Courier Reports 10% Drop in Q4 Results
Book printing and publishing firm sees 8% drop in manufacturing for Q4 and year
Source: Courier -- Graphic Arts Online, November 8, 2009
NORTH CHELMSFORD, Mass.--Courier Corporation (Nasdaq: CRRC), one of America’s leading book manufacturers and specialty publishers, today announced fourth-quarter and full-year results for its fiscal year ended September 26, 2009.
With the recession affecting sales in both of the company’s business segments, Courier’s consolidated fourth-quarter revenues were $68.4 million, down 10% from $76.3 million in last year’s fourth quarter. Net income for the fourth quarter was $5.7 million or $.48 per diluted share, versus $7.2 million or $.60 per diluted share in the fourth quarter of fiscal 2008. Excluding a fourth-quarter restructuring charge, net income would have been $.54 per diluted share, in line with previous guidance.
For fiscal 2009 overall, Courier sales were $248.8 million, down from $280.3 million in 2008. Net loss for the year was $3.1 million or $.27 per share, versus a loss of $370,000 or $.03 per share last year. The net loss in fiscal 2009 reflects a non-cash, pre-tax impairment charge of $15.6 million taken earlier in the year, as well as restructuring costs of $4.8 million. Excluding these charges, net income for fiscal 2009 would have been $10.2 million or $.86 per diluted share. The net loss in fiscal 2008 included a pre-tax impairment charge of $23.6 million; excluding this charge, fiscal 2008 net income would have been $15 million or $1.22 per diluted share.
In Courier’s specialty publishing segment, with consumer spending down and book retailers managing inventories tightly, sales for the year were down 24%. Much of this decline occurred at Creative Homeowner, the business most directly affected by the weak housing market. However, more than 70% of the reduction in Creative Homeowner sales was due to the winding-down of its unprofitable book distribution operation early in 2009, a move which enabled Creative Homeowner to reduce its operating loss substantially from a year ago. The weak economy also affected the publishing segment’s other two businesses, Dover Publications and Research & Education Association (REA), with combined full-year sales at Dover and REA down 12%.
Book manufacturing revenues were down 8%, reflecting declines in educational and religious sales. In education, solid growth in college textbook sales was offset by the effects of widespread budget shortfalls at the elementary and high school levels. Religious sales were also down for the year, reflecting the recession’s impact on religious donations. In specialty trade, the company’s successful pursuit of new customers enabled a modest rise in sales despite overall market weakness.
“As expected, we did better in the fourth quarter than earlier in the year,” said Courier Chairman and Chief Executive Officer James F. Conway III. “While we continued to wrestle with the worst recession in decades, we were helped by the tough measures we took early in the downturn to reduce operating costs and align our capacity with market conditions. In addition to winding down Creative Homeowner’s distribution operation, those measures included closing a small one-color book manufacturing plant, consolidating one-color work at other manufacturing facilities and reducing our overall employee base by 12%. Equally important, we did all this without compromising either our service to customers or our investment in the future.
“Finally, despite the market turbulence, our cash flow and financial condition remained strong. We finished fiscal 2009 with our debt paid down by more than $10 million, to $13.6 million, while also returning another $10 million in dividends to shareholders. I am pleased to report that once again this morning, Courier’s Board of Directors declared a dividend of $.21 per share, the same as last quarter.”
Book manufacturing: continuing strength in higher education
Courier’s book manufacturing segment had fourth-quarter sales of $58.8 million, down 8% from $63.5 million last year. Operating income in the fourth quarter was $8.0 million, including $1.0 million of restructuring costs related to the closing of a one-color printing plant in February 2009. Fourth-quarter operating income in fiscal 2008 was $10.4 million.
For the full year, book manufacturing sales were $212.2 million, down 8% from $229.8 million in fiscal 2008. The segment’s full-year operating income was $14.7 million, including restructuring costs of $4.3 million. In fiscal 2008 the segment’s operating income was $26.2 million.
The segment’s gross profit was $14.0 million or 23.9% of sales in the fourth quarter, versus $16.2 million or 25.5% a year ago. Gross profit in fiscal 2009 was $40.5 million or 19.1% of sales, down from $55.0 million or 24.0% of sales last year, indicating the recession’s continuing impact on sales, pricing pressure and capacity utilization, as well as a decline in revenue from recycled paper. The fourth-quarter improvement reflected the cumulative benefit of the cost-reduction measures described above.
