**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C.  20549**

 

**FORM 10-Q**

 

**(MarkOne)**

 

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

 

**For thequarterly period ended  March 29, 2008**

 

**OR**

 

**o****             ****TRANSITION REPORT PURSUANT TO SECTION 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For thetransition period from                        to                        **

 

**Commissionfile number  0-7597**

 

**COURIERCORPORATION**

(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 sincelast report)

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

 

Yes x  No o

 

Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer, a non-accelerated filer, or a smaller reportingcompany. See definitions of “large accelerated filer,” “accelerated filer,” and“smaller reporting company” in Rule 12b-2 of the Exchange Act. (Checkone):

 

| Large accelerated filer                        | o      |   | Accelerated filer         | x      |
|------------------------------------------------|--------|--------|---------------------------|--------|
|                                           |   |   |                      |   |
| Non-accelerated filer                          | o      |   | Smaller reporting company | o      |
| (Do not check if a smaller  reporting company) |   |   |                      |

 

Indicateby check mark whether the registrant is a shell company (as defined in ExchangeAct Rule 12b-2).

 

Yes o  No x

 

Indicatethe number of shares outstanding of each of the registrant’s classes of commonstock, as of the latest practicable date.

 
| **Class**                  | ** ** | **Outstanding  at May 6, 2008** |
|----------------------------|------------|--------------------------------------|
| Common Stock, $1 par value |       | 12,280,683 shares                    |

 

 

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COURIER CORPORATION

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(Dollars in thousands except per share amounts)

 
| ** **                          | ** ** | **QUARTER ENDED** | ** ** | **SIX MONTHS ENDED** | ** ** |
|-------------------------------------|------------|------------------------|------------|--------------------------------|------------|
| ** **                          | ** ** | **March 29,**     | ** ** | **March 31,**             | ** ** | **March 29,** | ** ** | **March 31,** | ** ** |
| ** **                          | ** ** | **2008**               | ** ** | **2007**                       | ** ** | **2008** | ** ** | **2007** | ** ** |
|                                |       |                   |       |                           |       |   |   |   |   |
| Net sales                           |       | $                      | 67,787     |                           | $          | 76,336 |   | $ | 130,650 |   | $ | 140,648 |   |
| Cost of sales                       |       | 48,418                 |       | 52,706                         |       | 94,540 |   | 96,874 |   |
|                                |       |                   |       |                           |       |   |   |   |   |
| Gross profit                        |       | 19,369                 |       | 23,630                         |       | 36,110 |   | 43,774 |   |
|                                |       |                   |       |                           |       |   |   |   |   |
| Selling and administrative expenses |       | 13,674                 |       | 14,203                         |       | 27,890 |   | 27,704 |   |
| Interest expense, net               |       | 272                    |       | 476                            |       | 567 |   | 698 |   |
|                                |       |                   |       |                           |       |   |   |   |   |
| Pretax income                       |       | 5,423                  |       | 8,951                          |       | 7,653 |   | 15,372 |   |
|                                |       |                   |       |                           |       |   |   |   |   |
| Provision for income taxes (Note C) |       | 2,040                  |       | 3,342                          |       | 2,854 |   | 5,740 |   |
|                                |       |                   |       |                           |       |   |   |   |   |
| Net income                          |       | $                      | 3,383      |                           | $          | 5,609 |   | $ | 4,799 |   | $ | 9,632 |   |
|                                |       |                   |       |                           |       |   |   |   |   |
| Net income per share (Note D):      |       |                   |       |                           |       |   |   |   |   |
|                                |       |                   |       |                           |       |   |   |   |   |
| Basic                               |       | $                      | 0.27       |                           | $          | 0.45 |   | $ | 0.38 |   | $ | 0.77 |   |
|                                |       |                   |       |                           |       |   |   |   |   |
| Diluted                             |       | $                      | 0.27       |                           | $          | 0.44 |   | $ | 0.38 |   | $ | 0.76 |   |
|                                |       |                   |       |                           |       |   |   |   |   |
| Cash dividends declared per share   |       | $                      | 0.20       |                           | $          | 0.18 |   | $ | 0.40 |   | $ | 0.36 |   |

 

Theaccompanying notes are an integral part of the consolidated financialstatements.

 

2

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COURIER CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)

(Dollars in thousands)

 
| ** **                                                                                                                              | ** ** | **March 29,** | ** ** | **September 29,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|------------------------|------------|
| ** **                                                                                                                              | ** ** | **2008**           | ** ** | **2007**               | ** ** |
| ASSETS                                                                                                                                  |       |               |       |                   |       |
| Current assets:                                                                                                                         |       |               |       |                   |       |
| Cash and cash equivalents                                                                                                               |       | $                  | 1,524      |                   | $          | 1,549 |   |
| Accounts receivable, less allowance for  uncollectible accounts of $1,665 at March 29, 2008 and $1,531 at  September 29, 2007 |       | 46,008             |       | 47,673                 |       |
| Inventories (Note B)                                                                                                                    |       | 41,713             |       | 38,183                 |       |
| Deferred income taxes                                                                                                                   |       | 3,460              |       | 3,469                  |       |
| Other current assets                                                                                                                    |       | 3,105              |       | 1,550                  |       |
|                                                                                                                                    |       |               |       |                   |       |
| Total current assets                                                                                                                    |       | 95,810             |       | 92,424                 |       |
|                                                                                                                                    |       |               |       |                   |       |
| Property, plant and equipment, less accumulated  depreciation: $148,557 at March 29, 2008 and $141,079 at  September 29, 2007 |       | 95,751             |       | 97,778                 |       |
|                                                                                                                                    |       |               |       |                   |       |
| Goodwill (Note A)                                                                                                                       |       | 55,199             |       | 55,199                 |       |
|                                                                                                                                    |       |               |       |                   |       |
| Other intangibles, net (Note A)                                                                                                         |       | 12,483             |       | 12,904                 |       |
|                                                                                                                                    |       |               |       |                   |       |
| Prepublication costs, net (Note A)                                                                                                      |       | 10,068             |       | 10,220                 |       |
|                                                                                                                                    |       |               |       |                   |       |
| Other assets                                                                                                                            |       | 1,438              |       | 1,310                  |       |
|                                                                                                                                    |       |               |       |                   |       |
| Total assets                                                                                                                            |       | $                  | 270,749    |                   | $          | 269,835 |   |

 

Theaccompanying notes are an integral part of the consolidated financialstatements.

 

3

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COURIER CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)

(Dollars in thousands)

 
| ** **                                                                                                                                      | ** ** | **March 29,** | ** ** | **September 29,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|------------------------|------------|
| ** **                                                                                                                                      | ** ** | **2008**           | ** ** | **2007**               | ** ** |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                       |       |               |       |                   |       |
| Current liabilities:                                                                                                                            |       |               |       |                   |       |
| Current maturities of long-term debt                                                                                                            |       | $                  | 91         |                   | $          | 91 |   |
| Accounts payable                                                                                                                                |       | 16,134             |       | 20,111                 |       |
| Accrued payroll                                                                                                                                 |       | 6,352              |       | 7,409                  |       |
| Accrued taxes                                                                                                                                   |       | 1,208              |       | 2,129                  |       |
| Other current liabilities                                                                                                                       |       | 5,787              |       | 6,652                  |       |
|                                                                                                                                            |       |               |       |                   |       |
| Total current liabilities                                                                                                                       |       | 29,572             |       | 36,392                 |       |
|                                                                                                                                            |       |               |       |                   |       |
| Long-term debt                                                                                                                                  |       | 29,746             |       | 17,375                 |       |
| Deferred income taxes                                                                                                                           |       | 11,462             |       | 9,446                  |       |
| Other liabilities                                                                                                                               |       | 2,848              |       | 3,619                  |       |
|                                                                                                                                            |       |               |       |                   |       |
| Total liabilities                                                                                                                               |       | 73,628             |       | 66,832                 |       |
|                                                                                                                                            |       |               |       |                   |       |
| Stockholders’ equity (Notes F and G):                                                                                                      |       |               |       |                   |       |
| Preferred stock, $1 par value - authorized 1,000,000  shares; none issued                                                                       |       |               |       |                   |       |
| Common stock, $1 par value - authorized 18,000,000  shares; issued 12,396,000 at March 29, 2008 and 12,612,000 at September 29,  2007 |       | 12,396             |       | 12,612                 |       |
| Additional paid-in capital                                                                                                                      |       | 7,528              |       | 12,977                 |       |
| Retained earnings                                                                                                                               |       | 177,702            |       | 177,919                |       |
| Accumulated other comprehensive loss                                                                                                            |       | (505               | )          | (505                   | )          |
|                                                                                                                                            |       |               |       |                   |       |
| Total stockholders’ equity                                                                                                                 |       | 197,121            |       | 203,003                |       |
|                                                                                                                                            |       |               |       |                   |       |
| Total liabilities and stockholders’ equity                                                                                                 |       | $                  | 270,749    |                   | $          | 269,835 |   |

 

The accompanying notes are an integral part of the consolidatedfinancial statements.

