Courier Starts Off Strong in New Fiscal YearJanuary 22, 2013
Book manufacturing: gains in education and religious markets
Courier’s book manufacturing segment reported first-quarter sales of $57.5 million, up 3 percent from $56.0 million in last year’s first quarter. The segment’s operating income was $5.5 million, up from $5.1 million in fiscal 2012, excluding last year’s severance and post-retirement benefit expenses.
Gross profit in the segment was $13.1 million or 22.7 percent of sales in the quarter, versus $12.5 million or 22.3 percent of sales a year ago, as a favorable sales mix and continuing benefits from last year’s cost-reduction measures offset a competitive pricing environment and reduced recycling income.
The book manufacturing segment focuses on three markets: education, religion, and specialty trade. Sales to the education market were $25 million in the first quarter, up 16 percent from the same period last year, due to increased sales of college textbooks. Sales to the religious market were up 6 percent to $17 million in the quarter, with sales to Courier’s largest religious customer up 9 percent. Sales to the specialty trade market were down 13 percent to $15 million, reflecting tight inventory management among publishers and the impact of e-book sales on certain titles.
Revenues rose more than 40 percent at Courier Digital Solutions on continued growth of customized versions of college textbooks as well as increased use of digital printing among specialty trade publishers. With its current digital facilities running close to capacity, in October Courier announced plans to add a new HP Indigo cover press in Massachusetts and a new digital production facility in Kendallville, Indiana. The Indiana facility will include a wide format HP press and new HP Indigo press together with finishing equipment. This is expected to bring the company’s total investment in digital print to approximately $40 million.
“Our book manufacturing business continued to prove its resilience in response to changing market conditions,” said Conway. “Our standard textbook print runs are getting shorter but more frequent as publishers opt to carry smaller inventories and spread production throughout the academic year. The result is both a larger number of orders and more flexibility to handle the customized work that constitutes an increasing percentage of the total. To support this evolving workload, we are continuing on a path of investing in state-of-the-art equipment to handle the full spectrum of offset and digital work.
“The same approach is also working well at National Publishing Company, our Philadelphia subsidiary that serves the religious market. With new binding systems in place to meet expanding needs internationally, we achieved a healthy increase in volume for our largest religious customer.”
Publishing segment trims loss despite sales decline
Courier’s publishing segment includes three businesses: Dover Publications, a 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 and plans on home design, decorating, landscaping and gardening.
First-quarter revenues for the segment were $9.1 million, down 3 percent from last year’s first quarter, with the decline spread among all three businesses. The segment’s operating loss for the quarter was $1.1 million, versus $1.3 million for the first quarter of fiscal 2012, excluding last year’s severance and post-retirement benefit expenses.
“Our publishing businesses continued to face a challenging sales environment,” said Conway. “In addition, when we were hit by Hurricane Sandy, all of our publishing operations closed for several days, while generators were hauled into service to bring operations back until power was restored several weeks later.
“However, we continued to offer a growing range of titles online in both printed and e-book form, with more than 3,500 titles now available as e-books through Amazon, Apple, Barnes & Noble and Google. While e-book sales have risen, consumers are still in the process of discovering the wealth of material that has been converted. Meanwhile, print is still unmatched for certain kinds of books such as our new line of Creative Haven adult coloring books, which have been well received in craft stores nationwide.
“Helped by increased e-book sales and resolute cost containment, our publishing segment continued to trim its losses during the quarter. We look forward to further expansion of our online offerings, both direct to consumers and through large and small online retailers.”
“With a solid quarter behind us, our debt down and our improved efficiency, we are well positioned to take advantage of the continuing evolution of the markets we serve,” said Conway. “As a book manufacturer, we expect to continue to outpace the overall education market with our integrated solutions for customized textbook production, capture additional short-run opportunities among trade publishers, and extend our international role on behalf of our largest religious customer. As a publisher, while we remain cautious about consumer spending, we expect to benefit from our investments in e-books and other digital content to complement our print offerings.
“We expect capital expenditures, which were $10 million in fiscal 2012, to increase to between $17 million and $19 million in fiscal 2013, with approximately $13 million dedicated to expanding our digital capabilities.
“As in the past, we expect our performance in fiscal 2013 to follow a seasonal pattern, with the larger portion of our earnings coming in the second half. And we expect to have the additional digital capacity in Kendallville available in time for the busiest part of the year.
“In line with our past practice, today’s guidance, including comparisons to prior performance, excludes impairment and restructuring charges. Overall, we expect fiscal 2013 sales of between $268 million and $283 million, an increase of between 2 percent and 8 percent over the 53-week period of fiscal 2012. We also expect earnings per diluted share of between $.75 and $1.05, which compares with our fiscal 2012 earnings of $.91 per diluted share.
“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 2013, we expect EBITDA to be between $39 million and $45 million, compared to $42 million in fiscal 2012, excluding restructuring charges.
Factors not incorporated into this guidance include the possibility of future impairment or restructuring charges.
About Courier Corp.
Courier Corp. is among America’s leading book manufacturers and a leader in content management and customization in new and traditional media. It also publishes books under three brands offering award-winning content and thousands of titles. Founded in 1824, Courier is headquartered in North Chelmsford, Massachusetts.