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**UNITEDSTATES********SECURITIES AND EXCHANGE COMMISSION****Washington, D.C.  20549**

**FORM 10-Q**

**(Mark One)**
| ý | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934** |
|--------|----------------------------------------------------------------------------------------------|

**For the quarterly period ended June 30, 2001****OR**
| **o** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934** |
|-------|-----------------------------------------------------------------------------------------------|

**For the transition period from****_____________****to****_____________****Commission file number 0-7597**

| **COURIER CORPORATION******                                                         |
|-------------------------------------------------------------------------------------|
| (Exact name of registrant as specified in its charter)                              |
|                                                                                |   |
| **Massachusetts**                                                                   |
|                                                                                     |
| (State or other jurisdiction of incorporation or organization)                      |
|                                                                                |   |
| **04-2502514**                                                                      |
| ****                                                                                |
| (I.R.S. Employer Identification No.)                                                |
|                                                                                |   |
| **15 Wellman Avenue, North Chelmsford, Massachusetts**                              | **01863** |
|                                                                                     |  |
| (Address of principal executive offices)                                            | (Zip Code) |
|                                                                                |   |
| **(978) 251-6000**                                                                  |
| ****                                                                                |
| (Registrant's telephone number, including area code)                                |
|                                                                                |
| **NO CHANGE**                                                                       |
| ****                                                                                |
| (Former name, former address and former fiscal year, if changed since  last report) |
|                                                                                |   |

                                             Indicateby check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 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 ý No o

Indicate the number of shares outstanding of eachof the issuer's classes of common stock, as of the latest practicable date.
| **Class**                  | **Outstanding at August 2, 2001** |
|----------------------------|-----------------------------------|
|                            |                                   |
| Common Stock, $1 par value | 3,383,894 Shares                  |

                                                                                                                          

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COURIERCORPORATION

CONSOLIDATEDCONDENSED BALANCE SHEETS (UNAUDITED)

(Dollars inthousands)

|                                                                                                                       |                                                            |   | June 30, |   | September 30, |   |
|----------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------|--------|----------|--------|---------------|--------|
| ASSETS                                                                                                                     |                                                            |   | 2001     |   | 2000          |   |
|                                                                                                                            |                                                            |   |          |   |               |   |
|                                                                                                                       |                                                            |   |     |   |          |   |
| Current assets:                                                                                                            |                                                            |   |     |   |          |   |
|                                                                                                                       | Cash  and cash equivalents                                      |   |     | $      | 56            |   | $ | 562 |   |
|                                                                                                                       | Accounts  receivable, less allowance for uncollectible accounts |   |     | 32,806 |          | 39,811 |   |
|                                                                                                                       | Inventories  (Note B)                                           |   |     | 25,953 |          | 27,421 |   |
|                                                                                                                       | Deferred  income taxes                                          |   |     | 2,446  |          | 2,543  |   |
|                                                                                                                       | Other  current assets                                           |   |     | 742    |          | 1,016  |   |
|                                                                                                                       |                                                            |   |          |   |               |   |
|                                                                                                                       |                                                            |   |     |   |          |   |
|                                                                                                                       | Total  current assets                                           |   |     | 62,003 |          | 71,353 |   |
|                                                                                                                       |                                                            |   |     |   |          |   |
| Property, plant and equipment, less  accumulated depreciation: $88,054  at June 30, 2001 and $81,427 at September 30, 2000 |                                                            |   | 44,509   |   | 41,014        |   |
|                                                                                                                       |                                                            |   |     |   |          |   |
| Real estate held for sale or lease, net (Note E)                                                                           |                                                            | -      |     | 323    |          |
|                                                                                                                       |                                                            |   |     |   |          |   |
| Goodwill and other intangibles, net (Note A)                                                                               |                                                            |   | 26,137   |   | 26,040        |   |
|                                                                                                                       |                                                            |   |     |   |          |   |
| Prepublication costs                                                                                                       |                                                            |   | 2,763    |   | 2,949         |   |
|                                                                                                                       |                                                            |   |     |   |          |   |
| Other assets                                                                                                               |                                                            |   | 559      |   | 562           |   |
|                                                                                                                       |                                                            |   |          |   |               |   |
|                                                                                                                       |                                                            |   |     |   |          |   |
|                                                                                                                       | Total  assets                                                   |   |     | $      | 135,971       |   | $ | 142,241 |   |
|                                                                                                                       |                                                            |   |          |   |               |   |
|                                                                                                                            |                                                                 |        |          |        |               |        |  |  |  |  |  |

 

The accompanying notes are an integral part of theconsolidated financial statements.