 

4

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COURIER CORPORATION

CONSOLIDATED CONDENSEDSTATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands)

 
| ** **                                                                       | ** ** | **SIX MONTHS ENDED** | ** ** |
|----------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                       | ** ** | **March 29,**             | ** ** | **March 31,** | ** ** |
| ** **                                                                       | ** ** | **2008**                       | ** ** | **2007** | ** ** |
| Operating Activities:                                                            |       |                           |       |   |   |
| Net income                                                                       |       | $                              | 4,799      |   | $ | 9,632 |   |
| Adjustments to reconcile net income to cash  provided from operating activities: |       |                           |       |   |   |
| Depreciation and amortization                                                    |       | 10,558                         |       | 9,250 |   |
| Stock based compensation                                                         |       | 742                            |       | 726 |   |
| Deferred income taxes                                                            |       | 2,025                          |       | 1,133 |   |
| Changes in assets and liabilities:                                               |       |                           |       |   |   |
| Accounts receivable                                                              |       | 1,665                          |       | 1,918 |   |
| Inventory                                                                        |       | (3,530                         | )          | (5,806 | ) |
| Accounts payable                                                                 |       | (3,977                         | )          | 290 |   |
| Accrued taxes                                                                    |       | (921                           | )          | (2,660 | ) |
| Other elements of working capital                                                |       | (3,477                         | )          | (3,784 | ) |
| Other, net                                                                       |       | (994                           | )          | (189 | ) |
|                                                                             |       |                           |       |   |   |
| Cash provided from operating activities                                          |       | 6,890                          |       | 10,510 |   |
|                                                                             |       |                           |       |   |   |
| Investment Activities:                                                           |       |                           |       |   |   |
| Capital expenditures                                                             |       | (5,475                         | )          | (11,793 | ) |
| Prepublication costs                                                             |       | (2,464                         | )          | (2,757 | ) |
|                                                                             |       |                           |       |   |   |
| Cash used for investment activities                                              |       | (7,939                         | )          | (14,550 | ) |
|                                                                             |       |                           |       |   |   |
| Financing Activities:                                                            |       |                           |       |   |   |
| Long-term debt borrowings, net                                                   |       | 12,371                         |       | 7,043 |   |
| Cash dividends                                                                   |       | (5,016                         | )          | (4,494 | ) |
| Proceeds from stock plans                                                        |       | 804                            |       | 1,175 |   |
| Stock repurchases                                                                |       | (7,177                         | )          | — |   |
| Excess tax benefits from stock-based  compensation                               |       | 42                             |       | 201 |   |
|                                                                             |       |                           |       |   |   |
| Cash provided from financing activities                                          |       | 1,024                          |       | 3,925 |   |
|                                                                             |       |                           |       |   |   |
| Decrease in cash and cash equivalents                                            |       | (25                            | )          | (115 | ) |
|                                                                             |       |                           |       |   |   |
| Cash and cash equivalents at the beginning  of the period                        |       | 1,549                          |       | 1,483 |   |
|                                                                             |       |                           |       |   |   |
| Cash and cash equivalents at the end of the  period                              |       | $                              | 1,524      |   | $ | 1,368 |   |

 

The accompanying notes are an integral partof the consolidated financial statements.

 

5

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**COURIER CORPORATION**

** **

**NOTES TO CONSOLIDATED CONDENSEDFINANCIAL STATEMENTS (UNAUDITED)**

 

**A.****                                    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

**Unaudited Financial Statements**

 

Thebalance sheet of Courier Corporation (the “Company”) as of March 29, 2008,the statements of income for the three-month and six-month periods ended March 29,2008 and March 31, 2007, and the statements of cash flows for thesix-month periods ended March 29, 2008 and March 31, 2007 areunaudited.  In the opinion of management,all adjustments necessary for a fair presentation of such financial statementshave been recorded.  Such adjustmentsconsisted only of normal recurring items.

 

Certaininformation and footnote disclosures normally included in financial statementsprepared in accordance with accounting principles generally accepted in theUnited States (“generally accepted accounting principles”) have been condensedor omitted.  The balance sheet data as ofSeptember 29, 2007 was derived from audited year-end financial statements,but does not include disclosures required by generally accepted accountingprinciples.  It is suggested that theseinterim financial statements be read in conjunction with the Company’s mostrecent Form 10-K and Annual Report for the year ended September 29,2007.

 

**Prepublication Costs**

 

Prepublicationcosts, associated with creating new titles in the specialty publishing segment,are amortized to cost of sales using the straight-line method over estimateduseful lives of three to five years.

 

**Goodwill and Other Intangibles**

 

The Company evaluatespossible impairment annually or whenever events or circumstances indicate thatthe carrying value of the assets may not be recoverable. There were no suchevents or circumstances in the period presented.  “Other intangibles” include customer listsrelated to Federal Marketing Corporation,d/b/a Creative Homeowner (“Creative Homeowner”) and Moore-LangenPrinting Company, Inc. (“Moore Langen”), which are being amortized over15-year and 10-year periods, respectively. Amortization expense related to customer lists was approximately$200,000 in the second quarter of both fiscal 2008 and 2007 and for the firstsix months was approximately $400,000 in both fiscal 2008 and 2007.

 

**Recent****Accounting Pronouncements**

 

At the beginning offiscal 2008, the Company adopted the provisions of the Financial AccountingStandards Board (“FASB”) Interpretation No. 48, “Accounting forUncertainty in Income Taxes – an interpretation of FASB Statement No. 109”(“FIN 48”), which is more fully discussed in Note C below.

 

In December 2007,the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 141(revised 2007), “Business Combinations,” (“SFAS No. 141R”), which replacesSFAS No. 141. This statement retains the purchase method of accounting forbusiness acquisitions, but requires a number of changes in the recognition ofassets acquired and liabilities assumed as well as the treatment ofacquisition-related costs.  SFAS No. 141Rwill be effective at the beginning of the Company’s fiscal year 2010 and willapply prospectively to business combinations completed on or after thatdate.  In March 2008, the FASBissued SFAS No. 161, “Disclosures about Derivative Instruments and HedgingActivities,” an amendment of FASB Statement No. 133 (“SFAS No. 161”).SFAS No. 161 changes the disclosure requirements for derivativeinstruments and hedging activities and will also be effective at the beginningof the Company’s fiscal year 2010.

 

6

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# ** **

# **COURIER CORPORATION**

# ** **

**NOTES TO CONSOLIDATED CONDENSEDFINANCIAL STATEMENTS (UNAUDITED)**

 

# **B.            INVENTORIES**

# ** **

Inventoriesare valued at the lower of cost or market. Cost is determined using the last-in, first-out (LIFO) method forapproximately 45% of the Company’s inventories at both March 29, 2008 and September 29,2007.  Other inventories, primarily inthe specialty publishing segment, are determined on a first-in, first-out(FIFO) basis.  Inventories consisted ofthe following:

 
| ** **      | ** ** | **(000’s Omitted)** | ** ** |
|-----------------|------------|-------------------------------|------------|
| ** **      | ** ** | **March 29,  2008**      | ** ** | **September 29,  2007** | ** ** |
| Raw materials   |       | $                             | 6,177      |   | $ | 5,295 |   |
| Work in process |       | 10,430                        |       | 8,274 |   |
| Finished goods  |       | 25,106                        |       | 24,614 |   |
| Total           |       | $                             | 41,713     |   | $ | 38,183 |   |

 

# **C.            INCOMETAXES**

 

At the beginning offiscal 2008, the Company adopted the provisions of FIN 48, which contains a two-step approach to recognizing andmeasuring uncertain tax positions accounted for in accordance with SFAS No. 109,“Accounting for Income Taxes.”  The firststep is to evaluate the tax position for recognition by determining if theweight of available evidence indicates that it is more likely than not that theposition will be sustained on audit, including resolution of related appeals orlitigation processes, if any.  The secondstep is to measure the tax benefit, quantified as the largest amount that iscumulatively more than 50% likely to be realized upon ultimate settlement.  The Company recognizes interest and penaltiesrelated to unrecognized tax benefits in income tax expense.  The cumulative effect of adopting FIN 48 atthe beginning of fiscal 2008 was $108,000 and was recorded as a reduction inretained earnings with a corresponding liability included under the caption “OtherLiabilities” in the accompanying consolidated condensed balance sheet as of September 29,2007. At March 29, 2008, such unrecognized tax benefits and accruedinterest were approximately $113,000 and the impact, if recognized, wouldfavorably affect the Company’s effective income tax rate in future periods. TheCompany does not anticipate any significant changes in the amount ofunrecognized tax benefits over the next twelve months.

 

TheCompany files federal and state income tax returns in various jurisdictions ofthe United States. With few exceptions, the Company is no longer subject toincome tax examinations for years prior to fiscal 2004.  Substantially all U.S. federal tax yearsprior to fiscal 2004 have been audited by the Internal Revenue Service andclosed.

 

7

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# **COURIER CORPORATION**

# ** **

**NOTES TO CONSOLIDATED CONDENSEDFINANCIAL STATEMENTS (UNAUDITED)**

 

Theprovision for income taxes differs from that computed using the statutoryfederal income tax rates for the following reasons:

 
| ** **                            | ** ** | **(000’s Omitted)** | ** ** |
|---------------------------------------|------------|-------------------------------|------------|
| ** **                            | ** ** | **Quarter Ended**        | ** ** |
| ** **                            | ** ** | **March 29,  2008**      | ** ** | **March 31,  2007** | ** ** |
| Federal taxes at statutory rates      |       | $                             | 1,898      |   | 35.0 | % | $ | 3,133 |   | 35.0 | % |
| State taxes, net of federal benefit   |       | 196                           |       | 3.6 |   | 290 |   | 3.2 |   |
| Federal manufacturers’ deduction |       | (60                           | )          | (1.1 | ) | (77 | ) | (0.9 | ) |
| Tax benefit of export related income  |       | —                        |       | — |   | (33 | ) | (0.4 | ) |
| Stock-based compensation (Note F)     |       | —                        |       | — |   | 13 |   | 0.1 |   |
| Other                                 |       | 6                             |       | 0.1 |   | 16 |   | 0.2 |   |
| Total                                 |       | $                             | 2,040      |   | 37.6 | % | $ | 3,342 |   | 37.3 | % |

 
| ** **                            | ** ** | **(000’s Omitted)**  | ** ** |
|---------------------------------------|------------|--------------------------------|------------|
| ** **                            | ** ** | **Six Months Ended** | ** ** |
| ** **                            | ** ** | **March 29,  2008**       | ** ** | **March 31,  2007** | ** ** |
| Federal taxes at statutory rates      |       | $                              | 2,679      |   | 35.0 | % | $ | 5,380 |   | 35.0 | % |
| State taxes, net of federal benefit   |       | 261                            |       | 3.4 |   | 504 |   | 3.3 |   |
| Federal manufacturers’ deduction |       | (94                            | )          | (1.2 | ) | (132 | ) | (0.9 | ) |
| Tax benefit of export related income  |       | —                         |       | — |   | (55 | ) | (0.4 | ) |
| Stock-based compensation (Note F)     |       | 1                              |       | — |   | 21 |   | 0.1 |   |
| Other                                 |       | 7                              |       | 0.1 |   | 22 |   | 0.1 |   |
| Total                                 |       | $                              | 2,854      |   | 37.3 | % | $ | 5,740 |   | 37.3 | % |

