**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington,D.C.  20549**

 

**FORM 10-Q**

 

**(MarkOne)**

 

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

 

**For the quarterly period ended December 29,2007**

 

**or**

 

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

 

 

**For thetransition period from                        to                         .**

** **

**Commissionfile number 0-7597**

 

**COURIERCORPORATION**

(Exact name ofregistrant 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)

 

 

Indicate by checkmark whether the registrant (1) has filed all reports required to be filedby Section 13 or 15(d)

of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant

was required tofile such reports), and (2) has been subject to such filing requirementsfor the past 90 days.

Yes x No o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer or anon-accelerated filer

(as defined inExchange Act Rule 12b-2).

 

Large acceleratedfiler           o          Acceleratedfiler          x          Non-acceleratedfiler           o

 

Indicate by checkmark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).

Yes o No x

 

Indicate the number ofshares outstanding of each of the issuer’s classes of common stock, as of thelatest practicable

date.

 

| **Class**                   |   | **Outstanding  at February 5, 2008** |
|-----------------------------|--------|-------------------------------------------|
| Common Stock, $1  par value |   | 12,448,396  shares                        |

 

----

 

**COURIER CORPORATION**

**CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)**

**(Dollars in thousands except per share amounts)**

 
| ** **                                  | ** ** | **THREE MONTHS ENDED**      | ** ** |
|---------------------------------------------|------------|-----------------------------|------------|
| ** **                                  | ** ** | **December 29,  2007** | ** ** | **December 30,  2006** | ** ** |
| ** **                                  | ** ** | ** **                  | ** ** |
| Net sales                                   |       | $                           | 62,863     |   | $ | 64,312 |   |
| Cost of sales                               |       | 46,122                      |       | 44,168 |   |
| Gross profit                                |       | 16,741                      |       | 20,144 |   |
| Selling and administrative  expenses        |       | 14,216                      |       | 13,501 |   |
| Interest expense, net                       |       | 295                         |       | 222 |   |
| Pretax income                               |       | 2,230                       |       | 6,421 |   |
| Provision for income taxes  (Notes A and C) |       | 814                         |       | 2,398 |   |
| Net income                                  |       | $                           | 1,416      |   | $ | 4,023 |   |
| Net income per share (Note  D):             |       |                        |       |   |   |
| Basic                                       |       | $                           | 0.11       |   | $ | 0.32 |   |
| Diluted                                     |       | $                           | 0.11       |   | $ | 0.32 |   |
| Cash dividends declared  per share          |       | $                           | 0.20       |   | $ | 0.18 |   |

 

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

 

 

2

----

 

** **

**COURIERCORPORATION**

**CONSOLIDATEDCONDENSED BALANCE SHEETS (UNAUDITED)**

**(Dollarsin thousands)**

 
| ** **                                                                                                                                 | ** ** | **December 29,  2007** | ** ** | **September 29,  2007** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|------------------------------|------------|
| ** **                                                                                                                                 | ** ** | ** **                  | ** ** |
| **ASSETS**                                                                                                                                 | ** ** | ** **                  | ** ** | ** **                   | ** ** |
| Current assets:                                                                                                                            |       |                        |       |                         |       |
| Cash and cash equivalents                                                                                                                  |       | $                           | 1,510      |                         | $          | 1,549 |   |
| Accounts receivable, less allowance for uncollectible accounts of  $1,597 at December 29, 2007 and $1,531 at September 29, 2007  |       | 38,229                      |       | 47,673                       |       |
| Inventories (Note B)                                                                                                                       |       | 37,744                      |       | 38,183                       |       |
| Deferred income taxes                                                                                                                      |       | 3,467                       |       | 3,469                        |       |
| Other current assets                                                                                                                       |       | 2,245                       |       | 1,550                        |       |
|                                                                                                                                       |       |                        |       |                         |       |
| Total current assets                                                                                                                       |       | 83,195                      |       | 92,424                       |       |
|                                                                                                                                       |       |                        |       |                         |       |
| Property, plant and equipment, less accumulated depreciation:  $144,804 at  December 29, 2007 and $141,079 at September 29, 2007 |       | 96,230                      |       | 97,778                       |       |
|                                                                                                                                       |       |                        |       |                         |       |
| Goodwill (Note A)                                                                                                                          |       | 55,199                      |       | 55,199                       |       |
|                                                                                                                                       |       |                        |       |                         |       |
| Other intangibles, net  (Note A)                                                                                                           |       | 12,686                      |       | 12,904                       |       |
|                                                                                                                                       |       |                        |       |                         |       |
| Prepublication costs (Note  A)                                                                                                             |       | 10,237                      |       | 10,220                       |       |
|                                                                                                                                       |       |                        |       |                         |       |
| Other assets                                                                                                                               |       | 1,292                       |       | 1,310                        |       |
|                                                                                                                                       |       |                        |       |                         |       |
| Total  assets                                                                                                                              |       | $                           | 258,839    |                         | $          | 269,835 |   |

 

The accompanyingnotes are an integral part of the consolidated financial statements.

 

 

3

----

 

 