The book manufacturing segment focuses on three markets: education, religion, and specialty trade. Sales to the education market were $25.9 million in the fourth quarter, down 12% from a year earlier. For the year, education sales were $87.6 million, down 9% from fiscal 2008, with solid growth in sales of college textbooks offset by sharply reduced demand at the elementary and high school levels in conjunction with the nationwide squeeze on local and state spending. Sales to the religious market were down 6% to $15.6 million in the quarter, and down 9% to $59.6 million for the full year, reflecting the difficult fundraising environment faced by religious organizations. Sales to the specialty trade market were up 3% to $15.3 million in the quarter, and up 1% to $56.2 million for the full year, helped by growth in four-color sales and sales to new customers.
“It was a challenging year,” said Mr. Conway. “In book manufacturing, we did what was necessary to align our one-color capacity with market demand while also pushing ourselves to capture the full measure of efficiency from our advanced production platforms for four-color books and religious scriptures. In education, we were able to leverage our long-time familiarity with the college market and our ability to deliver outstanding four-color quality on short notice. Elsewhere, we continued to have excellent relationships with our customers but were hampered by the pervasive effects of the weak economy.
“We know customers appreciate our determination to help them succeed across every part of the cycle. So while pushing hard against the economic headwinds, we also continued our investment in advanced digital printing technology that will create new opportunities for ourselves and our customers when it becomes available next year. At the same time, we grew our business in specialty trade by attracting new customers who were delighted to find a cost-effective, environmentally responsible domestic source for state-of-the-art four-color production. By continuing to execute with the efficiency and service levels our customers need, we’ll be well positioned to compete in a variety of economic scenarios.”
Specialty publishing: cutting the cost of connecting with 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.
Fourth-quarter revenues for the segment were $11.9 million, down 28% from $16.4 million in last year’s fourth quarter. Creative Homeowner sales were down 57%, reflecting its cessation of book distribution activities earlier in the year; however, its operating loss was also down sharply, to $526,000 from $1.1 million in last year’s fourth quarter. Sales at Dover and REA were also down, though by smaller percentages. Overall, the segment posted fourth-quarter operating income of $928,000, versus $1.3 million last year.
For the year as a whole, specialty publishing sales were $46.8 million, down 24% from $61.8 million in fiscal 2008. The segment’s full-year operating loss was $2.2 million, versus a loss of $106,000 last year, with modest profitability at Dover and REA offset by a loss of $3.0 million at Creative Homeowner.
“Faced with widespread caution among consumers and retailers, our publishing businesses focused on value-priced titles and emerging market niches,” said Mr. Conway. “While sales were down overall, all three brands had notable successes, from Dover’s new Sesame Street Activity Books to Creative Homeowner’s award-winning 3-Step Vegetable Gardening and REA’s exciting relaunch of its highly regarded Advanced Placement Test Prep series. With our recently integrated administrative infrastructure throughout the segment, we continue to improve at getting products into development and out to market quickly and effectively. Once consumers return to the stores, they’ll also find we have more than ever to offer.”
Outlook
“While we are encouraged by positive indicators in some areas of the economy, we have yet to see them in our own,” said Mr. Conway. “Consumers and retailers are still skittish, which affects all of our publishing businesses as well as many of our book manufacturing customers. School budgets will be hard pressed to grow in the near term, the environment for charitable donations remains uncertain at best, and pricing pressure everywhere is intense.
“On the other hand, we face fiscal 2010 with the benefit of a year of significant cost reductions and productivity gains in both of our business segments. And we continue to have excellent relationships with customers who, like Courier, have weathered severe storms in the past and have the resources and focus to succeed in the long term.
“As always, our path to long-term success rests on delivering service and technology that anticipate customer needs. With this in mind, we will be offering customers a digital print option in the latter half of next year, with associated startup costs that will likely reduce fiscal 2010 income by between $.05 and $.10 per share. These costs have been factored into our fiscal 2010 guidance.
“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.
“For fiscal 2010 overall, we expect to achieve total sales of between $253 million and $268 million. We expect earnings per diluted share of between $.70 and $1.00, versus our fiscal 2009 earnings of $.86 per diluted share, excluding restructuring and impairment 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. In fiscal 2010, we expect EBITDA, excluding impairment and restructuring charges, to be between $36 million and $42 million, compared to $37 million in fiscal 2009.”
