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Courier Corp (CRRC) SEC Filing 10-Q Quarterly report for the period ending Saturday, December 27, 2014

Courier Corp

CIK: 25212 Ticker: CRRC

Exhibit 99.1

Courier Reports First-Quarter Results in Line with Expectations

NORTH CHELMSFORD, Mass.--(BUSINESS WIRE)--February 5, 2015--Courier Corporation (Nasdaq: CRRC), a leader in digital printing, publishing and content management in the United States, today announced financial results for the quarter ended December 27, 2014, the first quarter of its 2015 fiscal year.

Revenues in the quarter were $66 million, down 8% from $72 million in last year’s first quarter. Net income was $1.8 million or $.16 per diluted share, which includes approximately $800,000, or $.07 per diluted share, of transaction costs associated with the pending acquisition of Courier by R.R. Donnelley & Sons Company (Nasdaq: RRD), as separately announced today, and the terminated agreement with Quad/Graphics, Inc. (NYSE: QUAD), also separately announced today. Results also include $870,000, or $.05 per diluted share, of losses on foreign currency translation related to the November acquisition of a 60% interest in a Brazilian-based digital printer. Excluding these costs, net income was $3.2 million or $.28 per diluted share. In fiscal 2014, first-quarter net income from continuing operations was $2.8 million or $.25 per diluted share; including discontinued operations, last year’s first-quarter net income was $2.6 million or $.23 per diluted share.

Details of these and other items, including reconciliations of non-GAAP measures to GAAP, can be found in the tables at the end of this release.

In the company’s book manufacturing segment, Courier reported higher revenues in education, its largest principal market. This gain was offset by lower sales in the religious market, which has often been susceptible to fluctuations from quarter to quarter within a long-term pattern of single-digit growth. Sales to Courier’s third major market, specialty trade, were comparable to last year’s first quarter.

In the company’s publishing segment, first-quarter revenues were up 5% from last year, driven by strong sales to online retailers and growing consumer demand for Dover Publications’ Creative Haven product line.


The following information was filed by Courier Corp (CRRC) on Thursday, February 5, 2015 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

(Mark One)

 

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended December 27, 2014

 

OR

 

o         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 1-34268

 

COURIER CORPORATION

(Exact name of registrant as specified in its charter)

 

Massachusetts

 

04-2502514

(State or other jurisdiction of incorporation or organization)

 

(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 o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x    No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”

in Rule 12b-2 of the Exchange Act. (Check one:)

 

Large accelerated filer o

 

Accelerated filer x

 

 

 

Non- accelerated filer o

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).Yes o   No x

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable

date.

 

Class

 

Outstanding at January 28, 2015

Common Stock, $1 par value

 

11,524,463 shares

 

 

 


 


 

COURIER CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

(Dollars in thousands except per share amounts)

 

 

 

THREE MONTHS ENDED

 

 

 

December 27,

 

December 28,

 

 

 

2014

 

2013

 

 

 

 

 

 

 

Net sales

 

$

66,494

 

$

72,260

 

Cost of sales

 

49,006

 

54,513

 

 

 

 

 

 

 

Gross profit

 

17,488

 

17,747

 

 

 

 

 

 

 

Selling and administrative expenses

 

14,187

 

13,115

 

 

 

 

 

 

 

Operating income from continuing operations

 

3,301

 

4,632

 

 

 

 

 

 

 

Interest expense, net

 

137

 

175

 

 

 

 

 

 

 

Pretax income from continuing operations

 

3,164

 

4,457

 

 

 

 

 

 

 

Income tax provision (Note C)

 

1,368

 

1,635

 

 

 

 

 

 

 

Net income from continuing operations

 

$

1,796

 

$

2,822

 

 

 

 

 

 

 

Loss from discontinued operation, net of tax (Note H)

 

 

(175

)

 

 

 

 

 

 

Net income

 

$

1,796

 

$

2,647

 

 

 

 

 

 

 

Net income per share (Note I)

 

 

 

 

 

Basic:

 

 

 

 

 

Net income from continuing operations

 

$

0.16

 

$

0.25

 

Net loss from discontinued operation

 

 

(0.02

)

Net income

 

$

0.16

 

$

0.23

 

Diluted:

 

 

 

 

 

Net income from continuing operations

 

$

0.16

 

$

0.25

 

Net loss from discontinued operation

 

 

(0.02

)

Net income

 

$

0.16

 

$

0.23

 

 

 

 

 

 

 

Cash dividends declared per share

 

$

0.21

 

$

0.21

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

2



 

COURIER CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF

COMPREHENSIVE INCOME (UNAUDITED)

(Dollars in thousands)

 

 

 

THREE MONTHS ENDED

 

 

 

December 27,

 

December 28,

 

 

 

2014

 

2013

 

 

 

 

 

 

 

Net income

 

$

1,796

 

$

2,647

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

Amounts reclassified from accumulated other comprehensive income

 

(9

)

48

 

Change in fair value of derivative (Note G)

 

(63

)

 

Unrealized loss on foreign currency cash flow hedge (Note A)

 

(11

)

 

Other comprehensive income (loss)

 

(83

)

48

 

Comprehensive income

 

$

1,713

 

$

2,695

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

3



 

COURIER CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)

(Dollars in thousands)

 

 

 

December 27, 

 

September 27,

 

 

 

2014

 

2014

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

3,287

 

$

4,144

 

Investments

 

1,083

 

1,024

 

Accounts receivable, less allowance for uncollectible accounts of $345 at December 27, 2014 and $296 at September 27, 2014

 

49,930

 

48,200

 

Inventories (Note B)

 

41,710

 

38,239

 

Deferred income taxes

 

4,026

 

4,021

 

Recoverable income taxes

 

1,816

 

2,974

 

Other current assets

 

1,046

 

1,400

 

 

 

 

 

 

 

Total current assets

 

102,898

 

100,002

 

 

 

 

 

 

 

Property, plant and equipment less accumulated depreciation:

 

 

 

 

 

$236,110 at December 27, 2014 and $231,081 at September 27, 2014

 

84,250

 

83,145

 

 

 

 

 

 

 

Goodwill (Note A)

 

25,765

 

16,880

 

 

 

 

 

 

 

Other intangibles, net (Note A)

 

5,482

 

1,946

 

 

 

 

 

 

 

Prepublication costs, net (Note A)

 

5,524

 

5,711

 

 

 

 

 

 

 

Long-term investments (Notes F and G)

 

1,860

 

6,429

 

 

 

 

 

 

 

Other assets

 

2,941

 

2,403

 

 

 

 

 

 

 

Total assets

 

$

228,720

 

$

216,516

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

4



 

COURIER CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)

(Dollars in thousands)

 

 

 

December 27,

 

September 27,

 

 

 

2014

 

2014

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Current maturities of capital lease obligations (Notes D and F)

 

$

4,022

 

$

2,618

 

Current maturities of long-term debt (Notes D and F)

 

1,871

 

 

Accounts payable

 

12,729

 

11,124

 

Accrued payroll

 

6,326

 

8,610

 

Accrued taxes

 

949

 

1,051

 

Other current liabilities

 

11,143

 

8,918

 

 

 

 

 

 

 

Total current liabilities

 

37,040

 

32,321

 

 

 

 

 

 

 

Long-term debt (Note D)

 

25,899

 

24,508

 

Capital lease obligations (Notes D and F)

 

5,311

 

5,839

 

Deferred income taxes

 

2,259

 

1,286

 

Contingent consideration (Note G)

 

1,265

 

1,415

 

Other liabilities

 

8,971

 

6,731

 

 

 

 

 

 

 

Total liabilities

 

80,745

 

72,100

 

 

 

 

 

 

 

Stockholders’ equity (Notes K and M):

 

 

 

 

 

Preferred stock, $1 par value-authorized 1,000,000 shares; non issued

 

 

 

Common stock, $1 par value-authorized 18,000,000 shares; issued 11,467,000 at December 27, 2014 and 11,424,000 at September 27, 2014

 

11,467

 

11,424

 

Additional paid-in capital

 

21,853

 

21,617

 

Retained earnings

 

111,289

 

111,901

 

Accumulated other comprehensive loss

 

(609

)

(526

)

Total Courier stockholders’ equity

 

144,000

 

144,416

 

 

 

 

 

 

 

Noncontrolling interest (Note F)

 

3,975

 

 

Total equity

 

147,975

 

144,416

 

Total liabilities and stockholders’ equity

 

$

228,720

 

$

216,516

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

5



 

COURIER CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands)

 

 

 

THREE MONTHS ENDED

 

 

 

December 27,

 

December 28,

 

 

 

2014

 

2013

 

Operating Activities:

 

 

 

 

 

Net income from continuing operations

 

$

1,796

 

$

2,822

 

Loss from discontinued operation, net of tax (Note H)

 

 

(175

)

Net income

 

1,796

 

2,647

 

Adjustments to reconcile net income to cash provided from operating activites:

 

 

 

 

 

Depreciation of property, plant and equipment

 

5,028

 

5,213

 

Amortization of prepublication costs

 

787

 

908

 

Amortization of intangible assets

 

158

 

231

 

Change in fair value of loans receivable (Note F)

 

581

 

 

Change in fair value of contingent consideration (Note G)

 

(150

)

165

 

Change in fair value of derivative (Note G)

 

108

 

 

Stock-based compensation

 

365

 

358

 

Deferred income taxes

 

(288

)

(234

)

Changes in assets and liabilities - net of acquisition:

 

 

 

 

 

Accounts receivable

 

(829

)

5,178

 

Inventory

 

(3,232

)

295

 

Accounts payable

 

(545

)

(2,313

)

Accrued and recoverable taxes

 

1,442

 

(1,018

)

Other elements of working capital

 

(1,074

)

(2,052

)

Other long-term, net

 

(373

)

136

 

Cash provided from operating activities

 

3,774

 

9,514

 

 

 

 

 

 

 

Investment Activities:

 

 

 

 

 

Capital expenditures

 

(908

)

(6,095

)

Acquisition of business, net of cash acquired (Note F)

 

(482

)

 

Prepublication costs (Note A)

 

(600

)

(713

)

Loan receivable and other investments (Notes F and G)

 

(59

)

(4,409

)

Proceeds on disposition of assets (Note H)

 

150

 

 

Life insurance proceeds

 

 

387

 

Cash used for investment activities

 

(1,899

)

(10,830

)

 

 

 

 

 

 

Financing Activities:

 

 

 

 

 

Proceeds from capital lease financing (Note D)

 

 

10,488

 

Repayments under capital lease financing (Note D)

 

(650

)

(336

)

Other long-term debt borrowings (repayments) (Note D)

 

326

 

(6,339

)

Cash dividends

 

(2,408

)

(2,416

)

Proceeds from stock plans

 

 

8

 

Cash provided from (used for) financing activities

 

(2,732

)

1,405

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

(857

)

89

 

 

 

 

 

 

 

Cash and cash equivalents at the beginning of the period

 

4,144

 

57

 

 

 

 

 

 

 

Cash and cash equivalents at the end of the period

 

$

3,287

 

$

146

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

6


 


 

COURIER CORPORATION

 

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

 

A.            SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Unaudited Financial Statements

 

The consolidated condensed balance sheet as of December 27, 2014 and the consolidated condensed statements of operations, statements of comprehensive income and statements of cash flows for the three-month periods ended December 27, 2014 and December 28, 2013 are unaudited. In the opinion of management, all adjustments, consisting of normal recurring items, considered necessary for a fair presentation of such financial statements have been recorded. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“generally accepted accounting principles”) have been condensed or omitted. The balance sheet data as of September 27, 2014 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 Annual Report on Form 10-K for the year ended September 27, 2014.

 

Discontinued Operations

 

The Company sold one of the businesses in its publishing segment, Federal Marketing Corporation, d/b/a Creative Homeowner (“Creative Homeowner”), in September 2014 (see Note H). Creative Homeowner was classified as a discontinued operation in the Company’s financial statements for all periods presented.

