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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 25, 1999
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
CHELMSFORD, MASSACHUSETTS 01863
TELEPHONE NO. 978-251-6000
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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 22, 1999
Common Stock, $1 par value - $44,121,420
Indicate the number of shares outstanding of each of the registrant's classes
of common stock as of November 22, 1999
Common Stock, $1 par value - 3,258,104
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's proxy statement for the annual meeting of
stockholders scheduled to be held on January 20, 2000 (Part III).
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PART I
ITEM 1. BUSINESS.
INTRODUCTION
Registrant, Courier Corporation ("Courier" or the "Company"), was
incorporated under the laws of Massachusetts on June 30, 1972. Courier owns all
of the capital stock of Courier-Citizen Company, a Massachusetts corporation
organized in 1894 as successor to a printing business which originated in 1824.
Courier Corporation helps organizations manage the process of creating
and distributing intellectual properties. Courier is the largest book
manufacturer in the Northeast, offering services from preparation, production,
media replication, kitting and packaging through storage and distribution.
Products include Bibles, educational and consumer books, software kits and
technical documentation for education, religious and consumer book publishers.
Courier also operates businesses which respond to the need for greater choice in
education. Copyright Management Services provides Internet-based solutions that
enable educators to use coursepacks combining materials from multiple
publishers. The Home School is a direct marketer of educational materials to
families engaged in educating children at home.
In December 1994, the Company formed Courier New Media, Inc. ("Courier
New Media"), an information management services company which works with
publishers and other information developers to create new products from new and
existing intellectual properties. Simultaneously, Courier New Media launched a
new business, Copyright Management Services ("CMS"). CMS specializes in managing
the process of creating multiple-publisher college coursepacks for college
professors utilizing an Internet-based ordering process (www.coursepack.com),
enabling personalized course curriculum and 100% relevant materials for
students. CMS obtains copyright permissions and provides either ready-to-print
masters to a campus print shop, or high quality printed coursepacks to college
bookstores.
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 complements the Company's existing range of services so that the
Company can offer its customers, and Book-mart customers, one-stop full-service
shopping for book production at any run length.
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 retail, catalog and e-commerce (www.thehomeschool.com)
channels. It also offers free advice from experienced home schooling advisors.
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In May 1998, the Company consolidated its kitting, assembly, inventory
management and related services from Courier New Media, located in North
Chelmsford, Massachusetts, into Courier Stoughton where similar operations were
performed. Simultaneously, North Chelmsford's end-user fulfillment operation was
expanded to handle The Home School's national catalog roll out and other
end-user fulfillment business.
The Company operates in one primary business segment, book
manufacturing, with a second smaller business segment in customized education.
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 services from preparation,
production, media replication, kitting and packaging through storage and
distribution for education, religious and consumer book publishers. The
customized education segment, comprised of The Home School and CMS, responds to
the demand for increased choice in the way educational information is received
and used. 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-14 and F-15 included in this Annual Report on Form 10-K.
PRODUCTS
Courier's products include the manufacture of books, manuals and
replicated diskettes and CD-ROMs for publishers, software developers and other
information providers as well as related services involved in managing the
process of creating and distributing these products. Courier provides
manufacturing and related services from seven facilities in Westford, Stoughton
and North Chelmsford, Massachusetts; Philadelphia, Pennsylvania; North Bergen,
New Jersey; Kendallville, Indiana; and Arlington, Washington.
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 capabilities, printing on
lightweight paper for medical and religious publishers and 4-color book
manufacturing for educational and trade publishers.
In 1999, the Company launched an out-of-print book selling e-commerce
business (www.bookhound.com) offering customers replica books manufactured from
an original with copyright permission obtained from the publisher or author.
CMS specializes in providing Internet-based solutions for creating
multiple-publisher college coursepacks for college professors by obtaining
copyright permissions and providing either ready-to-print masters to campus
print shops or printed coursepacks to college bookstores.
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The Home School markets curriculum and other learning materials direct
to home schoolers through retail, catalog and e-commerce channels. Retail
operations and 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 also obtain free advice from
experienced home schooling advisors.
MARKETING AND CUSTOMERS
Courier's book manufacturing services are primarily sold to publishers
of educational, religious, consumer, professional and reference books and to
computer software and hardware manufacturers.
Courier's book manufacturing sales force of 21 people is responsible
for all of the Company's sales to over 625 book manufacturing customers.
Courier's salespeople operate out of sales offices located in New York, Chicago,
Philadelphia, Hayward, California, North Chelmsford, Massachusetts, and North
Bergen, New Jersey.
Sales to one customer, The Gideons International, aggregated
approximately 27% of consolidated sales in fiscal 1999 while sales to Pearson
PLC aggregated approximately 15% of fiscal 1999 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 1999
consolidated sales. The Company distributes products around the world; export
sales, as a percentage of consolidated sales, were approximately 18% in
fiscal 1999, 17% in fiscal 1998 and 18% in fiscal 1997.
CMS markets its custom coursepack services to college bookstores,
campus print shops and direct to professors nationwide. It utilizes direct
marketing techniques including mailings and e-mail backed up by a World Wide Web
site, www.coursepack.com, and related customer specific web sites, as well as
one sales person and an internal direct response staff located in North
Chelmsford, Massachusetts.
The Home School markets curriculum and other learning materials direct
to home schoolers through retail operations in Arlington, Washington, nationwide
through catalog operations in North Chelmsford, Massachusetts and through a
World Wide Web site, www.thehomeschool.com. It also offers customers free
advice from experienced home schoolers.
COMPETITION
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 Courier's competitors are considerably larger or are affiliated with
companies which 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.
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CMS's competition is primarily from university bookstores and
printshops which perform copyright clearance and coursepack production in-house
for the university. CMS distinguishes its products and services on the basis of
convenience, high-quality manufacturing and price.
The home schooling market is highly competitive ranging from small
local retail bookstores to national catalog book sellers 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.
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.
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. The Company may make up to $500,000 on
such capital expenditures in fiscal year 2000. 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 1,320 persons at September
25, 1999 compared to 1,254 a year ago.
OTHER
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 offset by demand from other customers.
Demand for CMS and The Home School products and services is highest in the
Company's fourth quarter.
There is no portion of Courier's business subject to cancellation of
government contracts or renegotiation of profits. Courier holds no patents,
licenses other than third-party software, franchises or concessions which are
important to its operations. The Company considers Courier, Courier New Media,
The Home School, Copyright Management Services, E-Master, CoursepackCounselors,
CampusPrint and Coursepack.com to be proprietary trademarks. In addition,
www.coursepack.com, www.coursepackconnection.com, www.thehomeschool.com and
www.bookhound.com are proprietary Universal Resource Locators (URL) on the World
Wide Web for Courier's businesses and are important to their operations.
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ITEM 2. PROPERTIES.
REAL PROPERTIES
The following schedule lists the facilities occupied by Courier at
September 25, 1999. 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-14 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.
<TABLE>
<CAPTION>
Owned/ Size in
Principal Activity and Location (Year Constructed) Leased Sq. Ft.
- -------------------------------------------------- ------ -------
<S> <C> <C>
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
REAL ESTATE HELD FOR SALE OR LEASE
Raymond, NH (1973) Owned 59,000 (4)
</TABLE>
(1) In September 1996, the Company relocated its corporate headquarters into
approximately 21,000 square feet of an existing facility in North
Chelmsford, MA which 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.
(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) This building, which had been leased through June 1996 to the purchaser
of the Company's former forms printing business, is now vacant pending
sale or lease.
EQUIPMENT
The Company's products are manufactured on equipment which 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 title is held by the lessor.
Capital expenditures amounted to approximately $5.0 million in 1999, $4.1
million in 1998 and $6.7 million in 1997. Capital expenditures in fiscal 1999
were for new binding equipment, computer-to-plate equipment, information systems
improvements and other equipment to lower costs and improve throughput. Fiscal
2000 capital expenditures are expected to be approximately $12 million. Courier
considers its equipment to be in good operating condition and adequate for its
present needs.
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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-10 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 25, 1999.
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-16 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-17 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" appearing on pages F-17 through
F-20 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 page
F-7 of this Annual Report on Form 10-K. The Company engages neither in
speculative nor derivative trading activities.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this Item is contained on pages F-1 through
F-15 of this Annual Report on Form 10-K.
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 47 Chairman, President and Chief
Executive Officer
George Q. Nichols 70 Corporate Senior Vice President
and President of National
Publishing Company
Robert P. Story, Jr. 48 Senior Vice President and
Chief Financial Officer
Thomas G. Osenton 46 Senior Vice President and
Chief Marketing Officer
Peter M. Folger 46 Vice President and
Controller
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.
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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.
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. Osenton joined Courier in October 1993 as Senior Vice President and
Chief Marketing Officer. He has been President of Courier New Media since
January 1996.
Mr. Folger has been Controller since 1982 and became Vice President in
November 1992.
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 20,
2000. 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 20,
2000. Such information is incorporated herein by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(A) DOCUMENTS FILED AS PART OF THIS REPORT
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1. FINANCIAL STATEMENTS PAGE(S)
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_ Independent Auditors' Report F-1
_ Consolidated Statements of Income for each of the three
years in the period ended September 25, 1999 F-2
_ Consolidated Balance Sheets as of September 25, 1999
and September 26, 1998 F-3 to F-4
_ Consolidated Statements of Cash Flows for each of the
three years in the period ended September 25, 1999 F-5
_ Consolidated Statements of Changes in Stockholders' Equity
for each of the three years in the period ended
September 25, 1999 F-6
_ Notes to Consolidated Financial Statements F-7 to F-15
2. FINANCIAL STATEMENT SCHEDULE
_ Schedule II - Consolidated Valuation and
Qualifying Accounts S-1
</TABLE>
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).
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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).
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).
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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+ Executive Incentive Compensation Program as amended and restated
effective December, 1987 (filed as Exhibit 10L-1 to the
Company's Annual Report on Form 10-K for the fiscal year ended
September 24, 1988, and incorporated herein by reference).
10E-2+ 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).
10E-3+ 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).
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10F+ Courier Corporation Senior Executive Severance Program and
Agreements, dated October 25, 1988 pursuant to the program with
Messrs. Conway III, Nichols, Story, Folger and Osenton (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).