**COURIERCORPORATION**

**CONSOLIDATEDCONDENSED BALANCE SHEETS (UNAUDITED)**

**(Dollarsin thousands)**

 
| **.**

** **                                                                                                                                       | ** ** | **December 29,  2007** | ** ** | **September 29,  2007** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|------------------------------|------------|
| ** **                                                                                                                                              | ** ** | ** **                  |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                           |       |                        |       |                         |       |
|                                                                                                                                                    |       |                        |       |                         |       |
| Current liabilities:                                                                                                                                    |       |                        |       |                         |       |
| Current maturities of long-term debt                                                                                                                    |       | $                           | 91         |                         | $          | 91 |   |
| Accounts payable                                                                                                                                        |       | 13,084                      |       | 20,111                       |       |
| Accrued payroll                                                                                                                                         |       | 5,588                       |       | 7,409                        |       |
| Accrued taxes                                                                                                                                           |       | 936                         |       | 2,129                        |       |
| Other current liabilities                                                                                                                               |       | 7,823                       |       | 6,652                        |       |
|                                                                                                                                                    |       |                        |       |                         |       |
| Total current liabilities                                                                                                                               |       | 27,522                      |       | 36,392                       |       |
|                                                                                                                                                    |       |                        |       |                         |       |
| Long-term debt                                                                                                                                          |       | 18,147                      |       | 17,375                       |       |
| Deferred income taxes                                                                                                                                   |       | 10,135                      |       | 9,446                        |       |
| Other liabilities                                                                                                                                       |       | 3,485                       |       | 3,619                        |       |
|                                                                                                                                                    |       |                        |       |                         |       |
| Total  liabilities                                                                                                                                      |       | 59,289                      |       | 66,832                       |       |
|                                                                                                                                                    |       |                        |       |                         |       |
| Stockholders’ equity  (Notes F or G):                                                                                                              |       |                        |       |                         |       |
| Preferred stock, $1 par value - authorized 1,000,000 shares; none  issued                                                                               |       |                        |       |                         |       |
| Common stock, $1 par value - authorized 18,000,000 shares; issued  12,527,000 at December 29, 2007 and 12,612,000 at  September 29, 2007 |       | 12,527                      |       | 12,612                       |       |
| Additional paid-in capital                                                                                                                              |       | 10,716                      |       | 12,977                       |       |
| Retained earnings                                                                                                                                       |       | 176,812                     |       | 177,919                      |       |
| Accumulated other comprehensive loss                                                                                                                    |       | (505                        | )          | (505                         | )          |
|                                                                                                                                                    |       |                        |       |                         |       |
| Total stockholders’ equity                                                                                                                         |       | 199,550                     |       | 203,003                      |       |
|                                                                                                                                                    |       |                        |       |                         |       |
| Total liabilities and  stockholders’ equity                                                                                                        |       | $                           | 258,839    |                         | $          | 269,835 |   |

 

The accompanyingnotes are an integral part of the consolidated financial statements.

 

 

4

----

 

 

**COURIER CORPORATION**

**CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS(UNAUDITED)**

**(Dollars in thousands)**

 
| ** **                                                                       | ** ** | **THREE MONTHS ENDED**        | ** ** |
|----------------------------------------------------------------------------------|------------|-------------------------------|------------|
| ** **                                                                       | ** ** | **December 29,****2007** | ** ** | **December 30,****2006** | ** ** |
|                                                                             |       |                          |       |
| Operating Activities:                                                            |       |                          |       |   |   |
| Net income                                                                       |       | $                             | 1,416      |   | $ | 4,023 |   |
| Adjustments to reconcile net income to cash provided from operating  activities: |       |                          |       |   |   |
| Depreciation and amortization                                                    |       | 5,174                         |       | 4,405 |   |
| Stock-based compensation (Note F)                                                |       | 440                           |       | 363 |   |
| Deferred income taxes                                                            |       | 691                           |       | 570 |   |
| Changes in assets and liabilities:                                               |       |                          |       |   |   |
| Accounts receivable                                                              |       | 9,444                         |       | 3,665 |   |
| Inventory                                                                        |       | 439                           |       | (3,969 | ) |
| Accounts payable                                                                 |       | (7,027                        | )          | 1,872 |   |
| Accrued taxes                                                                    |       | (1,193                        | )          | (1,050 | ) |
| Other elements of working capital                                                |       | (1,345                        | )          | (2,238 | ) |
| Other long-term, net                                                             |       | (169                          | )          | (252 | ) |
|                                                                             |       |                          |       |   |   |
| Cash provided from  operating activities                                         |       | 7,870                         |       | 7,389 |   |
|                                                                             |       |                          |       |   |   |
| Investment Activities:                                                           |       |                          |       |   |   |
| Capital expenditures                                                             |       | (2,192                        | )          | (7,895 | ) |
| Prepublication costs                                                             |       | (1,228                        | )          | (1,405 | ) |
|                                                                             |       |                          |       |   |   |
| Cash used for investment  activities                                             |       | (3,420                        | )          | (9,300 | ) |
|                                                                             |       |                          |       |   |   |
| Financing Activities:                                                            |       |                          |       |   |   |
| Long-term debt borrowings                                                        |       | 772                           |       | 3,726 |   |
| Cash dividends                                                                   |       | (2,523                        | )          | (2,242 | ) |
| Proceeds from stock plans                                                        |       | 105                           |       | 475 |   |
| Stock repurchases (Note G)                                                       |       | (2,893                        | )          | — |   |
| Excess tax benefits from stock-based compensation                                |       | 50                            |       | (25 | ) |
|                                                                             |       |                          |       |   |   |
| Cash provided from (used  for) financing activities                              |       | (4,489                        | )          | 1,934 |   |
|                                                                             |       |                          |       |   |   |
| Increase (decrease) in  cash and cash equivalents                                |       | (39                           | )          | 23 |   |
|                                                                             |       |                          |       |   |   |
| Cash and cash equivalents  at the beginning of the period                        |       | 1,549                         |       | 1,483 |   |
|                                                                             |       |                          |       |   |   |
| Cash and cash equivalents  at the end of the period                              |       | $                             | 1,510      |   | $ | 1,506 |   |

 

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

 

 

5

----

** **

**COURIER CORPORATION**

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

 

**                                               ****A.            SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES**

 

**                                               ****UnauditedFinancial Statements**

 

                                                The balance sheetas of December 29, 2007, the statements of income for the three-monthperiods ended December 29, 2007 and December 30, 2006, and thestatements of cash flows for the three-month periods ended December 29,2007 and December 30, 2006 are unaudited. In the opinion of management, all adjustments necessary for a fairpresentation of such financial statements have been recorded.  Such adjustments consisted only of normalrecurring items.