 

Goodwill and Other Intangibles

 

The Company evaluates possible impairment annually at the end of its fiscal year or whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. These tests are performed at the reporting unit level, which is the operating segment or one level below the operating segment. There were no such events or changes in circumstances in the period ended December 27, 2014. On November 18, 2014, the Company acquired a 60% ownership interest in Digital Page Gráfica E Editora (“Digital Page”), a Sao Paulo-based digital printing firm serving the education market in Brazil, and recorded goodwill of approximately $8.9 million (see Note F). “Other intangibles” include trade names, customer lists, and technology. Trade names with indefinite lives are not subject to amortization and are reviewed at least annually at the end of the fiscal year or whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. The Company recorded $3.7 million of amortizable intangible assets in the first quarter of fiscal 2015 with the acquisition of Digital Page (see Note F). Other intangible assets are being amortized over two to ten-year periods. Total amortization expense for intangibles was $158,000 and $231,000 in the first quarters of fiscal years 2015 and 2014, respectively. Annual amortization expense is expected to be approximately $540,000 in fiscal 2015, $475,000 in fiscal 2016, $450,000 in fiscal 2017, $330,000 in fiscal 2018 and $215,000 in fiscal years 2019 and 2020.

 

Fair Value Measurements

 

Certain assets and liabilities are required to be recorded at fair value on a recurring basis, while other assets and liabilities are recorded at fair value on a nonrecurring basis, generally as a result of impairment charges. Fair value is determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. Assets measured at fair value on a nonrecurring basis include long-lived assets and goodwill and other intangible assets. The three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies, is:

 

Level 1Valuations based on quoted prices for identical assets and liabilities in active markets.

 

Level 2Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or

 

7



 

similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

 

Level 3Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants.

 

Fair Value of Financial Instruments

 

Financial instruments consist primarily of cash, investments in mutual funds, accounts receivable, investment in convertible promissory notes (see Note G), accounts payable, debt obligations, and contingent consideration. At December 27, 2014 and September 27, 2014, the fair value of the Company’s cash, accounts receivable and accounts payable approximated their carrying values due to the short maturity of these instruments. The fair value of the Company’s revolving credit facility approximates its carrying value due to the variable interest rate and the Company’s current rate standing. At December 27, 2014, the Company had two forward exchange contracts to sell approximately 8 million South African Rands (ZAR) designated as cash flow hedges against two foreign currency customer orders to be settled for a total of approximately $0.7 million through March 2015. The fair values of the foreign exchange forward contracts were determined using market exchange rates (Level 2). The unrealized gain on these foreign currency cash flow hedges of $15,000, net of tax, was included in accumulated other comprehensive loss at December 27, 2014. The Company expects to reclassify the unrealized gain or loss in accumulated other comprehensive loss into earnings upon settlement of the related hedged transactions. The Company does not use financial instruments for trading or speculative purposes.

 

Prepublication Costs

 

Prepublication costs, associated with creating new titles in the publishing segment, are amortized to cost of sales using the straight-line method over estimated useful lives of three to four years.

 

B.            INVENTORIES

 

Inventories are valued at the lower of cost or market. Cost is determined using the last-in, first-out (LIFO) method for approximately 64% and 62% of the Company’s inventories at December 27, 2014 and September 27, 2014, respectively. Other inventories, primarily in the publishing segment, are determined on a first-in, first-out (FIFO) basis. Inventories consisted of the following:

 

 

 

(000’s Omitted)

 

 

 

December 27,
2014

 

September 27,
2014

 

Raw materials

 

$

10,299

 

$

9,652

 

Work in process

 

10,558

 

10,326

 

Finished goods

 

20,853

 

18,261

 

Total

 

$

41,710

 

$

38,239

 

 

C.            INCOME TAXES

 

In calculating the provision for income taxes on an interim basis, the Company uses an estimate of the annual effective tax rate based upon the facts and circumstances known and applies that rate to its ordinary year-to-date earnings or losses. The effect of discrete items, such as unusual or infrequently occurring events, is recognized in the interim period in which the discrete item occurs. The Company recorded a discrete item in the first quarter of fiscal 2015 of $0.8 million for transactions costs, which are not deductible for income tax purposes, relating to the pending acquisition of the Company discussed in Note N.

 

8



 

The income tax provision from continuing operations differs from that computed using the statutory federal income tax rates for the following reasons:

 

 

 

(000’s Omitted)

 

 

 

Three Months Ended

 

 

 

December 27, 2014

 

December 28, 2013

 

Federal taxes at statutory rates

 

$

1,107

 

35.0

%

$

1,560

 

35.0

%

State taxes, net of federal tax benefit

 

83

 

2.6

 

179

 

4.0

 

Federal manufacturer’s deduction

 

(147

)

(4.6

)

(183

)

(4.1

)

Transaction costs

 

302

 

9.5

 

30

 

0.7

 

Other

 

23

 

0.7

 

49

 

1.1

 

Total

 

$

1,368

 

43.2

%

$

1,635

 

36.7

%

 

D.            LONG-TERM DEBT AND CAPITAL LEASE OBLIGATION

 

The Company has a $100 million long-term revolving credit facility in place under which the Company can borrow at a rate not to exceed LIBOR plus 2.25%. In December 2014, the Company extended the maturity date of this credit facility from March 2016 to December 2019. At December 27, 2014, the Company had $24.8 million in borrowings under this facility at an interest rate of 1.4%. The revolving credit facility contains restrictive covenants including provisions relating to the incurrence of additional indebtedness and a quarterly test of EBITDA to debt service. The Company was in compliance with all such covenants at December 27, 2014. The facility also provides for a commitment fee not to exceed 3/8% per annum on the unused portion. The revolving credit facility is used by the Company for both its long-term and short-term financing needs.

 

In the first quarter of fiscal 2014, the Company entered into a $10.5 million master security lease agreement for printing and binding equipment in its Kendallville, Indiana digital print facility. The Company accounted for this transaction as a capital lease obligation, which expires in October 2017. At December 27, 2014, $7.8 million of debt was outstanding under this arrangement and the implicit interest rate was 1.8%. Depreciation expense was calculated on a straight-line basis over the estimated useful life of the assets under the capital lease and such depreciation was approximately $358,000 and $191,000 in the first quarter of fiscal years 2015 and 2014, respectively.

 

In November 2014, the Company acquired Digital Page (see Note F) and assumed various capital lease and other debt obligations totaling $4.5 million. Current maturities under the capital lease obligations and other debt of $1.4 million and $1.9 million, respectively, were included in the accompanying consolidated condensed balance sheet at December 27, 2014. The long-term portion of this debt of $1.2 million includes principal payments under Digital Page’s capital leases of $1.1 million due through June 2017.

 

E.            OPERATING SEGMENTS

 

The Company has two operating segments: book manufacturing and publishing. The book manufacturing segment offers a full range of services from production through storage and distribution for religious, educational and trade book publishers. In November 2014, Company acquired a 60% ownership interest in Digital Page Gráfica E Editora (“Digital Page”), a Sao Paulo-based digital printing firm serving the education market in Brazil, which has been included as a reporting unit within the book manufacturing segment (see Note F). The publishing segment consists of Dover Publications, Inc. and Research & Education Association, Inc. (“REA”). In September 2014, the Company sold its Creative Homeowner business (see Note H), which had been included in the publishing segment. Creative Homeowner was classified as a discontinued operation in the Company’s financial statements and, as such, was not reflected in the net sales and operating income (loss) in the table below.

 

Segment performance is evaluated based on several factors, of which the primary financial measure is operating income. For segment reporting purposes, operating income is defined as gross profit (sales less cost of sales) less selling and administrative expenses, and includes severance and other restructuring costs but excludes stock-based compensation. The Company recorded $0.8 million for transactions costs in the first quarter relating to the pending acquisition of the Company discussed in Note N. Such costs are not allocated to the business segments. As such, segment performance is evaluated

 

9



 

exclusive of interest, income taxes, stock-based compensation, impairment charges, other income and certain transaction costs associated with the pending acquisition. The elimination of intersegment sales and related profit represents sales from the book manufacturing segment to the publishing segment.

 

The following table provides segment information from continuing operations for the three-month periods ended December 27, 2014 and December 28, 2013.

 

 

 

(000’s Omitted)

 

 

 

Three Months Ended

 

 

 

December 27,

 

December 28,

 

 

 

2014

 

2013

 

Net sales:

 

 

 

 

 

Book manufacturing

 

$

59,645

 

$

65,576

 

Publishing

 

9,015

 

8,585

 

Elimination of intersegment sales

 

(2,166

)

(1,901

)

Total

 

$

66,494

 

$

72,260

 

 

 

 

 

 

 

Pretax income (loss):

 

 

 

 

 

Book manufacturing operating income

 

$

4,235

 

$

5,310

 

Publishing operating income (loss)

 

258

 

(412

)

Transactions costs (Note N)

 

(800

)

 

Stock-based compensation

 

(365

)

(358

)

Elimination of intersegment profit

 

(27

)

92

 

Interest expense, net

 

(137

)

(175

)

Total

 

$

3,164

 

$

4,457

 

 

F.            BUSINESS ACQUISITION

 

On November 18, 2014, the Company acquired 60% of the outstanding stock of Digital Page Gráfica E Editora (“Digital Page”), a Sao Paulo-based digital printing firm, and the founder of Digital Page continues to own 40% of the business and actively manage the operations. The investment in Digital Page complements the Company’s license of its custom publishing platform to Santillana, the largest Spanish/Portuguese educational publisher in the world as Digital Page has a multiyear commercial print agreement with Santillana. Under the investment agreement, as revised in August 2014, the Company invested a total of 20 million Brazilian Reals or $7.7 million. During the first quarter of fiscal 2014, the Company funded two loans to Digital Page totaling approximately 10 million Brazilian Reals which were secured by the pledge of the equity interest in Digital Page. The principal amount of the loans was credited towards the total purchase price, which was a non-cash investing activity for the first quarter of fiscal 2015. The Company then made a capital contribution of approximately 10 million Brazilian Reals to Digital Page upon closing of which 1.25 million was paid directly to the founding shareholder. The acquisition was accounted for as a business combination and, accordingly, Digital Page’s financial results are included as a reporting unit within the book manufacturing segment in the consolidated financial statements from the date of acquisition and are reported on a one-month lag to facilitate accurate reporting. Pro forma information related to this acquisition is not included because the impact on the Company’s consolidated results of operations is considered to be immaterial. Acquisition costs of approximately $85,000 were included in selling and administrative expenses in the first quarter of fiscal 2015.

 

The acquisition of Digital Page was recorded by allocating the consideration paid to the identified assets acquired, including intangible assets and liabilities assumed, based on their estimated fair value at the acquisition date. The excess of the fair value of the consideration paid over the net amounts assigned to the fair value of the assets acquired and liabilities assumed was recorded as goodwill, which is not tax deductible.

 

10



 

The acquisition-date fair value of the consideration transferred, including $482,000 paid directly to the founding shareholder, was as follows:

 

 

 

(000’s Omitted)

 

Cash consideration

 

$

3,535

 

Conversion of principal of loans

 

4,168

 

Total fair value of consideration transferred

 

$

7,703

 

 

Based on these valuations, the preliminary purchase price allocation was as follows:

 

 

 

(000’s Omitted)

 

Cash

 

$

3,053

 

Accounts receivable

 

1,051

 

Inventories

 

239

 

Machinery and equipment

 

5,227

 

Goodwill

 

8,896

 

Identified intangibles

 

3,694

 

Other assets

 

1,110

 

Accounts payable and accrued liabilities

 

(5,874

)

Capital leases and other debt obligations

 

(4,462

)

Deferred income tax liability

 

(1,256

)

Total fair value of net assets acquired

 

11,678

 

Less: Noncontrolling interest

 

(3,975

)

Total fair value of consideration transferred

 

$

7,703

 

 

The fair value of the acquired identifiable intangible assets, deferred taxes and tax obligations are provisional pending receipt of the final valuations for those assets and liabilities. The Company expects to finalize the preliminary estimates of the fair value of the intangible assets, deferred taxes, and tax obligations by the end of this fiscal year.

