Courier Reports Fourth-Quarter and Year-End Results

http://www.businesswire.com/news/home/20091105005716/en

Fourth-Quarter Income In Line with Prior Guidance
NORTH CHELMSFORD, Mass.--(Business Wire)--
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."

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.

This news release includes forward-looking statements. Statements that describe
future expectations, plans or strategies are considered "forward-looking
statements" as that term is defined under the Private Securities Litigation
Reform Act of 1995 and releases issued by the Securities and Exchange
Commission.The words "believe," "expect," "anticipate," "intend," "estimate" and
other expressions which are predictions of or indicate future events and trends
and which do not relate to historical matters identify forward-looking
statements.Such statements are subject to risks and uncertainties that could
cause actual results to differ materially from those currently
anticipated.Factors that could affect actual results include, among others,
changes in customers` demand for the Company`s products, including seasonal
changes in customer orders and shifting orders to lower cost regions, changes in
market growth rates, changes in raw material costs and availability, pricing
actions by competitors and other competitive pressures in the markets in which
the Company competes, consolidation among customers and competitors, success in
the execution of acquisitions and the performance and integration of acquired
businesses including carrying value of intangible assets, restructuring and
impairment charges required under generally accepted accounting principles,
changes in operating expenses including medical and energy costs, changes in
technology including migration from paper-based books to digital, difficulties
in the start up of new equipment or information technology systems, changes in
copyright laws, changes in consumer product safety regulations, changes in
environmental regulations, changes in tax regulations, changes in the Company`s
effective income tax rate and general changes in economic conditions, including
currency fluctuations, changes in interest rates, changes in consumer
confidence, changes in the housing market, and tightness in the credit
markets.Although the Company believes that the assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could be
inaccurate, and therefore, there can be no assurance that the forward-looking
statements will prove to be accurate.The forward-looking statements included
herein are made as of the date hereof, and the Company undertakes no obligation
to update publicly such statements to reflect subsequent events or
circumstances.

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

Courier Corporation
James F. Conway III, Chairman, 978-251-6000
President and Chief Executive Officer
or
Peter M. Folger, 978-251-6000
Senior Vice President and
Chief Financial Officer
www.courier.com

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