-----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, Aqa06VZkG3zze/hrCY+5VBh1yJWykyXbDxjrANpcTARGJgHXDek3X/JjXpibsNWD N7rfqi7lPImsR9tvQliCPg== 0000912057-01-004833.txt : 20010214 0000912057-01-004833.hdr.sgml : 20010214 ACCESSION NUMBER: 0000912057-01-004833 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001230 FILED AS OF DATE: 20010213 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-Q SEC ACT: SEC FILE NUMBER: 000-07597 FILM NUMBER: 1536560 BUSINESS ADDRESS: STREET 1: 15 WELLMAN AVENUE CITY: NORTH CHELMSFORD STATE: MA ZIP: 01863 BUSINESS PHONE: 9782516000 10-Q 1 a2038288z10-q.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 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 (Exact name of registrant as specified in its charter) Massachusetts (State or other jurisdiction of incorporation or organization) 04-2502514 (I.R.S. Employer Identification No.) 15 Wellman Avenue, North Chelmsford, Massachusetts 01863 (Address of principal executive offices) (Zip Code) (978) 251-6000 (Registrant's telephone number, including area code) NO CHANGE Former name, former address and former fiscal year, if changed since last report) 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at February 2, 2001 Common Stock, $1 par value 3,364,412 Shares Page 1 of 13 COURIER CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) (Dollars in thousands)
DECEMBER 30, SEPTEMBER 30, ASSETS 2000 2000 - ------ ------------ ------------- Current assets: Cash and cash equivalents $ 26 $ 562 Accounts receivable, less allowance for uncollectible accounts 40,643 39,811 Inventories (Note B) 27,038 27,421 Deferred income taxes 2,511 2,543 Other current assets 987 1,016 -------- -------- Total current assets 71,205 71,353 Property, plant and equipment, less accumulated depreciation: $83,687 at December 30, 2000 and $81,427 at September 30, 2000 40,041 41,014 Real estate held for sale or lease, net (Note E) -- 323 Goodwill and other intangibles, net (Note A) 26,850 26,040 Prepublication costs 2,905 2,949 Other assets 530 562 -------- -------- Total assets $141,531 $142,241 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. Page 2 of 13 COURIER CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) (Dollars in thousands)
DECEMBER 30, SEPTEMBER 30, LIABILITIES AND STOCKHOLDERS' EQUITY 2000 2000 - ------------------------------------ ------------ ------------- Current liabilities: Current maturities of long-term debt $ 321 $ 366 Accounts payable 11,410 18,023 Accrued payroll 3,793 6,708 Accrued taxes 5,653 5,303 Other current liabilities 8,309 7,606 --------- --------- Total current liabilities 29,486 38,006 Long-term debt 36,617 31,327 Deferred income taxes 2,523 2,428 Other liabilities 2,346 2,709 --------- --------- Total liabilities 70,972 74,470 --------- --------- Stockholders' equity: 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 3,750 3,750 Additional paid-in capital 2,463 2,283 Retained earnings 68,051 65,551 Unearned compensation (485) (513) Treasury stock, at cost: 391,000 shares at December 30, 2000 and 406,000 shares at September 30, 2000 (3,220) (3,300) --------- --------- Total stockholders' equity 70,559 67,771 --------- --------- Total liabilities and stockholders' equity $ 141,531 $ 142,241 ========= =========
The accompanying notes are an integral part of the consolidated financial statements. Page 3 of 13 COURIER CORPORATION CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Dollars in thousands except per share amounts)
THREE MONTHS ENDED --------------------------- DECEMBER 30, DECEMBER 25, 2000 1999 ------------ ------------ Net sales $53,279 $45,143 Cost of sales 38,655 34,059 ------- ------- Gross profit 14,624 11,084 Selling and administrative expenses 9,940 7,485 Amortization of goodwill and other intangibles 362 163 Interest expense 686 84 Other income (Note E) 930 -- ------- ------- Income before taxes 4,566 3,352 Provision for income taxes (Note C) 1,614 1,183 ------- ------- Net income $ 2,952 $ 2,169 ======= ======= Net income per share (Note D): Basic $ 0.88 $ 0.67 ======= ======= Diluted $ 0.86 $ 0.65 ======= ======= Cash dividends declared per share $ 0.135 $ 0.12 ======= =======