 

G.            FAIR VALUE MEASUREMENTS

 

Certain assets and liabilities are required to be recorded at fair value on a recurring basis. The Company’s only assets and liabilities adjusted to fair value on a recurring basis are short-term investments in mutual funds, a long-term investment in convertible promissory notes and contingent consideration. In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company is required to record certain assets and liabilities on a nonrecurring basis, generally as a result of acquisitions or the remeasurement of assets resulting in impairment charges (see Note F).

 

Long-term investments in the accompanying consolidated condensed balance sheet include convertible promissory notes of $1.5 million issued by Nomadic Learning Limited, a startup business focused on corporate and educational learning. At December 27, 2014, a fair value assessment was performed using a discounted cash flow model and the fair value approximated the carrying value of the notes. In addition, a fair value assessment of the conversion feature embedded in the convertible promissory notes was performed at December 27, 2014 resulting in a fair value of $0.4 million reflected in “Long-term investments” and “Accumulated other comprehensive loss” in the accompanying consolidated balance sheet.

 

11



 

The following table shows the assets and liabilities carried at fair value measured on a recurring basis as of December 27, 2014 and September 27, 2014 classified in one of the three levels described in Note A:

 

 

 

(000’s Omitted)

 

 

 

Total
Carrying
Value

 

Quoted
Prices in
Active
Markets
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

 

As of December 27, 2014:

 

 

 

 

 

 

 

 

 

Short-term investments in mutual funds

 

$

1,058

 

$

1,058

 

 

 

Convertible promissory notes:

 

 

 

 

 

 

 

 

 

Investment in notes receivable

 

1,500

 

 

 

$

1,500

 

Embedded derivative

 

360

 

 

 

360

 

Forward foreign exchange contracts (Note A)

 

25

 

 

$

25

 

 

 

Contingent consideration liability

 

(1,265

)

 

 

(1,265

)

 

 

 

 

 

 

 

 

 

 

As of September 27, 2014:

 

 

 

 

 

 

 

 

 

Short-term investments in mutual funds

 

$

1,016

 

$

1,016

 

 

 

Convertible promissory notes:

 

 

 

 

 

 

 

 

 

Investment in notes receivable

 

1,500

 

 

 

$

1,500

 

Embedded derivative

 

468

 

 

 

468

 

Forward foreign exchange contracts (Note A)

 

8

 

 

$

8

 

 

Contingent consideration liability

 

(1,415

)

 

 

(1,415

)

 

The contingent consideration liability at December 27, 2014 and September 27, 2014 relates to the acquisition of FastPencil in April 2013. The fair value of the contingent consideration was determined to be Level 3 under the fair value hierarchy and was measured using a probability weighted, discounted cash flow model, which uses significant inputs which are unobservable in the market.

 

The following table reflects fair value measurements using significant unobservable inputs (Level 3):

 

 

 

(000’s omitted)

 

 

 

Convertible
Promissory
Notes

 

Embedded
Derivative

 

Contingent
Consideration
Liability

 

Balance at September 27, 2014

 

$

1,500

 

$

468

 

$

(1,415

)

Change in fair value

 

 

(108

)

150

 

Amounts paid

 

 

 

 

Balance at December 27, 2014

 

$

1,500

 

$

360

 

$

(1,265

)

 

 

 

 

 

 

 

 

Balance at September 28, 2013

 

$

500

 

 

(4,960

)

Change in fair value

 

 

 

(165

)

Amounts paid

 

 

 

 

Balance at December 28, 2013

 

$

500

 

$

 

$

(5,125

)

 

12



 

H.            DISCONTINUED OPERATIONS

 

In September 2014, the Company sold Creative Homeowner, which was a separate reporting unit within its publishing segment, for $1.0 million. Proceeds received from the sale were $450,000 in fiscal 2014, $150,000 in the first quarter of fiscal 2015 and the balance due before the end of fiscal 2015. The following table summarizes the operating results of this discontinued operation for the three-month period ended December 28, 2013.

 

 

 

(000’s Omitted)

 

Revenues

 

$

536

 

Pretax loss from operations

 

(188

)

Income tax provision (benefit)

 

(13

)

Net loss from discontinued operations

 

$

(175

)

 

I.             NET INCOME PER SHARE

 

The following is a reconciliation of the outstanding shares used in the calculation of basic and diluted net income per share. Potentially dilutive shares, calculated using the treasury stock method, consist of shares issued under the Company’s stock option plans.

 

 

 

(000’s Omitted)

 

 

 

Three Months Ended

 

 

 

December 27,
2014

 

December 28,
2013

 

 

 

 

 

 

 

Weighted average shares for basic

 

11,275

 

11,285

 

Effect of potentially dilutive shares

 

135

 

230

 

Weighted average shares for diluted

 

11,410

 

11,515

 

 

J.             SHARE REPURCHASE PROGRAM

 

On November 20, 2014, the Company announced the approval by its Board of Directors for the repurchase of up to $10 million of the Company’s outstanding common stock from time to time on the open market or in privately negotiated transactions, including pursuant to a Rule 10b5-1 nondiscretionary trading plan. Through December 27, 2014, the Company had not repurchased any shares of common stock under this program.

 

In November 2013, the Company announced the approval by its Board of Directors for the repurchase of up to $10 million of the Company’s outstanding common stock. In fiscal 2014, the Company repurchased 153,150 shares of common stock for approximately $2.0 million under this program. This program expired on November 21, 2014.

 

K.            STOCK ARRANGEMENTS

 

The Company records stock-based compensation expense for the cost of stock options and stock grants as well as shares issued under the Company’s 1999 Employee Stock Purchase Plan, as amended. The fair value of each option awarded is calculated on the date of grant using the Black-Scholes option-pricing model. Stock-based compensation recognized in selling and administrative expenses in the accompanying financial statements in the first quarters of fiscal 2015 and 2014 was $365,000 and $358,000, respectively. The related tax benefit recognized in the first quarters of fiscal 2015 and 2014 was $135,000 and $127,000, respectively. Unrecognized stock-based compensation cost at December 27, 2014 was $1.9 million, to be recognized over a weighted-average period of 2.3 years.

 

The Company annually issues a combination of stock options and stock grants to its key employees under the Courier Corporation 2011 Stock Option and Incentive Plan (the “2011 Plan”). Stock options and stock grants generally vest over three years. Options and grants relating to fiscal 2014 were awarded in November 2014; 34,896 stock options were awarded under the 2011 Plan with an exercise price of $13.44 per share, which was the stock price on the date of grant, and a weighted-average fair value of

 

13



 

$3.03 per share. In addition, 45,132 stock grants were awarded in November 2014 with a weighted-average fair value of $13.44 per share.

 

The weighted average Black-Scholes fair value assumptions for stock options awarded under the 2011 Plan in the first quarter of fiscal 2015 were as follows:

 

Estimated life of options (years)

 

10

 

Risk-free interest rate

 

2.6

%

Expected volatility

 

42

%

Expected dividend yield

 

6.0

%

 

L.            RESTRUCTURING COSTS

 

In fiscal 2011, the Company recorded restructuring costs of $7.7 million associated with closing and consolidating its Stoughton, Massachusetts manufacturing facility due to the impact of technology and competitive pressures affecting the one-color paperback books in which the plant specialized. Restructuring costs included $2.3 million for employee severance and benefit costs, $2.1 million for an early withdrawal liability from a multi-employer pension plan, and $3.3 million for lease termination and other facility closure costs. As of December 27, 2014, remaining payments of approximately $2.6 million will be made over periods ranging from 1 year for the building lease obligation to 17 years for the liability related to the multi-employer pension plan. At December 27, 2014, approximately $0.6 million of the restructuring payments were included in “Other current liabilities” and $2.0 million were included in “Other liabilities” in the accompanying consolidated condensed balance sheet.

 

The following table depicts the remaining accrual balances for these restructuring costs.

 

 

 

(000’s omitted)

 

 

 

Accrual at

 

Charges

 

Costs

 

Accrual at

 

 

 

September 27,

 

or

 

Paid or

 

December 27,

 

 

 

2014

 

Reversals

 

Settled

 

2014

 

Employee severance, post-retirement and other benefit costs

 

$

88

 

 

$

(12

)

$

76

 

Early withdrawal from multi-employer pension plan

 

1,926

 

 

(21

)

1,905

 

Lease termination, facility closure and other costs

 

765

 

 

(98

)

667

 

Total

 

$

2,779

 

 

$

(131

)

$

2,648

 

 

M.           EQUITY

 

The Company’s equity as of December 27, 2014 and September 27, 2014, and changes during the three month period ended December 27, 2014, were as follows:

 

 

 

(000’s omitted)

 

 

 

Company
Stockholders’
Equity

 

Noncontrolling
Interest

 

Total
Equity

 

Balance at September 27, 2014

 

$

144,416

 

 

$

144,416

 

Net income

 

1,796

 

 

1,796

 

Cash dividends

 

(2,408

)

 

(2,408

)

Noncontrolling interest in acquired business (Note F)

 

 

$

3,975

 

3,975

 

Changes in other comprehensive income (loss)

 

(83

)

 

(83

)

Stock-based compensation

 

365

 

 

365

 

Other stock plan activity

 

(86

)

 

(86

)

Balance at December 27, 2014

 

$

144,000

 

$

3,975

 

$

147,975

 

 

The Company’s equity as of December 28, 2013 and September 28, 2013, and changes during the three month period ended December 28, 2013, were as follows:

 

 

 

(000’s omitted)

 

 

 

Company
Stockholders’
Equity

 

Noncontrolling
Interest

 

Total
Equity

 

Balance at September 28, 2013

 

$

146,044

 

 

$

146,044

 

Net income

 

2,647

 

 

2,647

 

Cash dividends

 

(2,416

)

 

(2,416

)

Changes in other comprehensive income (loss)

 

48

 

 

48

 

Stock-based compensation

 

358

 

 

358

 

Other stock plan activity

 

(52

)

 

(52

)

Balance at December 28, 2013

 

$

146,629

 

 

$

146,629

 

 

N.            SUBSEQUENT EVENT

 

On January 16, 2015, the Company entered into an Agreement and Plan of Merger (the “Quad Merger Agreement”) with Quad/Graphics, Inc. (“Quad”) pursuant to which the Company’s shareholders would have received $20.50 per share, consisting of cash and shares of Quad common stock. On January 26, 2015, the Company received an unsolicited proposal from R.R. Donnelley & Sons Company (“RR Donnelley”) to acquire the Company for $23.00 per share, consisting of cash and shares of RR Donnelley common stock.

 

On February 5, 2015, the Company terminated the Quad Merger Agreement and simultaneously entered into an Agreement and Plan of Merger with RR Donnelley (the “RRD Merger Agreement”). Under the terms of the RRD Merger Agreement, the Company’s shareholders will have the option to elect to receive either $23.00 in cash or 1.3756 RR Donnelley common shares for each outstanding share of the Company they own. Such elections are subject to pro ration so that a total of 8.0 million shares of RR Donnelley common stock, representing approximately 51% of the total merger consideration, will be issued in the merger. The completion of the transaction is subject to customary closing conditions, including regulatory approval and approval by Courier’s shareholders.

 

In accordance with the terms of the Quad Merger Agreement, upon termination, the Company paid Quad a $10 million termination fee. Under the terms of the RRD Merger Agreement, RR Donnelley reimbursed the Company the entire $10 million termination fee.

