Courier Corporation (Nasdaq: CRRC), a leader in digital
printing, publishing and content management in the United States,
today announced financial results for the quarter ended December
27, 2014, the first quarter of its 2015 fiscal year.
Revenues in the quarter were $66 million, down 8% from $72
million in last year’s first quarter. Net income was $1.8 million
or $.16 per diluted share, which includes approximately $800,000,
or $.07 per diluted share, of transaction costs associated with the
pending acquisition of Courier by R.R. Donnelley & Sons Company
(Nasdaq: RRD), as separately announced today, and the terminated
agreement with Quad/Graphics, Inc. (NYSE: QUAD), also separately
announced today. Results also include $870,000, or $.05 per diluted
share, of losses on foreign currency translation related to the
November acquisition of a 60% interest in a Brazilian-based digital
printer. Excluding these costs, net income was $3.2 million or $.28
per diluted share. In fiscal 2014, first-quarter net income from
continuing operations was $2.8 million or $.25 per diluted share;
including discontinued operations, last year’s first-quarter net
income was $2.6 million or $.23 per diluted share.
Details of these and other items, including reconciliations of
non-GAAP measures to GAAP, can be found in the tables at the end of
this release.
In the company’s book manufacturing segment, Courier reported
higher revenues in education, its largest principal market. This
gain was offset by lower sales in the religious market, which has
often been susceptible to fluctuations from quarter to quarter
within a long-term pattern of single-digit growth. Sales to
Courier’s third major market, specialty trade, were comparable to
last year’s first quarter.
In the company’s publishing segment, first-quarter revenues were
up 5% from last year, driven by strong sales to online retailers
and growing consumer demand for Dover Publications’ Creative Haven
product line.
“The first quarter of fiscal 2015 was a good quarter across most
of our business,” said Courier Chairman and Chief Executive
Officer James F. Conway III. “In our book manufacturing
segment, we saw solid performance in two of our three principal
markets. In particular, our education market saw healthy volume,
driven by double-digit growth at our digital inkjet facilities and
our specialty trade market matched a strong prior year quarter.
However, in the religious market, decades of experience with our
largest customer have taught us to expect periodic short-term
swings in order patterns, as we saw in this quarter. Meanwhile, our
publishing group had a profitable quarter as we realized the
benefits of continued product innovation as well as cost
management.
“During the quarter we continued to pursue additional
opportunities in South America’s education market, completing our
acquisition of a 60% interest in Digital Page Grafica e Editora, a
digital printer based in Sao Paulo, Brazil. In addition, based on
our strong cash flow and solid balance sheet, on January 28th
Courier’s Board of Directors declared our regular quarterly
dividend of $.21 per share.”
As separately announced today, Courier has terminated its
previously announced merger agreement with Quad/Graphics, and
Courier and RR Donnelley have signed a definitive agreement by
which RR Donnelley will acquire Courier for $23.00 per share in
cash or 1.3756 RR Donnelley common shares, subject to pro ration.
The completion of the RR Donnelley transaction is subject to
customary closing conditions, including regulatory approval and
approval of Courier’s shareholders.
“Our transaction with RR Donnelley provides superior value to
Courier shareholders and important benefits to our customers and
employees. By adding our digital printing and content management
capabilities to RR Donnelley’s current business, we will be even
better positioned to meet our collective customers’ needs. We are
excited by the opportunities created by this combination and look
forward to working with RR Donnelley to fulfill them,” continued
Mr. Conway.
In light of the pending acquisition by RR Donnelley, Courier
will not be hosting a conference call in connection with its
first-quarter results. In addition, the Company has discontinued
its financial guidance, and Courier’s previous guidance for fiscal
2015 should therefore not be relied upon.
Book manufacturing: higher textbook sales offset by order
timing in religious market
Courier’s book manufacturing segment reported first-quarter
sales of $60 million, down from $66 million last year. Operating
income in the segment was $5.1 million, excluding losses on foreign
currency translation, versus $5.3 million last year, as reduced
sales volume to its largest religious customer more than offset
improved gross profit margins associated with a favorable sales mix
and productivity gains.
The book manufacturing segment focuses on three markets:
education, religion, and specialty trade. Sales to the education
market were $30 million in the quarter, up 7% from the previous
year, driven by growth in sales of college textbooks. Sales to the
religious market were $11 million in the quarter, down sharply from
$19 million last year, largely due to order timing. Sales to the
specialty trade market were $17 million in the quarter, even with
last year.
