Courier Raises Full-Year Guidance Despite Soft First Quarter

Courier Corporation (Nasdaq: CRRC), one of America’s leading book

manufacturers and specialty publishers, today announced results for the

quarter ended December 25, 2010, the first quarter of its 2011 fiscal

year. Revenues for the quarter were $61.2 million, down 3% from last

year’s first-quarter sales of $63.1 million. Net income for the quarter

was $1.7 million or $.14 per diluted share, compared to $2.8 million or

$.23 per diluted share in the first quarter of fiscal 2010. However, the

company reaffirmed its confidence in the remainder of the fiscal year,

citing a history of quarter-to-quarter fluctuations in the timing of

orders as well as major long-term agreements with two of its largest

customers. Based on these and other factors, Courier raised its

full-year earnings guidance by $.05 to a range of $.90 to $1.20 per

diluted share.

First-quarter results were off in both of Courier’s business segments.

At the same time, both segments benefited from the successful startup of

Courier Digital Solutions, which has enabled improved efficiency in

short-run production, leading to an increasing flow of manufacturing

orders from Courier Publishing as well as other educational and trade

publishers.

“While our new fiscal year got off to a slow start, we remain confident

that we will hit our targets for the full year,” said Courier Chairman

and Chief Executive Officer James F. Conway III. “A major factor in our

first-quarter shortfall was the timing of manufacturing orders in the

religious market. Yet our relationship with our largest religious

customer has never been better, and we are in the early stages of a new

multi-year agreement which is already contributing to an expanded

worldwide role for Courier. At the same time, we had excellent

performance from Courier Digital Solutions, which is capitalizing on the

accelerating trend towards customized college textbooks. And on the

publishing side, we saw the first sales increase at Creative Homeowner

in more than 3 years.

“During the quarter we also continued to add much-needed four-color

capacity, both digital and offset, as our second HP digital inkjet

system and our fourth high-speed manroland press ramped up smoothly and

efficiently. And while our capital expenditures inevitably rose to cover

the costs of these new systems, we remain in a strong position

financially as well as an improved position competitively. So I am

excited about our prospects for the remainder of our fiscal year.”

Book manufacturing: focusing on long-term opportunities

Courier’s book manufacturing segment had first-quarter sales of $53.0

million, off 3% from $54.8 million in last year’s first quarter. The

segment’s operating income was $3.8 million, versus $5.7 million a year

ago. Gross profit in the segment was $11.4 million or 21.5% of sales,

versus $13.1 million or 23.8% of sales in fiscal 2010, reflecting lower

one-color capacity utilization and pricing pressures throughout the

industry.

The book manufacturing segment focuses on three publishing markets:

education, religion, and specialty trade. Sales to the education

market were up 4% in the quarter due to increased sales of four-color

textbooks for colleges and universities, though one-color sales were

down in keeping with the industry’s continuing shift from one- to

four-color production. Sales to the religious market were down

22% from last year’s first quarter, reflecting both the timing of orders

from the company’s largest religious customer and the prior-year

comparison with one of the strongest quarters in the history of its

religious business. Sales to the specialty trade market were up

4% from a year ago.

During the quarter the company completed the installation of its second

HP digital inkjet printing system and ramped up production at its

Courier Digital Solutions facility to a three-shift operation to keep

pace with accelerating demand in the education and trade markets. In

addition, shortly after the end of the quarter, Courier signed a

multi-year manufacturing agreement with one of the world’s leading

educational publishers and began preparing to acquire a third HP digital

press in time for the peak textbook season in late spring.

“This was a quarter of tremendous accomplishments in our book

manufacturing segment,” said Mr. Conway. “We worked closely with two of

our largest customers to lay the foundations for long-term growth in

religious and educational sales, and we added capacity that will help

customers make the most of their opportunities across the entire book

publishing life cycle. The smooth startups of both of our new presses

illustrate our ability to move quickly to take leading positions in

high-growth markets. And with each new press we have also raised the bar

in terms of operating efficiency and responsiveness to customers’

evolving needs.”

