-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q2wO3wXw8y238GMBJSFA9Evvc6ZUEupIXX1IIp0vTwlmAbtk8pq5EIPJsWtBXO4Z 2iVTZHKDjAKw+EA8nKSOBg== 0000912057-00-052251.txt : 20001206 0000912057-00-052251.hdr.sgml : 20001206 ACCESSION NUMBER: 0000912057-00-052251 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001205 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COURIER CORP CENTRAL INDEX KEY: 0000025212 STANDARD INDUSTRIAL CLASSIFICATION: BOOK PRINTING [2732] IRS NUMBER: 042502514 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-07597 FILM NUMBER: 783563 BUSINESS ADDRESS: STREET 1: 15 WELLMAN AVENUE CITY: NORTH CHELMSFORD STATE: MA ZIP: 01863 BUSINESS PHONE: 9782516000 10-K 1 a2032490z10-k.txt 10-K ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________TO_______________ COMMISSION FILE NUMBER 0-7597 COURIER CORPORATION A MASSACHUSETTS CORPORATION I.R.S. EMPLOYER IDENTIFICATION NO. 04-2502514 15 WELLMAN AVENUE NORTH CHELMSFORD, MASSACHUSETTS 01863 TELEPHONE NO. 978-251-6000 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, $1 PAR VALUE INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ] INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF THE REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [ ] STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT AS OF NOVEMBER 30, 2000 COMMON STOCK, $1 PAR VALUE - $61,402,397 INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF COMMON STOCK AS OF NOVEMBER 30, 2000 COMMON STOCK, $1 PAR VALUE - 3,360,083 DOCUMENTS INCORPORATED BY REFERENCE PORTIONS OF THE REGISTRANT'S PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS SCHEDULED TO BE HELD ON JANUARY 18, 2001 (PART III). ================================================================================ PART I ITEM 1. BUSINESS. INTRODUCTION Registrant, Courier Corporation, was incorporated under the laws of Massachusetts on June 30, 1972. Courier Corporation owns all of the capital stock of Courier-Citizen Company, a Massachusetts corporation organized in 1894 as successor to a printing business that originated in 1824. Courier Corporation and its subsidiaries ("Courier" or the "Company") are focused on streamlining and enhancing the process by which printed books and digital content reach end-user markets. The Company has three business segments: book manufacturing, customized education and specialized book publishing. Courier is the largest book manufacturer in the Northeast, offering services from prepress and production through storage and distribution. Products include Bibles, educational and consumer books, and technical documentation primarily for education, religious and specialty book publishers. Revenues from this segment accounted for 98% of Courier's consolidated revenues in fiscal 2000. Courier's customized education segment operates businesses that respond to the need for greater choice in education. Copyright Management Services ("CMS") provides Internet-based solutions that enable educators to combine materials from multiple publishers into customized books and coursepacks. The Home School is a direct marketer of educational materials to families engaged in educating children at home. Revenues in this segment accounted for 2% of consolidated revenues in fiscal 2000. On September 22, 2000, the Company acquired all of the outstanding capital stock of Dover Publications, Inc. ("Dover"), a leading publisher of special-interest books, which established the Company's third business segment, specialized book publishing. Revenues in this segment were not significant in fiscal 2000. Additional segment information, including the amounts of net sales, earnings or loss before taxes and total assets, for each of the last three fiscal years, is contained in the Notes to Consolidated Financial Statements on pages F-16 and F-17 included in this Annual Report on Form 10-K. On September 22, 2000, the Company acquired Dover, a Mineola, New York publisher of special-interest books. Founded in 1941, Dover is a successful, consistently profitable niche publisher with more than 7,000 in-print titles in over 30 specialty categories ranging from military history to paper dolls, and from musical scores to typographic fonts. Dover sells its products through a diverse range of wholesalers and distributors around the world and most major American bookstore chains, independent booksellers, children's stores, craft stores, and gift shops in museums, historic sites and elsewhere. It also sells direct to consumers through proprietary catalogs. The combination of Dover's publishing, sales and distribution skills with Courier's book manufacturing, digital content conversion, and e-commerce skills will provide a powerful end-to-end solution for Dover. On September 30, 1997, the Company purchased the assets of The Home School Books & Supplies ("The Home School") based in Arlington, Washington. The Home School markets curriculum and other learning materials direct to home schoolers through catalog and e-commerce (www.thehomeschool.com) channels. It also offers free advice from experienced home schooling advisors. 1 On July 21, 1997, the Company acquired all of the outstanding stock of Book-mart Press, Inc. ("Book-mart"), a North Bergen, New Jersey book manufacturer specializing in short to medium runs of softcover and hardcover books. Founded in 1977, Book-mart has built a strong reputation and loyal customer following in New York and the surrounding areas. Book-mart offers high quality offset printing and binding for order quantities as low as 300 copies. The acquisition complemented the Company's existing range of book manufacturing services so that the Company can offer its customers one-stop full-service shopping for book production at any run length. BUSINESS SEGMENTS BOOK MANUFACTURING SEGMENT Courier's book manufacturing segment produces hard and softcover books, as well as related services involved in managing the process of creating and distributing these products for publishers, religious organizations and other information providers. Courier provides book manufacturing and related services from six facilities in Westford, Stoughton and North Chelmsford, Massachusetts; Philadelphia, Pennsylvania; North Bergen, New Jersey; and Kendallville, Indiana. Courier's book manufacturing operations consist of both electronic and conventional film processing, platemaking, printing and binding of soft and hard bound books and manuals. These book manufacturing operations are conducted through five subsidiaries, Courier Westford, Inc. ("Westford"), Courier Stoughton, Inc. ("Stoughton"), Courier Kendallville, Inc. ("Kendallville"), National Publishing Company ("National"), and Book-mart. Each of these subsidiaries has certain specialties adapted to the needs of the market niches Courier serves, such as short-run book manufacturing, printing on lightweight paper and 4-color book manufacturing. These services are primarily sold to publishers of educational, religious, consumer, professional and reference books. Courier's book manufacturing sales force of 22 people is responsible for all of the Company's sales to over 650 book-manufacturing customers. Courier's salespeople operate out of sales offices located in New York, Chicago, Philadelphia, Hayward, California, North Chelmsford, Massachusetts, North Bergen and North Caldwell, New Jersey, and Buffalo Creek, Colorado. Sales to one customer, The Gideons International, aggregated approximately 26% of consolidated sales in fiscal 2000 while sales to Pearson PLC aggregated approximately 17% of fiscal 2000 consolidated sales. The loss of either of these customers would have a material adverse effect on the Company. No other customer accounted for more than 10% of fiscal 2000 consolidated sales. The Company distributes products around the world; export sales, as a percentage of consolidated sales, were approximately 18% in both fiscal 2000 and fiscal 1999, and 17% in fiscal 1998. All phases of Courier's business are highly competitive. The printing and publishing industries, exclusive of newspapers, include over 50,000 establishments. While most of these establishments are relatively small, several of the Company's competitors are considerably larger or are affiliated with companies that are considerably larger and have greater financial resources than Courier. In recent years, consolidation of both customers and competitors within the Company's markets has increased pricing pressures. The major competitive factors in Courier's book manufacturing business in addition to price are product quality, speed of delivery, customer service, availability of appropriate printing capacity, related services and technology support. 2 CUSTOMIZED EDUCATION SEGMENT CMS specializes in providing custom books for college professors who have created personally tailored curriculum that precisely matches the needs of their courses. These custom books range from reading anthologies, combining materials from multiple sources, to out-of-print books to self-authored original teaching materials. CMS obtains copyright permissions from the publishers or authors and prepares electronic masters from which these custom books are produced, either by Courier or the college campus print shop. CMS markets its custom book services direct to professors nationwide as well as to college bookstores and campus print shops. It utilizes direct marketing techniques to professors, including mailings and e-mail, backed up by a series of highly targeted web sites. The web sites include www.custombook.com, www.anthologypro.com, www.ceopress.com, www.eruditionbooks.com, www.bookhound.com, and www.coursepack.com. Direct marketing efforts to professors are supported by one sales person and an internal direct response staff located in North Chelmsford, Massachusetts. Student purchases of custom books from CMS are made over the web at www.custombookstore.com or by phone. Sales to college bookstores and campus print shops are made through direct marketing and a supporting web site, www.coursepackconnection.com. CMS's competition is primarily from university bookstores and printshops that perform copyright clearance and coursepack production in-house for the university, and from large college textbook publishers who offer custom publishing services. CMS distinguishes its products and services on the basis of convenience and high-quality book manufacturing. The Home School markets curriculum and other learning materials direct to home schoolers through catalog and e-commerce channels (www.thehomeschool.com). The Home School's Advisor Line and order center are located in Arlington, Washington, while catalog and e-commerce operations are located in North Chelmsford, Massachusetts. Customers may obtain free advice from experienced home schooling advisors and a free e-mail newsletter, "The Home School Advisor." The homeschooling market is highly competitive ranging from small local retail bookstores to national catalog booksellers to on-line book retailers. The Home School distinguishes itself by offering a wide range of top quality curriculum and free advice exclusively from experienced home schooling advisors. SPECIALTY BOOK PUBLISHING SEGMENT Dover, acquired by the Company in September 2000, is a publisher of books in over 30 specialty categories, including fine and commercial arts, children's books, crafts, musical scores, graphic design, mathematics, physics and other areas of science, puzzles, games, social science, stationery items, and classics of literature for both juvenile and adult markets, including the Dover Thrift editions. Dover sells its products through a diverse range of wholesalers and distributors around the world and in most major American bookstore chains, independent booksellers, children's stores, craft stores, and gift shops in museums and historic sites. Dover has also sold its books directly to consumers for over 50 years. Dover mails its proprietary catalogs to over 500,000 consumers. 3 The specialty book publishing market is comprised of hundreds of publishers; many of which are very small, but a few that are much larger than Dover or are part of organizations that are much larger. The number of publishers in the United States has doubled in the past decade to approximately 63,000 at the end of 2000 according to R.R. Bowker. In addition, newer sources of competition have emerged with large retailers launching or expanding publishing operations and new web-based publishing businesses starting up, which compete in the specialty book publishing market, including publishing of specialty electronic books. Dover distinguishes its products by offering an extremely wide variety of high quality books at modest prices. COMPANY BUSINESS AS A WHOLE MATERIALS AND SUPPLIES Courier purchases its principal raw materials, primarily paper, but also plate materials, ink, cover stock and casebinding materials, from numerous suppliers, and is not dependent upon any one source for its requirements. Many of Courier's book manufacturing customers purchase their own paper and furnish it at no charge to these operations for book production. The Home School purchases books and other learning materials from over 100 educational publishers and it is not dependent upon any one source. Dover purchases a significant portion of its books from Courier's book manufacturing operations. ENVIRONMENTAL REGULATIONS The Company periodically makes capital expenditures so that its operations comply, in all material respects, with applicable federal, state and local environmental laws and regulations. No significant expenditures are anticipated in fiscal 2001. The Company does not believe that its compliance with applicable environmental laws and regulations will have a material impact on the Company's earnings or competitive position. EMPLOYEES The Company and its subsidiaries employed 1,535 persons at September 30, 2000 (including 184 at Dover) compared to 1,320 a year ago. OTHER There is no portion of Courier's business subject to cancellation of government contracts or renegotiations of profits. Courier's overall business is not significantly seasonal in nature. Seasonal demand from educational publishers is highest in the Company's first and fourth quarters, but this has been balanced in recent years by demand from customers in other publishing markets. Demand for CMS and The Home School products and services is highest in the Company's fourth quarter. Dover's business is not significantly seasonal in nature. Courier holds no material patents, licenses, franchises or concessions that are important to its operations, but does have trademarks, service marks, and Universal Resource Locators (URL's) on the World Wide Web in connection with each of its businesses. Substantially all of Dover's publications are protected by copyright, either in its own name, in the name of the author of the work, or in the name of a predecessor publisher from whom rights were acquired. 4 ITEM 2. PROPERTIES. REAL PROPERTIES The following schedule lists the facilities occupied by Courier at September 30, 2000. The list also includes real estate which is held for sale or lease, as discussed in Note J to the Consolidated Financial Statements, which appears on page F-18 of this Annual Report on Form 10-K. Courier considers its plants and other facilities to be well maintained and suitable for the purpose intended.