Digital print sales continued their double-digit increase in the
quarter, reflecting demand for customized textbooks and for other
applications in the education and trade markets.
Publishing: growth at Dover drives segment
profitability
Courier’s publishing segment includes two businesses: Dover
Publications, a niche publisher with thousands of titles in dozens
of specialty trade markets, and Research & Education
Association (REA), a publisher of test preparation books and study
guides.
First-quarter revenues for the segment were $9.0 million, up 5%
from $8.6 million in last year’s first quarter. Operating income in
the quarter was $258,000, much improved from a loss of $412,000 in
the same period last year. The improved performance reflected
higher sales to online retailers, the success of Dover’s Creative
Haven product line, and cost containment measures.
About Courier Corporation
Courier Corporation is one of America’s major book manufacturers
as well as a leader in content management and customization in new
and traditional media. It also publishes books under two brands
offering award-winning content and thousands of titles. Founded in
1824, Courier is headquartered in North Chelmsford, Massachusetts.
For more information, visit www.courier.com.
About RR Donnelley
RR Donnelley (NASDAQ: RRD) is a global provider of integrated
communications. The company works collaboratively with more than
60,000 customers worldwide to develop custom communications
solutions that reduce costs, drive top-line growth, enhance ROI and
increase compliance. Drawing on a range of proprietary and
commercially available digital and conventional technologies
deployed across four continents, the company employs a suite of
leading Internet-based capabilities and other resources to provide
premedia, printing, logistics and business process outsourcing
services to clients in virtually every private and public
sector.
For more information, and for RR Donnelley's Global Social
Responsibility Report, visit the company's web site at
http://www.rrdonnelley.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the U.S. Securities Act of 1933, as
amended, and Section 21E of the U.S. Securities Exchange Act of
1934, as amended. These forward-looking statements, which are based
on current expectations, estimates and projections about the
industry and markets in which Courier operates and beliefs of and
assumptions made by Courier management, involve uncertainties that
could significantly affect the financial results of Courier or the
combined company. Words such as “aim,” “expect,” “anticipate,”
“intend,” “plan,” “goal,” “believe,” “hope,” “seek,” “target,”
“continue,” “estimate,” “will,” “may,” “would,” “could,” “should,”
or variations of such words and similar expressions or the negative
thereof are intended to identify such forward-looking statements,
which generally are not historical in nature. Such forward-looking
statements include, among others, statements regarding the proposed
transaction with RR Donnelley, including the value creation for
Courier’s shareholders. Forward-looking statements are not
guarantees of future performance and involve certain risks,
uncertainties and assumptions that are difficult to predict.
Although we believe the expectations reflected in any
forward-looking statements are based on reasonable assumptions, we
can give no assurance that our expectations will be attained and
therefore, actual outcomes and results may differ materially from
what is expressed or forecasted in such forward-looking statements.
Some of the factors that may affect outcomes and results include,
among others, successful completion of the proposed transaction
with RR Donnelley, the ability to implement plans for the
integration of the proposed transaction with RR Donnelley, and the
receipt of required regulatory approvals for the proposed
transaction (including the approval of antitrust authorities
necessary to complete the proposed transaction), and such other
risks and uncertainties detailed in RR Donnelley’s and Courier’s
respective periodic public filings with the U.S. Securities and
Exchange Commission (the “SEC”), including but not limited to those
discussed (i) under “Risk Factors” in RR Donnelley’s Form 10-K for
the fiscal year ended December 31, 2013, and in RR Donnelley’s
subsequent filings with the SEC and in other investor
communications of RR Donnelley from time to time and (ii) under
“Risk Factors” in Courier’s Form 10-K for the fiscal year ended
September 27, 2014 and in Courier’s subsequent filings with the SEC
and in other investor communications of Courier from time to time.
Neither RR Donnelley nor Courier undertakes to and specifically
declines any obligation to publicly release the results of any
revisions to these forward-looking statements that may be made to
reflect future events or circumstances after the date of such
statement or to reflect the occurrence of anticipated or
unanticipated events.