The accompanying notes are an integral part of the consolidated financial statements. Page 4 of 13 COURIER CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in thousands)
THREE MONTHS ENDED --------------------------- DECEMBER 30, DECEMBER 25, 2000 1999 ------------ ------------ Cash used for operating activities ($5,130) ($1,914) ------- ------- Investment activities: Capital expenditures (1,251) (1,490) Prepublication costs (408) -- Proceeds from sale of assets (Note E) 1,340 -- ------- ------- Cash used for investment activities (319) (1,490) ------- ------- Financing activities: Scheduled long-term debt repayments (88) (82) Increase in long-term borrowings 5,333 500 Cash dividends (452) (391) Proceeds from stock plans 120 63 Stock repurchase -- (114) ------- ------- Cash provided from (used for) financing activities 4,913 (24) ------- ------- Decrease in cash and cash equivalents (536) (3,428) Cash and equivalents at the beginning of the period 562 3,460 ------- ------- Cash and equivalents at the end of the period $ 26 $ 32 ======= =======
The accompanying notes are an integral part of the consolidated financial statements. Page 5 of 13 COURIER CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES UNAUDITED FINANCIAL STATEMENTS The balance sheet as of December 30, 2000, the statements of income and the statements of cash flows for the three-month periods ended December 30, 2000 and December 25, 1999 are unaudited and, in the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been recorded. Such adjustments consisted only of normal recurring items. Certain amounts for fiscal 2000 have been reclassified in the accompanying financial statements in order to be consistent with the current year's classification. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The balance sheet data as of September 30, 2000 was derived from audited year-end financial statements, but does not include disclosures required by generally accepted accounting principles. It is suggested that these interim financial statements be read in conjunction with the Company's most recent Form 10-K and Annual Report for the year ended September 30, 2000. BUSINESS ACQUISITION On September 22, 2000, the Company acquired all of the outstanding capital stock of Dover Publications, Inc. (Dover). 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 at September 30, 2000 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. During the first quarter of fiscal 2001, appraisal adjustments resulted in an increase in goodwill of approximately $1 million. NEW ACCOUNTING PRONOUNCEMENTS Effective October 1, 2000, the Company adopted Statement of Financial Accounting Standard (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); the adoption did not have a material effect on the Company's 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 fourth quarter of 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 its consolidated financial statements. Page 6 of 13 COURIER CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 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 46% and 47% of the Company's inventories at December 30, 2000 and September 30, 2000, respectively. Other inventories are determined using the first-in, first-out (FIFO) method with the exception of inventory relating to the September 2000 acquisition of Dover which, in accordance with purchase accounting requirements, is included at its estimated fair market value of $13.9 million at September 30, 2000. Inventories consisted of the following: (000'S OMITTED) -------------- DECEMBER 30, SEPTEMBER 30, 2000 2000 ----------- ------------ Raw materials $ 3,393 $ 3,619 Work in process 7,692 8,018 Finished goods 15,953 15,784 -------- -------- Total $ 27,038 $ 27,421 ======== ======== C. INCOME TAXES The statutory federal tax rate is 34%. The total tax provision differs from that computed using the statutory federal tax rate for the following reasons:
(000'S OMITTED) -------------- THREE MONTHS ENDED ------------------------------- DECEMBER 30, DECEMBER 25, 2000 1999 ------------ ------------ Federal income taxes at statutory rate $ 1,553 $ 1,140 State income taxes, net 134 97 Goodwill amortization 43 43 Foreign sales corporation (FSC) export related income (137) (104) Other 21 7 ------- ------- Total $ 1,614 $ 1,183 ======= =======