 

                                                Certain informationand footnote disclosures normally included in financial statements prepared inaccordance with accounting principles generally accepted in the United Statesof America (“generally accepted accounting principles”) have been condensed oromitted.  The balance sheet data as of September 29,2007 was derived from audited year-end financial statements, but does notinclude disclosures required by generally accepted accounting principles.  It is suggested that these interim financialstatements be read in conjunction with the Company’s most recent Form 10-Kand 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 years for Research & Education Association, Inc.(“REA”), four years for Dover Publications, Inc. (“Dover”) and five yearsfor Federal Marketing Corporation, d/b/a Creative Homeowner (“CreativeHomeowner”).

 

**                                               ****Goodwilland Other Intangibles**

 

                                                The Company evaluates possible impairmentannually or whenever events or circumstances indicate that the carrying valueof the assets may not be recoverable. There were no such events orcircumstances in the period presented. Other intangibles include customer lists related to Creative Homeownerand Moore-Langen Printing Company, Inc. (“Moore Langen”), which are beingamortized over 15-year and 10-year periods, respectively.  Amortization expense related to customerlists was approximately $200,000 in the first quarters of both fiscal 2008 and2007.

 

                                                **Recent Accounting Pronouncements**

 

                                                At the beginning of fiscal 2008, theCompany adopted the provisions of the Financial Accounting Standards Board (“FASB”)Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — aninterpretation of FASB Statement No. 109” (“FIN 48”), which is more fullydiscussed in Note C below.

 

                                                In December 2007, the FASB issuedStatement of Financial Accounting Standards No. 141 (revised 2007), “BusinessCombinations,” (“SFAS No. 141R”), which replaces SFAS No. 141. Thisstatement retains the purchase method of accounting for business acquisitions,but requires a number of changes in the recognition of assets acquired andliabilities assumed as well as in the treatment of acquisition-relatedcosts.  SFAS No. 141R is effectiveat the beginning of the Company’s fiscal year 2010 and will apply prospectivelyto business combinations completed on or after that date.

 

 

 

6

----

# ** **

 

# **COURIER CORPORATION**

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

 

# **                                               **B.            INVENTORIES

# ** **

                                                Inventories arevalued at the lower of cost or market. Cost is determined using the last-in, first-out (LIFO) method forapproximately 43% and 45% of the Company’s inventories at December 29,2007 and September 29, 2007, respectively. Other inventories, primarily in the specialty publishing segment, aredetermined on a first-in, first-out (FIFO) basis.  Inventories consisted of the following:

 

| ** **      | ** ** | **(000’s Omitted)**    | ** ** |
|-----------------|------------|-----------------------------|------------|
| ** **      | ** ** | **December 29,  2007** | ** ** | **September 29,****2007** | ** ** |
| Raw materials   |       | $                           | 4,944      |   | $ | 5,295 |   |
| Work in process |       | 9,263                       |       | 8,274 |   |
| Finished goods  |       | 23,537                      |       | 24,614 |   |
| Total           |       | $                           | 37,744     |   | $ | 38,183 |   |

 

# **                                               **C.            INCOME TAXES

# ** **

At the beginningof fiscal 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 as the largest amount that is cumulativelymore 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 was$108,000 and was recorded as a reduction in retained earnings at the beginning offiscal 2008 with a corresponding liability included under the caption “OtherLiabilities” in the accompanying consolidated condensed balance sheet. At December 29,2007, such unrecognized tax benefits and accrued interest were approximately$110,000 and the impact, if recognized, would favorably affect the Company’seffective income tax rate in future periods. The Company does not anticipateany significant changes in the amount of unrecognized tax benefits over thenext twelve months.

 

The Company files federal and state income tax returns in variousjurisdictions of the United States. With few exceptions, the Company is nolonger subject to income 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.

 

The provision for income taxesdiffers from that computed using the statutory federal income tax rates for thefollowing reasons:

 

| ** **                             | ** ** | **(000’s Omitted)**    | ** ** |
|----------------------------------------|------------|-----------------------------|------------|
| ** **                             | ** ** | **Three Months Ended**      | ** ** |
| ** **                             | ** ** | **December 29,  2007** | ** ** | **December 30,  2006** | ** ** |
| Federal taxes at statutory  rates      |       | $                           | 781        |   | 35.0 | % | $ | 2,247 |   | 35.0 | % |
| State taxes, net of federal  benefit   |       | 65                          |       | 2.9 |   | 214 |   | 3.3 |   |
| Federal manufacturers’  deduction |       | (34                         | )          | (1.5 | ) | (55 | ) | (0.9 | ) |
| Tax benefit of export related  income  |       |                        |       | — |   | (22 | ) | (0.3 | ) |
| Stock-based compensation (Note  F)     |       | 2                           |       | 0.1 |   | 8 |   | 0.1 |   |
| Other                                  |       | —                      |       | — |   | 6 |   | 0.1 |   |
| Total                                  |       | $                           | 814        |   | 36.5 | % | $ | 2,398 |   | 37.3 | % |

# ** **

# ** **

7

----

# ** **

 

# **COURIER CORPORATION**

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

 

# **                                               **D.            NET INCOME PER SHARE

# ** **

The following is areconciliation of the shares used in the calculation of basic and dilutedincome per share.  Potentially dilutiveshares, calculated using the treasury stock method, consist of shares issued under the Company’s stock option plans.

 

| ** **                              | ** ** | **(000’s Omitted)**    | ** ** |
|-----------------------------------------|------------|-----------------------------|------------|
| ** **                              | ** ** | **Three Months Ended**      | ** ** |
| ****                                    | ** ** | **December 29,  2007** | ** ** | **December 30,  2006** | ** ** |
| Average shares outstanding for  basic   |       | 12,538                      |       | 12,415 |   |
| Effect of potentially dilutive  shares  |       | 157                         |       | 241 |   |
| Average shares outstanding for  diluted |       | 12,695                      |       | 12,656 |   |

# ** **

# **                E.             BUSINESS SEGMENTS**

# ** **

The Company has two business segments: book manufacturing andspecialty publishing. The book manufacturing segment offers a full range ofservices from production through storage and distribution for religious, educationaland specialty trade book publishers. The specialty publishing segment consistsof Dover, REA and Creative Homeowner.

