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 March 28, 2015, the second quarter of its 2015 fiscal
year.
Revenues in the quarter were $61 million, even with last
year’s second quarter. For the quarter, the company reported a loss
of $15.6 million or $1.37 per diluted share,
including transaction costs of approximately $13 million,
or $1.14 per diluted share, associated with the pending
acquisition of Courier by R.R. Donnelley & Sons
Company (Nasdaq: RRD) and the terminated agreement
with Quad/Graphics, Inc. These costs include a $10 million
termination fee paid to Quad/Graphics for which the company was
reimbursed by R.R. Donnelley. For accounting purposes, the $10
million reimbursement will not be recognized in income until the
transaction with R.R. Donnelley closes. Results also
include $200,000, or $.01 per diluted share, of losses on
foreign currency translation associated with a recently acquired
Brazilian-based digital printer, as well as a net impairment charge
of $434,000, or $.01 per diluted share, related to
FastPencil, a business the company sold shortly after the close of
the quarter. Excluding these costs, the second quarter loss
was $2.4 million or $.21 per diluted share. In
fiscal 2014, Courier reported a second-quarter loss from continuing
operations of $2.6 million or $.23 per diluted
share, which included a net impairment charge for FastPencil of
$1.9 million, or $.17 per diluted share.
For the first six months of fiscal 2015, Courier revenues were
$127 million, down 4% from $133 million last year. The loss for the
fiscal year to date was $13.8 million or $1.22 per diluted share,
including transaction costs of $13.8 million, or $.1.21 per diluted
share, from the pending acquisition of Courier, foreign currency
losses of $1.1 million, or $.06 per diluted share, and the second
quarter net impairment charge. Excluding those items, year-to-date
net income was approximately $800,000 or $.07 per diluted share.
For the first six months of fiscal 2014, the company’s income from
continuing operations was $263,000 or $.02 per diluted share, which
included the net impairment charge of $1.9 million, or $.17 per
diluted share, recorded in last year’s second quarter.
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, the second fiscal
quarter has traditionally been its slowest due to seasonal
variations in some of its markets. In addition, the timing of
orders from several key customers depressed fiscal 2015’s
second-quarter sales despite an increase in capacity utilization
during the later portion of the quarter. In the company’s book
manufacturing segment, sales for the quarter were up in the
religious market, but down in the education and trade markets. In
Courier’s publishing segment, revenues were down 7% from last year
in the second quarter, but off less than 1% for the year to
date.
“The second quarter of our fiscal year has often been
challenging, and this year’s was no exception,” said Courier
Chairman and Chief Executive Officer James F. Conway
III. “Sales to the religious market rebounded from a sharp
drop in the previous quarter, but not enough to bring year-to-date
results up to last year’s level. And in the education market, sales
were off at every level from elementary and high school through
college.
“There were, however, some positive developments as well. While
the quarter was weak overall, business accelerated as the quarter
progressed, and the trend continued into the current quarter, with
April bookings up sharply from a year ago. In addition, this
quarter marked the first time we incorporated results from Digital
Page Grafica e Editora, our South American digital print operation,
and its contribution was positive to both sales and operating
income. And while our publishing segment reported a small loss for
the quarter, it remains profitable for the year to date as it
continues on the path of recovery from the challenges of the last
several years.
“I am also pleased to report that, based on our solid cash flow
and balance sheet, on April 29th Courier’s Board of Directors
declared our regular quarterly dividend of $.21 per share.
“While continuing to press forward across all our existing areas
of business, we are also preparing for new opportunities in
conjunction with Courier’s pending acquisition by RR Donnelley
under the agreement announced jointly by the two companies in
February. We believe the transaction with RR Donnelley provides
both superior value to Courier shareholders and important benefits
to our customers and employees.”
The completion of the RR Donnelley transaction is subject to
customary closing conditions, including approval of Courier’s
shareholders. One of the conditions to closing was met on March
23rd with the expiration of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976. With respect
to shareholder approval, the company announced today that it will
be holding a Special Meeting of Shareholders on Friday, June 5,
2015 and expects the transaction to close during the second quarter
of calendar 2015.
