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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______________to_______________
Commission file number 0-7597
COURIER CORPORATION
A Massachusetts corporation
I.R.S. Employer Identification No. 04-2502514
165 Jackson Street
Lowell, Massachusetts 01852
Telephone No. 508-458-6351
___________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1 par value
_____________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant as of November 16, 1995
Common Stock, $1 par value - $33,088,877
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of November 16, 1995
Common Stock, $1 par value - 2,011,470
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's proxy statement for the annual meeting of
stockholders scheduled to be held on January 18, 1996 (Part III).
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PART I
ITEM 1. BUSINESS.
INTRODUCTION
Registrant, Courier Corporation ("Courier" or the "Company"), was
incorporated under the laws of Massachusetts on June 30, 1972. Courier owns
all of the capital stock of Courier-Citizen Company, a Massachusetts
corporation organized in 1894 as successor to a printing business which
originated in 1824.
Courier helps organizations manage the process of creating and
distributing intellectual properties. It provides a variety of specialized
services to publishers and other information providers, including the
preparation, production, storage and distribution of information in a variety
of media formats from traditional books to CD-ROMs and online services.
Courier is the sixth largest book manufacturer in the United States. Products
include Bibles, reference texts, books, software manuals and technical
documentation.
In October 1992, the Company launched Courier EPIC (short for Electronic
Publishing Innovations Center) which provides technology-based publishing
services ranging from processing electronic files through reproduction and end
user distribution. Courier EPIC began offering customized on-demand printing
services in 1993.
In December 1994, the Company announced the formation of Courier New
Media, Inc. (Courier New Media), an information management services company
which works with publishers and other information developers to create new
products from new and existing intellectual properties. Courier New Media
includes two operating units, Courier EPIC and Copyright Management Services
(CMS), a new division established in December 1994. CMS specializes in
helping publishers and college bookstores manage the process of obtaining
copyright permissions for products such as multiple-publisher college
coursepacks.
PRODUCTS
Courier's products include the manufacture of books, manuals,
diskettes and CD-ROMs for publishers, software developers and other
information providers as well as related services involved in managing
the process of creating and distributing these products. Courier
provides manufacturing and related services from seven facilities in
Westford, Stoughton, North Chelmsford and Lowell, Massachusetts;
Philadelphia, Pennsylvania (2); and Kendallville, Indiana.
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Courier's book manufacturing operations consist of both electronic and
conventional film processing, platemaking, printing and binding of soft and
hard bound books and manuals. These book manufacturing operations are
conducted through four subsidiaries, Courier Westford, Inc. ("Westford"),
Courier Stoughton, Inc. ("Stoughton"), Courier Kendallville, Inc.
("Kendallville"), and National Publishing Company ("National"). Each of these
subsidiaries has certain specialties adapted to the needs of the selected
market niches they serve.
In December 1994, the Company formed Courier New Media, Inc. to
work with publishers, software developers and other information providers to
develop new products from new and existing intellectual properties. Courier
New Media includes two operating units, Courier EPIC and a newly launched
division, Copyright Management Services. Courier EPIC conducts electronic
publishing services including customized, on-demand printing and binding
services through Courier On-Demand and product assembly, packaging,
fulfillment, distribution and project management services through Courier
FulServ. CMS specializes in helping publishers and college bookstores manage
the process of obtaining copyright permissions for products such as
multiple-publisher college coursepacks.
MARKETING AND CUSTOMERS
Courier's products and services are primarily sold to publishers of
educational, religious, consumer, professional and reference books and to
computer software and hardware manufacturers. The Company distributes
products around the world; export sales, as a percentage of consolidated
sales, were approximately 16% in both fiscal 1995 and fiscal 1994 and 17% in
fiscal 1993.
Courier's sales force of 24 people is responsible for all of the
Company's sales to over 600 customers. Courier's salespeople operate out
of sales offices located in New York, Chicago, Philadelphia, San Mateo,
California, Orlando, Florida, and Lowell, Massachusetts. Sales to one
customer, the Gideon Society, aggregated approximately 27% of consolidated
sales in fiscal 1995; the loss of this customer would have a material
adverse effect on the Company. No other single customer accounted for more
than 10% of fiscal 1995 consolidated sales.
COMPETITION
All phases of Courier's business are highly competitive. The
printing and publishing industries, exclusive of newspapers, include over
50,000 establishments. While most of these establishments are relatively
small, several of Courier's competitors are considerably larger or are
affiliated with companies which are considerably larger and have greater
financial resources than Courier. In recent years, consolidation of both
customers and competitors within the Company's markets has increased
competitive pricing pressures. The major competitive factors in Courier's
business in addition to price are product quality, customer service,
availability of appropriate printing capacity, related services and,
increasingly, technology support.
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MATERIALS AND SUPPLIES
Courier purchases its principal raw materials, primarily paper, but also
plate materials, ink and cover stock, from numerous suppliers, and is not
dependent upon any one source for its requirements. Many customers of
Westford, Stoughton, and Kendallville purchase their own paper and furnish it
at no charge to these operations for book production purposes.
Paper markets began tightening in the latter half of 1994 causing
shortages in supply and significant increases in prices throughout 1995; a
trend that may continue into 1996. The Company passes on paper price increases
to its customers and believes that its long-term relationships with several
paper suppliers will enable it to continue to maintain an adequate
availability of paper for its book manufacturing operations.
ENVIRONMENTAL REGULATIONS
The Company believes that its operations comply in all material
respects with applicable federal, state and local environmental laws and
regulations. Although the Company makes capital expenditures for
environmental protection, it does not anticipate any significant expenditures
in order to comply with such laws and regulations which would have a material
impact on the Company's capital expenditures, earnings or competitive position.
EMPLOYEES
The Company and its subsidiaries employed 1,103 persons at September 30,
1995 compared to 1,093 a year ago.
OTHER
Courier's overall business is not significantly seasonal in nature,
although sales are generally lower in the Company's second quarter.
There is no portion of Courier's business subject to cancellation of
government contracts or renegotiation of profits. Courier holds no patents,
licenses, franchises or concessions which are important to its operations.
The Company considers Courier, Courier EPIC, Courier New Media, Copyright
Management Services, and CourieReader to be proprietary trademarks.
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ITEM 2. PROPERTIES.
REAL PROPERTIES
The following schedule lists the facilities occupied by Courier. The
list also includes real estate which is held for sale or lease, as discussed in
Note H to the Consolidated Financial Statements, which appears on page F-14 of
this Annual Report on Form 10-K. Courier considers its plants and other
facilities to be well maintained and suitable for the purpose intended.
Owned/ Size in
Principal Activity and Location (Year Constructed) Leased Sq. Ft.
-------------------------------------------------- ------ -------
CORPORATE HEADQUARTERS AND EXECUTIVE OFFICES
Jackson Street, Lowell, MA (1825, 1967, 1977) Owned 88,000
BOOK MANUFACTURING AND WAREHOUSING
Westford plant, Westford, MA (1900, 1968, 1969, 1981, 1990) Owned 593,000 (1)
Kendallville plant, Kendallville, IN (1978) Owned 155,000
National plant, Philadelphia, PA (1912) Owned 219,000
National plant, Philadelphia, PA (1975) Owned 128,000 (2)
Stoughton plant, Stoughton, MA (1980) Leased 169,000
Courier EPIC facility, North Chelmsford, MA (1973) Owned 69,000
REAL ESTATE HELD FOR SALE OR LEASE
Hall Street, Lowell, MA (1916, 1956, 1980) Owned 227,000 (3)
Raymond, NH (1973) Owned 59,000 (4)
(1) The Company completed a $4 million restructuring program in 1990 which
consolidated several scattered manufacturing operations into one modern
existing building, freeing up space in the adjacent older multi-story mill
complex which comprises approximately 350,000 square feet of the 593,000
square foot Westford facility. This mill complex remains approximately 50%
vacant pending lease.
(2) In July 1994, the Company exercised an option to purchase this
previously leased manufacturing facility for $2.6 million. The transaction
closed in October 1994.
