UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 27, 2009

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

For the transition period from to

Commission file number 0-7597

COURIER CORPORATION

(Exact name of registrant as specified in its charter)

Massachusetts		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 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 the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter 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 x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

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

Large accelerated filer o		Accelerated filer x

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

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes o No x

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

Class		Outstanding at August 4, 2009
Common Stock, $1 par value		11,911,748 shares

COURIER CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(Dollars in thousands except per share amounts)

	QUARTER ENDED					NINE MONTHS ENDED
	June 27,		June 28,			June 27,			June 28,
	2009		2008			2009			2008

Net sales	$	61,390	$	73,378		$	180,397		$	204,028
Cost of sales (Note E)	47,313		54,364			141,269			148,904

Gross profit	14,077		19,014			39,128			55,124

Selling and administrative expenses (Note E)	11,305		13,600			36,462			41,490
Impairment charge (Note A)	—		23,850			15,607			23,850

Operating income (loss)	2,772		(18,436		)	(12,941		)	(10,216		)

Interest expense, net	153		322			574			889

Pretax income (loss)	2,619		(18,758		)	(13,515		)	(11,105		)

Income tax provision (benefit) (Note C)	1,007		(6,386		)	(4,657		)	(3,532		)

Net income (loss)	$	1,612	$	(12,372	)	$	(8,858	)	$	(7,573	)

Net income (loss) per share (Note G):

Basic	$	0.14	$	(1.01	)	$	(0.75	)	$	(0.61	)

Diluted	$	0.14	$	(1.01	)	$	(0.75	)	$	(0.61	)

Cash dividends declared per share	$	0.21	$	0.20		$	0.63		$	0.60

The accompanying notes are an integral part of the consolidated financial statements.

COURIER CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)

(Dollars in thousands)

	June 27,		September 27,
	2009		2008
ASSETS

Current assets:
Cash and cash equivalents	$	127	$	178
Investments	892		820
Accounts receivable, less allowance for uncollectible accounts of $1,836 at June 27, 2009 and $1,611 at September 27, 2008	36,117		45,626
Inventories (Note B)	39,545		37,166
Deferred income taxes	4,581		4,680
Other current assets	3,869		1,528

Total current assets	85,131		89,998

Property, plant and equipment, less accumulated depreciation: $162,880 at June 27, 2009 and $153,606 at September 27, 2008	88,810		95,692

Goodwill (Note A)	24,305		39,912

Other intangibles, net (Note A)	3,770		3,920

Prepublication costs, net (Note A)	9,001		9,595

Other assets	1,619		1,381

Total assets	$	212,636	$	240,498

The accompanying notes are an integral part of the consolidated financial statements.

COURIER CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)

(Dollars in thousands)

	June 27,			September 27,
	2009			2008
LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Current maturities of long-term debt	$	93		$	93
Accounts payable	10,174			16,966
Accrued payroll	5,432			6,587
Accrued taxes	730			3,560
Other current liabilities	7,221			5,970

Total current liabilities	23,650			33,176

Long-term debt	24,524			23,646
Deferred income taxes	775			4,687
Other liabilities	2,478			2,765

Total liabilities	51,427			64,274

Stockholders’ equity (Note F):
Preferred stock, $1 par value - authorized 1,000,000 shares; none issued
Common stock, $1 par value - authorized 18,000,000 shares; issued 11,911,000 at June 27, 2009 and 11,878,000 at September 27, 2008	11,911			11,878
Additional paid-in capital	16,081			14,788
Retained earnings	133,567			149,920
Accumulated other comprehensive loss	(350		)	(362		)

Total stockholders’ equity	161,209			176,224

Total liabilities and stockholders’ equity	$	212,636		$	240,498

The accompanying notes are an integral part of the consolidated financial statements.

COURIER CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands)

	NINE MONTHS ENDED
	June 27,			June 28,
	2009			2008

Operating Activities:
Net loss	$	(8,858	)	$	(7,573	)
Adjustments to reconcile net loss to cash provided from operating activities:
Depreciation and amortization	15,824			16,607
Impairment charges (Note A)	15,607			23,850
Stock-based compensation	1,073			955
Deferred income taxes	(3,813		)	(5,098		)
Changes in assets and liabilities:
Accounts receivable	9,509			228
Inventory	(2,379		)	(1,426		)
Accounts payable	(6,792		)	(5,242		)
Accrued taxes	(2,830		)	(1,166		)
Other elements of working capital	(2,245		)	(1,975		)
Other, net	(150		)	(855		)

Cash provided from operating activities	14,946			18,305

Investment Activities:
Capital expenditures	(5,601		)	(7,755		)
Prepublication costs	(3,119		)	(3,689		)
Short-term investments	(72		)	—

Cash used for investment activities	(8,792		)	(11,444		)

Financing Activities:
Long-term debt borrowings, net	878			10,755
Cash dividends	(7,495		)	(7,469		)
Proceeds from stock plans	412			1,269
Stock repurchases	—			(12,055		)
Excess tax benefits from stock-based compensation	—			33

Cash used for financing activities	(6,205		)	(7,467		)

Decrease in cash and cash equivalents	(51		)	(606		)

Cash and cash equivalents at the beginning of the period	178			1,549

Cash and cash equivalents at the end of the period	$	127		$	943

The accompanying notes are an integral part of the consolidated financial statements.

COURIER CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unaudited Financial Statements

The consolidated condensed balance sheet as of June 27, 2009, the statements of operations for the three-month and nine-month periods ended June 27, 2009 and June 28, 2008, and the statements of cash flows for the nine-month periods ended June 27, 2009 and June 28, 2008 are unaudited. In the opinion of management, all adjustments, consisting of normal recurring items, considered necessary for a fair presentation of such financial statements have been recorded. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. Such events were evaluated through August 6, 2009, the date of financial statement issuance.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“generally accepted accounting principles”) have been condensed or omitted. The balance sheet data as of September 27, 2008 was derived from audited year-end financial statements, but does not include disclosures required by generally accepted accounting principles. It is suggested that these interim financial statements be read in conjunction with the Company’s most recent Annual Report on Form 10-K for the year ended September 27, 2008.

Goodwill and Other Intangibles

The Company evaluates possible impairment annually at the end of its fiscal year or whenever events or circumstances indicate that the carrying value of the assets may not be recoverable. These tests are performed at the reporting unit level, which is the operating segment or one level below the operating segment. Due to a decline in sales and profits at Dover Publications, Inc. (“Dover”), resulting from the continued downturn in the economic environment and in consumer spending, the Company performed an interim test of goodwill for Dover, one of the companies in its specialty publishing segment, in the second quarter of fiscal 2009.

The goodwill impairment test is a two-step test. In the first step, the Company compares the fair value of the reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value of its net assets, then goodwill is not impaired and the Company is not required to perform further testing. If the carrying value of the net assets of the reporting unit exceeds its fair value, then the Company must perform the second step in order to determine the implied fair value of the reporting unit’s goodwill and compare it to the carrying value of its goodwill. The Company used a valuation methodology to estimate the fair value of Dover based on a discounted cash flow and a market value approach. Key assumptions and estimates included revenue and operating income forecasts and the assessed growth rate after the forecast period.

