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Courier's Revenues, Net Income Rebound in First Quarter

January 20, 2010

The book manufacturing segment focuses on three publishing markets: education, religion, and specialty trade. Sales to the education market were up 15% in the quarter due to increased sales of four-color textbooks for colleges and universities. Sales to the specialty trade market were flat from a year ago, though four-color trade sales were up. Sales to the religious market were up 12% from last year’s first quarter.

“We welcomed the return of a healthy order flow from our largest religious customer,” said Mr. Conway. “On top of that, we had continued growth in sales of college textbooks. Our margins were helped by increased capacity utilization as well as the cost reductions achieved last year. But the largest factor continued to be our success at attracting more four-color work from both new and existing customers. Overall, it was a very good way to end the old calendar year and start off a more promising fiscal year.”

Growth at Dover and REA drives improved publishing performance

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.

First-quarter revenues for the segment were $11.6 million, up slightly from $11.5 million in last year’s first quarter. Sales were up 18% at Dover and up 48% at REA, spurred by strong sales of Dover books in several categories and REA’s largest quarterly launch of new titles ever. Creative Homeowner sales were down 61%, reflecting continued weakness in store traffic at home centers, the company’s largest sales channel. This decrease in sales also reflected the company’s cessation of its book distribution services in early January 2009, which contributed approximately $1.2 million of revenue in last year’s first quarter. Overall, the segment lost $514,000 in the quarter, versus a loss of $1.9 million a year ago. This improvement reflects both the revenue growth at Dover and REA and the effects of cost reduction measures implemented in fiscal 2009.

“Facing an uncertain holiday season, some retailers ordered cautiously and worked down their book inventories,” said Mr. Conway. “REA overcame this effect with its outstanding list of new releases, while Dover did well with its value-priced strategy in areas ranging from arts, crafts and math to children’s books. Slow sales to home improvement centers hurt Creative Homeowner, though its sales through other channels rose modestly. With inventories increasingly depleted and the economy gradually improving, we expect an uptick for Creative Homeowner in anticipation of spring home and garden promotions. Meanwhile, all three of our publishing businesses are getting increasingly positive responses from retailers as they continue to implement a more agile, market-driven approach to editorial content, branding and pricing.”

Outlook

“We are pleased to have gotten off to such a strong start in fiscal 2010,” said Mr. Conway. “At the same time, the challenges are far from over. Consumers are still worried about the economy, retailers are still ordering cautiously, and price competition remains intense. State and local governments are still strapped, and many school districts are deferring spending. In response, we are playing to our strengths in healthier market segments while working to differentiate ourselves everywhere through technology, productivity and service on the manufacturing side, and editorial quality and market focus on the publishing side.

“Meanwhile, we continue to seek out ways to serve both new and current customers better. On January 15, we acquired Highcrest Media LLC, a provider of Web-based software that streamlines the production of customized textbooks used in colleges, universities and businesses. Together with our forthcoming installation of digital printing technology, this acquisition will strengthen our capabilities in the highest-growth segment of the textbook market. For the balance of the year, we do not expect Highcrest to have an appreciable impact on Courier earnings; however, as previously noted, startup costs associated with the digital print operation 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 $255 million and $266 million. We expect earnings per diluted share of between $.75 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 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. We expect EBITDA in fiscal 2010 to be between $37 million and $42 million, compared to $37 million, excluding impairment and restructuring charges, in fiscal 2009.”

About Courier Corp.
Courier Corp. prints, publishes and sells books. Headquartered in North Chelmsford, MA, Courier has two business segments, full-service book manufacturing and specialty book publishing. For more information, visit www.courier.com.
 

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