**UNITEDSTATES**

**SECURITIES AND EXCHANGECOMMISSION**

**Washington, D.C.  20549**

 

**FORM 10-Q**

 

**(Mark One)**

 

**ý****QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934**

 

**For the quarterly period ended March 27, 2004**

 

**OR**

 

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

 

**For the transition period from                      to                      **

 

**Commission file number  0-7597**

 

**COURIER CORPORATION**

(Exact name of registrant as specified inits charter)

 

**Massachusetts**

(State or other jurisdiction ofincorporation 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) |

 

Indicate by check mark whether the registrant (1)has filed all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days.

 

Yes  ý  No  o

 

Indicate by check mark whether the registrant is anaccelerated filer (as defined in Exchange Act Rule 12b-2).

 

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 May 7,  2004** |
|----------------------------|--------|---------------------------------|
| Common Stock, $1 par value |   | 7,958,190 shares                |

 

 

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**COURIER CORPORATION**

**CONSOLIDATED STATEMENTS OF INCOME(UNAUDITED)**

**(Dollars in thousands except pershare amounts)**

** **
|                                |   | **QUARTER  ENDED**     |   | **SIX MONTHS  ENDED**  |   |
|-------------------------------------|--------|------------------------|--------|------------------------|--------|
|                                |   | **March 27,2004** |   | **March 29,2003** |   | **March 27,2004** |   | **March 29,2003** |   |
|                                |   |                   |   |                   |   |   |   |   |   |
| Net sales                           |   | $                      | 49,663 |                   | $      | 48,605 |   | $ | 96,482 |   | $ | 97,387 |   |
| Cost of sales                       |   | 34,136                 |   | 33,019                 |   | 65,326 |   | 66,413 |   |
|                                |   |                   |   |                   |   |   |   |   |   |
| Gross profit                        |   | 15,527                 |   | 15,586                 |   | 31,156 |   | 30,974 |   |
|                                |   |                   |   |                   |   |   |   |   |   |
| Selling and administrative expenses |   | 9,636                  |   | 9,788                  |   | 19,274 |   | 19,486 |   |
| Interest (income) expense           |   | (27                    | )      | 26                     |   | (54 | ) | 68 |   |
|                                |   |                   |   |                   |   |   |   |   |   |
| Income before taxes                 |   | 5,918                  |   | 5,772                  |   | 11,936 |   | 11,420 |   |
|                                |   |                   |   |                   |   |   |   |   |   |
| Provision for income taxes (Note C) |   | 2,067                  |   | 1,984                  |   | 4,173 |   | 3,883 |   |
|                                |   |                   |   |                   |   |   |   |   |   |
| Income from continuing operations   |   | $                      | 3,851  |                   | $      | 3,788 |   | $ | 7,763 |   | $ | 7,537 |   |
|                                |   |                   |   |                   |   |   |   |   |   |
| Discontinued operation (Note F):    |   |                   |   |                   |   |   |   |   |   |
| Loss from operation, net of tax     |   | —                 |   | —                 |   | — |   | (65 | ) |
| Gain on disposal, net of tax        |   | —                 |   | 33                     |   | — |   | 861 |   |
|                                |   |                   |   |                   |   |   |   |   |   |
| Net income                          |   | $                      | 3,851  |                   | $      | 3,821 |   | $ | 7,763 |   | $ | 8,333 |   |
|                                |   |                   |   |                   |   |   |   |   |   |
| Income per basic share (Note D):    |   |                   |   |                   |   |   |   |   |   |
| Continuing operations               |   | $                      | 0.48   |                   | $      | 0.48 |   | $ | 0.98 |   | $ | 0.96 |   |
| Discontinued operation (Note F):    |   |                   |   |                   |   |   |   |   |   |
| Loss from operation                 |   | —                 |   | —                 |   | — |   | (0.01 | ) |
| Gain on disposal                    |   | —                 |   | 0.01                   |   | — |   | 0.11 |   |
|                                |   |                   |   |                   |   |   |   |   |   |
| Net income per basic share          |   | $                      | 0.48   |                   | $      | 0.49 |   | $ | 0.98 |   | $ | 1.06 |   |
|                                |   |                   |   |                   |   |   |   |   |   |
| Income per diluted share (Note D):  |   |                   |   |                   |   |   |   |   |   |
| Continuing operations               |   | $                      | 0.47   |                   | $      | 0.47 |   | $ | 0.95 |   | $ | 0.93 |   |
| Discontinued operation (Note F):    |   |                   |   |                   |   |   |   |   |   |
| Loss from operation                 |   | —                 |   | —                 |   | — |   | (0.01 | ) |
| Gain on disposal                    |   | —                 |   | —                 |   | — |   | 0.11 |   |
|                                |   |                   |   |                   |   |   |   |   |   |
| Net income per diluted share        |   | $                      | 0.47   |                   | $      | 0.47 |   | $ | 0.95 |   | $ | 1.03 |   |
|                                |   |                   |   |                   |   |   |   |   |   |
| Cash dividends declared per share   |   | $                      | 0.0875 |                   | $      | 0.075 |   | $ | 0.175 |   | $ | 0.15 |   |

** **

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

 

2

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COURIER CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS(UNAUDITED)