After performing the step-one test, the Company determined that the fair value of Dover was below its carrying value and as such the second step was required. The second step of the impairment test included estimating the fair value of the tangible and identified intangible assets and liabilities of the impaired reporting unit. The implied goodwill is the residual of the total fair value of the reporting unit less the accumulated fair value of identified tangible and intangible assets and liabilities. Based on the results of these valuations, the Company recorded a pre-tax impairment charge of $15.6 million, representing 100% of Dover’s goodwill, at the end of the second quarter.

In the third quarter of fiscal 2008, impairment testing was performed on the goodwill and other intangible assets of Federal Marketing Corporation, d/b/a Creative Homeowner (“Creative Homeowner”), resulting in a pre-tax impairment charge of $23.9 million.

“Other intangibles” includes customer lists related to Creative Homeowner and Moore-Langen Printing Company, Inc. (“Moore Langen”), which are being amortized over 15-year and 10-year periods, respectively. Amortization expense related to customer lists was approximately $50,000 and $200,000 in the third quarters of fiscal 2009 and 2008, respectively, and for the first nine months was approximately $150,000 and $600,000 in fiscal 2009 and 2008, respectively.

COURIER CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

Fair Value of Financial Instruments

Financial instruments consist primarily of cash, investments in mutual funds, accounts receivable, accounts payable and debt obligations. At June 27, 2009 and September 27, 2008, the fair value of the Company’s financial instruments approximated their carrying values.

Prepublication Costs

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

Recent Accounting Pronouncements

In May 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No.165, “Subsequent Events” (“SFAS 165”). SFAS 165 establishes requirements for subsequent events. SFAS 165 was effective for interim or annual periods ending after June 15, 2009. Adoption of SFAS 165 in the third quarter did not have a significant effect on the Company’s consolidated financial position, results of operations or cash flows. The Company is now required to provide additional disclosures, which are included in Note A.

In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP No. FAS 107-1” and “APB 28-1”). This FSP amends SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” to require disclosures regarding the fair values of financial instruments in interim financial information and does not change the accounting treatment for these financial instruments. The Company adopted the provisions of FSP No. FAS 107-1 and APB 28-1 during the third quarter and the required disclosures are included in Note A.

At the beginning of the second quarter of fiscal 2009, the Company adopted the provisions of SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities,” an amendment of FASB Statement No. 133 (“SFAS No. 161”), which changed the disclosure requirements for derivative instruments and hedging activities. The adoption of SFAS No. 161 did not have a material effect on the Company’s consolidated financial position, results of operations, or cash flows.

In April 2008, the FASB issued FASB Staff Position (“FSP”) 142-3, “Determining the Useful Life of Intangible Assets” (“FSP 142-3”). FSP 142-3 amends the factors to be considered in determining the useful life of intangible assets. Its intent is to improve the consistency between the useful life of an intangible asset and the period of expected cash flows used to measure its fair value. FSP 142-3 will be effective at the beginning of the Company’s fiscal year 2010. The Company does not believe the adoption of FSP 142-3 will have a material effect on its consolidated financial position, results of operations, or cash flows.

In December 2007, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 141 (revised 2007), “Business Combinations,” (“SFAS No. 141R”), which replaces SFAS No. 141. This statement retains the purchase method of accounting for business acquisitions, but requires a number of changes in the recognition of assets acquired and liabilities assumed as well as in the treatment of acquisition-related costs. SFAS No. 141R will be effective at the beginning of the Company’s fiscal year 2010 and will apply prospectively to business combinations completed on or after that date. The Company does not believe the adoption of SFAS No. 141R will have a material effect on its consolidated financial position, results of operations, or cash flows.

COURIER CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

B. INVENTORIES

Inventories are valued at the lower of cost or market. Cost is determined using the last-in, first-out (LIFO) method for approximately 51% and 44% of the Company’s inventories at June 27, 2009 and September 27, 2008, respectively. Other inventories, primarily in the specialty publishing segment, are determined on a first-in, first-out (FIFO) basis. Inventories consisted of the following:

	(000’s Omitted)
	June 27, 2009		September 27, 2008
Raw materials	$	4,585	$	5,263
Work in process	8,366		8,091
Finished goods	26,594		23,812
Total	$	39,545	$	37,166

C. INCOME TAXES

The provision (benefit) for income taxes differs from that computed using the statutory federal income tax rates for the following reasons:

	(000’s Omitted)
	Quarter Ended
	June 27,					June 28,
	2009					2008
Federal taxes at statutory rates	$	917		35.0	%	$	(6,565	)	(35.0	)%
State taxes, net of federal tax benefit	121			4.6		225			1.2
Federal manufacturer’s deduction	(27		)	(1.0	)	(61		)	(0.3	)
Other	(4		)	(0.2	)	15			0.1
Total	$	1,007		38.4	%	$	(6,386	)	(34.0	)%

	(000’s Omitted)
	Nine Months Ended
	June 27,					June 28,
	2009					2008
Federal taxes at statutory rates	$	(4,730	)	(35.0	)%	$	(3,887	)	(35.0	)%
State taxes, net of federal tax benefit	96			0.7		486			4.4
Federal manufacturer’s deduction	(20		)	(0.1	)	(155		)	(1.4	)
Other	(3		)	—		24			0.2
Total	$	(4,657	)	(34.5	)%	$	(3,532	)	(31.8	)%

The tax benefits related to the impairment charges in both fiscal 2009 and 2008 were recognized at 35% (see Note A). No state tax benefits were recognized as the Company fully provided valuation allowances on the related deferred state tax assets.

COURIER CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

D. BUSINESS SEGMENTS

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

Segment performance is evaluated based on several factors, of which the primary financial measure is operating income. Operating income is defined as gross profit (sales less cost of sales) less selling and administrative expenses, and includes severance and other restructuring costs but excludes stock-based compensation. As such, segment performance is evaluated exclusive of interest, income taxes, stock-based compensation, intersegment profit elimination, and asset impairment charges. The elimination of intersegment sales and related profit represents sales from the book manufacturing segment to the specialty publishing segment.

During the first quarter of fiscal 2009, the Company changed to this current measure of reporting segment performance. Previously, reported segment results included an interest allocation. The Company’s prior year segment information has been adjusted to conform to the current year’s presentation.

The following table provides segment information for the three-month and nine-month periods ended June 27, 2009 and June 28, 2008.