Publishing: sales off, but Creative Homeowner improves

Courier’s specialty publishing segment includes three businesses: Dover

Publications, a niche publisher with thousands of titles in dozens of

specialty trade markets; Creative Homeowner, which publishes books on

home design, decorating, landscaping and gardening; and Research &

Education Association (REA), a publisher of test preparation books and

study guides.

First-quarter revenues for the segment were $10.8 million, down 7% from

$11.6 million in last year’s first quarter. Sales were down 3% at Dover

and down 31% at REA, with the decline at REA reflecting an exceptionally

strong first quarter in fiscal 2010 due to the simultaneous effects of a

major product launch and a chain-wide merchandising order at a large

nationwide bookseller. Creative Homeowner sales were up 7%, reflecting

improving sales of home plans as well as home-center book sales.

Overall, the segment lost $809,000 in the quarter, versus a loss of

$514,000 in fiscal 2010, reflecting the impact of slower sales at Dover

and REA.

“As in book manufacturing, there were positive currents at work in our

publishing segment,” said Mr. Conway. “Dover’s consumer marketing

expertise helped drive an increase in online sales for the quarter,

while the sales decline at REA was largely a function of how well last

year’s first quarter set the stage for its double-digit sales growth

throughout the year. Equally important, retail sell-through for REA

products was up in the quarter, signaling the likely advent of a new

wave of ordering for the coming spring testing season. We were also

pleased to see signs of a potential sales turnaround at Creative

Homeowner after the long drought of the nationwide housing slump. In

addition, thanks to its greatly reduced cost structure, most of Creative

Homeowner’s sales increase went straight to its bottom line. With more

hopeful signs appearing elsewhere in the U.S. economy, we look forward

to a stronger spring throughout the segment.”

Outlook

“Over the years we have learned to take quarter-to-quarter fluctuations

in stride as we pursue our long-term goals,” said Mr. Conway. “One of

the most valuable assets we bring to the task is the exceptional

strength of our key customer relationships, as illustrated by our recent

agreements. With the steps we have taken early in fiscal 2011, we are

confident that we will be able to reap the rewards throughout the

remainder of the year and beyond. For this reason we are raising our

guidance for fiscal 2011 as a whole.

“For fiscal 2011 overall, we expect to achieve total sales of between

$271 million and $283 million, an increase of between 5% and 10% over

fiscal 2010. We expect earnings per diluted share of between $.90 and

$1.20, versus our fiscal 2010 earnings of $.85 per diluted share,

excluding last year’s impairment charge.

“In addition to measuring our performance by generally accepted

accounting principles, we also track several non-GAAP measures including

EBITDA (earnings before interest, taxes, depreciation and amortization)

as an additional indicator of the company’s operating cash flow

performance. This measure should be considered in addition to, not a

substitute for or superior to, measures of financial performance

prepared in accordance with GAAP. In fiscal 2011, we expect EBITDA to be

between $42 million and $47 million, compared to $38 million in fiscal

2010, excluding last year’s impairment charge.

“Factors not incorporated into our guidance include the possibility of

future impairment or restructuring charges.”

About Courier Corporation

Courier Corporation prints, publishes and sells books. Headquartered in

North Chelmsford, Massachusetts, Courier has two business segments,

full-service book manufacturing and specialty book publishing. For more

information, visit www.courier.com.

This news release 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.

Factors that could affect actual results include, among others,

changes in customers’ demand for the Company’s products, including

seasonal changes in customer orders and shifting orders to lower cost

regions, changes in market growth rates, changes in raw material costs

and availability, pricing actions by competitors and other competitive

pressures in the markets in which the Company competes, consolidation

among customers and competitors, changes in the Company’s labor

relations, success in the execution of acquisitions and the performance

and integration of acquired businesses including carrying value of

intangible assets, restructuring and impairment charges required under

generally accepted accounting principles, changes in operating expenses

including medical and energy costs, changes in technology including

migration from paper-based books to digital, difficulties in the start

up 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 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.

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.