 

# **D.            NETINCOME PER SHARE**

# ** **

The following is a reconciliation of the shares used in thecalculation of basic and diluted income per share.  Potentially dilutive shares, calculated usingthe treasury stock method, consist of shares issued under the Company’s stockoption plans.

 
| ** **                             | ** ** | **(000’s Omitted)** | ** ** |
|----------------------------------------|------------|-------------------------------|------------|
| ** **                             | ** ** | **Quarter Ended**        | ** ** | **Six Months Ended** | ** ** |
| ** **                             | ** ** | **March 29,  2008**      | ** ** | **March 31,  2007** | ** ** | **March 29,  2008** | ** ** | **March 31,  2007** | ** ** |
|                                   |       |                          |       |   |   |   |   |   |   |
| Average shares outstanding for basic   |       | 12,402                        |       | 12,446 |   | 12,470 |   | 12,431 |   |
| Effect of potentially dilutive shares  |       | 119                           |       | 236 |   | 140 |   | 242 |   |
| Average shares outstanding for diluted |       | 12,521                        |       | 12,682 |   | 12,610 |   | 12,673 |   |

 

8

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# **COURIER CORPORATION**

# ** **

#### **NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS(UNAUDITED**)

#### ** **

# **E.             BUSINESSSEGMENTS**

# ** **

TheCompany has two business segments: book manufacturing and specialty publishing.The book manufacturing segment offers a full range of services from productionthrough storage and distribution for religious, educational and specialty tradebook publishers. The specialty publishing segment consists of DoverPublications, Inc. (“Dover”), Research & Education Association, Inc.(“REA”), and Creative Homeowner.

 

# **Inevaluating segment performance, management primarily focuses on income or lossbefore taxes, stock-based compensation and other income.  The elimination of intersegment sales andrelated profit represents sales from the book manufacturing segment to thespecialty publishing segment.  Corporateexpenses that are allocated to the segments include various support functionssuch as information technology services, finance, legal, human resources andengineering, and include depreciation and amortization expense related tocorporate assets*.***

# ** **

Thefollowing table provides segment information for the quarter and six-monthperiods ended March 29, 2008 and March 31, 2007.

 
| ** **                         | ** ** | **(000’s Omitted)** | ** ** |
|------------------------------------|------------|-------------------------------|------------|
| ** **                         | ** ** | **Quarter Ended**        | ** ** | **Six Months Ended** | ** ** |
| ** **                         | ** ** | **March 29,  2008**      | ** ** | **March 31,  2007** | ** ** | **March 29,  2008** | ** ** | **March 31,  2007** | ** ** |
|                               |       |                          |       |   |   |   |   |   |   |
| Net sales:                         |       |                          |       |   |   |   |   |   |   |
| Book manufacturing                 |       | $                             | 53,359     |   | $ | 60,464 |   | $ | 103,066 |   | $ | 110,426 |   |
| Specialty publishing               |       | 16,758                        |       | 18,160 |   | 32,014 |   | 34,918 |   |
| Elimination of intersegment sales  |       | (2,330                        | )          | (2,288 | ) | (4,430 | ) | (4,696 | ) |
| Total                              |       | $                             | 67,787     |   | $ | 76,336 |   | $ | 130,650 |   | $ | 140,648 |   |
|                               |       |                          |       |   |   |   |   |   |   |
| Income before taxes:               |       |                          |       |   |   |   |   |   |   |
| Book manufacturing                 |       | $                             | 5,487      |   | $ | 7,877 |   | $ | 8,006 |   | $ | 13,768 |   |
| Specialty publishing               |       | 202                           |       | 1,363 |   | 251 |   | 2,170 |   |
| Stock-based compensation           |       | (302                          | )          | (363 | ) | (742 | ) | (726 | ) |
| Elimination of intersegment profit |       | 36                            |       | 74 |   | 138 |   | 160 |   |
| Total                              |       | $                             | 5,423      |   | $ | 8,951 |   | $ | 7,653 |   | $ | 15,372 |   |

 

**F.             STOCK-BASED COMPENSATION**

 

The Company recordsstock-based compensation expense for the cost of stock options and stock grantsas well as shares issued under the Company’s 1999 Employee Stock Purchase Plan.The fair value of each option awarded is calculated on the date of grant usingthe Black-Scholes option-pricing model. Stock-based compensation recognized inselling and administrative expenses in the accompanying financial statements inthe second quarter of fiscal 2008 and 2007 was $302,000 and $363,000,respectively, and the related tax benefit recognized was $104,000 and $112,000,respectively. For the first six months of 2008 and 2007, stock-basedcompensation was $742,000 and $726,000, respectively, and the related taxbenefit recognized was $232,000 and $224,000, respectively. Unrecognizedstock-based compensation cost at March 29, 2008 was $1.9 million, to berecognized over a weighted-average period of 1.9 years.

 

9

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# ** **

# **COURIER CORPORATION**

# ** **

#### **NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS(UNAUDITED**)

#### ** **

**Stock Incentive Plan:** The Company’s stock incentive plan provides for the granting of stockoptions and stock grants up to a total of 2,064,375 shares.  Under the plan provisions, both non-qualifiedand incentive stock options to purchase shares of the Company’s common stockmay be granted to key employees.  Theoption price per share may not be less than the fair market value of the stockat the time the option is granted and incentive stock options must expire notlater than ten years from the date of grant. The Company annually issues a combination of stock options and stockgrants to its key employees. Stock options and stock grants generally vest overthree years.  The fair value of eachoption was estimated using the Black-Scholes option-pricing model on the dateof grant. The following table provides stock option activity under this plan inthe first six months of fiscal 2008:

 
|                                   | ** ** | ** **         | ** ** | **Weighted Average** | ** ** | **Aggregate**                  | ** ** |
|-----------------------------------|------------|--------------------|------------|---------------------------|------------|--------------------------------|------------|
| ** **                        | ** ** | **Option  Shares** | ** ** | **Exercise  Price**       | ** ** | **Remaining  Term (yrs)** | ** ** | **Intrinsic  Value** | ** ** |
| Outstanding at September 29, 2007 |       | 387,511            |       | $                         | 25.53      |                           |       |   |   |   |
| Issued                            |       | —             |       | —                    |       |                           |       |   |   |
| Exercised                         |       | (4,754             | )          | 22.18                     |       |                           |       | $ | 66,000 |   |
| Canceled                          |       | (6,048             | )          | 36.57                     |       |                           |       |   |   |
| Expired                           |       | (315               | )          | 35.51                     |       |                           |       |   |   |
| Outstanding at March 29, 2008     |       | 376,394            |       | $                         | 25.39      |                           | 2.7        |   | $ | 1,374,000 |   |
|                              |       |               |       |                      |       |                           |       |   |   |
| Exercisable at March 29, 2008     |       | 281,017            |       | $                         | 21.56      |                           | 2.1        |   | $ | 1,374,000 |   |
| Available for  future grants      |       | 192,182            |       |                      |       |                           |       |   |   |

 

Duringthe second quarter of fiscal 2008, 1,000 non-vested stock awards were grantedwith a weighted-average fair value of $26.86 per share, 1,000 stock grantsvested with a weighted-average fair value of $38.44 per share, and 1,893 stockgrants were forfeited with a weighted-average fair value of $36.39 per share.No such shares were granted or forfeited in the first quarter of fiscal2008.  At March 29, 2008, non-vestedstock grants outstanding were 40,859 shares with a weighted-average grant-datefair value of $37.18.