 

COURIERCORPORATIONCONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)(Dollars in thousands)

|                                       | June 30,                                                                                            |    | September 30, |   |
|--------------------------------------------|-----------------------------------------------------------------------------------------------------|---------|---------------|--------|
| LIABILITIES AND STOCKHOLDERS' EQUITY       | 2001                                                                                                |    | 2000          |   |
|                                            |                                                                                                     |    |               |   |
|                                       |                                                                                                |    |          |   |
| Current liabilities:                       |                                                                                                |    |          |   |
|                                       | Current  maturities of long-term debt                                                               | $       | 175           |   | $ | 366 |   |
|                                       | Accounts  payable                                                                                   | 11,263  |          | 18,023 |   |
|                                       | Accrued  payroll                                                                                    | 5,564   |          | 6,708  |   |
|                                       | Accrued  taxes                                                                                      | 4,073   |          | 5,303  |   |
|                                       | Other  current liabilities                                                                          | 8,329   |          | 7,606  |   |
|                                       |                                                                                                |         |          |        |   |
|                                       |                                                                                                |    |          |   |
|                                       | Total  current liabilities                                                                          | 29,404  |          | 38,006 |   |
|                                       |                                                                                                |    |          |   |
| Long-term debt                             | 25,748                                                                                              |    | 31,327        |   |
| Deferred income taxes                      | 2,718                                                                                               |    | 2,428         |   |
| Other liabilities                          | 2,706                                                                                               |    | 2,709         |   |
|                                       |                                                                                                     |    |               |   |
|                                       |                                                                                                |    |          |   |
|                                       | Total  liabilities                                                                                  | 60,576  |          | 74,470 |   |
|                                       |                                                                                                |         |          |        |   |
|                                       |                                                                                                |    |          |   |
| Stockholders' equity (Note G):             |                                                                                                |    |          |   |
|                                       | Preferred  stock, $1 par value - authorized 1,000,000 shares; none issued                           |    |          |   |   |
|                                       | Common  stock, $1 par value - authorized 6,000,000 shares; issued 3,750,000 shares                  | 3,750   |          | 3,750  |   |
|                                       | Additional  paid-in capital                                                                         | 2,998   |          | 2,283  |   |
|                                       | Retained  earnings                                                                                  | 72,241  |          | 65,551 |   |
|                                       | Unearned  compensation                                                                              | (430    | )             | (513   | ) |
|                                       | Treasury  stock, at cost: 368,000 shares at June 30, 2001 and 406,000 shares at  September 30, 2000 | (3,164  | )             | (3,300 | ) |
|                                       |                                                                                                |         |          |        |   |
|                                       |                                                                                                |    |          |   |
|                                       | Total  stockholders' equity                                                                         | 75,395  |          | 67,771 |   |
|                                       |                                                                                                |         |          |        |   |
|                                       |                                                                                                |    |          |   |
| Total liabilities and stockholders' equity | $                                                                                                   | 135,971 |          | $      | 142,241 |   |
|                                       |                                                                                                     |    |               |   |
|                                            |                                                                                                     |         |               |        |  |  |  |  |

 

The accompanying notes are an integral part of theconsolidated financial statements.

 

COURIER CORPORATIONCONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)(Dollars in thousands except per share amounts)

 