In light of the pending acquisition by RR Donnelley, Courier
will not be hosting a conference call in connection with its
second-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: Order timing impacts sales and operating
income
Courier’s book manufacturing segment reported second-quarter
sales of $55.2 million, off marginally from $55.4
million last year. The segment’s operating loss was $2.7
million, versus a loss of $718,000 last year, principally
due to lower sales in the education market and a less profitable
mix of work. For the year to date, book manufacturing sales were
$115 million, down 5% from $121 million in the first six months of
fiscal 2014. For the first six months, operating income in the
segment was $2.6 million, excluding foreign currency losses of $1.1
million, compared with $4.6 million in the same period last
year.
The book manufacturing segment focuses on three key U.S.
publishing markets: education, religion, and specialty trade. Sales
to the education market were $17 million in the
quarter, down from $21 million last year, with most of the decline
attributable to lower sales of college textbooks. For the first six
months of fiscal 2015, education sales were down 6% overall from a
year ago, but college textbook sales were up 1%. Sales to
the religious market were $18 million in the
quarter, up 8% from last year, with sales to the company’s
largest religious customer up 18% after an unusually slow first
quarter. For the year to date, sales to this customer were down
13%, reflecting both the timing of individual orders and a
long-standing pattern of quarter-to-quarter fluctuations. For the
religious market as a whole, six-month sales were down 17%. Sales
to the specialty trade market were $15 million, down
2% in the quarter and 1% for the year to date.
In addition to U.S. sales, Courier began incorporating revenues
from its operations in Brazil into segment results for the quarter.
The South American digital print business, which primarily serves
the education market, contributed approximately $4 million to sales
during the period.
Shortly after the close of the quarter, Courier completed the
sale of its FastPencil subsidiary.
Publishing: segment remains profitable for the year despite
slower second quarter
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.
Second-quarter revenues for the segment were $7.5 million,
down 7% from $8.1 million in last year’s second quarter.
Operating loss in the quarter was $141,000, versus income of
$211,000 last year. For the first six months of fiscal 2015,
publishing sales were $16.6 million, comparable to the same period
last year. Despite the second-quarter loss, the segment remained
modestly profitable for the year to date, with income of $117,000,
versus a loss of $201,000 in the first half of last year. Major
factors included previous cost containment measures and the growing
success of Dover’s Creative Haven line of adult coloring books.
Dover entered this emerging category in 2013 and is now one of
the leading providers, offering dozens of titles for purposes
ranging from entertainment to patient therapy. Revenues have risen
steadily, with sales doubling in the first six months of fiscal
2015.
About Courier Corporation
Courier Corporation is one of America’s major book
manufacturers as well as a leader in digital printing, and content
management 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.
Additional Information and Where To Find It
This news release includes information relating to a proposed
transaction between RR Donnelley and Courier. In connection with
the proposed transaction, RR Donnelley has filed a proxy
statement/prospectus with the SEC, which includes a final
prospectus with respect to RR Donnelley shares to be issued in the
proposed transaction and a definitive proxy statement of Courier
with respect to the proposed transaction. This news release is not
a substitute for the final proxy statement/prospectus 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 FINAL 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 BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION AND RELATED MATTERS.
Investors and security holders may obtain free copies of the final
proxy statement/prospectus 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 final proxy statement/prospectus and other relevant documents
filed by RR Donnelley with the SEC are 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 are available free
of charge on Courier's internet website at www.courier.com or by
contacting Courier Investor Relations at
investorrelations@courier.com.
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 for the year ended September 27,
2014, which was filed with the SEC on Form 10-K/A on January 26,
2015 and in its proxy statement for its 2015 annual meeting of
shareholders, which was filed with the SEC on February 17, 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, is contained in the
final proxy statement/prospectus and other relevant materials to be
filed with the SEC.