(3) This building, which had been leased through September 1994 to the
Company's former telephone directory printing operation, is now vacant pending
sale or lease.
(4) This building continues to be leased to the purchaser of the Company's
former forms printing business.
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EQUIPMENT
The Company's products are manufactured on equipment which in most cases
is owned by the Company, although it leases computers, image setters and
electronic printing systems which are subject to more rapid obsolescence.
Capital expenditures amounted to approximately $15.0 million in 1995, $2.2
million in 1994 and $3.4 million in 1993. Capital expenditures in 1995
included approximately $5.5 million for four new binding lines, $4.3 million
for a four-color web press, $2.6 million for the purchase of a previously
leased 128,000 square foot facility in Philadelphia, and continued
improvements to Company information systems. Another press, installed early
in fiscal 1995, was financed under a $4.5 million operating lease. Capital
expenditures for fiscal 1996 are expected to be approximately half of the
fiscal 1995 level. Courier considers its equipment to be in good operating
condition and adequate for its present needs.
ENCUMBRANCES AND RENTAL OBLIGATIONS
For a description of encumbrances on certain properties and equipment,
see Note D of Notes to Consolidated Financial Statements on page F-11 of
this Annual Report on Form 10-K. Information concerning leased properties
and equipment is disclosed in Note F of Notes to Consolidated Financial
Statements, which appears on page F-12 of this Annual Report on Form 10-K.
ITEM 3. LEGAL PROCEEDINGS.
In the ordinary course of business, the Company is subject to various
legal proceedings and claims. The Company believes that the ultimate outcome
of these matters will not have a material effect on its financial
statements.
ITEM 3A. EXECUTIVE OFFICERS OF THE REGISTRANT.
Courier's executive officers, together with their ages and all positions
and offices with the Company presently held by each person named, are as
follows:
James F. Conway III 43 Chairman, President and Chief
Executive Officer
George Q. Nichols 66 Vice President and
President of National Publishing
Company
Robert P. Story, Jr. 44 Senior Vice President and
Chief Financial Officer
Thomas G. Osenton 42 Senior Vice President and
Chief Marketing Officer
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The terms of office of all of the above executive officers continue
until the first meeting of the Board of Directors following the next
annual meeting of stockholders and the election or appointment and
qualification of their successors, unless any officer sooner dies,
resigns, is removed or becomes disqualified.
Mr. Conway III was elected Chairman of the Board in September
1994. He has been Chief Executive Officer since December 1992 and President
since July 1988.
Mr. Nichols became an executive officer of Courier in June 1989 while
retaining his position as President of National Publishing Company, a
position he has held since 1975. He was elected a Director of the Company
in March 1995.
Mr. Story became Senior Vice President and Chief Financial Officer in
April 1989. He joined Courier in November 1986 as Vice President and
Treasurer. He was elected a Director of the Company in February 1995.
Mr. Osenton joined Courier in October 1993 as Senior Vice President
and Chief Marketing Officer. He had previously served as
President/Chief Executive Officer and Publisher of The Sporting News
Publishing Company, a subsidiary of the Times Mirror Company, since 1989.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders
during the quarter ended September 30, 1995.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The information required by this Item is contained in the section
captioned "Selected Quarterly Financial Data" which appears on page F-16 of
this Annual Report on Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this Item is contained in the section
captioned "Five-Year Financial Summary" appearing on page F-17 of this Annual
Report on Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information required by this Item is contained in the section
captioned "Management's Discussion and Analysis" appearing on pages F-18
through F-20 of this Annual Report on Form 10-K.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this Item is contained on pages F-2 through
F-16 of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
and
ITEM 11. EXECUTIVE COMPENSATION.
and
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
and
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information regarding executive officers called for by paragraph (b) of
Item 401 of Regulation S-K for inclusion in answer to Item 10 is furnished
in Part I of this report under Item 3A, Executive Officers of the
Registrant. All other information called for by Items 10, 11, 12 and 13 is
contained in the definitive Proxy Statement to be delivered to stockholders
in connection with the Annual Meeting of Stockholders scheduled to be held
on Thursday, January 18, 1996. Such information is incorporated herein by
reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) DOCUMENTS FILED AS PART OF THIS REPORT
1. FINANCIAL STATEMENTS PAGE(S)
-------
_ Report of Independent Accountants F-1
_ Consolidated Balance Sheets as of September 30, 1995
and September 24, 1994 F-2 to F-3
_ Consolidated Statements of Operations for each of the
three years in the period ended September 30, 1995 F-4
_ Consolidated Statements of Cash Flows for each of the
three years in the period ended September 30, 1995 F-5
_ Consolidated Statements of Stockholders' Equity for
each of the three years in the period ended
September 30, 1995 F-6
_ Notes to Consolidated Financial Statements F-7 to F-15
2. FINANCIAL STATEMENT SCHEDULE
_ Schedule II - Valuation and Qualifying Accounts S-1
3. EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
3A-1 Articles of Organization of Courier Corporation, as of June 29, 1972 (filed as Exhibit 3A-1 to the Company's
Annual Report on Form 10-K for the fiscal year ended September 26, 1981, and incorporated herein by reference).
3A-2 Articles of Amendment of Courier Corporation (changing stockholder vote required for merger or consolidation), as
of January 20, 1977 (filed as Exhibit 3A-2 to the Company's Annual Report on Form 10-K for the fiscal year ended
September 26, 1981, and incorporated herein by reference).
3A-3 Articles of Amendment of Courier Corporation (providing for staggered election of directors), as of January 20,
1977 (filed as Exhibit 3A-3 to the Company's Annual Report on Form 10-K for the fiscal year ended September 26,
1981, and incorporated herein by reference).
3A-4 Articles of Amendment of Courier Corporation (authorizing class of Preferred Stock), as of February 15, 1978
(filed as Exhibit 3A-4 to the Company's Annual Report on Form 10-K for the fiscal year ended September 26, 1981,
and incorporated herein by reference).
3A-5 Articles of Amendment of Courier Corporation (increasing number of shares of authorized Common Stock), as of
January 16, 1986 (described in item #2 of the Company's Proxy Statement for the Annual Meeting of Stockholders
held on January 16, 1986, and incorporated herein by reference).
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3A-6 Articles of Amendment of Courier Corporation (providing for fair pricing procedures for stock to be sold in
certain business combinations), as of January 16, 1986 (filed as Exhibit A to the Company's Proxy Statement for
the Annual Meeting of Stockholders held on January 16, 1986, and incorporated herein by reference).
3A-7 Articles of Amendment of Courier Corporation (limiting personal liability of directors to the Corporation or to
any of its stockholders for monetary damages for breach of fiduciary duty), as of January 28, 1988 (filed as
Exhibit 3A-7 to the Company's Annual Report on Form 10-K for the fiscal year ended September 24, 1988, and
incorporated herein by reference).
3A-8 Articles of Amendment of Courier Corporation (establishing Series A Preferred Stock), as of November 8, 1988
(filed as Exhibit 3A-8 to the Company's Annual Report on Form 10-K for the fiscal year ended September 24, 1988,
and incorporated herein by reference).
3B By-Laws of Courier Corporation, as amended through April 28, 1988 (filed as Exhibit 3B to the Company's Annual
Report on Form 10-K for the fiscal year ended September 24, 1988, and incorporated herein by reference).
4A-1 Mortgage and Indenture of Trust and Agreement between Courier Westford, Inc., Massachusetts Industrial Finance
Agency, and related trustee, dated as of December 22, 1980 (filed as Exhibit 4 (a) to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended December 27, 1980, and incorporated herein by reference).
4A-2 Bond Purchase Agreement between Massachusetts Industrial Finance Agency and participating bank, dated as of
December 22, 1980 (filed as Exhibit 4 (b) to the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended December 27, 1980, and incorporated herein by reference).
4A-3 Guaranty Agreement of Courier Corporation, dated as of December 22, 1980 (filed as Exhibit 4 (c) to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended December 27, 1980, and incorporated herein by
reference).
4B+ Courier Employee Stock Ownership Plan, as adopted effective November 1, 1988 and as amended and restated on
November 4, 1993 (filed as Exhibit 4B to the Company's Annual Report on Form 10-K for the fiscal year ended
September 25, 1993, and incorporated herein by reference).