(Dollars in thousands)

 
|                                                                                                                                    |   | **March 27,  2004** |    | **September 27,  2003** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|---------|------------------------------|--------|
| ASSETS                                                                                                                                  |   |                     |    |                         |   |
|                                                                                                                                    |   |                     |    |                         |   |
| Current assets:                                                                                                                         |   |                     |    |                         |   |
| Cash and cash equivalents                                                                                                               |   | $                        | 8,164   |                         | $      | 23,824 |   |
| Accounts receivable, less allowance for  uncollectible accounts of $1,866 at March 27, 2004 and $1,741 at  September 27, 2003 |   | 30,306                   |    | 29,174                       |   |
| Inventories (Note B)                                                                                                                    |   | 24,935                   |    | 20,681                       |   |
| Deferred income taxes                                                                                                                   |   | 3,202                    |    | 3,164                        |   |
| Other current assets                                                                                                                    |   | 371                      |    | 830                          |   |
|                                                                                                                                    |   |                     |    |                         |   |
| Total current assets                                                                                                                    |   | 66,978                   |    | 77,673                       |   |
|                                                                                                                                    |   |                     |    |                         |   |
| Property, plant and equipment, less  accumulated depreciation: $105,639 at March 27, 2004 and $101,356 at  September 27, 2003 |   | 46,739                   |    | 43,342                       |   |
|                                                                                                                                    |   |                     |    |                         |   |
| Goodwill (Note A)                                                                                                                       |   | 33,541                   |    | 24,847                       |   |
|                                                                                                                                    |   |                     |    |                         |   |
| Prepublication costs (Note A)                                                                                                           |   | 4,928                    |    | 3,810                        |   |
|                                                                                                                                    |   |                     |    |                         |   |
| Other assets                                                                                                                            |   | 1,453                    |    | 1,429                        |   |
|                                                                                                                                    |   |                     |    |                         |   |
| Total assets                                                                                                                            |   | $                        | 153,639 |                         | $      | 151,101 |   |

 

The accompanying notes are anintegral part of the consolidated financial statements.

 

3

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COURIER CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS(UNAUDITED)

(Dollars in thousands)

 
|                                                                                                          |   | **March 27,  2004** |    | **September 27,  2003** |   |
|---------------------------------------------------------------------------------------------------------------|--------|--------------------------|---------|------------------------------|--------|
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                     |   |                     |    |                         |   |
|                                                                                                          |   |                     |    |                         |   |
| Current liabilities:                                                                                          |   |                     |    |                         |   |
| Current maturities of long-term debt                                                                          |   | $                        | 81      |                         | $      | 81 |   |
| Accounts payable                                                                                              |   | 6,411                    |    | 6,494                        |   |
| Accrued payroll                                                                                               |   | 5,794                    |    | 8,031                        |   |
| Accrued taxes                                                                                                 |   | 3,871                    |    | 6,521                        |   |
| Other current liabilities                                                                                     |   | 4,886                    |    | 5,686                        |   |
|                                                                                                          |   |                     |    |                         |   |
| Total current liabilities                                                                                     |   | 21,043                   |    | 26,813                       |   |
|                                                                                                          |   |                     |    |                         |   |
| Long-term debt                                                                                                |   | 553                      |    | 593                          |   |
| Deferred income taxes                                                                                         |   | 6,706                    |    | 5,597                        |   |
| Other liabilities                                                                                             |   | 2,630                    |    | 2,678                        |   |
|                                                                                                          |   |                     |    |                         |   |
| Total liabilities                                                                                             |   | 30,932                   |    | 35,681                       |   |
|                                                                                                          |   |                     |    |                         |   |
| Stockholders’ equity:                                                                                    |   |                     |    |                         |   |
| Preferred stock, $1 par value - authorized  1,000,000 shares; none issued                                     |   |                     |    |                         |   |
| Common stock, $1 par value - authorized 18,000,000  shares; issued 8,088,000 shares                           |   | 8,088                    |    | 8,088                        |   |
| Additional paid-in capital                                                                                    |   | 1,262                    |    | 650                          |   |
| Retained earnings                                                                                             |   | 115,191                  |    | 108,827                      |   |
| Unearned compensation                                                                                         |   | (270                     | )       | (350                         | )      |
| Treasury stock, at cost: 133,000 shares at  March 27, 2004 and 157,000 shares at September 27, 2003 |   | (1,564                   | )       | (1,795                       | )      |
|                                                                                                          |   |                     |    |                         |   |
| Total stockholders’ equity                                                                               |   | 122,707                  |    | 115,420                      |   |
|                                                                                                          |   |                     |    |                         |   |
| Total liabilities and stockholders’ equity                                                               |   | $                        | 153,639 |                         | $      | 151,101 |   |

** **

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

 

4

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COURIER CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASHFLOWS (UNAUDITED)

(Dollars in thousands)

 
|                                                                             |   | **SIX MONTHS  ENDED**    |   |
|----------------------------------------------------------------------------------|--------|--------------------------|--------|
|                                                                             |   | **March 27,  2004** |   | **March 29,  2003** |   |
|                                                                             |   |                     |   |   |   |
| Operating Activities:                                                            |   |                     |   |   |   |
| Net income                                                                       |   | $                        | 7,763  |   | $ | 8,333 |   |
| Adjustments to reconcile net income to cash  provided from operating activities: |   |                     |   |   |   |
| Depreciation and amortization                                                    |   | 5,329                    |   | 5,057 |   |
| Deferred income taxes                                                            |   | 1,071                    |   | 526 |   |
| Changes in assets and liabilities:                                               |   |                     |   |   |   |
| Accounts receivable                                                              |   | (61                      | )      | 2,030 |   |
| Inventory                                                                        |   | (2,325                   | )      | (313 | ) |
| Accounts payable                                                                 |   | (869                     | )      | 466 |   |
| Accrued taxes                                                                    |   | (2,650                   | )      | (2,581 | ) |
| Other elements of working capital                                                |   | (2,645                   | )      | (2,183 | ) |
| Gain on sale of discontinued operation  (Note F)                                 |   | —                   |   | (861 | ) |
| Other, net                                                                       |   | 385                      |   | (350 | ) |
|                                                                             |   |                     |   |   |   |
| Cash provided from operating activities                                          |   | 5,998                    |   | 10,124 |   |
|                                                                             |   |                     |   |   |   |
| Investment Activities:                                                           |   |                     |   |   |   |
| Capital expenditures                                                             |   | (7,580                   | )      | (2,373 | ) |
| Prepublication costs                                                             |   | (1,249                   | )      | (1,107 | ) |
| Business acquisition (Note E)                                                    |   | (11,850                  | )      | — |   |
| Proceeds from sale of discontinued  operation (Note F)                           |   | —                   |   | 1,500 |   |
|                                                                             |   |                     |   |   |   |
| Cash used for investment activities                                              |   | (20,679                  | )      | (1,980 | ) |
|                                                                             |   |                     |   |   |   |
| Financing Activities:                                                            |   |                     |   |   |   |
| Long-term debt repayments                                                        |   | (40                      | )      | (39 | ) |
| Cash dividends                                                                   |   | (1,399                   | )      | (1,174 | ) |
| Proceeds from stock plans                                                        |   | 460                      |   | 373 |   |
|                                                                             |   |                     |   |   |   |
| Cash used for financing activities                                               |   | (979                     | )      | (840 | ) |
|                                                                             |   |                     |   |   |   |
| Increase (decrease) in cash and cash  equivalents                                |   | (15,660                  | )      | 7,304 |   |
|                                                                             |   |                     |   |   |   |
| Cash and cash equivalents at the beginning  of the period                        |   | 23,824                   |   | 5,630 |   |
|                                                                             |   |                     |   |   |   |
| Cash and cash equivalents at the end of the  period                              |   | $                        | 8,164  |   | $ | 12,934 |   |