|                                                                                                                                                                                                                 | QUARTER ENDED       |   | NINE MONTHS ENDED |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------|--------|-------------------|--------|
|                                                                                                                                                                                                                 |                     |   |                   |   |
|                                                                                                                                                                                                                 |                |   |              |   |   |   |   |   |
|                                                                                                                                                                                                                 | June 30,            |   | June 24,          |   | June 30, |   | June 24, |   |
|                                                                                                                                                                                                                 | 2001                |   | 2000              |   | 2001 |   | 2000 |   |
|                                                                                                                                                                                                                 |                     |   |                   |   |  |   |  |   |
|                                                                                                                                                                                                                 |                |   |              |   |   |   |   |   |
|                                                                                                                                                                                                                 |                |   |              |   |   |   |   |   |
| Net sales                                                                                                                                                                                                            | $                   | 49,831 |              | $      | 47,215 |   | $ | 152,121 |   | $ | 136,847 |   |
| Cost of sales                                                                                                                                                                                                        | 34,538              |   | 35,056            |   | 108,426 |   | 102,061 |   |
|                                                                                                                                                                                                                 |                     |   |                   |   |  |   |  |   |
|                                                                                                                                                                                                                 |                |   |              |   |   |   |   |   |
|                                                                                                                                                                                                                 | Gross profit        | 15,293 |              | 12,159 |   | 43,695 |   | 34,786 |   |
|                                                                                                                                                                                                                 |                |   |              |   |   |   |   |   |
| Selling and administrative expenses                                                                                                                                                                                  | 10,001              |   | 8,116             |   | 29,784 |   | 23,253 |   |
| Amortization of goodwill and other intangibles                                                                                                                                                                       | 341                 |   | 163               |   | 1,061 |   | 489 |   |
| Interest expense                                                                                                                                                                                                     | 389                 |   | 62                |   | 1,694 |   | 247 |   |
| Other (income) expense (Note E)                                                                                                                                                                                      | -                   |   | (46               | )      | (1,230 | ) | (46 | ) |
|                                                                                                                                                                                                                 |                     |   |                   |   |  |   |  |   |
|                                                                                                                                                                                                                 |                |   |              |   |   |   |   |   |
|                                                                                                                                                                                                                 | Income before taxes | 4,562  |              | 3,864  |   | 12,386 |   | 10,843 |   |
|                                                                                                                                                                                                                 |                |   |              |   |   |   |   |   |
| Provision for income taxes (Note C)                                                                                                                                                                                  | 1,596               |   | 1,347             |   | 4,335 |   | 3,806 |   |
|                                                                                                                                                                                                                 |                     |   |                   |   |  |   |  |   |
|                                                                                                                                                                                                                 |                |   |              |   |   |   |   |   |
|                                                                                                                                                                                                                 | Net income          | $      | 2,966             |   | $ | 2,517 |   | $ | 8,051 |   | $ | 7,037 |   |
|                                                                                                                                                                                                                 |                |        |              |        |   |  |   |  |   |
|                                                                                                                                                                                                                 |                |   |              |   |   |   |   |   |
|                                                                                                                                                                                                                 |                |   |              |   |   |   |   |   |
| Net income per share (Note D):                                                                                                                                                                                       |                |   |              |   |   |   |   |   |
|                                                                                                                                                                                                                 |                |   |              |   |   |   |   |   |
|                                                                                                                                                                                                                 | Basic               | $      | 0.88              |   | $ | 0.77 |   | $ | 2.39 |   | $ | 2.16 |   |
|                                                                                                                                                                                                                 |                |        |              |        |   |  |   |  |   |
|                                                                                                                                                                                                                 |                |   |              |   |   |   |   |   |   |
|                                                                                                                                                                                                                 | Diluted             | $      | 0.85              |   | $ | 0.75 |   | $ | 2.33 |   | $ | 2.10 |   |
|                                                                                                                                                                                                                 |                |        |              |        |   |  |   |  |   |
|                                                                                                                                                                                                                 |                |   |              |   |   |   |   |   |
|                                                                                                                                                                                                                 |                |   |              |   |   |   |   |   |
| Cash dividends declared per share                                                                                                                                                                                    | $                   | 0.135  |              | $      | 0.12 |   | $ | 0.405 |   | $ | 0.36 |   |
|                                                                                                                                                                                                                 |                     |   |                   |   |  |   |  |   |
|                                                                                                                                                                                                                 |                |   |              |   |   |   |   |   |
|                                                                                                                                                                                                                 |                |   |              |   |   |   |   |   |
| Pro forma net income per share (Note G):                                                                                                                                                                             |                |   |              |   |   |   |   |   |
|                                                                                                                                                                                                                 |                |   |              |   |   |   |   |   |
| The following pro forma net income per share amounts reflect the  three-for-two stock split declared on July 19, 2001 to be effected in the form of a 50% stock dividend  to be distributed on August 31, 2001. |                |
|                                                                                                                                                                                                                 |                |   |              |   |   |   |   |   |
|                                                                                                                                                                                                                 |                |   |              |   |   |   |   |   |
|                                                                                                                                                                                                                 | Basic               | $      | 0.59              |   | $ | 0.51 |   | $ | 1.59 |   | $ | 1.44 |   |
|                                                                                                                                                                                                                 |                |        |              |        |   |  |   |  |   |
|                                                                                                                                                                                                                 |                |   |              |   |   |   |   |   |   |
|                                                                                                                                                                                                                 | Diluted             | $      | 0.57              |   | $ | 0.50 |   | $ | 1.55 |   | $ | 1.40 |   |
|                                                                                                                                                                                                                 |                |        |              |        |   |  |   |  |   |

 

 

The accompanying notes are an integral part of theconsolidated financial statements. 