4C Courier Employee Stock Ownership Plan Trust Agreement effective December 30, 1988 (filed as Exhibit 4H to the
Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1989, and incorporated herein by
reference).
4D+ Courier Corporation 1988 Employee Stock Purchase Plan (filed as Exhibit A to the Company's Proxy Statement for
the Annual Meeting of Stockholders held on January 21, 1988, and incorporated herein by reference).
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4E First Refusal Agreement, dated July 5, 1989, relating to stock owned by the Estate of Dorothy F. French (filed as
Exhibit 3 to the Company's Current Report on Form 8-K, dated July 6, 1989, and incorporated herein by reference).
10A-1+ Courier Corporation Stock Grant Plan (filed as Exhibit C to the Company's Proxy Statement for the Annual Meeting of
Stockholders held on January 20, 1977, and incorporated herein by reference).
10A-2+ Amendment, effective January 19, 1989, to the Courier Corporation Stock Grant Plan (described in Item 4 of the
Company's Proxy Statement for the Annual Meeting of Stockholders held January 19, 1989, and incorporated herein
by reference).
10B+ Letter Agreement, dated February 8, 1990, of Courier Corporation relating to supplemental retirement benefit and
consulting agreement with James F. Conway, Jr. (filed as Exhibit 10B to the Company's Annual Report on Form 10-K
for the fiscal year ended September 29, 1990, and incorporated herein by reference).
10C-1+ Courier Corporation 1989 Deferred Income Stock Option Plan for Non-employee Directors, effective September 28,
1989 (filed as Exhibit A to the Company's Proxy Statement for the Annual Meeting of Stockholders held January 18,
1990, and incorporated herein by reference).
10C-2+ Amendment, effective November 4, 1993, to the 1989 Deferred Income Stock Option Plan for Non-employee Directors
(filed as Exhibit 10C-2 to the Company's Annual Report on Form 10-K for the fiscal year ended September 25, 1993,
and incorporated herein by reference).
10D-1+ Courier Corporation 1983 Stock Option Plan (filed as Exhibit A to the Company's Proxy Statement for the Annual
Meeting of Stockholders held on January 20, 1983, and incorporated herein by reference).
10D-2+ Amendment, effective January 17, 1985, to the Courier Corporation 1983 Stock Option Plan (described in item 2 of
the Company's Proxy Statement for the Annual Meeting of Stockholders held on January 17, 1985, and incorporated
herein by reference).
10D-3+ Amendment, effective January 19, 1989, to the Courier Corporation 1983 Stock Option Plan (described in Item 3 of
the Company's Proxy Statement for the Annual Meeting of Stockholders held January 19, 1989, and incorporated
herein by reference).
10E-1+ Executive Incentive Compensation Program as amended and restated effective December, 1987 (filed as Exhibit 10L-1
to the Company's Annual Report on Form 10-K for the fiscal year ended September 24, 1988, and incorporated herein
by reference).
10E-2+ The Courier Executive Compensation Program, effective October 4, 1993 (filed as Exhibit 10E-2 to the Company's
Annual Report on Form 10-K for the fiscal year ended September 25, 1993, and incorporated herein by reference).
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10E-3+ The Management Incentive Compensation Program, effective October 4, 1993 (filed as Exhibit 10E-3 to the Company's
Annual Report on Form 10-K for the fiscal year ended September 25, 1993, and incorporated herein by reference).
10F+ Courier Corporation Senior Executive Severance Program and Agreements, dated October 25, 1988 pursuant to the
program with Messrs. Conway III, Nichols and Story (filed as Exhibit 10P to the Company's Annual Report on
Form 10-K for the fiscal year ended September 24, 1988, and incorporated herein by reference).
10G Rights Amendment between Courier Corporation and State Street Bank and Trust Company dated October 25, 1988
(filed as Exhibit 1 to the Company's Current Report on Form 8-K, dated October 28, 1988, and incorporated herein
by reference).
10H+ 1989 Incentive Program, as amended and restated on May 28, 1992 for the purchase of Courier Common Stock by
Executive Officers and Key Employees of the Corporation (filed as Exhibit 10H to the Company's Annual Report on
Form 10-K for the fiscal year ended September 24, 1994, and incorporated herein by reference).
10I-1+ Courier Profit Sharing and Savings Plan, as adopted effective January 1, 1989 (filed as Exhibit 10I-1 to the
Company's Annual Report on Form 10-K for the fiscal year ended September 29, 1990, and incorporated herein by
reference).
10I-2+ Amendment, effective February 8, 1990, to the Courier Profit Sharing and Savings Plan (filed as Exhibit 10I-2 to
the Company's Annual Report on Form 10-K for the fiscal year ended September 29, 1990, and incorporated herein by
reference).
10I-3+ Amendment, effective November 8, 1990, to the Courier Profit Sharing and Savings Plan (filed as Exhibit 10I-3 to
the Company's Annual Report on Form 10-K for the fiscal year ended September 29, 1990, and incorporated herein by
reference).
10I-4+ Amendment, effective January 1, 1989, to the Courier Profit Sharing and Savings Plan (filed as Exhibit 10I-4 to
the Company's Annual Report on Form 10-K for the fiscal year ended September 24, 1994, and incorporated herein by
reference).
10I-5+ Amendment, effective January 1, 1993, to the Courier Profit Sharing and Savings Plan (filed as Exhibit 10I-5 to
the Company's Annual Report on Form 10-K for the fiscal year ended September 24, 1994, and incorporated herein by
reference).
10I-6+ Amendment, effective December 1, 1994, to the Courier Profit Sharing and Savings Plan (filed as Exhibit 10I-6 to
the Company's Annual Report on Form 10-K for the fiscal year ended September 24, 1994, and incorporated herein by
reference).
10I-7*+ Amendment, effective April 1, 1995, to the Courier Profit Sharing and Savings Plan.
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10J+ Agreement, as of March 3, 1993, of Courier Corporation relating to employment contract and supplemental
retirement benefit with George Q. Nichols (filed as Exhibit 10J to the Company's Annual Report on Form 10-K for
the fiscal year ended September 25, 1993, and incorporated herein by reference).
10K* Agreement, dated as of October 16, 1995, of Courier Corporation relating to employment of John Pugsley.
10L-1 Revolving Credit Agreement, dated as of September 26, 1991, between Courier Corporation and the First National
Bank of Boston, providing for an $11,000,000 revolving credit facility (filed as Exhibit 4E to the Company's
Annual Report on Form 10-K for the fiscal year ended September 28, 1991, and incorporated herein by reference).
10L-2 Amendment, dated November 17, 1992, to Note Agreement between Courier Corporation and the First National Bank of
Boston, providing for $11,000,000 revolving credit facility (filed as Exhibit 10L-2 to the Company's Annual
Report on Form 10-K for the fiscal year ended September 26, 1992, and incorporated herein by reference).
10L-3 Amendment, dated March 12, 1993, to Note Agreement between Courier Corporation and the First National Bank of
Boston, providing for $11,000,000 revolving credit facility (filed as Exhibit 10L-3 to the Company's Annual Report
on Form 10-K for the fiscal year ended September 25, 1993, and incorporated herein by reference).
10L-4 Amendment, dated September 20, 1993, to Note Agreement between Courier Corporation and the First National Bank of
Boston, providing for $11,000,000 revolving credit facility (filed as Exhibit 10L-4 to the Company's Annual
Report on Form 10-K for the fiscal year ended September 25, 1993, and incorporated herein by reference).
10L-5 Amendment, dated March 31, 1994, to Note Agreement between Courier Corporation and the First National Bank of
Boston, providing for $11,000,000 revolving credit facility (filed as Exhibit 10L-5 to the Company's Annual
Report on Form 10-K for the fiscal year ended September 24, 1994, and incorporated herein by reference).
10L-6* Amendment, dated January 26, 1995, to Note Agreement between Courier Corporation and the First National Bank of
Boston, providing for $11,000,000 revolving credit facility.