 

# **In evaluating segmentperformance, management primarily focuses on income or loss before taxes,stock-based compensation and other income. The elimination of intersegment sales and related profit representssales from the book manufacturing segment to the specialty publishingsegment.  Corporate expenses that areallocated to the segments include various support functions such as informationtechnology services, legal, finance, human resources and engineering, andinclude depreciation and amortization expense related to corporate assets*.***

# ** **

The following table provides segment information for thethree-month periods ended December 29, 2007 and December 30, 2006.

 

| ** **                          | ** ** | **(000’s Omitted)**      | ** ** |
|-------------------------------------|------------|-------------------------------|------------|
| ** **                          | ** ** | **Three Months Ended**        | ** ** |
| ** **                          | ** ** | **December 29,****2007** | ** ** | **December 30,****2006** | ** ** |
| Net sales:                          |       |                          |       |   |   |
| Book manufacturing                  |       | $                             | 49,707     |   | $ | 49,962 |   |
| Specialty publishing                |       | 15,256                        |       | 16,758 |   |
| Elimination of intersegment  sales  |       | (2,100                        | )          | (2,408 | ) |
| Total                               |       | $                             | 62,863     |   | $ | 64,312 |   |
|                                |       |                          |       |   |   |
| Income before taxes:                |       |                          |       |   |   |
| Book manufacturing                  |       | $                             | 2,519      |   | $ | 5,891 |   |
| Specialty publishing                |       | 49                            |       | 807 |   |
| Stock-based compensation            |       | (440                          | )          | (363 | ) |
| Elimination of intersegment  profit |       | 102                           |       | 86 |   |
| Total                               |       | $                             | 2,230      |   | $ | 6,421 |   |

# ** **

 

8

----

 

 

# **COURIER CORPORATION**

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

 

**F.             STOCK-BASED COMPENSATION**

 

The Companyrecords stock-based compensation expense for the cost of stock options and stockgrants as well as shares issued under the Company’s 1999 Employee StockPurchase Plan. The fair value of each option awarded is calculated on the dateof grant using the Black-Scholes option-pricing model. Stock-based compensationrecognized in selling and administrative expenses in the accompanying financialstatements in the first quarter of fiscal 2008 and 2007 was $440,000 and$363,000, respectively.  The related taxbenefit recognized in the first quarter of fiscal 2008 and 2007 was $152,000and $112,000, respectively. Unrecognized stock-based compensation cost at December 29,2007 was $1.9 million, to be recognized over a weighted-average period of 2.3years.

 

**Stock Incentive Plan:** The Company’s stock incentiveplan provides for the granting of stock options and stock grants up to a totalof 2,064,375 shares.  Under the planprovisions, both non-qualified and incentive stock options to purchase sharesof the Company’s common stock may be granted to key employees.  The option price per share may not be lessthan the fair market value of stock at the time the option is granted andincentive stock options must expire not later than ten years from the date ofgrant.  The Company annually issues acombination of stock options and stock grants to its key employees. Stockoptions and stock grants generally vest over 3 years.  The fair value of each option was estimatedusing the Black-Scholes option-pricing model on the date of grant.

 

Thefollowing table provides stock option activity under this plan in the firstquarter of fiscal 2008:

 

| ** **                              | ** ** | ** **           | ** ** | **Weighted Average** | ** ** | **Aggregate  Intrinsic  Value** | ** ** |
|-----------------------------------------|------------|----------------------|------------|----------------------|------------|---------------------------------|------------|
| ** **                              | ** ** | **Option****Shares** | ** ** | **Exercise  Price**  | ** ** | **Remaining  Term (yrs)**       | ** ** | ** ** |
| Outstanding at  September 29, 2007 |       | 387,511              |       | $                    | 25.53      |                            |       |   |   |   |
| Exercised                               |       | (4,754               | )          | 22.18                |       |                            |       | $ | 66,000 |   |
| Outstanding at December 29,  2007  |       | 382,757              |       | $                    | 25.57      |                            | 2.9        |   | $ | 3,314,000 |   |
| Exercisable at  December 29, 2007  |       | 279,704              |       | $                    | 21.48      |                            | 2.4        |   | $ | 3,314,000 |   |
| Available for future grants             |       | 185,241              |       |                 |       |                            |       |   |   |

 

At December 29, 2007, there were 42,752 non-vested stock grantsoutstanding with a weighted-average fair value of $37.42. No such stock grantswere issued in the first quarter of fiscal 2008.

 

**Directors’ Option Plans:** In January 2005,stockholders approved the Courier Corporation 2005 Stock Equity Plan forNon-Employee Directors (the “2005 Plan”). Under the 2005 Plan provisions,non-qualified stock options to purchase shares of the Company’s common stockmay be granted to non-employee directors up to a total of 225,000 shares.  The option price per share is the fair marketvalue of stock at the time the option is granted.  The options are immediately exercisable andhave a term of five years. The fair value of each option was estimated usingthe Black-Scholes option-pricing model on the date of grant.  The 2005 Plan replaced the previous non-employeedirectors’ plan, which had been adopted in 1989.  No options were issued or exercised underthese plans in the first quarter of fiscal 2008.  At December 29, 2007, 167,097 optionshares were outstanding and exercisable with a weighted average exercise priceof $31.36, a weighted average remaining term of 2.0 years and an aggregateintrinsic value of approximately $680,000. Directors may also elect to receive their annual retainer and committeechair fees as shares of stock in lieu of cash; no such shares were issued inthe first quarter of fiscal 2008.  At December 29,2007, there were 93,282 shares available for future grants under the 2005 Plan.