| COURIER CORPORATION | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | ||||||||||||||||
| (In thousands, except per share amounts) | ||||||||||||||||
| QUARTER ENDED | YEAR ENDED | |||||||||||||||
| September 26, | September 27, | September 26, | September 27, | |||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
| Net sales | $ | 68,419 | $ | 76,296 | $ | 248,816 | $ | 280,324 | ||||||||
| Cost of sales | 49,816 | 53,541 | 191,085 | 202,445 | ||||||||||||
| Gross profit | 18,603 | 22,755 | 57,731 | 77,879 | ||||||||||||
| Selling and administrative expenses | 9,923 | 11,544 | 46,385 | 53,034 | ||||||||||||
| Impairment charge (1) | - | (207 | ) | 15,607 | 23,643 | |||||||||||
| Operating income (loss) | 8,680 | 11,418 | (4,261 | ) | 1,202 | |||||||||||
| Interest expense, net | 102 | 244 | 676 | 1,133 | ||||||||||||
| Income (loss) before taxes | 8,578 | 11,174 | (4,937 | ) | 69 | |||||||||||
| Income tax provision (benefit) | 2,861 | 3,971 | (1,796 | ) | 439 | |||||||||||
| Net income (loss) | $ | 5,717 | $ | 7,203 | ($3,141 | ) | ($370 | ) | ||||||||
| Net income (loss) per diluted share | $ | 0.48 | $ | 0.60 | ($0.27 | ) | ($0.03 | ) | ||||||||
| Cash dividends declared per share | $ | 0.21 | $ | 0.20 | $ | 0.84 | $ | 0.80 | ||||||||
| Wtd. average diluted shares outstanding | 11,889 | 12,007 | 11,850 | 12,294 | ||||||||||||
| SEGMENT INFORMATION: | ||||||||||||||||
|
Net sales: |
||||||||||||||||
| Book Manufacturing | $ | 58,756 | $ | 63,539 | $ | 212,228 | $ | 229,792 | ||||||||
| Specialty Publishing | 11,881 | 16,391 | 46,769 | 61,767 | ||||||||||||
| Elimination of intersegment sales | (2,218 | ) | (3,634 | ) | (10,181 | ) | (11,235 | ) | ||||||||
| Total | $ | 68,419 | $ | 76,296 | $ | 248,816 | $ | 280,324 | ||||||||
|
Operating income (loss): |
||||||||||||||||
| Book Manufacturing | $ | 7,991 | $ | 10,372 | $ | 14,667 | $ | 26,173 | ||||||||
| Specialty Publishing | 928 | 1,283 | (2,189 | ) | (106 | ) | ||||||||||
| Impairment charge (1) | - | 207 | (15,607 | ) | (23,643 | ) | ||||||||||
| Stock based compensation | (352 | ) | (358 | ) | (1,424 | ) | (1,313 | ) | ||||||||
| Intersegment profit | 113 | (86 | ) | 292 | 91 | |||||||||||
| Total | $ | 8,680 | $ | 11,418 | ($4,261 | ) | $ | 1,202 | ||||||||
| (1) In the second quarter of this fiscal year, the Company recorded a $15.6 million non-cash pre-tax impairment charge related to Dover Publications, Inc., which on an after-tax basis, was $10.2 million, or $0.86 per diluted share. In the prior year, the Company recorded a $23.6 million non-cash pre-tax impairment charge related to Creative Homeowner, which on an after-tax basis was $15.4 million, or $1.25 per diluted share. | ||||||||||||||||
| COURIER CORPORATION | |||||||||||||||
| SEGMENT RESULTS OF OPERATIONS (Unaudited) | |||||||||||||||
| (In thousands) | |||||||||||||||
|
BOOK MANUFACTURING SEGMENT |
QUARTER ENDED | YEAR ENDED | |||||||||||||
| September 26, | September 27, | September 26, | September 27, | ||||||||||||
| 2009 | 2008 | 2009 | 2008 | ||||||||||||
| Net sales | $ | 58,756 | $ | 63,539 | $ | 212,228 | $ | 229,792 | |||||||
| Cost of sales | 44,732 | 47,335 | 171,696 | 174,750 | |||||||||||
| Gross profit | 14,024 | 16,204 | 40,532 | 55,042 | |||||||||||
| Selling and administrative expenses | 6,033 | 5,832 | 25,865 | 28,869 | |||||||||||
| Operating income | $ | 7,991 | $ | 10,372 | $ | 14,667 | $ | 26,173 | |||||||
|
SPECIALTY PUBLISHING SEGMENT |
QUARTER ENDED | YEAR ENDED | |||||||||||||
| September 26, | September 27, | September 26, | September 27, | ||||||||||||
| 2009 | 2008 | 2009 | 2008 | ||||||||||||
| Net sales | $ | 11,881 | $ | 16,391 | $ | 46,769 | $ | 61,767 | |||||||
| Cost of sales | 7,415 | 9,753 | 29,862 | 39,021 | |||||||||||
| Gross profit | 4,466 | 6,638 | 16,907 | 22,746 | |||||||||||