Use of Forward-Looking Statements
This news release includes certain "forward-looking statements"
within the meaning of, and subject to the safe harbor created by,
Section 21E of the Securities Exchange Act of 1934, as amended,
including with respect to the business, strategy and plans of RR
Donnelley and Courier, their expectations relating to the proposed
transaction and their future financial condition and performance,
including estimated synergies. Statements that are not historical
facts, including statements about RR Donnelley or Courier
managements' beliefs and expectations, are forward-looking
statements. Words such as "believes", "anticipates", "estimates",
"expects", "intends", "aims", "potential", "will", "would",
"could", "considered", "likely", "estimate" and variations of these
words and similar future or conditional expressions are intended to
identify forward-looking statements but are not the exclusive means
of identifying such statements. While RR Donnelley and Courier
believe these expectations, assumptions, estimates and projections
are reasonable, such forward-looking statements are only
predictions and involve known and unknown risks and uncertainties,
many of which are beyond RR Donnelley's or Courier's control. By
their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend upon future
circumstances that may or may not occur. Actual results may differ
materially from RR Donnelley's and Courier's current expectations
depending upon a number of factors affecting their businesses and
risks associated with the successful execution and integration of
the proposed transaction and the performance of their businesses
following such transaction. These factors include, among others,
successful completion of the proposed transaction, the ability to
implement plans for the integration of the proposed transaction and
the receipt of required approvals for the proposed transaction, and
such other risks and uncertainties detailed in RRD's and Courier's
respective periodic public filings with the SEC, including but not
limited to those discussed (i) under "Risk Factors" in RRD's Form
10-K for the fiscal year ended December 31, 2014, in RRD's
subsequent filings with the SEC and in other investor
communications of RRD 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. RR
Donnelley and Courier do not undertake to and specifically decline
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.
COURIER
CORPORATIONCONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)(In thousands, except per share amounts) SECOND
QUARTER ENDED YEAR TO DATE March 28,2015 March 29,2014 March
28,2015 March 29,2014 Net sales $60,580 $60,580 $127,074
$132,840 Cost of sales 51,102 50,070 100,108
104,583 Gross profit 9,478 10,510 26,966 28,257
Selling and administrative expenses (1) 25,618 11,429 39,805
24,544 Impairment charge, net of reduction in contingent
consideration liability (2) 434 1,870 434
1,870 Operating income (loss) (16,574 ) (2,789 )
(13,273 ) 1,843 Interest expense, net 691 108
828 283 Income (loss) before taxes (17,265 )
(2,897 ) (14,101 ) 1,560 Income tax provision (benefit)
(1,709 ) (339 ) (341 ) 1,297 Income (loss) from
continuing operations ($15,556 ) ($2,558 ) ($13,760 ) $263
Loss from discontinued operations, net of tax - (812
) - (986 ) Loss ($15,556 ) ($3,370 ) ($13,760 ) ($723
) Net income (loss) per diluted share from: Continuing
operations ($1.37 ) ($0.23 ) ($1.22 ) $0.02 Discontinued operations
- (0.07 ) - (0.09 ) Loss per diluted share
($1.37 ) ($0.30 ) ($1.22 ) ($0.06 ) Cash dividends declared
per share $0.21 $0.21 $0.42 $0.42
Wtd. average diluted shares outstanding 11,335 11,314 11,305
11,299 SEGMENT INFORMATION:
Net
sales:
Book Manufacturing $55,224 $55,355 $114,869 $120,931 Publishing
7,548 8,128 16,563 16,713 Elimination of intersegment sales (2,192
) (2,903 ) (4,358 ) (4,804 ) Total $60,580 $60,580
$127,074 $132,840
Operating income
(loss):
Book Manufacturing ($2,700 ) ($718 ) $1,535 $4,592 Publishing (141
) 211 117 (201 ) Transaction costs on pending acquisition (1)
(13,015 ) - (13,815 ) - Impairment charge, net (2) (434 ) (1,870 )
(434 ) (1,870 ) Stock based compensation (274 ) (385 ) (639 ) (743
) Intersegment profit (10 ) (27 ) (37 ) 65 Total ($16,574 )
($2,789 ) ($13,273 ) $1,843 (1) In the second
quarter and first half of fiscal 2015, the Company recorded $13.0
million and $13.8 million, respectively, of transaction costs
related to the pending acquisition of the Company by R. R.
Donnelley & Sons Company ("RR Donnelley"). These costs include
a $10 million termination fee paid to Quad/Graphics, Inc. for which
the Company was reimbursed by RR Donnelley. For accounting
purposes, the $10 million reimbursement will not be recognized in
income until the transaction with RR Donnelley closes, which is
expected to occur in the second calendar quarter of 2015.
