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 incomludes 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.
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