Owned/ Principal Activity and Location (Year Constructed) Leased Sq. Ft. - -------------------------------------------------- ------ ------- CORPORATE HEADQUARTERS AND EXECUTIVE OFFICES North Chelmsford, MA (1973, 1996) Owned 69,000 (1) BOOK MANUFACTURING AND WAREHOUSING Westford plant, Westford, MA (1900, 1968, 1969, 1981, 1990) Owned 593,000 (2) Kendallville plant, Kendallville, IN (1978) Owned 155,000 National plant, Philadelphia, PA (1975, 1997) Owned 229,000 (3) Stoughton plant, Stoughton, MA (1980) Leased 169,000 Book-mart plant, North Bergen, NJ (1917, 1935, 1997) Leased 75,000 DOVER OFFICES AND WAREHOUSES Mineola, New York Leased 106,000 New Hyde Park, NY Leased 80,000 REAL ESTATE HELD FOR SALE OR LEASE Raymond, NH (1973) Owned 59,000 (4)
(1) In September 1996, the Company relocated its corporate headquarters into approximately 21,000 square feet of an existing facility in North Chelmsford, MA that also houses CMS, The Home School, warehousing and end-user fulfillment operations. (2) In April 1999, the Company announced its intention to offer for sale the old, unoccupied and underutilized portions of its multi-building manufacturing complex in Westford, MA. In January 2000, the Company signed an agreement to sell this property, but a number of significant contingencies exist. (3) In December 1996, the Company completed construction of a 100,000 square foot addition to its Philadelphia manufacturing facility. The expansion enabled the Company to consolidate operations located in an older multistory facility to the newer, more efficient property. The older multistory facility, which was vacated in January 1997, was sold in June 1998. (4) In February 2000, the Company entered into a five-year lease agreement for this facility, which had been vacant. The lease provided for a purchase option at a price of $1.3 million. The option was exercised in August 2000 and closed in October 2000. EQUIPMENT The Company's products are manufactured on equipment that in most cases is owned by the Company, although it leases computers, image setters and electronic printing systems which are subject to more rapid obsolescence. In addition, it leases three printing presses where the lessor holds title. Capital expenditures amounted to approximately $16.3 million in 2000, $5.0 million in 1999 and $4.1 million in 1998. Capital expenditures in fiscal 2000 were for new presses, binding lines, computer-to-plate equipment, information system improvements, and other equipment to automate workflows and reduce costs. Fiscal 2001 capital expenditures are expected to be approximately $15 million. Courier considers its equipment to be in good operating condition and adequate for its present needs. 5 ENCUMBRANCES AND RENTAL OBLIGATIONS For a description of encumbrances on certain properties and equipment, see Note D of Notes to Consolidated Financial Statements on page F-10 of this Annual Report on Form 10-K. Information concerning leased properties and equipment is disclosed in Note E of Notes to Consolidated Financial Statements, which appears on page F-11 of this Annual Report on Form 10-K. ITEM 3. LEGAL PROCEEDINGS. In the ordinary course of business, the Company is subject to various legal proceedings and claims. The Company believes that the ultimate outcome of these matters will not have a material adverse effect on its financial statements. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There were no matters submitted to a vote of security holders during the quarter ended September 30, 2000. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The information required by this Item is contained in the section captioned "Selected Quarterly Financial Data (Unaudited)" which appears on page F-19 of this Annual Report on Form 10-K. ITEM 6. SELECTED FINANCIAL DATA. The information required by this Item is contained in the section captioned "Five-Year Financial Summary" appearing on page F-20 of this Annual Report on Form 10-K. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information required by this Item is contained in the section captioned "Management's Discussion and Analysis" on pages F-21 through F-23 of this Annual Report on Form 10-K. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company does not hold any derivative financial instruments, derivative commodity instruments or other financial instruments except as noted in Note A of Notes to Consolidated Financial Statements, which appears on pages F-7 and F-8 of this Annual Report on Form 10-K. The Company engages neither in speculative nor derivative trading activities. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The information required by this Item is contained on pages F-1 through F-18 of this Annual Report on Form 10-K. 6 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Courier's executive officers, together with their ages and all positions and offices with the Company presently held by each person named, are as follows: James F. Conway III 48 Chairman, President and Chief Executive Officer George Q. Nichols 71 Corporate Senior Vice President and Chairman of National Publishing Company Robert P. Story, Jr. 49 Senior Vice President and Chief Financial Officer Peter M. Folger 47 Vice President and Controller Peter D. Tobin 45 Corporate Vice President and Executive Vice President of Courier Companies
The terms of office of all of the above executive officers continue until the first meeting of the Board of Directors following the next annual meeting of stockholders and the election or appointment and qualification of their successors, unless any officer sooner dies, resigns, is removed or becomes disqualified. Mr. Conway III was elected Chairman of the Board in September 1994 after serving as acting Chairman since December 1992. He has been Chief Executive Officer since December 1992 and President since July 1988. Mr. Nichols became an executive officer of Courier in June 1989 while retaining his position as President of National Publishing Company, a position he has held since 1975. He was elected a Director of the Company in March 1995 and became Senior Vice President of the Company in November 1996. He became Chairman of National Publishing Company in December 1999. Mr. Story became Senior Vice President and Chief Financial Officer in April 1989. He joined Courier in November 1986 as Vice President and Treasurer. He was elected a Director of the Company in February 1995. Mr. Folger has been Controller since 1982 and became Vice President in November 1992. 7 Mr. Tobin became Vice President of Courier Corporation and Executive Vice President of Courier Companies in October 2000. He joined Courier Companies as National Sales Manager in 1994 and became Vice President of Sales and Marketing in 1997. All other information called for by Item 10 is contained in the definitive Proxy Statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders scheduled to be held on Thursday, January 18, 2001. Such information is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION. and ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. and ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Information called for by Items 11, 12 and 13 is contained in the definitive Proxy Statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders scheduled to be held on Thursday, January 18, 2001. Such information is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (A) DOCUMENTS FILED AS PART OF THIS REPORT
1. FINANCIAL STATEMENTS PAGE(S) - Independent Auditors' Report F-1 - Consolidated Statements of Income for each of the three years in the period ended September 30, 2000 F-2 - Consolidated Balance Sheets as of September 30, 2000 and September 25, 1999 F-3 to F-4 - Consolidated Statements of Cash Flows for each of the three years in the period ended September 30, 2000 F-5 - Consolidated Statements of Changes in Stockholders' Equity for each of the three years in the period ended September 30, 2000 F-6 - Notes to Consolidated Financial Statements F-7 to F-18 2. FINANCIAL STATEMENT SCHEDULE - Schedule II - Consolidated Valuation and Qualifying Accounts S-1
8 3. EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT 3A-1 Articles of Organization of Courier Corporation, as of June 29, 1972 (filed as Exhibit 3A-1 to the Company's Annual Report on Form 10-K for the fiscal year ended September 26, 1981, and incorporated herein by reference). 3A-2 Articles of Amendment of Courier Corporation (changing stockholder vote required for merger or consolidation), as of January 20, 1977 (filed as Exhibit 3A-2 to the Company's Annual Report on Form 10-K for the fiscal year ended September 26, 1981, and incorporated herein by reference). 3A-3 Articles of Amendment of Courier Corporation (providing for staggered election of directors), as of January 20, 1977 (filed as Exhibit 3A-3 to the Company's Annual Report on Form 10-K for the fiscal year ended September 26, 1981, and incorporated herein by reference). 3A-4 Articles of Amendment of Courier Corporation (authorizing class of Preferred Stock), as of February 15, 1978 (filed as Exhibit 3A-4 to the Company's Annual Report on Form 10-K for the fiscal year ended September 26, 1981, and incorporated herein by reference). 3A-5 Articles of Amendment of Courier Corporation (increasing number of shares of authorized Common Stock), as of January 16, 1986 (described in item #2 of the Company's Proxy Statement for the Annual Meeting of Stockholders held on January 16, 1986, and incorporated herein by reference). 3A-6 Articles of Amendment of Courier Corporation (providing for fair pricing procedures for stock to be sold in certain business combinations), as of January 16, 1986 (filed as Exhibit A to the Company's Proxy Statement for the Annual Meeting of Stockholders held on January 16, 1986, and incorporated herein by reference). 3A-7 Articles of Amendment of Courier Corporation (limiting personal liability of directors to the Corporation or to any of its stockholders for monetary damages for breach of fiduciary duty), as of January 28, 1988 (filed as Exhibit 3A-7 to the Company's Annual Report on Form 10-K for the fiscal year ended September 24, 1988, and incorporated herein by reference). 3A-8 Articles of Amendment of Courier Corporation (establishing Series A Preferred Stock), as of November 8, 1988 (filed as Exhibit 3A-8 to the Company's Annual Report on Form 10-K for the fiscal year ended September 24, 1988, and incorporated herein by reference). 3B By-Laws of Courier Corporation, amended and restated as of March 18, 1999 (filed as Exhibit 3.2 to the Company's Current Report on Form 8-K, dated March 18, 1999, and incorporated herein by reference). 9 10A-1+ Courier Corporation Stock Grant Plan (filed as Exhibit C to the Company's Proxy Statement for the Annual Meeting of Stockholders held on January 20, 1977, and incorporated herein by reference). 10A-2+ Amendment, effective January 19, 1989, to the Courier Corporation Stock Grant Plan (described in Item 4 of the Company's Proxy Statement for the Annual Meeting of Stockholders held January 19, 1989, and incorporated herein by reference). 10B+ Letter Agreement, dated February 8, 1990, of Courier Corporation relating to supplemental retirement benefit and consulting agreement with James F. Conway, Jr. (filed as Exhibit 10B to the Company's Annual Report on Form 10-K for the fiscal year ended September 29, 1990, and incorporated herein by reference). 10C-1+ Courier Corporation 1989 Deferred Income Stock Option Plan for Non-employee Directors, effective September 28, 1989 (filed as Exhibit A to the Company's Proxy Statement for the Annual Meeting of Stockholders held January 18, 1990, and incorporated herein by reference). 10C-2+ Amendment, effective November 4, 1993, to the 1989 Deferred Income Stock Option Plan for Non-employee Directors (filed as Exhibit 10C-2 to the Company's Annual Report on Form 10-K for the fiscal year ended September 25, 1993, and incorporated herein by reference). 10C-3+ Amendment, effective September 24, 1998, to the 1989 Deferred Income Stock Option Plan for Non-employee Directors (filed as Exhibit 10C-3 to the Company's Annual Report on Form 10-K for the fiscal year ended September 26, 1998, and incorporated herein by reference). 10C-4+ Amendment, effective January 21, 1999, to the 1989 Deferred Income Stock Option Plan for Non-employee Directors (described in Item 3 of the Company's Proxy Statement for the Annual Meeting of Stockholders held January 21, 1999, and incorporated herein by reference). 10D-1+ Courier Corporation 1983 Stock Option Plan (filed as Exhibit A to the Company's Proxy Statement for the Annual Meeting of Stockholders held on January 20, 1983, and incorporated herein by reference). 10D-2+ Amendment, effective January 17, 1985, to the Courier Corporation 1983 Stock Option Plan (described in Item 2 of the Company's Proxy Statement for the Annual Meeting of Stockholders held on January 17, 1985, and incorporated herein by reference). 10D-3+ Amendment, effective January 19, 1989, to the Courier Corporation 1983 Stock Option Plan (described in Item 3 of the Company's Proxy Statement for the Annual Meeting of Stockholders held January 19, 1989, and incorporated herein by reference). 10E-1+ The Courier Executive Compensation Program, effective October 4, 1993 (filed as Exhibit 10E-2 to the Company's Annual Report on Form 10-K for the fiscal year ended September 25, 1993, and incorporated herein by reference). 10 10E-2+ The Management Incentive Compensation Program, effective October 4, 1993 (filed as Exhibit 10E-3 to the Company's Annual Report on Form 10-K for the fiscal year ended September 25, 1993, and incorporated herein by reference). 10F+ Courier Corporation Senior Executive Severance Program and Agreements, dated October 25, 1988 pursuant to the program with Messrs. Conway III, Nichols, Story, and Folger (filed as Exhibit 10P to the Company's Annual Report on Form 10-K for the fiscal year ended September 24, 1988, and incorporated herein by reference). 10G Rights Agreement between Courier Corporation and State Street Bank and Trust Company dated March 18, 1999 (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K, dated March 18, 1999, and incorporated herein by reference). 10H+ 1989 Incentive Program, as amended and restated on May 28, 1992 for the purchase of Courier Common Stock by Executive Officers and Key Employees of the Corporation (filed as Exhibit 10H to the Company's Annual Report on Form 10-K for the fiscal year ended September 24, 1994, and incorporated herein by reference). 10I+ Courier Corporation 1999 Employee Stock Purchase Plan (filed as Exhibit A to the Company's Proxy Statement for the Annual Meeting of Stockholders held on January 21, 1999, and incorporated herein by reference). 10J-1+ Agreement, as of March 3, 1993, of Courier Corporation relating to employment contract and supplemental retirement benefit with George Q. Nichols (filed as Exhibit 10J to the Company's Annual Report on Form 10-K for the fiscal year ended September 25, 1993, and incorporated herein by reference). 10J-2+ Amendment, as of April 16, 1997, to supplemental retirement benefit agreement with George Q. Nichols (filed as Exhibit 10J-2 to the Company's Annual Report on Form 10-K for the fiscal year ended September 27, 1997, and incorporated herein by reference). 10K Agreement, dated as of October 16, 1995, of Courier Corporation relating to employment of John Pugsley (filed as Exhibit 10K to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1995, and incorporated herein by reference). 10L-1 Revolving Credit Agreement, dated as of March 18, 1997, between Courier Corporation, State Street Bank and Trust Company and BankBoston, N.A., providing for a $20 million revolving credit facility (filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the period ended March 29, 1997, and incorporated herein by reference). 10L-2 Amendment, dated July 22, 1997, to Note Agreement between Courier Corporation, State Street Bank and Trust Company and BankBoston, N.A., providing for a $30 million revolving credit facility (filed as Exhibit 10L-2 to the Company's Annual Report on Form 10-K for the fiscal year ended September 27, 1997, and incorporated herein by reference). 11 10L-3 Amendment, dated February 27, 1998, to Note Agreement between Courier Corporation, State Street Bank and Trust Company and BankBoston, N.A., providing for a $30 million revolving credit facility (filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the period ended March 28, 1998, and incorporated herein by reference). 10L-4 Amendment, dated February 26, 1999, to Note Agreement between Courier Corporation, State Street Bank and Trust Company and BankBoston, N.A., providing for a $30 million revolving credit facility (filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the period ended March 27, 1999, and incorporated herein by reference). 10L-5 Amendment, dated July 22, 1999, to Note Agreement between Courier Corporation, State Street Bank and Trust Company, BankBoston, N.A. and KeyBank National Association, providing for a $30 million revolving credit facility (filed as Exhibit 10L-5 to the Company's Annual Report on Form 10-K for the fiscal year ended September 25, 1999, and incorporated herein by reference). 10L-6 Amendment, dated August 11, 2000, to Note Agreement between Courier Corporation, Citizens Bank of Massachusetts (successor to State Street Bank and Trust Company), Fleet National Bank (f/k/a BankBoston, N.A.) and KeyBank National Association, providing for a $60 million revolving credit facility (filed as Exhibit 10 to the Company's Current Report on Form 8-K dated September 22, 2000, and incorporated herein by reference). 10L-7* Amendment, dated October 12, 2000, to Note Agreement between Courier Corporation, Citizens Bank of Massachusetts, Fleet National Bank, and KeyBank National Association, providing for a $60 million revolving credit facility. 10M-1 Term Promissory Note, dated as of October 15, 1991, between Courier Corporation and MetLife Capital Credit Corporation for the principal sum of $2,000,000 at 9.5% due October 15, 2001 (filed as Exhibit 4F-1 to the Company's Annual Report on Form 10-K for the fiscal year ended September 28, 1991, and incorporated herein by reference). 10M-2 Loan and Security Agreement, dated as of October 15, 1991, between Courier Corporation and MetLife Capital Credit Corporation (filed as Exhibit 4F-2 to the Company's Annual Report on Form 10-K for the fiscal year ended September 28, 1991, and incorporated herein by reference). 10N Master Lease Finance Agreement, dated as of July 27, 1994, between Courier Corporation and BancBoston Leasing (filed as Exhibit 10P to the Company's Annual Report on Form 10-K for the fiscal year ended September 24, 1994, and incorporated herein by reference). 10O-1+ Courier Corporation 1993 Stock Incentive Plan, as amended and restated, effective May 6, 1996 (filed as Exhibit 10O to the Company's Annual Report on Form 10-K for the fiscal year ended September 28, 1996, and incorporated herein by reference). 12 10O-2+ Amendment, effective September 24, 1998, to the Courier Corporation 1993 Stock Incentive Plan (filed as Exhibit 10O-2 to the Company's Annual Report on Form 10-K for the fiscal year ended September 26, 1998, and incorporated herein by reference). 10O-3+ Amendment, effective January 21, 1999, to the Courier Corporation 1993 Stock Incentive Plan (described in Item 4 of the Company's Proxy Statement for the Annual Meeting of Stockholders held January 21, 1999, and incorporated herein by reference). 10P Stock Purchase Agreement by and among Courier Corporation and the stockholders of Book-mart Press, Inc., dated as of July 21, 1997 (filed as Exhibit 2.1 to the Company's Current Report on Form 8-K dated July 21, 1997, and incorporated herein by reference). 10Q+ Courier Corporation Deferred Compensation Program dated November 6, 1997 including Messrs. Conway III, Nichols, and Story (filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the period ended December 27, 1997, and incorporated herein by reference). 10R Master Lease Finance Agreement, dated as of September 23, 1998 between Courier Corporation and General Electric Capital Corporation (filed as Exhibit 10R to the Company's Annual Report on Form 10-K for the fiscal year ended September 26, 1998, and incorporated herein by reference). 10S Stock Purchase Agreement by and among Courier Corporation, Mrs. Blanche Cirker, individually, the Estate of Hayward Francis Cirker, by Blanche Cirker, executrix, and each of the stockholders of Dover Publications, Inc., Dover Book Store Inc. and Transfolio Express, Inc. dated as of August 14, 2000 (filed as Exhibit 2.1 to the Company's Current Report on Form 8-K dated September 22, 2000, and incorporated herein by reference). 10T* Master Lease Finance Agreement, dated as of September 25, 2000 between Courier Corporation and Eastern Bank. 21* Schedule of Subsidiaries. 23* Consent of Deloitte & Touche LLP, independent auditors. 27* Financial Data Schedule.