D. 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.
(000'S OMITTED) -------------- THREE MONTHS ENDED ------------------------------- DECEMBER 30, DECEMBER 25, 2000 1999 ------------ ------------ Average shares outstanding for basic 3,356 3,254 Effect of potentially dilutive shares 81 91 ----- ----- Average shares outstanding for diluted 3,437 3,345 ===== =====
Page 7 of 13 COURIER CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) E. OTHER INCOME During the first quarter of fiscal 2001, the Company completed the sale of its Raymond, NH facility; such facility comprised 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 the transaction closed in October 2000, resulting in a pretax gain of approximately $0.9 million and approximately $0.6 million after tax, or $.16 per diluted share. F. 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. (Dover), a publisher of special interest books. Dover comprises the Company's third segment, specialized publishing. 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 Courier Custom Publishing, a provider of customized college textbooks and coursepacks. In evaluating segment performance, management primarily focuses on income or loss before taxes and other income (see Note E). The elimination of intersegment sales represents sales from the book manufacturing segment to the specialized publishing segment. Corporate expenses that are allocated to the segments 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 following table provides segment information for the three-month periods ended December 30, 2000 and December 25, 1999:
(000'S OMITTED) -------------- THREE MONTHS ENDED ----------------------------- DECEMBER 30, DECEMBER 25, 2000 1999 ------------ ------------ NET SALES: Book manufacturing $ 45,209 $ 44,734 Customized education 422 409 Specialized publishing 8,569 -- Elimination of intersegment sales (921) -- -------- -------- Total company $ 53,279 $ 45,143 ======== ======== INCOME (LOSS) BEFORE TAXES: Book manufacturing 3,845 4,126 Customized education (351) (774) Specialized publishing 310 -- Elimination of intersegment profit (168) -- Other income 930 -- -------- -------- Total company $ 4,566 $ 3,352 ======== ========
Page 8 of 13 ITEM 2. COURIER CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS: Sales in the first quarter of fiscal 2001 were up 18% to $53.3 million compared to $45.1 million in the corresponding period last year. Sales by Dover Publications, Inc. (Dover), acquired on September 22, 2000, contributed $8.6 million to the increase in sales for the quarter. The acquisition of Dover also requires the elimination of intersegment sales, which reduced total consolidated sales by $0.9 million in the first quarter. Sales from the Company's book manufacturing segment increased 1% to $45.2 million for the quarter. Sales to the educational and religious markets continued to show solid growth, however, sales to the specialty publishing market decreased. This decrease was due in part to a decline in retail sales of books during the holiday season, particularly computer game books where the Company has developed a strong presence. Game book sales were down primarily because of the delay in delivery of Sony's new Play Station II game system. Sales from the Company's customized education segment increased 3% to $422,000 for the first quarter of fiscal 2001. In November 2000, the Company completed its plan to close The Home School retail store in Arlington, WA. The improvement in sales for the customized education segment in the first quarter was attributable to Courier Custom Publishing, the Company's college coursepack business where revenues increased 25% over the same period last year. Revenues from the customized education segment are highly seasonal with the Company's fiscal fourth quarter historically representing the period of highest market demand. Gross profit increased to $14.6 million, or 27.4% of sales, in the first quarter compared to $11.1 million, or 24.6% of sales, in the same period last year. The increase in gross profit is primarily from Dover sales. Dover's gross profit as a percentage of sales is higher than the Company's other businesses which increased the overall percentage. Book manufacturing segment margins were down slightly affected by higher fixed costs related to added capacity and slightly lower productivity due to the adverse effects of a tight labor market. The intersegment profit elimination reduced gross profit by approximately $0.2 million in the first quarter of fiscal 2001. Selling and administrative expenses increased to $9.9 million in the first three months of fiscal 2001 from $7.5 million in the same period last year. As a percentage of sales, selling and administrative expenses were 18.7% in the first quarter of fiscal 2001 compared to 16.6% in the corresponding period last year. The increase was primarily attributable to Dover where selling and administrative expenses as a percentage of sales are significantly higher than the Company's other businesses. Amortization of goodwill and other intangibles increased to $362,000 in the first quarter of fiscal 2001 from $163,000 for the same period last year reflecting the amortization of goodwill related to the acquisition of Dover. Interest expense was $686,000 in the first three months of fiscal 2001 compared to $84,000 in the same period of fiscal 2000 reflecting increased average borrowings of approximately $33 million, primarily due to the acquisition of Dover, as well as a slightly higher average interest rate. In addition, interest of $40,000 related to new equipment was capitalized in the first quarter of fiscal 2001. During the first quarter of fiscal 2001, the Company completed the sale of a building in Raymond, NH. 