	(000’s Omitted)
	Quarter Ended						Nine Months Ended
	June 27, 2009			June 28, 2008			June 27, 2009			June 28, 2008

Net sales :
Book manufacturing	$	52,691		$	63,187		$	153,472		$	166,253
Specialty publishing	11,327			13,362			34,888			45,376
Elimination of intersegment sales	(2,628		)	(3,171		)	(7,963		)	(7,601		)
Total	$	61,390		$	73,378		$	180,397		$	204,028

Pretax income (loss) :
Book manufacturing operating income	$	3,740		$	8,104		$	6,676		$	15,801
Specialty publishing operating loss	(624		)	(2,516		)	(3,117		)	(1,389		)
Impairment charges (Note A)	—			(23,850		)	(15,607		)	(23,850		)
Stock-based compensation	(347		)	(213		)	(1,072		)	(955		)
Elimination of intersegment profit	3			39			179			177
Interest expense, net	(153		)	(322		)	(574		)	(889		)
Total	$	2,619		$	(18,758	)	$	(13,515	)	$	(11,105	)

E. RESTRUCTURING COSTS

The Company recorded restructuring costs of $3.8 million in the first nine months of fiscal 2009. Restructuring costs included employee severance expenses related to cost savings initiatives in both of the Company’s segments as well as ceasing Creative Homeowner’s distribution services within the specialty publishing segment. Restructuring costs also included expenses related to closing and consolidating the Book-mart Press manufacturing facility within the book manufacturing segment during the second quarter of fiscal 2009.

COURIER CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

The following tables detail restructuring costs by segment and by classification in the accompanying consolidated statements of operations.

	(000’s Omitted)
	Quarter Ended June 27, 2009						Nine Months Ended June 27, 2009
	Book Manufacturing Segment		Specialty Publishing Segment		Total Company		Book Manufacturing Segment		Specialty Publishing Segment		Total Company

Employee severance costs	$	65	—		$	65	$	1,193	$	484	$	1,677
Write down of property, plant and equipment			—		—		591		—		591
Inventory write downs			—		—		778		—		778
Lease termination and other facility closure costs			—		—		748		—		748
Total restructuring costs	$	65	$	0	$	65	$	3,310	$	484	$	3,794

Included in cost of sales	$	65	—		$	65	$	2,819	$	107	$	2,926
Included in selling and administrative expenses	—		—		—		491		377		868
Total restructuring costs	$	65	$	0	$	65	$	3,310	$	484	$	3,794

Employee severance costs in the specialty publishing segment included centralizing back office and order fulfillment operations in addition to ceasing Creative Homeowner’s distribution services. Within the book manufacturing segment, the Company closed its Book-mart Press manufacturing facility during the second quarter in order to reduce redundant capacity and to lower costs and is consolidating its operations into the Company’s other manufacturing facilities. The Book-mart Press facility, located in North Bergen, New Jersey, was dedicated to short-run, single-color production. Also during the second quarter, a voluntary severance program was offered throughout the Company, which was followed by additional workforce reductions in the book manufacturing segment due primarily to reduced one- and two-color capacity utilization. At June 27, 2009, approximately $235,000 of severance costs were accrued in the accompanying consolidated condensed balance sheet and the Company anticipates that payments associated with employee terminations will be substantially completed by September 2009.

In connection with the closing and consolidation of the Book-mart Press facility, the Company wrote down the carrying value of assets that will not be utilized at other locations and for which the carrying value exceeded the fair value. Where applicable, the fair value of such assets was determined by estimating the proceeds that would be received based on the market value of similar assets. Lease termination and other Book-mart Press facility closure costs accrued in the accompanying consolidated condensed balance sheet at June 27, 2009 were approximately $420,000. Payments related to the lease obligation are scheduled to continue until July 2010.

F. STOCK-BASED COMPENSATION

The Company records stock-based compensation expense for the cost of stock options and stock grants as well as shares issued under the Company’s 1999 Employee Stock Purchase Plan. The fair value of each option awarded is calculated on the date of grant using the Black-Scholes option-pricing model. Stock-based compensation recognized in selling and administrative expenses in the accompanying financial statements in the third quarters of fiscal 2009 and 2008 was $347,000 and $213,000, respectively. The related tax benefit recognized in the third quarters of fiscal 2009 and 2008 was $113,000 and $62,000, respectively. For the first nine months of 2009 and 2008, stock-based compensation was $1,072,000 and $955,000, respectively, and the related tax benefit recognized was $350,000 and $293,000, respectively. Unrecognized stock-based compensation cost at June 27, 2009 was $1.4 million, to be recognized over a weighted-average period of 1.8 years.

COURIER CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

Stock Incentive Plan: The Company’s stock incentive plan provides for the granting of stock options and stock grants up to a total of 2,064,375 shares. Under the plan provisions, both non-qualified and incentive stock options to purchase shares of the Company’s common stock may be granted to key employees. The option price per share may not be less than the fair market value of stock at the time the option is granted and incentive stock options must expire not later than ten years from the date of grant. The Company annually issues a combination of stock options and stock grants to its key employees. Stock options and stock grants generally vest over 3 years.

The following is a summary of option activity under this plan in the first nine months of fiscal 2009:

			Weighted Average			Aggregate
	Option Shares		Exercise Price		Remaining Term (yrs)	Intrinsic Value
Outstanding at September 27, 2008	429,466		$	25.86
Expired	(1,552	)	36.41
Forfeited	(334	)	37.29
Outstanding at June 27, 2009	427,580		$	25.81	2.4	—

Exercisable at June 27, 2009	268,849		$	25.53	1.5	—
Available for future grants	263,880

During the first nine months of fiscal 2009, 50 stock awards were granted with a weighted-average fair value of $15.58 per share, 2,167 stock grants vested with a weighted-average fair value of $40.72 per share, and 333 stock grants were forfeited with a weighted-average fair value of $43.55 per share. At June 27, 2009, non-vested stock grants outstanding were 48,659 shares with a weighted-average grant-date fair value of $30.47.

Directors’ Option Plans: In January 2005, stockholders approved the Courier Corporation 2005 Stock Equity Plan for Non-Employee Directors (the “2005 Plan”). Under the 2005 Plan provisions, non-qualified stock options to purchase shares of the Company’s common stock may be granted to non-employee directors up to a total of 225,000 shares. The option price per share is the fair market value of stock at the time the option is granted. The options are immediately exercisable and have a term of five years. The 2005 Plan replaced the previous non-employee directors’ plan, which had been adopted in 1989. The fair value of each option grant was estimated on the date of the grant using the Black-Scholes option-pricing model. The key assumptions used to value options issued in fiscal 2009 were a risk-free interest rate of 2.0%, expected volatility of 39%, a dividend yield of 5.6%, and an expected life of five years. The following table provides activity under the directors’ option plans in the first nine months of fiscal 2009:

			Weighted Average			Aggregate
	Option Shares		Exercise Price		Remaining Term (yrs)	Intrinsic Value
Outstanding at September 27, 2008	163,620		$	31.63
Issued	42,000		15.08
Expired	(22,500	)	20.97
Outstanding at June 27, 2009	183,120		$	29.14	2.7	—

Exercisable at June 27, 2009	183,120		$	29.14	2.7	—
Available for future grants	8,994

Directors may also elect to receive their annual retainer and committee chair fees as shares of stock in lieu of cash; 9,616 such shares were issued in fiscal 2009 with a fair market value of $15.08 per share.

COURIER CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

Employee Stock Purchase Plan: The Company’s 1999 Employee Stock Purchase Plan (“ESPP”), as amended, covers an aggregate of 337,500 shares of Company common stock for issuance under the plan. Eligible employees may purchase shares of Company common stock at not less than 85% of fair market value at the end of the grant period. On March 1, 2009, 23,028 shares were issued under the ESPP at a price of $11.58 per share. At June 27, 2009, there were 29,308 shares available for future issuances.