* Exhibit is furnished herewith. + Designates a Company compensation plan or arrangement. (B) REPORTS ON FORM 8-K Report on Form 8-K filed August 29, 2000 reporting under Item 5 the proposed acquisition of Dover Publications, Inc. and Report on Form 8-K filed October 6, 2000 reporting under Item 2 the acquisition of Dover Publications, Inc. 13 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on December 5, 2000. COURIER CORPORATION By: s/James F. Conway III ------------------------------------- James F. Conway III Chairman, President and Chief Executive Officer By: s/Robert P. Story, Jr. ------------------------------------- Robert P. Story, Jr. Senior Vice President and Chief Financial Officer By: s/Peter M. Folger ------------------------------------- Peter M. Folger Vice President and Chief Accounting Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities indicated, on December 5, 2000. s/James F. Conway III s/George Q. Nichols - -------------------------------------- ------------------------------------- James F. Conway III George Q. Nichols Chairman, President and Director Chief Executive Officer s/Kathleen Foley Curley s/Charles E. Otto - -------------------------------------- ------------------------------------- Kathleen Foley Curley Charles E. Otto Director Director s/Richard K. Donahue s/Robert P. Story, Jr. - -------------------------------------- ------------------------------------- Richard K. Donahue Robert P. Story, Jr. Director Director s/Edward J. Hoff s/W. Nicholas Thorndike - -------------------------------------- ------------------------------------- Edward J. Hoff W. Nicholas Thorndike Director Director s/Arnold S. Lerner - -------------------------------------- Arnold S. Lerner Director
14 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Courier Corporation: We have audited the accompanying consolidated balance sheets of Courier Corporation and subsidiaries (the "Company") as of September 30, 2000 and September 25, 1999, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for each of the three years in the period ended September 30, 2000. Our audits also included the financial statement schedule listed in the Index at Item 14. These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2000 and September 25, 1999, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2000 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/Deloitte & Touche LLP Boston, Massachusetts November 9, 2000 F-1 COURIER CORPORATION CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED SEPTEMBER 30, 2000 SEPTEMBER 25, 1999 SEPTEMBER 26, 1998 --------------------------------------------------------------- Net sales $188,320,000 $163,991,000 $151,591,000 Cost of sales 140,226,000 123,184,000 113,923,000 ------------------------------------------------------------ Gross profit 48,094,000 40,807,000 37,668,000 Selling and administrative expenses 32,002,000 27,726,000 26,653,000 Interest expense 325,000 524,000 1,303,000 Other income (expense) (Note J) 119,000 -- 2,043,000 ------------------------------------------------------------ Income before taxes 15,886,000 12,557,000 11,755,000 Provision for income taxes (Note C) 5,249,000 4,181,000 4,030,000 ------------------------------------------------------------ Net income $ 10,637,000 $ 8,376,000 $ 7,725,000 ============================================================ Net income per share (Notes A and K): Basic $3.25 $2.61 $ 2.49 Diluted $3.15 $2.52 $ 2.37 Cash dividends declared per share $0.48 $0.42 $0.385 ============================================================
The accompanying notes are an integral part of the consolidated financial statements. F-2 COURIER CORPORATION CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 SEPTEMBER 25, 1999 ------------------------------------ ASSETS Current assets: Cash and cash equivalents (Note A) $ 562,000 $ 3,460,000 Accounts receivable, less allowance for uncollectible accounts of $1,391,000 in 2000 and $937,000 in 1999 39,811,000 31,388,000 Inventories (Note B) 27,421,000 12,232,000 Deferred income taxes (Note C) 2,543,000 1,915,000 Other current assets 1,016,000 271,000 ------------------------------------ Total current assets 71,353,000 49,266,000 Property, plant and equipment (Notes A and D): Land 1,059,000 1,059,000 Buildings and improvements 20,812,000 19,052,000 Favorable building lease 2,816,000 2,816,000 Machinery and equipment 93,392,000 79,967,000 Furniture and fixtures 1,512,000 1,700,000 Construction in progress 2,850,000 1,723,000 ------------------------------------ 122,441,000 106,317,000 Less-Accumulated depreciation and amortization (81,427,000) (75,689,000) ------------------------------------ Property, plant and equipment, net 41,014,000 30,628,000 Real estate held for sale or lease, net (Note J) 323,000 344,000 Goodwill and other intangibles, net (Notes A and H) 26,040,000 10,750,000 Prepublication costs 2,949,000 -- Other assets 562,000 524,000 ------------------------------------ Total assets $ 142,241,000 $ 91,512,000 ====================================
The accompanying notes are an integral part of the consolidated financial statements. F-3 COURIER CORPORATION CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 SEPTEMBER 25, 1999 ------------------------------------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt (Note D) $ 366,000 $ 338,000 Accounts payable 18,023,000 11,644,000 Accrued payroll 6,708,000 5,173,000 Accrued taxes 5,303,000 5,162,000 Other current liabilities 7,606,000 5,034,000 -------------------------------------- Total current liabilities 38,006,000 27,351,000 Long-term debt (Note D) 31,327,000 1,193,000 Deferred income taxes (Note C) 2,428,000 2,693,000 Other liabilities 2,709,000 2,716,000 -------------------------------------- Total liabilities 74,470,000 33,953,000 -------------------------------------- Commitments and contingencies (Note E) Stockholders' equity (Notes A and F): Preferred stock, $1 par value - authorized 1,000,000 shares; none issued Common stock, $1 par value - authorized 6,000,000 shares; issued 3,750,000 shares; outstanding 3,344,000 shares in 2000 and 3,233,000 shares in 1999 3,750,000 3,750,000 Additional paid-in capital 2,283,000 1,258,000 Retained earnings 65,551,000 56,486,000 Unearned compensation (513,000) -- Treasury stock, at cost: 406,000 shares in 2000 and 517,000 shares in 1999 (3,300,000) (3,935,000) -------------------------------------- Total stockholders' equity 67,771,000 57,559,000 -------------------------------------- Total liabilities and stockholders' equity $ 142,241,000 $ 91,512,000 ======================================
F-4 COURIER CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 2000 SEPTEMBER 25, 1999 SEPTEMBER 26, 1998 ---------------------------------------------------------------- Operating Activities: Net income $ 10,637,000 $ 8,376,000 $ 7,725,000 Adjustments to reconcile net income to cash provided from operating activities: Depreciation and amortization 8,062,000 8,282,000 8,541,000 Deferred income taxes (893,000) (456,000) (499,000) Changes in assets and liabilities, net of acquisitions: Accounts receivable (2,639,000) (3,447,000) (2,022,000) Inventory (1,300,000) (1,404,000) (1,010,000) Accounts payable 5,298,000 2,350,000 (263,000) Accrued taxes (31,000) 227,000 (26,000) Other elements of working capital 2,829,000 (245,000) 1,891,000 Other, net 557,000 687,000 (1,695,000) ---------------------------------------------------------- Cash provided from operating activities 22,520,000 14,370,000 12,642,000 ---------------------------------------------------------- Investment Activities: Business acquisitions, net of cash (Note H) (38,571,000) -- (563,000) Capital expenditures (16,347,000) (4,999,000) (4,147,000) Proceeds from sale of assets (Note J) -- -- 4,600,000 ---------------------------------------------------------- Cash used for investment activities (54,918,000) (4,999,000) (110,000) ---------------------------------------------------------- Financing Activities: Scheduled long-term debt repayments (338,000) (312,000) (387,000) Other long-term borrowings (repayments) 30,500,000 (5,250,000) (11,500,000) Cash dividends (1,572,000) (1,354,000) (1,205,000) Stock repurchases (114,000) (455,000) -- Proceeds from stock plans 1,024,000 738,000 1,255,000 ---------------------------------------------------------- Cash provided from (used for) financing activities 29,500,000 (6,633,000) (11,837,000) ---------------------------------------------------------- Increase (decrease) in cash and equivalents (2,898,000) 2,738,000 695,000 Cash and equivalents at the beginning of the period 3,460,000 722,000 27,000 ---------------------------------------------------------- Cash and equivalents at the end of the period $ 562,000 $ 3,460,000 $ 722,000 ========================================================== Supplemental cash flow information: Interest paid $ 311,000 $ 396,000 $ 1,243,000 Income taxes paid (net of receipts) $ 6,177,000 $ 3,939,000 $ 4,498,000
The accompanying notes are an integral part of the consolidated financial statements. F-5 COURIER CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
TOTAL STOCKHOLDERS' COMMON ADDITIONAL RETAINED UNEARNED TREASURY EQUITY STOCK PAID-IN CAPITAL EARNINGS COMPENSATION STOCK --------------------------------------------------------------------------------------- Balance, September 27, 1997 $ 41,748,000 $ 4,500,000 $ 9,277,000 $ 52,060,000 $ -- $(24,089,000) Net income 7,725,000 -- -- 7,725,000 -- -- Cash dividends (1,205,000) -- -- (1,205,000) -- -- Stock plan activity 1,522,000 -- 734,000 -- -- 788,000 Convert treasury shares (Note A) -- (2,000,000) (9,627,000) (7,866,000) -- 19,493,000 Stock dividend (Note A) -- 1,250,000 -- (1,250,000) -- -- --------------------------------------------------------------------------------------- Balance, September 26, 1998 49,790,000 3,750,000 384,000 49,464,000 -- (3,808,000) Net income 8,376,000 -- -- 8,376,000 -- -- Cash dividends (1,354,000) -- -- (1,354,000) -- -- Stock repurchase (455,000) -- -- -- -- (455,000) Stock plan activity 1,202,000 -- 874,000 -- -- 328,000 --------------------------------------------------------------------------------------- Balance, September 25, 1999 57,559,000 3,750,000 1,258,000 56,486,000 -- (3,935,000) Net income 10,637,000 -- -- 10,637,000 -- -- Cash dividends (1,572,000) -- -- (1,572,000) -- -- Stock repurchase (114,000) -- -- -- -- (114,000) Restricted stock grant/amorti- zation activity, net 45,000 -- 386,000 -- (513,000) 172,000 Other stock plan activity 1,216,000 -- 639,000 -- -- 577,000 --------------------------------------------------------------------------------------- Balance, September 30, 2000 $ 67,771,000 $ 3,750,000 $ 2,283,000 $ 65,551,000 $(513,000) $ (3,300,000) =======================================================================================
The accompanying notes are an integral part of the consolidated financial statements. F-6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS: Courier Corporation and its subsidiaries ("Courier" or the "Company") is focused on streamlining and enhancing the process by which printed books and digital content reach end-user markets, primarily for educational, religious, and specialty book publishers. Courier has three lines of business: full service book manufacturing, customized education and, beginning in fiscal 2001 with the acquisition of Dover Publications, Inc. ("Dover"), specialized publishing (see Note H). PRINCIPLES OF CONSOLIDATION: The consolidated financial statements, prepared on a fiscal year basis, include the accounts of Courier Corporation and its subsidiaries after elimination of all significant intercompany transactions. Such financial statements have been prepared in conformity with generally accepted accounting principles, which require the use of certain estimates and assumptions. Fiscal year 2000 was a 53-week period compared with fiscal years 1999 and 1998, which were 52-week periods. FINANCIAL INSTRUMENTS: Financial instruments consist primarily of cash, accounts receivable, accounts payable and debt obligations. The Company classifies as cash and cash equivalents amounts on deposit in banks and cash invested temporarily in various instruments with maturities of three months or less at time of purchase. The Company estimates the fair value of financial instruments based on interest rates available to the Company and by comparison to quoted market prices. At September 30, 2000 and September 25, 1999, the fair market value of the Company's financial instruments approximated their carrying values. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are recorded at cost, including interest on funds borrowed to finance the acquisition or construction of major capital additions. Interest of approximately $102,000 was capitalized in fiscal 2000. No interest was capitalized in fiscal years 1999 and 1998. The Company provides for depreciation of property, plant and equipment on a straight-line basis over periods ranging from 3 to 11 years, except for depreciation on buildings and improvements which is based on estimated useful lives ranging from 10 to 40 years. Leasehold improvements and a favorable building lease are amortized on a straight-line basis over the shorter of their useful life or the term of the lease. Expenditures for maintenance and repairs are charged against income as incurred; betterments that increase the value or materially extend the life of the related assets are capitalized. When assets are sold or retired, the cost and accumulated depreciation are removed from the accounts and any gain or loss is included in income. GOODWILL: Goodwill arising from business acquisitions is amortized using the straight-line method over periods ranging from 5 to 20 years. Amortization expense was approximately $596,000 for each of the fiscal years 2000, 1999 and 1998. The Company continues to carry goodwill of approximately $1.2 million arising from the purchase of a company prior to October 31, 1970; such amount is not being amortized because management believes that the value has not diminished. F-7 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) LONG-LIVED ASSETS: Management periodically reviews long-lived assets for impairment and does not believe that there is any material impairment of any asset of the Company as measured in accordance with Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." PREPUBLICATION COSTS: Prepublication costs acquired in the Dover acquisition (see Note H) will be amortized using the straight-line method over an estimated useful life of four years. INCOME TAXES: Deferred income tax liabilities and assets are determined based upon the differences between the financial statement and tax bases of assets and liabilities, and are measured by applying enacted tax rates and laws for the taxable years in which these differences are expected to reverse. REVENUE RECOGNITION: Revenue is recognized upon shipment of goods to customers or upon the transfer of ownership for those customers whom the Company provides manufacturing and distribution services. Revenue for distribution services is recognized as services are provided. USE OF ESTIMATES: The process of preparing financial statements in conformity with generally accepted accounting principles requires management to make estimates that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as revenues and expenses during the reporting period. Actual results may differ from these estimates. NET INCOME PER SHARE: Basic net income per share is based on the weighted average number of common shares outstanding each period. Diluted net income per share also includes potentially dilutive items such as options (see Note K). STOCK SPLIT: In June 1998, the Company distributed a three-for-two stock split effected in the form of a 50% stock dividend. Per share amounts for periods prior to June 1998 presented in the accompanying financial statements have been restated to give effect to the stock split. In addition, related to this stock split, the Company converted 2,000,000 shares of treasury stock to authorized but unissued shares. TREASURY STOCK: The Company has historically used treasury stock for stock options and grants and intends to continue to use treasury stock for such purposes. NEW ACCOUNTING PRONOUNCEMENTS: The Financial Accounting Standards Board has issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" (as amended by SFAS No. 137 in June 1999 and SFAS No. 138 in June 2000), which will be effective at the beginning of the Company's fiscal year ending September 29, 2001. The Company does not expect the adoption of this standard to have a material effect on its consolidated financial statements. The Securities and Exchange Commission has issued Staff Accounting Bulletin (SAB) No. 101 ("Revenue Recognition in Financial Statements"), that will be required to be implemented by the Company in the Company's fiscal year ending September 29, 2001. The Company is currently evaluating the impact, if any, that the adoption of this will have on the consolidated financial statements. F-8 B. INVENTORIES Inventories are valued at the lower of cost or market. Cost is determined using the last-in, first-out (LIFO) method for approximately 47% and 82% of the Company's inventories at September 30, 2000 and September 25, 1999, respectively. Other inventories are determined using the first-in, first-out (FIFO) method with the exception of inventory relating to the acquisition of Dover ($13.9 million) which, in accordance with purchase accounting requirements (see Note H), is included at its estimated fair market value at September 30, 2000. Inventories at September 30, 2000 and September 25, 1999 consisted of the following:
2000 1999 ----------- ----------- Raw materials $ 3,619,000 $ 2,945,000 Work in process 8,018,000 5,899,000 Finished goods 15,784,000 3,388,000 ----------- ----------- Total $27,421,000 $12,232,000 =========== ===========
On a FIFO basis, reported year-end inventories would have been higher by $5.9 million in fiscal 2000 and $5.5 million in fiscal 1999. C. INCOME TAXES The statutory federal tax rate is 34%. The total provision differs from that computed using the statutory federal income tax rate for the following reasons:
2000 1999 1998 ---------- ---------- ---------- Federal taxes at statutory rate $5,401,000 $4,269,000 $3,997,000 State income taxes, net of federal income tax benefit 474,000 397,000 428,000 Foreign sales corporation (FSC) export related income (643,000) (499,000) (310,000) Other 17,000 14,000 (85,000) ---------- ---------- ---------- Total $5,249,000 $4,181,000 $4,030,000 ========== ========== ==========
The provision for income taxes consisted of the following:
2000 1999 1998 ---------- ---------- ---------- Currently payable: Federal $5,353,000 $3,972,000 $3,697,000 State 789,000 665,000 832,000 ---------- ---------- ---------- 6,142,000 4,637,000 4,529,000 ---------- ---------- ---------- Deferred: Federal (822,000) (392,000) (315,000) State (71,000) (64,000) (184,000) ---------- ---------- ---------- (893,000) (456,000) (499,000) ---------- ---------- ---------- Total $5,249,000 $4,181,000 $4,030,000 ========== ========== ==========
F-9 C. INCOME TAXES (CONTINUED) The following is a summary of the significant components of the Company's deferred tax assets and liabilities as of September 30, 2000 and September 25, 1999:
2000 1999 ---------- ---------- Deferred tax assets: Vacation accrual not currently deductible $ 589,000 $ 510,000 Other accruals not currently deductible 567,000 238,000 Non-deductible reserves 1,364,000 1,138,000 Other 23,000 29,000 ---------- ---------- Classified as current 2,543,000 1,915,000 Deferred compensation arrangements 1,059,000 1,019,000 Other 232,000 133,000 ---------- ---------- Total deferred tax assets $3,834,000 $3,067,000 ========== ========== Deferred tax liabilities: Accelerated depreciation $3,719,000 $3,845,000 ========== ==========
Non-current deferred tax assets have been netted against non-current deferred tax liabilities for balance sheet classification purposes. D. LONG-TERM DEBT Long-term debt consisted of the following:
2000 1999 ----------- ----------- Obligation under revolving bank credit facility at 7.13% as of September 30, 2000 $30,500,000 $ -- Obligation under industrial development bond arrangement at 3%, payable in monthly installments through May 2011 901,000 972,000 9.5% secured promissory note, payable in monthly installments through October 2001 292,000 559,000 ----------- ----------- 31,693,000 1,531,000 Less: Current maturities 366,000 338,000 ----------- ----------- Total $31,327,000 $ 1,193,000 =========== ===========