 

14


 


 

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

 

Critical Accounting Policies and Estimates:

 

The Company’s consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles.  The preparation of these financial statements requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes.  On an ongoing basis, management evaluates its estimates and judgments, including those related to collectibility of accounts receivable, recovery of inventories, impairment of goodwill and other intangibles, and prepublication costs.  Management bases its estimates and judgments on historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented.  Actual results may differ from these estimates.  The significant accounting policies which management believes are most critical to aid in fully understanding and evaluating the Company’s reported financial results include the following:

 

Accounts Receivable.   Management performs ongoing credit evaluations of the Company’s customers and adjusts credit limits based upon payment history and the customer’s current creditworthiness.  Collections and payments from customers are continuously monitored.  A provision for estimated credit losses is determined based upon historical experience and any specific customer collection risks that have been identified.  If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

 

Inventories.   Management records reductions in the cost basis of inventory for excess and obsolete inventory based primarily upon historical and forecasted product demand.  If actual market conditions are less favorable than those projected by management, additional inventory charges may be required.

 

Goodwill and Other Intangibles.  Other intangibles include customer lists and technology, which are amortized on a straight-line basis over periods ranging from two to ten years and an indefinite-lived trade name. The Company evaluates possible impairment of goodwill and other intangibles at the reporting unit level, which is the operating segment or one level below the operating segment, on an annual basis or whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable.  The Company completed its annual impairment test at September 27, 2014, which resulted in no change to the nature or carrying amounts of its intangible assets, with the exception of FastPencil, a reporting unit within the book manufacturing segment. The Company concluded it was necessary to record a goodwill impairment charge of $4.5 million at the end of the second quarter of fiscal 2014 and $0.3 million at the end of the fourth quarter of fiscal 2014, as well as an impairment charge of $1.2 million for FastPencil’s other intangible assets at the end of the fourth quarter of fiscal 2014. Changes in market conditions or poor operating results could result in a decline in the fair value of the Company’s goodwill and other intangible assets thereby potentially requiring an impairment charge in the future.

 

Prepublication Costs.   The Company capitalizes prepublication costs, which include the costs of acquiring rights to publish a work and costs associated with bringing a manuscript to publication such as artwork and editorial efforts. Prepublication costs are amortized on a straight-line basis over periods ranging from three to four years.  Management regularly evaluates the sales and profitability of the products based upon historical and forecasted demand.  If actual market conditions are less favorable than those projected by management, additional amortization expense may be required.

 

15



 

Overview:

 

Courier Corporation, founded in 1824, is among America’s leading book manufacturers and a leader in content management and customization in new and traditional media.  The Company also publishes books under two brands offering award-winning content and thousands of titles. The Company has two operating segments: book manufacturing and publishing.  The book manufacturing segment streamlines the process of bringing books from the point of creation to the point of use.  Courier offers services from prepress and production through storage and distribution, as well as innovative content management, customization and state-of-the-art digital print capabilities.  The publishing segment consists of Dover Publications, Inc. (“Dover”) and Research & Education Association, Inc. (“REA”).  Dover publishes over 10,000 titles in more than 30 specialty categories including children’s books, literature, art, music, crafts, mathematics, science, religion and architecture.  REA publishes test preparation and study-guide books and software for high school, college and graduate students, and professionals.

 

On January 16, 2015, the Company entered into an Agreement and Plan of Merger (the “Quad Merger Agreement”) with Quad/Graphics, Inc. (“Quad”) pursuant to which the Company’s shareholders would have received $20.50 per share, consisting of cash and shares of Quad common stock.  On January 26, 2015, the Company received an unsolicited proposal from R.R. Donnelley & Sons Company (“RR Donnelley”) to acquire the Company for $23.00 per share, consisting of cash and shares of RR Donnelley common stock.

 

On February 5, 2015, the Company terminated the Quad Merger Agreement and simultaneously entered into an Agreement and Plan of Merger with RR Donnelley (the “RRD Merger Agreement”).  Under the terms of the RRD Merger Agreement, the Company’s shareholders will have the option to elect to receive either $23.00 in cash or 1.3756 RR Donnelley common shares for each outstanding share of Courier they own.  Such elections are subject to pro ration so that a total of 8.0 million shares of RR Donnelley common stock, representing approximately 51% of the total merger consideration, will be issued in the merger.  The completion of the transaction is subject to customary closing conditions, including regulatory approval and approval by Courier’s shareholders.

 

In accordance with the terms of the Quad Merger Agreement, upon termination, the Company paid Quad a $10 million termination fee.  Under the terms of the RRD Merger Agreement, RR Donnelley reimbursed the Company the entire $10 million termination fee.

 

Results of Continuing Operations:

 

FINANCIAL HIGHLIGHTS

(dollars in thousands except per share amounts)

 

 

 

Three Months Ended

 

 

 

December 27,
2014

 

December 28,
2013

 

%
Change

 

 

 

 

 

 

 

 

 

Net sales

 

$

66,494

 

$

72,260

 

-8.0

%

Cost of sales

 

49,006

 

54,513

 

-10.1

%

Gross profit

 

17,488

 

17,747

 

-1.5

%

As a percentage of sales

 

26.3

%

24.6

%

 

 

 

 

 

 

 

 

 

 

Selling and administrative expenses

 

14,187

 

13,115

 

8.2

%

Operating income

 

3,301

 

4,632

 

-28.7

%

Interest expense, net

 

137

 

175

 

-21.7

%

Pretax income

 

3,164

 

4,457

 

-29.0

%

Provision for income taxes

 

1,368

 

1,635

 

-16.3

%

Net income

 

$

1,796

 

$

2,822

 

-36.4

%

 

 

 

 

 

 

 

 

Net income per diluted share

 

$

0.16

 

$

0.25

 

-36.0

%

 

Revenues from continuing operations in the first quarter of fiscal 2015 were $66.5 million, down 8% from the same period last year. Book manufacturing segment sales decreased 9% to $59.6 million with growth

 

16



 

in the education market offset by lower sales in the religious market. In the publishing segment, revenues grew 5% to $9.0 million compared to last year’s first quarter.

 

Net income for the quarter was $1.8 million compared with $2.8 million in the first three months of fiscal 2014. Results include $800,000, or $0.07 per diluted share, for transaction costs associated with the pending acquisition of the Company, which are not deductible for income tax purposes. Results also included losses on foreign currency translation related to the Company’s acquisition of Digital Page Gráfica E Editora (“Digital Page”) of $870,000, or $0.05 per diluted share.  Results in the book manufacturing segment were down from the first quarter of last year reflecting the reduced sales volume and costs associated with the acquisition of Digital Page. Results in the publishing segment were profitable in the first three months of fiscal 2015 compared to a loss in the corresponding period of fiscal 2014.

 

Book Manufacturing Segment

 

SEGMENT HIGHLIGHTS

(dollars in thousands)

 

 

 

Three Months Ended

 

 

 

December 27,
2014

 

December 28,
2013

 

%
Change

 

 

 

 

 

 

 

 

 

Net sales

 

$

59,645

 

$

65,576

 

-9.0

%

Cost of sales

 

45,663

 

51,216

 

-10.8

%

Gross profit

 

13,982

 

14,360

 

-2.6

%

As a percentage of sales

 

23.4

%

21.9

%

 

 

 

 

 

 

 

 

 

 

Selling and administrative expenses

 

9,747

 

9,050

 

7.7

%

Operating income

 

$

4,235

 

$

5,310

 

-20.2

%

 

Within the book manufacturing segment, the Company focuses on three key publishing markets: education, religious and specialty trade. In the first quarter of fiscal 2015, sales to the education market were $30 million, up 7% from the same period last year, primarily due to increased sales of college textbooks. Sales to the religious market were $11 million, down from $19 million in the first three months of last year, primarily due to order timing with the Company’s largest religious customer. The volume of orders from this customer fluctuates from quarter to quarter within a long-term pattern of single-digit growth.  Sales to the specialty trade market were $17 million, comparable to last year’s first quarter.

 

On November 18, 2014, the Company acquired 60% of the outstanding stock of Digital Page, a Sao Paulo-based digital printing firm, and the founder of Digital Page continues to own 40% of the business and actively manage the operations. The investment in Digital Page complements the Company’s license of its custom publishing platform to Santillana, the largest Spanish/Portuguese educational publisher in the world as Digital Page has a multiyear commercial print agreement with Santillana. The acquisition of Digital Page was accounted for as a business combination and, accordingly, Digital Page’s financial results are included as a reporting unit within the book manufacturing segment in the consolidated financial statements from the date of acquisition and are reported on a one-month lag to facilitate accurate reporting.

 

In the first quarter of fiscal 2015, cost of sales in the book manufacturing segment decreased 11%, or $5.6 million, to $45.7 million compared to the same period last year largely due to the decline in sales volume. Gross profit for the first quarter decreased $0.4 million to $14.0 million compared with the corresponding period in fiscal 2014 and, as a percentage of sales, increased to 23.4% from 21.9%, reflecting a favorable sales mix and productivity gains.

 

Selling and administrative expenses for the segment were $9.7 million in the first quarter of fiscal 2015, slightly higher than the same period last year, with increased foreign exchange and other costs associated with the investment in Brazil offset in part by a reduction in amortization and contingent consideration expenses related to the acquisition of FastPencil.

 

First quarter operating income in the book manufacturing segment declined 20% to $4.2 million compared

 

17



 

with the first quarter of fiscal 2014, reflecting the reduced sales volume and increased costs associated with the Company’s investment in Brazil.

 

Publishing Segment

 

SEGMENT HIGHLIGHTS

(dollars in thousands)

 

 

 

Three Months Ended

 

 

 

December 27,
2014

 

December 28,
2013

 

%
Change

 

 

 

 

 

 

 

 

 

Net sales

 

$

9,015

 

$

8,585

 

5.0

%

Cost of sales

 

5,483

 

5,290

 

3.6

%

Gross profit

 

3,532

 

3,295

 

7.2

%

As a percentage of sales

 

39.2

%

38.4

%

 

 

 

 

 

 

 

 

 

 

Selling and administrative expenses

 

3,274

 

3,707

 

-11.7

%

Operating income (loss)

 

$

258

 

$

(412

)

 

 

 

The Company’s publishing segment reported revenues from continuing operations of $9.0 million, an increase of 5% over last year’s first quarter. Sales at REA were $0.7 million, slightly lower than the first three months of fiscal 2014. Sales at Dover in the first quarter of fiscal 2015 increased 6% to $8.3 million compared to the first three months last year, reflecting growth in sales to online retailers and the success of its Creative Haven product line.

 

Cost of sales in this segment increased 4% to $5.5 million in the first three months of fiscal 2015 compared to the prior year, reflecting the growth in sales. Gross profit increased 7% to $3.5 million compared to last year’s first quarter and, as a percentage of sales, increased to 39.2% from 38.4%, reflecting an improved cost structure in the segment.

 

This lower cost structure also benefitted selling and administrative expenses for the segment, which were down 12% from the comparable prior year period. The first quarter of last year included approximately $100,000 related to actions taken to reduce overhead at REA and refocus new product development.

 

The publishing segment’s operating income was $258,000 in the first three months of fiscal 2015 compared to a loss of $412,000 in the corresponding period last year, largely due to the improvement in sales at Dover, coupled with cost reductions.

 

Total Consolidated Company

 

Interest expense, net of interest income, was $137,000 in the first quarter of fiscal 2015 compared to $175,000 of net interest expense in the first three months of last year. Average debt under the revolving credit facility in the first quarter of fiscal 2015 was approximately $24.1 million at an average annual interest rate of 1.4%, generating interest expense of approximately $85,000. Average debt under the revolving credit facility in the first quarter of last year was also approximately $24.1 million at an average annual interest rate of 1.4%, generating interest expense of approximately $88,000. In the first quarter of fiscal 2014, the Company entered into a capital lease arrangement for certain assets in its Kendallville, Indiana digital print facility. At December 27, 2014, $7.8 million of debt was outstanding under this arrangement at an implicit interest rate of 1.8%.  Interest expense under the capital lease was approximately $32,000 and $25,000 in the first quarters of fiscal 2015 and 2014, respectively.  In addition, approximately $24,000 and $30,000 of interest expense was amortized in the first three months of fiscal years 2015 and 2014, respectively, associated with the restructuring costs incurred in fiscal 2011. Interest expense also includes commitment fees and other costs associated with maintaining the Company’s $100 million revolving credit facility. In the first quarters of fiscal years 2015 and 2014, the Company recorded interest income of approximately $65,000 and $50,000, respectively, from loans relating to the investment in Brazil.