 

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

 

5

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**COURIERCORPORATION**

** **

**NOTESTO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)**

 

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

 

**UnauditedFinancial Statements**

 

The balance sheet as of March 27, 2004,the statements of income for the three-month and six-month periods endedMarch 27, 2004 and March 29, 2003, and the statements of cash flowsfor the six-month periods ended March 27, 2004 and March 29, 2003 areunaudited.  In the opinion ofmanagement, all adjustments necessary for a fair presentation of such financialstatements have been recorded.  Suchadjustments consisted only of normal recurring items. Certain amounts forfiscal 2003 have been reclassified in the accompanying financial statements inorder to be consistent with the current year’s classification.

 

Certain information and footnote disclosuresnormally included in financial statements prepared in accordance withaccounting principles generally accepted in the United States (“generallyaccepted accounting principles”) have been condensed or omitted.  The balance sheet data as ofSeptember 27, 2003 was derived from audited year-end financial statements,but does not include disclosures required by generally accepted accountingprinciples.  It is suggested that theseinterim financial statements be read in conjunction with the Company’s mostrecent Form 10-K and Annual Report for the year ended September 27, 2003.

 

**Prepublication Costs**

 

Prepublication costs, associated with thespecialty publishing segment, are amortized using the straight-line method overestimated useful lives of three years for recently acquired Research andEducation Association (see Note E) and four years for Dover Publications.  Effective with the second quarter of fiscal2003, amortization expense of prepublication costs was reclassified to cost ofsales from selling and administrative expense. Prior periods presented in the accompanying financial statements havebeen reclassified in order to be consistent with the current classification.

 

**Goodwill**

 

The Company accounts for goodwill in accordance with SFAS No. 142,“Accounting for Goodwill and Other Intangible Assets.”  Accordingly, the Company evaluates possibleimpairment annually or whenever events or circumstances indicate that thecarrying value of the assets may not be recoverable.

 

**Stock Split**

 

On November 6, 2003, the Company announced a three-for-two stocksplit effected in the form of a 50% stock dividend, except for treasury shares,which was distributed on December 5, 2003.  Previously authorized but unissued shares were used to effect thedividend.  Weighted average sharesoutstanding and per share amounts presented in the accompanying financialstatements for periods prior to the stock split have been restated to giveeffect to the stock split.

 

**Stock-BasedCompensation**

 

Pursuant to SFAS No. 123, “Accounting for Stock-Based Compensation,” asamended by SFAS No. 148, the Company applies the recognition and measurementprinciples of APB Opinion No. 25, “Accounting for Stock Issued to Employees”and related interpretations. Accordingly, because the number of shares is fixed and the exerciseprice of the stock options equals the market price of the underlying stock onthe date of grant, no compensation expense has been recognized.

 

6

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Had compensation cost for stock options, and grants under the EmployeeStock Purchase Plan, been determined under the provisions of SFAS No. 123, theCompany’s net income would have been as follows:

 
|                                                                                               |   | **(000’s  Omitted)** |   |
|----------------------------------------------------------------------------------------------------|--------|---------------------------|--------|
|                                                                                               |   | **Quarter  Ended**        |   | **Six Months  Ended** |   |
|                                                                                               |   | **March 27,  2004**  |   | **March 29,  2003** |   | **March 27,  2004** |   | **March 29,  2003** |   |
|                                                                                               |   |                      |   |   |   |   |   |   |   |
| Net income as reported                                                                             |   | $                         | 3,851  |   | $ | 3,821 |   | $ | 7,763 |   | $ | 8,333 |   |
| Deduct:Stock-based compensation expense  determined under SFAS No. 123, net of related tax effects |   | (349                      | )      | (237 | ) | (698 | ) | (475 | ) |
| Pro forma net income                                                                               |   | $                         | 3,502  |   | $ | 3,584 |   | $ | 7,065 |   | $ | 7,858 |   |
|                                                                                               |   |                      |   |   |   |   |   |   |   |
| Net income per share as reported:                                                                  |   |                      |   |   |   |   |   |   |   |
| Basic                                                                                              |   | $                         | 0.48   |   | $ | 0.49 |   | $ | 0.98 |   | $ | 1.06 |   |
| Diluted                                                                                            |   | 0.47                      |   | 0.47 |   | 0.95 |   | 1.03 |   |
|                                                                                               |   |                      |   |   |   |   |   |   |   |
| Pro forma net income per share:                                                                    |   |                      |   |   |   |   |   |   |   |
| Basic                                                                                              |   | $                         | 0.44   |   | $ | 0.46 |   | $ | 0.89 |   | $ | 1.00 |   |
| Diluted                                                                                            |   | 0.43                      |   | 0.44 |   | 0.86 |   | 0.97 |   |

 