 

 

# ** **

9

----

# ** **

# **                COURIERCORPORATION**

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

 

**Employee Stock Purchase Plan:** The Company’s 1999 EmployeeStock Purchase Plan (“ESPP”), as amended, covers an aggregate of 337,500 sharesof Company common stock for issuance under the plan.  Eligible employees may purchase shares ofCompany common stock at not less than 85% of fair market value at the end ofthe grant period.  During the firstquarter of fiscal 2008, no shares were issued under the ESPP. At December 29,2007, there were 81,110 shares 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 quarter of fiscal 2008, approximately 90,000 shares of common stock wererepurchased for approximately $2.9 million. As such, at December 29, 2007, the Company had approximately $7.1million of remaining authorization available for future stock repurchases.

 

 

 

10

----

 

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

 

 

**Critical Accounting Policies and Estimates****:**

 

The Company’s consolidatedcondensed financial statements have been prepared in accordance with generallyaccepted accounting principles.  Thepreparation of these financial statements requires management to make estimatesand assumptions that affect the amounts reported in these financial statementsand accompanying notes.   On an ongoingbasis, management evaluates its estimates and judgments, including thoserelated to collectibility of accounts receivable, recovery of inventories,impairment of goodwill, prepublication costs and income taxes.  Management bases its estimates and judgmentson historical experience and various other factors believed 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 performs ongoing creditevaluations of the Company’s customers and adjusts credit limits based uponpayment 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  Management records reductions in the cost basisof inventory for excess and obsolete inventory based primarily upon historicaland forecasted product demand.  If actualmarket conditions are less favorable than those projected by management,additional inventory charges may be required.

 

Goodwill and OtherIntangibles  Other intangibles include customer listswhich 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.

 

Prepublication Costs  TheCompany capitalizes prepublication costs, which include the costs of acquiringrights to 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  Theincome tax provision and related accrued taxes are based on amounts reported onthe Company’s tax returns and changes in deferred taxes.  Deferred income tax liabilities and assets are determined based upon the differences betweenthe financial statement and tax bases of assets and liabilities.  Changes in the recoverability of the Company’sdeferred tax assets or audits by tax authorities could result in future chargesor credits to income tax expense, and related accrued and deferred taxes.

 

 

11

----

 

 
| **Item 2****.** | ** ** | **MANAGEMENT’S DISCUSSION AND  ANALYSIS OF** |
|-----------------|------------|---------------------------------------------------|
|            |       | **FINANCIAL CONDITION AND RESULTS OF OPERATIONS** |

###### ** **

**Overview:**

 

Courier Corporation, founded in1824, is one of America’s leading book manufacturers and specialtypublishers.  The Company has two businesssegments: 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 and largest in the Northeast,offering services from prepress and production, through storage anddistribution.  The specialty publishingsegment consists of Dover Publications, Inc. (“Dover”), Research &Education Association, Inc. (“REA”), and Federal Marketing Corporation,d/b/a Creative Homeowner (“Creative Homeowner”).  Dover publishes over 9,000 titles in morethan 30 specialty categories ranging from literature to paper dolls, and frommusic scores to clip art.  REA publishestest preparation and study-guide books and software for high school, collegeand graduate students, as well as professionals.  Creative Homeowner publishes and distributesbooks on home design, decorating, landscaping, gardening and crafts, and sellshome plans.

 

**Results of Operations:**

 

## FINANCIAL HIGHLIGHTS

# **(dollars in thousands except per share amounts)**

| ** **                           | ** ** | **Three Months Ended**        | ** ** |
|--------------------------------------|------------|-------------------------------|------------|
| ** **                           | ** ** | **December 29,****2007** | ** ** | **December 30,  2006** | ** ** | **%  Change** | ** ** |
| Net sales                            |       | $                             | 62,863     |   | $ | 64,312 |   | -2.3 | % |
| Cost of sales                        |       | 46,122                        |       | 44,168 |   | 4.4 | % |
| Gross profit                         |       | 16,741                        |       | 20,144 |   | -16.9 | % |
| As a percentage of sales             |       | 26.6                          | %          | 31.3 | % |   |   |
| Selling and administrative  expenses |       | 14,216                        |       | 13,501 |   | 5.3 | % |
| Interest expense, net                |       | 295                           |       | 222 |   | 32.9 | % |
| Pretax income                        |       | 2,230                         |       | 6,421 |   | -65.3 | % |
| Provision for income taxes           |       | 814                           |       | 2,398 |   |   |   |
| Net income                           |       | $                             | 1,416      |   | $ | 4,023 |   | -64.8 | % |
|                                 |       |                          |       |   |   |   |   |   |   |
| Net income per diluted share         |       | $                             | 0.11       |   | $ | 0.32 |   | -65.6 | % |

# ** **

# **Revenues in the firstquarter of fiscal 2008 decreased 2% to $62.9 million compared to the sameperiod last year.  Book manufacturingrevenues were down less than 1% with modest growth in education and religioussales offset by lower trade sales.  Inthe specialty publishing segment, sales declined 9% in the first quarter offiscal 2008 compared to last year due to a weak retail market for CreativeHomeowner books, a result of the softness in the housing market.  This was partially offset by an increase insales by REA.**

# ** **

# **Net income for thequarter was $1.4 million, down from $4.0 million in the first quarter of fiscal2007, reflecting delays in textbook orders that resulted in a significant dropin capacity utilization in the book manufacturing segment and the impact of thesales shortfall at Creative Homeowner.**

# ** **

# ** **

 

12

----

 

# ** **

| **Item 2****.** | ** ** | **MANAGEMENT’S DISCUSSION AND  ANALYSIS OF** |
|-----------------|------------|---------------------------------------------------|
| ** **      | ** ** | **FINANCIAL CONDITION AND RESULTS OF OPERATIONS** |

 

*Book Manufacturing Segment*

 

## SEGMENT HIGHLIGHTS

# **(dollars in thousands)**

| ** **                           | ** ** | **Three Months Ended**        | ** ** |
|--------------------------------------|------------|-------------------------------|------------|
| ** **                           | ** ** | **December 29,****2007** | ** ** | **December 30,  2006** | ** ** | **%  Change** | ** ** |
| Net sales                            |       | $                             | 49,707     |   | $ | 49,962 |   | -0.5 | % |
| Cost of sales                        |       | 39,316                        |       | 36,910 |   | 6.5 | % |
| Gross profit                         |       | 10,391                        |       | 13,052 |   | -20.4 | % |
| As a percentage of sales             |       | 20.9                          | %          | 26.1 | % |   |   |
| Selling and administrative  expenses |       | 8,013                         |       | 7,379 |   | 8.6 | % |
| Interest income                      |       | (141                          | )          | (218 | ) |   |   |
| Pretax income                        |       | $                             | 2,519      |   | $ | 5,891 |   | -57.2 | % |