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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.
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).
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).
13
<PAGE>
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 with Messrs. Conway III, Nichols, Story and Osenton
(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).
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
None.
14
<PAGE>
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 2, 1999.
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 2, 1999.
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
15
<PAGE>
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 25, 1999 and
September 26, 1998, 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 25, 1999. Our audits also included the
financial statement schedule listed in the index at Item 14. These financial
statements and 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 generally accepted auditing
standards. 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 25,
1999 and September 26, 1998, and the results of its operations and its cash
flows for each of the three years in the period ended September 25, 1999 in
conformity with generally accepted accounting principles. 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 4, 1999
F-1
<PAGE>
CONSOLIDATED
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
------------------------------------------------------------
SEPTEMBER 25, 1999 SEPTEMBER 26, 1998 SEPTEMBER 27, 1997
------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 163,991,000 $ 151,591,000 $ 131,433,000
Cost of sales 123,184,000 113,923,000 103,311,000
------------------------------------------------------------
Gross profit 40,807,000 37,668,000 28,122,000
Selling and administrative expenses 27,726,000 26,653,000 20,945,000
Interest expense 524,000 1,303,000 867,000
Other income (expense) (Note J) - 2,043,000 (306,000)
------------------------------------------------------------
Income before taxes 12,557,000 11,755,000 6,004,000
Provision for income taxes (Note C) 4,181,000 4,030,000 1,688,000
------------------------------------------------------------
Net income $ 8,376,000 $ 7,725,000 $ 4,316,000
============================================================
Net income per share (Notes A and H):
Basic $ 2.61 $ 2.49 $ 1.44
Diluted $ 2.52 $ 2.37 $ 1.41
Cash dividends declared per share $ .42 $ .385 $ .32
============================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
F-2
<PAGE>
CONSOLIDATED
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS SEPTEMBER 25, 1999 SEPTEMBER 26, 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note A) $ 3,460,000 $ 722,000
Accounts receivable, less allowance for uncollectible
accounts of $937,000 in 1999 and $1,078,000 in 1998 31,388,000 27,941,000
Inventories (Note B) 12,232,000 10,828,000
Deferred income taxes (Note C) 1,915,000 1,758,000
Other current assets 271,000 847,000
--------------------------------------
Total current assets 49,266,000 42,096,000
Property, plant and equipment (Notes A and D):
Land 1,059,000 1,059,000
Buildings and improvements 19,052,000 18,803,000
Favorable building lease 2,816,000 2,816,000
Machinery and equipment 79,967,000 77,490,000
Furniture and fixtures 1,700,000 1,668,000
Construction in progress 1,723,000 523,000
--------------------------------------
106,317,000 102,359,000
Less-Accumulated depreciation and amortization (75,689,000) (69,102,000)
--------------------------------------
Property, plant and equipment, net 30,628,000 33,257,000
Real estate held for sale or lease, net (Note J) 344,000 336,000
Goodwill and other intangibles, net (Notes A and I) 10,750,000 11,421,000
Other assets 524,000 520,000
--------------------------------------
Total assets $ 91,512,000 $ 87,630,000
======================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
F-3
<PAGE>
CONSOLIDATED
BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY SEPTEMBER 25, 1999 SEPTEMBER 26, 1998
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt (Note D) $ 338,000 $ 312,000
Accounts payable 11,644,000 9,294,000
Accrued payroll 5,173,000 4,319,000
Accrued taxes 5,162,000 4,935,000
Other current liabilities 5,034,000 6,709,000
----------------------------------
Total current liabilities 27,351,000 25,569,000
Long-term debt (Note D) 1,193,000 6,781,000
Deferred income taxes (Note C) 2,693,000 2,992,000
Other liabilities 2,716,000 2,498,000
----------------------------------
Total liabilities 33,953,000 37,840,000
----------------------------------
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:
Shares 1999 1998
----------------------------------------------------------------------
Authorized 6,000,000 6,000,000
Issued 3,750,000 3,750,000
Outstanding 3,233,000 3,172,000 3,750,000 3,750,000
Additional paid-in capital 1,258,000 384,000
Retained earnings 56,486,000 49,464,000
Treasury stock, at cost: 517,000 shares in 1999 and 578,000 shares in 1998 (3,935,000) (3,808,000)
----------------------------------
Total stockholders' equity 57,559,000 49,790,000
----------------------------------
Total liabilities and stockholders' equity $ 91,512,000 $ 87,630,000
==================================
</TABLE>
F-4
<PAGE>
CONSOLIDATED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
- ----------------------------------------------------------------------------------------------------------------------
SEPTEMBER 25, 1999 SEPTEMBER 26, 1998 SEPTEMBER 27, 1997
-------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities:
Net income $ 8,376,000 $ 7,725,000 $ 4,316,000
Adjustments to reconcile net income to
cash provided from operating activities:
Depreciation and amortization 8,282,000 8,541,000 7,237,000
Deferred income taxes (456,000) (499,000) (812,000)
Change in accounts receivable (3,447,000) (2,022,000) 1,671,000
Change in inventory (1,404,000) (1,010,000) (705,000)
Change in accounts payable 2,350,000 (263,000) (472,000)
Change in accrued taxes 227,000 (26,000) 364,000
Change in other elements of working capital (245,000) 1,891,000 1,431,000
Other, net 687,000 (1,695,000) 1,051,000
-------------------------------------------------------------
Cash provided from operating activities 14,370,000 12,642,000 14,081,000
-------------------------------------------------------------
Investment Activities:
Business acquisitions (Note I) - (563,000) (12,701,000)
Capital expenditures (4,999,000) (4,147,000) (6,732,000)
Proceeds from sale of assets (Note J) - 4,600,000 -
-------------------------------------------------------------
Cash used for investment activities (4,999,000) (110,000) (19,433,000)
-------------------------------------------------------------
Financing Activities:
Scheduled long-term debt repayments (312,000) (387,000) (466,000)
Other long-term borrowings (repayments) (5,250,000) (11,500,000) 7,404,000
Cash dividends (1,354,000) (1,205,000) (969,000)
Stock repurchases (455,000) - (882,000)
Proceeds from stock plans 738,000 1,255,000 259,000
-------------------------------------------------------------
Cash provided from (used for) financing activities (6,633,000) (11,837,000) 5,346,000
-------------------------------------------------------------
Increase (decrease) in cash and equivalents 2,738,000 695,000 (6,000)
Cash and equivalents at the beginning of the period 722,000 27,000 33,000
-------------------------------------------------------------
Cash and equivalents at the end of the period $ 3,460,000 $ 722,000 $ 27,000
=============================================================
Supplemental cash flow information:
Interest paid $ 396,000 $ 1,243,000 $ 774,000
Income taxes paid (net of receipts) $ 3,939,000 $ 4,498,000 $ 2,060,000
=============================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
F-5
<PAGE>
CONSOLIDATED
STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON ADDITIONAL RETAINED TREASURY STOCKHOLDERS'
STOCK PAID-IN CAPITAL EARNINGS STOCK EQUITY
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, September 28, 1996 $ 4,500,000 $ 9,055,000 $ 48,713,000 $ (23,504,000) $ 38,764,000
Net income - - 4,316,000 - 4,316,000
Cash dividends - - (969,000) - (969,000)
Stock repurchases - - - (882,000) (882,000)
Stock plan activity - 125,000 - 194,000 319,000
Shares issued in connection with
business acquisition (Note I) - 97,000 - 103,000 200,000
---------------------------------------------------------------------------
Balance, September 27, 1997 4,500,000 9,277,000 52,060,000 (24,089,000) 41,748,000
Net income - - 7,725,000 - 7,725,000
Cash dividends - - (1,205,000) - (1,205,000)
Stock plan activity - 734,000 - 788,000 1,522,000
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 3,750,000 384,000 49,464,000 (3,808,000) 49,790,000
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 - 874,000 - 328,000 1,202,000
---------------------------------------------------------------------------
Balance, September 25, 1999 $ 3,750,000 $ 1,258,000 $ 56,486,000 $ (3,935,000) $ 57,559,000
===========================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
F-6
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS: Courier Corporation ("Courier" or the "Company") helps
organizations manage the process of creating and distributing intellectual
properties. Courier's book manufacturing business offers services from
preparation, production, media replication, kitting and packaging through
storage and distribution for education, religious and consumer book
publishers. Courier also operates businesses which respond to the need for
greater choice in education, providing Internet-based solutions for custom
coursepacks, as well as direct marketing of educational materials to families
engaged in educating children at home.
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. Certain amounts for fiscal years 1998 and 1997 have been
reclassified in the accompanying financial statements in order to conform with
the current year's presentation.
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 25, 1999 and September 26,
1998, 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. No interest was capitalized in fiscal
years 1999 and 1998; approximately $34,000 was capitalized in fiscal 1997. 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 which 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 recent business acquisitions, which are
discussed more fully in Note I, is being amortized using the straight-line
method over periods ranging from 5 to 20 years. Amortization expense was
approximately $597,000 for fiscal years 1999 and 1998, and approximately $97,000
for fiscal 1997. 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.
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.
F-7
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
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 H).
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 consolidated 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: Effective September 27, 1998, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." Comprehensive income and net income were the same for
each of the three years ended September 25, 1999. 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), which will be
effective in the Company's fiscal year ending September 29, 2001. The Company is
currently evaluating the impact, if any, that the adoption of this new standard
will have on the consolidated financial statements.
B. INVENTORIES
Inventories are valued at the lower of cost or market using the last-in,
first-out (LIFO) method for most inventories. Inventories as of September 25,
1999 and September 26, 1998 consisted of the following:
<TABLE>
<CAPTION>
1999 1998
- ----------------------------------------------------
<S> <C> <C>
Raw materials $ 2,945,000 $ 3,171,000
Work in process 5,899,000 4,903,000
Finished goods 3,388,000 2,754,000
--------------------------------
Total $12,232,000 $ 10,828,000
================================
</TABLE>
On a first-in, first-out (FIFO) basis, reported year-end inventories would have
been higher by $5.5 million in fiscal 1999 and $5.3 million in fiscal 1998.