Scheduled aggregate principal payments of long-term debt are $366,000 in fiscal 2001, $76,000 in fiscal 2002, $30,578,000 in fiscal 2003, $80,000 in fiscal 2004, $83,000 in fiscal 2005 and $510,000 thereafter. F-10 D. LONG-TERM DEBT (CONTINUED) In August 2000, the Company amended its long-term revolving credit facility increasing the amount available under this facility from $30 million to $60 million in contemplation of the acquisition of Dover Publications, Inc. (see Note H). Under this credit facility, the Company can borrow at a rate not to exceed LIBOR plus 1.5%. The revolving credit facility matures in March 2003 and borrowings of $30,500,000 are included in scheduled aggregate principal payments due in 2003. The Company has not had any short-term borrowings during the three fiscal years ended September 30, 2000. The revolving credit facility contains restrictive covenants including provisions relating to the maintenance of working capital, the level of capital expenditures, the incurring of additional indebtedness and a quarterly test of EBITDA to debt service. It also provides for a commitment fee not to exceed 3/8% per annum on the unused portion. The industrial bond arrangement and the 9.5% promissory note provide for a lien on the assets acquired with the proceeds. E. COMMITMENTS AND CONTINGENCIES The Company is committed under various operating leases to make annual rental payments for certain buildings and equipment. Amounts charged to operations under such leases approximated $3,956,000 in fiscal 2000, $3,553,000 in fiscal 1999 and $2,872,000 in fiscal 1998. As of September 30, 2000, minimum annual rental commitments under the Company's long-term operating leases are approximately $4,821,000 in fiscal 2001, $3,643,000 in fiscal 2002, $3,036,000 in fiscal 2003, $2,872,000 in fiscal 2004, $2,070,000 in fiscal 2005 and $2,756,000 in the aggregate thereafter. The Company leases one of its facilities from a corporation owned in part by an executive of the Company. The lease agreement requires annual payments of approximately $216,000 over the initial term of July 1997 through July 2002. At September 30, 2000 and September 25, 1999, the Company had letters of credit outstanding of $542,000 and $338,000, respectively. In the ordinary course of business, the Company is subject to various legal proceedings and claims. The Company believes that the ultimate outcome of these matters will not have a material adverse effect on its consolidated financial statements. F. STOCK ARRANGEMENTS STOCK OPTION/INCENTIVE PLANS: The Courier Corporation 1993 Stock Incentive Plan, as amended and restated, replaced the expiring 1983 Stock Option Plan. The 1993 Stock Incentive Plan, as amended, provides for the granting of stock options and stock grants up to a total of 445,000 shares. Under the provisions of each plan, both non-qualified and incentive stock options to purchase shares of the Company's common stock may be granted to key employees. The option price per share may not be less than the fair market value of stock at the time the option is granted and incentive stock options must expire not later than ten years from the date of grant. During fiscal 2000, 18,000 shares of restricted stock were granted which vest over a four-year period. Amortization expense relating to fiscal 2000 stock grants was $45,000. F-11 F. STOCK ARRANGEMENTS (CONTINUED) DIRECTORS' OPTION PLAN: A 1989 plan, as amended and restated, allows members of the Company's Board of Directors to make an election to apply either 50% or 100% of their annual retainer fee, including the committee chair retainer, toward the annual grant of stock options to be offered at a price per share $5 below the fair market value of the Company's common stock at the time the option is granted. Retainer fees for fiscal 2000 amounted to $16,000 per director; in addition, the two committee chair fees amounted to a total of $15,000 for fiscal 2000. The plan, as approved by stockholders, provides a total of 250,000 shares for the issuance of such options. The following is a summary of all option activity for these plans:
Stock Option/Incentive Plans Directors' Option Plan ---------------------------- ---------------------- Average Average Exercise Exercise Shares Price Shares Price ------------------ ----------------- --------------- --------------- Outstanding at September 27, 1997 371,366 $ 10.13 42,900 $ 8.69 Issued 35,300 21.46 24,000 11.29 Exercised (137,510) 8.69 (22,500) 9.43 Cancelled (3,599) 10.11 - - ------------------ ------- --------- --------------- ----- --------- Outstanding at September 26, 1998 265,557 $ 12.39 44,400 $ 9.72 Issued 5,000 23.75 18,000 15.75 Exercised (59,329) 10.63 (20,600) 10.47 ------------------ ------- --------- --------------- ----- --------- Outstanding at September 25, 1999 211,228 $ 13.15 41,800 $ 11.95 Issued 78,800 26.88 20,100 19.14 Exercised (70,082) 10.42 (12,700) 14.35 Cancelled (7,916) 21.35 - - ------------------ ------- --------- --------------- ----- --------- Outstanding at September 30, 2000 212,030 $ 18.85 49,200 $ 14.26 ================== ======= ========= =============== ===== ========= Exercisable at September 30, 2000 134,389 $ 14.42 49,200 $ 14.26 Available for future grants 70,653 90,400
The following tables present information with regards to stock options outstanding at September 30, 2000:
Stock Option/Incentive Plans ------------------------------------------------------------ $4.67 - $9.50 - $15.58 - $23.75 - Range of Exercise Prices $9.17 $14.17 $22.83 $31.49 - ------------------------ ------------- -------------- ---------------- -------------- Options outstanding 13,500 75,380 42,850 80,300 Weighted average exercise price of options outstanding $7.67 $11.71 $19.84 $26.89 Weighted average remaining life 1.5 years 2.3 years 3.8 years 6.1 years Options exercisable 13,500 75,380 31,918 13,591 Weighted average exercise price of options exercisable $7.67 $11.71 $19.31 $24.64
F-12 F. STOCK ARRANGEMENTS (CONTINUED)
Directors' Option Plan Range of Exercise Prices $7.46 - $19.21 - ------------------------ -------------- Options outstanding 49,200 Weighted average exercise price of options outstanding $14.26 Weighted average remaining life 2.8 years Options exercisable 49,200 Weighted average exercise price of options exercisable $14.26
STOCK GRANT PLAN: The Company established a stock grant plan in 1977 entitling key employees to receive shares of common stock of the Company. Shares granted are either fully vested or vest over periods up to 5 years. The maximum number of shares of common stock that may be awarded under the stock grant plan is 198,750 and no more than 33,750 shares may be awarded in any one fiscal year. The numbers of shares granted under the plan were 4,000 in fiscal 2000, 100 in fiscal 1999 and 2,000 in fiscal 1998. As of September 30, 2000, there were 828 shares available for future grants under the plan. EMPLOYEE STOCK PURCHASE PLAN: The Company's 1999 Employee Stock Purchase Plan ("ESPP"), approved by stockholders in January 1999 to replace the expiring 1989 ESPP, covers an aggregate of 100,000 shares of Company common stock for issuance under the plan. Eligible employees may purchase shares of Company common stock at not less than 85% of fair market value at the beginning or end of the grant period. During fiscal 2000, 11,560 shares were issued under the plan at an average price of $20.67 per share. Since inception, 21,297 shares have been issued. At September 30, 2000, an additional 78,703 shares were reserved for future issuances. STOCKHOLDERS' RIGHTS PLAN: In March 1999, the Board of Directors adopted a ten-year stockholders' rights plan, replacing a plan which expired in October 1998. Under the plan, the Company's stockholders of record at March 19, 1999 received rights to purchase one one-thousandth of a share of preferred stock for each share of common stock held on that date. The rights are not exercisable, or transferable apart from the common stock, until certain events occur. PRO FORMA DISCLOSURES: The Company accounts for its stock option plans under APB Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations. Had compensation cost for grants under the ESPP and for stock options granted after 1995 been determined under the provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," the Company's net income would have been $10,145,000, or $3.01 per diluted share, for fiscal 2000; $8,026,000, or $2.42 per diluted share, for fiscal 1999; and $7,511,000, or $2.31 per diluted share, for fiscal 1998. The pro forma effect on net income and net income per diluted share for fiscal 2000, fiscal 1999 and fiscal 1998 is not representative of the pro forma effect on net income in future years, because it does not take into consideration pro forma compensation expense related to options granted prior to fiscal 1996. F-13 F. STOCK ARRANGEMENTS (CONTINUED) For purposes of pro forma disclosures, the fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model. The following key assumptions were used to value options issued:
2000 1999 1998 ---- ---- ---- Risk-free interest rate 5.9% 6.3% 4.9% Expected volatility 39% 42% 35% Expected dividend yields 1.7% 1.7% 2.0% Estimated life for grants under: 1993 Stock Incentive Plan 7 years 7 years 7 years Directors' Option Plan 5 years 5 years 5 years ESPP 0.5 years 0.5 years 0.5 years
For purposes of pro forma disclosure, following is a summary of the weighted average fair value per share of options granted during each of the past three fiscal years.
1993 Stock Incentive Plan Directors' Option Plan ------------------------- ---------------------- On grant date: 2000 1999 1998 2000 1999 1998 ---- ---- ---- ---- ---- ---- Exercise price was equal to stock price $11.44 $10.76 $7.74 - - - Exercise price was in excess of stock price $ 9.08 - $5.98 - - - Exercise price was less than stock price - - - $10.38 $9.31 $5.79
G. RETIREMENT PLANS The Company and its consolidated subsidiaries maintain various defined contribution retirement plans covering substantially all of its employees, except for Dover employees. Dover, acquired in September 2000 (see Note H), provides retirement benefits through a defined benefit plan as described below. Retirement costs of multi-employer union plans consist of defined contributions determined in accordance with the respective collective bargaining agreements. Retirement benefits for non-union employees are provided through the Courier Profit Sharing and Savings Plan, which includes an Employee Stock Ownership Plan (ESOP). Retirement costs included in the accompanying financial statements amounted to approximately $2,500,000 in fiscal 2000, $2,330,000 in fiscal 1999 and $2,202,000 in fiscal 1998. The Profit Sharing and Savings Plan is qualified under Section 401(k) of the Internal Revenue Code. The plan allows eligible employees to contribute up to 16% of their compensation, with the Company matching 25% of the first 6% of employee contributions. The Company also makes contributions to the plan annually based on profits each year for the benefit of all eligible non-union employees. F-14 G. RETIREMENT PLANS (CONTINUED) Shares of Company common stock may be allocated to participants' ESOP accounts annually based on their compensation as defined in the plan. During fiscal years 2000, 1999 and 1998, no such shares were allocated to eligible participants. At September 30, 2000, the ESOP held 167,243 shares on behalf of the participants. Dover has a noncontributory, defined benefit pension plan covering substantially all of its employees. The following table provides the plan's funded status and the amounts recognized in the consolidated balance sheet as of September 30, 2000 for Dover's defined benefit pension plan, as well as the actuarial assumptions used in the determination. Projected benefit obligation $3,647,000 Fair value of plan assets 3,471,000 ---------- Funded status and accrued pension obligation $(176,000) ========== Weighted average assumptions: Discount rate 7.0% Expected return on plan assets 7.5% Rate of compensation increase 5.0%
H. BUSINESS ACQUISITIONS On September 22, 2000, the Company acquired all of the outstanding capital stock of Dover Publications, Inc., a Mineola, New York publisher of special-interest books. The Company paid approximately $39 million in cash to the former stockholders of Dover for their shares of capital stock. The acquisition was accounted for as a purchase and, accordingly, Dover's financial results have been included in the consolidated financial statements from the date of acquisition. The financial statements reflect the preliminary allocation of the purchase price to the assets acquired and liabilities assumed, based on their estimated fair value at the date of acquisition. Such estimates are subject to final appraisals for certain assets acquired. The excess purchase price over the fair value of net assets acquired amounted to approximately $16 million, which has been accounted for as goodwill and will be amortized on a straight-line basis over twenty years. F-15 H. BUSINESS ACQUISITIONS (CONTINUED) The following unaudited pro forma information presents a summary of consolidated results of operations of the Company and Dover as if the acquisition had occurred at the beginning of fiscal 2000 and 1999, with pro forma adjustments to give effect to amortization of goodwill, interest expense on acquisition debt and certain other adjustments, together with related income tax effects.
(Unaudited) 2000 1999 - ------------------------------------------------------------------------- Net sales $216,282,000 $192,071,000 Net income 10,881,000 9,150,000 Net income per diluted share 3.23 2.76
These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which actually would have resulted had the business combination been in effect at the beginning of the fiscal 2000 and 1999 or of future results of operations of the consolidated entities. On September 30, 1997, the Company purchased The Home School Books & Supplies ("The Home School") based in Arlington, Washington. The Home School is a direct marketer of educational materials to families engaged in educating children at home. The purchase price was approximately $0.5 million. I. BUSINESS SEGMENTS The Company has operated in one primary business segment, book manufacturing, with a second smaller business segment in customized education. On September 22, 2000, the Company acquired Dover Publications, Inc. (see Note H) which operates in a third segment, specialized publishing. The specialized publishing segment is not included in the segment information table below because the results of operations for the period prior to September 30, 2000 were not significant. Dover's assets of $41.5 million at September 30, 2000 are included in "unallocated" assets. The Company has aggregated its book manufacturing business into one segment because of strong similarities in the economic characteristics, the nature of products and services, production processes, class of customer and distribution methods used. The book-manufacturing segment offers a full range of services from production through storage and distribution for education, religious and specialty book publishers. The customized education segment responds to the demand for increased choice in the way educational information is received and used. Operations include The Home School, a direct marketer of educational materials to families engaged in home-based learning, and Copyright Management Services, a provider of customized college coursepacks and textbooks. The accounting policies of the segments are the same as those described in Note A. Intersegment sales are not significant. In evaluating segment performance, management primarily focuses on income or loss before taxes and other income. Other income is reflected as "unallocated" in the following table. Corporate expenses that are allocated to the segments F-16 I. BUSINESS SEGMENTS (CONTINUED) include various support functions such as information technology services, finance, human resources and engineering, and include depreciation and amortization expense related to corporate assets. The corresponding corporate asset balances are not allocated to the segments. Unallocated corporate assets consist primarily of cash and cash equivalents and fixed assets used by the corporate support functions. For fiscal 2000, such assets also include the assets of Dover. The following table provides segment information as required under SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information."
Book Manu- Customized Unallo- Total facturing Education cated Company --------------- -------------- -------------- --------------- Fiscal 2000 - ----------- Net sales $ 184,959,000 $ 3,361,000 $ - $ 188,320,000 Earnings (loss) before income taxes 19,066,000 (3,299,000) 119,000 15,886,000 Assets 88,748,000 848,000 52,645,000 142,241,000 Depreciation and amortization 7,844,000 218,000 - 8,062,000 Capital expenditures 15,665,000 13,000 669,000 16,347,000 Interest expense 272,000 53,000 - 325,000 - ------------------------------------------------------------------------------------------------------------------ Fiscal 1999 - ----------- Net sales $ 161,186,000 $ 2,805,000 $ - $ 163,991,000 Earnings (loss) before income taxes 15,155,000 (2,598,000) - 12,557,000 Assets 74,900,000 1,470,000 15,142,000 91,512,000 Depreciation and amortization 7,988,000 294,000 - 8,282,000 Capital expenditures 3,848,000 107,000 1,044,000 4,999,000 Interest expense 445,000 79,000 - 524,000 - ------------------------------------------------------------------------------------------------------------------ Fiscal 1998 - ----------- Net sales $ 149,546,000 $ 2,045,000 $ - $ 151,591,000 Earnings (loss) before income taxes 12,769,000 (3,057,000) 2,043,000 11,755,000 Assets 72,939,000 2,167,000 12,524,000 87,630,000 Depreciation and amortization 8,328,000 213,000 - 8,541,000 Capital expenditures 3,239,000 307,000 601,000 4,147,000 Interest expense 1,221,000 82,000 - 1,303,000 - ------------------------------------------------------------------------------------------------------------------
Export sales as a percentage of consolidated sales were approximately 18% in both fiscal 2000 and fiscal 1999 and 17% in fiscal 1998. Sales to the Company's largest customer amounted to approximately 26% of consolidated sales in fiscal 2000, 27% in fiscal 1999 and 26% in fiscal 1998. In addition, sales to another customer amounted to 17% of consolidated sales in fiscal 2000, 15% in fiscal 1999 and 12% in fiscal 1998. No other customer accounted for more than 10% of consolidated sales. Customers are granted credit on an unsecured basis. F-17 J. OTHER INCOME (EXPENSE) Other income (expense) in fiscal 2000 reflects net rental income from the Company's Raymond, New Hampshire facility; such facility comprises the September 30, 2000 balance sheet caption "Real estate held for sale or lease, net." In February 2000, the Company entered into a five-year lease agreement for this facility, which had been vacant. The lease provided for a purchase option at a price of $1.3 million. The option was exercised in August 2000 and closed in October 2000, resulting in an after-tax gain of approximately $0.6 million, or $0.16 per diluted share, which will be included in the Company's fiscal 2001 first quarter results. In June 1998, the Company completed the sale of a former manufacturing facility in Philadelphia that had been vacant. During fiscal 1997, the Company had consolidated its operations in Philadelphia from this older, multistory facility to a recently expanded, more efficient manufacturing facility also in Philadelphia. The selling price of the property was $4.6 million, resulting in a pretax gain of approximately $2.0 million. The after-tax gain of approximately $1.1 million, or $.34 per diluted share, generated approximately $3.2 million of cash after taxes. K. NET INCOME PER SHARE Following is a reconciliation of the shares used in the calculation of basic and diluted net income per share. Potentially dilutive shares, calculated using the treasury stock method, consist of shares issued under the Company's stock option plans.