 

**Directors’ Option Plan:** In January 2005, stockholders approved the Courier Corporation 2005Stock Equity Plan for Non-Employee Directors (the “2005 Plan”). Under the 2005Plan, non-qualified stock options to purchase shares of the Company’s commonstock may be granted to non-employee directors up to a total of 225,000shares.  The option price per share isthe fair market value of stock at the time the option is granted.  The options are immediately exercisable andhave a term of five years. The 2005 Plan replaced the previous non-employeedirectors’ plan, which had been adopted in 1989.  The fair value of each option grant wasestimated on the date of the grant using the Black-Scholes option-pricingmodel.  The key assumptions used to valueoptions issued in the second quarter of fiscal 2008 were a risk-free interestrate of 3.14%, expected volatility of 26.6%, a dividend yield of 2.59%, and anexpected life of five years.  The following table provides activity under thedirectors’ option plans in the first six months of fiscal 2008:

 
| ** **                             | ** ** | ** **         | ** ** | **Weighted Average** | ** ** | **Aggregate**                  | ** ** |
|----------------------------------------|------------|--------------------|------------|---------------------------|------------|--------------------------------|------------|
| ** **                             | ** ** | **Option  Shares** | ** ** | **Exercise  Price**       | ** ** | **Remaining  Term (yrs)** | ** ** | **Intrinsic  Value** | ** ** |
| Outstanding at September 29, 2007 |       | 167,097            |       | $                         | 31.36      |                           |       |   |   |   |
| Issued                                 |       | 42,000             |       | 26.86                     |       |                           |       |   |   |
| Exercised                              |       | (10,500            | )          | 21.46                     |       |                           |       | $ | 68,000 |   |
| Outstanding at March 29, 2008     |       | 198,597            |       | $                         | 30.94      |                           | 2.5        |   | $ | 162,000 |   |
|                                   |       |               |       |                      |       |                           |       |   |   |
| Exercisable at March 29, 2008     |       | 198,597            |       | $                         | 30.94      |                           | 2.5        |   | $ | 162,000 |   |
| Available for future grants            |       | 45,883             |       |                      |       |                           |       |   |   |

 

10

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# **COURIER CORPORATION**

# ** **

**NOTES TO CONSOLIDATED CONDENSEDFINANCIAL STATEMENTS (UNAUDITED)**

 

Directorsmay also elect to receive their annual retainer and committee chair fees asshares of stock in lieu of cash; 5,399 such shares were issued in the secondquarter of fiscal 2008 with a fair market value of $26.86 per share.

 

**Employee Stock Purchase Plan:** The Company’s 1999 Employee Stock Purchase Plan (“ESPP”), as amended,authorizes the issuance of up to an aggregate of 337,500 shares of the Company’scommon stock for issuance under the plan. Eligible employees may purchase shares of the Company’s common stock atnot less than 85% of fair market value at the end of the grant period.  On March 1, 2008, 13,120 shares wereissued under the ESPP at a price of $23.13 per share.  At March 29, 2008, there were 67,990shares available for future issuances.

 

**G.            STOCK REPURCHASE PLAN**

 

On November 8, 2007,the Company announced the approval by its Board of Directors for the repurchaseof up to $10 million of the Company’s outstanding common stock from time totime at management’s discretion either through the open market or privatelynegotiated transactions. In the first half of fiscal 2008, approximately 250,000 shares of common stock wererepurchased for approximately $7.2 million. As such, at March 29, 2008, the Company had approximately $2.8million of remaining authorization available for future stock repurchases. On May 8,2008, the Board of Directors increased the share repurchase program by anadditional $5 million.

 

11

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**Item 2.**

**COURIER CORPORATION**

**MANAGEMENT’S DISCUSSION ANDANALYSIS OF**

**FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

**Critical Accounting Policies and Estimates:**

 

The Company’sconsolidated condensed financial statements have been prepared in accordancewith generally accepted accounting principles. The preparation of these financial statements requires management tomake estimates and assumptions that affect the amounts reported in thesefinancial statements and accompanying notes.  On an ongoing basis, management evaluates its estimates and judgments,including those related to collectibility of accounts receivable, recovery ofinventories, impairment of goodwill, prepublication costs and income taxes.  Management bases its estimates and judgmentson historical experience and various other factors it believes to be reasonableunder the circumstances, the results of which form the basis for makingjudgments about the carrying value of assets and liabilities at the date of thefinancial statements and the reported amounts of revenues and expenses duringthe periods presented.  Actual resultsmay differ from these estimates.  Thesignificant accounting policies which management believes are most critical toaid in fully understanding and evaluating the Company’s reported financialresults include the following:

 

# **Accounts Receivable**  Management performsongoing credit evaluations of the Company’s customers and adjusts credit limitsbased upon payment history and the customer’s current creditworthiness.  Collections and payments from customers arecontinuously monitored.  A provision forestimated credit losses is determined based upon historical experience and anyspecific customer collection issues that have been identified.  If the financial condition of the Company’scustomers were to deteriorate, resulting in an impairment of their ability tomake payments, additional allowances may be required.

# ** **

Inventories   Managementrecords reductions in the cost basis of inventory for excess and obsoleteinventory based primarily upon historical and forecasted product demand.  If actual market conditions are lessfavorable than those projected by management, additional inventory charges maybe required.

 

Goodwill and Other Intangibles  Other intangibles include customer lists,which are amortized on a straight-line basis over periods ranging from ten tofifteen years. The Company evaluates possible impairment of goodwill and otherintangibles annually or whenever events or circumstances indicate that thecarrying value of the assets may not be recoverable.  The Company completed the annual impairmenttest at September 29, 2007 resulting in no change to the nature orcarrying amounts of its intangible assets. Changes in market conditions or poor operating results could result in adecline in value thereby potentially requiring an impairment charge in thefuture.

#####  

PrepublicationCosts   The Companycapitalizes prepublication costs, which include the costs of acquiring rightsto publish a work and costs associated with bringing a manuscript topublication such as artwork and editorial efforts. Prepublication costs areamortized on a straight-line basis over periods ranging from three to fiveyears.  Management regularly evaluatesthe sales and profitability of the products based upon historical andforecasted demand.  Based upon thisevaluation, adjustments may be required to amortization expense.

 

Income Taxes   The income tax provision and related accruedtaxes are based on amounts reported on the Company’s tax returns and changes indeferred taxes.  Deferred income tax liabilities and assets are determined based uponthe differences between the financial statement and tax bases of assets andliabilities.  Changes in the recoverabilityof the Company’s deferred tax assets or audits by tax authorities could resultin future charges or credits to income tax expense, and related accrued anddeferred taxes.

 

12

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###### ** **

**Overview:**

 

Courier Corporation (the“Company”), founded in 1824, is one of America’s leading book manufacturers andspecialty publishers.  The Company hastwo business segments: book manufacturing and specialty publishing.  The book manufacturing segment streamlinesthe process of bringing books from the point of creation to the point ofuse.  Based on sales, Courier is thethird largest book manufacturer in the United States, offering services fromprepress and production, through storage and distribution.  The specialty publishing segment consists ofDover Publications, Inc. (“Dover”), Research & EducationAssociation, Inc. (“REA”), and Federal Marketing Corporation d/b/aCreative Homeowner (“Creative Homeowner”). Dover publishes over 9,000 titles in more than 30 specialty categoriesranging from literature to paper dolls, and from music scores to clip art.  REA publishes test preparation andstudy-guide books and software for high school, college and graduate students,as well as professionals.  CreativeHomeowner publishes and distributes books on home design, decorating,landscaping, gardening and crafts, and sells home plans.

 

**Results of Operations:**

# ** **

| ** **                           | ** ** | **FINANCIAL HIGHLIGHTS**                                                     | ** ** |
|--------------------------------------|------------|-----------------------------------------------------------------------------------|------------|
| ** **                           | ** ** | **(dollars in thousands except per share amounts)** | ** ** |
| ** **                           | ** ** | **Quarter Ended**                                                            | ** ** | **Six Months Ended** | ** ** |
| ** **                           | ** ** | **March 29,  2008**                                                          | ** ** | **March 31,  2007** | ** ** | **%  Change** | ** ** | **March 29,  2008** | ** ** | **March 31,  2007** | ** ** | **%  Change** | ** ** |
|                                 |       |                                                                              |       |   |   |   |   |   |   |   |   |   |   |
| Net sales                            |       | $                                                                                 | 67,787     |   | $ | 76,336 |   | -11.2 | % | $ | 130,650 |   | $ | 140,648 |   | -7.1 | % |
| Cost of sales                        |       | 48,418                                                                            |       | 52,706 |   | -8.1 | % | 94,540 |   | 96,874 |   | -2.4 | % |
| Gross profit                         |       | 19,369                                                                            |       | 23,630 |   | -18.0 | % | 36,110 |   | 43,774 |   | -17.5 | % |
| As a percentage of sales             |       | 28.6                                                                              | %          | 31.0 | % |   |   | 27.6 | % | 31.1 | % |   |   |
| Selling and administrative  expenses |       | 13,674                                                                            |       | 14,203 |   | -3.7 | % | 27,890 |   | 27,704 |   | 0.7 | % |
| Interest expense, net                |       | 272                                                                               |       | 476 |   | -42.9 | % | 567 |   | 698 |   | -18.8 | % |
| Pretax income                        |       | 5,423                                                                             |       | 8,951 |   | -39.4 | % | 7,653 |   | 15,372 |   | -50.2 | % |
| Provision for income taxes           |       | 2,040                                                                             |       | 3,342 |   |   |   | 2,854 |   | 5,740 |   |   |   |
| Net income                           |       | $                                                                                 | 3,383      |   | $ | 5,609 |   | -39.7 | % | $ | 4,799 |   | $ | 9,632 |   | -50.2 | % |
|                                 |       |                                                                              |       |   |   |   |   |   |   |   |   |   |   |
| Net income per diluted share         |       | $                                                                                 | 0.27       |   | $ | 0.44 |   | -38.6 | % | $ | 0.38 |   | $ | 0.76 |   | -50.0 | % |

# ** **

# **Revenuesin the second quarter and first half of fiscal 2008 decreased in both of theCompany’s operating segments compared to the same periods last year, reflectinga combination of industry factors and the sluggish national economy. Bookmanufacturing revenues were down 12% for the second quarter and 7% for thefirst half of the year compared to the corresponding periods last year,reflecting declines in each of the Company’s principal manufacturing markets.  In the specialty publishing segment, saleswere down 8% both in the second quarter and year to date compared to the sameperiods last year.  Modest sales growthat REA was more than offset by weak sales at Dover and Creative Homeowner, withthe continued housing recession in particular impacting demand for CreativeHomeowner’s books.**

# ** **

Net income for thequarter was $3.4 million, down from $5.6 million in the second quarter lastyear, reflecting the sales shortfall in both segments along with corresponding reductionsin gross profit as a percentage of sales. For the first six months, net income was $4.8 million compared to $9.6million for the same period in fiscal 2007, reflecting similar reductions insales and gross profit.