G. NET INCOME (LOSS) PER SHARE

The following is a reconciliation of the shares used in the calculation of basic and diluted income (loss) per share. Potentially dilutive shares, calculated using the treasury stock method, consist of shares issued under the Company’s stock option plans. No potentially dilutive shares are included in the computation in periods when a loss is incurred.

	(000’s Omitted)
	Quarter Ended		Nine Months Ended
	June 27, 2009	June 28, 2008	June 27, 2009	June 28, 2008

Average shares outstanding for basic	11,861	12,252	11,844	12,397
Effect of potentially dilutive shares	10	—	—	—
Average shares outstanding for diluted	11,871	12,252	11,844	12,397

Item 2 . COURIER CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Critical Accounting Policies and Estimates :

The Company’s consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates and judgments, including those related to collectibility of accounts receivable, recovery of inventories, impairment of goodwill and other intangibles, prepublication costs and income taxes. Management bases its estimates and judgments on historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Actual results may differ from these estimates. The significant accounting policies which management believes are most critical to aid in fully understanding and evaluating the Company’s reported financial results include the following:

Accounts Receivable Management performs ongoing credit evaluations of the Company’s customers and adjusts credit limits based upon payment history and the customer’s current creditworthiness. Collections and payments from customers are continuously monitored. A provision for estimated credit losses is determined based upon historical experience and any specific customer collection issues that have been identified. If the financial condition of the Company’s customers were to deteriorate, it may result in their inability to make payments, and such events could possibly lead to their insolvency, and therefore additional allowances may be required.

Inventories Management records reductions in the cost basis of inventory for excess and obsolete inventory based primarily upon historical and forecasted product demand. If actual market conditions are less favorable than those projected by management, additional inventory charges may be required.

Goodwill and Other Intangibles Other intangibles include customer lists which are amortized on a straight-line basis over periods ranging from ten to fifteen years. The Company evaluates possible impairment of goodwill and other intangibles at the reporting unit level, which is the operating segment or one level below the operating segment, on an annual basis or whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. The Company completed its annual impairment test at September 27, 2008 resulting in no change to the nature or carrying amounts of its intangible assets in the book manufacturing segment. In the second quarter of fiscal 2009, the Company performed an interim impairment test for Dover Publications, Inc. (“Dover”), a reporting unit within the specialty publishing segment, due to the continued downturn in the economic environment and in consumer spending. As a result of the impairment test, the Company concluded that the carrying value of Dover’s goodwill exceeded its estimated fair value and a pre-tax impairment charge of $15.6 million, representing 100% of Dover’s goodwill, was recorded at the end of the second quarter. The Company continues to monitor the value of its intangible assets closely in each of its segments. Changes in market conditions, further declines in operating results or cash flows, or deterioration in the market value of the Company or its peers, could result in an impairment charge in the future. Continued disruption in the credit markets may contribute to possible future impairment charges.

Prepublication Costs The Company capitalizes prepublication costs, which include the costs of acquiring rights to publish a work and costs associated with bringing a manuscript to publication such as artwork and editorial efforts. Prepublication costs are amortized on a straight-line basis over periods ranging from three to five years. Management regularly evaluates the sales and profitability of the products based upon historical and forecasted demand. If actual market conditions are less favorable than those projected by management, additional amortization expense may be required.

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

Overview:

Courier Corporation, founded in 1824, is one of America’s leading book manufacturers and specialty publishers. The Company has two business segments: book manufacturing and specialty publishing. The book manufacturing segment streamlines the process of bringing books from the point of creation to the point of use. Based on sales, Courier is the third largest book manufacturer in the United States, offering services from prepress and production, through storage and distribution. The specialty publishing segment 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 more than 30 specialty categories ranging from literature to paper dolls, and from music scores to clip art. REA publishes test preparation and study-guide books and software for high school, college and graduate students, as well as professionals. Creative Homeowner publishes books on home design, decorating, landscaping, and gardening, and sells home plans.

Results of Operations:

	FINANCIAL HIGHLIGHTS
	(dollars in thousands except per share amounts)
	Quarter Ended								Nine Months Ended
	June 27, 2009			June 28, 2008			% Change		June 27, 2009			June 28, 2008			% Change

Net sales	$	61,390		$	73,378		-16.3	%	$	180,397		$	204,028		-11.6	%
Cost of sales	47,313			54,364			-13.0	%	141,269			148,904			-5.1	%
Gross profit	14,077			19,014			-26.0	%	39,128			55,124			-29.0	%
As a percentage of sales	22.9		%	25.9		%			21.7		%	27.0		%
Selling and administrative expenses	11,305			13,600			-16.9	%	36,462			41,490			- 12.1	%
Impairment charge	—			23,850					15,607			23,850
Operating income (loss)	2,772			(18,436		)			(12,941		)	(10,216		)
Interest expense, net	153			322			-52.5	%	574			889			-35.4	%
Pretax income (loss)	2,619			(18,758		)			(13,515		)	(11,105		)
Income tax provision (benefit)	1,007			(6,386		)			(4,657		)	(3,532		)
Net income (loss)	$	1,612		$	(12,372	)			$	(8,858	)	$	(7,573	)

Net income (loss) per diluted share	$	0.14		$	(1.01	)			$	(0.75	)	$	(0.61	)

Revenues in the third quarter and first nine months of fiscal 2009 decreased in both of the Company’s segments compared to the same periods last year. Book manufacturing segment revenues in the third quarter of fiscal 2009 were down 17% from the same period last year. On a year-to-date basis, sales in this segment were down 8% compared to the corresponding period last year, with growth in sales of four-color books offset by reduced demand for one- and two-color books. In the specialty publishing segment, revenues were down 15% in the third quarter and down 23% in the first nine months of fiscal 2009, compared to the same periods last year, primarily due to the weak economy and reduced consumer spending. The winding down of Creative Homeowner’s book distribution services early in the second quarter also contributed to the segment’s sales decline compared to prior year periods.

The Company recorded net income in the third-quarter of $1.6 million, or $.14 per diluted share, and a net loss of $8.9 million, or $.75 per diluted share, for the first nine months of the year. These results include restructuring costs related to cost saving initiatives in both of the Company’s segments of $3.8 million year to date. In addition, the Company recorded a pre-tax impairment charge of $15.6 million at the end of the second quarter related to Dover’s goodwill. For the first nine months of fiscal 2009, these restructuring and impairment charges totaled $19.4 million, or $1.05 per diluted share. The third quarter of fiscal 2008 included a pre-tax impairment charge related to Creative Homeowner’s goodwill and other intangibles of $23.9 million or $1.27 per diluted share.

Impairment Charges

The Company evaluates possible impairment of goodwill and other intangibles at the reporting unit level, which is an operating segment or one level below an operating segment, on an annual basis or whenever events or circumstances indicate that the carrying value of the assets may not be recoverable. Due to a decline in sales and profits at Dover, resulting from the continued downturn in the economic environment and in consumer spending, the Company performed an interim test of Dover’s goodwill in the second quarter of fiscal 2009. As a result of the impairment test, the Company concluded that the carrying value of Dover’s goodwill exceeded its estimated fair value and recorded a pre-tax impairment charge of $15.6 million, representing 100% of Dover’s goodwill, at the end of the second quarter. On an after-tax basis, the impairment charge was $10.1 million, or $.86 per diluted share. In the third quarter of fiscal 2008, a pre-tax impairment charge of $23.9 million was recorded related to goodwill and other intangible assets of Creative Homeowner. On an after-tax basis, this impairment charge was $15.5 million, or $1.27 per diluted share.