10L-7* Amendment, dated March 31, 1995, to Note Agreement between Courier Corporation and the First National Bank of
Boston, regarding $11,000,000 revolving credit facility.
10M-1 Term Promissory Note, dated as of October 15, 1991, between Courier Corporation and MetLife Capital Credit
Corporation for the principal sum of $2,000,000 at 9.5% due October 15, 2001 (filed as Exhibit 4F-1 to the
Company's Annual Report on Form 10-K for the fiscal year ended September 28, 1991, and incorporated herein by
reference).
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10M-2 Loan and Security Agreement, dated as of October 15, 1991, between Courier Corporation and MetLife Capital Credit
Corporation (filed as Exhibit 4F-2 to the Company's Annual Report on Form 10-K for the fiscal year ended
September 28, 1991, and incorporated herein by reference).
10N-1+ Courier Corporation 1993 Stock Incentive Plan (filed as Exhibit A to the Company's Proxy Statement for the Annual
Meeting of Stockholders held January 21, 1993, and incorporated herein by reference).
10N-2+ Amendment, effective November 4, 1993, to the Courier Corporation 1993 Stock Incentive Plan (filed as Exhibit
10N-2 to the Company's Annual Report on Form 10-K for the fiscal year ended September 25, 1993, and incorporated
herein by reference).
10O Master Lease Finance Agreement, dated as of July 27, 1994, between Courier Corporation and BancBoston Leasing
(filed as Exhibit 10P to the Company's Annual Report on Form 10-K for the fiscal year ended September 24, 1994,
and incorporated herein by reference).
11* Computation of Per Share Earnings.
21* Schedule of Subsidiaries.
23* Consent of Coopers & Lybrand L.L.P., independent accountants
27* Financial Data Schedule
_______________________________________________________
* Exhibit is furnished herewith.
+ Designates a Company compensation plan or arrangement.
(c) REPORTS ON FORM 8-K
There were no reports on Form 8-K filed during the last quarter of the
Company's fiscal year ended September 30, 1995.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on November 20,
1995.
COURIER CORPORATION
By: s/James F. Conway III
-------------------------------
James F. Conway III
Chairman, President and
Chief Executive Officer
By: s/Robert P. Story, Jr.
-------------------------------
Robert P. Story, Jr.
Senior Vice President and
Chief Financial Officer
By: s/Peter M. Folger
-------------------------------
Peter M. Folger
Vice President and Chief
Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities indicated, on November 20, 1995.
s/James F. Conway III s/Charles E. Otto
---------------------------------- ------------------------------------
James F. Conway III Charles E. Otto
Chairman, President and Director
Chief Executive Officer
s/Edward J. Hoff s/W. Nicholas Thorndike
-------------------------------------- --------------------------------------
Edward J. Hoff W. Nicholas Thorndike
Director Director
s/Arnold S. Lerner s/Kathleen Foley Curley
--------------------------------------- --------------------------------------
Arnold S. Lerner Kathleen Foley Curley
Director Director
s/George Q. Nichols s/Richard K. Donahue, Sr.
------------------------------------- --------------------------------------
George Q. Nichols Richard K. Donahue, Sr.
Director Director
s/Robert P. Story, Jr.
----------------------------------------
Robert P. Story, Jr.
Director
14
16
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Courier Corporation:
We have audited the consolidated financial statements and the financial
statement schedule of Courier Corporation listed in the index on page 8 of
this Form 10-K. These financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Courier
Corporation as of September 30, 1995 and September 24, 1994, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended September 30, 1995, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all
material respects, the information required to be included therein.
As described in Note C of Notes to the Consolidated Financial Statements, the
Company changed its method of accounting for income taxes in accordance with
Statement of Financial Accounting Standards No. 109 in 1994.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
November 9, 1995
F-1
17
COURIER CORPORATION
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 SEPTEMBER 24, 1994
- ---------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents (Note A) $ 1,147,000 $ 3,033,000
Accounts receivable, less allowance for uncollectible
accounts of $564,000 in 1995 and $588,000 in 1994 20,019,000 19,150,000
Inventories (Note B) 9,449,000 8,098,000
Deferred income taxes (Note C) 1,236,000 1,738,000
Other current assets 1,054,000 529,000
------------ ------------
Total current assets 32,905,000 32,548,000
Property, plant and equipment (Notes A and D):
Land 3,288,000 2,516,000
Buildings and improvements 15,580,000 13,298,000
Favorable building lease 2,816,000 2,816,000
Machinery and equipment 59,417,000 58,454,000
Furniture and fixtures 1,529,000 1,521,000
Construction in progress 8,981,000 924,000
------------ ------------
91,611,000 79,529,000
Less-Accumulated depreciation and amortization (55,386,000) (52,110,000)
------------ ------------
Net property, plant and equipment 36,225,000 27,419,000
Real estate held for sale or lease, net (Note H) 2,055,000 2,142,000
Investment in AlphaGraphics, at cost (Note H) - 624,000
Goodwill, at cost (Note A) 1,204,000 1,204,000
Other assets 572,000 437,000
------------ ------------
TOTAL ASSETS $ 72,961,000 $ 64,374,000
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
F-2
18
COURIER CORPORATION
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 SEPTEMBER 24, 1994
- ------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt (Note D) $ 382,000 $ 2,080,000
Accounts payable 8,979,000 7,898,000
Accrued payroll 3,152,000 2,816,000
Income taxes payable 1,373,000 1,918,000
Other current liabilities 6,042,000 5,083,000
----------- -----------
Total current liabilities 19,928,000 19,795,000
Long-term debt (Note D) 9,488,000 5,848,000
Deferred income taxes (Note C) 3,447,000 3,972,000
Other liabilities 3,272,000 3,190,000
----------- -----------
Total liabilities 36,135,000 32,805,000
Commitments and contingencies (Note F)
Stockholders' equity (Note G):
Preferred stock, $1 par value-authorized 1,000,000 shares; none issued
Common stock, $1 par value:
Shares 1995 1994
-----------------------------------------------------
Authorized 6,000,000 6,000,000
Issued 4,500,000 4,500,000
Outstanding 2,007,000 1,957,000 4,500,000 4,500,000
Additional paid-in capital 8,884,000 8,520,000
Retained earnings 47,133,000 42,696,000
Treasury stock, at cost: 2,493,000 shares in 1995
and 2,543,000 shares in 1994 (23,691,000) (24,147,000)
----------- -----------
Total stockholders' equity 36,826,000 31,569,000
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $72,961,000 $64,374,000
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
19
COURIER CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED
-------------------
SEPTEMBER 30, 1995 SEPTEMBER 24, 1994 SEPTEMBER 25, 1993
------------------ ------------------ ------------------
Net sales $120,701,000 $122,727,000 $115,238,000
Cost of sales 94,666,000 98,213,000 93,911,000
------------ ------------ ------------
Gross profit 26,035,000 24,514,000 21,327,000
Selling and administrative expenses 18,351,000 17,941,000 17,237,000
Interest expense 990,000 1,400,000 1,815,000
Other income (Note H) 1,066,000 666,000 1,080,000
------------ ------------ ------------
Income before taxes 7,760,000 5,839,000 3,355,000
Provision for income taxes (Note C) 2,530,000 2,133,000 1,166,000
------------ ------------ ------------
Net income before cumulative effect
of accounting change 5,230,000 3,706,000 2,189,000
Cumulative effect on prior years of change
in accounting for income taxes (Note C) - 1,525,000 -
------------ ------------ ------------
Net income $5,230,000 $5,231,000 $2,189,000
============ =========== ============
Net income per share:
