<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 June 24, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-7597
COURIER CORPORATION
----------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts
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(State or other jurisdiction of incorporation or organization)
04-2502514
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(I.R.S. Employer Identification No.)
15 Wellman Avenue, North Chelmsford, Massachusetts 01863
-------------------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
(978) 251-6000
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(Registrant's telephone number, including area code)
NO CHANGE
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(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 July 31, 2000
------------ ----------------------------
Common Stock, $1 par value 3,318,476 shares
Page 1 of 13
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COURIER CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
June 24, September 25,
ASSETS 2000 1999
------ ---------------- ---------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $334 $3,460
Accounts receivable, less allowance
for uncollectible accounts 31,588 31,388
Inventories (Note B) 14,263 12,232
Deferred income taxes 1,984 1,915
Other current assets 2,136 271
---------------- ---------------
Total current assets 50,305 49,266
Property, plant and equipment, less
accumulated depreciation: $80,011
at June 24, 2000 and $75,689
at September 25, 1999 35,467 30,628
Real estate held for sale or lease, net 328 344
Goodwill and other intangibles, net 10,254 10,750
Other assets 553 524
---------------- ---------------
Total assets $96,907 $91,512
================ ===============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page 2 of 13
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COURIER CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
June 24, September 25,
LIABILITIES AND STOCKHOLDERS' EQUITY 2000 1999
------------------------------------ --------------- ---------------
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $351 $338
Accounts payable 10,657 11,644
Accrued payroll 5,469 5,173
Accrued taxes 4,630 5,162
Other current liabilities 6,100 5,034
---------------- ---------------
Total current liabilities 27,207 27,351
Long-term debt 930 1,193
Deferred income taxes 2,497 2,693
Other liabilities 2,709 2,716
---------------- ---------------
Total liabilities 33,343 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 1,566 1,258
Retained earnings 62,350 56,486
Unearned compensation (212) -
Treasury stock, at cost: 489,000 shares
at June 24, 2000 and 517,000
shares at September 25, 1999 (3,890) (3,935)
---------------- ---------------
Total stockholders' equity 63,564 57,559
---------------- ---------------
Total liabilities and stockholders' equity $96,907 $91,512
================ ===============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page 3 of 13
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COURIER CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
---------------------------------- ------------------------------------
June 24, June 26, June 24, June 26,
2000 1999 2000 1999
------------- ------------- ----------------- --------------
<S> <C> <C> <C> <C>
Net sales $47,215 $40,731 $136,847 $120,512
Cost of sales 35,056 30,925 102,061 91,144
------------- ------------- ----------------- --------------
Gross profit 12,159 9,806 34,786 29,368
Selling and administrative expenses 8,279 6,998 23,742 21,187
Interest expense 62 121 247 423
Other income (expense) (Note E) 46 - 46 -
------------- ------------- ----------------- --------------
Income before taxes 3,864 2,687 10,843 7,758
Provision for income taxes (Note C) 1,347 861 3,806 2,645
------------- ------------- ----------------- --------------
Net income $2,517 $1,826 $7,037 $5,113
============= ============= ================= ==============
Net income per share (Note D):
Basic $0.77 $0.57 $2.16 $1.60
============= ============= ================= ==============
Diluted $0.75 $0.55 $2.10 $1.54
============= ============= ================= ==============
Cash dividends declared per share $0.12 $0.105 $0.36 $0.315
============= ============= ================= ==============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page 4 of 13
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COURIER CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------------------
June 24, June 26,
2000 1999
--------------- --------------
<S> <C> <C>
Cash provided from operating activities $8,614 $9,412
--------------- --------------
Investment activities:
Capital expenditures (10,384) (2,273)
--------------- --------------
Cash used for investment activities (10,384) (2,273)
--------------- --------------
Financing activities:
Scheduled long-term debt repayments (250) (230)
Decrease in long-term borrowings - (5,250)
Cash dividends (1,173) (1,011)
Proceeds from stock plans 181 489
Stock repurchase (114) -
--------------- --------------
Cash used for financing activities (1,356) (6,002)
--------------- --------------
Increase (decrease) in cash and cash equivalents (3,126) 1,137
Cash and equivalents at the beginning of the period 3,460 722
--------------- --------------
Cash and equivalents at the end of the period $334 $1,859
=============== ==============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page 5 of 13
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COURIER CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