Additional Information about the Proposed Transaction and
Where to Find It:
This press release relates to a proposed transaction between RR
Donnelley and Courier, which will become the subject of a
registration statement on Form S-4 and proxy statement/prospectus
forming a part thereof, to be filed with the SEC by RR Donnelley
and Courier. This document is not a substitute for the registration
statement and proxy statement/prospectus that RR Donnelley and
Courier will file with the SEC or any other documents that RR
Donnelley or Courier may file with the SEC or send to shareholders
of Courier in connection with the proposed transaction. BEFORE
MAKING ANY VOTING DECISION, INVESTORS AND SECURITY HOLDERS OF
COURIER ARE URGED TO READ THE REGISTRATION STATEMENT, PROXY
STATEMENT/PROSPECTUS AND ALL OTHER RELEVANT DOCUMENTS FILED OR THAT
WILL BE FILED BY RR DONNELLEY OR COURIER WITH THE SEC CAREFULLY AND
IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION AND
RELATED MATTERS. Investors and security holders will be able to
obtain free copies of the registration statement, the proxy
statement/prospectus (when available) and other relevant documents
filed or that will be filed by RR Donnelley or Courier with the SEC
through the website maintained by the SEC at http://www.sec.gov.
Copies of the registration statement, proxy statement/prospectus
and other relevant documents filed by RR Donnelley with the SEC
will be available free of charge on RR Donnelley’s internet website
at http://investor.rrd.com/sec.cfm or by contacting RR Donnelley’s
Investor Relations Department at (800) 742-4455. Copies of the
proxy statement/prospectus and other relevant documents filed by
Courier with the SEC will be available free of charge on Courier’s
internet website at www.courier.com or by contacting Courier
Investor Relations at investorrelations@courier.com.
No Offer or Solicitation
This press release shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the U.S.
Securities Act of 1933, as amended.
Participants in the Solicitation
RR Donnelley, Courier, and their respective directors and
executive officers may be considered participants in the
solicitation of proxies from shareholders of Courier in connection
with the proposed transaction. Information about the directors and
executive officers of Courier is set forth in Amendment No. 1 to
its Annual Report on Form 10-K, which was filed with the SEC on
Form 10-K/A on January 26, 2015. Information about the directors
and executive officers of RR Donnelley is set forth in its proxy
statement for its 2014 annual meeting of stockholders, which was
filed with the SEC on April 15, 2014. Other information regarding
the participants in the proxy solicitation and a description of
their direct and indirect interests, by security holdings or
otherwise, will be contained in the proxy statement/prospectus and
other relevant materials to be filed with the SEC when they become
available.
COURIER CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF
OPERATIONS (Unaudited) (In thousands, except per share amounts)
FIRST QUARTER ENDED December 27, December 28, 2014
2013 Net sales $66,494 $72,260 Cost of sales
49,006 54,513 Gross profit 17,488 17,747
Selling and administrative expenses 14,187 13,115
Operating income 3,301 4,632 Interest expense,
net 137 175 Income before taxes 3,164 4,457
Income tax provision 1,368 1,635 Income
from continuing operations $1,796 $2,822 Loss
from discontinued operations, net of tax - (175 ) Net
income $1,796 $2,647 Net income (loss) per
diluted share from: Continuing operations $0.16 $0.25 Discontinued
operations - (0.02 ) Net income per diluted share
$0.16 $0.23 Cash dividends declared per share
$0.21 $0.21 Wtd. average diluted shares
outstanding 11,410 11,515 SEGMENT INFORMATION:
Net
sales:
Book Manufacturing $59,645 $65,576 Publishing 9,015 8,585
Elimination of intersegment sales (2,166 ) (1,901 ) Total $66,494
$72,260
Operating income
(loss):
Book Manufacturing $4,235 $5,310 Publishing 258 (412 ) Transaction
costs on pending acquisition (800 ) - Stock based compensation (365
) (358 ) Intersegment profit (27 ) 92 Total $3,301
$4,632 COURIER CORPORATION SEGMENT RESULTS OF
OPERATIONS (Unaudited) (In thousands)
BOOK MANUFACTURING
SEGMENT
FIRST QUARTER ENDED December 27, December 28, 2014 2013