 

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*Book Manufacturing Segment*

 
| ** **                           | ** ** | **SEGMENT HIGHLIGHTS**                                                       | ** ** |
|--------------------------------------|------------|-----------------------------------------------------------------------------------|------------|
| ** **                           | ** ** | **(dollars in thousands except per share amounts)** | ** ** |
| ** **                           | ** ** | **Quarter Ended**                                                            | ** ** | **Six Months Ended** | ** ** |
| ** **                           | ** ** | **March 29,  2008**                                                          | ** ** | **March 31,  2007** | ** ** | **%  Change** | ** ** | **March 29,  2008** | ** ** | **March 31,  2007** | ** ** | **%  Change** | ** ** |
|                                 |       |                                                                              |       |   |   |   |   |   |   |   |   |   |   |
| Net sales                            |       | $                                                                                 | 53,359     |   | $ | 60,464 |   | -11.8 | % | $ | 103,066 |   | $ | 110,426 |   | -6.7 | % |
| Cost of sales                        |       | 40,563                                                                            |       | 44,787 |   | -9.4 | % | 79,879 |   | 81,697 |   | -2.2 | % |
| Gross profit                         |       | 12,796                                                                            |       | 15,677 |   | -18.4 | % | 23,187 |   | 28,729 |   | -19.3 | % |
| As a percentage of sales             |       | 24.0                                                                              | %          | 25.9 | % |   |   | 22.5 | % | 26.0 | % |   |   |
| Selling and administrative  expenses |       | 7,476                                                                             |       | 7,795 |   | -4.1 | % | 15,489 |   | 15,174 |   | 2.1 | % |
| Interest expense (income)            |       | (167                                                                              | )          | 5 |   |   |   | (308 | ) | (213 | ) |   |   |
| Pretax income                        |       | $                                                                                 | 5,487      |   | $ | 7,877 |   | -30.3 | % | $ | 8,006 |   | $ | 13,768 |   | -41.9 | % |

 

Within the bookmanufacturing segment, the Company focuses on three key markets: education,religious and specialty trade.  Sales tothe education market were $22.2 million in the second quarter, a decrease of17% compared to the second quarter last year. For the first six months, sales were $37.9 million, down 9% from thefirst half of fiscal 2007. The first two quarters are the seasonally slowperiod for the education market, which is typically when publishers beginplacing orders for textbook reprints. During this year, a variety of industry factors significantly delayedthe reprint order flow, which began to improve towards the end of the secondquarter. Sales to the religious market were $14.4 million in the secondquarter, down 15% from an unusually strong second quarter in fiscal 2007 whensales had increased 22%. For the first six months, sales to this market weredown 6% to $30.6 million, but for the full year, religious sales are expectedto grow at a low single digit rate, in line with historical trends.  Sales to the specialty trade market, despiteshare gains and several new accounts, were down 2% in the second quarter to$13.6 million and down 5% to $28.0 million for the first six months compared tothe corresponding periods last year, reflecting both a current softness inretail sales and several large one-time orders last year.

 

Costof sales in this segment decreased by 9% to $40.6 million for the quarter anddecreased by 2% to $79.9 million for the first six months of fiscal 2008 due tothe lower sales volume compared to the same periods last year.  Gross profit in this segment decreased by 18%to $12.8 million for the quarter, and as a percentage of sales decreased to24.0% from 25.9% in last year’s second quarter. Gross profit for the first six months of fiscal 2008 decreased 19% to$23.2 million and decreased as a percentage of sales to 22.5% from 26.0% in thecorresponding period last year.  Thesedecreases reflect lower capacity utilization, combined with increaseddepreciation expense of approximately $300,000 in the second quarter and$900,000 in the first six months compared to the prior year as a result of lastyear’s investments in additional capacity at the Kendallville, Indianafacility.  Orders from educationalpublishers improved significantly at the end of the second quarter and it isanticipated that the Company’s four-color presses will operate near fullcapacity during the second half of fiscal 2008. During the second quarter, the Company also completed the installationof a new press, incorporating advanced, exclusive technology to serve thereligious market, at its Philadelphia facility, with new bindery equipmentexpected to be installed by the end of the third quarter of fiscal 2008.

 

14

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Sellingand administrative expenses for the segment decreased 4% in the second quarterto $7.5 million, including a reduction in incentive compensation that was tiedto profitability.  For the first half offiscal 2008, such expenses increased 2% to $15.5 million compared to the sameperiod last year.  This increase includesadditions to the segment’s sales force in the fourth quarter of last year totarget specific markets and customers, as well as inflationary cost increasescombined with reductions in incentive compensation.

 

Intercompanyinterest income allocated to the book manufacturing segment was $167,000 in thesecond quarter compared to interest expense of $5,000 in the same period lastyear.  For the first six months of fiscal2008, intercompany interest income allocated to this segment increased to$308,000 compared to $213,000 in the first half of last year.

 

Pretaxincome in the book manufacturing segment was $5.5 million in the second quarterof fiscal 2008, down 30% from the same period last year.  For the first six months, pretax income was$8.0 million, compared to $13.8 million in the first half of fiscal 2007, duein large part to lower capacity utilization and the resulting drop in grossprofit as well as higher depreciation expense.

 

*Specialty Publishing Segment*

 
| ** **                           | ** ** | **SEGMENT HIGHLIGHTS**                                                       | ** ** |
|--------------------------------------|------------|-----------------------------------------------------------------------------------|------------|
| ** **                           | ** ** | **(dollars in thousands except per share amounts)** | ** ** |
| ** **                           | ** ** | **Quarter Ended**                                                            | ** ** | **Six Months Ended** | ** ** |
| ** **                           | ** ** | **March 29,  2008**                                                          | ** ** | **March 31,  2007** | ** ** | **%  Change** | ** ** | **March 29,****2008** | ** ** | **March 31,  2007** | ** ** | **%  Change** | ** ** |
|                                 |       |                                                                              |       |   |   |   |   |   |   |   |   |   |   |
| Net sales                            |       | $                                                                                 | 16,758     |   | $ | 18,160 |   | -7.7 | % | $ | 32,014 |   | $ | 34,918 |   | -8.3 | % |
| Cost of sales                        |       | 10,218                                                                            |       | 10,280 |   | -0.6 | % | 19,227 |   | 20,033 |   | -4.0 | % |
| Gross profit                         |       | 6,540                                                                             |       | 7,880 |   | -17.0 | % | 12,787 |   | 14,885 |   | -14.1 | % |
| As a percentage of sales             |       | 39.0                                                                              | %          | 43.4 | % |   |   | 39.9 | % | 42.6 | % |   |   |
| Selling and administrative  expenses |       | 5,898                                                                             |       | 6,045 |   | -2.4 | % | 11,660 |   | 11,805 |   | -1.2 | % |
| Interest expense                     |       | 440                                                                               |       | 472 |   |   |   | 876 |   | 910 |   |   |   |
| Pretax income                        |       | $                                                                                 | 202        |   | $ | 1,363 |   | -85.2 | % | $ | 251 |   | $ | 2,170 |   | -88.4 | % |

 

Sales in the Company’sspecialty publishing segment were down 8% in both the quarter and the firsthalf of fiscal 2008 to $16.8 million and $32.0 million, respectively.  Creative Homeowner sales were down 6% in thesecond quarter and down 15% for the first six months, compared to thecorresponding periods last year.  Thecontinued slowdown in the housing market has reduced store traffic and sales inthe home center market, which is Creative Homeowner’s largest channel.  Despite market softness, Creative Homeownerachieved a small share gain in this channel in the second quarter and continuedto expand their growth in other channels, such as warehouse clubs.  Dover sales decreased 11% in the secondquarter and 6% for the first six months of fiscal 2008, during a period of slowmarket growth.  Sales were down across mostof Dover’s sales channels as retailers ordered cautiously and managedinventories carefully.  Sales at REAincreased 2% in the second quarter despite slower retail traffic.  REA’s year-to-date sales increased 9% overthe first half of fiscal 2007, reflecting continued market growth for testpreparation books and study guides.

 

Cost of sales in thespecialty publishing segment was comparable to the prior year’s second quarterat $10.2 million.  Creative Homeownerincurred charges of approximately $350,000 in the second quarter of fiscal 2008to increase inventory reserves and to write down the investment in titles thathave not performed up to expectations. Also during the second quarter, the Company’s book manufacturing

 

15

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segment took overmanufacturing of Creative Homeowner’s books. For the first half of the year, cost of sales for the specialtypublishing segment decreased 4% to $19.2 million compared to the first sixmonths of fiscal 2007.  Gross profit as apercentage of sales for the segment decreased in the quarter to 39.0% from43.4% in the corresponding period last year. Creative Homeowner reduced the overall gross profit percentage in thesegment because of their lower-margin distribution business and the previouslydiscussed second-quarter charges.  Grossprofit as a percentage of sales for Dover and REA was comparable to the prioryear’s second quarter due to productivity gains and cost reductions.  As a percentage of sales, gross profit for thespecialty publishing segment for the first six months of fiscal 2008 was 39.9%compared to 42.6% in the corresponding period last year.

 

Selling andadministrative expenses in this segment were down slightly both in the quarterand the first six months of fiscal 2008 at $5.9 million and $11.7 million,respectively, compared to the same periods in fiscal 2007.

 

Intercompany interestexpense is allocated to the specialty publishing segment based on acquisitioncosts, reduced by cash generated by each business since acquisition.  Interest expense for the second quarter of fiscal 2008 was $440,000 compared to$472,000 last year and for the first six months was $876,000 versus $910,000 inthe corresponding period of fiscal 2007.