Restructuring Costs

The Company recorded restructuring costs of $3.8 million in the first nine months of the year. Restructuring costs included employee severance expenses related to cost savings initiatives in both of the Company’s segments as well as ceasing Creative Homeowner’s distribution services within the specialty publishing segment. Restructuring costs also included expenses related to closing and consolidating the Book-mart Press manufacturing facility within the book manufacturing segment during the second quarter of fiscal 2009. The following tables detail restructuring costs by segment and by classification in the accompanying consolidated statements of operations.

	(000’s Omitted)
	Quarter Ended June 27, 2009						Nine Months Ended June 27, 2009
	Book Manufacturing Segment		Specialty Publishing Segment		Total Company		Book Manufacturing Segment		Specialty Publishing Segment		Total Company

Employee severance costs	$	65	—		$	65	$	1,193	$	484	$	1,677
Write down of property, plant and equipment	—		—		—		591		—		591
Inventory write downs	—		—		—		778		—		778
Lease termination and other facility closure costs	—		—		—		748		—		748
Total restructuring costs	$	65	$	0	$	65	$	3,310	$	484	$	3,794

Included in cost of sales	$	65	—		$	65	$	2,819	$	107	$	2,926
Included in selling and administrative expenses	—		—		—		491		377		868
Total restructuring costs	$	65	$	0	$	65	$	3,310	$	484	$	3,794

Employee severance costs in the specialty publishing segment included centralizing back office and order fulfillment operations in addition to ceasing Creative Homeowner’s distribution services. Within the book manufacturing segment, the Company closed its Book-mart Press manufacturing facility during the second quarter in order to reduce redundant capacity and to lower costs and is consolidating its operations into the Company’s other manufacturing facilities. The Book-mart Press facility, located in North Bergen, New Jersey, was dedicated to short-run, single-color production. The Book-mart Press facility had 72 employees and sales of approximately $7 million annually. Also during the second quarter, a voluntary severance program was offered throughout the Company, which was followed by additional workforce reductions in the book manufacturing segment due primarily to reduced one- and two-color capacity utilization. Overall, total headcount has been reduced by approximately 12% during fiscal 2009. At June 27, 2009, approximately $235,000 of severance costs remained accrued and the Company anticipates that payments associated with employee terminations will be substantially completed by September 2009. Annual savings from the reduction in staffing are projected to be approximately $5 million in the book manufacturing segment and approximately $3 million in the specialty publishing segment.

In connection with the closing and consolidation of the Book-mart Press facility, the Company wrote down the carrying value of assets that will not be utilized at other locations and for which the carrying value exceeded the fair value. Where applicable, the fair value of such assets was determined by estimating the proceeds that would be received based on the market value of similar assets. Lease termination and other Book-mart Press facility closure costs accrued at June 27, 2009 were approximately $420,000. Payments related to the lease obligation are scheduled to continue until July 2010. The Company anticipates additional expenses of approximately $300,000 related to consolidating and moving equipment from the Book-mart Press facility to the Company’s other manufacturing facilities over the next six months.

Book Manufacturing Segment

	SEGMENT HIGHLIGHTS
	(dollars in thousands)
	Quarter Ended								Nine Months Ended
	June 27, 2009			June 28, 2008			% Change		June 27, 2009			June 28, 2008			% Change

Net sales	$	52,691		$	63,187		-16.6	%	$	153,472		$	166,253		-7.7	%
Cost of sales	42,824			47,536			-9.9	%	126,964			127,415			0.4	%
Gross profit	9,867			15,651			-37.0	%	26,508			38,838			-31.7	%
As a percentage of sales	18.7		%	24.8		%			17.3		%	23.4		%
Selling and administrative expenses	6,127			7,547			-18.8	%	19,832			23,037			-13.9	%
Operating income	$	3,740		$	8,104		-53.8	%	$	6,676		$	15,801		-57.7	%

Within the book manufacturing segment, the Company focuses on three key markets: education, religious and specialty trade. Sales to the education market were down 18% to $23 million in the third quarter and down 8% to $62 million for the first nine months compared to the same periods last year. Higher education sales were up for the quarter and year to date, particularly growth in sales of four-color college textbooks, while sales of elementary and high school textbooks were down, largely due to continued pressure on state and local school budgets. Sales to the specialty trade market were down 10% to $13 million in the quarter compared to last year’s third quarter. On a year-to-date basis, sales to this market were flat at $41 million when compared to the corresponding prior year period as growth in sales of four-color specialty trade books, as well as a number of new customers, was offset by declines in one- and two-color sales. Sales to the religious market were down 18% to $15 million in the third quarter and were down 10% to $44 million in the first nine months compared to the same periods last year, reflecting a difficult fundraising environment in recent months.

A continuing decline in demand for one- and two-color books resulted in reduced capacity utilization at some of the Company’s manufacturing plants. In response, faced with the weak economy and the need to reduce redundant capacity and lower costs, the Company closed its Book-mart Press manufacturing facility in the second quarter of fiscal 2009 and reduced one-color capacity in other manufacturing facilities. Cost of sales in this segment decreased 10% to $42.8 million in the third quarter and was comparable to the first nine months of last year at $127.0 million, but increased as a percentage of sales for the third quarter and year to date, reflecting the impact of restructuring costs and lower capacity utilization. Gross profit in the book manufacturing segment in the third quarter decreased to $9.9 million, or 19% of sales, down from $15.7 million, or 25% of sales, in the prior year’s third quarter. Gross profit for the first nine months decreased to $26.5 million, or 17% of sales, compared to $38.8 million, or 23% of sales, in the same period last year. In addition to the impact of lower sales and of restructuring costs of $2.8 million, the decline in gross profit year to date also reflects continued industry-wide competitive pricing pressures and reduced revenues from recycling programs.

Selling and administrative expenses for the book manufacturing segment decreased 19% in the third quarter to $6.1 million. On a year-to-date basis, such expenses decreased 14% to $19.8 million, and, as a percentage of sales, decreased to 13% from 14%. These decreases resulted from reductions in staffing and other cost saving initiatives implemented in the past year along with reduced variable compensation and were obtained despite restructuring costs of approximately $0.5 million in the second quarter of fiscal 2009.

Operating income in the book manufacturing segment in the third quarter was $3.7 million compared to operating income of $8.1 million in the same period last year. Year to date, operating income was $6.7 million compared to $15.8 million in the first nine months of last year. The decline in operating income includes restructuring costs of $3.3 million in the first nine months of fiscal 2009.