 

COURIER CORPORATIONCONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)      (Dollars inthousands)

 

|                                                | NINE MONTHS ENDED                      |    |
|-----------------------------------------------------|----------------------------------------|---------|
|                                                |                                        |    |
|                                                |                                   |    |   |   |
|                                                | June 30,                               |    | June 24, |   |
|                                                | 2001                                   |    | 2000 |   |
|                                                |                                        |    |  |   |
|                                                |                                   |    |   |   |
|                                                |                                   |    |   |   |
| Cash provided from operating activities             | $                                      | 15,592  |   | $ | 8,614 |   |
|                                                |                                        |    |  |   |
|                                                |                                   |    |   |   |
| Investment activities:                              |                                   |    |   |   |
|                                                | Capital expenditures                   | (10,267 | ) | (10,384 | ) |
|                                                | Prepublication costs                   | (1,190  | ) | - |   |
|                                                | Proceeds from sale of assets  (Note E) | 2,124   |   | - |   |
|                                                |                                        |    |  |   |
|                                                |                                   |    |   |   |
| Cash used for investment activities                 | (9,333                                 | )       | (10,384 | ) |
|                                                |                                        |    |  |   |
|                                                |                                   |    |   |   |
| Financing activities:                               |                                   |    |   |   |
|                                                | Scheduled long-term debt  repayments   | (270    | ) | (250 | ) |
|                                                | Decrease in long-term  borrowings      | (5,500  | ) | - |   |
|                                                | Cash dividends                         | (1,361  | ) | (1,173 | ) |
|                                                | Proceeds from stock plans              | 366     |   | 181 |   |
|                                                | Stock repurchase                       | -       |   | (114 | ) |
|                                                |                                        |    |  |   |
|                                                |                                   |    |   |   |
| Cash used for financing activities                  | (6,765                                 | )       | (1,356 | ) |
|                                                |                                        |    |  |   |
|                                                |                                   |    |   |   |
|                                                |                                   |    |   |   |
| Decrease in cash and cash equivalents               | (506                                   | )       | (3,126 | ) |
|                                                |                                   |    |   |   |
| Cash and equivalents at the beginning of the period | 562                                    |    | 3,460 |   |
|                                                |                                        |    |  |   |
|                                                |                                   |    |   |   |
| Cash and equivalents at the end of the period       | $                                      | 56      |   | $ | 334 |   |
|                                                |                                        |    |  |   |

 

The accompanying notes are an integral part of theconsolidated financial statements. 
**COURIER CORPORATION**

**NOTES TO CONSOLIDATEDCONDENSED FINANCIAL STATEMENTS (UNAUDITED)**

**A.**         **SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES**

**Unaudited Financial Statements**

The balance sheet as of June 30, 2001, thestatements of income for the three-month and nine-month periods ended June 30,2001 and June 24, 2000, and the statements of cash flows for the nine-monthperiods ended June 30, 2001 and June 24, 2000 are unaudited and, in the opinionof management, all adjustments necessary for a fair presentation of suchfinancial statements have been recorded. Such adjustments consisted only of normal recurring items.  Certain amounts for fiscal 2000 have beenreclassified in the accompanying financial statements in order to be consistentwith the current year’s classification.

Certain information and footnote disclosuresnormally included in financial statements prepared in accordance with generallyaccepted accounting principles in the United States of America have beencondensed or omitted.  The balance sheetdata as of September 30, 2000 was derived from audited year-end financialstatements, but does not include disclosures required by generally acceptedaccounting principles in the United States of America.  It is suggested that these interim financialstatements be read in conjunction with the Company's most recent Form 10-K andAnnual Report for the year ended September 30, 2000.

**Business Acquisition**

OnSeptember 22, 2000, the Company acquired all of the outstanding capital stockof Dover Publications, Inc. (Dover). The Company paid approximately $39 million in cash to the formerstockholders of Dover for their shares of capital stock.  The acquisition was accounted for as apurchase and, accordingly, Dover’s financial results have been included in theconsolidated financial statements from the date of acquisition.  The financial statements at September 30,2000 reflect the preliminary allocation of the purchase price to the assetsacquired and liabilities assumed, based on their estimated fair value at thedate of acquisition.  During the firstnine months of fiscal 2001, appraisal adjustments resulted in an increase ingoodwill of approximately $1 million.

