<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 25, 2000
-----------------------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-7597
-------------------------------
COURIER CORPORATION
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts
------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
04-2502514
----------------------------------
(I.R.S. Employer Identification No.)
15 Wellman Avenue
North Chelmsford, Massachusetts 01863
-------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(978) 251-6000
--------------
(Registrant's telephone number, including area code)
No Change
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 24, 2000
- -------------------------- -----------------------------
Common Stock, $1 par value 3,269,043 shares
Page 1 of 13
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COURIER CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
March 25, September 25,
2000 1999
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 254 $ 3,460
Accounts receivable, less allowance
for uncollectible accounts 31,154 31,388
Inventories (Note B) 14,923 12,232
Deferred income taxes 1,915 1,915
Other current assets 1,150 271
------------- -------------
Total current assets 49,396 49,266
Property, plant and equipment, less
accumulated depreciation: $79,171
at March 25, 2000 and $75,689
at September 25, 1999 32,166 30,628
Real estate held for sale or lease, net 334 344
Goodwill and other intangibles, net 10,420 10,750
Other assets 547 524
------------- -------------
Total assets $ 92,863 $ 91,512
============= =============
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
Page 2 of 13
<PAGE>
COURIER CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
March 25, September 25,
2000 1999
------------- -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 351 $ 338
Accounts payable 10,519 11,644
Accrued payroll 4,415 5,173
Accrued taxes 4,451 5,162
Other current liabilities 5,658 5,034
------------- -------------
Total current liabilities 25,394 27,351
Long-term debt 1,015 1,193
Deferred income taxes 2,534 2,693
Other liabilities 2,520 2,716
------------- -------------
Total liabilities 31,463 33,953
------------- -------------
Stockholders' equity:
Preferred stock, $1 par value--authorized
1,000,000 shares; none issued
Common stock, $1 par value--authorized
6,000,000 shares; issued 3,750,000 shares 3,750 3,750
Additional paid-in capital 1,552 1,258
Retained earnings 60,225 56,486
Unearned compensation (224) --
Treasury stock, at cost: 491,000 shares
at March 25, 2000 and 517,000
shares at September 25, 1999 (3,903) (3,935)
------------- -------------
Total stockholders' equity 61,400 57,559
------------- -------------
Total liabilities and stockholders' equity $ 92,863 $ 91,512
============= =============
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
Page 3 of 13
<PAGE>
COURIER CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
---------------------- ----------------------
March 25, March 27, March 25, March 27,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 44,489 $ 40,480 $ 89,632 $ 79,781
Cost of sales 32,946 30,256 67,005 60,219
--------- --------- --------- ---------
Gross profit 11,543 10,224 22,627 19,562
Selling and administrative expenses 7,815 7,186 15,463 14,189
Interest expense 101 167 185 302
--------- --------- --------- ---------
Income before taxes 3,627 2,871 6,979 5,071
Provision for income taxes (Note C) 1,276 1,004 2,459 1,784
--------- --------- --------- ---------
Net income $ 2,351 $ 1,867 $ 4,520 $ 3,287
========= ========= ========= =========
Net income per share (Note D):
Basic $ 0.72 $ 0.59 $ 1.39 $ 1.03
========= ========= ========= =========
Diluted $ 0.70 $ 0.56 $ 1.35 $ 0.99
========= ========= ========= =========
Cash dividends declared per share $ 0.12 $ 0.105 $ 0.24 $ 0.21
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
Page 4 of 13
<PAGE>
COURIER CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
------------------------
March 25, March 27,
2000 1999
--------- ---------
<S> <C> <C>
Cash provided from operating activities $ 2,900 $ 343
--------- ---------
Investment activities:
Capital expenditures (5,227) (1,326)
--------- ---------
Cash used for investment activities (5,227) (1,326)
--------- ---------
Financing activities:
Scheduled long-term debt repayments (165) (152)
Increase in long-term borrowings -- 750
Cash dividends (781) (672)
Proceeds from stock plans 181 363
Stock repurchase (114) --
--------- ---------
Cash provided from (used for) financing activities (879) 289
--------- ---------
Decrease in cash and cash equivalents (3,206) (694)
Cash and equivalents at the beginning of the period 3,460 722
--------- ---------
Cash and equivalents at the end of the period $ 254 $ 28
========= =========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
Page 5 of 13
<PAGE>
COURIER CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
UNAUDITED FINANCIAL STATEMENTS
The balance sheet as of March 25, 2000, the statements of income for the
three-month and six-month periods ended March 25, 2000 and March 27, 1999, and