Specialty Publishing Segment

	SEGMENT HIGHLIGHTS
	(dollars in thousands)
	Quarter Ended								Nine Months Ended
	June 27, 2009			June 28, 2008			% Change		June 27, 2009			June 28, 2008			% Change

Net sales	$	11,327		$	13,362		-15.2	%	$	34,888		$	45,376		-23.1	%
Cost of sales	7,120			10,041			-29.1	%	22,447			29,268			-23.3	%
Gross profit	4,207			3,321			26.7	%	12,441			16,108			-22.8	%
As a percentage of sales	37.1		%	24.9		%			35.7		%	35.5		%
Selling and administrative expenses	4,831			5,837			-17.2	%	15,558			17,497			-11.1	%
Operating loss	$	(624	)	$	(2,516	)			$	(3,117	)	$	(1,389	)

The Company’s specialty publishing segment reported second quarter sales of $11.3 million, down 15% from last year’s third quarter, primarily due to the impact of reduced consumer spending and book retailers managing inventory levels tightly. Year-to-date segment sales decreased to $34.9 million, 23% below the first nine months of fiscal 2008. Sales at Creative Homeowner decreased 38% in the third quarter to $2.3 million and 46% in the first nine months to $8.5 million, compared to the corresponding periods last year. These decreases reflect the persistent weakness in the nation’s housing sector, which has reduced store traffic and sales in the home center market, its largest channel, as well as the impact of ceasing its distribution services. In November 2008, the Company announced that Creative Homeowner would cease its book distribution services for one nationwide retailer, which was accomplished at the beginning of January, allowing Creative Homeowner to focus on its core publishing business. Dover’s sales decreased 8% to $7.3 million in the third quarter and decreased 10% to $21.6 million year to date, compared to the same periods last year. Revenues for REA were flat in the third quarter at $1.7 million and were down 12% to $4.8 million on a year-to-date basis compared to the corresponding periods last year. Revenues for Dover and REA were also impacted by the drop in consumer spending as well as continued inventory reductions by major book retailers and distributors in the first nine months of fiscal 2009.

Cost of sales in the specialty publishing segment decreased 29% to $7.1 million for the third quarter and decreased 23% to $22.4 million for the first nine months of fiscal 2009 reflecting the lower sales volume compared to the prior year periods. The reduction in cost of sales for this segment was offset in part by restructuring costs related to employee severance of approximately $100,000. Gross profit as a percentage of sales for the segment increased in the quarter to 37% from 25% in last year’s third quarter primarily as a result of Creative Homeowner ceasing its distribution services earlier this year and from approximately $1 million in charges last year to increase inventory reserves and write down the investment in underperforming titles. On a year-to-date basis, gross profit as a percentage of sales was comparable to the prior year at 36% as the impact of lower volume was offset by cost savings initiatives, including cessation of Creative Homeowner’s distribution activities.

Selling and administrative expenses in this segment decreased 17% to $4.8 million and 11% to $15.6 million in the third quarter and first nine months, respectively, when compared to the same periods last year. The decline in such expenses reflect reduced expenses related to Creative Homeowner’s former distribution services as well as cost savings initiatives throughout the segment. These savings were offset in part by severance costs of approximately $400,000 for restructuring charges earlier in the year related to centralizing back office and order fulfillment operations in the segment in order to reduce costs and improve efficiency.

The operating loss for the specialty publishing segment for the third quarter was $624,000, compared to $2.5 million in last year’s third quarter, reflecting the impact of Creative Homeowner ceasing its distribution services earlier in this year as well as approximately $1 million in charges in last year’s third quarter to increase inventory reserves and write down the investment in underperforming titles. On a year-to-date basis, the operating loss for this segment was $3.1 million compared to $1.4 million in the first nine months of fiscal 2008, reflecting the sales shortfall resulting from reduced spending by both retailers and consumers, as well as the restructuring charges incurred earlier in the year and losses incurred prior to winding down Creative Homeowner’s distribution services in January.

Total Consolidated Company

Interest expense, net of interest income, was $153,000 in the third quarter of fiscal 2009, compared to $322,000 of net interest expense in the same quarter last year. For the first nine months, interest expense, net of interest income, was $574,000 compared to $889,000 of net interest expense in the first nine months of fiscal 2008. Average debt under the revolving credit facility in the third quarter of fiscal 2009 was approximately $27.2 million at an average annual interest rate of 0.9%, generating interest expense of approximately $62,000. Average debt under the revolving credit facility in the third quarter of last year was approximately $29.8 million at an average annual interest rate of 3.2%, generating interest expense of approximately $240,000. Average debt under the revolving credit facility for the first nine months of fiscal 2009 was approximately $26.4 million at an average annual interest rate of 1.6%, generating interest expense of approximately $320,000. For the first nine months of fiscal 2008, average debt under this facility was approximately $24.0 million at an average annual interest rate of 4.3%, generating interest expense of approximately $770,000. Interest expense also includes commitment fees and other costs associated with maintaining the Company’s $100 million revolving credit facility. Interest capitalized in the first nine months of fiscal 2008 was approximately $123,000; no interest was capitalized in the first nine months of fiscal 2009.

The income tax provision for the third quarter was $1.0 million compared to an income tax benefit of $6.4 million in the same quarter last year. On a year-to-date basis, the income tax benefit was $4.7 million compared to a benefit of $3.5 million for the first nine months of fiscal 2008. The tax benefits related to the impairment charges in both fiscal 2009 and 2008 were recognized at 35%; no state tax benefits were recognized as the Company fully provided valuation allowances on the related deferred state tax assets. The effective tax rate in the quarter was 38.4% compared to 38.6% last year after excluding the effect of the tax benefit of Creative Homeowner’s impairment charge in the prior year’s third quarter. Excluding the impairment charges in both years, the effective tax rate for the first nine months was 38.5% in fiscal 2009 compared to 37.8% last year, primarily because of a higher effective state tax rate.

Weighted average shares outstanding used to compute net income (loss) per diluted share decreased by 381,000 shares and 553,000 from last year’s third quarter and first nine months, respectively, primarily due to the Company’s repurchase of approximately 856,000 shares during fiscal 2008.

Liquidity and Capital Resources :

During the first nine months of fiscal 2009, operations provided $14.9 million of cash. The year-to-date net loss of $8.9 million included a non-cash, after-tax impairment charge of $10.1 million. Depreciation and amortization was $15.8 million, slightly lower than the first nine months of last year. Working capital used $4.7 million compared to $9.6 million in the same period last year. The improvement in working capital was primarily from a reduction in accounts receivable of $9.5 million, which was offset by an increase in inventories of $2.4 million and a decrease in accounts payable and accrued taxes totaling $9.6 million.

Investment activities in the first nine months of fiscal 2009 used $8.8 million of cash. Capital expenditures were $5.6 million, compared to $7.8 million in the same period last year. For the entire fiscal year, capital expenditures are expected to be approximately $10 million, including approximately $4 million for the completion during the second quarter of a 150,000 square foot warehouse to support the expanded capacity at the Kendallville, Indiana facility. Prepublication costs were $3.1 million, down from $3.7 million in the first nine months of last year. For the full fiscal year, prepublication costs are projected to be between $4 and $4.5 million, slightly below last year’s $5 million.