# **B.**                                    INVENTORIES

# ** **

Inventories are valued at the lower of costor market.  Cost is determined using thelast-in, first-out (LIFO) method for approximately 37% and 44% of the Company’sinventories at March 27, 2004 and September 27, 2003,respectively.  Other inventories,primarily in the specialty publishing segment, are determined on a first-in,first-out (FIFO) basis.  REA’s inventoryof $1.7 million at March 27, 2004 is included in finished goods.  Inventories consisted of the following:

 
|             |   | **(000’s Omitted)** |   |
|------------------|--------|--------------------------|--------|
|             |   | **March 27,  2004** |   | **September 27,  2003** |   |
| Raw materials    |   | $                        | 2,712  |   | $ | 1,704 |   |
| Work in  process |   | 5,911                    |   | 3,833 |   |
| Finished goods   |   | 16,312                   |   | 15,144 |   |
| Total            |   | $                        | 24,935 |   | $ | 20,681 |   |

 

# **C.**                                    INCOME TAXES

# ** **

The provision for income taxes fromcontinuing operations differs from that computed using the statutory federalincome tax rates for the following reasons:

 
|                                                     |   | **(000’s  Omitted)** |   |
|----------------------------------------------------------|--------|---------------------------|--------|
|                                                     |   | **Quarter  Ended**        |   | **Six Months  Ended** |   |
|                                                     |   | **March 27,  2004**  |   | **March 29,  2003** |   | **March 27,  2004** |   | **March 29,  2003** |   |
| Federal taxes  at statutory rates                        |   | $                         | 2,071  |   | $ | 1,999 |   | $ | 4,178 |   | $ | 3,966 |   |
| State taxes,  net of federal benefit                     |   | 176                       |   | 137 |   | 329 |   | 254 |   |
| Foreign sales  corporation (FSC)  export  related income |   | (181                      | )      | (184 | ) | (343 | ) | (358 | ) |
| Other                                                    |   | 1                         |   | 32 |   | 9 |   | 21 |   |
| Total                                                    |   | $                         | 2,067  |   | $ | 1,984 |   | $ | 4,173 |   | $ | 3,883 |   |

 

7

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# **D.**                                    NET INCOME PER SHARE

# ** **

Followingis a reconciliation of the shares used in the calculation of basic and dilutedincome per share.  Potentially dilutiveshares, calculated using the treasury stock method, consist of shares issuedunder the Company’s stock option plans. These shares have been adjusted to reflect the three-for-two stock spliteffected in the form of a dividend distributed on December 5, 2003 (seeNote A).

 
|                                    |   | **(000’s  Omitted)** |   |
|-----------------------------------------|--------|---------------------------|--------|
|                                    |   | **Quarter  Ended**        |   | **Six Months  Ended** |   |
|                                    |   | **March 27,  2004**  |   | **March 29,  2003** |   | **March 27,  2004** |   | **March 29,  2003** |   |
|                                    |   |                      |   |   |   |   |   |   |   |
| Average shares  outstanding for basic   |   | 7,944                     |   | 7,834 |   | 7,938 |   | 7,828 |   |
| Effect of  potentially dilutive shares  |   | 285                       |   | 272 |   | 272 |   | 262 |   |
| Average shares  outstanding for diluted |   | 8,229                     |   | 8,106 |   | 8,210 |   | 8,090 |   |

 

**E.****                                      BUSINESSACQUISITION**

 

On January 6, 2004, the Companypurchased substantially all of the assets of Research & EducationAssociation (REA), a publisher of test preparation and study guide books andsoftware for high school, college, graduate students, and professionals, withtotal annual sales of approximately $6 million.  The acquisition was accounted for as a purchase, and accordingly,REA’s financial results were included in the specialty publishing segment inthe consolidated financial statements from the date of acquisition.  The purchase price was approximately $12million, with an initial allocation of approximately $9 million to goodwill inthe accompanying financial statements. This allocation will be finalized later this year.  The Company expects REA to be neutral tofiscal 2004 earnings and to contribute positively in 2005 and beyond.

 

**F.****                                      DISCONTINUEDOPERATION**

 

On December 17, 2002, the Company sold theassets of its wholly owned subsidiary, Courier Custom Publishing, Inc., whichcomprised all of the activities of the customized education segment.  The customized education segment providedcustomized coursepacks and textbooks. Fiscal 2003 financial results of thisdiscontinued operation through the date of disposal were a loss, net of tax, of$65,000 or $.01 per diluted share. Proceeds from the sale were $1.5 million resulting in an after-tax gainof approximately $0.9 million, or $.11 per diluted share, in fiscal 2003.

 

8

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# **G.**                                    BUSINESS SEGMENTS

# ** **

The Company has two business segments:full-service book manufacturing and specialty publishing. The bookmanufacturing segment offers a full range of services from production throughstorage and distribution for religious, educational and specialty trade bookpublishers. The specialty publishing segment consists of Dover Publications,Inc. and, beginning with the second quarter, REA (see Note E).

 

In evaluating segment performance,management primarily focuses on income or loss before taxes and otherincome.  The elimination of intersegmentsales and related profit represents sales from the book manufacturing segmentto 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*.*

 

The following table provides segmentinformation for the three-month and six-month periods ended March 27, 2004and March 29, 2003. Information relating to the discontinued customizededucation segment is not included (see Note F).