2000 1999 1998 ----------------------------------------------- Average shares outstanding for basic 3,277,000 3,204,000 3,100,000 Effect of potentially dilutive shares 96,000 115,000 154,000 =============================================== Average shares outstanding for dilutive 3,373,000 3,319,000 3,254,000 ===============================================
F-18 COURIER CORPORATION SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
FISCAL 2000 (Dollars in thousands except per share amounts) First Second Third Fourth - ------------------------------------------------------------------------------------------------------------------ Operating Results: Net sales $45,143 $44,489 $47,215 $51,473 Gross profit 11,084 11,543 12,159 13,308 Net income 2,169 2,351 2,517 3,600 Net income per diluted share 0.65 0.70 0.75 1.06 Dividends declared per share 0.12 0.12 0.12 0.12 Stock price: Highest 24 5/8 25 26 3/4 30 3/4 Lowest 21 3/8 22 1/4 23 1/8 27 FISCAL 1999 (Dollars in thousands except per share amounts) First Second Third Fourth - ------------------------------------------------------------------------------------------------------------------ Operating Results: Net sales $39,301 $40,480 $40,731 $43,479 Gross profit 9,338 10,224 9,806 11,439 Net income 1,420 1,867 1,826 3,263 Net income per diluted share 0.43 0.56 0.55 0.98 Dividends declared per share 0.105 0.105 0.105 0.105 Stock price: Highest 31 26 23 3/8 25 3/4 Lowest 18 9/16 19 5/8 18 22 3/4
COMMON SHARES OF THE COMPANY ARE TRADED OVER-THE-COUNTER ON THE NASDAQ NATIONAL MARKET - SYMBOL "CRRC." THERE WERE APPROXIMATELY 700 STOCKHOLDERS OF RECORD AS OF SEPTEMBER 30, 2000. F-19 COURIER CORPORATION FIVE-YEAR FINANCIAL SUMMARY
(Dollar amounts in millions except per share amounts) 2000* 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------------------- Net sales $188.3 $164.0 $151.6 $131.4 $125.2 Gross profit 48.1 40.8 37.7 28.1 22.6 Net income 10.6 8.4 7.7 4.3 2.6 Net income per diluted share 3.15 2.52 2.37 1.41 0.82 Dividends per share 0.48 0.42 0.385 0.32 0.32 Working capital 33.3 21.9 16.5 14.1 13.7 LIFO reserve 5.9 5.5 5.3 5.7 6.0 Current ratio (FIFO basis) 2.0 2.0 1.9 1.8 1.9 Total assets 142.2 91.5 87.6 89.6 74.8 Long-term debt 31.3 1.2 6.8 18.6 9.3 Long-term debt as a percentage of capitalization 31.6% 2.0% 12.0% 30.8% 19.3% Depreciation and amortization 8.1 8.3 8.5 7.2 6.5 Capital expenditures 16.3 5.0 4.1 6.7 7.3 Stockholders' equity 67.8 57.6 49.8 41.7 38.8 Return on stockholders' equity 17.0% 15.6% 16.9% 10.7% 6.7% Stockholders' equity per share 20.27 17.80 15.70 13.87 12.74 Shares outstanding (in 000's) 3,344 3,233 3,172 3,011 3,044 Number of employees 1,535 1,320 1,254 1,202 1,050
NET INCOME PER SHARE IS BASED ON WEIGHTED AVERAGE SHARES OUTSTANDING; STOCKHOLDERS' EQUITY PER SHARE IS BASED ON SHARES OUTSTANDING AT YEAR END. SHARES OUTSTANDING AND PER SHARE AMOUNTS HAVE BEEN RETROACTIVELY ADJUSTED TO REFLECT A THREE-FOR-TWO STOCK SPLIT EFFECTED ON JUNE 1, 1998 (SEE NOTE A). * FISCAL 2000 INCLUDED 53 WEEKS. F-20 MANAGEMENT'S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Sales in fiscal 2000 increased 15% to $188.3 million compared to $164.0 million in fiscal 1999. Fiscal 2000 included 53 weeks compared to 52 weeks in fiscal 1999. Sales from the Company's book manufacturing segment were also up 15% for the year reflecting increased sales in education, religion and specialized publishing markets. Revenues from the Company's customized education segment, which consists of Copyright Management Services and The Home School, grew by 20% in fiscal 2000 to $3.4 million. Total sales in fiscal 1999 increased 8% to $164.0 million compared to $151.6 million in fiscal 1998. Sales from the Company's book manufacturing segment also increased 8% over fiscal 1998 due to increased sales across all of the Company's major publishing markets. Revenues from the Company's customized education segment grew by 37% in fiscal 1999 to $2.8 million. Gross profits in fiscal 2000 increased by $7.3 million or 18% and, as a percentage of sales, increased to 26% from 25% in fiscal 1999. The improvement in gross profits in fiscal 2000 resulted from increased sales volume combined with productivity gains from investments in capital equipment and increased recycling income. Gross profit increased to $40.8 million in fiscal 1999, up 8% from $37.7 million in fiscal 1998. The increase in gross profit reflected the impact of the increased sales volume. As a percentage of sales, gross profit for fiscal 1999 was comparable to fiscal 1998 at 25% of sales. During the past three years, inflation has not had a significant impact on the Company's gross profits, or on its overall operations. Selling and administrative expenses increased to $32.0 million in fiscal 2000 from $27.7 million in fiscal 1999, remaining at 17% as a percentage of sales. The increase in selling and administrative expense resulted primarily from the impact of the extra week in fiscal 2000 and from expenses that relate directly to the increase in profitability. Selling and administrative expenses increased to $27.7 million in fiscal 1999, up 4% from $26.7 million in fiscal 1998. The increase was due to costs associated with improvements to the Company's information systems and with expenses that relate directly to the increase in profitability. As a percentage of sales, selling and administrative expenses decreased to 17% in fiscal 1999 from 18% in fiscal 1998. Interest expense in fiscal 2000 was $0.3 million compared to $0.5 million in fiscal 1999 due to a reduction in average borrowings of approximately $1.3 million. In addition, interest of approximately $0.1 million related to new equipment was capitalized in fiscal 2000. In fiscal 1999, interest expense was $0.8 million lower than fiscal 1998 reflecting a reduction in average borrowings of approximately $13 million due to cash generated from operations as well as a slightly lower average interest rate in fiscal 1999. Other income (expense) in fiscal 2000 is comprised of net rental income from the Company's Raymond, New Hampshire facility. In February 2000, the Company entered into a five-year lease agreement for this facility, which had been vacant. The lease provided for a purchase option at a price of $1.3 million. The option was exercised in August 2000 and the building was sold in October 2000. The after-tax gain of approximately $0.6 million, or $.16 per diluted share, will be included in the Company's fiscal 2001 first quarter results. Other income (expense) in fiscal 1998 resulted from a gain on the sale of a former manufacturing facility in Philadelphia that had been vacant. During fiscal 1997, the Company had completed the consolidation of its operations in Philadelphia from this older facility to a recently expanded, more efficient manufacturing facility also in Philadelphia. The selling price of the facility was $4.6 million, resulting in a pretax gain of approximately $2.0 million and an after-tax gain of approximately $1.1 million, or $.34 per diluted share. The Company's effective tax rate for fiscal 2000 was comparable to the prior year at 33%. In fiscal 1999, the effective tax rate was lower than the 34% rate for fiscal 1998 due to higher state and local taxes in fiscal 1998 related to the sale of the Philadelphia real estate, as well as an increased benefit from export related income in fiscal 1999. F-21 Net income for fiscal 2000 was $10.6 million, an increase of 27% over net income in fiscal 1999 of $8.4 million. Net income per share on a diluted basis was up 25% to $3.15 per share from $2.52 per share in fiscal 1999. Pretax earnings from the Company's book manufacturing segment increased 26% to $19.1 million from $15.2 million in the prior year. In fiscal 2000, the customized education segment incurred a pretax loss of $3.3 million, or $0.64 per diluted share compared to a pretax loss of $2.6 million, or $0.52 per diluted share in fiscal 1999. Results for fiscal 2000 in the customized education segment include a $350,000 pretax charge, or $.07 per diluted share, for the planned sale or closure of The Home School's retail store. In fiscal 1999, net income was $8.4 million, up 27% over net income of approximately $6.6 million in fiscal 1998, when adjusted to exclude the after-tax gain from the sale of real estate of approximately $1.1 million. Net income per share on a diluted basis increased 24% to $2.52 per share compared to $2.03 per diluted share in fiscal 1998, after adjusting to exclude the real estate gain of $.34 per share. Pretax earnings from the Company's book manufacturing segment increased to $15.2 million, a 19% increase over fiscal 1998, reflecting increased sales volume. The Company's customized education segment in fiscal 1999 had a pretax loss of $2.6 million, or $.52 per diluted share, compared to a pretax loss of $3.1 million, or $.62 per diluted share, in fiscal 1998. For purposes of computing diluted net income per share, weighted average shares outstanding increased by approximately 54,000 shares in fiscal 2000 and 65,000 shares in fiscal 1999. These increases were primarily due to shares exercised and issued under the Company's stock plans and the impact of potentially dilutive shares which increased primarily due to the increase in the price per share of the Company's stock. The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities" (as amended by SFAS No. 137 in June 1999 and SFAS No. 138 in June 2000), which will be effective at the beginning of the Company's fiscal year ending September 29, 2001. The Company does not expect the adoption of this standard to have a material effect on its consolidated financial statements. The Securities and Exchange Commission has issued Staff Accounting Bulletin (SAB) No. 101 ("Revenue Recognition in Financial Statements"), that will be required to be implemented by the Company in the Company's fiscal year ending September 29, 2001. The Company is currently evaluating the impact, if any, that the adoption of this SAB will have on the consolidated financial statements. LIQUIDITY AND CAPITAL RESOURCES In fiscal 2000, operating activities provided approximately $22.5 million of cash. Net income for the year was $10.6 million and depreciation and amortization was $8.1 million. Working capital provided approximately $4.2 million of cash, primarily from an increase in accounts payable related to increased inventories and to capital equipment recently installed with final payments due after September 30, 2000. Accounts receivable and inventories used cash of approximately $3.9 million in fiscal 2000 related to the increase in sales volume. Investment activities in 2000 used $16.3 million in cash for capital expenditures for new presses, binding lines, computer-to-plate equipment, information system improvements and other equipment to automate work flows and lower costs. Capital expenditures in fiscal 2001 are expected to be approximately $15 million. On September 22, 2000 the Company acquired all of the capital stock of Dover Publications, Inc. for approximately $39 million in cash. The acquisition is expected to have a minimal effect on Courier's net income for fiscal 2001 due to interest expense on acquisition debt, amortization of goodwill of approximately $0.8 million and a required purchase accounting inventory write up which will increase cost of sales when this inventory is sold. Dover is expected to be accretive to earnings thereafter and to generate substantial cash from operations from the outset. In February 2000, the Company entered into a 5-year lease of its facility in Raymond NH, which had been vacant and held for sale or lease. The lease provided for a purchase option at a price of $1.3 million. The option was exercised in August and the sale was closed in October 2000, resulting in after-tax cash proceeds of approximately $0.8 million and an after-tax gain of approximately $0.6 million, or $.16 per diluted share, which will be included in the Company's first quarter fiscal 2001 results. In addition, the Company intends to sell the F-22 unoccupied and underutilized portions of its multi-building manufacturing complex in Westford, MA, which would result in reductions in building operating costs while maintaining current levels of book manufacturing at the site. In January 2000, the Company signed an agreement to sell this property, but a number of significant contingencies exist. The prospective buyer has until September 2001 to purchase the property. Financing activities in fiscal 2000 provided approximately $29.5 million of cash. Cash of $30.5 million was provided from an increase in long-term borrowings related to the acquisition of Dover. Dividend payments were $1.6 million and proceeds from stock plans were $1.0 million, primarily from the exercise of stock options. In August 2000, the Company amended its long-term revolving bank credit facility, increasing the amount available under this facility from $30 million to $60 million, in contemplation of the acquisition of Dover. At September 30, 2000, borrowings under this credit facility were $30.5 million. This revolving credit facility matures in March 2003. The Company intends to extend this credit facility an additional year during fiscal year 2001. The Company believes that its cash from operations and available credit facilities will be sufficient to meet its cash requirements through 2001. The Company does not hold any derivative financial instruments, derivative commodity instruments or other financial instruments except as noted in Note A to the financial statements. The Company engages neither in speculative nor derivative trading activities. FORWARD-LOOKING INFORMATION STATEMENTS THAT DESCRIBE FUTURE EXPECTATIONS, PLANS OR STRATEGIES ARE CONSIDERED "FORWARD-LOOKING STATEMENTS" AS THAT TERM IS DEFINED UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND RELEASES ISSUED BY THE SECURITIES AND EXCHANGE COMMISSION. THE WORDS "BELIEVE," "EXPECT," "ANTICIPATE," "INTEND," "ESTIMATE" AND OTHER EXPRESSIONS WHICH ARE PREDICTIONS OF OR INDICATE FUTURE EVENTS AND TRENDS AND WHICH DO NOT RELATE TO HISTORICAL MATTERS IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CURRENTLY ANTICIPATED. FACTORS THAT COULD AFFECT ACTUAL RESULTS INCLUDE, AMONG OTHERS, CHANGES IN CUSTOMERS' DEMAND FOR THE COMPANY'S PRODUCTS, CHANGES IN RAW MATERIAL COSTS AND AVAILABILITY, SEASONAL CHANGES IN CUSTOMER ORDERS, PRICING ACTIONS BY COMPETITORS, CHANGES IN COPYRIGHT LAWS, CONSOLIDATION AMONG CUSTOMERS AND COMPETITORS, SUCCESS IN THE INTEGRATION OF ACQUIRED BUSINESSES, CHANGES IN TECHNOLOGY, AND GENERAL CHANGES IN ECONOMIC CONDITIONS. ALTHOUGH THE COMPANY BELIEVES THAT THE ASSUMPTIONS UNDERLYING THE FORWARD-LOOKING STATEMENTS ARE REASONABLE, ANY OF THE ASSUMPTIONS COULD BE INACCURATE, AND THEREFORE, THERE CAN BE NO ASSURANCE THAT THE FORWARD-LOOKING STATEMENTS WILL PROVE TO BE ACCURATE. THE FORWARD-LOOKING STATEMENTS INCLUDED HEREIN ARE MADE AS OF THE DATE HEREOF, AND THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY SUCH STATEMENTS TO REFLECT SUBSEQUENT EVENTS OR CIRCUMSTANCES. F-23 COURIER CORPORATION SCHEDULE II CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
ADDITIONS BALANCE AT CHARGED TO BALANCE BEGINNING COSTS AND OTHER AT END OF PERIOD EXPENSES DEDUCTIONS CHANGES (1) OF PERIOD ---------- -------- ---------- ----------- --------- Fiscal year ended September 30, 2000 Allowance for uncollectible accounts $ 937,000 $345,000 $141,000 $250,000 $1,391,000 Fiscal year ended September 25, 1999 Allowance for uncollectible accounts $1,078,000 $174,000 $315,000 $ -- $ 937,000 Fiscal year ended September 26, 1998 Allowance for uncollectible accounts $1,242,000 $178,000 $342,000 $ -- $1,078,000
(1) Other changes reflects amount related to a business acquisition. S-1 EX-10.(L)(7) 2 a2032490zex-10_l7.txt EXHIBIT 10(L)(7) Exhibit 10(L)(7) COURIER CORPORATION COURIER-CITIZEN COMPANY COURIER COMPANIES, INC. COURIER DELAWARE HOLDING CORPORATION COURIER FOREIGN SALES CORPORATION LIMITED COURIER INVESTMENT CORPORATION COURIER KENDALLVILLE, INC. COURIER PROPERTIES, INC. COURIER STOUGHTON, INC. COURIER WESTFORD, INC. NATIONAL PUBLISHING COMPANY COURIER NEW MEDIA, INC. BOOK-MART PRESS, INC. THE HOME SCHOOL, INC. NATIONAL PUBLISHING BUSINESS TRUST DOVER PUBLICATIONS, INC. TRANSFOLIO EXPRESS, INC. DOVER BOOK STORE, INC. Dated as of: October 12, 2000 Citizens Bank of Massachusetts (successor to State Street Bank and Trust Company), Individually and as Agent 28 State Street Boston, Massachusetts 02109 Fleet National Bank (f/k/a BankBoston, N.A.) 100 Federal Street Boston, Massachusetts 02110 KeyBank National Association 286 Water Street Augusta, Maine 04332 Re: AMENDMENT NO. 6 TO REVOLVING CREDIT AGREEMENT Ladies and Gentlemen: We refer to the Revolving Credit Agreement, dated as of March 18, 1997 (as amended, the "Agreement"), among COURIER CORPORATION, COURIER-CITIZEN COMPANY, COURIER COMPANIES, INC., COURIER DELAWARE HOLDING CORPORATION, COURIER FOREIGN SALES CORPORATION LIMITED, COURIER INVESTMENT CORPORATION, COURIER KENDALLVILLE, INC., COURIER PROPERTIES, INC., COURIER STOUGHTON, INC., COURIER WESTFORD, INC., NATIONAL PUBLISHING COMPANY, COURIER NEW MEDIA, INC., BOOK-MART PRESS, INC. and THE HOME SCHOOL, INC. (each a "Borrower" and collectively the "Borrowers"), CITIZENS BANK OF MASSACHUSETTS (successor to State Street Bank and Trust Company), in its capacity as a Bank ("Citizens"), FLEET NATIONAL BANK (f/k/a BankBoston, N.A.), in its capacity as a Bank ("Fleet"), KEYBANK NATIONAL ASSOCIATION, in its capacity as a Bank ("Key"; and together with Citizens and Fleet, the "Banks"), and CITIZENS BANK OF MASSACHUSETTS, in its capacity as agent for the Banks (the "Agent"). Terms used in this letter of agreement (this "Amendment") which are not defined herein, but which are defined in the Agreement, shall have the same respective meanings herein as therein. We have requested you to make certain amendments to the Agreement. You have advised us that you are prepared and would be pleased to make the amendments so requested by us on the condition that we join with you in this Amendment. Accordingly, in consideration of these premises, the promises, mutual covenants and agreements contained in this Amendment, and fully intending to be legally bound by this Amendment, we hereby agree with you as follows: ARTICLE I AMENDMENTS TO AGREEMENT Effective October 12, 2000, the Agreement is amended as follows: (a) The term "Loan Documents" shall, wherever used in the Agreement or any of the other Loan Documents, be deemed to also mean and include Amendment No. 6 to Revolving Credit Agreement, the Fleet Allonge, the Citizens Allonge and the Key Allonge. (b) The Borrowers having informed the Agent and the Banks that the National Publishing Business Trust (the "Trust") has been formed as a new Subsidiary and has acquired the capital stock of Dover Publications, Inc. ("Dover Publications"), Transfolio Express, Inc. ("Transfolio") and Dover Book Store, Inc. ("Dover Book Store"), accordingly, the term "Borrower" or "Borrowers" shall, wherever used in any of the Loan Documents, be deemed to also mean and include the Trust, Dover Publications, Transfolio and Dover Book Store. It is the express understanding and intention of the parties hereto that each of the Trust, Dover Publications, Transfolio and Dover Book Store shall hereafter be entitled to make borrowings in accordance with the terms and conditions of the Agreement, and shall hereafter be bound, on a joint and several basis, by all of the