the statements of cash flows for the six-month periods ended March 25, 2000 and
March 27, 1999 are unaudited and, in the opinion of management, all adjustments
necessary for a fair presentation of such financial statements have been
recorded. Such adjustments consisted only of normal recurring items.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. The balance sheet data as of September 25, 1999
was derived from audited year-end financial statements, but does not include
disclosures required by generally accepted accounting principles. It is
suggested that these interim financial statements be read in conjunction with
the Company's most recent Form 10-K and Annual Report for the year ended
September 25, 1999.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities" (as amended by SFAS No. 137 in June 1999), 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 consisted of the
following:
<TABLE>
<CAPTION>
(000's Omitted)
--------------------------------
March 25, September 25,
2000 1999
------------- -------------
<S> <C> <C>
Raw materials $3,650 $2,945
Work in process 7,610 5,899
Finished goods 3,663 3,388
------------- --------------
Total $14,923 $12,232
============= ==============
</TABLE>
Page 6 of 13
<PAGE>
COURIER CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
C. INCOME TAXES
The statutory federal tax rate is 34%. The total tax provision differs from that
computed using the statutory federal tax rate for the following reasons:
<TABLE>
<CAPTION>
(000's Omitted)
--------------------------------------------------------
Quarter Ended Six Months Ended
------------------------ ------------------------
March 25, March 27, March 25, March 27,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Federal income taxes at
statutory rate $ 1,233 $ 976 $ 2,373 $ 1,724
State income taxes, net 110 73 207 115
Goodwill amortization 43 43 86 86
Foreign sales corporation
(FSC) benefit from
export related income (127) (66) (231) (121)
Other 17 (22) 24 (20)
--------- --------- --------- ---------
Total $ 1,276 $ 1,004 $ 2,459 $ 1,784
========= ========= ========= =========
</TABLE>
D. NET INCOME PER SHARE
Following is a reconciliation of the shares used in the calculation of basic and
diluted net income per share. Potentially dilutive shares, calculated using the
treasury stock method, consist of shares issued under the Company's stock option
plans.
<TABLE>
<CAPTION>
(000's Omitted)
--------------------------------------------------
Quarter Ended Six Months Ended
---------------------- ----------------------
March 25, March 27, March 25, March 27,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Average shares outstanding for basic 3,263 3,191 3,259 3,185
Effect of potentially dilutive shares 95 121 93 129
--------- -------- --------- --------
Average shares outstanding for diluted 3,358 3,312 3,352 3,314
========= ======== ========= ========
</TABLE>
Page 7 of 13
<PAGE>
COURIER CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
E. BUSINESS SEGMENTS
The Company operates in one primary business segment, book manufacturing, with a
second smaller business segment in customized education. 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.
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. Intersegment sales are not significant. Corporate expenses that are
allocated to the segments include various support functions such as information
technology services, finance, human resources and engineering, and include
depreciation and amortization expense related to corporate assets.
The following table provides segment information for the three-month and
six-month periods ended March 25, 2000 and March 27, 1999:
<TABLE>
<CAPTION>
(000's Omitted)
--------------------------------------------------
Quarter Ended Six Months Ended
---------------------- ----------------------
March 25, March 27, March 25, March 27,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
BOOK MANUFACTURING SEGMENT:
Net sales $ 43,987 $ 39,999 $ 88,721 $ 79,020
Earnings before income taxes 4,354 3,687 8,480 6,735
CUSTOMIZED EDUCATION SEGMENT:
Net sales 502 481 911 761
Loss before income taxes (727) (816) (1,501) (1,664)
TOTAL COMPANY:
Net sales 44,489 40,480 89,632 79,781
Earnings before income taxes 3,627 2,871 6,979 5,071
</TABLE>
Page 8 of 13
<PAGE>
ITEM 2.
COURIER CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
Sales in the second quarter of fiscal 2000 were up 10% to $44.5 million compared
to $40.5 million in the corresponding period last year. Sales from the Company's
book manufacturing segment increased 10% to $44.0 million for the quarter,
reflecting continued growth in sales to religious and educational publishing
customers, as well as increased sales to specialized trade publishing customers
including increased paper sales to these customers. Sales from the Company's
customized education segment were $0.5 million in the second quarter, an
increase of 4% compared to the same period last year. Revenues from the
customized education segment are highly seasonal with the Company's fourth
quarter historically representing the period of highest market demand.