F-8
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
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:
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income taxes at statutory rate $4,269,000 $ 3,997,000 $2,041,000
State income taxes, net of federal income tax benefit 397,000 428,000 189,000
Export related income (499,000) (310,000) (288,000)
Donation of real estate - - (300,000)
Other 14,000 (85,000) 46,000
--------------------------------------------------
Total $4,181,000 $ 4,030,000 $1,688,000
==================================================
</TABLE>
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Currently payable:
Federal $3,972,000 $ 3,697,000 $2,040,000
State 665,000 832,000 460,000
--------------------------------------------------
4,637,000 4,529,000 2,500,000
--------------------------------------------------
Deferred:
Federal (392,000) (315,000) (638,000)
State (64,000) (184,000) (174,000)
--------------------------------------------------
(456,000) (499,000) (812,000)
--------------------------------------------------
Total $4,181,000 $ 4,030,000 $1,688,000
==================================================
</TABLE>
The following is a summary of the significant components of the Company's
deferred tax assets and liabilities as of September 25, 1999 and September 26,
1998:
<TABLE>
<CAPTION>
1999 1998
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Vacation accrual not currently deductible $ 510,000 $ 444,000
Other accruals not currently deductible 238,000 375,000
Non-deductible reserves 1,138,000 881,000
Other 29,000 58,000
---------------------------------
Classified as current 1,915,000 1,758,000
Deferred compensation arrangements 1,019,000 1,058,000
Charitable contributions carryforward - 74,000
Other 133,000 75,000
---------------------------------
Total deferred tax assets $3,067,000 $ 2,965,000
=================================
Deferred tax liabilities:
Accelerated depreciation $3,845,000 $ 4,199,000
=================================
</TABLE>
Non-current deferred tax assets have been netted against non-current deferred
tax liabilities for balance sheet classification purposes.
F-9
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
D. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
1999 1998
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Obligation under industrial development bond arrangement
at 3%, payable in monthly installments through May 2011 $ 972,000 $ 1,041,000
9.5% secured promissory note, payable in monthly installments
through October 2001 559,000 802,000
Obligation under revolving bank credit facility - 5,250,000
------------------------------
1,531,000 7,093,000
Less: Current maturities 338,000 312,000
------------------------------
Total $1,193,000 $ 6,781,000
==============================
</TABLE>
Scheduled aggregate principal payments of long-term debt are $338,000 in fiscal
2000, $366,000 in fiscal 2001, $76,000 in fiscal 2002, $78,000 in fiscal 2003,
$80,000 in fiscal 2004 and $593,000 thereafter.
In July 1999, the Company amended its $30 million long-term revolving credit
facility with State Street Bank and Trust Company and BankBoston, N.A. to add a
third bank, KeyBank National Association. The amendment also extended the
maturity date of the revolving credit facility to March 2002. Under this credit
facility, the Company can borrow at a rate not to exceed the lesser of LIBOR
plus 1.5% or the bank's money market rates. There were no borrowings under this
facility at September 25, 1999. The Company has not had any short-term
borrowings during the three fiscal years ended September 25, 1999.
The revolving credit facility contains restrictive covenants including
provisions relating to the maintenance of working capital, 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 against income
under such leases approximated $3,553,000 in fiscal 1999, $2,872,000 in fiscal
1998 and $2,365,000 in fiscal 1997. As of September 25, 1999, minimum annual
rental commitments under the Company's long-term operating leases are
approximately $3,556,000 in fiscal 2000, $3,282,000 in fiscal 2001, $2,120,000
in fiscal 2002, $1,682,000 in fiscal 2003, $1,556,000 in fiscal 2004 and
$3,024,000 in the aggregate thereafter.
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. In
January 1999, stockholders approved an amendment to the plan which provided an
increase in the number of shares available for the granting of stock options and
stock grants under the plan by 100,000 shares 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.
F-10
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DIRECTORS' OPTION PLAN: A 1989 plan, as amended in November 1993, 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 a stock option 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 1999 amounted to $16,000 per director; in
addition, the two committee chair fees amounted to a total of $15,000 for fiscal
1999. In January 1999, the stockholders approved amendments to the plan
increasing the number of shares available for issuance by the plan by 100,000 to
a total of 250,000 shares and deleting the termination date, which would have
been September 28, 1999.
The following is a summary of all option activity for these plans:
<TABLE>
<CAPTION>
STOCK OPTION/INCENTIVE PLANS DIRECTORS' OPTION PLAN
- --------------------------------------------------------------------------------------------------------------
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at September 28, 1996 362,778 $ 9.85 35,100 $ 8.77
Issued during period 31,538 14.50 21,000 7.46
Exercised during period (5,250) 6.38 (13,200) 7.40
Canceled during period (2,250) 12.89 - -
Expired during period (15,450) 13.25 - -
----------------------------------------------------------------
Outstanding at September 27, 1997 371,366 $ 10.13 42,900 $ 8.69
Issued during period 35,300 21.46 24,000 11.29
Exercised during period (137,510) 8.69 (22,500) 9.43
Canceled during period (3,599) 10.11 - -
----------------------------------------------------------------
Outstanding at September 26, 1998 265,557 $ 12.39 44,400 $ 9.72
Issued during period 5,000 23.75 18,000 15.75
Exercised during period (59,329) 10.63 (20,600) 10.47
----------------------------------------------------------------
Outstanding at September 25, 1999 211,228 $ 13.15 41,800 $ 11.95
================================================================
Exercisable at September 25, 1999 160,925 $ 11.76 41,800 $ 11.95
Available for future grants 159,537 - 110,500 -
</TABLE>
The following table presents information with regard to all stock options
outstanding at September 25, 1999:
<TABLE>
<CAPTION>
DIRECTORS'
STOCK OPTION/INCENTIVE PLANS OPTION PLAN
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 8.83- $ 14.17- $ 22.83- $ 7.46-
Range of Exercise Prices $ 4.67 $ 13.17 $ 20.75 $ 27.25 $ 15.75
- -------------------------------------------------------------------------------------------------------------------
Options outstanding 5,250 130,241 61,887 13,850 41,800
Weighted average exercise price of options outstanding $ 4.67 $ 10.37 $ 17.36 $ 23.64 $ 11.95
Weighted average remaining life 3.2 years 2.2 years 5.0 years 5.0 years 3.1 years
Options exercisable 5,250 118,978 33,747 2,950 41,800
Weighted average exercise price of options exercisable $ 4.67 $ 10.44 $ 16.48 $ 23.58 $ 11.95
</TABLE>
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 which 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 number of shares granted under the plan were 100 in fiscal 1999, 2,000 in
fiscal 1998 and 3,000 in fiscal 1997. The related compensation expense, based on
the amortization over the vesting period of the fair market value of the shares
on the date granted, was $42,000 in fiscal 1999, $52,000 in fiscal 1998 and
$22,000 in fiscal 1997. As of September 25, 1999, there were 4,828 shares
available for future grants under the plan.
F-11
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
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 1999, 9,737 shares were issued under the plan at an
average price of $17.23 per share. At September 25, 1999, an additional 90,263
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 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 $8,026,000, or $2.42 per diluted share, for fiscal 1999; $7,511,000, or
$2.31 per diluted share, for fiscal 1998; and $4,230,000, or $1.38 per diluted
share, for fiscal 1997. The pro forma effect on net income and net income per
diluted share for fiscal 1999, fiscal 1998 and fiscal 1997 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.
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 grants issued:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Risk-free interest rate 6.3% 4.9% 6.2%
Expected volatility 42% 35% 34%
Expected dividend yields 1.7% 2.0% 2.3%
Estimated life for grants under:
1993 Stock Incentive Plan 7 years 7 years 7 years
Directors' Option Plan 5 years 5 years 5 years
Employee Stock Purchase Plan 6 months 6 months 6 months
===============================================
</TABLE>
Using the Black-Scholes model, following is a summary of the weighted average
fair value per share of options granted during each of the past three fiscal
years:
<TABLE>
<CAPTION>
1993 STOCK INCENTIVE PLAN DIRECTORS' OPTION PLAN
- ------------------------------------------------------------------------------------------------------
On grant date: 1999 1998 1997 1999 1998 1997
-----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Exercise price was equal to stock price $10.76 $7.74 $5.29 - - -
Exercise price was in excess of stock price - $5.98 $4.16 - - -
Exercise price was less than stock price - - - $9.31 $5.79 $3.73
</TABLE>
F-12
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
G. RETIREMENT PLANS
The Company and its consolidated subsidiaries maintain various retirement plans
covering substantially all of its employees. 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
amounted to $2,330,000 in fiscal 1999, $2,202,000 in fiscal 1998 and $1,730,000
in fiscal 1997.
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.
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
1999, 1998 and 1997, no such shares were allocated to eligible participants. At
September 25, 1999, the ESOP held 177,741 shares on behalf of the participants.
H. 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
and stock grant plans.
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Average shares outstanding for basic 3,204,000 3,100,000 3,007,000
Effect of potentially dilutive shares 115,000 154,000 60,000
----------------------------------------
Average shares outstanding for dilutive 3,319,000 3,254,000 3,067,000
========================================
</TABLE>
I. BUSINESS ACQUISITIONS
On July 21, 1997, the Company acquired all of the outstanding capital 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. The Company paid approximately $12.7 million in cash to the former
stockholders of Book-mart for their shares of capital stock. At the time of the
closing, Book-mart had approximately $2.3 million of outstanding bank
indebtedness which was subsequently paid in full. In connection with the
acquisition, 16,667 shares of Courier common stock (based upon a valuation of
$12 per share) were issued to two key executives of Book-mart for non-compete
agreements.
In addition, one of such executives was issued 25,000 shares (subject to a
four-year vesting schedule) in connection with an employment agreement. The
acquisition was accounted for as a purchase and, accordingly, Book-mart's
results of operations have been included in the consolidated financial
statements from July 21, 1997 forward. The excess of the purchase price over the
fair value of net assets acquired amounted to approximately $10 million, which
has been accounted for as goodwill and is being amortized on a straight-line
basis over twenty years. Book-mart leases its office and plant facility from a
corporation owned by two of the former stockholders of Book-mart, one of whom
remains as a key executive of Book-mart. The lease agreement requires annual
payments of approximately $216,000 and the initial term expires five years from
the date of acquisition.
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.