 
|                                |   | **(000’s) Omitted)** |   |
|-------------------------------------|--------|---------------------------|--------|
|                                |   | **Quarter  Ended**        |   | **Six Months  Ended** |   |
|                                |   | **March 27,  2004**  |   | **March 29,  2003** |   | **March 27,  2004** |   | **March 29,  2003** |   |
|                                |   |                      |   |   |   |   |   |   |   |
| Net sales:                          |   |                      |   |   |   |   |   |   |   |
| Book  manufacturing                 |   | $                         | 40,988 |   | $ | 41,127 |   | $ | 80,645 |   | $ | 82,967 |   |
| Specialty  publishing               |   | 10,124                    |   | 9,077 |   | 19,191 |   | 17,442 |   |
| Elimination of  intersegment sales  |   | (1,449                    | )      | (1,599 | ) | (3,354 | ) | (3,022 | ) |
| Total for  continuing operations    |   | $                         | 49,663 |   | $ | 48,605 |   | $ | 96,482 |   | $ | 97,387 |   |
|                                |   |                      |   |   |   |   |   |   |   |
| Income before  taxes:               |   |                      |   |   |   |   |   |   |   |
| Book  manufacturing                 |   | $                         | 4,907  |   | $ | 4,714 |   | $ | 9,730 |   | $ | 9,428 |   |
| Specialty  publishing               |   | 1,067                     |   | 1,188 |   | 2,380 |   | 2,249 |   |
| Elimination of  intersegment profit |   | (56                       | )      | (130 | ) | (174 | ) | (257 | ) |
| Total for  continuing operations    |   | $                         | 5,918  |   | $ | 5,772 |   | $ | 11,936 |   | $ | 11,420 |   |

 

9

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

 

**CriticalAccounting Policies and Estimates:**

 

TheCompany’s consolidated condensed financial statements have been prepared inaccordance with generally accepted accounting principles.  The preparation of these financialstatements requires management to make estimates and assumptions that affectthe amounts reported in these financial statements and accompanying notes.   On an ongoing basis, management evaluatesits estimates and judgments, including those related to collectibility ofaccounts receivable, recovery of inventories, impairment of goodwill,prepublication costs and income taxes. Management bases its estimates and judgments on historical experienceand various other factors believed to be reasonable under the circumstances,the results of which form the basis for making judgments about the carryingvalue of assets and liabilities at the date of the financial statements and thereported amounts of revenues and expenses during the periods presented.  Actual results may differ from theseestimates.  The significant accountingpolicies which management believes are most critical to aid in fullyunderstanding and evaluating the Company’s reported financial results includethe following:

 

# **AccountsReceivable**   Managementperforms ongoing credit evaluations of the Company’s customers and adjustscredit limits based upon payment history and the customer’s currentcreditworthiness.  Collections andpayments from customers are continuously monitored.  A provision for estimated credit losses is determined based uponhistorical experience and any specific customer collection issues that havebeen identified.  If the financialcondition of the Company’s customers were to deteriorate, resulting in animpairment of their ability to make payments, additional allowances may berequired.

# ** **

Inventories  Management records reductions in thecost basis of inventory for excess and obsolete inventory based primarily uponhistorical and forecasted product demand. If actual market conditions are less favorable than those projected bymanagement, additional inventory charges may be required.

 

Goodwill  The Company accounts for goodwill inaccordance with SFAS No. 142, “Accounting for Goodwill and Other IntangibleAssets”.  Accordingly, the Companyevaluates possible impairment annually or whenever events or circumstancesindicate that the carrying value of the assets may not be recoverable.  The Company completed the annual impairmenttest required by SFAS No. 142 at September 27, 2003 resulting in no change tothe nature or carrying amounts of its intangible assets.  Changes in market conditions or poor operatingresults could result in a decline in value thereby potentially requiring animpairment charge in the future.

 

Prepublication Costs   The Company capitalizes prepublication costs, which include thecosts of acquiring rights to publish a work and costs associated with bringinga manuscript to publication such as artwork and editorial efforts.Prepublication costs are amortized on a straight-line basis over periodsranging from three to four years. Management regularly evaluates the sales and profitability of theproducts based upon historical and forecasted demand.  Based upon this evaluation, adjustments may be required toamortization expense.

 

Income Taxes  The income tax provision and related accrued taxes are based on amountsreported on the 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.

 

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**Resultsof Operations:**

 

For the second quarter of fiscal2004, the Company’s income from continuing operations was $3.9 million, or $.47per diluted share, compared to last year’s second quarter results of $3.8million, or $.47 per diluted share. Sales from continuing operations in the second quarter were $49.7million, up 2% from $48.6 million in the same period last year.  Gross profit decreased slightly to $15.5million in the second quarter compared to $15.6 million in the same period lastyear, and, as a percentage of sales, was 31.3% compared to 32.1% in the prioryear.

 

For the first six months of fiscal2004, income from continuing operations was $7.8 million, or $.95 per dilutedshare, up 3% from $7.5 million, or $.93 per diluted share, for the first halfof fiscal 2003.  Sales of $96.5 millionfor the first six months were 1% below sales for the first half of lastyear.  Gross profit for the first sixmonths of fiscal 2004 of $31.2 million was comparable to the same period lastyear.  As a percentage of sales, grossprofit improved slightly for the first half of the fiscal year to 32.3% from31.8% in fiscal 2003.

 

Both the second-quarter and six-monthresults include the results of Research & Education Association, Inc.(REA). On January 6, 2004, the Company purchased substantially all of the assetsof REA, a publisher of test preparation and study guide books and software forhigh school, college, graduate students, and professionals, with total annualsales of approximately $6 million.  Theacquisition was accounted for as a purchase, and accordingly, REA’s financialresults were included in the specialty publishing segment in the consolidatedfinancial statements from the date of acquisition.  The purchase price was approximately $12 million, with an initialallocation of approximately $9 million to goodwill in the accompanyingfinancial statements.  This allocationwill be finalized later this year.  TheCompany expects REA to be neutral to fiscal 2004 earnings and to contributepositively in 2005 and beyond.  Thesecond-quarter and six-month results do not include the results of adiscontinued operation (see section below on Discontinued Operation).