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 transaction closed in October 2000, resulting in a pretax gain of approximately $0.9 million and approximately $0.6 million after tax, or $.16 per diluted share. The Company's effective tax rate for the first quarter of fiscal 2001 was comparable to the same period last year at 35%. Net income for the first quarter of fiscal 2001 was approximately $3.0 million, or $.86 per diluted share, up 36% over last year's first quarter net income of approximately $2.2 million, or $.65 per diluted share. Net income in fiscal 2001 includes an after-tax gain of approximately $0.6 million, or $.16 per diluted share, on the sale of the Raymond, NH facility. Absent the gain, net income was $2.4 million or $.70 per diluted Page 9 of 13 COURIER CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (CONTINUED): share, up 8% over the corresponding period last year. Dover, which comprises the Company's new specialized publishing segment, contributed approximately $0.3 million in pretax earnings, or $.05 per diluted share, after goodwill amortization and interest expense. Pretax earnings from the book manufacturing segment decreased to $3.8 million from $4.1 million in last year's first quarter, reflecting a slight reduction in the gross profit percentage. The Company's customized education segment reduced first quarter pretax earnings by $0.4 million, and net income by $.07 per diluted share, compared to a reduction in pretax earnings of $0.8 million, and net income of $.15 per diluted share, for the same period last year. The improvement was due in part to the Company's completion in November 2000 of its previously announced plan to close The Home School retail store in Arlington, WA and other steps taken to reduce costs. For purposes of computing diluted net income per share, weighted average shares outstanding increased by approximately 92,000 shares over last year's first quarter. The increase was largely due to options exercised under the Company's stock plans. Effective October 1, 2000, the Company adopted Statement of Financial Accounting Standard (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); the adoption did not have a material effect on the Company's 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 fourth quarter of 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 its consolidated financial statements. LIQUIDITY AND CAPITAL RESOURCES: During the first quarter of fiscal 2001, operations used approximately $5.1 million of cash. Net income was $3.0 million and depreciation and amortization were $3.0 million. This was more than offset by increased working capital requirements related to an increase in accounts receivable coupled with reductions in accounts payable and accrued expenses. Investment activities in the first quarter of fiscal 2001 used approximately $0.3 million of cash. Capital expenditures were approximately $1.3 million for the first three months of fiscal 2001. For the entire fiscal year, capital expenditures are expected to approximate $15 million, primarily for added capacity and factory automation equipment to increase productivity and service levels. Proceeds from the October 2000 sale of the Raymond, NH facility were $1.3 million. The Company entered into an agreement in January 2000 to sell the 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. A number of significant contingencies exist and in December 2000, the Company agreed to extend the closing date to September 2001 because of delays in obtaining necessary permits. Financing activities for the first quarter of fiscal 2001 included an increase in long-term borrowings of approximately $5.2 million. At December 30, 2000, the Company had borrowings of approximately $35.8 million under its $60 million long-term revolving credit facility. Dividends in the first quarter of fiscal 2001 were $0.5 million, a 16% increase over last year's first quarter primarily due to an increase in the amount of the quarterly dividend. Page 10 of 13 COURIER CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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. Page 11 of 13 COURIER CORPORATION ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes from the information concerning the Company's "Quantitative and Qualitative Disclosures About Market Risk" as previously reported in the Company's Annual Report on Form 10-K for the year ended September 30, 2000. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None. (b) Reports on Form 8-K Report on Form 8-K dated September 22, 2000 and filed October 6, 2000 reporting under Item 2 the acquisition of Dover Publications, Inc. A Form 8-K/A filed December 6, 2000 containing the required financial statements for the acquired business and pro forma financial information for the September 22, 2000 acquisition. Page 12 of 13 SIGNATURES Pursuant to the requirements 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. COURIER CORPORATION ------------------- (REGISTRANT) FEBRUARY 12, 2001 By: /s/ JAMES F. CONWAY III - -------------------------- --------------------------------- Date James F. Conway III Chairman, President and Chief Executive Officer FEBRUARY 12, 2001 By: /s/ ROBERT P. STORY, JR. - -------------------------- --------------------------------- Date Robert P. Story, Jr. Senior Vice President and Chief Financial Officer FEBRUARY 12, 2001 By: /s/ PETER M. FOLGER - -------------------------- --------------------------------- Date Peter M. Folger Vice President and Chief Accounting Officer -----END PRIVACY-ENHANCED MESSAGE-----