UNAUDITED FINANCIAL STATEMENTS
The balance sheet as of June 24, 2000, the statements of income for the
three-month and nine-month periods ended June 24, 2000 and June 26, 1999, and
the statements of cash flows for the nine-month periods ended June 24, 2000 and
June 26, 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 and SFAS No. 138 in
June 2000), which will be effective in the Company's fiscal year ending
September 29, 2001. The Securities and Exchange Commission has issued Staff
Accounting Bulletin No. 101 (Revenue Recognition and Financial Statements) which
will also be required to be implemented by the Company in the Company's fiscal
year ending September 29, 2001. The Company is currently evaluating the impact,
if any, that the adoption of these new standards 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)
---------------
June 24, September 25,
2000 1999
-------------- -------------------
<S> <C> <C>
Raw materials $ 4,020 $ 2,945
Work in process 7,325 5,899
Finished goods 2,918 3,388
-------------- --------------
Total $ 14,263 $ 12,232
============== ===============
</TABLE>
Page 6 of 13
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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 Nine Months Ended
------------- -----------------
June 24, June 26, June 24, June 26,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Federal income taxes at
statutory rate $ 1,314 $ 914 $ 3,687 $ 2,638
State income taxes, net 110 52 317 167
Goodwill amortization 43 43 130 129
Foreign sales corporation
(FSC) export related income (196) (222) (427) (343)
Other 76 74 99 54
-------- --------- -------- ----------
Total $ 1,347 $ 861 $ 3,806 $ 2,645
======== ========= ======== ==========
</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 Nine Months Ended
------------- -----------------
June 24, June 26, June 24, June 26,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average shares outstanding for basic 3,269 3,225 3,262 3,198
Effect of potentially dilutive shares 103 98 96 118
----- ----- ----- -----
Average shares outstanding for diluted 3,372 3,323 3,358 3,316
===== ===== ===== =====
</TABLE>
E. OTHER INCOME (EXPENSE)
Other income (expense) is comprised of net rental income from the
Company's Raymond, New Hampshire facility. In February 2000, the
Company entered into a five-year lease agreement for this facility,
which had been vacant. The agreement also provides for a purchase
option through August 2000, at a price of approximately $1.3 million.
Page 7 of 13
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COURIER CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
F. 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 textbooks and coursepacks.
In evaluating segment performance, management primarily focuses on income or
loss before taxes and non-operating items such as rental income (see Note E) and
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
nine-month periods ended June 24, 2000 and June 26, 1999:
<TABLE>
<CAPTION>
(000'S Omitted)
---------------
Quarter Ended Nine Months Ended
------------- -----------------
June 24, June 26, June 24, June 26,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
BOOK MANUFACTURING SEGMENT:
Net sales $46,613 $40,328 $135,334 $119,348
Earnings before income taxes 4,589 3,388 13,069 10,123
CUSTOMIZED EDUCATION SEGMENT:
Net sales 602 403 1,513 1,164
Loss before income taxes (771) (701) (2,272) (2,365)
UNALLOCATED
Earnings before income taxes 46 -- 46 --
TOTAL COMPANY:
Net sales 47,215 40,731 136,847 120,512
Earnings before income taxes 3,864 2,687 10,843 7,758
</TABLE>
Page 8 of 13
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ITEM 2. COURIER CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
Sales in the third quarter of fiscal 2000 were up 16% to $47.2 million compared
to $40.7 million in the corresponding period last year. Sales from the Company's
book manufacturing segment increased 16% to $46.6 million for the quarter,
reflecting continued growth in sales to religious and educational publishing
customers. Sales from the Company's customized education segment were $0.6
million in the third quarter, an increase of 49% 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 $12.2 million, or 25.8% of sales, in the third quarter
compared to $9.8 million, or 24.1% 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 $8.3 million in the third
quarter of fiscal 2000 from $7.0 million in the same period last year due
largely to expenses related to the increase in sales and profitability. Costs
associated with improvements to the Company's information systems and increased
marketing activities in the customized education segment also contributed to the
increase in selling and administrative expenses. As a percentage of sales,
selling and administrative expenses were 17.5% in the third quarter of fiscal
2000 compared to 17.2% in the corresponding period last year.
Interest expense was $62,000 in the third quarter of fiscal 2000 compared to
$121,000 in the same period of fiscal 1999 reflecting a reduction in average
borrowings of approximately $1.5 million. In addition, interest of $45,000
related to new equipment was capitalized in the third quarter of fiscal 2000.
Other income (expense) is comprised of net rental income from the Company's
Raymond, New Hampshire facility. In February 2000, the Company entered into a
five-year lease agreement for this facility, which had been vacant. The
agreement also provides for a purchase option through August 2000, at a price of
approximately $1.3 million.