F-13
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
J. OTHER INCOME (EXPENSE)
Other income (expense) as reported in the accompanying consolidated income
statements consisted of gains or losses from the sale or donation of real
estate. In June 1998, the Company completed the sale of a former manufacturing
facility in Philadelphia which 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.
In September 1996, the Company relocated its corporate headquarters into an
existing facility in North Chelmsford, Massachusetts. In August 1997, the
Company finalized the donation of its former corporate headquarters in Lowell,
Massachusetts. The donation had no impact on 1997 net earnings as a pretax loss
of approximately $300,000 was offset by a comparable tax benefit.
The Company's Raymond, New Hampshire facility, which had been leased through
June 1996, is now vacant pending sale or lease and is included in the September
25, 1999 balance sheet as "Real estate held for sale or lease, net." Management
does not believe that there is any material impairment of this or any other
asset of the Company as measured in accordance with SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of."
K. BUSINESS SEGMENTS AND FOREIGN OPERATIONS
The Company operates in one primary business segment, book manufacturing, with a
second smaller business segment in customized education. 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 services from preparation,
production, media replication, kitting and packaging through storage and
distribution for education, religious and consumer 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.
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 non-operating
items such as gains or losses from asset disposals as disclosed in the following
table. Corporate expenses which are allocated to the segments include various
support functions such as information technology services, finance, human
resources and engineering, and includes 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, fixed assets and intangibles used by the corporate
support functions.
F-14
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
The following table provides segment information as required under SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information,"
which the Company adopted in fiscal 1999.
<TABLE>
<CAPTION>
Book Customized Total
Manufacturing Education Unallocated Company
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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 73,606,000 1,218,000 $ 16,688,000 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 71,735,000 1,817,000 14,078,000 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
==========================================================================
Fiscal 1997
Net sales $130,973,000 $ 460,000 - $131,433,000
Earnings (loss) before income taxes 7,866,000 (1,556,000) $ (306,000) 6,004,000
Assets 73,061,000 640,000 15,942,000 89,643,000
Depreciation and amortization 7,165,000 72,000 - 7,237,000
Capital expenditures 4,961,000 269,000 1,502,000 6,732,000
Interest expense 857,000 10,000 - 867,000
==========================================================================
</TABLE>
Export sales as a percentage of consolidated sales were approximately 18% in
fiscal 1999, 17% in fiscal 1998 and 18% in fiscal 1997. Sales to the Company's
largest customer amounted to approximately 27% of consolidated sales in fiscal
1999, 26% in fiscal 1998 and 28% in fiscal 1997. In addition, sales to another
customer amounted to 15% of consolidated sales in fiscal 1999, 12% in fiscal
1998 and 11% in fiscal 1997. No other customer accounted for more than 10% of
consolidated sales. Customers are granted credit on an unsecured basis.
F-15
<PAGE>
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FISCAL 1999 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) FIRST SECOND THIRD FOURTH
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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 .43 .56 .55 .98
Dividends declared per share .105 .105 .105 .105
Stock Price:
Highest bid 31 26 23 3/8 25 3/4
Lowest bid 18 9/16 19 5/8 18 22 3/4
=================================================================
FISCAL 1998 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) FIRST SECOND THIRD FOURTH
-----------------------------------------------------------------
Operating Results:
Net sales $35,306 $39,136 $36,903 $40,246
Gross profit 8,794 9,232 9,312 10,330
Net income 1,210 1,358 2,572 2,585
Net income per diluted share .38 .42 .79 .78
Dividends declared per share .093 .093 .093 .105
Stock Price:
Highest bid 20 3/8 19 3/8 30 29
Lowest bid 13 7/8 17 3/8 17 3/4 20 3/4
=================================================================
</TABLE>
Common shares of the Company are traded over-the-counter on the Nasdaq
National Market-Symbol "CRRC."
THERE WERE APPROXIMATELY 740 STOCKHOLDERS OF RECORD AS OF SEPTEMBER 25, 1999
F-16
<PAGE>
<TABLE>
<CAPTION>
FIVE-YEAR FINANCIAL SUMMARY
- ---------------------------------------------------------------------------------------------------------------
(DOLLAR AMOUNTS IN MILLIONS EXCEPT PER SHARE DATA) 1999 1998 1997 1996 1995*
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 164.0 $ 151.6 $ 131.4 $ 125.2 $ 120.7
Gross profit 40.8 37.7 28.1 22.6 26.3
Net income 8.4 7.7 4.3 2.6 5.2
Net income per diluted share 2.52 2.37 1.41 .82 1.73
Dividends per share .42 .385 .32 .32 .267
Working capital 21.9 16.5 14.1 13.7 11.0
LIFO reserve 5.5 5.3 5.7 6.0 5.9
Current ratio (FIFO basis) 2.0 1.9 1.8 1.9 1.8
Total assets 91.5 87.6 89.6 74.8 73.0
Long-term debt 1.2 6.8 18.6 9.3 9.5
Long-term debt as a percentage of capitalization 2.0% 12.0% 30.8% 19.3% 20.5%
Depreciation and amortization 8.3 8.5 7.2 6.5 6.0
Capital expenditures 5.0 4.1 6.7 7.3 15.0
Stockholders' equity 57.6 49.8 41.7 38.8 36.8
Return on stockholders' equity 14.6% 15.5% 10.3% 6.6% 14.2%
Stockholders' equity per share 17.80 15.70 13.87 12.74 12.23
Shares outstanding (000s omitted) 3,233 3,172 3,011 3,044 3,011
Number of employees 1,320 1,254 1,202 1,050 1,103
============================================================
</TABLE>
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 1995 INCLUDED 53 WEEKS.
MANAGEMENT'S
DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Sales in fiscal 1999 increased 8% to $164.0 million compared to $151.6 million
in fiscal 1998. Sales from the Company's core book manufacturing segment were
also up 8% for the year reflecting increased sales across all of the Company's
major publishing markets. The Company's customized education segment consists of
The Home School and Copyright Management Services (CMS). The Home School, which
was acquired on September 30, 1997, is a direct marketer of books and other
educational products for supplementing or replacing traditional education with
home-based learning. CMS provides customized coursepacks and copyright clearance
services primarily to colleges and universities. Revenues from these two newer
businesses grew by 37% in fiscal 1999 to $2.8 million. Total sales in fiscal
1998 increased 15% to $151.6 million compared to $131.4 million in fiscal 1997.
Sales from the Company's core book manufacturing segment increased 14% over
fiscal 1997. Strong sales to educational and religious publishers provided much
of the growth, while sales to software customers continued to drop, reflecting
a reduction in the use of printed instruction manuals. The acquisition in July
1997 of Book-mart Press, Inc. ("Book-mart"), a short-run book manufacturer,
accounted for approximately half of the fiscal 1998 sales increase. Sales from
the Company's two newer businesses, The Home School and CMS, added approximately
$1.6 million in revenues in fiscal 1998.
Gross profit increased to $40.8 million in fiscal 1999, up 8% from $37.7 million
in fiscal 1998. The increase in gross profit reflects the impact of the
increased sales volume. As a
F-17
<PAGE>
MANAGEMENT'S
DISCUSSION AND ANALYSIS
percentage of sales, gross profit was comparable to fiscal 1998 at 25% of
sales. Gross profits in fiscal 1998 increased by $9.6 million or 34% and, as a
percentage of sales, increased to 25% from 21% in fiscal 1997. The improvement
in gross profits in fiscal 1997 resulted from increased sales volume and an
improved mix of sales combined with productivity gains and cost savings.
Inflation has not had a significant impact on the Company's gross profits, nor
on its overall operations, during the past three years.
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 to
expenses which relate directly to the increase in profitability. As a percentage
of sales, selling and administrative expenses decreased to 17% from 18% last
year. Selling and administrative expenses increased to $26.7 million in 1998
from $20.9 million in 1997 and, as a percentage of sales, were 18% in 1998
compared to 16% in 1997. The increase as a percentage of sales resulted from
increased expenses of approximately $1 million for improvements to the Company's
information systems and infrastructure, including expenses related to "Year
2000" remediation efforts, incremental selling and marketing expenses of
approximately $1 million associated with the Company's newer businesses, The
Home School and CMS, goodwill amortization of approximately $0.5 million related
to the acquisition of Book-mart, and other expenses that relate directly to the
increase in profitability.
Interest expense was $0.5 million in fiscal 1999 compared to $1.3 million in
fiscal 1998, reflecting a reduction in average borrowings of $13 million due to
cash generated from operations as well as a slightly lower average interest rate
in fiscal 1999. Interest expense was $1.3 million in fiscal 1998 compared to
$0.9 million in fiscal 1997, reflecting increased average borrowings of
approximately $6 million. Increased borrowings of approximately $16 million to
finance the acquisitions of Book-mart and The Home School were offset by cash
generated from operations which reduced borrowings by approximately $12 million
during fiscal 1998.
Other income (expense) in fiscal 1998 resulted from a gain on the sale of a
former manufacturing facility in Philadelphia. 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. In fiscal 1997, other
income (expense) resulted from a pretax loss of approximately $0.3 million from
the Company's donation of its former corporate headquarters. The donation had no
impact on fiscal 1997 net income as the pretax loss was offset by a comparable
tax benefit.
The Company's effective tax rate for fiscal 1999 was 33% compared to 34% for
fiscal 1998. The decrease was due to higher state and local taxes in the prior
year related to the sale of the Philadelphia real estate, as well as an
increased benefit from export related income in fiscal 1999. The Company's
effective tax rate for fiscal 1998 was 34% compared to 33% for fiscal 1997,
exclusive of the $0.3 million tax benefit related to the donation of property in
fiscal 1997. The 1998 tax rate was higher than fiscal 1997 primarily due to
nondeductible goodwill related to the acquisition of Book-mart.
Net income was $8.4 million in fiscal 1999, up 27% over last year's net income
of approximately $6.6 million, 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 core book manufacturing operations
increased to $15.2 million, a 19% increase over last year, reflecting increased
sales volume. The Company's newer businesses, CMS and The Home School, reduced
fiscal 1999 pretax earnings by $2.6 million, or $.52 per diluted share, compared
to a reduction of $3.1 million pretax, or $.62 per diluted share, last year. Net
income for fiscal 1998, including the real estate gain, was $7.7 million or
$2.37 per diluted share, compared to $4.3 million, or $1.41 per diluted share,
for fiscal 1997. The increase in net income in fiscal 1998, in addition to the
real estate gain, was due to a significant increase in sales and gross profits.