 

Within this segment, the Company focuses on three key markets: education,religious and specialty trade. In the first quarter of fiscal 2008, sales tothe education market rose 5% to $15.8 million, primarily driven by sales offour-color textbooks, but were well below expected levels due to delays intextbook reprint orders. The Company’s first quarter is the seasonally slowperiod for the education market, which is typically when publishers beginplacing orders for reprints. This year, a variety of industry factorssignificantly reduced reprint order flow in the first three months of the year.  It is anticipated that these orders will beplaced later in this fiscal year.  Salesto the religious market were up 3% to $16.2 million from last year’s firstquarter, which is in line with long-term historical growth trends.  Sales to the specialty trade market, despiteshare gains and a number of new accounts, were down 7% to $14.5 million for thefirst quarter of fiscal 2008 compared to last year, which included severallarge one-time orders. Sales of computer game books were down as well.

 

Cost of sales in the book manufacturing segment increased by 6.5% to$39.3 million for the quarter compared to the same period last year.  The higher cost of sales was the result of a$600,000 increase in depreciation expense related to last year’s investments inadditional capacity to serve the long-term growth of the education market, a $300,000increase in medical expenses along with other inflationary cost increases and alower capacity utilization.  Gross profitin this segment decreased by 20% to $10.4 million for the quarter, and as apercentage of sales decreased to 20.9% from 26.1% in last year’s firstquarter.  This decrease was attributableto the lower capacity utilization and increased depreciation expense in thefirst three months of fiscal 2008.

 

Selling and administrative expenses for the segment increased 9% in thefirst quarter to $8.0 million and, as a percentage of sales, increased to 16.1%from 14.8% last year.  This increaseresulted from additions to the segment’s sales force in the fourth quarter oflast year to target specific markets and customers, as well as inflationarycost increases.

 

Intercompany interest income allocated to the book manufacturing segmentin the first quarter decreased to $141,000 from $218,000 last year primarilydue to the capital expansion program in the prior year.

 

First quarter pretax income in this segment was $2.5 million, compared to$5.9 million in the corresponding quarter last year, due in large part toincreased depreciation and medical costs combined with lower capacityutilization and a resulting drop in gross profit.

 

 

13

----

 

 
| **Item 2****.** | ** ** | **MANAGEMENT’S DISCUSSION AND  ANALYSIS OF** |
|-----------------|------------|---------------------------------------------------|
| ** **      | ** ** | **FINANCIAL CONDITION AND RESULTS OF OPERATIONS** |

 

*Specialty Publishing Segment*

 

## SEGMENT HIGHLIGHTS

# **(dollars in thousands)**

| ** **                           | ** ** | **Three Months Ended**        | ** ** |
|--------------------------------------|------------|-------------------------------|------------|
| ** **                           | ** ** | **December 29,****2007** | ** ** | **December 30,  2006** | ** ** | **%  Change** | ** ** |
| Net sales                            |       | $                             | 15,256     |   | $ | 16,758 |   | -9.0 | % |
| Cost of sales                        |       | 9,009                         |       | 9,753 |   | -7.6 | % |
| Gross profit                         |       | 6,247                         |       | 7,005 |   | -10.8 | % |
| As a percentage of sales             |       | 41.0                          | %          | 41.8 | % |   |   |
| Selling and administrative  expenses |       | 5,762                         |       | 5,760 |   | 0.0 | % |
| Interest expense                     |       | 436                           |       | 438 |   | -0.5 | % |
| Pretax income                        |       | $                             | 49         |   | $ | 807 |   | -93.9 | % |

 

The Company’s specialtypublishing segment reported first quarter sales of $15.3 million, down 9% from$16.8 million in last year’s first quarter. The decrease was attributable to a 24% decline in revenues at CreativeHomeowner, which was hurt by weakness in the economy’s housing sector andreduced consumer traffic at home improvement centers, which are CreativeHomeowner’s most important sales channel. In addition, Creative Homeowner experienced changes in the size andtiming of retailers’ promotion activity during the first quarter of fiscal 2008compared to a year ago.  Sales for therest of the segment were up 2%, with a 19% sales growth at REA partially offsetby a 2% sales decline at Dover.  Dover’ssales reflect a weak holiday season for major book retailers this year, offsetin part by an increase in direct-to-consumer sales and growth with onlineretailers.  REA’s sales reflect continuedmarket growth for test preparation books and study guides, as well as aneffective focus on high stakes testing in such areas as advanced placement andhigh school exit exams.

 

Cost of sales in the specialty publishing segment decreased 8% to $9.0million for the first three months of fiscal 2008 due to the lower sales volumecompared to the same period last year.  Gross profit as a percentage of sales forthe segment decreased in the quarter to 41.0% from 41.8% in the correspondingperiod last year.  Creative Homeownerreduced the overall gross profit percentage in the segment because of theirlower sales volume while Dover’s and REA’s gross profit percentage improvedmodestly in the first quarter of fiscal 2008 compared to last year’s firstquarter.

 

Selling andadministrative expenses in this segment were $5.8 million in the first quarter,which was comparable to the first quarter last year.

 

Intercompany interest expense is allocated to the specialty publishingsegment based on acquisition costs, reduced by cash generated by each businesssince acquisition.  Interest expense forthe first quarter of fiscal 2008 was $436,000, which was comparable to last year’s first quarter.