Gross profit increased to $11.5 million, or 25.9% of sales, in the second
quarter compared to $10.2 million, or 25.3% of sales, in the same period last
year. The increase in gross profit reflects the impact of the increased sales
volume, as well as gains in productivity related to previous investments in
facilities, equipment and information systems. Higher prices for recycled
paper also contributed to the increase in gross profit.
Selling and administrative expenses increased to $7.8 million in the second
quarter of fiscal 2000 from $7.2 million in the same period last year due
largely to expenses directly related to the increase in profitability. As a
percentage of sales, selling and administrative expenses decreased to 17.6% in
the second quarter compared to 17.8% of sales in the corresponding period last
year.
Interest expense was $101,000 in the second quarter of fiscal 2000 compared to
$167,000 in the same period of fiscal 1999 reflecting a reduction in average
borrowings of approximately $3.2 million. In addition, interest of $19,000
related to new equipment was capitalized in the second quarter of fiscal 2000.
The Company's effective tax rate of 35% for the second quarter of fiscal 2000
was comparable to the same period last year as a higher effective state tax
rate was offset by an increased foreign sales corporation (FSC) benefit from
export related income.
Net income for the second quarter of fiscal 2000 was approximately $2.4
million, up 26% over last year's second quarter earnings of approximately
$1.9 million. Net income per share on a diluted basis increased 25% to $.70
per share compared to $.56 per share for the corresponding period last year.
Pretax earnings from the Company's book manufacturing operations increased to
$4.4 million, 18% over last year's second quarter, reflecting increased sales
volume and higher levels of productivity. The Company's customized education
segment reduced second quarter pretax earnings by $0.7 million, and net
income by $.14 per diluted share compared to a reduction of $.16 per diluted
share for the same period last year. Revenues and related earnings for the
customized education segment are highly seasonal and are expected to increase
in the fourth fiscal quarter, which coincides with the months of highest
market demand.
For purposes of computing diluted net income per share, weighted average shares
outstanding increased by approximately 46,000 shares over last year's second
quarter. The increase was largely due to options exercised and grants issued to
employees under the Company's stock plans.
For the six months ended March 25, 2000, sales were $89.6 million, an increase
of 12% compared to sales of $79.8 million in the corresponding period last year.
Net income for the first half of fiscal 2000 was approximately $4.5 million, or
$1.35 per diluted share, up 38% compared to approximately $3.3 million, or $.99
per diluted share, for the same period last year. The growth in sales and
earnings for the first six months of fiscal 2000 compared to fiscal 1999 was the
result of factors similar to those discussed above for the second quarter. Sales
from the Company's book manufacturing segment increased by 12% while related
pretax earnings increased by 26% compared to the first six months of fiscal
1999. The customized education segment reduced net income by $.29 per diluted
share compared to $.33 per diluted share in the first half of fiscal 1999.
Page 9 of 13
<PAGE>
COURIER CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED):
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities" (as amended by SFAS No. 137 in June 1999), 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:
During the first six months of fiscal 2000, operations provided approximately
$2.9 million of cash. Net income was $4.5 million and depreciation and
amortization were $4.0 million. Working capital utilized approximately $5.3
million of cash in the first half of the year due to a $2.7 million increase
in inventories, primarily work-in-process, as well as reductions in accounts
payable and taxes payable. Also, working capital utilized $0.8 million for
deposit payments related to a press expansion project currently in process.
The deposit is expected to be returned later this year since the Company
intends to finance the full press expansion cost of approximately $1.6
million.
Investment activities in the first half of fiscal 2000 used approximately $5.2
million of cash for capital expenditures. For the entire fiscal year, capital
expenditures are expected to be approximately $15 million, up sharply over the
level of capital spending in recent years. Much of the increase in spending is
for equipment, which will expand capacity, primarily additional press capacity
as well as new computer-to-plate equipment to continue the Company's prepress
technology upgrade program and bindery equipment intended to improve both
capacity and productivity. In February 2000, the Company entered into a
five-year lease agreement for its Raymond, New Hampshire facility, which had
been vacant. The agreement provides for a purchase option at a price of
approximately $1.3 million through August 2000. In addition, the Company intends
to sell the unoccupied and underutilized portions of its multi-building
manufacturing complex in Westford, MA, which would result in reductions in
building operating costs while maintaining current levels of book manufacturing
at the site. In January 2000, the Company signed an agreement to sell this
property, but a number of significant contingencies exist. Assuming the
contingencies can be resolved, closing is scheduled for the second quarter of
fiscal 2001.