Net income before cumulative effect
of accounting change $2.60 $1.92 $1.20
Cumulative effect on prior years of change
in accounting for income taxes - 0.79 -
------------ ------------ ------------
Net income per share $2.60 $2.71 $1.20
============ =========== ============
Cash dividends declared per share $0.40 $0.20 -
============ =========== ============
Weighted average shares outstanding 2,015,000 1,930,000 1,823,000
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
20
COURIER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
-------------------
SEPTEMBER 30, 1995 SEPTEMBER 24, 1994 SEPTEMBER 25, 1993
------------------ ------------------ ------------------
Operating Activities
Net income $ 5,230,000 $5,231,000 $2,189,000
Adjustments to reconcile net income to net cash from operations:
Depreciation and amortization 5,950,000 5,830,000 6,338,000
Other non-cash items 382,000 426,000 412,000
Deferred income taxes (23,000) (216,000) (1,539,000)
Tax accounting change (Note C) - (1,525,000) -
Change in accounts receivable (869,000) 618,000 41,000
Change in inventory (1,351,000) 1,202,000 (1,358,000)
Change in accounts payable 1,081,000 (185,000) 1,294,000
Change in income taxes payable (545,000) 629,000 4,302,000
Change in other elements of working capital 770,000 (326,000) (490,000)
Other, net (827,000) 273,000 681,000
----------- ----------- -----------
Cash provided from operations 9,798,000 11,957,000 11,870,000
Investment Activities
Capital expenditures (14,961,000) (2,242,000) (3,428,000)
Proceeds from sale of assets 820,000 324,000 140,000
Proceeds from sale of investment in AlphaGraphics (Note H) 953,000 - -
----------- ----------- -----------
Cash used for investment activities (13,188,000) (1,918,000) (3,288,000)
Financing Activities
Scheduled long-term debt repayments (2,080,000) (2,065,000) (2,231,000)
Other long-term borrowings (repayments) 4,022,000 (5,833,000) (6,368,000)
Cash dividends (793,000) (382,000) -
Proceeds from stock plans 355,000 666,000 251,000
----------- ----------- -----------
Cash provided from (used for) financing activities 1,504,000 (7,614,000) (8,348,000)
----------- ----------- -----------
Increase (decrease) in cash and cash equivalents (1,886,000) 2,425,000 234,000
Cash at the beginning of the period 3,033,000 608,000 374,000
----------- ----------- -----------
Cash at the end of the period $1,147,000 $3,033,000 $608,000
=========== =========== ===========
Supplemental cash flow information:
Interest paid $1,173,000 $1,435,000 $1,926,000
Income taxes paid (net of receipts) $2,880,000 $1,667,000 ($2,600,000)
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
21
COURIER CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
COMMON ADDITIONAL RETAINED TREASURY STOCKHOLDERS'
STOCK PAID-IN CAPITAL EARNINGS STOCK EQUITY
---------- --------------- ----------- ------------ -----------
Balance, September 26, 1992 $4,500,000 $8,165,000 $35,658,000 $(25,776,000) $22,547,000
Net income - - 2,189,000 - 2,189,000
Allocation of stock by ESOP - - - 372,000 372,000
Shares issued under stock plans - (8,000) - 483,000 475,000
--------------------------------------------------------------------------
Balance, September 25, 1993 4,500,000 8,157,000 37,847,000 (24,921,000) 25,583,000
Net income - - 5,231,000 - 5,231,000
Cash dividends - - (382,000) - (382,000)
Purchase of Company stock - - - (18,000) (18,000)
Allocation of stock by ESOP - 201,000 - 186,000 387,000
Shares issued under stock plans - 162,000 - 606,000 768,000
--------------------------------------------------------------------------
Balance, September 24, 1994 4,500,000 8,520,000 42,696,000 (24,147,000) 31,569,000
Net income - - 5,230,000 - 5,230,000
Cash dividends - - (793,000) - (793,000)
Allocation of stock by ESOP - 153,000 - 190,000 343,000
Shares issued under stock plans - 211,000 - 266,000 477,000
--------------------------------------------------------------------------
Balance, September 30, 1995 $4,500,000 $8,884,000 $47,133,000 $(23,691,000) $36,826,000
==========================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS: Courier Corporation helps organizations manage the process of
creating and distributing intellectual properties. Services include the
preparation, production, storage and distribution of information in a variety
of formats from traditional books to CD-ROMs and online services. Products
include Bibles, reference texts, books, software manuals and technical
documentation.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements, prepared on
a fiscal year basis, include the accounts of Courier Corporation and its
subsidiaries after elimination of all significant intercompany transactions.
Fiscal year 1995 was a 53 week period compared with fiscal years 1994 and 1993
which were 52 week periods.
CASH EQUIVALENTS: The Company classifies as cash and cash equivalents amounts
on deposit in banks and cash invested temporarily in various instruments with
maturities of three months or less at time of purchase.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are recorded at
cost, including interest on funds borrowed to finance the acquisition or
construction of major capital additions. Interest of approximately $120,000 was
capitalized in fiscal 1995. No interest was capitalized in fiscal 1994 or
fiscal 1993. The Company provides for depreciation of plant and equipment on a
straight-line basis over periods ranging from 3 to 11 years, except for
depreciation on buildings and improvements which is based on estimated useful
lives ranging from 10 to 40 years.
Leasehold improvements are amortized on a straight-line basis over the shorter
of the useful life of the improvement or the term of the lease. A favorable
building lease is being amortized over the life of the lease, which expires in
2005. Expenditures for maintenance and repairs are charged against income as
incurred; betterments which increase the value or materially extend the life of
the related assets are capitalized. When assets are sold or retired, the cost
and accumulated depreciation are removed from the accounts and any gain or loss
is included in income.
GOODWILL: Goodwill is stated at cost and represents the excess of the
consideration paid over the estimated fair value of the net assets of a company
purchased prior to October 31, 1970; such amount is not being amortized because
management believes that the value has not diminished.
INCOME TAXES: The provision for income taxes includes federal and state taxes
based on income. Deferred income taxes are recorded based upon the differences
between the financial statement and tax bases of assets and liabilities and
available tax credit carryforwards.
F-7
23
NOTE B. INVENTORIES
Inventories are valued at the lower of cost or market using the last-in,
first-out (LIFO) method for substantially all inventories. Inventories as of
September 30, 1995 and September 24, 1994 consisted of:
Fiscal Year
------------------------------------
1995 1994
---- ----
Raw materials $4,984,000 $2,913,000
Work in process 3,529,000 4,368,000
Finished goods 936,000 817,000
---------- ----------
Total $9,449,000 $8,098,000
========== ==========
On a first-in, first-out (FIFO) basis, reported year-end inventories would have
increased by $5.9 million in 1995 and $5.1 million in 1994.
NOTE C. INCOME TAXES
Effective September 26, 1993, the Company adopted the provisions of SFAS No.
109, "Accounting for Income Taxes." SFAS No. 109 requires the use of the
liability method of accounting for deferred income taxes. This method utilizes
current tax rates, whereas much of the Company's deferred tax liabilities had
been determined in past years when the liabilities arose and when tax rates
were higher. As a result, the cumulative effect on prior years relating to the
adoption of this required accounting change was an increase in net income of
$1,525,000 or $.79 per share, reported in the first quarter of fiscal year
1994. Financial statements for years prior to fiscal 1994 have not been
restated to apply the provisions of SFAS No. 109.