Financing activities for the first nine months of fiscal 2009 used approximately $6.2 million of cash. Cash dividends of $7.5 million were paid and borrowings increased by $0.9 million during the first nine months of fiscal 2009. The Company has a $100 million long-term revolving credit facility in place under which the Company can borrow at a rate not to exceed LIBOR plus 1.5%. At June 27, 2009, the Company had $24.4 million in borrowings under this facility at an interest rate of 0.8%. The revolving credit facility, which matures in 2013, contains restrictive covenants including provisions relating to the maintenance of working capital, the incurrence of additional indebtedness and a quarterly test of EBITDA to debt service. The Company was in compliance with all such covenants at June 27, 2009. The facility also provides for a commitment fee not to exceed 3/8% per annum on the unused portion. The revolving credit facility is used 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 to meet its cash requirements through 2009.

Recent Accounting Pronouncements:

In May 2009, the FASB issued SFAS No.165, “Subsequent Events” (“SFAS 165”). SFAS 165 establishes requirements for subsequent events. SFAS 165 was effective for interim or annual periods ending after June 15, 2009. Adoption of SFAS 165 in the third quarter did not have a significant effect on the Company’s consolidated financial position, results of operations or cash flows.

Forward-Looking Information :

This Quarterly Report on Form 10-Q includes forward-looking statements. Statements that describe future expectations, plans or strategies are considered “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995 and releases issued by the Securities and Exchange Commission. The words “believe,” “expect,” “anticipate,” “intend,” “estimate” and other expressions which are predictions of or indicate future events and trends and which do not relate to historical matters identify forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those currently anticipated. Factors that could affect actual results include, among others, changes in customers’ demand for the Company’s products, including seasonal changes in customer orders and shifting orders to lower cost regions, changes in market growth rates, changes in raw material costs and availability, pricing actions by competitors and other competitive pressures in the markets in which the Company competes, consolidation among customers and competitors, success in the execution of acquisitions and the performance and integration of acquired businesses including carrying value of intangible assets, restructuring and impairment charges required under generally accepted accounting principles, changes in operating expenses including medical and energy costs, changes in technology including migration from paper-based books to digital, difficulties in the start up of new equipment or information technology systems, changes in copyright laws, changes in consumer product safety regulations, changes in environmental regulations, changes in tax regulations, changes in the Company’s effective income tax rate and general changes in economic conditions, including currency fluctuations, changes in interest rates, changes in consumer confidence, changes in the housing market, and tightness in the credit markets. Although the Company believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements will prove to be accurate. The forward-looking statements included herein are made as of the date hereof, and the Company undertakes no obligation to update publicly such statements to reflect subsequent events or circumstances.

Item 3 . QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes from the information concerning the Company’s “Quantitative and Qualitative Disclosures About Market Risk” as previously reported in the Company’s Annual Report on Form 10-K for the year ended September 27, 2008.

Item 4 . CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this Quarterly Report, the Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.

(b) Changes in internal controls over financial reporting

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

PART II. OTHER INFORMATION

Item 1 . Legal Proceedings

None.

Item 1A . Risk Factors

The Company’s consolidated results of operations, financial condition and cash flows can be adversely affected by various risks. Our business is influenced by many factors that are difficult to predict, involve uncertainties that may materially affect actual results and are often beyond our control. These risks include, but are not limited to, the principal factors listed below and the other matters set forth in this Quarterly Report on Form 10-Q. You should carefully consider all of these factors. For other factors that may cause actual results to differ materially from those indicated in any forward-looking statement contained in this report, see Forward-Looking Information in Management’s Discussion and Analysis of Financial Condition and Results of Operations .

Highly competitive markets for our products and industry consolidation may create increased pricing pressures.

The book industry is extremely competitive. In the book manufacturing segment, consolidation over the past few years of both customers and competitors within the markets the Company competes has caused downward pricing pressures. In addition, excess capacity and competition from printing companies in lower cost countries may increase competitive pricing pressures. Furthermore, some of our competitors have greater sales, assets and financial resources than us, particularly those in foreign countries, who may derive significant advantages from local governmental regulation, including tax holidays and other subsidies. All or any of these competitive pressures could affect prices or customers’ demand for our products, impacting our profit margins and/or resulting in a loss of customers and market share.

We need to keep pace with rapid industry and technological change.

The printing industry is in a period of rapid technological evolution. Our future financial performance will depend, in part, upon the ability to anticipate and adapt to rapid industry and technological changes occurring in the industry and upon the ability to offer, on a timely basis, services that meet evolving industry standards. We cannot assure investors that we will be able to adapt to such technological changes or offer these services on a timely basis or establish or maintain a competitive position. We are unable to predict which of the many possible future product and service offerings will be important to establish and maintain a competitive position or what expenditures will be required to develop and provide these products and services. We cannot assure investors that one or more of these factors will not vary unpredictably, which could have a material adverse effect on us. In addition, we cannot assure investors, even if these factors turn out as we anticipate, that we will be able to implement our strategy or that the strategy will be successful in this rapidly evolving market.

Our operating results are dependent in part on unpredictable order patterns.

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

·	the timing and size of the orders for our books;

·	the availability of markets for sales or distribution by our major customers;

·	the lengthy and unpredictable sales cycles associated with sales of textbooks to the elementary and high school market;

·	our customers’ willingness and success in shifting orders from the peak textbook season to the off-peak season to even out our manufacturing load over the year;

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

·	issues that might arise from the integration of acquired businesses, including their inability to achieve expected results; and

·	tightness in credit markets affecting the availability of capital for ourselves, our vendors, and/or our customers.

As a result of these and other factors, period-to-period comparisons of our operating results are not necessarily meaningful or indicative of future performance. In addition, the factors noted above may make it difficult for us to forecast and provide in a timely manner public guidance (including updates to prior guidance) related to our projected financial performance. Furthermore, it is possible that in future quarters our operating results could fall below the expectations of securities analysts or investors. If this occurs, the trading price of our common stock could decline.

Fluctuations in the cost and availability of paper and other raw materials may cause disruption and impact margins.

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

Availability of paper is important to both our book manufacturing and specialty publishing segments. Although we generally have not experienced difficulty in obtaining adequate supplies of paper, unexpected changes in the paper markets could result in a shortage of supply. If this were to occur in the future, it could cause disruption to the business or increase paper costs, adversely impacting either or both net sales or profits.

Fluctuations in the costs and availability of other raw materials could adversely affect operating costs or customer demand and thereby negatively impact our operating results, financial condition or cash flows.

In addition, fluctuations in the markets for paper and raw materials may adversely affect the market for our waste byproducts, including recycled paper, used plates and used film, and therefore adversely affect our income from such sales.

Energy costs and availability may negatively impact our financial results.

Energy costs are incurred directly to run production equipment and facilities and indirectly through expenses such as freight and raw materials such as ink. In a competitive market environment, increases to these direct and indirect energy related costs might not be able to be passed through to customers through price increases or mitigated through other means. In such instances, increased energy costs could adversely impact operating costs or customer demand. In addition, interruption in the availability of energy could disrupt operations, adversely impacting operating results.

We may not be able to continue to improve our operating efficiencies.