 

Pretax income in the specialty publishing segment for the first quarterwas $49,000, compared to $807,000, in last year’s first quarter.  As a result of the impact of lower sales,Creative Homeowner lost $750,000 in the quarter compared to pretax income lastyear of $300,000.  Apart from Creative Homeowner,pretax income in the segment was up 62% from the first quarter of fiscal 2007,with both Dover and REA reporting gains of more than 50%.

 

*Total Consolidated Company*

 

Interest expense, net of interest income, was $295,000 in the firstquarter of fiscal 2008, compared to $222,000 of net interest expense in thesame period of fiscal 2007.  Average debtunder the revolving credit facility in the first quarter of fiscal 2008 wasapproximately $18.3 million at an average annual interest rate of 5.5%,generating interest expense of approximately $250,000.  Average debt under the revolving creditfacility in the first quarter of last year was approximately $18.7 million atan average annual interest rate of 5.8%, generating interest expense ofapproximately $275,000.  Interest expensealso includes commitment fees and other costs associated with maintaining thiscredit facility.  Interest

 

 

14

----

 

 
| **Item 2****.** | ** ** | **MANAGEMENT’S DISCUSSION AND  ANALYSIS OF** |
|-----------------|------------|---------------------------------------------------|
| ** **      | ** ** | **FINANCIAL CONDITION AND RESULTS OF OPERATIONS** |

 

capitalized in the first three months of fiscal 2008 and fiscal 2007 wasapproximately $52,000 and $125,000, respectively.

 

The Company’s effective taxrate for the first quarter of fiscal 2008 was 36.5% compared to 37.3% for thesame period last year.  The decrease inthe effective tax rate was largely due to increased benefits from the phase inof the domestic manufacturers deduction.

 

At the beginningof fiscal 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 as the largest amount thatis cumulatively more than 50% likely to be realized upon ultimatesettlement.  The cumulative effect ofadopting FIN 48 was $108,000 and was recorded as a reduction in retainedearnings at the beginning of fiscal 2008 with a corresponding liabilityincluded under the caption “Other Liabilities” in the accompanying consolidatedcondensed balance sheet.  At December 29,2007, such unrecognized tax benefits and accrued interest were approximately$110,000 and the impact, if recognized, would favorably affect the Company’seffective income tax rate in future periods. The Company does not anticipate anysignificant changes in the amount of unrecognized tax benefits over the nexttwelve months.

 

For purposes of computing net income per diluted share, weighted averageshares outstanding increased by approximately 39,000 shares over last year’sfirst quarter.  This increase reflectsoptions exercised and shares issued under the Company’s stock plans, offset inpart by lower potentially dilutive shares. In addition, the Company repurchased approximately 90,000 shares of itscommon stock in the first quarter of fiscal 2008 under a plan approved by theBoard of Directors on November 8, 2007.

 

**Liquidity and Capital Resources****:**

 

During the first three monthsof fiscal 2008, operations provided approximately $7.9 million of cash.  Net income was $1.4 million and depreciationand amortization were $5.2 million. Working capital decreased by approximately $0.3 million in the quarter.

 

Investment activities in the first quarter of fiscal 2008 usedapproximately $3.4 million of cash. Capital expenditures were approximately$2.2 million.  For the entire fiscalyear, capital expenditures are expected to be approximately $20 to $25million.  This amount includes completionof the expansion of printing and binding capacity in the religious bookmanufacturing operation in Philadelphia and the construction of a 200,000square foot warehouse to support the expanded capacity at the Kendallville,Indiana facility.  Prepublication costswere $1.2 million compared to $1.4 million in the first three months lastyear.  For the full fiscal year, prepublicationcosts are projected to be approximately $5 to $6 million.

 

Financing activities for the first three months of fiscal 2008 usedapproximately $4.5 million of cash. During the quarter, cash dividends were $2.5 million and $2.9 millionwas used to repurchase approximately 90,000 shares of common stock under theCompany’s share repurchase program authorized in November 2007.  At December 29, 2007, the Company hadapproximately $7.1 million of remaining authorization available for futurestock repurchases. Borrowings increased by $0.8 million during the firstquarter of fiscal 2008.  At December 29,2007, the Company had $17.9 million in borrowings under its $100 millionlong-term revolving credit facility, which bears interest at a floatingrate.  The revolving credit facility isused by the Company 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.

 

 

15

----

| **Item 2****.** |       | **MANAGEMENT’S DISCUSSION AND  ANALYSIS OF**  |
|-----------------|------------|----------------------------------------------------|
| ** **      | ** ** | **FINANCIAL CONDITION  AND RESULTS OF OPERATIONS** |

###### ** **

The following table summarizesthe Company’s contractual obligations and commitments at December 29, 2007to 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)          |       | $                              | 18,238     |   | $ | 91 |   | $ | 189 |   | $ | 17,958 |   | $ | — |   |
| Operating Leases (3)        |       | 8,998                          |       | 2,676 |   | 3,572 |   | 1,654 |   | 1,096 |   |
| Purchase Obligations (4)    |       | 2,279                          |       | 2,279 |   | — |   | — |   | — |   |
| Other Long-Term Liabilities |       | 3,485                          |       | — |   | 1,534 |   | 350 |   | 1,601 |   |
| Total                       |       | $                              | 33,000     |   | $ | 5,046 |   | $ | 5,295 |   | $ | 19,962 |   | $ | 2,697 |   |

 

----

(1) Amounts do not include interest expense.

(2) Includes the Company’s revolving creditfacility, which has a maturity date of March 2011.

(3) Represents amounts at September 29,2007.

(4) Represents capital commitments.

 

**Recent Accounting Pronouncements:**

 

In December 2007, the FASB issued Statement of FinancialAccounting Standards No. 141 (revised 2007), “Business Combinations,” (“SFASNo. 141R”), which replaces SFAS No. 141. This statement retains thepurchase method of accounting for business acquisitions, but requires a numberof changes in the recognition of assets acquired and liabilities assumed aswell as in the treatment of acquisition-related costs.  SFAS No. 141R is effective at thebeginning of the Company’s fiscal year 2010 and will apply prospectively tobusiness combinations completed on or after that date.