terms and conditions of the Agreement, and all of the Obligations of the Borrowers under (and as defined in) the Agreement, as if it was an original signatory thereto, including, without limitation, the representations, warranties and covenants contained therein and the obligation to repay all amounts owing under the Agreement and the Notes in accordance with the respective terms thereof. (c) Section 1.1.56 of the Agreement is amended to read in its entirety as follows: "1.1.56 "Revolving Loan Maturity Date" means March 15, 2003." ARTICLE II AMENDMENT TO REVOLVING CREDIT NOTES Effective on October 12, 2000, the Revolving Credit Notes to Citizens, Fleet and Key are amended as set forth in the Allonges respectively attached hereto as ANNEX 1, ANNEX 2 and ANNEX 3. ARTICLE III CONDITIONS PRECEDENT TO AMENDMENT NO. 6 This Amendment shall become and be effective as of the date hereof, but only if: (a) The Borrowers shall have executed and delivered to Fleet an Allonge to the Revolving Credit Note issued in favor of Fleet in the form of ANNEX 1 (the "Fleet Allonge"); (b) The Borrowers shall have executed and delivered to Citizens an Allonge to the Revolving Credit Note issued in favor of Citizens in the form of ANNEX 2 (the "Citizens Allonge"); (c) The Borrowers shall have executed and delivered to Key an Allonge to the Revolving Credit Note issued in favor of Key in the form of ANNEX 3 (the "Key Allonge"); and (d) This Amendment shall have been signed by the Borrowers, the Agent and the Banks. ARTICLE IV REPRESENTATIONS AND WARRANTIES The Borrowers jointly and severally represent and warrant to you as follows: (a) REPRESENTATIONS IN AGREEMENT. Each of the representations and warranties made by the Borrowers in the Agreement was true, correct and complete when made and is true, correct and complete on and as of the date hereof with the same full force and effect as if each of such representations and warranties had been made by the Borrowers on the date hereof and in this Amendment (except to the extent that such representations and warranties relate expressly to an earlier date). (b) NO DEFAULTS OR EVENTS OF DEFAULT. No Event of Default, or any event which, with the giving of notice or the passage of time, or both, would constitute an Event of Default, exists on the date of this Amendment (after giving effect to all of the arrangements and transactions contemplated by this Amendment). (c) BINDING EFFECT OF DOCUMENTS. This Amendment has been duly authorized, executed and delivered to you by the Borrowers and is in full force and effect as of the date hereof, and the agreements and obligations of the Borrowers contained herein constitute the joint and several, and legal, valid and binding obligations of the Borrowers enforceable against the Borrowers in accordance with their respective terms. (d) SOLVENCY. Both before and after giving effect to all indebtedness incurred by the Borrowers on the date of this Amendment, the Borrowers taken as a whole (i) are not Insolvent (as hereinafter defined), and will not be rendered Insolvent by the indebtedness incurred in connection therewith, (ii) will not be left with unreasonably small capital with which to engage in their businesses, even allowing for a reasonable margin of error in the projections of the future performance of the Borrowers, (iii) will not have incurred indebtedness beyond their ability to pay such indebtedness as it matures, and (iv) will not fail to have assets (both tangible and intangible) having a present fair salable value in excess of the amount required to pay the probable liability on their then existing debts (whether matured or unmatured, liquidated or unliquidated, absolute fixed or contingent). As used herein, the term "Insolvent" means the occurrence of one or more of the following events with respect to a Borrower: dissolution; termination of existence; insolvency within the meaning of the United States Bankruptcy Code or other applicable statutes; such Borrower's inability to pay its debts as they come due; appointment of a receiver of any part of the property of, execution of a trust mortgage or an assignment for the benefit of creditors by, or the entry of an order for relief or the filing of a petition in bankruptcy or the commencement of any proceedings under any bankruptcy or insolvency laws, or any laws relating to the relief of debtors, readjustment of indebtedness or reorganization of debtors, or the offering of a plan to creditors for composition or extension, except for an involuntary proceeding commenced against such Borrower which is dismissed within 60 days after the commencement thereof without the entry or an order for relief or the appointment of a trustee. ARTICLE V MISCELLANEOUS This Amendment may be executed in any number of counterparts, each of which when executed and delivered shall be deemed an original, but all of which together shall constitute one instrument. In making proof of this Amendment, it shall not be necessary to produce or account for more than one counterpart thereof signed by each of the parties hereto. Except to the extent specifically amended and supplemented hereby, all of the terms, conditions and the provisions of the Agreement and each of the Loan Documents shall remain unmodified, and the Agreement and each of the Loan Documents, as amended and supplemented by this Amendment, are confirmed as being in full force and effect. If you are in agreement with the foregoing, please sign the form of acceptance on the enclosed counterpart of this Amendment and return such counterpart to the undersigned, together with the signed documents referred to in Article III, duly executed and certified authorizing resolutions, an officer's certificate to which are attached the charter documents, bylaws and good standing certificates of the Trust, Dover Publications, Transfolio and Dover Book Store, and a favorable legal opinion from your counsel, whereupon this Amendment, as so accepted by you, shall become a binding agreement among you and the undersigned. Very truly yours, THE BORROWERS: COURIER CORPORATION By: s/ Lee E. Cochrane ---------------------------------- Title: V.P. & Treasurer COURIER CITIZEN COMPANY By: s/ Lee E. Cochrane ---------------------------------- Title: V.P. & Treasurer COURIER COMPANIES, INC. By: s/ Lee E. Cochrane ---------------------------------- Title: Asst. Treasurer COURIER DELAWARE HOLDING CORPORATION By: s/ William L. Lampe, Jr. ---------------------------------- Title: V.P. & Treasurer COURIER FOREIGN SALES CORPORATION LIMITED By: s/ Lee E. Cochrane ---------------------------------- Title: Treasurer COURIER INVESTMENT CORPORATION By: s/ Lee E. Cochrane ---------------------------------- Title: Asst. Treasurer COURIER KENDALLVILLE, INC. By: s/ Lee E. Cochrane ---------------------------------- Title: Asst. Treasurer COURIER PROPERTIES, INC. By: s/ Lee E. Cochrane ---------------------------------- Title: Asst. Treasurer COURIER STOUGHTON, INC. By: s/ Lee E. Cochrane ---------------------------------- Title: Asst. Treasurer COURIER WESTFORD, INC. By: s/ Lee E. Cochrane ---------------------------------- Title: Asst. Treasurer NATIONAL PUBLISHING COMPANY By: s/ Lee E. Cochrane ---------------------------------- Title: Asst. Treasurer COURIER NEW MEDIA, INC. By: s/ Lee E. Cochrane ---------------------------------- Title: Asst. Treasurer BOOK-MART PRESS, INC. By: s/ Lee E. Cochrane ---------------------------------- Title: Asst. Treasurer THE HOME SCHOOL, INC. By: s/ Lee E. Cochrane ---------------------------------- Title: Asst. Treasurer NATIONAL PUBLISHING BUSINESS TRUST By: s/ Lee E. Cochrane ---------------------------------- Title: Asst. Treasurer DOVER PUBLICATIONS, INC. By: s/ Lee E. Cochrane ---------------------------------- Title: Asst. Treasurer TRANSFOLIO EXPRESS, INC. By: s/ Lee E. Cochrane ---------------------------------- Title: Asst. Treasurer DOVER BOOK STORE, INC. By: s/ Lee E. Cochrane ---------------------------------- Title: Asst. Treasurer The foregoing Amendment is hereby accepted by the undersigned as of October 12, 2000. THE BANKS: CITIZENS BANK OF MASSACHUSETTS (successor to State Street Bank and Trust Company) By: s/ C. Andrew Piculell ---------------------------------- Title: Vice President FLEET NATIONAL BANK (f/k/a BankBoston, N.A.) By: s/ Elise M. Russo ---------------------------------- Title: S.V.P. KEYBANK NATIONAL ASSOCIATION By: s/ Mitchell Feldman ---------------------------------- Title: S.V.P. THE AGENT: CITIZENS BANK OF MASSACHUSETTS (successor to State Street Bank and Trust Company) By: s/ C. Andrew Piculell ---------------------------------- Title: Vice President EX-10.(T) 3 a2032490zex-10_t.txt EXHIBIT 10(T) Exhibit 10(T) MASTER EQUIPMENT LEASE AGREEMENT NO. 1199 LESSOR: EASTERN BANK LESSEE: COURIER KENDALLVILLE, INC. Address: 53 State Street Address: 2500 Marion Ave Boston, MA 02109-2809 Kendallville, IN 46755 Organization Type: Corporation All capitalized terms used herein and not defined herein shall have the meanings set forth or referred to in the Lease Schedule. 1. LEASE OF EQUIPMENT Lessor agrees to lease to Lessee, and Lessee agrees to lease from Lessor, the items and units of personal property described in each numbered lease schedule (each, a "Lease Schedule"), (collectively, the "Equipment") on the terms and conditions of the applicable Lease Schedule and the terms of this Master Equipment Lease Agreement (this "Master Lease Agreement"). As used in this Lease, the term "Item of Equipment" shall mean each functionally integrated and separately marketable group or unit of Equipment subject to this Lease. Each Lease Schedule shall constitute a separate, distinct and independent lease of Equipment and contractual obligation of Lessee. References to "the Lease," "this Lease" or "any Lease" shall mean and refer to any Lease Schedule together with the terms and conditions of this Master Lease Agreement, and all exhibits, addenda, schedules, certificates, riders and other such documents and instruments executed and delivered in connection with the Lease Schedule or this Master Lease Agreement, all as the same may be amended or modified from time to time. The Equipment is to be delivered and installed at the equipment location (the "Equipment Location") specified or referred to in the applicable Lease Schedule. The Equipment shall be deemed to have been accepted by Lessee on the "Acceptance Date" specified on the acceptance certificate executed in connection with the applicable Lease Schedules (the "Acceptance Certificate"). Lessor shall not be liable or responsible for any failure or delay in the delivery of the Equipment to Lessee for whatever reason. As used in this Lease, "Acquisition Cost" shall mean (a) with respect to all Equipment subject to a Lease Schedule, the amount set forth as the Acquisition Cost in the Lease Schedule; and (b) with respect to any item of Equipment, the total amount of all vendor or seller invoices (including Lessee invoices, if any) for such item of Equipment, together with all acquisition fees and costs of delivery, installation, testing and related services, accessories, supplies or attachments procured or financed by Lessor from vendors or suppliers thereof (including items provided by Lessee) relating or allocable to such item of Equipment ("Related Expenses"). As used in this Lease with respect to any Equipment, the terms "Acceptance Date," "Lease Term", "Lease Term Commencement Date", "Lease Termination Date", "Basic Rent", "Interim Rent", "Basic Rent Payment Date", and "Basic Rent Commencement Date" shall have the meanings and values assigned to them in the Lease Schedule and/or the Acceptance Certificate applicable to such Equipment. 2. TERM AND RENT The Lease Term for any Equipment shall be specified in the applicable Lease Schedule. Lessee shall pay Lessor Basic Rent on each Basic Rent Payment Date commencing with the Basic Rent Commencement Date and continuing through the Basic Rent Payment Date next preceding the Lease Termination Date. Lessee shall, in addition, pay Interim Rent to Lessor from and including the Acceptance Date to but excluding the Lease Term Commencement Date, payable on such Lease Term Commencement Date. If and to the extent that a day on which any payment shall be due hereunder shall fall on a day which shall not be a business day in Boston, Massachusetts, then the due date for such payment shall be on the next succeeding business day. In addition to and not in lieu of the foregoing, Lessee agrees to pay when due, and to defend and indemnify Lessor against liability for all license fees, assessments, and sales, use, property, excise, privilege, franchise, ad valorem or value added taxes, leasing taxes and stamp taxes, and other taxes (including any related interest, fines or penalties) or other charges or fees now or hereafter imposed by any governmental body or agency upon any Equipment, or with respect to the manufacturing, ordering, shipment, purchase, ownership, delivery, installation, leasing, operation, possession, use, return, or other disposition thereof or the Rent or the Lease (other than taxes on or measured solely by the net income of Lessor) (collectively, "Taxes"). All Taxes, together with all other amounts due under the Lease, including Stipulated Loss Value, late charges and indemnification payments, are hereinafter referred to as "Supplemental Rent". As used herein, "Rents" shall mean and include all Basic Rent and all Supplemental Rent. With respect to any taxes for which Lessee is responsible under this Section, Lessee shall notify Lessor of any requirement to file tax returns with any governmental authority and, to the extent permitted by applicable law, shall prepare (in such a manner as will show Lessor's ownership of the Equipment) and timely file the tax returns required to be filed. With respect to any tax return required to be filed by Lessor which Lessee is not permitted to prepare or file or both, Lessee shall notify Lessor of the requirement and furnish Lessor with all forms and information necessary for proper and timely filing of the return. Lessee shall pay Lessor in advance one or more Basic Rent payments and/or a security deposit to the extent so specified in a Lease Schedule. If any amounts are so paid to Lessor, then Lessor shall hold them as security for Lessee's obligations under the Lease. Any such security deposit shall not bear interest, may be commingled with other funds of Lessor and shall be immediately restored by Lessee if applied under the Lease. Upon the occurrence of the Lease Termination Date and satisfaction of all Lessee's obligations under the Lease, any such advance rentals or security deposit held by Lessor shall be returned to Lessee. If any Rent or other amount payable hereunder shall not be paid within 3 days after notice, Lessee shall pay as an administrative and late charge an amount equal to 5% of the amount of any such overdue payment. In addition, Lessee shall pay overdue interest on any delinquent payment or other amounts due under the Lease (by reason of acceleration or otherwise) from 30 days after the due date until paid at the rate of 1 1/2% per month or the maximum amount permitted by applicable law, whichever is lower. All payments made to Lessor shall be made to Lessor in immediately available funds at the address shown above, or at such other place as Lessor shall specify in writing. To the extent that any payment to Lessor is made by check and such check is thereafter dishonored, Lessee shall be obligated for and shall pay Lessor any fee customarily charged by Lessor for any such dishonor. UNLESS SPECIFIED IN A RIDER TO THE LEASE, THIS IS A NON-CANCELABLE, NON-TERMINABLE LEASE OF EQUIPMENT FOR THE ENTIRE LEASE TERM PROVIDED IN EACH LEASE SCHEDULE HERETO. 3. POSSESSION; PERSONAL PROPERTY No right, title or interest in the Equipment shall pass to Lessee other than the right to maintain possession and use of the Equipment for the Lease Term free from interference by any person claiming by, through, or under Lessor. The Equipment shall always remain personal property even though the Equipment may hereafter become attached or affixed to real property. Lessee agrees to give and record such notices and to take such other action at its own expense as may be necessary to prevent any third party (other than an assignee of Lessor) from acquiring or having the right under any circumstances to acquire any interest in the Equipment or the Lease. 4. DISCLAIMER OF WARRANTIES LESSOR IS NOT THE MANUFACTURER, VENDOR OR SUPPLIER OF THE EQUIPMENT, NOR THE AGENT THEREOF OR OF LESSEE, AND MAKES NO EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES AS TO ANY MATTER WHATSOEVER, INCLUDING WITHOUT LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT, ITS FITNESS FOR A PARTICULAR PURPOSE, ITS DESIGN OR CONDITION, ITS CAPACITY OR DURABILITY, THE QUALITY OF THE MATERIAL OR WORKMANSHIP IN THE MANUFACTURE OR ASSEMBLY OF THE EQUIPMENT, OR THE CONFORMITY OF THE EQUIPMENT TO THE PROVISIONS AND SPECIFICATIONS OF ANY PURCHASE ORDER RELATING THERETO, OR TRADEMARK, COPYRIGHT OR PATENT INFRINGEMENTS, AND LESSOR HEREBY DISCLAIMS ANY SUCH WARRANTY. LESSOR IS NOT RESPONSIBLE FOR ANY REPAIRS OR SERVICE TO THE EQUIPMENT, DEFECTS THEREIN OR FAILURES IN THE OPERATION THEREOF. Lessee has made the selection of each item of Equipment and the vendor, supplier or manufacturer thereof based on its own judgment and expressly disclaims any reliance upon any statements or representations made by Lessor. If the Equipment does not operate as warranted, becomes obsolete, or is unsatisfactory for any reason whatsoever, Lessee shall make all claims on account thereof solely against the seller, vendor, supplier or manufacturer and not against Lessor. Lessee acknowledges that neither the seller, vendor, supplier or manufacturer of the Equipment, nor any sales or other representative thereof, is an agent of Lessor, and no representation, warranty, covenant or agreement as to the Equipment or any other matter by any such person shall in any way affect Lessee's obligations hereunder. For so long as no Event of Default (or event or condition which, with the passage of time or giving of notice, or both, would become such an Event of Default) has occurred and is continuing, Lessee shall be the beneficiary of, and shall be entitled to, all rights under any applicable manufacturer's, supplier's or vendor's warranties with respect to the Equipment, to the extent permitted by law. 5. REPRESENTATIONS, WARRANTIES, AND COVENANTS Lessee represents and warrants to and covenants with Lessor that: (a) Lessee has the form of business organization indicated above and is duly formed or organized or incorporated and existing in good standing under the laws of the state listed in the caption of this Master Lease Agreement and is duly qualified to do business wherever necessary to carry on its present business and operations and to own its property; (b) the Lease has been duly authorized by all necessary action on the part of Lessee consistent with its form of organization, does not require any further shareholder, partner or member or other approval, does not require the approval of, or the giving notice to, any federal, state, local, or foreign government authority and does not contravene any law binding on Lessee or contravene any of its governing documents, or any agreement, indenture, or other instrument to which Lessee is a party or by which it may be bound; (c) the Lease has been duly executed and delivered by Lessee and constitutes a legal, valid and binding obligation of Lessee enforceable in accordance with its terms; (d) Lessee has not and will not, directly or indirectly, create, incur, or permit to exist any lien, encumbrance, mortgage, pledge, attachment, or security interest ( a "Lien") on or with respect to the Equipment or the Lease (except those of persons claiming by, through or under Lessor); (e) the Equipment is and will be used solely in the conduct of Lessee's business and is not being used, and will at no time be used, for personal or consumer purposes, and will remain in the location shown on the applicable Lease Schedule unless Lessor otherwise agrees in writing and Lessee has completed all notifications, filings, recordings and other actions in such new location as Lessor may reasonably request to protect Lessor's interest in the Equipment; (f) there are no pending or threatened actions or proceedings before any court or administrative agency which might materially adversely affect Lessee's financial condition or operations, and all credit, financial and other information provided by Lessee or at Lessee's direction is, and all such information hereafter furnished will be, true, correct and complete in all material respects; (g) the chief executive office of Lessee is set forth in the caption of this Master Lease Agreement; and (h) Lessor has not selected, manufactured or supplied the Equipment to Lessee and has acquired any Equipment subject hereto solely in connection with the Lease and Lessee has received and approved the terms of any purchase order or agreement with respect to the Equipment. 