Pretax earnings from the Company's core book manufacturing operations increased
to $12.8 million in fiscal 1998, a 62% increase over fiscal
F-18
<PAGE>
MANAGEMENT'S
DISCUSSION AND ANALYSIS
1997. The customized education segment, CMS and The Home School, reduced fiscal
1998 pretax earnings by $3.1 million, or $.62 per diluted share, compared to a
reduction of $1.6 million in pretax earnings, or $.33 per diluted share, in
fiscal 1997.
For purposes of computing diluted net income per share, weighted average shares
outstanding increased by approximately 65,000 shares in fiscal 1999, primarily
due to shares exercised under the Company's stock option plans. Similarly,
weighted average shares outstanding increased by approximately 187,000 shares in
fiscal 1998. The increase was due to shares exercised under the stock option
plans, shares issued as compensation for noncompetition agreements pursuant to a
business acquisition, and the impact of potentially dilutive shares which
increased primarily due to the increase in the price per share of the Company's
stock.
On April 16, 1998, the Company announced a three-for-two stock split effected in
the form of a 50% stock dividend, which was distributed on June 1, 1998 to
stockholders of record on May 15, 1998. Weighted average shares outstanding and
net income per share amounts have been restated to give effect to the stock
split.
Effective September 27, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income."
Comprehensive income and net income were the same for each of the three years
ended September 25, 1999. 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), which will be effective in the Company's
fiscal year ending September 29, 2001. The Company is currently evaluating the
impact, if any, that the adoption of this new standard will have on the
consolidated financial statements.
LIQUIDITY AND CAPITAL RESOURCES
In fiscal 1999, operations provided approximately $14.4 million of cash. Net
income for the year was approximately $8.4 million and depreciation and
amortization were $8.3 million. Working capital utilized approximately $2.5
million of cash, primarily from an increase in accounts receivable related to
the increase in sales volume.
Investment activities in 1999 used approximately $5.0 million in cash for
capital expenditures for new binding equipment, computer-to-plate equipment,
information systems improvements and other equipment to lower costs and improve
throughput. Fiscal 2000 capital expenditures are expected to be approximately
$12 million. The Company's Raymond, New Hampshire facility, which had been
leased through June 1996, continues to be vacant pending sale or lease. In
addition, the Company intends to sell the old, unoccupied and underutilized
portions of its multi-building manufacturing complex in Westford,
Massachusetts, which would result in reductions in building operating costs
while maintaining current levels of book manufacturing at the site.
Financing activities used approximately $6.6 million of cash, $5.6 million of
which was used to reduce long-term debt. Dividend payments were $1.4 million and
proceeds from the Company's stock plans were $0.7 million, primarily from the
exercise of stock options. During 1999, the Company repurchased a block of
20,000 shares of its common stock for $0.5 million because the Company believed
the stock was attractively priced. At September 25, 1999, the Company had no
borrowings under its $30 million long-term revolving credit facility. During
1999, the maturity of this revolving credit facility was extended to March
2002.
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.
The Company expects that its cash from operations and available credit
facilities will be sufficient to meet its cash requirements through 2000.
YEAR 2000 ISSUE
THE STATEMENTS IN THE FOLLOWING SECTION INCLUDE "YEAR 2000 READINESS DISCLOSURE"
WITHIN THE MEANING OF THE YEAR 2000 INFORMATION AND READINESS DISCLOSURE ACT.
Historically, many computer programs were written using two digits rather than
four to specify the year. Such software may recognize the year 2000 as "00"
which could
F-19
<PAGE>
MANAGEMENT'S
DISCUSSION AND ANALYSIS
result in computer system failures or miscalculations, commonly referred to as
the Year 2000 (Y2K) issue. The Company recognizes the need to ensure that its
operations will not be adversely impacted by a Year 2000 software failure.
Incomplete or untimely resolution of the Y2K issue by the Company, key
suppliers, customers and other parties could have a material adverse effect on
the Company's results of operations, financial condition and cash flows. The
Company established a Year 2000 Management Task Force to address the Y2K issue.
This Task Force is coordinating efforts to identify, assess and implement
changes to information technology ("IT") systems and operational systems such as
presses and binders, telecommunications equipment, building security and
environmental controls, and is evaluating the Y2K readiness of key suppliers,
customers and other parties.
Operational systems have been inventoried and assessment and testing have been
completed. Less than 2% of operational systems were found to be non-compliant.
Remediation has been completed.
The Company completed inventories and assessments of its IT systems in use at
each of its locations and determined that many of the IT systems were not
compliant. The Company has replaced or upgraded these systems with
enterprise-wide systems across all of the Company's operations, utilizing a
common IT infrastructure which collectively is designed to give the Company the
benefit of new technology with enhanced functionality and resultant improvements
in service and productivity. Implementation and testing to verify compliance of
the IT systems has been completed.
The Company has assessed the Y2K readiness of third parties (including
suppliers, financial institutions and customers) with which it has a material
relationship to identify potentially non-compliant parties. The Company has
performed site visits and continues to actively work with the key suppliers of
raw materials, such as paper mills and film and plate manufacturers. The Company
believes that its most reasonably likely, worst-case Y2K scenario may involve
non-compliant third parties, including suppliers of utilities. The Company is
continually assessing the degree of exposure and risk of non-compliance by such
third parties, which could include possible consequences such as temporary plant
disruptions and delays in the receipt of key materials, the receipt of orders,
the delivery of finished products and the preparation of invoices. The Company
has developed contingency plans to establish processes and procedures for
responding to potential Y2K-related disruptions.
The Company estimates the cost of achieving Y2K compliance to be approximately
$1.8 million of which approximately half will be capital expenditures, primarily
for new IT systems. Costs incurred in fiscal 1999 directly related to Y2K
remediation were approximately $0.8 million bringing total costs to date to
approximately $1.6 million, of which approximately $0.7 million was expensed.
The Y2K costs have been funded through operating cash flows. The Company does
not separately track internal costs incurred for the Y2K project, particularly
the payroll costs of its engineering and information technology groups.
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 CERTAIN RISKS AND
UNCERTAINTIES WHICH 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, CONSOLIDATION AMONG CUSTOMERS, SUCCESS IN THE
INTEGRATION OF ACQUIRED BUSINESSES, YEAR 2000 ISSUES, 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-20
<PAGE>
COURIER CORPORATION
SCHEDULE II
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND OTHER AT END
OF PERIOD EXPENSES DEDUCTIONS CHANGES (1) OF PERIOD
<S> <C> <C> <C> <C> <C>
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
Fiscal year ended September 27, 1997
Allowance for uncollectible accounts $829,000 $242,000 $79,000 $250,000 $1,242,000
</TABLE>
(1) Other changes reflects amount related to a business acquisition.
S-1
<PAGE>
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.
Dated as of: July 22, 1999
State Street Bank and Trust Company,
Individually and as Agent
225 Franklin Street
Boston, Massachusetts 02110
BankBoston, N.A.
100 Federal Street
Boston, Massachusetts 02110
KeyBank National Association
286 Water Street
Augusta, Maine 04332
Re: AMENDMENT NO. 4 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
<PAGE>
"Borrower" and collectively the "Borrowers"), STATE STREET BANK AND TRUST
COMPANY, in its capacity as a Bank ("SSB"), BANKBOSTON, N.A. (f/k/a The First
National Bank of Boston), in its capacity as a Bank ("BKB"; and together with
SSB, the "Banks") and STATE STREET BANK AND TRUST COMPANY, 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 July 22, 1999, 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. 4 to Revolving Credit Agreement, the BKB Allonge, the SSB Allonge and the
Key Note.
(b) Section 1.1.8 of the Agreement is amended to read in its entirety
as follows:
"1.1.8 "Banks" means, collectively, (i) SSB, (ii) BKB, (iii) Key, and
(iv) each of the other financial institutions which may after the date
hereof become a party to this Agreement as a Bank hereunder."
(c) Section 1.1.14 of the Agreement is amended to read in its entirety
as follows:
"1.1.14 "Commitment Percentage" means, with respect to the Revolving
Credit Commitment, (i) in relation to SSB, 33-1/3%, (ii) in relation to
BKB, 33-1/3%, and (iii) in relation to Key, 33-1/3%."
(d) Section 1.1.41 of the Agreement is amended to read in its entirety
as follows:
-2-
<PAGE>
"1.1.41 "EBITDA" means for any fiscal period, on a Consolidated basis,
an amount equal to (i) EBIT for such period, and (ii) plus all
depreciation, amortization and other non-cash charges of the Borrowers
and their respective Subsidiaries taken in accordance with GAAP and
deducted in computing Consolidated Net Income for such period."
(e) Section 1.1.48 is amended to read in its entirety as follows:
"1.1.48 "Rate Period" means the period beginning on the day following
delivery to the Agent and the Banks of the financial statements
required to be delivered pursuant to 5.1(ii) hereof (and pursuant to
Section 5.1(i) hereof in the case of the Borrowers' fiscal year-end)
and ending one day after the day on which the next such financial
statements (as applicable) are delivered to the Agent and the Banks."
(f) 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, 2002."
(g) Section 1.1.57 of the Agreement is amended to read in its entirety
as follows:
"1.1.57 "Revolving Loan Maximum Amount" means $30,000,000."
(h) Section 1.1 of the Agreement is further amended by inserting at the
end thereof the following additional subsection 1.1.63 as follows:
"1.1.63 "Key" means KeyBank National Association, a national banking
association."
(i) Section 1.1 of the Agreement is further amended by inserting at the
end of Section 1.1.63 the following new Section 1.1.64 as follows:
"1.1.64 "Funded Debt Ratio" shall have the meaning set forth in
Section 5.24 hereof."
(j) Section 1.1 of the Agreement is further amended by inserting at the
end of Section 1.1.64 the following new Section 1.1.65 as follows:
"1.1.65 "Total Funded Debt" means, in relation to the Borrowers and
their respective Subsidiaries on a Consolidated basis for any period,
all Indebtedness for borrowed money outstanding at the end of such
period (including, without limitation, the Obligations and obligations
in respect of letters of credit and capital leases)."