**New Accounting Pronouncements**

EffectiveOctober 1, 2000, the Company adopted Statement of Financial Accounting Standard(SFAS) No. 133, "Accounting for Derivative Instruments and HedgingActivities" (as amended by SFAS No. 137 in June 1999 and SFAS No. 138 inJune 2000); the adoption did not have a material effect on the Company’sconsolidated financial statements.  TheSecurities and Exchange Commission has issued Staff Accounting Bulletin (SAB)No. 101 (“Revenue Recognition in Financial Statements”), that will be requiredto be implemented by the Company in the fourth quarter of the Company’s fiscalyear ending September 29, 2001.  TheCompany does not believe the adoption of this SAB will have a material impacton its consolidated financial statements.

InJune 2001, the Financial Accounting Standards Board issued SFAS No. 141,“Business Combinations,” and SFAS No. 142, “Goodwill and Other IntangibleAssets.”  SFAS No. 141 requires thepurchase method of accounting be used for all business combinations initiatedafter June 30, 2001.  Use of thepooling-of-interests method will be prohibited.  SFAS No. 142 changes the accounting for goodwill from anamortization method to an impairment-only approach.  Thus, amortization of goodwill, including goodwill recorded inpast business combinations, will cease upon adoption of this statement.  Management is currently assessing the impactof implementation of SFAS No. 142 on the Company’s financial position andresults of operations.  At this time,the Company anticipates adopting SFAS No. 142 effective at the beginning of itsfiscal year ending September 28, 2002.

**B.         INVENTORIES**

Inventories are valued at the lower of costor market.  Cost is determined using thelast-in, first-out (LIFO) method for approximately 50% and 47% of the Company’sinventories at June 30, 2001 and September 30, 2000, respectively.  Other inventories are determined using thefirst-in, first-out (FIFO) method with the exception of inventory relating tothe September 2000 acquisition of Dover which, in accordance with purchase accountingrequirements, was included at its estimated fair market value of $13.9 millionat September 30, 2000.  Inventoriesconsisted of the following:

 
 (000’s Omitted)    June 30, 2001 September 30, 2000         Raw materials$2,848 $3,619 Work in process8,124 8,018 Finished goods14,981 15,784     Total$25,953 $27,421     
 

**C.**            **INCOME TAXES**

The statutoryfederal tax rate is 34%.  The total taxprovision differs from that computed using the statutory federal tax rate forthe following reasons:
 (000’s  Omitted)    Quarter  Ended Nine  Months Ended     June 30,2001 June 24,2000 June 30,2001 June 24,2000      Federal income taxes at  statutory rate$1,551 $1,314 $4,212 $3,687 State income taxes, net136 110 365 317 Goodwill amortization43 43 130 130 Foreign sales  corporation (FSC) export related income(178)(196)(439)(427)Other44 76 67 99       Total$1,596 $1,347 $4,335 $3,806       
 

**D.         NET INCOME PER SHARE**

Following is a reconciliation of theshares used in the calculation of basic and diluted net income per share.  Potentially dilutive shares, calculatedusing the treasury stock method,   consistof shares issued under the Company's stock option plans.
 (000’s  Omitted)  Quarter  Ended Nine  Months Ended     June 30,2001 June 24,2000 June 30,2001 June 24,2000               Average shares  outstanding for basic3,373 3,269 3,365 3,262 Effect of potentially  dilutive shares107 103 92 96      Average shares  outstanding for diluted3,480 3,372 3,457 3,358      
**E.          OTHER INCOME**

In March 2001, the Company sold theassets of its subsidiary, The Home School, and ceased operating thisbusiness.  The proceeds from the salewere $0.8 million resulting in a pretax gain of approximately $300,000 and anafter-tax gain of approximately $200,000, or $.06 per diluted share.

During the first quarter of fiscal 2001,the Company completed the sale of its Raymond, NH facility; such facilitycomprised the September 30, 2000 balance sheet caption "Real estate heldfor sale or lease, net."  InFebruary 2000, the Company entered into a five-year lease agreement for thisfacility, which had been vacant.  Thelease provided for a purchase option at a price of $1.3 million.  The option was exercised in August 2000 andthe transaction closed in October 2000, resulting in a pretax gain ofapproximately $0.9 million and approximately $0.6 million after tax, or $.16per diluted share.