 

**ContinuingOperations**

 

*BookManufacturing Segment*

 

Sales from the Company’s book manufacturingsegment were $41.0 million in the second quarter, a decrease of less than 1%from the same period last year.  For thefirst six months of fiscal 2004, book manufacturing sales were down 3% fromfiscal 2003.  Within this segment, theCompany focuses on three key markets: religious, education, and specialtytrade.  Sales in the religious marketwere up 2% both in the second quarter and first six months compared to theprior year, reflecting stronger religious trade sales in keeping withlonger-term market trends.   Sales tothe education market were up 14% for the second quarter and 6% for the firsthalf of the fiscal year compared to last year. Sales to the elementary/high school market were particularly strong inthe quarter, primarily as a result of gains in market share with keycustomers.  Sales to the specialty trademarket were down by 20% in the quarter compared to a strong second quarter lastyear, and down 14% for the first six months compared to the same period lastyear.  Publishers remained cautiousabout inventory levels in an uncertain economy and orders for reprints weredown, particularly at the beginning of the second quarter.  In addition, sales of computer game bookswere below last year as a result of the maturing of current game platforms andthe absence of new “blockbuster” games. During the second quarter, the Company expanded its four-colorcapabilities with the installation of a major new four-color press at itsKendallville, Indiana facility.  Thispress became operational in April 2004.

 

Gross profit as a percentage of sales in thebook manufacturing segment decreased by 140 basis points to 26.8% in the secondquarter from 28.2% in the same quarter last year, despite continuedimprovements in productivity.  Thedecline was due to a combination of pricing pressures and product mix, as wellas start-up costs of approximately $150,000 related to the new four-colorpress.  For the first six months offiscal 2004, gross profit in this segment was 27.7% compared to 28.0% in thefirst half of last year.

 

Selling and administrative expenses decreasedby 11% in the second quarter to $6.2 million compared to the same period in theprior year.  For the first six months,selling and administrative expenses of $12.8 million were down by 8% comparedto the first half of fiscal 2003.  As apercentage of sales, selling and administrative expenses were 15% and 16% ofsales in the second quarter and the first six months, respectively, compared to17% for the corresponding periods of fiscal 2003.  The reductions were due, in part, to lower bad debt expense aswell as reductions in incentive compensation.

 

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Interest income allocated to the bookmanufacturing segment increased to $112,000 in the second quarter of fiscal2004 resulting in interest income of $186,000 for the first six months of thisyear, compared to $60,000 and $137,000 for the second quarter and first half offiscal 2003, respectively.  Fiscal 2004interest income includes capitalized interest related to the new four-colorpress, which amounted to $38,000 for the second quarter and $61,000 for thefirst six months of the year.

 

Second quarter pretax income in this segmentwas $4.9 million, or $.39 per diluted share, up 4% from the correspondingquarter last year.  For the first halfof the year, pretax income was up 3% over last year to $9.7 million, or $.78per diluted share.  As a percentage ofsales, pretax income increased to approximately 12% from 11% last year for boththe quarter and the first six months of the year.

 

*SpecialtyPublishing Segment*

 

The Company’s specialty publishing segment iscomprised of Dover Publications, Inc. (“Dover”), as well as REA since itsacquisition on January 6, 2004. Second quarter sales in this segment were $10.1 million, up 12% from$9.1 million in last year’s second quarter, with the increase attributable toREA.  For the first six months, salesincreased 10% over the same period last year to $19.2 million.  Dover’s sales for the first half of the yearwere up 4% to $18.1 million, although sales were down 1% in the second quartercompared to the same period last year. Sales to U.S. retailers, which account for approximately 70% of allDover sales, decreased 4% in the quarter. Sales to major booksellers decreased 11% in the second quarter, butincreased 5% for the first six months compared to last year.  In addition, last year’s second quarterincluded a large order of a custom product for a specialty retailer thataccounted for 3% of Dover’s sales in the quarter and which did not recur thisyear.  Dover’s sales to crafts stores,gift shops and other non-bookstore outlets continued to grow strongly in thesecond quarter.  International salesincreased by 13% in the second quarter and 21% in the first half compared tothe corresponding periods last year.  Direct-to-consumersales also continued to grow in the quarter, up 8% over an exceptionally strongsecond quarter last year when direct-to-consumer sales increased by more than30%.  Web-based marketing activities wereup significantly over the prior year.  In addition, Dover’s consumer catalog mailing schedule wasmodified during the second quarter with approximately 20% fewer catalogsdistributed, which will be mailed in the third quarter this year. The segment’snew business, REA, contributed sales of $1.1 million to the second quarter andwas neutral to income.

 

Gross profit as a percent of sales in the specialty publishing segmentwas 45.5%, the same as last year’s second quarter. Dover’s gross profit as apercentage of sales continued to improve in the second quarter with an increaseof 180 basis points to 47.3% of sales. REA’s gross profit percentage was 31.2%, which included $215,000 ofexpense related to a required write up of inventory to fair market value whenREA was acquired.  The total inventorywrite up was approximately $1 million, which will be expensed as the acquiredinventory is sold.  Excluding thisexpense, REA’s gross profit percentage in the second quarter would have been50%.

 

Sellingand administrative expenses in this segment were $3.4 million in the secondquarter, an increase of 21% over the corresponding prior year period.  Dover accounted for approximately half ofthe increase, due to a step up in sales and marketing initiatives.  The addition of REA accounted for theremainder of the increase.  For thefirst six months of fiscal 2004, selling and administrative expenses of $6.5million were 17% higher than the corresponding period last year as a result ofDover’s increased sales and marketing initiatives and the acquisition of REA.

 

Interest expense is allocated to thespecialty publishing segment based on the acquisition cost of Dover and REA,reduced by cash generated by each business since acquisition.  Such interest expense in the second quarterwas $85,000, comparable to the same period last year, and split evenly betweenDover and REA.  Interest expense for thefirst six months was $132,000 compared to $205,000 for the first half of theprior year with the decrease primarily attributable to cash generated by Dover.

 

Pretax income in the specialty publishingsegment was $1.1 million, or $.08 per diluted share, a 10% decrease from lastyear’s second quarter.  REA’s resultsfor the quarter were at breakeven, as expected, reflecting post acquisitioncosts, such as the expense related to the write up of inventory to fair marketvalue, and allocated interest expense. For the first six months, pretax income in this segment increased 6%to  $2.4 million, or $.18 per dilutedshare, from $2.2 million, or $.17 per diluted share, for the same period lastyear.