-3-
<PAGE>
(k) Section 1.1 of the Agreement is further amended by inserting at the
end of Section 1.1.65 the following new Section 1.1.66 as follows:
"1.1.66 "Applicable Commitment Fee Margin" shall have the meaning set
forth in Section 2.5.1(ii) hereof."
(l) Section 2.5.1 of the Agreement is amended to read in its entirety
as follows:
"(ii) For purposes of this Section 2.5.1 and also Section 2.5.4 below,
(x) the "Applicable Prime Rate Margin" shall be equal to the annual
percentage determined for each Rate Period by reference to Table 1
below, (y) the "Applicable Euroloan Margin" shall be equal to the
annual percentage determined for each Rate Period by reference to Table
1 below, and (z) the "Applicable Commitment Fee Margin" shall be equal
to the annual percentage determined for each Rate Period by reference
to Table 1 below:
<TABLE>
<CAPTION>
Table 1
-------
Applicable Applicable Applicable
Prime Rate Euroloan Commitment
Funded Debt Ratio Margin Margin Fee Margin
----------------- ---------- ---------- ----------
<S> <C> <C> <C>
a) greater than 2.5 to 1 0.00% 1.500% 0.375%
b) greater than 2.0 to 1, but less than or
equal to 2.5 to 1 0.00% 1.125% 0.325%
c) greater than 1.5 to 1, but less than or
equal to 2.0 to 1 0.00% 0.875% 0.250%
d) greater than 1.0 to 1, but less than or
equal to 1.5 to 1 0.00% 0.750% 0.200%
e) less than or equal to 1.0 to 1 0.00% 0.500% 0.175%
</TABLE>
For purposes of determining the Applicable Prime Rate Margin, the
Applicable Euroloan Margin and the Applicable Commitment Fee Margin,
the Funded Debt Ratio will be tested quarterly based on the financial
statements required to be delivered pursuant to Section 5.1(ii) hereof
(and pursuant to Section 5.1(i) hereof in the case of the Borrowers'
fiscal year-end). For purposes of determining the interest rate for any
Rate Period hereunder, any interest rate change shall be effective five
(5) days after the date on which the financial statements required to
-4-
<PAGE>
be delivered pursuant to Sections 5.1(i) or 5.1(ii), as applicable, are
delivered to the Agent and the Banks, together with a notice to the
Agent (which shall be verified by the Agent) specifying any change in
the Applicable Prime Rate Margin, the Applicable Euroloan Margin and
the Applicable Commitment Fee Margin, and if the Borrowers have failed
to deliver the financial statements required to be delivered by them
pursuant to Sections 5.1(i) or 5.1(ii), as applicable, the Applicable
Prime Rate Margin, the Applicable Euroloan Margin and the Applicable
Commitment Fee Margin shall automatically be increased to 0.50%, 1.50%
and 0.375%, respectively, until such financial statements are
delivered." Notwithstanding the foregoing, the Funded Debt Ratio shall
be deemed to be (subject to the preceding sentence if the Borrowers
have failed to deliver financial statements) at level "C" of TABLE 1
above from July 22, 1999 (the "Fourth Amendment Date") through the
later of (x) the date which is 90 days after the Fourth Amendment Date
and (y) the date which is five (5) days after the annual financial
statements for the fiscal year ending September 25, 1999 are delivered
to the Agent and the Banks.
(m) Section 2.5.2 of the Agreement is amended by deleting the phrase
"computed at the annual rate of one-quarter of one percent (1/4%)," and by
inserting in place thereof the following: "in accordance with the Applicable
Commitment Fee Margin,".
(n) Section 5.24 of the Agreement is amended to read in its entirety as
follows:
"5.24 FUNDED DEBT RATIO. At the end of each fiscal quarter, for the
preceding four consecutive fiscal quarters commencing with the fiscal
quarter ending March 27, 1999, the Borrowers shall not cause or permit
the ratio of (i) Consolidated Total Funded Debt to (ii) Consolidated
EBITDA to be greater than 3.0 to 1 (the "Funded Debt Ratio")."
(o) Section 5.25 of the Agreement is amended to read in its entirety as
follows:
"5.25 CURRENT RATIO. The Borrowers shall not cause or permit the ratio
of (i) Current Assets to (ii) Current Liabilities at the end of any
fiscal quarter of the Borrowers to be less than 1.20 to 1."
(p) Section 5.26 of the Agreement is amended to read in its entirety as
follows:
"5.26 DEBT SERVICE COVERAGE. At the end of each fiscal quarter, for the
preceding four consecutive fiscal quarters commencing with the fiscal
quarter ending March 27, 1999, the Borrowers shall not cause or permit
the ratio of (i)
-5-
<PAGE>
Consolidated EBITDA to (ii) Consolidated Total Debt Service to be less
than 3.0 to 1."
(q) Section 5.29 of the Agreement is amended to read in its entirety as
follows:
"5.29 CAPITAL EXPENDITURES. The Borrowers shall not make any Capital
Expenditures in excess of (i) $10,000,000 in the aggregate during each
of the fiscal years ending September 30, 1999 and September 30, 2000,
and (ii) $12,000,000 in the aggregate during each fiscal year
thereafter. Notwithstanding the foregoing provisions of this Section
5.29, any unexpended portion of the amount permitted for Capital
Expenditures in any fiscal year may be carried forward and included in
the aggregate amount permitted for Capital Expenditures in the
following fiscal year only.
(r) Section 8.3 of the Agreement is amended to read in its entirety as
follows:
"8.3 FUTURE ADVANCES. In order to more conveniently administer the
Revolving Loans, BKB and Key do hereby authorize the Agent and SSB to
make all Revolving Loans and advances, subject to the terms and
conditions of this Agreement, to the Borrowers, which are requested by
the Borrowers on any Business Day. BKB and Key do hereby further
irrevocably agree, whether or not this Agreement has been terminated,
an Event of Default has occurred, the Agent has accelerated the
Obligations or the Agent is proceeding to liquidate any collateral, to
transfer to the Agent on each Business Day, if not already transferred,
sufficient immediately available federal funds to reimburse SSB for BKB
and Key's respective Commitment Percentages of all Revolving Loans and
other advances made during such Business Day after taking into account
payments received by the Agent. Any payments made by the Agent on
behalf of any Borrower shall constitute Revolving Loans initially made
by the Agent at such time as such funds are actually provided, or such
payments are made, by the Agent. All Revolving Loans and other advances
made by the Agent on behalf of BKB and Key shall be, for purposes of
interest income and other charges, considered loans from BKB and Key to
the Borrowers at such time as the Agent receives from BKB and Key funds
as provided in this Section 8.3, and prior to such time such Revolving
Loans and advances shall be considered, for purposes of interest income
and other charges, loans from SSB. The Agent may at any time upon
notice to BKB and Key (i) refuse to make Revolving Loans and advances
on behalf of BKB and Key unless BKB and Key shall have provided to the
Agent immediately available federal funds sufficient to cause the
outstanding Revolving Loans to equal each of the Banks' respective
Commitment Percentage; (ii) require BKB and Key to fund such Revolving
Loans and advances before making such Revolving Loans and advances to
the Borrower requesting the same; or (iii) require that BKB and Key
immediately transfer to the Agent on each Business Day immediately
available federal funds sufficient to cause the
-6-
<PAGE>
outstanding Revolving Loans to equal each of the Banks' respective
Commitment Percentage. Notwithstanding the provisions hereof, the
obligations to make Revolving Loans and advances under the terms of
this Agreement shall be the several and not joint obligation of BKB,
Key and SSB, and any advances made by the Agent on behalf of BKB and
Key are strictly for the administrative convenience of the parties and
shall in no way diminish BKB and Key's liability to the Agent and SSB
to repay the Agent for such Revolving Loans and advances."
(s) Section 8.5(ii) of the Agreement is amended to read in its entirety
as follows:
"(ii) All payments received by the Agent pursuant to Section 10.7 of
this Agreement shall be applied by the Agent to reimburse itself, SSB,
BKB or Key as the case may be, on account of the Obligation, tax,
charge or expense in respect of which such payment is made."
(t) Section 8.8 of the Agreement is amended by deleting the reference
to "each of SSB and FNBB" in the first sentence thereof and inserting in place
thereof "each of the Banks."
(u) Section 10.1 of the Agreement is amended by inserting the following
clause at the end of the second to last sentence: ", and written notices to Key
shall be sent to the attention of such officer as may be designated by Key, with
a copy to Preti, Flaherty, Beliveau, Pachios & Haley, LLC, 45 Memorial Circle,
P.O. Box 1058, Augusta, Maine 04332-1058, Attention: James C. Pitney, Jr., Esq."
(v) Section 10.8 of the Agreement is amended to read in its entirety as
follows:
"10.8 AMENDMENTS, WAIVERS, ETC. Except as otherwise expressly provided
in this Agreement or any of the other Loan Documents: (i) each of the
Loan Documents may be modified, amended or supplemented in any respect
whatever only with the prior written consent or approval of the
Majority Banks and the Borrowers; and (ii) the performance or
observance by the Borrowers of any of their covenants, agreements or
obligations under any of the Loan Documents may be waived only with the
written consent of the Majority Banks; PROVIDED, HOWEVER, that the
following changes shall require the written consent, agreement or
approval of all of the Banks: (A) any decrease in the amount or
postponement of the due date of any of the Obligations; (B) any
decrease in the interest rates prescribed in any of the Notes; (C) any
increase in the Revolving Credit Commitment or Commitment Percentage of
any of the Banks, except as permitted by Section 10.10; (D) any change
in the definition of Majority Banks; and (E) any change in the terms of
this Section 10.8. Any change to Section 8 or any other provision of
this Agreement
-7-
<PAGE>
affecting the rights or obligations of the Agent shall not be amended
or modified without the prior written consent of the Agent.
Without limitation of the foregoing, it is agreed that any requirement
in any Loan Document of the consent or waiver of the Banks shall be
deemed to require the consent or waiver of the Majority Banks.
As used herein, the term "Majority Banks" means those Banks whose
aggregate Revolving Credit Commitments constitute at least fifty-one
percent (51%) of the Revolving Credit Maximum Amount in effect at the
relevant time of reference."