Net sales $59,645 $65,576 Cost of sales 45,663 51,216
Gross profit 13,982 14,360 Selling and administrative
expenses 9,747 9,050 Operating income $4,235 $5,310
PUBLISHING
SEGMENT
FIRST QUARTER ENDED December 27, December 28, 2014 2013
Net sales $9,015 $8,585 Cost of sales 5,483 5,290
Gross profit 3,532 3,295 Selling and administrative
expenses 3,274 3,707 Operating income/(loss) $258
($412 ) COURIER CORPORATION CONSOLIDATED CONDENSED
BALANCE SHEETS (Unaudited) (In thousands)
December 27, September 27,
ASSETS
2014 2014 Current assets: Cash and cash equivalents $3,287
$4,144 Investments 1,083 1,024 Accounts receivable 49,930 48,200
Inventories 41,710 38,239 Deferred income taxes 4,026 4,021 Other
current assets 2,862 4,374 Total current assets 102,898 100,002
Property, plant and equipment, net 84,250 83,145 Goodwill
and other intangibles 31,247 18,826 Prepublication costs 5,524
5,711 Long-term investments 1,860 6,429 Other assets 2,941 2,403
Total assets $228,720 $216,516
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities: Current maturities of long-term debt
$5,893 $2,618 Accounts payable 12,729 11,124 Accrued taxes 949
1,051 Other current liabilities 17,469 17,528 Total current
liabilities 37,040 32,321 Long-term debt 31,210 30,347
Deferred income taxes 2,259 1,286 Other liabilities 10,236 8,146
Total liabilities 80,745 72,100 Total stockholders'
equity 147,975 144,416 Total liabilities and stockholders'
equity $228,720 $216,516 COURIER CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (In
thousands) For the Three Months Ended December 27,
December 28, 2014 2013 Operating Activities: Net
income $1,796 $2,647
Adjustments to reconcile net income to
cash provided from operating activities:
Depreciation and amortization 5,973 6,352 Stock-based compensation
365 358 Change in fair value of contingent consideration (150 ) 165
Change in fair value of derivative 689 - Deferred income taxes (288
) (234 ) Changes in working capital (4,238 ) 90 Other long-term,
net (373 ) 136 Cash provided from operating
activities 3,774 9,514 Investment Activities:
Capital expenditures (908 ) (6,095 ) Acquisition of business, net
of cash (482 ) - Prepublication costs (600 ) (713 ) Proceeds on
disposition of assets 150 - Loan receivable and other investments
(59 ) (4,409 ) Life insurance proceeds - 387
Cash used for investment activities (1,899 ) (10,830 )
Financing Activities: Long-term debt borrowings, net (324 ) 3,813
Cash dividends (2,408 ) (2,416 ) Other - 8
Cash used for financing activities (2,732 ) 1,405
Increase (decrease) in cash and cash equivalents ($857 ) $89
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) and adjusted EBITDA 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.
Non-GAAP reconciliation - EBITDA: Net income from continuing
operations $1,796 $2,822 Income tax provision 1,368 1,635 Interest
expense, net 137 175 Depreciation and amortization 5,973
6,247 EBITDA $9,274 $10,879 Change in fair value of
contingent consideration (150 ) 165 Transaction costs on pending
acquisition 800 - Adjusted EBITDA $9,924
$11,044 COURIER CORPORATION OTHER
RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES (Unaudited) (In
thousands, except per share amounts)
First Quarter Ended December 27, 2014 Income
Income Net Income Before Tax Net per Diluted Taxes Provision Income
Share GAAP basis measures $3,164 $1,368 $1,796 $0.16
Transaction costs (1) 800 - 800 0.07 Loss on foreign
currency translation (2) 870 300 570 0.05
Non-GAAP measures $4,834 $1,668 $3,166 $0.28
BOOK MANUFACTURING
SEGMENT
First Quarter Ended December 27, 2014 GAAP Basis Non-Recurring
Non-GAAP Measures Items (2) Measures Net sales
$59,645 $59,645 Cost of sales 45,663 45,663 Gross
profit 13,982 13,982 Selling and administrative expenses
9,747 (870 ) 8,877 Operating income $4,235 870 $5,105
(1) Transaction costs associated with pending
acquisition of the Company, which are not deductible for tax
purposes. (2) Loss on foreign currency translation related to the
acquisition of Digital Page.
Courier Investor Relations Contact:Peter Folger,
978-251-6000Senior Vice President and Chief Financial
Officerinvestorrelations@courier.comorCourier Media Contact:Joele
Frank, Wilkinson Brimmer KatcherAverell Withers, 212-355-4449orNick
Leasure, 212-355-4449
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