 

The Company’s effective tax rate from continuing operations for the first quarter of fiscal 2015 was 43%, compared to the 37% rate for the same period last year, reflecting nondeductible transaction costs of $800,000 associated with the pending acquisition. Excluding these transaction costs, the effective tax rate in fiscal 2015 was 34.5%, reflecting a lower effective state tax rate compared with the prior year period.

 

18



 

For purposes of computing net income per diluted share, weighted average shares outstanding for the first quarter of fiscal 2015 decreased by approximately 105,000 shares compared with the same period last year, primarily due to a decrease in potentially dilutive shares.

 

Restructuring Costs

 

In fiscal 2011, the Company recorded restructuring costs of $7.7 million associated with closing and consolidating its Stoughton, Massachusetts manufacturing facility due to the impact of technology and competitive pressures affecting the one-color paperback books in which the plant specialized.  Restructuring costs included $2.3 million for employee severance and benefit costs, $2.1 million for an early withdrawal liability from a multi-employer pension plan, and $3.3 million for lease termination and other facility closure costs. Remaining payments of approximately $2.6 million will be made over periods ranging from 1 year for the building lease obligation to 17 years for the liability related to the multi-employer pension plan.  At December 27, 2014, approximately $0.6 million of the restructuring payments were included in “Other current liabilities” and $2.0 million were included in “Other liabilities” in the accompanying consolidated balance sheet.

 

The following table depicts the remaining accrual balances for these restructuring costs.

 

 

 

 

(000’s omitted)

 

 

 

Accrual at

 

Charges

 

Costs

 

Accrual at

 

 

 

September 27,

 

or

 

Paid or

 

December 27,

 

 

 

2014

 

Reversals

 

Settled

 

2014

 

Employee severance, post-retirement and other benefit costs

 

$

88

 

 

$

(12

)

$

76

 

Early withdrawal from multi-employer pension plan

 

1,926

 

 

(21

)

1,905

 

Lease termination, facility closure and other costs

 

765

 

 

(98

)

667

 

Total

 

$

2,779

 

 

$

(131

)

$

2,648

 

 

Liquidity and Capital Resources:

 

During the first three months of fiscal 2015, operations provided $3.8 million of cash, compared to $9.5 million in the first quarter of last year; this decline was largely attributable to increased working capital requirements. Net income for the quarter was $1.8 million and depreciation and amortization were $6.0 million. Changes in working capital used $4.2 million of cash in the first quarter of fiscal 2015, largely due to an increase in inventory.

 

Investment activities in the first quarter of this fiscal year used $1.9 million of cash. Capital expenditures were $0.9 million.  For the entire fiscal year, capital expenditures are expected to be approximately $8 to $10 million.  Prepublication costs were $0.6 million in the first three months of fiscal 2015 and for the full fiscal year are projected to be between $2 and $3 million.

 

On November 18, 2014, the Company acquired 60% of the outstanding stock of Digital Page Gráfica E Editora (“Digital Page”), a Sao Paulo-based digital printing firm. Under the investment agreement, as revised in August 2014, the Company invested a total of 20 million Brazilian Reals. During the first quarter of fiscal 2014, the Company funded two loans to Digital Page totaling approximately 10 million Brazilian Reals which were secured by the pledge of the equity interest in Digital Page. The principal amount of the loans was credited towards the total purchase price of $7.7 million, with $3.5 million in cash paid upon closing, of which $482,000 was paid to the founder.

 

In December 2014, the Company signed an agreement to sell approximately 110,000 square feet of unoccupied or underutilized portions of its multi-building manufacturing complex in Westford, Massachusetts for $1.2 million. The Company will continue its current levels of book manufacturing at the site. The agreement contains a number of significant contingencies. Assuming these contingencies can be resolved, closing is anticipated in late 2015. Although the carrying value of the property is nominal, the agreement requires that the Company incur certain costs to complete the transaction, such as the separation of all utilities within the complex. If the transaction is completed, the Company anticipates realizing a gain on the sale.

 

Financing activities for the first three months of fiscal 2015 used approximately $2.7 million of cash.  Cash dividends of $2.4 million were paid and net borrowings decreased by $0.3 million during the first quarter

 

19



 

of fiscal 2015.  In the first quarter of fiscal 2014, the Company entered into a $10.5 million capital lease arrangement for printing and binding equipment in its Kendallville, Indiana digital print facility. At December 27, 2014, $7.8 million of debt was outstanding under this capital lease arrangement and the implicit interest rate was 1.8%. The Company also has a $100 million long-term revolving credit facility in place under which the Company can borrow at a rate not to exceed LIBOR plus 2.25%.  In December 2014, the Company extended the maturity date of this credit facility from March 2016 to December 2019.  At December 27, 2014, the Company had $24.8 million in borrowings under this facility at an interest rate of 1.4%.  The revolving credit facility contains restrictive covenants including provisions relating to the incurrence of additional indebtedness and a quarterly test of EBITDA to debt service.  The Company was in compliance with all debt covenants at December 27, 2014.  The facility also provides for a commitment fee not to exceed 3/8% per annum on the unused portion.  The revolving credit facility is used by the Company for both its long-term and short-term financing needs.  The Company believes that its cash on hand, cash from operations and the available credit facility will be sufficient to meet its cash requirements for at least the next twelve months.

 

The following table summarizes the Company’s contractual obligations and commitments at December 27, 2014 to make future payments as well as its existing commercial commitments.

 

 

 

 

 

(000’s omitted)

 

 

 

 

 

Payments due by period

 

 

 

 

 

Less than

 

1 to 3

 

3 to 5

 

More than

 

Contractual Payments:

 

Total

 

1 Year

 

Years

 

Years

 

5 Years

 

Debt, including capital lease obligations (1)

 

$

37,103

 

$

5,893

 

$

6,376

 

$

24,834

 

 

Interest due on debt (2)

 

246

 

142

 

104

 

 

 

Operating leases (3)

 

4,693

 

920

 

1,590

 

1,440

 

$

743

 

Purchase obligations (4)

 

1,499

 

1,499

 

 

 

 

Contingent consideration (5)

 

1,265

 

 

1,265

 

 

 

Other liabilities (6)

 

9,952

 

981

 

4,153

 

722

 

4,096

 

Total

 

$

54,758

 

$

9,435

 

$

13,488

 

$

26,996

 

$

4,839

 

 


(1)         Includes $24.8 million under the Company’s long-term revolving credit facility, which has a maturity date of December 2019, as well as capital leases and other debt associated with the acquisition of Digital Page in November 2014.

(2)         Represents scheduled interest payments on the Company’s capital lease financing. Future interest on the Company’s revolving credit facility is not included because the interest rate and principal balance fluctuate on a daily basis and an estimate could differ significantly from actual interest expense.

(3)         Represents amounts at September 27, 2014, except for the Stoughton, Massachusetts building lease obligation which was included in the restructuring accrual in “Other liabilities.”

(4)         Represents capital commitments.

(5)         Related to the acquisition of FastPencil in April 2013.

(6)         Includes approximately $2.6 million of restructuring costs related to closing the Stoughton, Massachusetts facility, in addition to a current liability of $0.6 million. Operating leases exclude the Stoughton building lease obligation which is included above in “Other liabilities.”

 

Forward-Looking Information:

 

This Quarterly Report on Form 10-Q includes forward-looking statements. Statements that describe future expectations, plans or strategies are considered “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995 and releases issued by the Securities and Exchange Commission.  The words “believe,” “expect,” “anticipate,” “intend,” “estimate” and other expressions which are predictions of or indicate future events and trends and which do not relate to historical matters identify forward-looking statements.  Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those currently anticipated.  Some of the factors that could affect actual results are discussed in Item 1A of this Form 10-Q and include, among others, pricing actions by competitors and other competitive pressures in the markets in which the Company competes, consolidation among customers and competitors, changes in customers’ demand for the Company’s products, including seasonal changes in customer orders and shifting orders to lower cost regions, increased concentration with a few customers, success in the execution of acquisitions and the performance and integration of acquired businesses including carrying value of intangible assets and

 

20



 

contingent consideration, performance of investments in unconsolidated subsidiaries and exposure to risks of operating internationally, restructuring and impairment charges required under generally accepted accounting principles, insolvency of key customers or vendors, changes in technology including migration from paper-based books to digital, changes in market growth rates, changes in obligations of multiemployer pension plans and general changes in economic conditions, including currency fluctuations, changes in interest rates, changes in consumer confidence, changes in the housing market, and tightness in the credit markets, changes in raw material costs and availability, changes in the Company’s labor relations, changes in operating expenses including medical and energy costs, difficulties in the startup of new equipment or information technology systems, changes in copyright laws, changes in consumer product safety regulations, changes in environmental regulations, changes in tax regulations, changes in the Company’s effective income tax rate, and risks related to the pending acquisition of the Company.  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.

 

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 27, 2014. With the acquisition of 60% of the equity in Digital Page in November 2014, the Company is exposed to the impact of foreign currency fluctuations in Brazil. The exposure to foreign currency movements is limited because the operating revenues and expenses of Digital Page are substantially in the local currency in which they operate. Although operating in the local currency may limit the impact of currency rate fluctuations on the results of operations of Digital Page, fluctuations in such rates may affect the translation of these results into the Company’s condensed consolidated financial statements. At December 27, 2014, the Company had two forward exchange contracts to sell a total of 8 million South African Rands (ZAR) as hedges against future sales proceeds, which were designated as cash flow hedges. The fair values of the foreign exchange forward contracts were valued using market exchange rates.  The Company does not use financial instruments for trading or speculative purposes.

 

Item 4.                   CONTROLS AND PROCEDURES

 

(a)       Evaluation of disclosure controls and procedures

 

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this Quarterly Report, the Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures.  Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.

 

(b)       Changes in internal controls over financial reporting

 

There was no change in the Company’s internal control over financial reporting that occurred during the period covered by this Quarterly Report that has materially affected, or that is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

21


 


 

PART II.  OTHER INFORMATION

 

Item 1.                                                         Legal Proceedings

 

None.

 

Item 1A.                                                Risk Factors

 

The Company’s consolidated results of operations, financial condition and cash flows can be adversely affected by various risks.  Our business is influenced by many factors that are difficult to predict, involve uncertainties that may materially affect actual results and are often beyond our control.  We discuss below the risks that we believe are material.  You should carefully consider all of these factors.  For other factors that may cause actual results to differ materially from those indicated in any forward-looking statement contained in this report, see Forward-Looking Information in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The first section of risk factors below, “Risks Related to our Business,” represent those faced by the Company as a standalone company and should be read in conjunction with the second section of risk factors below, “Merger Related Risks,” which represent risks the Company currently faces under the merger agreement with R. R. Donnelley & Sons Company (“RRD”).

 

Risks Related to Our Business

 

Industry competition and consolidation may increase pricing pressures and adversely impact our margins or result in a loss of customers.

 

The book industry is extremely competitive.  In the book manufacturing segment, consolidation over the past few years of both customers and competitors within the markets in which the Company competes has caused downward pricing pressures.  In addition, customers switching from traditional manufacturing processes to digital printing and ebooks as well as excess capacity and competition from printing companies in lower cost countries such as China may increase competitive pricing pressures.  Furthermore, some of our competitors have greater sales, assets and financial resources than us, and those in foreign countries may derive significant advantages from local governmental regulation, including tax holidays and other subsidies.  All or any of these competitive pressures could affect prices or customers’ demand for our products, impacting our profit margins and/or resulting in a loss of customers and market share.

