Digital Sales Growth Drives Courier’s Positive Revenue ResultsNovember 20, 2012
“Throughout the year, we continued to distinguish ourselves competitively by our strong customer focus, efficient workflow and superior product quality. Equally important, we did so while maintaining the robust cash flow we have enjoyed for the last several years. As a result, even after a $10-million stock buyback, $10 million in capital expenditures and our customary $10 million in dividends paid, we were able to reduce our debt by $6 million from a year ago.”
Book Manufacturing: Strong Growth in Religious and Trade Markets
Courier’s book manufacturing segment had fourth-quarter sales of $69.2 million, up 4 percent from $66.6 million last year. Excluding restructuring costs, fourth-quarter operating income was $11.7 million in fiscal 2012, up from $11.2 million in fiscal 2011.
For the full year, book manufacturing sales were $233.0 million, up 1 percent from $230.2 million in fiscal 2011. The segment’s full-year operating income, excluding restructuring costs, was $23.4 million, up 4 percent from $22.5 million in fiscal 2011.
The segment’s gross profit, excluding restructuring costs, was $19.6 million in the fourth quarter, vs. $18.0 million a year ago. Gross profit for fiscal 2012 as a whole was $51.7 million, excluding restructuring costs, compared to $49.9 million last year. Despite intense price competition and reduced recycling income, the segment’s margins improved because of a favorable sales mix and continued gains in operating efficiency made possible by recent technology investments and the consolidation of one-color capacity.
The book manufacturing segment focuses on three markets: education, religion, and specialty trade. Sales to the education market totaled $31 million in the fourth quarter, comparable to a year earlier. Education sales were $98 million, down 3 percent from fiscal 2011, due to shorter run lengths in certain college textbooks and continued weakness in elementary and high school sales. Sales to the religious market were up 6 percent to $19 million in the quarter, and up 2 percent to $68 million for the full year.
However, sales to Courier’s largest religious customer were up 13 percent in the quarter and up 5 percent for the year. Sales to the specialty trade market were up 25 percent to $17 million in the quarter, and up 11 percent to $60 million for the full year, reflecting increased four-color offset sales as well as growing demand for digital.
Revenues rose sharply at Courier Digital Solutions, reflecting growth in demand for customized versions of college textbooks as well as increased sales of trade books. With its current digital facilities running close to capacity, in October Courier announced plans to add both a new HP digital cover press in Massachusetts and a complete new digital production facility to complement its four-color offset plant in Kendallville, IN.
“In large measure, our book manufacturing business returned to seasonal form in the fourth quarter,” said Conway. “The difference is that the college textbook market continues to evolve toward a shorter peak season, with more customized editions prepared just ahead of the start of classes.
“However, we remain in excellent position to capture the digital growth opportunities this trend continues to create. With our new digital production capability at Kendallville, customers will soon be able to integrate top-quality digital and offset print strategies from a single location for complete life-cycle management of every title.
“It was also a quarter in which religious sales returned to form, with a double-digit increase at our largest customer more than making up for a couple of short quarters,” Conway continued. “Over the year, religious sales grew in keeping with longer-term trends associated with our ongoing partnership with this customer to bring Scriptures to people in more than 100 countries.
“Finally, it was a quarter of continued growth in trade sales, as we landed several new accounts while also achieving higher volume with a number of long-time customers. In a tough competitive environment, publishers appreciate our combination of quality, efficiency and responsiveness across the whole spectrum of one- to four-color work, both offset and digital. And the productivity of our people and workplaces, always high, continues to improve, helped further by our consolidation of one-color print capacity earlier in the year.”
Publishing Segment Trims Loss, Increases Online Offerings
Courier’s 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 and plans on home design, decorating, landscaping and gardening.
Fourth-quarter revenues for the segment were $10.1 million, comparable to last year’s fourth quarter, with 9 percent sales growth at Dover offset by weak results at REA and Creative Homeowner. Despite its sales decline, REA remained profitable, but Dover and Creative Homeowner reported operating losses. Overall, the segment’s fourth-quarter operating loss was $426,000, versus $872,000 in fiscal 2011.
For the year as a whole, publishing sales were $38.4 million, down 6 percent from $40.8 million in fiscal 2011, with sales up modestly at Dover but down at the other two businesses. Excluding restructuring costs in both years, the segment’s operating loss for fiscal 2012 was $3.7 million, versus a loss of $4.1 million in fiscal 2011. The reduction in the loss was attributable to the effects of cost-reduction measures taken throughout the year.
“A year after the Borders bankruptcy, our publishing businesses have taken significant steps to regain their footing,” said Conway. “Part of the solution is to provide content which consumers can access directly online, and we have delivered that: Dover with its DoverPictura.com online image library; REA with its All Access program, allowing students to access test prep materials anytime via mobile devices; and Creative Homeowner with its UltimatePlans.com downloadable home plan business.
“A larger part of the solution, of course, is sales through online retailers, where we saw double-digit growth this year in the segment. But while REA shared in the growth, it continued to suffer from the absence of Borders’ bricks-and-mortar network, where REA products had benefited from prominent placement in store displays. Developing other channels remains a key agenda item for REA in the coming year,” Conway added.
“Finally, the third piece is our entry into e-books. After considerable investment, we now have thousands of titles available to consumers across all four leading e-book platforms of Amazon, Apple, Barnes & Noble and Google. The first fruits of this effort started to materialize during the fourth quarter.”
“Once again we have come through a year of economic uncertainty with good prospects and solid finances,” said Conway. “With our debt down and our organization more efficient than ever, we have been able to invest in growth opportunities we could not have foreseen just a few years ago.
“Bolstered by strong customer relationships in key long-term markets, we expect to continue to outpace the overall education market with our integrated solutions for customized textbook production, seize additional short-run opportunities among trade publishers, and continue the steady expansion of our responsibilities on behalf of our largest religious customer. And as a publisher, while we remain cautious about consumer spending, we expect to begin to benefit from our investments in eBooks and other digital content to complement our print offerings,” he continued.
“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 $269 million and $283 million, an increase of between 3 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,” Conway revealed.
“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.
Courier Corp. is America’s third largest book manufacturer 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 more than 10,000 titles. Founded in 1824, Courier is headquartered in North Chelmsford, MA.