 

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*TotalConsolidated Company*

 

Interest income, net of interest expense, was$27,000 in the second quarter of fiscal 2004 compared to interest expense of$26,000 in the same period of fiscal 2003. There were no borrowings under the Company’s $60 million revolvingcredit facility in the first half of either year, however, interest expenseincludes commitment fees and other costs associated with maintaining thiscredit facility.  Cash investments inthe second quarter of fiscal 2004 averaged approximately $13.1 million investedat an average annual interest rate of 1.4% generating interest income ofapproximately $46,000.  For the sameperiod last year, the Company’s average cash investments were $15.0 millioninvested at an average annual interest rate of 1.2%, generating approximately$46,000 of interest income.  For thefirst six months of fiscal 2004, interest income, net of interest expense, was$54,000 compared to net interest expense of $68,000 in the first half of fiscal2003.  Capitalized interest was $38,000in the second quarter and $61,000 for the first six months of fiscal 2004.  No interest was capitalized in thecorresponding prior year periods.

 

TheCompany’s effective tax rate for the second quarter and first six months offiscal 2004 was 35% compared to 34% for the corresponding periods last year,primarily due to a higher effective state tax rate in fiscal 2004.

 

Forpurposes of computing net income per diluted share, weighted average sharesoutstanding increased by approximately 123,000 shares and 120,000 shares overlast year’s second quarter and first six months, respectively.  The increase in both periods was largely dueto options exercised. On December 5, 2003, a three-for-two stock split waseffected in the form of a 50% stock dividend, except for treasury shares.  Weighted average shares outstanding and pershare amounts presented in the accompanying financial statements for periodsprior to the stock split have been restated to give effect to the stock split.

 

**Discontinued Operation**

 

OnDecember 17, 2002, the Company sold the assets of its wholly ownedsubsidiary, Courier Custom Publishing, Inc., which comprised all of theactivities of the Customized Education segment. The Customized Educationsegment provided customized coursepacks and textbooks.  Results for the first quarter of fiscal 2003for this discontinued operation were a loss, net of tax, of $65,000, or $.01per diluted share.  Proceeds from thesale of Courier Custom Publishing were $1.5 million, resulting in an after-taxgain of approximately $0.9 million, or $.11 per diluted share recorded in lastyear’s first quarter.

 

**Liquidityand Capital Resources:**

 

Duringthe first six months of fiscal 2004, operations provided approximately $6million of cash.  Income from continuingoperations was $7.8 million and depreciation and amortization were $5.3million.  Working capital used approximately$8.6 million of cash, due in part to an increase in inventories and payment ofaccrued taxes and annual profit sharing contributions.

 

Investment activities in the first half offiscal 2004 used $20.7 million of cash, including approximately $12 million forthe acquisition of REA. Capital expenditures were approximately $7.6 million,primarily for the new four-color press installed during the second quarter inthe Kendallville, Indiana facility.  Forthe entire fiscal year, capital expenditures are expected to be approximately$14 to $16 million, including approximately $10 million for the new pressproject. Prepublication costs were $1.2 million and are projected to beapproximately $3 million for the full fiscal year.

 

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In March 2003, the Company announcedan agreement to sell approximately 200,000 square feet of unoccupied andunderutilized portions of its multi-building manufacturing complex in Westford,Massachusetts for $1.7 million.  TheCompany will continue its current levels of book manufacturing at thesite.  The agreement contains a numberof significant contingencies, many of which have been resolved. Assuming theremaining contingencies can be resolved, the sale is anticipated to close infiscal 2004.  Although the carryingvalue of the property is nominal, the agreement requires that the Company incurcertain costs to complete the transaction, such as the separation of allutilities within the complex.  Althoughthese costs could be significant, if the transaction is completed, the Companyanticipates realizing a small gain on the sale.

 

Financing activities for the first six monthsof fiscal 2004 used approximately $1.0 million of cash.  Dividend payments were $1.4 million whileproceeds from stock plans were $460,000. At March 27, 2004, the Company had $8.2 million in cash and noborrowings under its $60 million long-term revolving credit facility, whichbears interest at a floating rate.  Therevolving credit facility is used by the Company for both its long-term and short-termfinancing needs. On March 31, 2004, the Company extended the maturity dateof this facility to March 2007.  The Company believes that its cash from operations and available creditfacilities will be sufficient to meet its cash requirements through fiscal2004.

 

The following table summarizes the Company’scontractual obligations and commitments at September 27, 2003 to makefuture payments as well as its existing commercial commitments.

 
|                         |   |      |   | **(000’s omitted)**   |   |
|------------------------------|--------|-----------|--------|----------------------------|--------|
|                         |   |      |   | **Payments due by period** |   |
|                         |   | **Total** |   | **Less than  1 Year**      |   | **1 to 3  Years** |   | **4 to 5  Years** |   | **After 5  Years** |   |
| Contractual  Payments:       |   |      |   |                       |   |   |   |   |   |   |   |
| Long-Term Debt               |   | $         | 674    |                       | $      | 81 |   | $ | 168 |   | $ | 179 |   | $ | 246 |   |
| Operating  Leases            |   | $         | 9,654  |                       | $      | 3,679 |   | $ | 4,033 |   | $ | 1,942 |   | $ | — |   |
| Purchase  Obligations (1)    |   | $         | 2,254  |                       | $      | 2,254 |   | $ | — |   | $ | — |   | $ | — |   |
| Other Long-Term  Liabilities |   | $         | 2,678  |                       | $      | — |   | $ | 1,294 |   | $ | 360 |   | $ | 1,024 |   |

 

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(1)          Represent amounts at March 27, 2004primarily for capital commitments for the new four-color press.