(2) In the second quarter of fiscal 2015, the Company recorded a
$1.7 million impairment charge representing the remainder of
FastPencil's goodwill and other intangible assets, as well as
eliminating the balance of the related contingent consideration
liability of $1.3 million. The goodwill impairment and adjustment
to the contingent consideration liability are not deductible for
income tax purposes.
COURIER CORPORATIONSEGMENT RESULTS OF OPERATIONS
(Unaudited)(In thousands)
BOOK MANUFACTURING
SEGMENT
SECOND QUARTER ENDED
YEAR TO DATE March 28,2015 March 29,2014 March 28,2015 March
29,2014 Net sales $55,224 $55,355 $114,869 $120,931 Cost of
sales 48,570 48,135 94,233 99,351 Gross
profit 6,654 7,220 20,636 21,580 Selling and administrative
expenses 9,354 7,938 19,101 16,988
Operating income (loss) ($2,700 ) ($718 ) $1,535 $4,592
PUBLISHING
SEGMENT
SECOND QUARTER ENDED YEAR TO DATE March 28,2015 March
29,2014 March 28,2015 March 29,2014 Net sales $7,548 $8,128
$16,563 $16,713 Cost of sales 4,715 4,809 10,198
10,100 Gross profit 2,833 3,319 6,365 6,613
Selling and administrative expenses 2,974 3,108 6,248
6,814 Operating income (loss) ($141 ) $211
$117 ($201 ) COURIER CORPORATIONCONSOLIDATED CONDENSED
BALANCE SHEETS (Unaudited)(In thousands)
March 28,2015
September 27,2014
ASSETS
Current assets: Cash and cash equivalents $1,646 $4,144
Investments 1,129 1,024 Accounts receivable 35,582 48,200
Inventories 46,239 38,239 Deferred income taxes 4,007 4,021 Other
current assets 8,419 4,374 Total current assets 97,022 100,002
Property, plant and equipment, net 80,869 83,145 Goodwill
and other intangibles 28,230 18,826 Prepublication costs 5,393
5,711 Long-term investments 2,629 6,429 Other assets 2,880 2,403
Total assets $217,023 $216,516
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities: Current maturities of long-term debt
$4,941 $2,618 Accounts payable 14,274 11,124 Accrued taxes 1,128
1,051 Termination fee reimbursement 10,000 - Other current
liabilities 16,949 17,528 Total current liabilities 47,292 32,321
Long-term debt 29,409 30,347 Deferred income taxes 1,857
1,286 Other liabilities 7,990 8,146 Total liabilities 86,548
72,100 Total stockholders' equity 130,475 144,416
Total liabilities and stockholders' equity $217,023 $216,516
COURIER CORPORATIONCONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)(In thousands) For the Six
Months Ended March 28,2015 March 29,2014 Operating Activities: Net
income (loss) ($13,760 ) ($723 ) Adjustments to reconcile net
income (loss) to cash provided from operating activities:
Depreciation and amortization 12,157 13,092 Stock-based
compensation 639 743 Impairment charge 1,742 4,500 Change in fair
value of contingent consideration (1,415 ) (2,280 ) Change in fair
value of loans receivable 581 - Change in fair value of derivative
(161 ) - Deferred income taxes (564 ) (282 ) Termination fee
reimbursement 10,000 - Changes in working capital 825 (1,045 )
Other long-term, net (533 ) 91 Cash provided from
operating activities 9,511 14,096 Investment
Activities: Capital expenditures (3,199 ) (7,532 ) Acquisition of
business, net of cash (482 ) - Prepublication costs (1,255 ) (1,479
) Proceeds on disposition of assets 275 - Loan receivable and other
investments (605 ) (4,917 ) Life insurance proceeds - 387
Cash used for investment activities (5,266 ) (13,541
) Financing Activities: Long-term debt borrowings
(repayments), net (2,745 ) 8,506 Cash dividends (4,828 ) (4,842 )
Proceeds from stock plans 943 175 Cash
provided from (used for) financing activities (6,630 ) 3,839
Effect of exchange rate on cash (113 ) -
Increase (decrease) in cash and cash equivalents ($2,498 ) $4,394
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 (loss) from continuing operations ($13,760 ) $263 Income tax