The Company's effective tax rate for the third quarter of fiscal 2000 was 35%
compared to 32% for the same period last year primarily due to a higher
effective state tax rate and a reduced foreign sales corporation (FSC) benefit
from export related income.
Net income for the third quarter of fiscal 2000 was approximately $2.5
million, up 38% over last year's third quarter earnings of approximately $1.8
million. Net income per share on a diluted basis increased 36% to $.75 per
share compared to $.55 per share for the corresponding period last year.
Pretax earnings from the Company's book manufacturing operations increased to
$4.6 million, 35% over last year's third quarter, reflecting increased sales
volume and higher levels of productivity. The Company's customized education
segment reduced third quarter pretax earnings by $0.8 million, and net income
by $.15 per diluted share, compared to a reduction in pretax earnings of $0.7
million, and net income of $.14 per diluted share, for the same period last
year. Revenues 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 49,000 shares over last year's third
quarter. The increase was largely due to options exercised and grants issued to
employees under the Company's stock plans.
Page 9 of 13
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COURIER CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED):
For the nine months ended June 24, 2000, sales were $136.8 million, an increase
of 14% compared to sales of $120.5 million in the corresponding period last
year. Net income for the first nine months of fiscal 2000 was approximately $7.0
million, or $2.10 per diluted share, up 38% compared to approximately $5.1
million, or $1.54 per diluted share, for the same period last year. The growth
in sales and earnings for the first nine months of fiscal 2000 compared to
fiscal 1999 was the result of factors similar to those discussed above for the
third quarter. Sales from the Company's book manufacturing segment increased by
13% while related pretax earnings increased by 29% compared to the first nine
months of fiscal 1999. The customized education segment reduced net income by
$.45 per diluted share compared to $.47 per diluted share in the first nine
months of fiscal 1999.
The Company's fiscal year ends on the last Saturday in September and, as such,
fiscal year 2000 will consist of 53 weeks compared with fiscal year 1999, which
was 52 weeks. The additional week will be included in the fourth quarter ending
September 30, 2000. Therefore, the fourth quarter of fiscal 2000 will comprise
14 weeks compared to 13 weeks for the corresponding period last year.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities" (as amended by SFAS No. 137 in June 1999 and SFAS No. 138 in
June 2000), which will be effective in the Company's fiscal year ending
September 29, 2001. The Securities and Exchange Commission has issued Staff
Accounting Bulletin No. 101 (Revenue Recognition and Financial Statements) which
will also be required to be implemented by the Company in the Company's fiscal
year ending September 29, 2001. The Company is currently evaluating the impact,
if any, that the adoption of these new standards will have on the consolidated
financial statements.
LIQUIDITY AND CAPITAL RESOURCES:
During the first nine months of fiscal 2000, operations provided approximately
$8.6 million of cash. Net income was $7.0 million and depreciation and
amortization were $6.1 million. Working capital utilized approximately $4.3
million of cash in the first nine months including a $2.0 million increase in
inventories, primarily work-in-process. In addition, working capital utilized
$1.7 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 $1.9
million utilizing an operating lease.
Investment activities in the first nine months of fiscal 2000 used
approximately $10.4 million of cash for capital expenditures. For the entire
fiscal year, capital expenditures are expected to be approximately $15
million, up significantly over the level of capital spending in recent years.
Much of the increase in spending is for additional presses, which will expand
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
through August 2000, at a price of approximately $1.3 million. 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
no later than April 2, 2001.
Financing activities for the first nine months of fiscal 2000 used approximately
$1.4 million of cash, including dividend payments of approximately $1.2 million.
At June 24, 2000, the Company had no borrowings under its $30 million long-term
revolving credit facility.
Page 10 of 13
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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
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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
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT NO. DESCRIPTION OF EXHIBIT
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
Page 12 of 13
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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)
AUGUST 2, 2000 By: /s/ JAMES F. CONWAY III
------------------------------------- ------------------------
Date James F. Conway III
Chairman, President and
Chief Executive Officer
AUGUST 2, 2000 By: /s/ ROBERT P. STORY, JR.
------------------------------------- ------------------------
Date Robert P. Story, Jr.
Senior Vice President and
Chief Financial Officer
AUGUST 2, 2000 By: /s/ PETER M. FOLGER
------------------------------------- ------------------------
Date Peter M. Folger
Vice President and
Chief Accounting Officer
Page 13 of 13
