, and an increase in gross profit to 48% of sales from 46% a year ago. Also, on March 6th, Dover's web site completed its first year of existence with two million consumer visits, 40,000 orders, 350,000 books sold, and $1.4 million in revenues. This accomplishment not only solidified our strong relationship with Dover readers but also laid the groundwork for our forthcoming launch of a B2B web site for Dover retailers -- who account for 85% of segment sales and provide some of our most exciting growth opportunities."
Customized Education -- Courier's small customized education segment, narrowed its loss from a year earlier, benefiting from the sale of The Home School in March 2001 and improvements this year in the remaining operation, Courier Custom Publishing. For the quarter ended March 30, 2002, the segment was approximately breakeven on a per share basis, versus a loss of $.03 per diluted share in fiscal 2001.
"Despite the recent tough market in education and specialty trade, we have a lot to be thankful for at the midpoint of our fiscal year,"said Conway. "Our organization is more efficient than ever, our customer relationships are excellent, and the synergy of our book manufacturing and specialty publishing operations is increasingly apparent. Our investments in improved efficiency and customer service have enabled growth in gross margins at a time of reduced capacity utilization. These benefits should increase further in an improving economy, and we are seeing signs that the economic turnaround may finally be on its way. Many of our book manufacturing customers report that they expect a busier summer, with inventories down and consumer demand rising."
"Meanwhile, at Dover Publications we are continuing to roll out new programs which we believe will fuel double-digit sales growth and even steeper growth in earnings. New products, additional channels, expanding e-commerce and an increasing international presence are all part of a growth strategy which has played out according to plan for the year and a half since our acquisition of Dover in September 2000. Long-term, I truly believe there is no limit to what we can do with Dover."
"Overall, Courier has come through the first half of the year in a manner that increases my confidence about the balance of the year,"said Conway. "As the economic recovery unfolds, we will be in a strong position to capture new business and transmit an increasing percentage of revenues to the bottom line. Company-wide, we expect sales for the second half to be up 4% to 8% from last year, resulting in full-year sales of $206 to $211 million."
"On the earnings front, the outlook is also strong. We have raised our guidance for the full fiscal year to be in the range of $2.80 to $2.90 per diluted share. This compares very favorably with $2.40 per diluted share from last year, which excludes last year's gains of $.14 per diluted share from asset sales. The $2.40 per diluted share includes $.20 of goodwill amortization. If we reach $2.80 to $2.90 per diluted share for fiscal 2002 -- which I am confident we will do -- we will have done more than simply establish a new earnings record for Courier. We will have extended our multi-year string of earnings increases across an entire cycle of industry consolidation and economic fluctuation."
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