**F.**             **BUSINESS SEGMENTS**

The Companyhistorically operated in one primary business segment, book manufacturing, witha second smaller business segment in customized education.  On September 22, 2000, the Company acquiredDover Publications, Inc. (Dover), a publisher of special interest books.  Dover comprises the Company’s third segment,specialty publishing.  The bookmanufacturing segment offers a full range of services from production throughstorage and distribution for education, religious and specialty bookpublishers.  The customized educationsegment responds to the demand for increased choice in the way educationalinformation is received and used. Operations include Courier Custom Publishing, a provider of customizedcollege textbooks and coursepacks and The Home School, a direct marketer ofeducational materials to families engaged in home-based learning.  The assets of The Home School were sold inMarch 2001 (see Note E).

Inevaluating segment performance, management primarily focuses on income or lossbefore taxes and other income (see Note E). The gain on the sale of The Home School’s assets is included in thecustomized education segment below.  Theelimination of intersegment sales represents sales from the book manufacturingsegment to the specialty publishing segment. Corporate expenses that are allocated to the segments include varioussupport functions such as information technology services, finance, humanresources and engineering, and include depreciation and amortization expenserelated to corporate assets.

Thefollowing table provides segment information for the three-month and nine-monthperiods ended June 30, 2001 and June 24, 2000:
 (000’s  Omitted)  Quarter  Ended Nine  Months Ended     June 30,2001 June 24,2000 June 30,2001 June 24,2000      Net Sales:                Book manufacturing$42,771 $46,613 $130,720 $135,334 Customized education95 602 1,017 1,513 Specialty publishing8,000 - 23,337 - Elimination of  intersegment sales(1,035)- (2,953)-       Total Company$49,831 $47,215 $152,121 $136,847                Income (loss) before  taxes:                Book manufacturing4,607 4,589 12,151 13,069 Customized education(209)(771)(522)(2,272)Specialty publishing377 - 363 - Elimination of  intersegment profit(213)- (536)- Other income- 46 930 46       Total Company$4,562 $3,864 $12,386 $10,843       
 

**G.         SUBSEQUENT EVENT**

On July 19, 2001, the Company announced athree-for-two stock split effected in the form of a 50% stock dividend to bedistributed on August 31, 2001 to shareholders of record on August 10,2001.   Previously authorized butunissued shares will be used to effect the 50% stock dividend.

 
** 
**Item 2****.****COURIER CORPORATION** **MANAGEMENT'S DISCUSSION AND ANALYSIS OF** **FINANCIAL CONDITION AND RESULTS OF OPERATIONS**
 

**Results of Operations****:**

Sales in thethird quarter of fiscal 2001 increased 6% to $49.8 million from $47.2 millionfor the third quarter of fiscal 2000. Sales by Dover Publications, Inc. (Dover), acquired on September 22,2000, contributed $8.0 million to the increase in sales for the quarter.  The acquisition of Dover also requires theelimination of intersegment sales, which reduced total consolidated sales by$1.0 million in the third quarter. Sales from the Company's book manufacturing segment declined 8% to $42.8million for the quarter as sales to the specialty publishing market continuedto run well below last year’s levels due to softness in consumer demand forbooks on topics such as investing, general business and computer applications.  In addition, sales to the religious marketwere off in the quarter after a strong first half.  Meanwhile, sales to educational publishers increased slightly forthe quarter, primarily due to a strong market for elementary and high schooltexts.  Sales from the Company'scustomized education segment, which is now comprised solely of Courier CustomPublishing, were approximately $95,000 for the third quarter of fiscal 2001down from $602,000 for the same period last year, reflecting the March 2001sale of The Home School.  Sales forCourier Custom Publishing, the Company’s college coursepack business, increased13% over the same period last year. Revenues from the customized educationsegment are highly seasonal with the Company's fiscal fourth quarterhistorically representing the period of highest market demand.

Gross profit increased to $15.3 million,or 30.7% of sales, in the third quarter compared to $12.2 million, or 25.8% ofsales, in the same period last year. The increase in gross profit was primarily from Dover sales.  Dover’s gross profit as a percentage ofsales, at 47%, is significantly higher than the Company’s other businesseswhich increased Courier’s overall percentage. Despite the shortfall in sales, book manufacturing segment marginsimproved through effective cost management and gains in productivity, whichoffset higher energy costs and depreciation on new capacity added in the lasttwo years.  The intersegment profitelimination reduced gross profit by approximately $0.2 million in the thirdquarter of fiscal 2001.