 

A reduction in orders or pricing from, or the loss of, any of our significant customers may adversely impact our operating results.

 

We derived approximately 55% and 57% of our fiscal 2014 and 2013 revenues from continuing operations, respectively, from two major customers.  We expect similar concentrations in fiscal 2015.  We do business with these customers on a purchase order basis and they are not bound to purchase at particular volume levels.  As a result, either of these customers could determine to reduce their order volume or pricing with us, especially if our pricing is not deemed competitive.  A significant reduction in order volumes or pricing from, or the loss of, either of these customers could have a material adverse effect on our results of operations and financial condition.  In addition, our publishing segment is dependent on Amazon as a primary sales channel. Any change in pricing or order volume from that customer could have a material adverse effect on our results.

 

A failure to successfully integrate acquired businesses may have a material adverse effect on our business or operations.

 

Over the past several years, we have completed several acquisitions, and may continue to make acquisitions in the future.  We believe that these acquisitions provide strategic growth opportunities for us.  Achieving the anticipated benefits of these acquisitions will depend in part upon our ability to integrate these businesses in an efficient and effective manner.  The challenges involved in successfully integrating acquisitions include:

 

·                  we may find that the acquired company or assets do not further our business strategy, or that we overpaid for the company or assets, or that economic conditions have changed, all of which may

 

22



 

result in a future impairment charge;

 

·                  we may have difficulty integrating the operations and personnel of the acquired business and may have difficulty retaining the customers and/or the key personnel of the acquired business;

 

·                  we may have difficulty incorporating and integrating acquired technologies into our business;

 

·                  our ongoing business and management’s attention may be disrupted or diverted by transition or integration issues and the complexity of managing diverse locations;

 

·                  we may have difficulty maintaining uniform standards, controls, procedures and policies across locations;

 

·                  an acquisition may result in litigation from shareholders or terminated employees of the acquired business or third parties; and

 

·                  we may experience significant problems or liabilities associated with technology and legal contingencies of the acquired business.

 

These factors could have a material adverse effect on our business, results of operations and financial condition or cash flows, particularly in the case of a larger acquisition or multiple acquisitions in a short period of time.  From time to time, we may enter into negotiations for acquisitions that are not ultimately consummated.  Such negotiations could result in significant diversion of management’s time from our business as well as significant out-of-pocket costs. Tightness in credit markets may also affect our ability to consummate such acquisitions.

 

The consideration that we pay in connection with an acquisition could affect our financial results.  If we were to proceed with one or more significant acquisitions in which the consideration included cash, we could be required to use a substantial portion of our available cash and credit facilities to consummate such acquisitions.  To the extent we issue shares of stock or other rights to purchase stock, including options or other rights, our existing stockholders may experience dilution in their share ownership in our company and their earnings per share may decrease.

 

In addition, acquisitions may result in the incurrence of debt, large one-time write-offs and restructuring charges.  They may also result in goodwill and other intangible assets that are subject to impairment tests, which could result in future impairment charges.  Accounting for business combinations may involve complex and subjective valuations of the assets and liabilities recorded as a result of the business combination or other agreement, and in some instances contingent consideration, which is recorded in the Company’s Consolidated Financial Statements pursuant to the standards applicable for business combinations in accordance with accounting principles generally accepted in the United States.  Differences between the inputs and assumptions used in the valuations and actual results could have a material effect on our financial position and results of operation.

 

Any of these factors may materially and adversely affect our business and operations.

 

We could face significant liability as a result of our participation in multi-employer pension plans.

 

We participate in two multi-employer defined benefit pension plans for certain union employees. Multi-employer pension plans cover employees of and receive contributions from two or more unrelated employers under one or more union contracts. Our risks of participating in these types of plans include the fact that (i) plan contributions by each employer, including us, may be used to provide benefits to employees of other participating employers, (ii) if another participating employer withdraws from either plan, the unfunded obligations of the plan may be borne by the remaining participating employers, including us, and (iii) if we withdraw from participating in either plan, we may be required to pay the plan an amount based on our allocable share of the underfunded status of the plan.

 

We make periodic contributions to the two multi-employer plans pursuant to our union contracts, each of which was renewed in fiscal year 2013, to allow the plans to meet the pension benefit obligations to plan participants. We currently expect that we will be required to contribute approximately $357,000 to these two plans in fiscal 2015, but these contributions could significantly increase due to other employers’ withdrawals or changes in the funded status of the plans. Further, if we continue to participate in such pension plans, our contributions may increase depending on the outcome of future union negotiations and applicable law, changes in the funding status of the plans, and any reduction in participation or withdrawal by other employers from the plans. Our continued participation in these plans could have a material

 

23



 

adverse impact on our results of operations, cash flows or financial condition. In the event that we withdraw from participation in one or both of these plans, we could be required to make a withdrawal liability payment or series of payments to the plan, which would be reflected as an expense in our consolidated statements of comprehensive income and a liability on our consolidated balance sheet. Our withdrawal liability for any multiemployer plan would depend on the funded status of the plan and the level of our prior plan contributions.  Both plans are estimated to be underfunded as of December 27, 2014 and have a Pension Protection Act zone status of critical (“red”); such status identifies plans that are less than 65% funded. In addition, our contributions to the Bindery Industry Employers GCC/IBT Pension Plan represented approximately 70% of total contributions in each of the last three years.  This plan currently includes only two other contributing employers.  A withdrawal by one or both of these employers could materially increase the amount of our required contributions to this plan.  Under our contract with the bindery union, if certain events occur we have the right to withdraw from the pension plan without the union’s consent. A future withdrawal by us from either of the two multi-employer pension plans could result in a withdrawal liability for us, the amount of which could be material to our results of operations, cash flows and financial condition.

 

Our investment in Brazil increases our exposure to the risks of operating internationally.

 

Substantially all of our operations are conducted within the United States. Investing in Brazil or elsewhere outside the United States will expose us to a number of risks, including:

 

·                  compliance with a wide variety of foreign laws and regulations, including licensing, tax, trade, intellectual property, currency, political and other business restrictions and requirements and local laws and regulations, whose interpretation and enforcement vary significantly among jurisdictions and can change significantly over time;

 

·                  additional U.S. and other regulation of non-domestic operations, including regulation under the Foreign Corrupt Practices Act and other anti-corruption laws;

 

·                  potential difficulties in managing foreign operations, obtaining accurate and timely financial information, enforcing agreements and collecting receivables through foreign legal systems;

 

·                  tariffs, duties, price controls or other restrictions on foreign currencies or trade barriers imposed by foreign countries;

 

·                  potential adverse tax consequences, including tax withholding laws and policies and restrictions on repatriation of funds to the United States;

 

·                  fluctuations in currency exchange rates;

 

·                  impact of recessions and economic slowdowns in economies outside the United States, including foreign currency devaluation, higher interest rates, inflation, and increased government regulation or ownership of traditional private businesses;

 

·                  the instability of foreign economies, governments and currencies and unexpected regulatory, economic or political changes in foreign markets; and

 

·                  developing and emerging markets may be especially vulnerable to periods of instability and unexpected changes, and consumers in those markets may have relatively limited resources to spend on products and services.

 

We cannot assure you that one or more of these factors will not have a material adverse effect on our investment in Brazil and our business, results of operation or financial condition.

 

From time to time, we may make investments in companies over which we do not have sole control, including our investment in Digital Page in Brazil.

 

From time to time, we may make debt or equity investments in other companies that we may not control or over which we may not have sole control.  For example, we own only 60% of the Digital Page equity interests (acquired in November 2014). Investments in these businesses, among other risks, subject us to the operating and financial risks of the businesses we invest in and to the risk that we do not

 

24



 

have sole control over the operations of these businesses.  From time to time, we may make additional investments in or acquire other entities that may subject us to similar risks.  Investments in entities over which we do not have sole control, including joint ventures and strategic alliances, present additional risks such as having differing objectives from our partners or the entities in which we invest, time consuming decision making and information sharing procedures or becoming involved in disputes. The benefits from such joint ventures are shared among the co-owners, so that we do not receive all the benefits from our successful joint ventures. In addition, we rely on the internal controls and financial reporting controls of these entities and their failure to maintain effectiveness or comply with applicable standards may adversely affect us.

 

Because a significant portion of publishing sales are made to or through retailers and distributors, the insolvency of any of these parties could have an adverse impact on our financial condition and operating results.

 

In our publishing segment, sales to retailers and distributors are highly concentrated on a small group, which previously included Borders Group, Inc. (“Borders”). Any bankruptcy, liquidation, insolvency or other failure of a major retailer or distributor could also have a material impact on the Company.  For example, during fiscal 2014, we recorded a net bad debt expense of $825,000 related to the closing and liquidation of a primary distributor for our Creative Homeowner business. Creative Homeowner was sold in September 2014 and is included in discontinued operations in our consolidated financial statements.

 

Electronic delivery of content may adversely affect our business.

 

Electronic delivery of content offers an alternative to the traditional delivery through print.  Widespread consumer acceptance of electronic delivery of books is uncertain, as is the extent to which consumers are willing to replace print materials with online hosted media content.  If our customers’ acceptance of electronic delivery of books and online hosted media content continues to grow, demand for and/or pricing of our printed products may be adversely affected. Non-profit organizations have worked to encourage development of educational content that can be “open sourced” for educational purposes.  If these initiatives increase the availability and utilization of free or inexpensive materials online, it may adversely impact sales, reduce demand or change customer expectations regarding pricing and delivery.

 

A failure to successfully adapt to changing book sales channels may have an adverse impact on our business.

 

Over the last several years, the “bricks & mortar” bookstore channel has experienced a significant contraction, including the bankruptcy of Borders Group, Inc. and Nebraska Book Co., the closure of many independent bookstores, and the reduction in inventory and shelf space for books in other national chains.  In addition to expanding our online and direct to consumer sales, we have responded by offering over 5,000 of our titles as ebooks, as well as seeking alternative channels for our products, such as mass merchandising chains.  However, there is no guarantee that we will be able to address the challenges in these channels, including creating price competitive products that will successfully penetrate these markets and accurately predicting the volume of returns.

 

Declines in general economic conditions may adversely impact our business.

 

Economic conditions have the potential to impact our financial results significantly.  Within the book manufacturing and publishing segments, we may be adversely affected by changes in economic conditions, including as a result of changes in government, business and consumer spending.  Examples of how our financial results may be impacted include:

 

·                  Fluctuations in federal or state government spending on education, including a reduction in tax revenues, could lead to a corresponding decrease in the demand for educational materials, which are produced in our book manufacturing segment and comprise a portion of our publishing products.

 

·                  Consumer demand for books can be impacted by reductions in disposable income.

 

·                  Tightness in credit markets may result in customers delaying orders to reduce inventory levels and may impact their ability to pay their debts as they become due and may disrupt supplies from vendors, and may result in customers becoming insolvent.

 

25



 

·                  Reduced fundraising by religious customers may decrease their order levels.

 

·                  A slowdown in book purchases may result in retailers returning an unusually large number of books to publishers to reduce their inventories.

 

A failure to keep pace with rapid industrial and technological change may have an adverse impact on our business.

 

The printing industry is in a period of rapid technological evolution.  Our future financial performance will depend, in part, upon the ability to anticipate and adapt to rapid industrial and technological changes occurring in the industry and upon the ability to offer, on a timely basis, services that meet evolving industry standards.  If we are unable to adapt to such technological changes, we may lose customers and may not be able to maintain our competitive position. In addition, we may encounter difficulties in the implementation and start-up of new equipment and technology.