The statutory federal tax rate is 34%. The total provision differs from that
computed using the statutory federal income tax rate for the following reasons:
Fiscal Year
------------------------------------------
1995 1994 1993
---- ---- ----
Federal income taxes at statutory rate $2,638,000 $1,985,000 $1,141,000
State income taxes, net of federal income tax benefit 259,000 449,000 448,000
Export related income (277,000) (277,000) (297,000)
Dividend deduction (96,000) - -
Income from life insurance proceeds - - (70,000)
Other 6,000 (24,000) (56,000)
---------- ---------- ----------
Total $2,530,000 $2,133,000 $1,166,000
========== ========== ==========
F-8
24
The provision for income taxes consisted of the following:
Fiscal Year
-----------------------------------------------
1995 1994 1993
---- ---- ----
Currently payable:
Federal $2,127,000 $1,591,000 $ 2,022,000
State 426,000 758,000 683,000
---------- ---------- ----------
2,553,000 2,349,000 2,705,000
---------- ---------- ----------
Deferred:
Federal 11,000 (138,000) (1,535,000)
State (34,000) (78,000) (4,000)
---------- ---------- ----------
(23,000) (216,000) (1,539,000)
---------- ---------- ----------
Total $2,530,000 $2,133,000 $ 1,166,000
========== ========== ===========
The deferred income tax provision (benefit) arose from the following temporary
differences:
Fiscal Year
------------------------------------------
1995 1994 1993
---- ---- ----
Accelerated depreciation $(479,000) $(262,000) $ (312,000)
Non-deductible accruals and reserves 281,000 42,000 (490,000)
Utilization of tax credits 214,000 21,000 -
Retirement plan contributions (61,000) (10,000) 81,000
Deduction of foreign advances - - (678,000)
Other 22,000 (7,000) (140,000)
--------- ---------- ------------
Total $ (23,000) $(216,000) $(1,539,000)
========= ========= ===========
F-9
25
The following is a summary of the significant components of the Company's
deferred tax assets and liabilities as of September 30, 1995 and September 24,
1994:
Fiscal Year
-----------------------------
1995 1994
---- ----
Deferred tax assets:
Vacation accrual not currently deductible $ 389,000 $ 391,000
Other accruals not currently deductible 252,000 524,000
Non-deductible reserves 567,000 572,000
Alternative minimum tax carryforward - 214,000
Other 28,000 37,000
---------- ----------
Classified as current 1,236,000 1,738,000
Deferred compensation arrangements 713,000 654,000
Other (6,000) 7,000
---------- ----------
Total $1,943,000 $2,399,000
========== ==========
Deferred tax liabilities:
Accelerated depreciation $4,154,000 $4,633,000
========== ==========
Non-current deferred tax assets have been netted against non-current deferred
tax liabilities for balance sheet classification purposes.
NOTE D. LONG-TERM DEBT
Long-term debt of the Company and its consolidated subsidiaries consisted of
the following:
Fiscal Year
----------------------------
1995 1994
---- ----
9.5% secured promissory note, payable in monthly installments $1,405,000 $1,571,000
through October 2001
Obligation under revolving bank credit facility at 7.5% as of
September 30, 1995 7,965,000 -
Obligation under industrial revenue bond arrangement at 65% of
prime rate (5.7% at September 30, 1995), payable in
semi-annual installments of $100,000 through December 1997 500,000 700,000
10.55% senior promissory note - 5,657,000
---------- ---------
9,870,000 7,928,000
Less: Current maturities 382,000 2,080,000
---------- ----------
Total $9,488,000 $5,848,000
========== ==========
F-10
26
Scheduled aggregate principal payments of long-term debt are $382,000 in fiscal
1996, $401,000 in fiscal 1997, $8,285,000 in fiscal 1998, $242,000 in fiscal
1999, $266,000 in fiscal 2000 and $294,000 thereafter.
The Company maintains an $11 million long-term revolving credit agreement at
the lender's prime interest rate. Borrowings under this facility amounted to
approximately $8.0 million at September 30, 1995. This revolving facility
matures in January 1998 and is included in scheduled aggregate principal
payments due in 1998, although the maturity date is expected to be extended
periodically. A provision of the revolving credit agreement requires a
commitment fee of 1/2% per annum of the unused portion.
Subsequent to its annual $1.7 million installment payment made in June 1995,
the Company redeemed the outstanding balance of its 10.55% senior promissory
note. The $3.9 million principal balance on the note, which originally provided
for annual installments through 1998, was paid in its entirety in August 1995.
A prepayment penalty of $92,000 was also paid at that time.
The revolving credit facility contains restrictive covenants including
provisions relating to the maintenance of working capital, incurrence of
additional indebtedness and a quarterly test of cash flow to debt service. The
industrial revenue bond arrangement and the 9.5% promissory note provide for a
lien on the assets acquired with the proceeds.
The Company also maintains an informal line of credit providing for aggregate
borrowings of $10 million at an interest rate not to exceed the lender's prime
rate. There have been no short-term borrowings against the Company's line
during the three fiscal years ended September 30, 1995.
NOTE E. RETIREMENT PLANS
The Company and its consolidated subsidiaries maintain various retirement plans
covering substantially all of its employees. Pension costs of multi-employer
union plans consist of defined contributions determined in accordance with the
respective collective bargaining agreements. Retirement benefits for non-union
employees are provided through the Courier Employee Stock Ownership Plan (ESOP)
and the Courier Profit Sharing and Savings Plan. Non-union employees become
participants in these retirement plans after completing at least one year of
eligible service. Retirement costs for the Company's principal plans amounted
to $1,328,000 in fiscal 1995, $1,338,000 in fiscal 1994, and $1,325,000 in
fiscal 1993.
The ESOP allocates shares of Company common stock to participants annually
based on their compensation as defined in the plan. During fiscal 1995, 20,761
shares were allocated to participants representing the contribution for the
plan year ended December 31, 1994. The shares allocated to participants were
contributed to the ESOP from the Company's treasury stock during fiscal 1995.
Shares held by the ESOP on behalf of the participants were 153,970 at September
30, 1995.
The Profit Sharing and Savings Plan is qualified under Section 401(k) of the
Internal Revenue Code. The plan allows eligible employees to contribute up to
F-11
27
16% of their compensation, with the Company matching 25% of the first 6% of
employee contributions. The Company also makes contributions based on profits
each year for the benefit of all eligible employees under the plan.
NOTE F. COMMITMENTS AND CONTINGENCIES
The Company is committed under various operating leases to make annual rental
payments for certain buildings and equipment. Amounts charged against income
under such leases approximated $2,428,000 in fiscal 1995, $1,681,000 in fiscal
1994, and $1,294,000 in fiscal 1993. As of September 30, 1995, minimum annual
rental commitments under the Company's long-term operating leases were
projected to amount to $1,871,000 in fiscal 1996, $1,355,000 in fiscal 1997,
$1,120,000 in fiscal 1998, $1,117,000 in fiscal 1999, $1,103,000 in fiscal 2000
and $4,745,000 thereafter.
NOTE G. STOCK ARRANGEMENTS
STOCK OPTION/INCENTIVE PLANS: In January 1993, shareholders approved the
Courier Corporation 1993 Stock Incentive Plan to replace the expiring 1983
Stock Option Plan. Under the provisions of each plan, both non-qualified and
incentive stock options to purchase shares of the Company's common stock may be
granted to key employees. The option price per share for incentive stock
options may not be less than the fair market value of stock at the time the
option is granted and incentive stock options must expire not later than ten
years from the date of grant. The 1993 Stock Incentive Plan provides that
130,000 shares be reserved for the granting of stock options, stock grants or
stock appreciation rights.
The following table summarizes stock option activity for these plans for each
of the last three fiscal years:
Fiscal Year
---------------------------------------------
1995 1994 1993
---- ---- ----
Option Shares:
Outstanding at beginning of period 227,550 229,574 153,324
Issued during period 21,930 72,150 102,000
Exercised during period (12,450) (52,224) (22,500)
Canceled during period (3,350) (21,950) (3,250)
------- ------- -------
Outstanding at end of period 233,680 227,550 229,574
======= ======= =======
Exercisable at end of period 133,323 101,650 109,964
Shares available for granting of options
at end of period 6,270 28,200 97,000
Average price of options outstanding at
end of period $ 14.48 $ 13.87 $ 12.80
Average price of options exercised during
the period $ 13.41 $ 10.57 $ 5.95
F-12
28
STOCK GRANT PLAN: The Company established a stock grant plan in 1977 entitling
key employees to receive shares of common stock of the Company. Shares granted
are either fully vested or vest after a 5 year period. The maximum number of
shares of common stock which may be awarded under the stock grant plan is
132,500 shares and no more than 22,500 shares may be awarded in any one fiscal
year. No shares were granted under the plan in fiscal 1995 and fiscal 1994;
2,700 shares were granted in fiscal 1993. The related compensation expense,
based on the amortization over a five-year vesting period of the fair market
value of the shares on the date granted, was $39,000 in 1995, $63,000 in 1994
and $153,000 in 1993. As of September 30, 1995, there were 10,719 shares
available for future grants under the plan.