Selling andadministrative expenses increased to $10.0 million in the third quarter offiscal 2001 from $8.1 million in the same period last year.  As a percentage of sales, selling andadministrative expenses were 20.1% in the third quarter of fiscal 2001 comparedto 17.2% in the corresponding period last year.  The increase was attributable to Dover where selling andadministrative expenses as a percentage of sales are significantly higher thanthe Company’s other businesses.  AbsentDover, selling and administrative expenses were $7.2 million or 16.9% of sales,which is below the levelof last year's third quarter.

Amortizationof goodwill and other intangibles increased to $341,000 in the third quarter offiscal 2001 from $163,000 for the same period last year reflecting theamortization related to the acquisition of Dover.

Interestexpense was $389,000 in the third quarter of fiscal 2001 compared to $62,000 inthe same period of fiscal 2000 reflecting increased average borrowings ofapproximately $25 million, primarily due to the acquisition of Dover.

The Company's effective tax rate for thethird quarter of fiscal 2001 was comparable to the same period last year at35%.

 

Net income for the third quarter offiscal 2001 was approximately $3.0 million, or $.85 per diluted share, comparedwith $2.5 million, or $.75 per diluted share for the same period lastyear.  Dover, which comprises theCompany’s new specialty publishing segment, reported for the third quarterpretax income of approximately $0.4 million, or $.06 per diluted share, aftergoodwill amortization and interest expense. Pretax earnings from the bookmanufacturing segment of $4.6 million was comparable to last year’s thirdquarter, despite an 8% decline in sales, reflecting effective cost managementand productivity gains, offsetting higher energy costs and depreciation on newcapacity.  The Company's customizededucation segment reported a pretax loss in the quarter of $0.2 million, or$.04 per diluted share, compared to a pretax loss of $0.8 million, or $.15 perdiluted share, for the same period last year. The improvement in the customized education segment was due to the March2001 sale of The Home School.

For purposes of computing diluted netincome per share, weighted average shares outstanding increased byapproximately 108,000 shares over last year's third quarter.  The increase was largely due to optionsexercised under the Company's stock plans.

For the nine months ended June 30, 2001,sales increased 11% to $152.1 million from $136.8 million for the prior year’speriod.  Net income for the first ninemonths of fiscal 2001 was approximately $8.1 million, or $2.33 per dilutedshare, compared with approximately $7.0 million, or $2.10 per diluted sharelast year.  Results for the first ninemonths of fiscal 2001 include a pretax gain of approximately $0.9 million(approximately $0.6 million after tax or $.16 per diluted share) from the saleof real estate, as well as a pretax gain of approximately $0.3 million(approximately $0.2 million after tax or $.06 per diluted share) from the saleof The Home School assets.  TheCompany’s newly formed specialty publishing segment, comprised of Dover,reported sales of $23.3 million for the first nine months of fiscal 2001 andpretax income of approximately $0.4 million after goodwill and interest. Salesfrom the Company’s book manufacturing segment declined 3% while related pretaxearnings declined 7% compared to the first nine months of fiscal 2000 as thefactors discussed above for the third quarter similarly affected year-to-dateresults.  The customized educationsegment reduced net income by $.10 per diluted share compared to $.45 perdiluted share in the first nine months of fiscal 2000 reflecting reductions inthe losses of The Home School and the gain on the sale of that business inMarch 2001.

Effective October 1, 2000, the Companyadopted Statement of Financial Accounting Standard (SFAS) No. 133,"Accounting for Derivative Instruments and Hedging Activities" (asamended by SFAS No. 137 in June 1999 and SFAS No. 138 in June 2000); theadoption did not have a material effect on the Company’s consolidated financialstatements.  The Securities and ExchangeCommission has issued Staff Accounting Bulletin (SAB) No. 101 (“RevenueRecognition in Financial Statements”), that will be required to be implementedby the Company in the fourth quarter of the Company’s fiscal year endingSeptember 29, 2001.  The Company doesnot believe the adoption of this SAB will have a material impact on its consolidatedfinancial statements.