 

Pretaxincome in the specialty publishing segment for the second quarter was $202,000,including a loss at Creative Homeowner of $775,000, compared to pretax incomeof $1.4 million for this segment in last year’s second quarter.  For the first half of fiscal 2008, pretaxincome was $251,000 compared to $2.2 million for the first six months of fiscal2007.

 

*Total Consolidated Company*

 

Interestexpense, net of interest income, was $272,000 in the second quarter of fiscal2008, compared to net interest expense of $476,000 in the same period of fiscal2007.  For the first six months of fiscal2008, interest expense, net of interest income, was $567,000 compared to netinterest expense of $698,000 in the first half of fiscal 2007. Average debtunder the revolving credit facility in the second quarter of fiscal 2008 wasapproximately $23.9 million at an average annual interest rate of 4.2%,generating interest expense of approximately $250,000.  In the second quarter of last year, averagedebt under this facility was approximately $26.2 million at an average annualinterest rate of 5.8%, generating interest expense of approximately$390,000.  Average debt under therevolving credit facility for the first six months of fiscal 2008 wasapproximately $21.1 million at an average annual interest rate of 4.9%,generating interest expense of approximately $510,000.  For the first half of fiscal 2007, averagedebt under this facility was approximately $22.4 million at an average annualinterest rate of 5.8%, generating interest expense of approximately $670,000.  Interest expense also includes commitmentfees and other costs associated with maintaining this credit facility.  Interest capitalized in the first half offiscal 2008 was approximately $123,000, related primarily to the new pressinstalled at the Philadelphia facility during the quarter.  Interest capitalized in the first six monthsof fiscal 2007 was approximately $134,000, related primarily to the expansionof the Kendallville, Indiana facility.

 

The Company’s effectivetax rate for the second quarter and first half of fiscal 2008 was 37.6% and37.3%, respectively, comparable to the same periods last year.  An increased benefit from the phase in of thedomestic manufacturers deduction was offset by the phase out of the tax benefiton export related income and a slight increase in the Company’s effective statetax rate.

 

16

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###### ** **

At the beginning offiscal 2008, the Company adopted the provisions of the Financial AccountingStandards Board (“FASB”) Interpretation No. 48, “Accounting forUncertainty in Income Taxes – an interpretation of FASB Statement No. 109”(“FIN 48”).  FIN 48 contains a two-step approach to recognizing andmeasuring uncertain tax positions.  Thefirst step is to evaluate the tax position for recognition by determining ifthe weight of available evidence indicates that it is more likely than not thatthe position will be sustained on audit, including resolution of relatedappeals or litigation processes, if any. The second step is to measure the tax benefit, quantified as the largestamount that is cumulatively more than 50% likely to be realized upon ultimatesettlement.  The cumulative effect ofadopting FIN 48 at the beginning of fiscal 2008 was $108,000 and was recordedas a reduction in retained earnings with a corresponding liability includedunder the caption “Other Liabilities” in the accompanying consolidatedcondensed balance sheet at September 29, 2007.  At March 29, 2008, such unrecognized taxbenefits and accrued interest were approximately $113,000 and the impact, ifrecognized, would favorably affect the Company’s effective income tax rate infuture periods. The Company does not anticipate any significant changes in theamount of unrecognized tax benefits over the next twelve months.

 

For purposes of computingnet income per diluted share, weighted average shares outstanding decreased byapproximately 161,000 shares and 63,000 shares compared to last year’s secondquarter and first six months, respectively. These decreases reflect the Company’s repurchase of approximately 160,000 shares of its common stock inthe second quarter and approximately 250,000 shares in the first half of fiscal2008 under a plan approved by the Board of Directors on November 8,2007.  Weighted average sharesoutstanding in the second quarter and first six months of fiscal 2008 alsoreflect lower potentially dilutive shares compared to the same periods lastyear.  These decreases were partiallyoffset by options exercised and shares issued under the Company’s stockplans.

 

**Liquidity and Capital Resources:**

 

During the first sixmonths of fiscal 2008, operations provided approximately $6.9 million ofcash.  Net income was $4.8 million,depreciation and amortization were $10.6 million and deferred taxes increasedby $2.0 million.  Working capitalincreased by approximately $10.2 million, compared to $10.0 million in the sameperiod last year.  The change in workingcapital in the first half of fiscal 2008 includes a $3.5 million increase ininventories, of which $2.2 million was a growth in work in process, as well asa reduction in accounts payable of $4.0 million.

 

Investmentactivities through the second quarter of fiscal 2008 used approximately $7.9million of cash. Capital expenditures were approximately $5.5 million.  For the entire fiscal year, capitalexpenditures are expected to be approximately $17 to $22 million.  This amount includes completion of theexpansion of printing and binding capacity in the religious book manufacturingoperation in Philadelphia and the construction of a 150,000 square footwarehouse to support the expanded capacity at the Kendallville, Indianafacility.  Prepublication costs were $2.5million compared to $2.8 million in the first six months last year.  For the full fiscal year, prepublicationcosts are projected to be approximately $5 to $6 million.

 

Financingactivities for the first six months of fiscal 2008 used approximately $1.0million of cash.  Cash dividends were$5.0 million and $7.2 million was used to repurchase approximately 250,000shares of common stock under the Company’s share repurchase program authorizedin November 2007.  At March 29,2008, the Company had approximately $2.8 million of remaining authorizationavailable for future stock repurchases. On May 8, 2008, the Board ofDirectors increased the share repurchase program by an additional $5million.  Borrowings increased by $12.4million during the first half of fiscal 2008. At March 29, 2008, the Company had $29.5 million in borrowingsunder its $100 million revolving credit facility, which bears interest at afloating rate, which was 3.0% as of March 29, 2008.  The revolving credit facility is used by theCompany 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 tomeet its cash requirements through 2008.

 

17

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###### ** **

The following tablesummarizes the Company’s contractual obligations and commitments at March 29,2008 to make future payments as well as its existing commercial commitments.

 
| ** **                  | ** ** | **(000’s Omitted)**                      | ** ** |
|-----------------------------|------------|----------------------------------------------------|------------|
| ** **                  | ** ** | **Payments due by period (1)** | ** ** |
| ** **                  | ** ** | ** **                                         | ** ** | **Less than** | ** ** | **1 to 3** | ** ** | **3 to 5** | ** ** | **More than** | ** ** |
| ** **                  | ** ** | **Total**                                          | ** ** | **1 Year** | ** ** | **Years** | ** ** | **Years** | ** ** | **5 Years** | ** ** |
| Contractual Payments:  | ** ** | ** **                                         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Long-Term Debt (2)          |       | $                                                  | 29,837     |   | $ | 91 |   | $ | 189 |   | $ | 29,557 |   | $ | — |   |
| Operating Leases (3)        |       | 8,998                                              |       | 2,676 |   | 3,572 |   | 1,654 |   | 1,096 |   |
| Purchase Obligations (4)    |       | 1,878                                              |       | 1,878 |   | — |   | — |   | — |   |
| Other Long-Term Liabilities |       | 2,848                                              |       | — |   | 869 |   | 350 |   | 1,629 |   |
| Total                       |       | $                                                  | 43,561     |   | $ | 4,645 |   | $ | 4,630 |   | $ | 31,561 |   | $ | 2,725 |   |

 

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(1) Amountsdo not include interest expense.

(2) Includesthe Company’s revolving credit facility, which has a maturity date of March 2011.

(3) Representsamounts at September 29, 2007.

(4) Representscapital commitments.

 

**RecentAccounting Pronouncements:**

 

In December 2007,the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 141(revised 2007), “Business Combinations,” (“SFAS No. 141R”), which replacesSFAS No. 141. This statement retains the purchase method of accounting forbusiness acquisitions, but requires a number of changes in the recognition ofassets acquired and liabilities assumed as well as in the treatment ofacquisition-related costs.  SFAS No. 141Ris effective at the beginning of the Company’s fiscal year 2010 and will applyprospectively to business combinations completed on or after that date.  In March 2008, the FASB issued SFAS No. 161,“Disclosures about Derivative Instruments and Hedging Activities,” an amendmentof FASB Statement No. 133 (“SFAS No. 161”). SFAS No. 161 changesthe disclosure requirements for derivative instruments and hedging activitiesand will also be effective at the beginning of the Company’s fiscal year 2010.

 

**Forward-Looking Information:**

 

ThisQuarterly 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 isdefined under the Private Securities Litigation Reform Act of 1995 and releasesissued by the Securities and Exchange Commission.  The words “believe,” “expect,” “anticipate,” “intend,”“estimate” and other expressions which are predictions of or indicate futureevents and trends and which do not relate to historical matters identifyforward-looking statements.  Suchstatements are subject to risks and uncertainties that could cause actualresults to differ materially from those currently anticipated.  Factors that could affect actual resultsinclude, among others, changes in customers’ demand for the Company’s products,including seasonal changes in customer orders and shifting orders to lower costregions, changes in market growth rates such as the housing market, changes inraw material costs and availability, pricing actions by competitors and othercompetitive pressures in the markets in which the Company competes,consolidation among customers and competitors, success in the execution ofacquisitions and the performance and integration of acquired businesses,changes in operating expenses including medical and energy costs, changes intechnology including migration from paper-based books to digital, difficultiesin the start up of new equipment or information technology systems, changes incopyright laws, changes in tax regulations, changes in environmentalregulations, changes in the Company’s effective income tax rate, generalchanges in economic conditions, including currency fluctuations, changes ininterest rates, and tightness in the credit markets, and the other factors setforth below under Item 1A, “Risk Factors.” Although the Company believes that the assumptions underlying theforward-looking statements are reasonable, any of the assumptions could beinaccurate, and therefore, there can be no assurance that the forward-lookingstatements will prove to be accurate. The forward-looking statements included herein are made as of the datehereof, and the Company undertakes no obligation to update publicly suchstatements to reflect subsequent events or circumstances.