EMPLOYEE STOCK PURCHASE PLAN: Under the Company's Employee Stock Purchase Plan
adopted in fiscal 1988, eligible employees may purchase shares of Company
common stock at not less than 85% of fair market value at the beginning or end
of the grant period. At September 30, 1995, 44,694 shares had been issued under
the plan at an average price of $11.32 per share with an additional 45,306
shares reserved for future issuances.
DIRECTORS' OPTION PLAN: A 1989 plan, as amended in November 1993, allows
members of the Company's Board of Directors to make an election to apply either
50% or 100% of their annual director's fee toward the annual grant of a stock
option to be offered at a price per share $5 below the fair market value of the
Company's common stock at the time the option is granted. The annual director's
fee for 1995 was $12,000. The plan, as approved by stockholders, provides that
100,000 shares be reserved for the granting of options.
The following table summarizes stock option activity for this plan for each of
the last three fiscal years:
Fiscal Year
------------------------------------
1995 1994 1993
---- ---- ----
Option Shares:
Outstanding at beginning of period 18,600 13,200 19,600
Issued during period 9,200 9,600 6,000
Exercised during period (9,400) (4,200) (10,800)
Canceled during period (6,000) - (1,600)
------ ------ ------
Outstanding at end of period 12,400 18,600 13,200
====== ====== ======
Exercisable at end of period 12,400 18,600 13,200
Shares available for granting of options at end of period 62,400 65,600 75,200
Average price of options outstanding at end of period $10.89 $10.89 $10.78
Average price of options exercised during the period $ 7.69 $ 6.49 $ 5.63
F-13
29
STOCKHOLDERS' RIGHTS PLAN: In October 1988, the Board of Directors adopted a
stockholders' rights plan. Under the plan, the Company's stockholders of record
at November 4, 1988 received rights to purchase one one-hundredth of a share of
preferred stock for each share of common stock held on that date, at an
exercise price of $75 per one-hundredth of a share. The rights will be
exercised only if a person or group either acquires or announces a proposal to
acquire 20% or more of the Company's outstanding stock. In addition, if a large
holder of the Company's stock merges with the Company or acquires a substantial
part of the Company's assets, the rights will entitle holders to purchase stock
in the surviving Company at half of its then-current market price. If there is
no merger, but a large stockholder engages in one of a number of specified
self-dealing transactions involving the Company, the rights will entitle
holders to purchase stock in the Company at half of its then-current market
price. The rights may also be redeemed by the Company at $.01 per right for up
to ten business days after the time any person or group has acquired 20% or
more of the Company's shares. The rights expire in 1998.
NOTE H. OTHER INCOME
Other income as reported in the accompanying income statements consisted of the
following:
Fiscal Year
--------------------------------------------
1995 1994 1993
---- ---- ----
Net rental income $ 335,000 $601,000 $ 710,000
Gain on sale of investment in AlphaGraphics 329,000 - -
Dividend income 402,000 65,000 70,000
Income from life insurance policy - - 175,000
Other - - 125,000
---------- -------- ----------
Total $1,066,000 $666,000 $1,080,000
========== ======== ==========
Net rental income is derived from two buildings which are separately reported
in the accompanying balance sheets as "Real estate held for sale or lease,
net." The lease on one of these properties expired September 30, 1994 and the
facility is currently vacant pending sale or lease. Management does not believe
that there is any material impairment of this or any other asset of the Company
as measured in accordance with recently issued SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
of."
On September 29, 1995, AlphaGraphics repurchased the Company's investment
interest and paid the related cumulative dividends. The Company received
$953,000 for its investment in AlphaGraphics resulting in a gain of $329,000.
In addition, the Company received $347,000 in cumulative dividends.
F-14
30
NOTE I. BUSINESS SEGMENTS AND FOREIGN OPERATIONS
The Company is engaged in one industry, the manufacture of printed products.
Customers, which consist primarily of publishers, are granted credit on an
unsecured basis.
Export sales as a percentage of consolidated sales were approximately 16% in
fiscal 1995 and fiscal 1994 and 17% in fiscal 1993. Sales to a religious book
customer amounted to approximately 27% of consolidated sales in fiscal 1995,
25% in fiscal 1994 and 27% in fiscal 1993. No other customer accounted for more
than 10% of consolidated sales.
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COURIER CORPORATION
FINANCIAL AND MARKET DATA (UNAUDITED)
Fiscal 1995: (dollars in thousands except per share amounts)
- -------------------------------------------------------------------------------------------
First Second Third Fourth
- -------------------------------------------------------------------------------------------
Operating Results:
Net sales $30,916 $29,643 $30,210 $29,932
Gross profit 6,687 6,171 6,458 6,719
Net income 1,002 758 1,217 2,253
Net income per share 0.50 0.38 0.60 1.10
Dividends declared per share 0.10 0.10 0.10 0.10
Stock Price:
Highest bid 18 1/2 18 3/4 20 21 1/2
Lowest bid 15 1/2 16 1/4 17 1/4 18 3/4
Fiscal 1994: (dollars in thousands except per share amounts)
- -------------------------------------------------------------------------------------------
First Second Third Fourth
- -------------------------------------------------------------------------------------------
Operating Results:
Net sales $30,037 $30,576 $32,343 $29,771
Gross profit 5,670 5,107 6,545 7,192
Net income before cumulative effect of
accounting change 675 340 1,100 1,591
Net income 2,200 340 1,100 1,591
Net income per share before cumulative effect
of accounting change 0.35 0.18 0.57 0.81
Net income per share 1.15 0.18 0.57 0.81
Dividends declared per share 0.05 0.05 0.05 0.05
Stock Price:
Highest bid 20 19 1/2 18 1/2 16 1/2
Lowest bid 12 3/4 16 3/4 14 1/2 14 1/2
Common shares of the Company are traded over-the-counter on the Nasdaq national
market system-symbol "CRRC".
There were approximately 635 shareholders of record as of September 30, 1995.
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COURIER CORPORATION
FINANCIAL SUMMARY
(Dollar amounts in millions except per share data)
- --------------------------------------------------------------------------------------------------------
1995 1994* 1993 1992** 1991
- --------------------------------------------------------------------------------------------------------
Net sales $120.7 $122.7 $115.2 $121.9 $124.2
Gross profit 26.0 24.5 21.3 16.5 21.2
Net income (loss) before cumulative effect
of accounting change 5.2 3.7 2.2 (6.0) 1.3
Net income (loss) 5.2 5.2 2.2 (6.0) 1.3
Net income (loss) per share before cumulative
effect of accounting change 2.60 1.92 1.20 (3.44) 0.75
Dividends per share 0.40 0.20 - 0.20 0.40
Working capital 13.0 12.8 10.5 13.9 16.5
LIFO reserve 5.9 5.1 5.2 5.4 5.3
Current ratio (FIFO basis) 1.9 1.9 1.8 2.1 2.1
Total assets 73.0 64.4 66.0 70.7 82.4
Long-term debt 9.5 5.8 13.8 22.2 23.9
Long-term debt as a percentage of capitalization 20.5% 15.6% 35.0% 49.6% 45.6%
Depreciation and amortization 6.0 5.8 6.3 6.8 6.2
Capital expenditures 15.0 2.2 3.4 2.5 8.7
Stockholders' equity 36.8 31.6 25.6 22.5 28.4
Return on stockholders' equity 14.2% 16.6% 8.6% -26.8% 4.5%
Stockholders' equity per share 18.35 16.13 13.67 12.77 16.49
Shares outstanding (000's omitted) 2,007 1,957 1,872 1,766 1,725
Number of employees 1,103 1,093 1,165 1,155 1,396
Earnings per share are based on weighted average shares outstanding;
stockholders' equity per share is based on shares outstanding at year end.
* Fiscal 1994 net income includes non-cash income of $1.5 million from the
adoption of SFAS No. 109, "Accounting for Income Taxes," resulting in net
income per share of $2.71 (Note C).
** Fiscal 1992 results include a charge of $2.1 million or $1.18 per share for
closing the Company's U.K. plant.