(w) EXHIBIT A to the Agreement is amended (i) by deleting each
reference to "$15,000,000" or "Fifteen Million Dollars ($15,000,000)" and
inserting in place thereof either "$10,000,000" or "Ten Million Dollars
($10,000,000)," as the case may be, and (ii) by adding a new Revolving Credit
Note of the Borrowers to Key.
(x) The Agreement and each of the other Loan Documents is amended (i)
by deleting all references to "either Bank" or "either of the Banks" and
inserting in place thereof "each Bank," "each of the Banks," "any Bank" or "any
of the Banks," as the case may be and as the context may require, (ii) by
deleting all references to "both Banks" or "both of the Banks" and inserting in
place thereof "all Banks" or "all of the Banks," as the case may be, and (iii)
to the extent not already amended pursuant to any other provision of this
Amendment No. 4, by deleting all references to "FNBB" and inserting in place
thereof "BKB."
ARTICLE II
AMENDMENT TO REVOLVING CREDIT NOTES
Effective on July 22, 1999, the Revolving Credit Notes to SSB and BKB
are amended as set forth in the Allonges respectively attached hereto as ANNEX 1
and ANNEX 2. In addition, the Revolving Loans shall be evidenced by a separate
Revolving Credit Note of the Borrowers to Key substantially in the form of ANNEX
3 attached hereto.
-8-
<PAGE>
ARTICLE III
CONDITIONS PRECEDENT TO AMENDMENT NO. 4
This Amendment shall become and be effective as of the date hereof, but
only if:
(a) The Borrowers shall have executed and delivered to BKB an Allonge
to the Revolving Credit Note issued in favor of BKB in the form of ANNEX 1 (the
"BKB Allonge");
(b) The Borrowers shall have executed and delivered to SSB an Allonge
to the Revolving Credit Note issued in favor of SSB in the form of ANNEX 2 (the
"SSB Allonge");
(c) The Borrowers shall have executed and delivered to Key a Revolving
Credit Note in favor of Key in the form of ANNEX 3 (the "Key Note"); 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.
-9-
<PAGE>
(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, whereupon this
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<PAGE>
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
-11-
<PAGE>
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/ William L. Lampe, Jr.
----------------------------------
Title: 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
-12-
<PAGE>
THE HOME SCHOOL, INC.
By: /s/ Lee E. Cochrane
----------------------------------
Title: Asst. Treasurer
The foregoing Amendment is hereby accepted by the undersigned as of
July 22, 1999.
THE BANKS:
STATE STREET BANK AND TRUST COMPANY
By: /s/ C. Andrew Picculell
----------------------------------
Title: Vice President
BANKBOSTON, N.A. (f/k/a The First National
Bank of Boston)
By: /s/ Christopher S. Allen
----------------------------------
Title: Director
KEYBANK NATIONAL ASSOCIATION
By: /s/ V. Levesque
----------------------------------
Title: Vice President
THE AGENT:
STATE STREET BANK AND TRUST COMPANY
By: /s/ C. Andrew Picculell
----------------------------------
Title: Vice President
-13-
<PAGE>
ANNEX 1
ALLONGE TO REVOLVING CREDIT NOTE
$10,000,000.00 Dated as of: July 22, 1999
This Allonge is made by 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. (collectively, the "Borrowers"), to that certain Revolving
Credit Note dated March 18, 1997, in the face amount of $10,000,000 (as amended
by that certain Allonge dated July 22, 1997, February 27, 1998 and February 26,
1999 the "Note"), executed and delivered by the Borrowers to BankBoston, N.A.,
f/k/a The First National Bank of Boston, (the "Bank") pursuant to the terms of a
Revolving Credit Agreement, dated as of March 18, 1997, among the Borrowers, the
Bank, and State Street Bank and Trust Company, Individually and as Agent (as
amended, the "Loan Agreement").
Effective on the day and year first above written, each reference in
the Note to "$15,000,000" or to "FIFTEEN MILLION DOLLARS ($15,000,000)" shall be
deemed to be a reference to "$10,000,000" or "TEN MILLION DOLLARS
($10,000,000)," as the case may be.
Effective on the day and year first above written, and without
prejudice to Section 2.4.3 of the Loan Agreement, the Revolving Loan Maturity
Date shall be extended to March 15, 2002.
The Borrowers hereby confirm their joint and several promise to pay as
set forth in the Note, and all other terms and conditions of the Note, as
modified by this Allonge.
All capitalized terms used herein but not defined herein shall have the
same meaning as set forth in the Note.
-14-
<PAGE>
This Allonge shall become part of the Note, and although it is the
intent of the parties that this Allonge be affixed to the Note, this Allonge
shall continue in full force and effect even if it has not been so affixed.
Executed as a sealed instrument as of the date first above written.
THE BORROWERS:
WITNESS: COURIER CORPORATION
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: V.P. & Treasurer
WITNESS: COURIER CITIZEN COMPANY
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: V.P. & Treasurer
WITNESS: COURIER COMPANIES, INC.
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Asst. Treasurer
WITNESS: COURIER DELAWARE HOLDING CORPORATION
/s/ Joan Cavaliere By: /s/ William L. Lampe, Jr.
- -------------------------- ----------------------------------
Title: Title: V.P. & Treasurer
(signatures continue on next page)
-2-
<PAGE>
WITNESS: COURIER FOREIGN SALES CORPORATION
LIMITED
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Treasurer
WITNESS: COURIER INVESTMENT CORPORATION
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Asst. Treasurer
WITNESS: COURIER KENDALLVILLE, INC.
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Asst. Treasurer
WITNESS: COURIER PROPERTIES, INC.
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Asst. Treasurer
WITNESS: COURIER STOUGHTON, INC.
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Asst. Treasurer
WITNESS: COURIER WESTFORD, INC.
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Asst. Treasurer
(signatures continue on next page)
-3-
<PAGE>
WITNESS: NATIONAL PUBLISHING COMPANY
/s/ Joan Cavaliere By: /s/ William L. Lampe, Jr.
- -------------------------- ----------------------------------
Title: Title: Treasurer
WITNESS: COURIER NEW MEDIA, INC.
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Asst. Treasurer
WITNESS: BOOK-MART PRESS, INC.
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Asst. Treasurer
WITNESS: THE HOME SCHOOL, INC.
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Asst. Treasurer
-4-
<PAGE>
ANNEX 2
ALLONGE TO REVOLVING CREDIT NOTE
$10,000,000.00 Dated as of: July 22, 1999
This Allonge is made by 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. (collectively, the "Borrowers"), to that certain Revolving
Credit Note dated March 18, 1997, in the face amount of $10,000,000 (as amended
by that certain Allonge dated July 22, 1997, February 27, 1998, and February 26,
1999 the "Note"), executed and delivered by the Borrowers to State Street Bank
and Trust Company (the "Bank"), pursuant to the terms of a Revolving Credit
Agreement, dated as of March 18, 1997, among the Borrowers, BankBoston, N.A.,
f/k/a The First National Bank of Boston, and State Street Bank and Trust
Company, Individually and as Agent (as amended, the "Loan Agreement").
Effective on the day and year first above written, each reference in
the Note to "$15,000,000" or to "FIFTEEN MILLION DOLLARS ($15,000,000)" shall be
deemed to be a reference to "$10,000,000" or "TEN MILLION DOLLARS
($10,000,000)," as the case may be.
Effective on the day and year first above written, and without
prejudice to Section 2.4.3 of the Loan Agreement, the Revolving Loan Maturity
Date shall be extended to March 15, 2002.
The Borrowers hereby confirm their joint and several promise to pay as
set forth in the Note, and all other terms and conditions of the Note, as
modified by this Allonge.
All capitalized terms used herein but not defined herein shall have the
same meaning as set forth in the Note.
-18-
<PAGE>
This Allonge shall become part of the Note, and although it is the
intent of the parties that this Allonge be affixed to the Note, this Allonge
shall continue in full force and effect even if it has not been so affixed.
Executed as a sealed instrument as of the date first above written.
THE BORROWERS:
WITNESS: COURIER CORPORATION
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: V.P. & Treasurer
WITNESS: COURIER CITIZEN COMPANY
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: V.P. & Treasurer
WITNESS: COURIER COMPANIES, INC.
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Asst. Treasurer
WITNESS: COURIER DELAWARE HOLDING CORPORATION
/s/ Joan Cavaliere By: /s/ William L. Lampe, Jr.
- -------------------------- ----------------------------------
Title: Title: V.P. & Treasurer
WITNESS: COURIER FOREIGN SALES CORPORATION
LIMITED
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Treasurer
(signatures continue on next page)
-2-
<PAGE>
WITNESS: COURIER INVESTMENT CORPORATION
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Asst. Treasurer
WITNESS: COURIER KENDALLVILLE, INC.
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Asst. Treasurer
WITNESS: COURIER PROPERTIES, INC.
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Asst. Treasurer
WITNESS: COURIER STOUGHTON, INC.
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Asst. Treasurer
WITNESS: COURIER WESTFORD, INC.
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Asst. Treasurer
WITNESS: NATIONAL PUBLISHING COMPANY
/s/ Joan Cavaliere By: /s/ William L. Lampe, Jr.
- -------------------------- ----------------------------------
Title: Title: Treasurer
WITNESS: COURIER NEW MEDIA, INC.
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Asst. Treasurer
(signatures continue on next page)
-3-
<PAGE>
WITNESS: BOOK-MART PRESS, INC.
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Asst. Treasurer
WITNESS: THE HOME SCHOOL, INC.
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Asst. Treasurer
-4-
<PAGE>
ANNEX 3
REVOLVING CREDIT NOTE
$10,000,000.00 Boston, Massachusetts
July 22, 1999
FOR VALUE RECEIVED, the undersigned (hereinafter, together with their
respective successors in title and assigns, collectively called the
"Borrowers"), by this promissory note (hereinafter, called "this Note"),
absolutely and unconditionally promise to pay to the order of KeyBank National
Association, a national banking association organized under the laws of the
United States of America (hereinafter, together with its successors in title and
assigns, called the "Bank"), the principal sum of TEN MILLION DOLLARS
($10,000,000), or so much thereof as shall have been advanced by the Bank to the
Borrowers by way of revolving loans under the Credit Agreement (as hereinafter
defined) and shall remain outstanding, such payment to be made as hereinafter
provided, and to pay interest on the principal sum outstanding hereunder from
time to time from the date hereof until the said principal sum or the unpaid
portion thereof shall have become due and payable as hereinafter provided.