| Selling and administrative expenses | 3,538 | 5,355 | 19,096 | 22,852 | |||||||||||
| Operating income (loss) | $ | 928 | $ | 1,283 | ($2,189 | ) | ($106 | ) | |||||||
| COURIER CORPORATION | ||||||||
| CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) | ||||||||
| (In thousands) | ||||||||
| September 26, | September 27, | |||||||
|
ASSETS |
2009 | 2008 | ||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 492 | $ | 178 | ||||
| Investments | 1,017 | 820 | ||||||
| Accounts receivable | 33,850 | 45,626 | ||||||
| Inventories | 38,026 | 37,166 | ||||||
| Deferred income taxes | 4,462 | 4,680 | ||||||
| Other current assets | 1,404 | 1,528 | ||||||
| Total current assets | 79,251 | 89,998 | ||||||
| Property, plant and equipment, net | 89,754 | 95,692 | ||||||
| Goodwill and other intangibles | 28,700 | 43,832 | ||||||
| Prepublication costs | 9,194 | 9,595 | ||||||
| Other assets | 1,212 | 1,381 | ||||||
| Total assets | $ | 208,111 | $ | 240,498 | ||||
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||
| Current liabilities: | ||||||||
| Current maturities of long-term debt | $ | 96 | $ | 93 | ||||
| Accounts payable | 10,974 | 16,966 | ||||||
| Accrued taxes | 3,032 | 3,560 | ||||||
| Other current liabilities | 12,722 | 12,557 | ||||||
| Total current liabilities | 26,824 | 33,176 | ||||||
| Long-term debt | 13,514 | 23,646 | ||||||
| Deferred income taxes | 177 | 4,687 | ||||||
| Other liabilities | 3,006 | 2,765 | ||||||
| Total liabilities | 43,521 | 64,274 | ||||||
| Total stockholders' equity | 164,590 | 176,224 | ||||||
| Total liabilities and stockholders' equity | $ | 208,111 | $ | 240,498 | ||||
| COURIER CORPORATION | |||||||||
| CONSOLIDATED STATEMENTS OF FREE CASH FLOW (Unaudited) | |||||||||
| (In thousands) | |||||||||
| For the Years Ended | |||||||||
| September 26, | September 27, | ||||||||
| 2009 | 2008 | ||||||||
| Operating Activities: | |||||||||
| Net loss | ($3,141 | ) | ($370 | ) | |||||
| Adjustments to reconcile net loss to | |||||||||
| cash provided from operating activities: | |||||||||
| Depreciation and amortization | 20,784 | 21,373 | |||||||
| Impairment charge | 15,607 | 23,643 | |||||||
| Stock based compensation | 1,424 | 1,313 | |||||||
| Deferred income taxes | (4,966 | ) | (5,970 | ) | |||||
| Changes in working capital | 4,685 | (132 | ) | ||||||
| Other, net | 443 | (1,118 | ) | ||||||
| Cash provided from operating activities | 34,836 | 38,739 | |||||||
| Investments in organic growth: | |||||||||
| Capital expenditures | (10,084 | ) | (12,865 | ) | |||||
| Prepublication costs | (4,782 | ) | (5,000 | ) | |||||
| Free cash flow | 19,970 | 20,874 | |||||||
| Financing Activities: | |||||||||
| Long-term borrowings, net | (10,129 | ) | 6,273 | ||||||
| Cash dividends | (9,997 | ) | (9,881 | ) | |||||
| Proceeds from stock plans | 667 | 1,749 | |||||||
| Stock repurchases | - | (19,592 | ) | ||||||
| Other | (197 | ) | (794 | ) | |||||
| Cash used for financing activities | (19,656 | ) | (22,245 | ) | |||||
| Increase (decrease) in cash and cash equivalents | $ | 314 | ($1,371 | ) | |||||
| RECONCILIATION TO GAAP PRESENTATION | |||||||||
| Investing Activities: | |||||||||
| Capital expenditures | ($10,084 | ) | ($12,865 | ) | |||||
| Prepublication costs | (4,782 | ) | (5,000 | ) | |||||
| Other | (197 | ) | (820 | ) | |||||
| Cash used for investing activities | ($15,063 | ) | ($18,685 | ) | |||||
| Other non-GAAP measures - EBITDA: | |||||||||
| Net loss | ($3,141 | ) | ($370 | ) | |||||
| Income tax (benefit) provision | (1,796 | ) | 439 | ||||||
| Interest expense, net | 676 | 1,133 | |||||||
| Depreciation and amortization | 20,784 | 21,373 | |||||||
| Impairment charge | 15,607 | 23,643 | |||||||
| Restructuring costs | 4,782 | - | |||||||