 

**Forward-LookingInformation:**

 

This Quarterly Report onForm 10-Q and the Company’s Annual Report for the year ended September 27,2003 on Form 10-K include forward-looking statements.  Statements that describe future expectations, plans or strategiesare 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 otherexpressions which are predictions of or indicate future events and trends and whichdo not relate to historical matters identify forward-looking statements.  Such statements are subject to risks anduncertainties that could cause actual results to differ materially from thosecurrently anticipated.  Factors thatcould affect actual results include, among others, changes in customers’ demandfor the Company’s products, including seasonal changes in customers’ orders,changes in raw material availability or costs, pricing actions by competitors,consolidation among customers and competitors, success in the integration ofacquired businesses, unanticipated changes in operating expenses, costs relatedto starting up new printing presses, changes in technology, changes incopyright laws, changes in tax policy including export credits, and generalchanges in economic conditions. Although the Company believes that the assumptions underlying theforward-looking statements are reasonable, any of the assumptions could beinaccurate, and therefore, there can be no assurance that the forward-lookingstatements will prove to be accurate. The forward-looking statements included herein are made as of the datehereof, and the Company undertakes no obligation to update publicly suchstatements to reflect subsequent events or circumstances.

 

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**COURIERCORPORATION**

 

**Item3.****                                                           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUTMARKET 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 onForm 10-K for the year ended September 27, 2003.

 

#### **Item 4**.                                                           CONTROLS AND PROCEDURES

#### ** **

**(a)****                                 ****Evaluation of disclosure controls and procedures**

 

As required by Rule 13a-15 under the Securities Exchange Actof 1934, as of the end of the period covered by this quarterly report, theCompany carried out an evaluation under the supervision and with theparticipation of the Company’s management, including the Company’s ChiefExecutive Officer and Chief Financial Officer, of the effectiveness of thedesign and operation of the Company’s disclosure controls and procedures.  Based upon that evaluation, the ChiefExecutive Officer and Chief Financial Officer concluded that the Company’sdisclosure controls and procedures are effective to ensure that informationrequired to be disclosed by the Company in the reports it files or submitsunder the Exchange Act is recorded, processed, summarized and reported, withinthe time periods specified in the Securities and Exchange Commission’s rulesand forms.

 

**(b)****                                 ****Changes in internal controls over financial reporting**

 

There was no change in the Company’s internal control overfinancial reporting that occurred during the period covered by this quarterlyreport that has materially affected, or that is reasonably likely to materiallyaffect, the Company’s internal control over financial reporting.

 

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

#### ** **

**Item 1.****                                                           Legal Proceedings**

 

None.

 

**Item 2.****                                                           Changes in Securities and Use of Proceeds**

 

None.

 

**Item 3.****                                                          ****Defaults UponSenior Securities**

### ** **

None.

 

**Item 4.****                                                           Submission of Matters to a Vote of SecurityHolders**

 

The Annual Meeting of Stockholders of theregistrant was held on January 15, 2004. Following are the matters voted on at the meeting.

 

**Election of Directors:**  Allnominees of the Board of Directors of the registrant were elected for athree-year term.  Votes were cast asfollows:  Arnold S. Lerner – 5,044,695votes for and 40,343 votes withheld; George Q. Nichols – 5,069,296 votes forand 15,742 votes withheld; Ronald L. Skates – 5,056,260 votes for and 28,778votes withheld.

 

**Ratification/Approval of Accountants:**  Stockholders voted to ratify and approve the selection by the Audit andFinance Committee of the Board of Directors, of Deloitte & Touche LLP asindependent public accountants for the Corporation for the fiscal year endingSeptember 25, 2004.  Votes werecast as follows:  5,036,344 votes for,34,614 votes against and 14,080 abstained.

 

**Item5.****                                                           OtherInformation**

 

None.

 

**Item 6.**                                                           **Exhibits andReports on Form 8-K**

### ** **

(a) Exhibits

 
| **Exhibit No.** |   | **Description**                                                                                                                                                                                                                                                                                                           |
|-----------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |   |                                                                                                                                                                                                                                                                                                                      |
| 10.             |   | Amendment,  dated March 31, 2004, to Amended and Restated Revolving Credit  Agreement, dated as of March 31, 2003, between Courier Corporation,  Fleet National Bank, KeyBank National Association, Citizens Bank of  Massachusetts and Sovereign Bank, providing for a $60 million revolving  credit facility. |
|            |   |                                                                                                                                                                                                                                                                                                                      |
| 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                                                                                                                                                                                                                                                                                  |

 

(b) Reports on Form 8-K

 

Filed January 7, 2004, reporting underItem 5 a press release dated January 6, 2004 announcing the acquisition ofResearch & Education Association.

 

Filed January 15, 2004, reporting underItem 12 a press release dated January 15, 2004 reporting financial resultsfor the quarter ended December 27, 2003.

 

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**SIGNATURES**

 

Pursuant to the requirements of theSecurities Exchange Act of 1934, the Company has duly caused this report to besigned on its behalf by the undersigned thereunto duly authorized.

 

 
|                      | **COURIER  CORPORATION** |   |
|---------------------------|--------------------------|--------|
|                      | **(Registrant)**         |   |
|                      |                     |
| *  May 7, 2004*      |                     | By:    | *s/James F. Conway III* |   |
| Date                      |                     |   |   | James F. Conway III |
|                      |                     |   |   | Chairman, President and |
|                      |                     |   |   |      Chief Executive Officer |
|                      |                     |   |   |
|                      |                     |   |   |
| *  May 7, 2004*      |                     | By:    | *s/Robert P. Story, Jr.* |   |
| Date                      |                     |   | Robert P.  Story, Jr. |
|                      |                     |   | Senior Vice  President and  Chief Financial Officer |
|                      |                     |   |   |
| *  May 7, 2004* |                     | By:    | *s/Peter M. Folger* |   |
| Date                      |                     |   | Peter M.  Folger |
|                      |                     |   | Vice President  and  Chief Accounting Officer |
|                           |                          |        |  |  |  |  |  |  |

 

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