OPERATING SEGMENTS

6 Months Ended

Mar. 28, 2015

OPERATING SEGMENTS

OPERATING SEGMENTS

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 I), 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 $13.8 million for transaction costs in the first six months of fiscal 2015 relating to the pending acquisition of the Company discussed in Note A.  Such costs are not allocated to the business segments. As such, segment performance is evaluated 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 and six-month periods ended March 28, 2015 and March 29, 2014.

	(000’s Omitted)
	Quarter Ended						Six Months Ended
	March 28,			March 29,			March 28,			March 29,
	2015			2014			2015			2014
Net sales:
Book manufacturing	$	55,224		$	55,355		$	114,869		$	120,931
Publishing	7,548			8,128			16,563			16,713
Elimination of intersegment sales	(2,192		)	(2,903		)	(4,358		)	(4,804		)
Total	$	60,580		$	60,580		$	127,074		$	132,840
Pretax income (loss):
Book manufacturing operating income (loss)	$	(2,700	)	$	(718	)	$	1,535		$	4,592
Publishing operating income (loss)	(141		)	211			117			(201		)
Impairment charge and reduction in fair value of contingent consideration (Note G)	(434		)	(1,870		)	(434		)	(1,870		)
Transaction costs (Note A)	(13,015		)	—			(13,815		)	—
Stock-based compensation	(274		)	(385		)	(639		)	(743		)
Elimination of intersegment profit	(10		)	(27		)	(37		)	65
Interest expense, net	(691		)	(108		)	(828		)	(283		)
Total	$	(17,265	)	$	(2,897	)	$	(14,101	)	$	1,560