 

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

 

ThisQuarterly Report on Form 10-Q and the Company’s Annual Report for the yearended September 29, 2007 on Form 10-K include forward-lookingstatements.  Statements that describefuture expectations, plans or strategies are considered “forward-lookingstatements” as that term is defined under the Private Securities LitigationReform Act of 1995 and releases issued by the Securities and ExchangeCommission.  The words “believe,” “expect,”“anticipate,” “intend,” “estimate” and other expressions which are predictionsof or indicate future events and trends and which do not relate to historicalmatters identify forward-looking statements. Such statements are subject to risks and uncertainties that could causeactual results 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, consolidationamong customers and competitors, success in the execution of acquisitions andthe performance and integration of acquired businesses, changes in operatingexpenses including energy costs, changes in technology including migration frompaper-based books to digital, difficulties in the start up of new equipment orinformation technology systems, changes in copyright laws, changes in taxregulations, changes in the Company’s effective income tax rate, and generalchanges in economic conditions, including currency fluctuations and changes ininterest rates.  Although the Companybelieves that the assumptions underlying the forward-looking statements arereasonable, any of the assumptions could be inaccurate, and therefore, therecan be no assurance that the forward-looking statements will prove to beaccurate.  The forward-looking statementsincluded herein are made as of the date hereof, and the Company undertakes noobligation to update publicly such statements to reflect subsequent events orcircumstances.

 

 

16

----

 

 

 

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

 

There have been no material changes from theinformation concerning the Company’s “Quantitative and Qualitative DisclosuresAbout Market Risk” as previously reported in the Company’s Annual Report on Form 10-Kfor the year ended September 29, 2007.

 

#### **Item 4**.                    CONTROLSAND 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 coveredby this 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 in theCompany’s internal control over financial reporting that occurred during theperiod covered by this Quarterly Report that has materially affected, or thatis reasonably likely to materially affect, the Company’s internal control overfinancial reporting.

 

 

17

----

 

 
| **COURIER CORPORATION**              |
|--------------------------------------|
|                                 |
| **PART II.  OTHER INFORMATION** |

#### ** **

| **Item 1****.**  | **Legal Proceedings**                                                                                                                                                                          |
|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|             |                                                                                                                                                                                           |
|             | None.                                                                                                                                                                                          |
|             |                                                                                                                                                                                           |
| **Item 1A****.** | **Risk Factors**                                                                                                                                                                               |
|             |                                                                                                                                                                                           |
|             | There have been no material changes to the risk factors as previously  disclosed in Item 1A in the Company’s  Annual Report on Form 10-K for the year ended September 29, 2007. |
|             |                                                                                                                                                                                           |
| **Item 2****.**  | **Unregistered Sales of Equity  Securities and Use of Proceeds**                                                                                                                               |
|             |                                                                                                                                                                                           |
|             | None.                                                                                                                                                                                          |
|             |                                                                                                                                                                                           |
| **Item 3.**      | **Defaults Upon Senior Securities**                                                                                                                                                            |
|             |                                                                                                                                                                                           |
|             | None.                                                                                                                                                                                          |
|             |                                                                                                                                                                                           |
| **Item 4.**      | **Submission of Matters to a Vote of Security  Holders**                                                                                                                                       |
|             |                                                                                                                                                                                           |
|             | None.                                                                                                                                                                                          |
|             |                                                                                                                                                                                           |
| **Item 5.**      | **Other Information**                                                                                                                                                                          |
|             |                                                                                                                                                                                           |
|             | None.                                                                                                                                                                                          |
|             |                                                                                                                                                                                           |
| **Item 6.**      | **Exhibits**                                                                                                                                                                                   |

 

| **Exhibit No.** | ** ** | **Description**                                                                                  | ** ** |
|----------------------|------------|--------------------------------------------------------------------------------------------------|------------|
| 10*                  |       | Amendment  to Courier Corporation Deferred Compensation Program, effective  January 1, 2008 |       |
| 31.1*                |       | Certification  of Chief Executive Officer                                                        |       |
| 31.2*                |       | Certification  of Chief Financial Officer                                                        |       |
| **32.1***            | ** ** | **Certification of Chief  Executive Officer**                                                    | ** ** |
| 32.2*                |       | Certification  of Chief Financial Officer                                                        |       |

 

----

* Filed herewith.

 

 

 

18

----

 

 

**SIGNATURES**

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the Company has duly caused this report to be signed onits behalf by the undersigned thereunto duly authorized.

 

**COURIER CORPORATION**

**(Registrant)**

 

 

| *February 7,  2008* |   | By:    | /*s/ James F. Conway III*                          |
|--------------------------|--------|--------|----------------------------------------------------|
| Date                     |   |   | James F. Conway III                                |
|                     |   |   | Chairman, President and Chief Executive Officer    |
|                     |   |   |                                               |
| *February 7,  2008* |   | By:    | /*s/ Peter M. Folger*                              |
| Date                     |   |   | Peter M. Folger                                    |
|                     |   |   | Senior Vice President and Chief Financial  Officer |
|                     |   |   |                                               |
| *February 7, 2008*  |   | By:    | /*s/ Kathleen M. Leon*                             |
| Date                     |   |   | Kathleen M. Leon                                   |
|                     |   |   | Vice President and Controller                      |

 

 

19

----

 

 

**EXHIBIT INDEX**

 

 

| **Exhibit No.** | ** ** | **Description**                                                                                   | ** ** |
|----------------------|------------|---------------------------------------------------------------------------------------------------|------------|
| 10*                  |       | Amendment  to Courier Corporation Deferred Compensation Program, effective  January 1, 2008. |       |
| 31.1*                |       | Certification  of Chief Executive Officer                                                         |       |
| 31.2*                |       | Certification  of Chief Financial Officer                                                         |       |
| 32.1*                |       | Certification of Chief  Executive Officer                                                         |       |
| 32.2*                |       | Certification  of Chief Financial Officer                                                         |       |

 

            

----

            *Filed herewith.

 

 

20

----