 

18

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**Item 3.            QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

Therehave been no material changes from the information concerning the Company’s “Quantitativeand Qualitative Disclosures About Market Risk” as previously reported in theCompany’s Annual Report on Form 10-K for the year ended September 29,2007.

 

**Item 4.            CONTROLS AND PROCEDURES**

#### ** **

**(a)           Evaluation of disclosure controls andprocedures**

 

As required by Rule 13a-15under the Securities Exchange Act of 1934, as of the end of the period covered bythis Quarterly Report, the Company carried out an evaluation under thesupervision and with the participation of the Company’s management, includingthe Company’s Chief Executive Officer and Chief Financial Officer, of theeffectiveness of the design and operation of the Company’s disclosure controlsand procedures.  Based upon thatevaluation, the Chief Executive Officer and Chief Financial Officer concludedthat the Company’s disclosure controls and procedures are effective to ensurethat information required to be disclosed by the Company in the reports itfiles or submits under the Exchange Act is recorded, processed, summarized andreported, within the time periods specified in the Securities and ExchangeCommission’s rules and forms.

 

**(b)           Changes in internal controls overfinancial reporting**

 

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

 

#### **PART II.  OTHERINFORMATION**

#### ** **

**Item 1. Legal Proceedings**

 

None.

 

**Item 1A. Risk Factors**

 

TheCompany’s consolidated results of operations, financial condition and cashflows can be adversely affected by various risks.  Our business is influenced by many factorsthat are difficult to predict, involve uncertainties that may materially affectactual results and are often beyond our control.  These risks include, but are not limited to,the principal factors listed below and the other matters set forth in thisquarterly report on Form 10-Q.  Youshould carefully consider all of these factors. For other factors that may cause actual results to differ materiallyfrom 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 Resultsof Operations*.

 

**Highlycompetitive markets for our products and industry consolidation may create increasedpricing pressures.**

 

Theprinting industry is extremely competitive. In the book manufacturing segment, consolidation over the past few yearsof both customers and competitors within the markets the Company competes hascaused downward pricing pressures.  Inaddition, excess capacity and competition from printing companies in lower costcountries may increase competitive pricing pressures.  Furthermore, some of our competitors havegreater sales, assets and financial resources than us and others, particularlythose in foreign countries, may derive significant advantages from localgovernmental regulation, including tax holidays and other subsidies.  All or any of these competitive pressurescould affect prices or customers’ demand for our products, impacting our profitmargins and/or resulting in a loss of customers and market share.

 

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**Wehave a high degree of customer concentration.**

 

Wederived approximately 35% of our 2007 revenues, 40% of our 2006 revenues, and47% of our 2005 revenues from two major customers.  A significant reduction in order volumes orprice levels from either of them could have a material adverse effect on theCompany.

 

**Weneed to keep pace with rapid industry and technological change.**

 

Theprinting 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 industry andtechnological changes occurring in the industry and upon the ability to offer,on a timely basis, services that meet evolving industry standards.  We cannot assure investors that we will beable to adapt to such technological changes or offer these services on a timelybasis or establish or maintain a competitive position.  We are unable to predict which of the manypossible future product and service offerings will be important to establishand maintain competitive position or what expenditures will be required todevelop and provide these products and services.  We cannot assure investors that one or moreof these factors will not vary unpredictably, which could have a materialadverse effect on us. In addition, we cannot assure investors, even if thesefactors turn out as we anticipate, that we will be able to implement ourstrategy or that the strategy will be successful in this rapidly evolvingmarket.

 

**Our operating results are dependent in part on unpredictableorder patterns.**

 

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

 

·                  thetiming and size of the orders for our books;

 

·                  theavailability of markets for sales to our largest customer;

 

·                  thelengthy and unpredictable sales cycles associated with sales of textbooks tothe elementary and high school market;

 

·                  ourcustomers’ willingness and success in shifting orders from the busy textbookseason to even out our press load over the year;

 

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

 

·                  issuesthat might arise from the integration of acquired entities or the inability toachieve expected results from such acquisitions; and

 

·                  tightnessin credit markets affecting the availability of capital for our customers.

 

As a result of these andother factors, period-to-period comparisons of our operating results are notnecessarily meaningful or indicative of future performance. In addition, thefactors noted above may make it difficult for us to forecast and provide in atimely manner public guidance (including updates to prior guidance) related toour projected financial performance. Furthermore, it is possible that in somefuture quarters our operating results will fall below the expectations ofsecurities analysts or investors. If this occurs, the trading price of ourcommon stock could decline.

 

**Fluctuationsin the cost and availability of paper and other raw materials may causedisruption and impact margins.**

 

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

 

Availabilityof paper is important to both the book manufacturing and specialty publishingsegments of the Company.  Although wegenerally have not experienced difficulty in obtaining adequate supplies ofpaper, unexpected changes in the paper markets could result in a shortage ofsupply.  If this were to occur in thefuture, it could cause disruption to the business or increase paper costs,adversely impacting either or both net sales or profits.

 

20

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Fluctuationsin the costs and availability of other raw materials could adversely affectoperating costs or customer demand and thereby negatively impact our operatingresults, financial condition or cash flows.

 

**Energycosts and availability may negatively impact our financial results.**

 

Energycosts are incurred directly to run production equipment and facilities andindirectly 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 ableto be passed through to customers through price increases or mitigated throughother means.  In such instances,increased energy costs could adversely impact operating costs or customerdemand.  In addition, interruption in theavailability of energy could disrupt operations, adversely impacting operatingresults.

 

**Wemay not be able to continue to improve our operating efficiencies.**

 

Becausethe markets in which we operate are highly competitive, we must continue toimprove our operating efficiency in order to maintain or improve our profitability.  Although we have been able to expand ourcapacity, improve our productivity and reduce costs in the past, there is noassurance that we will continue to be able to do so in the future.  In addition, reducing operating costs in thefuture may require significant initial costs to reduce headcount, close orconsolidate operations, or upgrade equipment and technology.

 

**Inadequateintellectual property protection for our publications could negatively impactour financial results.**

 

Certainof our publications are protected by copyright, primarily held in the Company’sname.  Such copyrights protect ourexclusive right to publish the work in the United States and in many othercountries for specified periods.  Ourability to continue to achieve anticipated results depends in part on ourability to defend our intellectual property against infringement.  Our operating results may be adverselyaffected by inadequate legal and technological protections for intellectual propertyand proprietary rights in some jurisdictions and markets.

 

**Declinesin general economic conditions may adversely impact our business.**

 

Economicconditions have the potential to impact our financial resultssignificantly.  Within the bookmanufacturing and specialty publishing segments, a change in economicconditions can impact many areas of spending, including government, businessand consumer spending.  Examples of thechanges in spending that could affect and potentially impact our financial resultsinclude:

 

·                  Fluctuations in federal or state governmentspending on education could lead to a corresponding decrease or increase in thedemand for educational materials, which are produced in our book manufacturingsegment and comprise a portion of our publishing products.

 

·                  Consumer demand for books can be impactedby reductions in disposable income when costs such as electricity and gasolinereduce discretionary spending.

 

·                  Tightness in credit markets may impactcustomer order patterns and inventory levels.

 

·                  Changes in the housing market may impactthe sale of Creative Homeowner’s products.

 

·                  Fundraising by religious organizations.

 

**Thesubstitution of electronic delivery for printed materials may adversely affectour business.**

 

Electronicdelivery of documents and data, including the online distribution and hostingof media content, offers alternatives to traditional delivery of printeddocuments.  Consumer acceptance ofelectronic delivery of books is uncertain, as is the extent to which consumersare replacing print materials with online hosted media content.  To the extent that our customers accept theseelectronic alternatives, demand for our printed products may be adverselyaffected.

 

**Changesin postal rates and postal regulations may adversely impact our business.**

 

Postalcosts are a significant component of our direct marketing cost structure andpostal rate changes can influence the number of catalogs that we may mail.  In addition, increased postal rates canimpact the cost of delivering our products to customers.  The occurrence of either of these eventscould adversely affect consumer demand and our results of operations.

 

21

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**Ourfacilities are subject to environmental laws and regulations, which may subjectus to liability or increase costs.**

 

We usevarious materials in our operations that contain substances consideredhazardous or toxic under environmental laws. In addition, our operations are subject to federal, state, and localenvironmental laws relating to, among other things, air emissions, wastegeneration, handling, management and disposal, waste water treatment anddischarge and remediation of soil and groundwater contamination.  Permits are required for the operation ofcertain of our businesses and these permits are subject to renewal,modification and in some circumstances, revocation.  Under certain environmental laws, includingthe Comprehensive Environmental Response, Compensation and Liability Act, asamended (“CERCLA,” commonly referred to as “Superfund”), and similar state lawsand regulations, we may be liable for costs and damages relating to soil andgroundwater contamination at off-site disposal locations or at our ownfacilities.  Future changes toenvironmental laws and regulations may give rise to additional costs orliabilities that could have a material adverse impact on our financial positionand results of operations.