 

We are unable to predict which of the many possible future product and service offerings will be important to establish and maintain a competitive position or what expenditures will be required to develop and provide these products and services.  We cannot assure investors that one or more of these factors will not vary unpredictably, which could have a material adverse effect on us. In addition, we cannot assure investors, even if these factors turn out as we anticipate that we will be able to implement our strategy or that the strategy will be successful in this rapidly evolving market.

 

Our operating results are unpredictable and fluctuate significantly, which may adversely affect our stock price.

 

Our quarterly and annual operating results have fluctuated in the past and are likely to fluctuate in the future due to a variety of factors, some of which are outside of our control. Factors that may affect our future operating results include:

 

·                  the timing and size of the orders for our books;

 

·                  the availability of markets for sales or distribution by our major customers;

 

·                  the lengthy and unpredictable sales cycles associated with sales of textbooks to the elementary and high school market;

 

·                  the migration of educators and students towards electronic delivery of content;

 

·                  our customers’ willingness and success in shifting orders from the peak textbook season to the off-peak season to even out our manufacturing load over the year;

 

·                  fluctuations in the currency market may make manufacturing in the United States more or less attractive and make equipment more or less expensive for us to purchase;

 

·                  issues that might arise from the integration of acquired businesses, including their inability to achieve expected results; and

 

·                  tightness in credit markets affecting the availability of capital for ourselves, our vendors, and/or our customers.

 

As a result of these and other factors, period-to-period comparisons of our operating results are not necessarily meaningful or indicative of future performance. In addition, the factors noted above may make it difficult for us to forecast and provide in a timely manner public guidance (including updates to prior guidance) related to our projected financial performance. Furthermore, it is possible that in future quarters our operating results could fall below the expectations of securities analysts or investors. If this occurs, the trading price of our common stock could decline.

 

Our financial results could be negatively impacted by impairments of goodwill or other intangible assets, or other long-lived assets.

 

We perform an annual assessment for impairment of goodwill and other intangible assets, as well as other long-lived assets, at the end of our fiscal year or whenever events or changes in circumstances occur that would more likely than not reduce the fair value of a reporting unit below its carrying value, including a downturn in the market value of the Company’s stock.  A downward revision in the fair value of one of our acquired businesses could result in impairments of goodwill and non-cash charges.  Any impairment charge could have a significant negative effect on our reported results of operations.  For

 

26



 

example, the Company concluded it was necessary to record impairment charges of $4.8 million for FastPencil’s goodwill in fiscal 2014 as well as an impairment charge of $1.2 million for FastPencil’s other intangible assets.  The impact of these impairment charges was offset in part by the reduction of $4.1 million in the related contingent consideration liability during fiscal 2014.

 

Fluctuations in the cost and availability of paper and other raw materials may cause disruption and impact margins.

 

Purchases of paper and other raw materials represent a large portion of our costs.  In our book manufacturing segment, paper is normally supplied by our customers at their expense or price increases are passed through to our customers.  In our publishing segment, cost increases have generally been passed on to customers through higher prices or we have substituted a less expensive grade of paper.  However, if we are unable to continue to pass on these increases or substitute a less expensive grade of paper, our margins and profits could be adversely affected.

 

Availability of paper is important to both our book manufacturing and publishing segments.  Although we generally have not experienced difficulty in obtaining adequate supplies of paper, recent reductions in capacity may impact paper production and unexpected changes in the paper markets could result in a shortage of supply.  If this were to occur in the future, it could cause disruption to the business or increase paper costs, adversely impacting either or both net sales or profits.

 

Fluctuations in the costs and availability of paper and other raw materials could adversely affect operating costs or customer demand and thereby negatively impact our operating results, financial condition or cash flows.

 

In addition, fluctuations in the markets for paper and other raw materials may adversely affect the market for our waste byproducts, including recycled paper, and used plates, and therefore adversely affect our income from such sales.

 

Energy costs and availability may negatively impact our financial results.

 

Energy costs are incurred directly to run production equipment and facilities and indirectly through expenses such as freight and raw materials such as ink.  In a competitive market environment, increases to these direct and indirect energy related costs might not be able to be passed through to customers through price increases or mitigated through other means.  In such instances, increased energy costs could adversely impact operating costs or customer demand.  In addition, interruption in the availability of energy could disrupt operations, adversely impacting operating results.

 

Inadequate intellectual property protection for our publications could negatively impact our financial results.

 

Certain of our publications are protected by copyright, primarily held in the Company’s name.  Such copyrights protect our exclusive right to publish the work in the United States and in many other countries for specified periods.  Our ability to continue to achieve anticipated results depends in part on our ability to defend our intellectual property against infringement.  Our operating results may be adversely affected by inadequate legal and technological protections for intellectual property and proprietary rights in some jurisdictions and markets.  In addition, some of our publications are of works in the public domain, for which there is nearly no intellectual property protection.  Our operating results may be adversely affected by the increased availability of such works elsewhere, including on the Internet, either for free or for a lower price.

 

A failure to maintain or improve our operating efficiencies could adversely impact our profitability.

 

Because the markets in which we operate are highly competitive, we must continue to improve our operating efficiency in order to maintain or improve our profitability.  Although we have been able to expand our capacity, improve our productivity and reduce costs in the past, there is no assurance that we will be able to do so in the future.  In addition, reducing operating costs in the future may require significant initial costs to reduce headcount, close or consolidate operations, or upgrade equipment and technology.

 

27


 


 

Our facilities are subject to stringent environmental laws and regulations, which may subject us to liability or increase our costs.

 

We use various materials in our operations that contain substances considered hazardous or toxic under environmental laws.  In addition, our operations are subject to federal, state, and local environmental laws relating to, among other things, air emissions, waste generation, handling, management and disposal, waste water treatment and discharge and remediation of soil and groundwater contamination.  Permits are required for the operation of certain of our businesses and these permits are subject to renewal, modification and in some circumstances, revocation.  Under certain environmental laws, including the Comprehensive Environmental Response, Compensation and Liability Act, as amended (“CERCLA,” commonly referred to as “Superfund”), and similar state laws and regulations, we may be liable for costs and damages relating to soil and groundwater contamination at off-site disposal locations or at our facilities.  Future changes to environmental laws and regulations may give rise to additional costs or liabilities that could have a material adverse impact on our financial position and results of operations.

 

A failure to hire and train key executives and other qualified employees could adversely affect our business.

 

Our success depends, in part, on our ability to continue to retain our executive officers and key management personnel.  Our business strategy also depends on our ability to attract, develop, motivate and retain employees who have relevant experience in the printing and publishing industries.  There can be no assurance that we can continue to attract and retain the necessary talented employees, including executive officers and other key members of management and, if we fail to do so, it could adversely affect our business.

 

A lack of skilled employees to manufacture our products may adversely affect our business.

 

If we experience problems hiring and retaining skilled employees, our business may be negatively affected.  The timely manufacture and delivery of our products requires an adequate supply of skilled employees, and the operating costs of our manufacturing facilities can be adversely affected by high turnover in skilled positions.  Accordingly, our ability to increase sales, productivity and net earnings could be impacted by our ability to employ the skilled employees necessary to meet our requirements.  Although our book manufacturing locations are geographically dispersed, individual locations may encounter strong competition with other manufacturers for skilled employees.  There can be no assurance that we will be able to maintain an adequate skilled labor force necessary to efficiently operate our facilities.  In addition, unions represent certain groups of employees at one of our locations, and periodically, contracts with those unions come up for renewal.  The outcome of those negotiations could have an adverse effect on our operations at that location.  Also, changes in federal and/or state laws may facilitate the organization of unions at locations that do not currently have unions, which could have an adverse effect on our operations.

 

We are subject to various laws and regulations that may require significant expenditures.

 

We are subject to federal, state and local laws and regulations affecting our business, including those promulgated under the Consumer Product Safety Act, the rules and regulations of the Consumer Products Safety Commission as well as laws and regulations relating to personal information.  We may be required to make significant expenditures to comply with such governmental laws and regulations and any amendments thereto. Complying with existing or future laws or regulations may materially limit our business and increase our costs.  Failure to comply with such laws may expose us to potential liability and have a material adverse effect on our results of operations.

 

Merger Related Risks

 

The value of the stock portion of the merger consideration is subject to changes based on fluctuations in the value of RRD common stock, and Courier stockholders may receive stock consideration with a value that, at the time received, is less than $23.00 per share of Courier common stock.

 

The market value of RRD common stock will fluctuate during the period before the date of the special meeting of Courier stockholders to vote on the adoption of the RRD merger agreement, during the

 

28



 

period before Courier stockholders receive merger consideration in the form of RRD common stock, as well as thereafter.

 

Upon completion of the merger, each issued and outstanding share of Courier common stock will be converted into the right to receive the per share merger consideration, which is equal to $23.00 in cash or a number of RRD shares equal to the exchange ratio, which depends on the RRD closing stock price at signing. Accordingly, the actual number of shares and the value of RRD common stock delivered to Courier stockholders will depend on the stock price, and the value of the shares of RRD common stock delivered for each such share of Courier common stock may be greater than or less than, or equal to, $23.00. It is impossible to accurately predict fluctuations in the market price of RRD common stock and therefore impossible to accurately predict the value of the shares of RRD common stock that Courier stockholders will receive in the merger.

 

The market price of RRD common stock after the merger will continue to fluctuate and may be affected by factors different from those affecting shares of Courier common stock currently.

 

Upon completion of the merger, holders of Courier common stock will become holders of RRD common stock. The market price of RRD common stock may fluctuate significantly following consummation of the merger and holders of Courier common stock could lose the value of their investment in RRD common stock. In addition, the stock market has experienced significant price and volume fluctuations in recent times, which could have a material adverse effect on the market for, or liquidity of, the RRD common stock, regardless of RRD’s actual operating performance. In addition, RRD’s business differs in important respects from that of Courier, and accordingly, the results of operations of the combined company and the market price of RRD common stock after the completion of the merger may be affected by factors different from those currently affecting the independent results of operations of each of RRD and Courier.

 

Sales of shares of RRD common stock before and after the completion of the transaction may cause the market price of RRD common stock to fall.

 

The issuance of new shares of RRD common stock in connection with the transaction could have the effect of depressing the market price for RRD common stock.  In addition, many Courier stockholders may decide not to hold, and instead may sell, the shares of RRD common stock they will receive in the merger.  Such sales of RRD common stock could have the effect of depressing the market price for RRD common stock and may take place promptly following the merger.

 

Completion of the merger is subject to conditions and if these conditions are not satisfied or waived, the merger will not be completed. The RRD merger agreement can also be terminated by Courier under certain circumstances relating to a superior proposal, as described in the RRD merger agreement.

 

The obligations of RRD and Courier to complete the merger are subject to satisfaction or waiver, to the extent permitted under applicable law, of a number of conditions including adoption of the merger by the Courier stockholders, expiration or termination of the applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”), the effectiveness of the Form S-4, the approval of the listing on the Nasdaq of the RRD common stock to be issued in the merger, the absence of an injunction prohibiting the merger, the accuracy of the representations and the warranties of the other party under the RRD merger agreement (subject to the materiality standards set forth in the RRD merger agreement), the performance by the other party of its respective obligations under the RRD merger agreement in all material respects, and in the case of RRD’s obligations to complete the merger, the absence of a material adverse effect, as described in the RRD merger agreement, on Courier following February 5, 2015.

 

The satisfaction of all of the required conditions could delay the completion of the merger for a significant period of time or prevent it from occurring. Any delay in completing the merger could cause RRD not to realize some or all of the benefits that RRD expects to achieve if the merger is successfully completed within its expected timeframe. Further, there can be no assurance that the conditions to the closing of the merger will be satisfied or waived or that the merger will be completed. See the risk factor entitled “Failure to complete the merger could negatively impact the stock price and the future business and financial results of Courier,’’ below.

 

29



 

Under certain circumstances, if a third party makes a superior proposal, as described in the RRD merger agreement, to acquire Courier, Courier could pay RRD a termination fee of $7.5 million, terminate the RRD merger agreement, and sign a merger agreement with the third party, in which case the pending merger between Courier and RRD would not be completed.