Financing activities for the first six months of fiscal 2000 used approximately
$0.9 million of cash, including dividend payments of approximately $0.8 million.
At March 25, 2000, the Company had no borrowings under its $30 million long-term
revolving credit facility.
Page 10 of 13
<PAGE>
COURIER CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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.
The Company's plan for identifying, assessing and implementing changes to its
information technology and operational systems necessary to ensure Year 2000
(Y2K) compliance is contained in the section captioned "Management's
Discussion and Analysis" in the Company's Annual Report on Form 10-K for the
year ended September 25, 1999. To date, the Company has not experienced any
problems of consequence related to the Y2K issue. The cost to the Company of
achieving Y2K compliance was approximately $1.6 million, of which
approximately half was for capital expenditures, primarily for new IT
systems. The Company has not incurred any significant Y2K costs in fiscal
2000.
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 or competitors, success in the
integration of acquired businesses, and general changes in economic
conditions. Although the Company believes that the assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could be
inaccurate, and therefore, there can be no assurance that the forward-looking
statements will prove to be accurate. The forward-looking statements included
herein are made as of the date hereof, and the Company undertakes no
obligation to update publicly such statements to reflect subsequent events or
circumstances.
Page 11 of 13
<PAGE>
COURIER CORPORATION
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes from the information concerning the
Company's "Quantitative and Qualitative Disclosures About Market Risk" as
previously reported in the Company's Annual Report on Form 10-K for the year
ended September 25, 1999.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the registrant was held on
January 20, 2000. Following are the matters voted on at the meeting.
ELECTION OF DIRECTORS All nominees of the Board of Directors of the
registrant were reelected for a three-year term.
RATIFICATION/APPROVAL OF ACCOUNTANTS Stockholders voted to ratify and
approve the selection by the Board of Directors of Deloitte & Touche
LLP as independent public accountants for the Corporation for the
fiscal year ending September 30, 2000. Votes were cast as follows:
2,934,259 votes for, 11,772 votes against and 13,467 abstained.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<S> <C>
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
None.
Page 12 of 13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
COURIER CORPORATION
-------------------
(Registrant)
May 8, 2000 By: /s/ James F. Conway III
- ----------------------------- ----------------------------
Date James F. Conway III
Chairman, President and
Chief Executive Officer
May 8, 2000 By: /s/ Robert P. Story, Jr.
- ----------------------------- ----------------------------
Date Robert P. Story, Jr.
Senior Vice President and
Chief Financial Officer
May 8, 2000 By: /s/ Peter M. Folger
- ----------------------------- ----------------------------
Date Peter M. Folger
Vice President and
Chief Accounting Officer
Page 13 of 13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> SEP-26-1999
<PERIOD-END> MAR-25-2000
<CASH> 254
<SECURITIES> 0
<RECEIVABLES> 31,154<F1>
<ALLOWANCES> 1,040
<INVENTORY> 14,923
<CURRENT-ASSETS> 49,396
<PP&E> 111,337
<DEPRECIATION> 79,171
<TOTAL-ASSETS> 92,863
<CURRENT-LIABILITIES> 25,394
<BONDS> 0
0
0
<COMMON> 3,750
<OTHER-SE> 57,650<F2>
<TOTAL-LIABILITY-AND-EQUITY> 92,863
<SALES> 89,632
<TOTAL-REVENUES> 89,632
<CGS> 67,005
<TOTAL-COSTS> 67,005
<OTHER-EXPENSES> 15,387
<LOSS-PROVISION> 76
<INTEREST-EXPENSE> 185
<INCOME-PRETAX> 6,979
<INCOME-TAX> 2,459
<INCOME-CONTINUING> 4,520
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,520
<EPS-BASIC> 1.39
<EPS-DILUTED> 1.35
<FN>
<F1>ACCOUNTS RECEIVABLE ARE NET OF ALLOWANCES
<F2>OTHER SE INCLUDES TREASURY STOCK
</FN>
</TABLE>