6. LIMITATION OF LIABILITY; INDEMNITY Lessor shall have no liability in connection with and Lessee assumes the risk of liability for, and hereby agrees to indemnify and hold safe and harmless, and covenants to defend, Lessor, its directors, officers, shareholders, partners, employees, servants and agents (collectively, the "Indemnified Parties") from and against: (a) any and all liabilities, losses, damages, claims and expenses (including legal expenses of every kind and nature) arising out of the manufacture, purchase, shipment and delivery of the Equipment to Lessee, acceptance or rejection, ownership, titling, registration, leasing, furnishing, possession, maintenance, operation, performance, use, return or other disposition 2 of the Equipment, including, without limitation, any liabilities that may arise from patent or latent defects in the Equipment (whether or not discoverable by Lessee), any claims based on absolute tort liability or warranty and any claims based on patent, trademark or copyright infringement; (b) any and all loss or damage of or to the Equipment; (c) any obligation or liability to the manufacturer, vendor or any supplier of the Equipment arising under any purchase orders issued by or assigned to Lessor, and (d) any breach or default by Lessee of any representation, warranty, covenant or agreement made by or on behalf of Lessee in the Lease. Further, Lessor shall have no liability for or any special, indirect, incidental, consequential, exemplary or punitive damages of any character, including, without limitation, loss of use of production facilities or equipment, loss of profits, property damage or lost production, whether suffered by Lessee or any third party. The foregoing indemnity shall continue in full force and effect and shall survive the expiration or termination of the Lease. 7. TAXES AND OTHER CHARGES If any Lease is denominated on the applicable Lease Schedule as a "True Lease" then, with respect to the Equipment subject to the Lease, Lessee hereby covenants and agrees that Lessor shall be entitled to cost recovery deductions under Section 168 of the Internal Revenue Code of 1986, as amended (the "Code"), using 200% declining balance method of depreciation switching to the straight line method for the first taxable year for which such method will yield larger depreciation deductions, and assuming a half-year convention and zero salvage value, for the applicable recovery period for such Equipment (the "Tax Benefits"). Lessee further acknowledges and agrees that Lessor has entered into such Lease on the assumption that Lessor will be taxed throughout the Lease Term at Lessor's federal corporate income tax rate existing on the date of the applicable Lease Schedule (the "Assumed Tax Rate"). If, for any reason whatsoever, there shall be a loss, disallowance, recapture or delay in claiming all or any portion of the Tax Benefits with respect to the Equipment, or there shall be included in Lessor's gross income for federal, state or local income tax purposes any amount on account of any addition, modification or improvement to or in respect of any of the Equipment made or paid for by Lessee, or if there shall be a change in the Assumed Tax Rate (any loss, disallowance, recapture, delay, inclusion or change being herein called a "Tax Loss"), then thirty (30) days after written notice to Lessee by Lessor that a Tax Loss has occurred, Lessee shall pay Lessor a lump sum amount which, after deduction of all taxes required to be paid by Lessor with respect to the receipt of such amount, will provide Lessor with an amount necessary to maintain Lessor's after-tax economic yield and overall net after-tax cash flows at least at the same level that would have been available if such Tax Loss had not occurred, plus any interest, penalties or additions to tax which may be imposed in connection with such Tax Loss. Such amount shall be paid in equal periodic payments over the applicable remaining Lease Term with respect to such Equipment on each Basic Rent Payment Date. A Tax Loss shall conclusively be deemed to have occurred if either (a) a deficiency shall have been proposed by the Internal Revenue Service or other taxing authority having jurisdiction, or (b) tax counsel for Lessor has rendered an opinion to Lessor that such Tax Loss has so occurred. The foregoing indemnity shall continue in full force and effect and shall survive the expiration or earlier termination of the Lease. 8. DEFAULT Lessee shall be in default of the Lease upon the occurrence of any one or more of the following events (each an "Event of Default"): (a) Lessee shall fail to make any payment, of Rent or otherwise on the date when due, and such failure shall continue for ten (10) days after notice thereof to Lessee; or (b) Lessee shall fail to obtain or maintain any insurance required under the Lease; or (c) Lessee shall fail to perform or observe any other covenant, condition or agreement under the Lease, and such failure shall continue for ten (10) days after notice thereof to Lessee; or (d) Lessee shall default in the payment or performance of any indebtedness or obligation to Lessor or any affiliated person, firm or entity controlled by or under common control with Lessor (an "Affiliate"), under any loan, note, security agreement, lease, guaranty, title retention or conditional sales agreement or any other instrument or agreement evidencing such indebtedness with Lessor or any Affiliate; or (e) any representation or warranty made by Lessee herein or in any certificate, agreement, statement or document hereto or hereafter furnished to Lessor in connection herewith, including without limitation, any financial information disclosed to Lessor, shall prove to be false or incorrect in any material respect; or (f) death or judicial declaration of incompetence of Lessee, if an individual; the commencement of any bankruptcy, insolvency, arrangement, reorganization, receivership, liquidation or other similar proceeding by or against Lessee or any of its properties or businesses, or the appointment of a trustee, receiver, liquidator or custodian for Lessee or any of its properties of business, or if Lessee suffers the entry of an order for relief under Title 11 of the United States Code; or the making by Lessee of a general assignment or deed of trust for the benefit of creditors, or (g) Lessee shall default in any payment or other obligation to any third party and any applicable grace or cure period with respect thereto has expired; or (h) Lessee shall terminate its existence by merger, consolidation, sale of substantially all of its assets or otherwise; or (i) if Lessee is a privately held business, more than 50% of Lessee's voting capital stock or equity interests, or effective control of Lessee's voting capital stock or equity interests, issued and outstanding from time to time, is not retained by the holders of such stock or equity interests on the date of the Lease; or (j) if Lessee is a publicly held corporation, there shall be a change in the ownership of Lessee's stock such that Lessee is no longer subject to the reporting requirements of the Securities Exchange Act of 1934, or no longer has a class of equity securities registered under Section 12 of the Securities Act of 1933; or (k) Lessor shall determine, in its sole discretion and in good faith, that there has been a material adverse change in the financial condition of the Lessee since the date of the Lease, or that Lessee's ability to make any payment hereunder promptly when due or otherwise comply with the terms of the Lease or any other agreement between Lessor and Lessee is impaired; or (l) any event or condition set forth in subsections (b) through (k) of this Section 8 shall occur with respect to any guarantor or other person responsible, in whole or in part, for payment or performance of the Lease; or (m) any event or condition set forth in subsections (d) through (j) shall occur with respect to any Affiliate. Lessee shall promptly notify Lessor of the occurrence of any Event of Default or the occurrence or existence of any event or condition which, upon the giving of notice of lapse of time, or both, may become an Event of Default. 9. REMEDIES; MANDATORY PREPAYMENT Upon the occurrence of any Event of Default, Lessor may, in its sole discretion, exercise one or more of the following remedies with respect to any or all of the Equipment: 3 (a) cause Lessee to promptly return, at Lessee's expense, any or all Equipment to such location as Lessor may designate anywhere in the continental United States in accordance with the terms of Section 17 of this Master Lease Agreement, or Lessor, at its option, may enter upon the premises where the Equipment is located and take immediate possession of the same by summary proceedings or otherwise, all without liability to Lessor for or by reason of damage to property or such entry or taking possession except for Lessor's gross negligence or willful misconduct; (b) sell any or all Equipment at public or private sale or otherwise dispose of, hold, use, operate, lease to others or keep idle the Equipment, all as Lessor in its sole discretion may determine and all free and clear of any rights of Lessee; (c) remedy such default, including making repairs or modifications to the Equipment, for the account and expense of Lessee, and Lessee agrees promptly to reimburse Lessor for all of Lessor's costs and expenses; (d) by written notice to Lessee, terminate the Lease and any other Lease Schedules and the Equipment subject thereto, as such notice shall specify, and, with respect to such terminated Lease Schedules and Equipment, declare immediately due and payable and recover from Lessee, as liquidated damages for loss of Lessor's bargain and not as a penalty, an amount equal to the Stipulated Loss Value of the Equipment, calculated as of the next following Basic Rent Payment Date; (e) immediately collect any and all Rent and other amounts then due and owing to Lessor under the Lease, together with all accrued interest and late charges thereon calculated through and including the date of payment through the date on which the Equipment shall be returned to Lessor pursuant hereto; (f) apply any advance rental payments or security deposit or other cash collateral or sale or remarketing proceeds of the Equipment at any time to reduce any amounts due to Lessor, and (g) exercise any other right or remedy which may be available to Lessor under applicable law, or proceed by appropriate court action to enforce the terms hereof or to recover damages for the breach hereof, including reasonable attorneys' fees and court costs. Notice of Lessor's intention to accelerate, notice of acceleration, notice of nonpayment, presentment, protest, notice of dishonor, or any other notice whatsoever are hereby waived by Lessee and any endorser, guarantor, surety or other party liable in any capacity for any of Lessee's obligations under or in respect of the Lease. No remedy referred to in this Section 9 shall be exclusive, but each shall be cumulative and in addition to any other remedy referred to above or otherwise available to Lessor at law or in equity. Termination under this Section 9 shall not effect the Lessee's duty to perform Lessee's obligations hereunder to Lessor in full. Lessee agrees to reimburse Lessor on demand for any and all costs and expenses incurred by Lessor in enforcing its rights and remedies hereunder following the occurrence of an Event of Default, including, without limitation, reasonable attorneys' fees, and the costs of repossession, storage, insuring, reletting, selling and disposing of any and all Equipment. The exercise or pursuit by Lessor of any one or more of such remedies shall not preclude the simultaneous or later exercise or pursuit by Lessor of any or all such other remedies, and all remedies hereunder shall survive termination of the Lease. Lessee agrees that in connection with any disposition of the Equipment, to the extent Lessor is required to give Lessee notice, seven (7) days notice shall be deemed sufficient notice. In the event Lessor takes possession and disposes of the Equipment, the proceeds of any such disposition shall be applied in the following order: (1) to Lessor's costs, charges and expenses incurred in taking, removing, holding, storing, insuring, maintaining, repairing and selling, leasing or remarketing the Equipment; (2) to the extent not previously paid by Lessee, to pay Lessor for any damages then remaining unpaid hereunder; (3) to reimburse Lessee for any Stipulated Loss Value paid by Lessee to Lessor hereunder; and (4) the balance, if any, shall be retained by the Lessor. The term "Stipulated Loss Value" with respect to any item of Equipment shall mean the Stipulated Loss Value as set forth in any Schedule of Stipulated Loss Values attached to and made a part of the applicable Lease Schedule as Schedule B thereto or, if there is no such Schedule of Stipulated Loss Values, then the Stipulated Loss Value with respect to any item of Equipment on any Basic Rent Payment Date shall be an amount equal to the net present value of: (i) all Basic Rent payments then remaining unpaid for the balance of the Lease Term, plus (ii) the amount of any purchase obligation with respect to such item of Equipment or, if there is no such obligation, then the fair market value of such item of Equipment at the end of the Lease Term, as estimated by Lessor in its sole discretion (accounting for the amount of any unpaid Related Expenses for such item of Equipment and, with respect to any such item of Equipment that has been attached to or installed on or in any other property leased or owned by Lessee, such value shall be determined on an installation basis, in place and in use), all discounted to net present value at a discount rate equal to the 1-year Treasury Constant Maturity rate as published in the Selected Interest Rates table of the Federal Reserve statistical release H.15(519) for the week ending immediately prior to the Acceptance Date for such Equipment. Lessee is or may become indebted under or in respect of one or more leases, loans, notes, credit agreements, reimbursements agreements, security agreements, title retention or conditional sales agreements, or other documents, instruments or agreements, whether now existing or hereafter arising, evidencing Lessee's obligations for the payment of borrowed money or other financial accommodations ("Obligations") owing to Lessor, or to one or more Affiliates. If Lessee pays or prepays all or substantially all of its Obligations owing to any Affiliate, whether or not such payment or prepayment is voluntarily or involuntarily made by Lessee before or after any default or acceleration of such Obligations, then Lessee shall pay, at Lessor's option and immediately upon notice from Lessor, all or Lessee's obligations owing to Lessor, including but not limited to all Rent together with the Stipulated Loss Value in respect to all Equipment subject to each Lease Schedule as set forth in such notice from Lessor. 10. ADDITIONAL SECURITY For so long as any obligations of Lessee shall remain outstanding under the Lease, Lessee hereby grants to Lessor a security interest in all of Lessee's rights in and to all Equipment subject to such Lease from time to time, to secure the prompt payment and performance when due (by reason of acceleration or otherwise) of each and every indebtedness, obligation or liability of Lessee, or any Affiliate, owing to Lessor, whether now existing or hereafter arising, including but not limited to all of such obligations under or in respect of each Lease. The extent to which Lessor shall have a purchase money security interest in any item of Equipment under a Lease which is deemed to create a security interest under Section 1-201(37) of the Uniform Commercial Code shall be determined by reference to the Acquisition Cost of such item financed by Lessor. In order more fully to secure its payment of all Rent and all other obligations to Lessor hereunder, Lessee hereby grants to Lessor a security interest in any advance rental or security deposit paid by Lessee to Lessor under any Lease Schedule hereto. The term "Lessor" as used in this Section 10 shall include any Affiliate. 