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Courier Corporation (CRRC)

F2Q08 Earnings Call

April 16, 2008 2:30 pm ET


James F. Conway – Chairman, President and Chief Executive Officer

Robert P. Story – Executive Vice President and Chief Operating Officer

Peter M. Folger – Senior Vice President and Chief Financial Officer


John Rogers – Ferris Baker Watts

Jamie Clement – Sidoti & Company



Good afternoon, ladies and gentlemen, and welcome to the second quarter 2008 Courier Corporation earnings conference call. (Operator Instructions) I would now like to turn the presentation over to your host for today, Mr. James Conway, Chairman and Chief Executive Officer of Courier Corporation. Please proceed, sir.

James F. Conway

Thank you, Stacey. Good afternoon everyone, and welcome to Courier Corporation’s Second Quarter Earnings Conference Call. I’m Jim Conway, Chairman and Chief Executive Officer. Thank you for joining us. We released earnings earlier this morning. I hope you’ve all had a chance to see the results.

It was a tough quarter for Courier, as for many other companies. A combination of factors in our industry and the economy as a whole, took it toward sales and earnings in both of our business segments. So, we finished the quarter with bookings up strongly on the manufacturing side, and preparations unscheduled prepared important product launches in publishing in our third and fourth quarters.

Courier’s Chief Operating Officer, Bob Story is here with me today, and Peter Folger, Courier’s Chief Financial Officer is also here with us.

Bob, will begin with an overview of financial results for the second quarter and first half of fiscal 2008. I’ll then discuss the key issues driving our business. I will also provide guidance on what you expect for the full-year. Bob, please go ahead.

Robert P. Story

Thank you, Jim. Before I begin, I’ll remind you that during this call, we may make forward-looking statements relating to the company’s financial goals, and business environment among other things. Actual results may differ materially. Today’s earnings release, issued earlier this morning, includes detailed commentary on the factors that could affect financial results. We encourage you to review those factors in conjunction with any forward-looking statements we make today.

All forward-looking statements are being made under the provisions of the Private Securities Litigation Reform Act. Also throughout this call, whenever we refer to earnings per share, it will be on a diluted basis. So, now let’s look at our performance for the second quarter ended March 29, 2008. We focused on three key measures that drive shareholder value, growth in revenues, growth in earnings per share, and growth in EBITDA. EBITDA is earnings before interest, taxes, depreciation, and amortization, which is a non-GAAP measure that we track as an indicator of the Company’s operating cash flow performance.

This measure should be considered in addition to, not as a substitute for or superior to GAAP financial measures. Relative to revenue, second quarter sales were $67.8 million down 11% compared to the last year second quarter. First half sales were $130.7 million, a decrease of 7% from last year. Weakness was seen across the Board in all of our diverse markets, reflecting a sluggish economy and the timing of orders, especially delays in text book orders. Relative to our second measure of earnings per share we earned $0.27 per share in this year’s second quarter compared to $0.44 per share last year, a decrease of 39%. And for the first six months earnings were $0.38 per share this year compared to $0.76 per share last year.

This drop in earnings is the result of the shortness in sales, other key measure, EBITDA was $11.1 million in the second quarter down 22% from last year’s $14.3 million, as a result of our earnings. For the first six months EBITDA was $18.8 million compared to $25.3 million last year. Now I will take a closer look at our two business segments and talk about the results of each one. I will start with the Specialty Publishing segment, which is comprised of Dover Publications, Research & Education Association or REA, and Creative Homeowner. Specialty publishing sales in the second quarter was $16.8 million down 8% from last year; while sales for the first half were $32 million also down 8%.

Creative Homeowner sales were down 6% in the second quarter and 15% for the first six months of fiscal 2008. The slowdown in the housing market this year has significantly reduced traffic in sales in the home center market, which is Creative’s largest channel. A chief dismount, but important gain in market share in this channel this quarter to help offset the market softness. We also achieved growth this quarter in other channels such as warehouse clubs.

REA sales were up 2% in the second quarter, which is well below their growth rate of 19% last quarter and 16% throughout of last year. Sell through of REA books and major retailers’ remain strong in the quarter. Suggesting retailers are managing inventories closely, and as the competitive environment has become tougher this year. For the first half of the year REA sales were up 9%. Dover sales were down 11% in the second quarter and down 6% for the first six months, during the period of slow market growth.

Dover had a challenging quarter across channels as retailers of all types ordered cautiously and managed inventories carefully. On the other hand, Dover made promising inroads into the mass market channel during the quarter, which we expect to contribute significantly to performance in the second half of the year. Dover also introduced a major new line of products targeting the craft market, which will begin shipping in the third quarter and we prepared to launch of another product line, which is expected to begin shipping in the fourth quarter.

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