 

In order to complete the merger, RRD and Courier must make certain governmental filings and obtain certain governmental authorizations, and if such filings and authorizations are not made or granted or are granted with conditions, or if regulators otherwise seek to impose conditions or to challenge the merger, completion of the merger may be jeopardized or the anticipated benefits of the merger could be reduced.

 

Although RRD and Courier have agreed in the RRD merger agreement to use their reasonable best efforts, subject to certain limitations, to make certain governmental filings, and obtain the required expiration or termination of the waiting period under the HSR Act, there can be no assurance the waiting period under the HSR Act will expire or be terminated. As a condition to granting termination of the waiting period under the HSR Act or avoiding a lawsuit challenging the merger, governmental authorities may impose requirements, limitations or costs or require divestitures or place restrictions on the conduct of RRD’s business after completion of the merger. Under the terms of the RRD merger agreement, subject to certain exceptions, RRD and its subsidiaries are required to accept certain conditions and take certain actions imposed by governmental authorities that would apply to, or affect, the businesses, assets or properties of it, its subsidiaries or Courier and its subsidiaries. There can be no assurance regulators will not impose conditions, terms, obligations or restrictions and that such conditions, terms, obligations or restrictions will not have the effect of delaying completion of the merger or imposing additional material costs on or materially limiting the revenues of the combined company following the merger, or otherwise adversely affecting RRD’s businesses and results of operations after completion of the merger. In addition, we can provide no assurance these conditions, terms, obligations or restrictions will not result in the delay or abandonment of the merger. There can also be no assurance regulators will not seek to challenge the merger.

 

Combining the two companies may be more difficult, costly, or time consuming than expected and the anticipated benefits and cost savings of the merger may not be realized.

 

Courier and RRD have operated and, until the completion of the merger, will continue to operate, independently. The success of the merger, including anticipated benefits and cost savings, will depend, in part, on RRD’s ability to successfully combine and integrate the businesses of RRD and Courier. It is possible the pending nature of the merger and/or the integration process could result in the loss of key employees, higher than expected costs, diversion of management attention of both Courier and RRD, increased competition, the disruption of either company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the combined company’s ability to maintain relationships with customers, vendors, and employees or to achieve the anticipated benefits and cost savings of the merger. If RRD experiences difficulties with the integration process, the anticipated benefits of the merger may not be realized fully or at all, or may take longer to realize than expected. Integration efforts between the two companies will also divert management’s attention and resources. These integration matters could have an adverse effect on each of RRD and Courier during this transition period and for an undetermined period after completion of the merger on the combined company. In addition, the actual cost savings of the merger could be less than anticipated.

 

Courier’s executive officers and directors have interests in the merger that may be different from the interests of a stockholder of Courier or RRD.

 

When considering the recommendation of the Courier board that Courier stockholders adopt the RRD merger agreement, Courier stockholders should be aware that directors and executive officers of Courier have certain interests in the merger that may be different from or in addition to the interests of Courier stockholders and RRD stockholders generally. These interests, which arise from both contractual arrangements existing prior to the execution of the RRD merger agreement and provisions of the RRD merger agreement, include, among others, the treatment of outstanding equity awards pursuant to the RRD merger agreement, potential severance benefits and other payments, and rights to ongoing indemnification and insurance coverage by the surviving company for acts or omissions occurring prior to the merger. As a result of these interests, these directors and executive officers of Courier might be more likely to support and to vote in favor of the proposals described in the proxy statement than if they did not have these interests. Courier’s stockholders should consider whether these interests might have

 

30



 

influenced these directors and executive officers to support or recommend adoption of the RRD merger agreement.

 

The RRD merger agreement limits Courier’s ability to pursue alternatives to the merger and may discourage other companies from trying to acquire Courier for greater consideration than what RRD has agreed to pay.

 

The RRD merger agreement contains provisions that make it more difficult for Courier to sell its business to a party other than RRD. These provisions include a general prohibition on Courier soliciting any acquisition proposal or offer for a competing transaction. In some circumstances upon termination of the RRD merger agreement, Courier may be required to pay RRD a termination fee of $7.5 million. Further, there are only limited exceptions to Courier’s agreement that the Courier Board of Directors will not withdraw or modify in a manner adverse to RRD the recommendation of the Courier board in favor of the adoption of the RRD merger agreement and to Courier’s agreement not to enter into an agreement with respect to a superior proposal.

 

These provisions might discourage a third party that has an interest in acquiring Courier from considering or proposing an acquisition, even if the party were prepared to pay consideration with a higher per share cash or market value than that proposed to be received or realized in the merger, or might result in a potential competing acquirer proposing to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee or the payment of expenses that may become payable in certain circumstances.

 

Proposals and actions by other interested parties could negatively impact the interests of Courier stockholders and Courier.

 

It is unclear what additional actions other interested parties may take with respect to potential competing proposals or to prevent the RRD merger from occurring. Such potential third party actions may cause disruption in Courier’s business and could negatively impact the expected timing of the consummation of the RRD merger. In addition, Courier’s stockholders may be persuaded to vote against adoption of the RRD merger agreement as a result of such parties’ proposals and, consequently, the required stockholder approval of the RRD merger may not be obtained. If Courier stockholders were to fail to approve the RRD merger, then:

 

· The RRD merger agreement may be terminated without any money going to Courier stockholders;

 

· If the RRD merger agreement is terminated, Courier will have to pay a termination fee to RRD in cash of $7.5 million; and

 

· Courier may remain a stand-alone company and reject any proposed transactions with such third parties.

 

Failure to complete the merger could negatively impact the stock price and the future business and financial results of Courier.

 

If the merger is not completed for any reason, including as a result of Courier stockholders failing to adopt the RRD merger agreement, the ongoing business of Courier may be adversely affected and, without realizing any of the benefits of having completed the merger, Courier would be subject to a number of risks, including the following:

 

· Courier may experience negative reactions from the financial markets, including negative impacts on its stock price;

 

· Courier may experience negative reactions from its customers, vendors and employees;

 

· Courier will be required to pay certain costs relating to the merger, whether or not the merger is completed;

 

· The RRD merger agreement places certain restrictions on the conduct of Courier’s businesses prior to completion of the merger. Such restrictions, the waiver of which is subject to the consent of RRD (in certain cases, not to be unreasonably withheld, conditioned or delayed), may prevent Courier from

 

31



 

taking certain specified actions during the pendency of the merger; and

 

· Matters relating to the merger, including integration planning, will require substantial commitments of time and resources by Courier management, which would otherwise have been devoted to day-to-day operations and other opportunities that may have been beneficial to Courier as an independent company.

 

In addition to the above risks, Courier may be required, under certain circumstances, to pay to RRD a termination fee of $7.5 million, which may materially adversely affect Courier’s financial results. Further, Courier could be subject to litigation related to any failure to complete the merger or related to any enforcement proceeding commenced against Courier to perform its obligations under the RRD merger agreement. If the merger is not completed, these risks may materialize and may adversely affect Courier’s businesses, financial condition, financial results, and stock price.

 

The shares of RRD common stock to be received by Courier stockholders as a result of the merger will have rights different from the shares of Courier common stock.

 

Upon completion of the merger, Courier stockholders will no longer be stockholders of Courier but will instead become RRD stockholders, and their rights as stockholders will be governed by the terms of the RRD charter and bylaws and by Delaware corporate law. The terms of the RRD charter and bylaws and Delaware corporate law are, in some respects, different than the terms of the Courier charter and bylaws and Massachusetts corporate law, which currently govern the rights of Courier stockholders.

 

After the merger, Courier stockholders will have a significantly lower ownership and voting interest in RRD than they currently have in Courier and will exercise less influence over management.

 

It is expected that, immediately after completion of the merger, former Courier stockholders will have significantly less of an ownership percentage of RRD common stock, compared to their previous ownership percentage of Courier common stock. Consequently, former Courier stockholders will have less influence over the management and policies of RRD than they currently have over the management and policies of Courier.

 

Item 2.                                                         Unregistered Sales of Equity Securities and Use of Proceeds

 

On November 20, 2014, the Company announced the approval by its Board of Directors for the repurchase of up to $10 million of the Company’s outstanding common stock from time to time on the open market or in privately negotiated transactions, including pursuant to a Rule 10b5-1 nondiscretionary trading plan. This stock repurchase authorization is effective for a period of twelve months.  Through December 27, 2014, the Company had not repurchased any shares of common stock under this program. During fiscal 2014, the Company repurchased 153,150 shares of common stock for approximately $2.0 million under a similar program which expired on November 21, 2013.

 

32



 

Item 3.                                                         Defaults Upon Senior Securities

 

None.

 

Item 4.                                                         Mine Safety Disclosures

 

Not applicable.

 

Item 5.                                                         Other Information

 

There have been no material changes to the procedures by which security holders may recommend nominees to the Company’s Board of Directors.

 

Item 6.                                                         Exhibits

 

Exhibit No.

 

Description

 

 

 

10.1

 

Third Amended and Restated Revolving Credit Agreement, dated December 19, 2014, between Courier Corporation; Citizens Bank, National Association; KeyBank National Association; JPMorgan Chase Bank, N.A.; and TD Bank, N.A., providing for a $100 million revolving credit facility (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on December 23, 2014, and incorporated herein by reference).

 

 

 

31.1*

 

Certification of Chief Executive Officer

 

 

 

31.2*

 

Certification of Chief Financial Officer

 

 

 

32.1**

 

Certification of Chief Executive Officer

 

 

 

32.2**

 

Certification of Chief Financial Officer

 

 

 

101.INS*

 

XBRL Instance Document

 

 

 

101.SCH*

 

XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL*

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.DEF*

 

XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

101.LAB*

 

XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE*

 

XBRL Taxonomy Extension Presentation Linkbase Document

 


*   Filed herewith.

** Furnished herewith.

 

33


 


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

COURIER CORPORATION

(Registrant)

 

 

February 5, 2015

 

By:

/s/James F. Conway III

             Date

 

 

James F. Conway III

 

 

 

Chairman, President and

 

 

 

   Chief Executive Officer

 

 

 

 

February 5, 2015

 

By:

/s/Peter M. Folger

             Date

 

 

Peter M. Folger

 

 

 

Senior Vice President and

 

 

 

   Chief Financial Officer

 

 

 

 

February 5, 2015

 

By:

/s/Kathleen M. Leon

             Date

 

 

Kathleen M. Leon

 

 

 

Vice President and

 

 

 

   Controller

 

34



 

EXHIBIT INDEX

 

Exhibit No.

 

Description

 

 

 

10.1

 

Third Amended and Restated Revolving Credit Agreement, dated December 19, 2014, between Courier Corporation; Citizens Bank, National Association; KeyBank National Association; JPMorgan Chase Bank, N.A.; and TD Bank, N.A., providing for a $100 million revolving credit facility (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on December 23, 2014, and incorporated herein by reference).

 

 

 

31.1*

 

Certification of Chief Executive Officer

 

 

 

31.2*

 

Certification of Chief Financial Officer

 

 

 

32.1**

 

Certification of Chief Executive Officer

 

 

 

32.2**

 

Certification of Chief Financial Officer

 

 

 

101.INS*

 

XBRL Instance Document

 

 

 

101.SCH*

 

XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL*

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.DEF*

 

XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

101.LAB*

 

XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE*

 

XBRL Taxonomy Extension Presentation Linkbase Document

 


*   Filed herewith.

** Furnished herewith.

 

35


 

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Ticker: CRRC
CIK: 25212
Form Type: 10-Q Quarterly Report
Accession Number: 0001104659-15-006996
Submitted to the SEC: Thu Feb 05 2015 3:34:48 PM EST
Accepted by the SEC: Thu Feb 05 2015
Period: Saturday, December 27, 2014
Industry: Book Printing

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