4 11. USE; MAINTENANCE; INSPECTION; LOSS AND DAMAGE Lessee shall, unless Lessor shall otherwise give its prior written consent in writing: (a) use each item of Equipment only within the continental United States by qualified personnel solely for business purposes and the purpose for which it was designed and shall, at its sole expense, service, repair, overhaul and maintain each item of Equipment in the same condition as when received, ordinary wear and tear excepted, in good operating order, consistent with prudent industry practice (but, in no event less than the same extent to which Lessee maintains other similar equipment in the prudent management of its assets and properties) and in compliance with all applicable laws, ordinances, regulations, and conditions of all insurance policies required to be maintained by Lessee and all manuals, orders, recommendations, instructions and other written requirements as to the repair and maintenance of such item of Equipment issued at any time by the vendor, supplier and/or manufacturer thereof; (b) maintain conspicuously on any Equipment such labels, plates, decals or other markings as Lessor may reasonably require, stating that Lessor is the owner of such Equipment; (c) furnish to Lessor from time to time such information concerning the condition, location, use and operation of the Equipment as Lessor may request; (d) permit any person designated by Lessor to visit and inspect any Equipment and any records maintained in connection therewith, provided, however, that the failure of Lessor to inspect the Equipment or to inform Lessee of any noncompliance shall not relieve Lessee of any of its obligations hereunder; (e) if any Equipment does not comply with the requirements of the Lease, Lessee shall, within thirty (30) days of written notice from Lessor, bring such Equipment into compliance; (f) not use any Equipment, nor allow the same to be used, for any unlawful purpose, nor in connection with any property or material that would subject Lessor to any liability under any municipal, state or federal statute or regulation pertaining to the production, transport, storage, disposal or discharge of oil or petroleum-containing substances, or hazardous or toxic waste or materials; and (g) make no additions, alterations, modifications or improvements (collectively, "Improvements") to any item of Equipment that are not readily removable without causing material damage to such item of Equipment or which will cause the value, utility or useful life of such item of Equipment to materially decline. If any such Improvement is made and cannot be removed without causing material damage or decline in value, utility or useful life (a "Non-Severable Improvement"), then Lessee warrants that such Non-Severable Improvement shall immediately become Lessor's property upon being installed and shall be free and clear of all Liens and shall become Equipment subject to all of the terms and conditions of the Lease. All such Improvements that are not Non-Severable Improvements shall be removed by Lessee prior to the return of the item of Equipment hereunder or such Improvements shall also become the sole and absolute property of Lessor without any further payment by Lessor to Lessee and shall be free and clear of all Liens whatsoever. Lessee shall repair all damage to any item of Equipment caused by the removal of any Improvement so as to restore such item of Equipment to the same condition which existed prior to its installation, normal wear and tear excepted, and as required by the Lease. Lessee hereby assumes all risk of loss, damage or destruction for whatever reason to the Equipment from and after the earlier of the date (i) on which the Equipment is ordered or (ii) Lessor pays the purchase price of the Equipment, and continuing until the Equipment has been returned to, and accepted by, Lessor in the condition required by Section 17 hereof upon the expiration of the Lease Term. If during the Lease Term all or any portion of an item of Equipment shall become lost, stolen, destroyed, damaged beyond repair or rendered permanently unfit for use for any reason, or in the event of any condemnation, confiscation, theft or seizure or requisition of title to or use of such item, Lessee shall immediately pay to Lessor an amount equal to the Stipulated Loss Value of such item of Equipment, as of the next following Basic Rent Payment Date, together with all Rent and all other amounts due and payable hereunder. Upon any such payment in full to Lessor, the Lease with respect to such item(s) of Equipment shall terminate and Basic Rent attributable thereto shall abate. If and to the extent that Lessor shall have received the full Stipulated Loss Value from Lessee with respect to any item of Equipment and shall thereafter receive any insurance proceeds by reason of the foregoing, Lessor shall pay over to Lessee such amount of such insurance proceeds so as to reimburse Lessee for any payment made by Lessee to Lessor of such Stipulated Loss Value and Lessor shall retain the balance of such proceeds, if any. 12. INSURANCE Commencing with the Lease Term Commencement Date and until the Equipment has been returned to, and accepted by, Lessor in compliance with the terms of the Lease, Lessee shall procure and maintain insurance in such amounts and upon such terms and with such companies as Lessor may approve, at Lessee's expense, provided that in no event shall such insurance be less than the following coverages and amounts: (a) Worker's Compensation and Employers Liability Insurance, in the full statutory amounts provided by law; (b) Comprehensive General Liability Insurance including product/completed operations and contractual liability coverage, with minimum limits of $1,000,000 each occurrence, and Combined Single Limit Body Injury and Property Damage, $1,000,000 aggregate, where applicable; and (c) All Risk Physical Damage Insurance, including earthquake and flood, on each item of Equipment, in an amount not less than the greater of the Stipulated Loss Value of the Equipment or (if applicable) its full replacement value. Lessor shall be included as an additional insured and loss payee as its interest may appear. Such policies shall be endorsed to provide that the coverage afforded to Lessor shall not be rescinded, impaired or invalidated by any act or neglect of Lessee. Lessee agrees to waive Lessee's right of subrogation against Lessor for any and all loss or damage. In addition to the foregoing minimum insurance coverage, Lessee shall procure and maintain such other insurance coverage as Lessor may require from time to time during the Lease Term. All policies shall be endorsed or contain a clause requiring the insurer to furnish Lessor with at least thirty (30) days' prior written notice of any material change, cancellation or non-renewal of coverage. Prior to the Lease Term Commencement Date, Lessee shall furnish Lessor with a certificate of insurance or other evidence satisfactory to Lessor that such insurance coverage is in effect, together with a copy of each such policy, if so requested by Lessor, provided, however, that Lessor shall be under no duty either to ascertain the existence of or to examine such insurance coverage or to advise Lessee in the event such insurance coverage should not comply with the requirements hereof. In case of failure of Lessee to procure or maintain insurance, Lessor may at its option obtain such insurance, the cost of which will be paid by Lessee. Lessee further agrees to give Lessor prompt notice of any damage to or loss of, the Equipment, or any item thereof. 5 13. INFORMATION; FURTHER ASSURANCES Upon request, Lessee shall provide to Lessor a copy of its financial statements prepared in accordance with generally accepted accounting principles and, in the case of annual financial statements, audited by independent certified public accountants, together with any management letter prepared by such accountants, and in the case of quarterly financial statements certified by Lessee's chief financial officer. Lessee shall execute and deliver to Lessor upon Lessor's request any and all schedules, forms and other reports and information as Lessor may deem necessary or appropriate to respond to requirements or regulations imposed by any governmental authorities. Lessee shall execute and deliver to Lessor upon Lessor's request such further and additional documents, instruments and assurances as Lessor deems necessary (a) to acknowledge and confirm, for the benefit of Lessor or any assignee or transferee of any of Lessor's rights, title and interests hereunder (an "Assignee"), all of the terms and conditions of all or any part of the Lease and Lessor's or Assignee's rights with respect thereto, and Lessee's compliance with all of the terms and provisions hereof, (b) to preserve, protect and perfect Lessor's or Assignee's right, title and interest hereunder and in any Equipment, including, without limitation, such financing statements on Form UCC-1 or amendments, corporate resolutions, certificates of compliance, notices of assignment or transfers of interest, and restatements and reaffirmations of Lessee's obligations and its representations and warranties with respect thereto as of the dates requested by Lessor from time to time, and (c) Lessee shall promptly execute and deliver to Lessor such further documents and take such further action as Lessor may require in order to more effectively carry out the intent and purpose of the Lease. In furtherance of the foregoing, Lessor may file or record the Lease or a memorandum or a photocopy hereof (which for the purposes hereof shall be effective as a financing statement) so as to give notice to third parties, and Lessee hereby appoints Lessor as its attorney-in-fact to execute, sign, file and record financing statements on Form UCC-1 and other Lien recordation documents with respect to the Equipment, and Lessee agrees to pay or reimburse Lessor for any filing, recording or stamp fees or taxes arising from any such filings. 14. LESSOR'S ASSIGNMENT The Lease and all rights of Lessor hereunder shall be assignable by Lessor absolutely or as security, without notice to Lessee, subject to the rights of Lessee hereunder so long as no Event of Default has occurred and is continuing hereunder. No such assignment shall relieve Lessor of its obligations hereunder unless specifically assumed by the Assignee, and Lessee agrees it shall not assert any defense, rights of set-off or counterclaim against any Assignee to which Lessor shall have assigned its rights and interests hereunder, nor hold or attempt to hold such Assignee liable for any of Lessor's obligations hereunder. No such assignment shall increase Lessee's obligations hereunder. If and to the extent that Lessor shall so assign any of its rights and/or obligations hereunder, from and after such date, all references herein to Lessor shall mean and include the Assignee. 15. LESSEE'S ASSIGNMENT OR SUBLETTING Lessee shall not assign or dispose of any of its rights or obligations under the Lease or enter into any sublease with respect to any of the Equipment without the express prior written consent of Lessor. 16. LESSEE'S OBLIGATIONS UNCONDITIONAL This Lease is a net lease and Lessee hereby agrees that during the Lease Term it shall not be entitled to any abatement of Rent or of any other amounts payable hereunder by Lessee, and that its obligation to pay all Rent and any other amount owing hereunder shall be absolute and unconditional under all circumstances, including, without limitation, the following circumstances: (i) any claim by Lessee to any right of set-off, counterclaim, recoupment, defense or other right of which Lessee may have against Lessor, any seller, vendor, supplier or manufacturer of any Equipment or anyone else for any reason whatsoever; (ii) the existence of any liens, encumbrances or rights of others whatsoever with respect to any Equipment, whether or not resulting from claims against Lessor not related to the ownership of such Equipment; or (iii) any other event or circumstances whatsoever. Each Rent payment or other amount paid by Lessee hereunder shall be final and Lessee will not seek to recover all or any part of such payment from Lessor for any reason whatsoever. 17. RETURN OF EQUIPMENT Upon the expiration or earlier termination of the Lease Term with respect to any Equipment, and provided that Lessee has not validly exercised any purchase option (contained in a duly executed rider hereto) with respect thereto, Lessee shall: (a) return the Equipment to a location and in the manner designated by the Lessor within the continental United States, including, as reasonably required by Lessor, securing arrangements for the disassembly and packing for shipment by an authorized representative of the manufacturer, supplier or vendor of the Equipment, shipment with all parts and pieces on a carrier designated or approved by Lessor, and then reassembly (including, if necessary, repair and overhaul) by such representative at the return location in the condition the Equipment is required to be maintained by the Lease and in such condition as will make the Equipment immediately able to perform all functions for which the Equipment was originally designed (or as upgraded during the Lease Term), and immediately qualified for the manufacturer's (or other authorized servicing representative's) then-available service contract or warranty; (b) cause the Equipment to qualify for all applicable licenses or permits necessary for its operation for its intended purpose and to comply with all specifications and requirements of applicable federal, state and local laws, regulations and ordinances; (c) upon Lessor's request, provide suitable storage, acceptable to Lessor, for a period not to exceed 180 days from the date of return; (d) cooperate with Lessor in attempting to remarket the Equipment, including display and demonstration of the Equipment to prospective purchasers or lessees, and allowing Lessor to conduct any private or public sale or auction of the Equipment on Lessee's premises. All costs incurred in connection with any of the foregoing shall be the sole responsibility of Lessee. During any period of time from the expiration or earlier termination of the Lease until the Equipment is returned in accordance with the provisions hereof or until Lessor has been paid the applicable purchase option price if any applicable purchase option is exercised, Lessee agrees to pay to Lessor additional per diem rent ("Holdover Rent"), payable promptly on demand in an amount equal to 125% of the highest monthly Basic Rent Payment payable during the 6 Lease Term divided by thirty (30), provided, however, that nothing contained herein and no payment of Holdover Rent hereunder shall relieve Lessee of its obligation to return the Equipment upon the expiration or earlier termination of the Lease. 18. RELATED LEASE SCHEDULES In the event that any Equipment subject to the Lease shall become attached to, affixed to, or used in connection with Equipment subject to any other Lease hereunder (each a "Related Lease Schedule"), Lessee agrees that: (a) if Lessee elects to exercise any purchase option, early termination option, renewal option, purchase obligation or early purchase option under any such other Lease; or (b) if Lessee elects to return the Equipment under any Lease in accordance therewith, then, in either case, Lessor shall have the right, in its discretion, to require the same disposition for all Equipment subject to a Related Lease Schedule. 19. NOTICES Any notices or demands required or permitted to be given under the Lease shall be given in writing and by regular mail and shall become effective when deposited in the United States mail with postage prepaid, to Lessor to the attention of Customer Accounts, and to Lessee at the address set forth above, or to such other address as the party to receive notice hereafter may designate by such written notice. 20. MISCELLANEOUS The term "Lessee" as used in the Lease shall mean and include any and all Lessees who sign below, each of whom shall be jointly and severally liable under the Lease. This Master Lease Agreement will not be binding on Lessor until accepted and executed by Lessor, notice of which is hereby waived by Lessee. Any waiver of the terms hereof shall be effective only in the specific instance and only for the specific purpose given. Time is of the essence in the payment and performance of all of Lessee's obligations under the Lease. The captions in the Lease are for convenience only and shall not define or limit any of the terms hereof. Any provisions of the Lease which are unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such unenforceability without invalidating the remaining provisions hereof, and any such unenforceability in any jurisdiction shall not render unenforceable such provisions in any other jurisdiction. To the extent permitted by applicable law, Lessee hereby waives any provisions of law which render any provision hereof unenforceable in any respect. THIS LEASE AND THE LEGAL RELATIONS OF THE PARTIES HERETO SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT REGARD TO PRINCIPLES REGARDING THE CHOICE OF LAW, THE PARTIES HERETO CONSENT AND SUBMIT TO THE JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS AND THE FEDERAL DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER, AND EXPRESSLY WAIVES ANY OBJECTIONS THAT THEY MAY HAVE TO THE VENUE OF SUCH COURTS. THE PARTIES HERETO HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT. Any action by Lessee against Lessor (but not by Lessor against Lessee) for any cause of action relating to the Lease shall be brought within one year after any such cause of action first arises. This Master Lease Agreement, together with the applicable Lease Schedule, Acceptance Certificate and any other Riders hereto (as desired below), and any Exhibits and Schedules to the foregoing, shall constitute the entire agreement of Lessor and Lessee with respect to the Lease of the Equipment. 21. RIDERS Lessor and Lessee may from time to time agree that the Lease shall be amended or supplemented by other terms and provisions. Such terms and provisions shall be evidenced by riders hereto and shall be effective if and only to the extent that both Lessor and Lessee shall have executed and delivered same, and, once executed and delivered, shall be incorporated herein by reference. Executed under seal on the 25th day of September, 2000. LESSOR: LESSEE: EASTERN BANK COURIER KENDALLVILLE, INC. By: s/ S.J. O'Leary By: s/ Lee E. Cochrane ------------------------- ------------------------- Title: Sr. Vice President Title: Asst. Teasurer 7 EX-21 4 a2032490zex-21.txt EXHIBIT 21 COURIER CORPORATION SUBSIDIARIES OF REGISTRANT EXHIBIT 21 Registrant has the following subsidiaries:
% Owned Jurisdiction of by Immediate Name Immediate Parent Incorporation Parent - --------------------------------------- --------------------------------- ----------------------- -------------------- Courier-Citizen Company Courier Corporation Massachusetts 100% Courier Investment Corporation Courier Corporation Massachusetts 100% Book-mart Press, Inc. Courier Corporation New Jersey 100% The Home School, Inc. Courier Corporation Massachusetts 100% Courier Westford, Inc. Courier Delaware Holding Corp. Massachusetts 100% National Publishing Company Courier Delaware Holding Corp. Pennsylvania 100% Courier Stoughton, Inc. Courier Delaware Holding Corp. Massachusetts 100% Courier Companies, Inc. Courier Delaware Holding Corp. Massachusetts 100% Courier Kendallville, Inc. Courier Delaware Holding Corp. Indiana 100% Courier New Media, Inc. Courier Delaware Holding Corp. Massachusetts 100% Courier Foreign Sales Corporation Ltd. National Publishing Company Jamaica 99% Courier Delaware Holding Corp. Courier-Citizen Company Delaware 100% Courier Properties, Inc. Courier-Citizen Company Massachusetts 100% Massachusetts National Publishing Business Trust National Publishing Company Massachusetts 100% Dover Publications, Inc. Massachusetts National Publishing Business Trust New York 100% Transfolio Express, Inc. Massachusetts National Publishing Business Trust New York 100% Dover Book Store, Inc. Massachusetts National Publishing Business Trust New York 100%
EX-23 5 a2032490zex-23.txt EXHIBIT 23 Exhibit 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statements Nos. 333-03201, 333-71631, 333-75187 and 333-75189 of Courier Corporation on Form S-8 of our report dated November 9, 2000, appearing in this Annual Report on Form 10-K of Courier Corporation and subsidiaries for the year ended September 30, 2000. /s/Deloitte & Touche LLP Boston, Massachusetts December 5, 2000 EX-27 6 a2032490zex-27.txt EXHIBIT 27
5 1,000 YEAR SEP-30-2000 SEP-26-1999 SEP-30-2000 562 0 39,811 1,391 27,421 71,353 122,441 81,427 142,241 38,006 0 0 0 3,750 64,021 142,241 188,320 188,320 140,226 140,226 31,657 345 325 15,886 5,249 10,637 0 0 0 10,637 3.25 3.15 ACCOUNTS RECEIVABLE ARE NET OF ALLOWANCES OTHER SE INCLUDES TREASURY STOCK
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