| EBITDA, excluding impairment and restructuring charges | $ | 36,912 | $ | 46,218 | |||||
| In addition to measuring our performance by generally accepted accounting principles, we also track several non-GAAP measures including Free Cash Flow and EBITDA (earnings before interest, taxes, depreciation and amortization) as additional indicators of the company's operating cash flow performance. These measures should be considered in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. | |||||||||
| COURIER CORPORATION | ||||||||||||||||||||||||
| RECONCILIATION OF GAAP TO NON-GAAP MEASURES | ||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
| Quarter Ended | Year Ended | |||||||||||||||||||||||
|
BOOK MANUFACTURING SEGMENT |
September 26, 2009 | September 26, 2009 | ||||||||||||||||||||||
| GAAP | Restruc- | Non- | GAAP | Restruc- | Non- | |||||||||||||||||||
| Basis | turing | GAAP | Basis | turing | GAAP | |||||||||||||||||||
| Measures | Costs (1) | Measures | Measures | Costs (1) | Measures | |||||||||||||||||||
| Net sales | $ | 58,756 | $ | 58,756 | $ | 212,228 | $ | 212,228 | ||||||||||||||||
| Cost of sales | 44,732 | (988 | ) | 43,744 | 171,696 | (3,807 | ) | 167,889 | ||||||||||||||||
| Gross profit | 14,024 | 988 | 15,012 | 40,532 | 3,807 | 44,339 | ||||||||||||||||||
| Selling and administrative expenses | 6,033 | - | 6,033 | 25,865 | (491 | ) | 25,374 | |||||||||||||||||
| Operating income | $ | 7,991 | $ | 988 | $ | 8,979 | $ | 14,667 | $ | 4,298 | $ | 18,965 | ||||||||||||
| Quarter Ended | Year Ended | |||||||||||||||||||||||
|
SPECIALTY PUBLISHING SEGMENT |
September 26, 2009 | September 26, 2009 | ||||||||||||||||||||||
| GAAP | Restruc- | Non- | GAAP | Restruc- | Non- | |||||||||||||||||||
| Basis | turing | GAAP | Basis | turing | GAAP | |||||||||||||||||||
| Measures | Costs (1) | Measures | Measures | Costs (1) | Measures | |||||||||||||||||||
| Net sales | $ | 11,881 | $ | 11,881 | $ | 46,769 | $ | 46,769 | ||||||||||||||||
| Cost of sales | 7,415 | - | 7,415 | 29,862 | (107 | ) | 29,755 | |||||||||||||||||
| Gross profit | 4,466 | - | 4,466 | 16,907 | 107 | 17,014 | ||||||||||||||||||
| Selling and administrative expenses | 3,538 | - | 3,538 | 19,096 | (377 | ) | 18,719 | |||||||||||||||||
| Operating income (loss) | $ | 928 | $ | 0 | $ | 928 | ($2,189 | ) | $ | 484 | ($1,705 | ) | ||||||||||||
| (1) | Restructuring costs include employee severance expenses related to cost savings initiatives in both of the Company's segments as well as ceasing Creative Homeowner's distribution service within the Specialty Publishing segment. Restructuring costs also include expenses related to closing the Book-mart Press manufacturing facility within the Book Manufacturing segment. | |||||||||||||||||||||||
| Quarter Ended | Year Ended | |||||||||||||||||||||||
| September 26, 2009 | September 26, 2009 | |||||||||||||||||||||||
| Book | Specialty | Book | Specialty | |||||||||||||||||||||
|
|
Manufacturing | Publishing | Total | Manufacturing | Publishing | Total | ||||||||||||||||||
| Segment | Segment | Company | Segment | Segment | Company | |||||||||||||||||||
| Employee severance expenses | $ | 133 | - | $ | 133 | $ | 1,326 | $ | 484 | $ | 1,810 | |||||||||||||
| Facility closure costs | 387 | - | 387 | 1,135 | - | 1,135 | ||||||||||||||||||
| Other | 468 | - | 468 | 1,837 | - | 1,837 | ||||||||||||||||||
| Total restructuring costs | $ | 988 | $ | 0 | $ | 988 | $ | 4,298 | $ | 484 | $ | 4,782 | ||||||||||||
Source: Courier Corporation
About Courier Corporation
Courier Corporation prints, publishes and sells books. Headquartered in North Chelmsford, Massachusetts, Courier has two business segments, full-service book manufacturing and specialty book publishing. For more information, visit www.courier.com.