 

**Wemay not be able to successfully integrate acquired businesses.**

 

Inrecent years, we have completed three acquisitions, including Moore Langen andCreative Homeowner in fiscal year 2006 and REA in fiscal 2004, and may continueto make acquisitions in the future.  Webelieve that these acquisitions provide strategic growth opportunities for theCompany.  Achieving the anticipatedbenefits of these acquisitions will depend in part upon our ability tointegrate these businesses in an efficient and effective manner.  The challenges involved in successfullyintegrating acquisitions include:

 

·                  we may find thatthe acquired company or assets do not further our business strategy, or that weoverpaid for the company or assets, or that economic conditions have changed,all of which may result in a future impairment charge;

 

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

 

·                  we may havedifficulty incorporating and integrating acquired technologies into ourbusiness;

 

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

 

·                  we may havedifficulty maintaining uniform standards, controls, procedures and policiesacross locations;

 

·                  an acquisition mayresult in litigation from terminated employees of the acquired business orthird parties; and

 

·                  we may experiencesignificant problems or liabilities associated with technology and legalcontingencies of the acquired business.

 

These factors could havea material adverse effect on our business, results of operations and financialcondition or cash flows, particularly in the case of a larger acquisition ormultiple acquisitions in a short period of time.  From time to time, we may enter intonegotiations for acquisitions that are not ultimately consummated.  Such negotiations could result in significantdiversion of management time from our business as well as significantout-of-pocket costs. Tightness in credit markets may also affect our ability toconsummate such acquisitions.

 

The consideration that wepay in connection with an acquisition could affect our financial results.  If we were to proceed with one or moresignificant acquisitions in which the consideration included cash, we could berequired to use a substantial portion of our available cash and creditfacilities to consummate such acquisitions. To the extent we issue shares of stock or other rights to purchasestock, including options or other rights, our existing stockholders mayexperience dilution in their share ownership in our company and their earningsper share may decrease.  In addition,acquisitions may result in the incurrence of debt, large one-time write-offsand restructuring charges.  They may alsoresult in goodwill and other intangible assets that are subject to impairmenttests, which could result in future impairment charges.  Any of these factors may materially andadversely affect our business and operations.

 

22

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**Ourability to hire and train key executives and other qualified employees iscrucial.**

 

Oursuccess depends, in part, on our ability to continue to retain our executiveofficers 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 andpublishing industries.  There can be noassurance that we can continue to attract and retain the necessary talentedemployees, including executive officers and other key members ofmanagement.  If that were to occur, itcould adversely affect our business.

 

**Weneed skilled employees to manufacture our products.**

 

If we experience problemshiring and retaining skilled employees, our business may be negativelyaffected.  The timely manufacture anddelivery of our products requires an adequate supply of skilled employees, andthe operating costs of our manufacturing facilities can be adversely affectedby high turnover in skilled positions. Accordingly, our ability to increase sales, productivity and netearnings will be limited to a degree by our ability to employ the skilledemployees necessary to meet our requirements. Although our book manufacturing locations are geographically dispersed,individual locations may encounter strong competition with other manufacturersfor skilled employees.  There can be noassurance that we will be able to maintain an adequate skilled labor forcenecessary to efficiently operate our facilities.  In addition, unions represent certain groupsof employees at several of our locations, and periodically, contracts withthose unions come up for renewal.  Theoutcome of those negotiations could have an adverse affect on our operations atthose locations.

 

**Compliancewith changing regulation of corporate governance, public disclosure andaccounting matters may result in additional expenses.**

 

Changinglaws, regulations and standards relating to corporate governance and publicdisclosure, including the Sarbanes-Oxley Act of 2002 and new rules subsequentlyimplemented by the Securities and Exchange Commission and The NASDAQ StockMarket, as well as new accounting pronouncements, are creating uncertainty andadditional complexities for companies. To maintain high standards of corporate governance and public disclosure,we continue to invest resources to comply with evolving standards.  This investment may result in increasedgeneral and administrative expenses and a diversion of management time andattention from revenue generating and cost management activities.

 

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

 

On November 8, 2007,the Company’s Board of Directors authorized a share repurchase program of up to$10 million of the Company’s outstanding common stock either through the openmarket or privately negotiated transactions. In the first half of fiscal 2008, approximately 250,000 shares of common stock wererepurchased for approximately $7.2 million. As such, at March 29, 2008, the Company had approximately $2.8million of remaining authorization available for future stock repurchases.  On May 8, 2008, the Board of Directorsincreased the share repurchase program by an additional $5 million.  Such purchases may be made from timeto time at management’s discretion and may be discontinued at any time.  The following table summarizes the purchasesunder this program during the second quarter of the Company’s fiscal year 2008.

 

###### **ISSUERPURCHASES OF EQUITY SECURITIES**

 
| ** **                                      | ** ** | ** **         | ** ** | ** **           | ** ** | **(c) Total Number of** | ** ** | **(d) Maximum Number (or**         | ** ** |
|-------------------------------------------------|------------|--------------------|------------|----------------------|------------|----------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                      | ** ** | **(a) Total** | ** ** | ** **           | ** ** | **Shares Purchased as**      | ** ** | **Approximate Dollar**                       | ** ** |
| ** **                                      | ** ** | **Number of** | ** ** | **(b) Average** | ** ** | **Part of Publicly**         | ** ** | **Value) of Shares that May** | ** ** |
| ** **                                      | ** ** | **Shares**         | ** ** | **Price Paid**  | ** ** | **Announced Plans or**       | ** ** | **Yet Be Purchased Under**         | ** ** |
| **Fiscal Period**                          | ** ** | **Purchased**      | ** ** | **per Share**   | ** ** | **Programs**                           | ** ** | **the Plans or Programs**          | ** ** |
| December 30,  2007 - January 26, 2008 |       | 9,423              |       | $                    | 26.720     |                                   | 9,423      |                                              | $          | 6,860,946 |   |
| January 27,  2008 - February 23, 2008 |       | 133,573            |       | $                    | 26.663     |                                   | 133,573    |                                              | $          | 3,299,439 |   |
| February 24,  2008 - March 29, 2008   |       | 17,009             |       | $                    | 27.093     |                                   | 17,009     |                                              | $          | 2,838,612 |   |
| Total                                           |       | 160,005            |       | $                    | 26.712     |                                   | 160,005    |                                              |       |   |

 

23

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### **Item 3. Defaults Upon Senior Securities**

 

None.

 

**Item 4. Submission of Matters to a Vote of Security Holders**

 

The Annual Meeting ofStockholders of the Company was held on January 16, 2008.  Following are the matters voted on at themeeting.

 

1) All nominees of theBoard of Directors of the Company were elected for a three-year term.  Votes were cast as follows: Edward J. Hoff –12,077,662 for and 87,439 withheld; Robert P. Story, Jr. – 12,083,386 forand 81,795 withheld, and Susan L. Wagner – 12,078,384 for and 86,717 withheld.

 

2) Stockholders voted toratify and approve the selection by the Audit and Finance Committee of theBoard of Directors, of Deloitte & Touche LLP as independent publicaccountants for the Company for the fiscal year ending September 27,2008.  Votes were cast as follows:12,106,202 votes for, 42,399 votes against, and 16,500 votes abstained.

 

**Item 5. Other Information**

 

There have been nomaterial changes to the procedures by which security holders may recommendnominees to the Board of Directors.

 

### **Item 6. Exhibits**

 
| **Exhibit No.** | ** ** | **Description**                                                                                                                                                                                    |
|----------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |       |                                                                                                                                                                                               |
| 31.1*                |       | Certification  of Chief Executive Officer pursuant to Rule 13a-14(a) or  15d-14(a) of the Exchange Act, as adopted pursuant to Section 302  of the Sarbanes-Oxley Act of 2002. |
| 31.2*                |       | Certification  of Chief Financial Officer pursuant to Rule 13a-14(a) or  15d-14(a) of the Exchange Act, as adopted pursuant to Section 302  of the Sarbanes-Oxley Act of 2002. |
| **32.1***            | ** ** | **Certification of Chief Executive Officer pursuant to 18  U.S.C. Section 1350, as adopted pursuant to Section 906 of the**Sarbanes-Oxley  Act of 2002.                                  |
| 32.2*                |       | Certification of Chief  Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002.                                     |

 

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* Filed herewith.

 

24

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**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the Company hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 

 

**COURIER CORPORATION**

**(Registrant)**

 

 
| *  May 8, 2008* | * * | By:                | */s/James F. Conway III*  |
|--------------------------------|----------|--------------------|---------------------------|
| Date                           |     |               | James F. Conway III       |
|                           |     |               | Chairman, President and   |
|                           |     |               | Chief Executive Officer   |
|                           |     |               |                      |
|                           |     |               |                      |
| *  May 8, 2008* |     | By:                | */s/Peter M. Folger*      |
| Date                           |     |               | Peter M. Folger           |
|                           |     |               | Senior Vice President and |
|                           |     |               | Chief Financial Officer   |
|                           |     |               |                      |
|                           |     |               |                      |
|   *May 8, 2008* |     | By:                | */s/Kathleen M. Leon*     |
| Date                           |     |               | Kathleen M. Leon          |
|                           |     | Vice President and |
|                           |     | Controller         |

 

25

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**EXHIBIT INDEX**

 
| **Exhibit No.** | ** ** | **Description**                                                                                                                                                                                    |
|----------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |       |                                                                                                                                                                                               |
| 31.1*                |       | Certification  of Chief Executive Officer pursuant to Rule 13a-14(a) or  15d-14(a) of the Exchange Act, as adopted pursuant to Section 302  of the Sarbanes-Oxley Act of 2002. |
| 31.2*                |       | Certification  of Chief Financial Officer pursuant to Rule 13a-14(a) or  15d-14(a) of the Exchange Act, as adopted pursuant to Section 302  of the Sarbanes-Oxley Act of 2002. |
| **32.1***            | ** ** | **Certification of Chief Executive Officer pursuant to 18  U.S.C. Section 1350, as adopted pursuant to Section 906 of the**Sarbanes-Oxley  Act of 2002.                                  |
| 32.2*                |       | Certification of Chief Financial Officer pursuant to  18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002.                                     |

 

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* Filed herewith.

 

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