In June 2001, the Financial AccountingStandards Board issued SFAS No. 141, “Business Combinations,” and SFAS No. 142,“Goodwill and Other Intangible Assets.” SFAS No. 141 requires the purchase method of accounting be used for allbusiness combinations initiated after June 30, 2001.  Use of the pooling-of-interests method will be prohibited.  SFAS No. 142 changes the accounting forgoodwill from an amortization method to an impairment-only approach.  Thus, amortization of goodwill, includinggoodwill recorded in past business combinations, will cease upon adoption ofthis statement.  Management is currentlyassessing the impact of implementation of SFAS No. 142 on the Company’sfinancial position and results of operations. At this time, the Company anticipates adopting SFAS No. 142 effective atthe beginning of its fiscal year ending September 28, 2002.

 

**Liquidityand Capital Resources****:**

During thefirst nine months of fiscal 2001, operations generated approximately $15.6 millionof cash.  Net income was $8.0 millionand depreciation and amortization were $9.2 million.  This more than offset a slight increase in working capitalrequirements.

Investmentactivities in the first nine months of fiscal 2001 used approximately $9.3 millionof cash. Capital expenditures were approximately $10.3 million for the firstnine months of fiscal 2001.  For theentire fiscal year, capital expenditures are expected to approximate $15million, primarily for added capacity and factory automation equipment toincrease productivity and service levels. Proceeds from the March 2001 sale of The Home School were approximately$0.8 million, with an additional $1.3 million from the October 2000 sale of theRaymond, NH facility.  The Companyentered into an agreement in January 2000 to sell the unoccupied andunderutilized portions of its multi-building manufacturing complex in Westford,MA.  In April 2001, the buyer failed tomeet certain performance requirements of the agreement, and by its terms, theagreement expired.  The Company iscurrently evaluating its options regarding this property.

Financingactivities for the first nine months of fiscal 2001 included a decrease inlong-term borrowings of approximately $5.8 million. Dividends in the first ninemonths of fiscal 2001 were $1.4 million, a 16% increase over the same periodlast year, primarily due to an increase in the amount of the quarterlydividend. At June 30, 2001, the Company had borrowings of approximately $25million under its $60 million long-term revolving credit facility.  The Company believes that its cash fromoperations and available credit facilities will be sufficient to meet its cashrequirements through 2001.

**Forward-Looking Information****:**

Statementsthat describe future expectations, plans or strategies are considered"forward-looking statements" as that term is defined under thePrivate Securities Litigation Reform Act of 1995 and releases issued by theSecurities and Exchange Commission.  Thewords "believe," "expect," "anticipate," "intend,""estimate" and other expressions which are predictions of or indicatefuture events and trends and which do not relate to historical matters identifyforward-looking statements.  Such statementsare subject to risks and uncertainties that could cause actual results todiffer materially from those currently anticipated.  Factors that could affect actual results include, among others,changes in customers' demand for the Company's products, changes in raw materialcosts and availability, seasonal changes in customer orders, pricing actions bycompetitors, changes in copyright laws, consolidation among customers andcompetitors, success in the integration of acquired businesses, changes intechnology, and general changes in economic conditions.  Although the Company believes that theassumptions underlying the forward-looking statements are reasonable, any ofthe assumptions could be inaccurate, and therefore, there can be no assurancethat the forward-looking statements will prove to be accurate.  The forward-looking statements includedherein are made as of the date hereof, and the Company undertakes no obligationto update publicly such statements to reflect subsequent events orcircumstances.

**COURIER CORPORATION**

 

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

There havebeen no material changes from the information concerning the Company's"Quantitative and Qualitative Disclosures About Market Risk" aspreviously reported in the Company's Annual Report on Form 10-K for the year endedSeptember 30, 2000.

 

**PART II.  OTHER INFORMATION**

**Item 1****.**                           **LegalProceedings**

                                        None.

**Item 2****.**                           **Changesin Securities and Use of Proceeds**

                                        None.

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

                                        None.

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

                                        None.

**Item 5****.                            OtherInformation**

                                        None.

**Item 6****.                            Exhibits and Reports on Form 8-K**

                                        (a)  Exhibits

                                        None.

                                        (b)  Reports on Form 8-K

                                        None.

**SIGNATURES**

 

Pursuant tothe requirements of the Securities Exchange Act of 1934, the Company has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

 
**COURIER CORPORATION********(Registrant)**      *August 13, 2001*By: * s/James F. Conway III*****DateJames  F. Conway III Chairman,  President and  Chief  Executive Officer    *August 13, 2001*By: * s/Robert P. Story, Jr.*****DateRobert  P. Story, Jr. Senior  Vice President and  Chief  Financial Officer    *August 13, 2001*By: * s/Peter M. Folger*****DatePeter  M. Folger Vice  President and  Chief  Accounting Officer
 **