The entire unpaid principal (not at the time overdue) of this Note
shall bear interest at the rate or rates from time to time in effect under the
Credit Agreement. Accrued interest on the unpaid principal under this Note shall
be payable on the dates specified in the Credit Agreement.
On March 15, 2002, the date of the final maturity of this Note (unless
extended pursuant to Section 2.4.3 of the Credit Agreement), there shall become
absolutely due and payable by the Borrowers hereunder, and the Borrowers hereby
jointly and severally promise to pay to the holder hereof, the balance (if any)
of the principal hereof then remaining unpaid, all of the unpaid interest
accrued hereon and all (if any) other amounts payable on or in respect of this
Note or the indebtedness evidenced hereby.
Each overdue amount (whether of principal, interest or otherwise)
payable on or in respect of this Note or the indebtedness evidenced hereby shall
(to the extent permitted by applicable law) bear interest at the rates and on
the terms provided by the Credit Agreement. The unpaid interest accrued on each
overdue amount in accordance with the foregoing terms of this paragraph shall
become and be absolutely due and payable by the Borrowers to the holder hereof
on demand by the holder of this Note. Interest on each overdue amount will
continue to accrue as provided by the foregoing terms of this paragraph, and
will (to the extent permitted by applicable law) be compounded monthly until the
obligations of the Borrowers in respect of the payment of such overdue amount
shall be discharged (whether before or after judgment).
-22-
<PAGE>
Each payment of principal, interest or other sum payable on or in
respect of this Note or the indebtedness evidenced hereby shall be made by the
Borrowers directly to the Agent in U.S. Dollars, at the Agent's Head Office (as
hereinafter defined), on the due date of such payment, and in immediately
available and freely transferable funds. All payments on or in respect of this
Note or the indebtedness evidenced hereby shall be made without set-off or
counterclaim and free and clear of and without any deductions, withholdings,
restrictions or conditions of any nature.
This Note is made and delivered by the Borrowers to the Bank pursuant
to a Revolving Credit Agreement, dated as of March 18, 1997, among the
Borrowers, the Banks and the Agent (hereinafter, as originally executed, or, if
varied or supplemented or amended and restated, called the "Credit Agreement").
This Note evidences the joint and several obligations of the Borrowers (a) to
repay the principal amount of each Revolving Loan (as defined in the Credit
Agreement) made by the Bank to the Borrowers pursuant to the Credit Agreement;
(b) to pay interest, as herein and therein provided, on the principal amount
hereof remaining unpaid from time to time; and (c) to pay other amounts which
may become due and payable hereunder as herein provided. Reference is hereby
made to the Credit Agreement (including the EXHIBITS annexed thereto) for a
complete statement of the terms thereof.
No reference herein to the Credit Agreement or to any provisions
thereof shall impair the obligations of the Borrowers, which are absolute,
unconditional and irrevocable, to pay the principal of and the interest on this
Note and to pay all (if any) other amounts which may become due and payable on
or in respect of this Note or the indebtedness evidenced hereby, strictly in
accordance with the terms and the tenor of this Note.
For all purposes of this Note, the following terms shall have the
respective meanings set forth below:
(a) "Agent" means State Street Bank and Trust Company, acting
in its capacity as Agent for the Banks under the Credit Agreement.
(b) "Agent's Head Office" means the head office of State
Street Bank and Trust Company located at 225 Franklin Street, Boston,
Massachusetts 02110.
(c) "Banks" shall have the meaning ascribed to such term in
the Credit Agreement.
(d) "holder" means the Bank in possession of this Note or any
other Person who is at the time the lawful holder in possession of this
Note.
The Borrowers will have the right to prepay the unpaid principal of
this Note in full or in part upon the terms contained in the Credit Agreement.
The Borrowers will have an obligation to prepay principal of this Note upon the
terms contained in the Credit
-23-
<PAGE>
Agreement. Any partial payment of the indebtedness evidenced by this Note shall
be applied in accordance with the terms of the Credit Agreement.
Pursuant to, and upon the terms contained in, Section 6 of the Credit
Agreement, the entire unpaid principal of this Note, all of the interest accrued
on the unpaid principal of this Note and all (if any) other amounts payable on
or in respect of this Note or the indebtedness evidenced hereby may be declared
to be immediately due and payable, whereupon the entire unpaid principal of this
Note, all of the interest accrued on the unpaid principal of this Note and all
(if any) other amounts payable on or in respect of this Note or the indebtedness
evidenced hereby shall (if not already due and payable) forthwith become and be
due and payable to the holder of this Note without presentment, demand, protest
or any other formalities of any kind, all of which are hereby expressly and
irrevocably waived by the Borrowers.
All computations of interest payable as provided in this Note shall be
made by the Agent on the basis of the actual number of days elapsed divided by
360. The Prime Rate (as defined in the Credit Agreement) in effect from time to
time shall be determined in accordance with the terms of the Credit Agreement.
Should all or any part of the indebtedness represented by this Note be
collected by action at law, or in bankruptcy, insolvency, receivership or other
court proceedings, or should this Note be placed in the hands of attorneys for
collection after default, the Borrowers hereby jointly and severally promise to
pay to the holder of this Note, upon demand by the holder hereof at any time, in
addition to principal, interest and all (if any) other amounts payable on or in
respect of this Note or the indebtedness evidenced hereby, all court costs and
attorneys' fees and all other collection charges and expenses reasonably
incurred or sustained by the holder of this Note.
The Borrowers hereby irrevocably waive notice of acceptance,
presentment, notice of nonpayment, protest, notice of protest, suit and all
other conditions precedent in connection with the delivery, acceptance,
collection and/or enforcement of this Note. The Borrowers hereby absolutely and
irrevocably consent and submit to the jurisdiction of the Courts of the
Commonwealth of Massachusetts and of any Federal Court located in the said
Commonwealth in connection with any actions or proceedings brought against the
Borrowers by the holder hereof arising out of or relating to this Note.
This Note is intended to take effect as a sealed instrument. This Note
and the obligations of the Borrowers hereunder shall be governed by and
interpreted and determined in accordance with the laws of the Commonwealth of
Massachusetts.
Each of the Borrowers shall be jointly and severally liable for the
full amount owing under this Note.
-24-
<PAGE>
IN WITNESS WHEREOF, this REVOLVING CREDIT NOTE has been duly executed
by the undersigned on the day and in the year first above written in Boston,
Massachusetts.
THE BORROWERS:
WITNESS: COURIER CORPORATION
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: V.P. & Treasurer
WITNESS: COURIER CITIZEN COMPANY
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: V.P. & Treasurer
WITNESS: COURIER COMPANIES, INC.
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Asst. Treasurer
WITNESS: COURIER DELAWARE HOLDING CORPORATION
/s/ Joan Cavaliere By: /s/ William L. Lampe, Jr.
- -------------------------- ----------------------------------
Title: Title: V.P. & Treasurer
WITNESS: COURIER FOREIGN SALES CORPORATION
LIMITED
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Treasurer
WITNESS: COURIER INVESTMENT CORPORATION
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Asst. Treasurer
<PAGE>
WITNESS: COURIER KENDALLVILLE, INC.
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Asst. Treasurer
WITNESS: COURIER PROPERTIES, INC.
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Asst. Treasurer
WITNESS: COURIER STOUGHTON, INC.
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Asst. Treasurer
WITNESS: COURIER WESTFORD, INC.
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Asst. Treasurer
WITNESS: NATIONAL PUBLISHING COMPANY
/s/ Joan Cavaliere By: /s/ William L. Lampe, Jr.
- -------------------------- ----------------------------------
Title: Title: Treasurer
WITNESS: COURIER NEW MEDIA, INC.
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Asst. Treasurer
WITNESS: BOOK-MART PRESS, INC.
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Asst. Treasurer
<PAGE>
WITNESS: THE HOME SCHOOL, INC.
/s/ Elaine Imbrogna By: /s/ Lee E. Cochrane
- -------------------------- ----------------------------------
Title: Title: Asst. Treasurer
-4-
<PAGE>
COURIER CORPORATION
SUBSIDIARIES OF REGISTRANT
EXHIBIT 21
Registrant has the following subsidiaries:
<TABLE>
<CAPTION>
% OWNED
Jurisdiction of by Immediate
Name Immediate Parent Incorporation Parent
- ------------------------------------ -------------------------- ------------------ -------------
<S> <C> <C> <C>
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%
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
333-03201, 333-71631, 333-75187 and 333-75189 of Courier Corporation on Form S-8
of our report dated November 4, 1999, appearing in this Annual Report on Form
10-K of Courier Corporation and subsidiaries for the year ended September
25, 1999.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 9, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-25-1999
<PERIOD-START> SEP-27-1998
<PERIOD-END> SEP-25-1999
<CASH> 3,460
<SECURITIES> 0
<RECEIVABLES> 31,388<F1>
<ALLOWANCES> 937
<INVENTORY> 12,232
<CURRENT-ASSETS> 49,266
<PP&E> 106,317
<DEPRECIATION> 75,689
<TOTAL-ASSETS> 91,512
<CURRENT-LIABILITIES> 27,351
<BONDS> 0
0
0
<COMMON> 3,750
<OTHER-SE> 53,809<F2>
<TOTAL-LIABILITY-AND-EQUITY> 91,512
<SALES> 163,991
<TOTAL-REVENUES> 163,991
<CGS> 123,184
<TOTAL-COSTS> 123,184
<OTHER-EXPENSES> 27,552
<LOSS-PROVISION> 174
<INTEREST-EXPENSE> 524
<INCOME-PRETAX> 12,557
<INCOME-TAX> 4,181
<INCOME-CONTINUING> 8,376
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,376
<EPS-BASIC> 2.61
<EPS-DILUTED> 2.52
<FN>
<F1>ACCOUNTS RECEIVABLE ARE NET OF ALLOWANCES
<F2>OTHER SE INCLUDES TREASURY STOCK
</FN>
</TABLE>