F-17
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MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Sales in fiscal 1995 were $120.7 million, down 1.7% from fiscal 1994 sales
of $122.7 million. (Fiscal 1995 included 53 weeks compared to 52 weeks in
1994). The decline in sales reflects the impact of a Company initiative
designed to improve the quality of revenue by shifting the focus away from
commodity-like business, adding new services enabling growth in higher
value-added turnkey relationships and enhancing the skills of the sales and
service teams to deliver these new services. Sales in fiscal 1994 were $122.7
million, compared to fiscal 1993 sales of $115.2 million. The 6.5% increase in
sales was attributable to sales growth across nearly all the major markets
served by the Company. Sales of software documentation and educational
publishers' materials were particularly strong.
Gross profits in 1995 were approximately $1.5 million higher than 1994 and,
as a percentage of sales, increased from 20.0% to 21.6%. The increase was
attributable to the improvement in the quality of revenue, as well as cost
reductions and other benefits associated with process improvements. Gross
profits increased by approximately $3.2 million from 1993 to 1994. As a
percentage of sales, gross profit improved from 18.5% to 20.0%. The improvement
reflects the impact of sales growth, cost containment efforts and productivity
gains, reduced by on-going development costs at the Company's Electronic
Publishing Innovations Center (Courier EPIC).
Selling and administrative expenses in 1995 increased by approximately $0.4
million or 2% over 1994. As a percentage of sales, selling and administrative
expenses were 14.6% in 1994 compared to 15.2% in 1995. The increase resulted
from higher selling costs, the introduction of copyright management services,
costs associated with improvements to the Company's information systems, and
the additional week in fiscal 1995. These factors more than offset a reduction
in administrative expenses. From 1993 to 1994, selling and administrative
expenses increased by $0.7 million or 4% due to continued growth and expansion
of services at Courier EPIC and increased selling expenses. However, as a
percentage of sales, selling and administrative expenses decreased from 15.0%
to 14.6%.
Interest expense for fiscal 1995 was $0.4 million lower than fiscal 1994 as
average borrowings were approximately $4.8 million lower in fiscal 1995 than
fiscal 1994. A lower average borrowing rate also contributed to the reduction
in interest expense. From 1993 to 1994, interest expense decreased by
approximately $0.4 million due to a reduction in borrowings of approximately
$7.9 million during the year.
In 1995, other income includes a $329,000 gain on the sale of the Company's
investment in AlphaGraphics and dividend income of approximately $400,000
related to that investment. Net rental income was $335,000 in 1995. In 1994,
other income includes approximately $65,000 in dividends received from
AlphaGraphics, as well as $601,000 of net rental income. The 1994 net rental
income includes $425,000 from a building lease which expired on September 30,
1994. The property is currently vacant pending sale or lease. In 1993, other
F-18
34
income included approximately $175,000 from a life insurance policy and
approximately $70,000 in dividends from AlphaGraphics, as well as $710,000 of
net rental income.
The Company's tax rate was 33% for 1995 compared to 37% for 1994. The lower
tax rate reflects the benefit of the tax exempt portion of dividend income and
a lower effective state income tax rate. The Company's tax rate of 37% for 1994
was slightly higher than the 1993 rate of 35% because 1993 included tax exempt
income from life insurance proceeds.
Net income before the cumulative effect of an accounting change was $5.2
million for fiscal 1995, up 41% from $3.7 million in fiscal 1994. These
earnings, on a per share basis, increased 35% to $2.60 per share in fiscal 1995
versus $1.92 per share in fiscal 1994. The improvement in gross profit margins
and income associated with the sale of the Company's investment in
AlphaGraphics were the primary factors contributing to the improvement in
earnings. Net income before the cumulative effect of an accounting change for
fiscal 1994 was $3.7 million or $1.92 per share compared to $2.2 million or
$1.20 per share for fiscal 1993. The increase in income of $1.5 million or 69%
reflects the impact of increased sales, cost containment efforts and
productivity improvements. Weighted average shares outstanding increased by
85,000 shares from 1994 to 1995 and 107,000 shares from 1993 to 1994 due to
shares allocated under the Employee Stock Ownership Plan and additional
equivalent shares for stock options.
At the beginning of fiscal 1994, the Company adopted SFAS No. 109
"Accounting for Income Taxes," which requires companies to determine deferred
income taxes under the liability method of accounting. The cumulative effect on
prior years relating to the adoption of this required accounting change
produced one-time, non-cash income of $1.5 million, increasing net income for
fiscal 1994 to $5.2 million or $2.71 per share.
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock-Based Compensation," which establishes
accounting and reporting standards for stock-based employee compensation plans.
The Company has until fiscal 1997 to adopt SFAS No. 123; this pronouncement will
apply to options granted after 1995.
LIQUIDITY AND CAPITAL RESOURCES
In fiscal 1995, operations provided approximately $9.8 million in cash.
Cash provided from earnings was $5.2 million and depreciation was $6.0 million.
This cash was utilized in part to fund a $1.4 million increase in inventory,
primarily because of higher paper prices and stocking levels.
Investment activities in 1995 utilized approximately $13.2 million in cash.
Capital expenditures were $15.0 million while proceeds of approximately $1.0
million were received from the sale of the Company's investment in
AlphaGraphics and $0.8 million from the sale of equipment. Capital expenditures
included approximately $5.5 million for four new binding lines, $4.3 million
for a four-color web press, $2.6 million for the purchase of a previously
leased 128,000 square foot manufacturing facility in Philadelphia, and
continued improvements to Company information systems. Another press installed
early in fiscal 1995 was financed under a $4.5 million operating lease. Capital
expenditures for fiscal 1996 are expected to be approximately half of the
fiscal 1995 level.
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Financing activities provided approximately $1.5 million of cash in 1995,
primarily in long-term borrowings of $1.9 million. Dividend payments were
approximately $0.8 million while proceeds received from Company stock plans
were $0.4 million. In August 1995, the Company redeemed the entire outstanding
principal amount of the 10.55% senior promissory note outstanding of $3.9
million. The redemption was funded by utilizing available credit lines at more
favorable interest rates than the promissory note. In November 1995, the
Company increased its quarterly dividend from $.10 per common share to $.12
per common share.
The Company maintains an $11 million long-term revolving credit facility.
This revolving facility matures in January 1998 and is expected to be extended
periodically. The revolving credit facility contains restrictive covenants,
including provisions related to the maintenance of working capital, incurrence
of additional indebtedness and a quarterly test of cash flow to debt service.
The Company continues to maintain an informal bank credit line of $10
million. There were no short-term borrowings during fiscal 1995. The Company
expects that its cash from operations and available credit facilities will be
sufficient to meet its cash requirements through fiscal 1996. In fiscal 1996,
the Company expects to obtain approximately $1 million of development bond
financing at a 3% interest rate in connection with the fiscal 1995 purchase of
the Philadelphia building.
EFFECTS OF INFLATION
The Company attempts to minimize the impact of inflation on production and
operating costs through cost control programs and productivity improvements.
Over the past three years, the rate of inflation has remained moderate, which
has allowed the Company to pass on to customers a significant portion of
inflationary cost increases through price adjustments, except where otherwise
dictated by competition. By accounting for most inventories on a LIFO basis,
the earnings reported in the Company's financial statements more closely
approximate the level of earnings which would be reported if measured in terms
of constant, current value dollars.
Paper markets began tightening in the latter half of 1994 and paper prices
rose significantly throughout 1995; a trend that may continue into 1996. The
Company believes that it can continue to pass on paper cost increases to its
customers through price adjustments.
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COURIER CORPORATION
SCHEDULE II - CONSOLIDATED VALUATION
AND QUALIFYING ACCOUNTS AND RESERVES
- ---------------------------------------------------------------------------------------------------------
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
- ---------------------------------------------------------------------------------------------------------
Fiscal year ended September 30, 1995:
Allowance for uncollectible accounts $588,000 $204,000 $228,000 $564,000
Fiscal year ended September 24, 1994:
Allowance for uncollectible accounts $683,000 $269,000 $364,000 $588,000
Fiscal year ended September 25, 1993:
Allowance for uncollectible accounts $594,000 $183,000 $94,000 $683,000
S-1