provision (benefit) (341 ) 1,297 Interest expense, net 828 283
Depreciation and amortization 12,157 13,092 EBITDA
($1,116 ) $14,935 Impairment charge 1,742 4,500 Change in fair
value of contingent consideration (1,415 ) (2,280 ) Losses on
foreign currency exchange 1,070 - Transaction costs on pending
acquisition 13,815 - Adjusted EBITDA $14,096
$17,155
COURIER CORPORATIONOTHER RECONCILIATIONS
OF GAAP TO NON-GAAP MEASURES (Unaudited)(In thousands, except per
share amounts)
Quarter Ended March 28, 2015
Year To Date March 28, 2015
Income Income Net Income Income
Income Net Income (Loss)
Tax Net (Loss) (Loss) Tax Net (Loss) Before Provision Income per
Diluted Before Provision Income per Diluted Taxes (Benefit) (Loss)
Share Taxes (Benefit) (Loss) Share GAAP basis
measures ($17,265 ) ($1,709 ) ($15,556 ) ($1.37 ) ($14,101 ) ($341
) ($13,760 ) ($1.22 ) Transaction costs (1) 13,015 127
12,888 1.14 13,815 127 13,688 1.21 Loss on foreign currency
exchange (2) 200 69 131 0.01 1,070 371 699 0.06 Impairment charge,
net (3) 434 265 169 0.01 434 265 169 0.01
Non-GAAP measures ($3,616
) ($1,248 ) ($2,368 ) ($0.21 ) $1,218 $422 $796
$0.07 Quarter Ended March 29, 2014 (5)
Year To Date March 29, 2014 (5) Income Income Net
Income Income Income Net Income (Loss) Tax Net (Loss) (Loss) Tax
Net (Loss) Before Provision Income per Diluted Before Provision
Income per Diluted Taxes (Benefit) (Loss) Share Taxes (Benefit)
(Loss) Share GAAP basis measures ($2,897 ) ($339 ) ($2,558 )
($0.23 ) $1,560 $1,297 $263 $0.02 Impairment charge, net (4)
1,870 - 1,870 0.17 1,870 -
1,870 0.17 Non-GAAP measures ($1,027 )
($339 ) ($688 ) ($0.06 ) $3,430 $1,297 $2,133
$0.18
BOOK MANUFACTURING
SEGMENT
Quarter Ended March 28, 2015 Year To Date March 28, 2015 GAAP Basis
Non-Recurring Non-GAAP GAAP Basis Non-Recurring Non-GAAP Measures
Items (2) Measures Measures Items (2) Measures Net
sales $55,224 - $55,224 $114,869 - $114,869 Cost of sales 48,570
- 48,570 94,233 - 94,233
Gross profit 6,654 - 6,654 20,636 - 20,636
Selling and administrative expenses 9,354 (200 ) 9,154
19,101 (1,070 ) 18,031 Operating
income ($2,700 ) $200 ($2,500 ) $1,535 $1,070
$2,605 (1) In the second quarter and
first half of fiscal 2015, the Company recorded $13.0 million and
$13.8 million, respectively, of transaction costs related to the
pending acquisition of the Company by R. R. Donnelley & Sons
Company ("RR Donnelley"). These costs include a $10 million
termination fee paid to Quad/Graphics, Inc. for which the Company
was reimbursed by RR Donnelley. For accounting purposes, the $10
million reimbursement will not be recognized in income until the
transaction with RR Donnelley closes, which is expected to occur in
the second calendar quarter of 2015. (2) Loss on foreign currency
exchange related to Digital Page, a Brazilian printer acquired in
November 2014. (3) In the second quarter of fiscal 2015, the
Company recorded a $1.7 million impairment charge representing the
remainder of FastPencil's goodwill and other intangible assets, as
well as eliminating the balance of the related contingent
consideration liability of $1.3 million. The goodwill impairment
and adjustment to the contingent consideration liability are not
deductible for income tax purposes. (4) In the second quarter of
fiscal 2014, the Company recorded a $4.5 million impairment charge
related to FastPencil's goodwill, as well as a reduction in the
related contingent consideration liability of $2.6 million. Both
adjustments are non-cash and not deductible for income tax
purposes. (5) Results for fiscal 2014 are from continuing
operations.
Investor and Media Contact:Courier CorporationPeter M. Folger,
+1-978-251-6000Senior Vice President and Chief Financial
Officerinvestorrelations@courier.com
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