Because the markets in which we operate are highly competitive, we must continue to improve our operating efficiency in order to maintain or improve our profitability. Although we have been able to expand our capacity, improve our productivity and reduce costs in the past, there is no assurance that we will be able to do so in the future. In addition, reducing operating costs in the future may require significant initial costs to reduce headcount, close or consolidate operations, or upgrade equipment and technology.

Inadequate intellectual property protection for our publications could negatively impact our financial results.

Certain of our publications are protected by copyright, primarily held in the Company’s name. Such copyrights protect our exclusive right to publish the work in the United States and in many other countries for specified periods. Our ability to continue to achieve anticipated results depends in part on our ability to defend our intellectual property against infringement. Our operating results may be adversely affected by inadequate legal and technological protections for intellectual property and proprietary rights in some jurisdictions and markets. In addition, some of our publications are of works in the public domain, for which there is nearly no intellectual property protection. Our operating results may be adversely affected

by the increased availability of such works elsewhere, including on the Internet, either for free or for a lower price.

We have a high degree of customer concentration.

We derived approximately 50% of our fiscal 2008 revenues from three major customers, and in fiscal 2007 and 2006 we derived approximately 35% and 40%, respectively, of our revenues from two major customers. We expect similar concentrations in fiscal 2009. A significant reduction in order volumes or price levels from any of these customers could have a material adverse effect on the Company.

Declines in general economic conditions may adversely impact our business.

Economic conditions have the potential to impact our financial results significantly. Within the book manufacturing and specialty publishing segments, we may be adversely affected by the current worldwide economic downturn, including as a result of changes in government, business and consumer spending. Examples of how our financial results may be impacted include:

·	Fluctuations in federal or state government spending on education, including a reduction in tax revenues due to the current economic environment, could lead to a corresponding decrease or increase in the demand for educational materials, which are produced in our book manufacturing segment and comprise a portion of our publishing products.

·	Consumer demand for books can be impacted by reductions in disposable income when costs such as electricity and gasoline reduce discretionary spending.

·	Tightness in credit markets may result in customers delaying orders to reduce inventory levels and may impact their ability to pay their debts as they become due and may disrupt supplies from vendors.

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

·	Reduced fundraising by religious customers may decrease their order level.

·	A slowdown in book purchases may result in retailers returning an unusually large number of books to publishers who, in turn reduce their reorders.

The substitution of electronic delivery for printed materials may adversely affect our business.

Electronic delivery of documents and data, including the online distribution and hosting of media content, offers alternatives to traditional delivery of printed documents. Consumer acceptance of electronic delivery of books is uncertain, as is the extent to which consumers are willing to replace print materials with online hosted media content. To the extent that our customers accept these electronic alternatives, demand for our printed products may be adversely affected.

Changes in postal rates and postal regulations may adversely impact our business.

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

Our facilities are subject to stringent environmental laws and regulations, which may subject us to liability or increase our costs.

We use various materials in our operations that contain substances considered hazardous or toxic under environmental laws. In addition, our operations are subject to federal, state, and local environmental laws relating to, among other things, air emissions, waste generation, handling, management and disposal, waste water treatment and discharge and remediation of soil and groundwater contamination. Permits are required for the operation of certain of our businesses and these permits are subject to renewal, modification and in some circumstances, revocation. Under certain environmental laws, including the Comprehensive Environmental Response, Compensation and Liability Act, as amended (“CERCLA,” commonly referred to as “Superfund”), and similar state laws and regulations, we may be liable for costs and damages relating to soil and groundwater contamination at off-site disposal locations or at our own

facilities. Future changes to environmental laws and regulations may give rise to additional costs or liabilities that could have a material adverse impact on our financial position and results of operations.

We may not be able to successfully integrate acquired businesses.

In recent years, we have completed three acquisitions, including Moore Langen and Creative Homeowner in fiscal year 2006 and REA in fiscal 2004, and may continue to make acquisitions in the future. We believe that these acquisitions provide strategic growth opportunities for us. Achieving the anticipated benefits of these acquisitions will depend in part upon our ability to integrate these businesses in an efficient and effective manner. The challenges involved in successfully integrating acquisitions include:

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

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

·	we may have difficulty incorporating and integrating acquired technologies into our business;

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

·	we may have difficulty maintaining uniform standards, controls, procedures and policies across locations;

·	an acquisition may result in litigation from terminated employees of the acquired business or third parties; and

·	we may experience significant problems or liabilities associated with technology and legal contingencies of the acquired business.

These factors could have a material adverse effect on our business, results of operations and financial condition or cash flows, particularly in the case of a larger acquisition or multiple acquisitions in a short period of time. From time to time, we may enter into negotiations for acquisitions that are not ultimately consummated. Such negotiations could result in significant diversion of management’s time from our business as well as significant out-of-pocket costs. Tightness in credit markets may also affect our ability to consummate such acquisitions.

The consideration that we pay in connection with an acquisition could affect our financial results. If we were to proceed with one or more significant acquisitions in which the consideration included cash, we could be required to use a substantial portion of our available cash and credit facilities to consummate such acquisitions. To the extent we issue shares of stock or other rights to purchase stock, including options or other rights, our existing stockholders may experience dilution in their share ownership in our company and their earnings per share may decrease. In addition, acquisitions may result in the incurrence of debt, large one-time write-offs and restructuring charges. They may also result in goodwill and other intangible assets that are subject to impairment tests, which could result in future impairment charges. Any of these factors may materially and adversely affect our business and operations.

Our financial results could be negatively impacted by impairments of goodwill or other intangible assets required by SFAS 142 and the application of future accounting policies or interpretations of existing policies.

In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), we perform an annual assessment for impairment of goodwill and other intangible assets at the end of our fiscal year or whenever events or changes in circumstances occur that would more likely than not reduce the fair value of a reporting unit below it’s carrying value. A downward revision in the fair value of one of our acquired businesses could result in impairments of goodwill under SFAS 142 and non-cash charges. Any charge resulting from the application of SFAS 142 could have a significant negative effect on our reported results of operations. In addition, our financial results could be negatively impacted by the application of existing and future accounting policies or interpretations of existing accounting policies, any continuing impact of SFAS 142 or any negative impact relating to the application of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”

Our ability to hire and train key executives and other qualified employees is crucial.

Our success depends, in part, on our ability to continue to retain our executive officers and key management personnel. Our business strategy also depends on our ability to attract, develop, motivate and retain employees who have relevant experience in the printing and publishing industries. There can be no assurance that we can continue to attract and retain the necessary talented employees, including executive officers and other key members of management. If that were to occur, it could adversely affect our business.

We need skilled employees to manufacture our products.

If we experience problems hiring and retaining skilled employees, our business may be negatively affected. The timely manufacture and delivery of our products requires an adequate supply of skilled employees, and the operating costs of our manufacturing facilities can be adversely affected by high turnover in skilled positions. Accordingly, our ability to increase sales, productivity and net earnings could be impacted by our ability to employ the skilled employees necessary to meet our requirements. Although our book manufacturing locations are geographically dispersed, individual locations may encounter strong competition with other manufacturers for skilled employees. There can be no assurance that we will be able to maintain an adequate skilled labor force necessary to efficiently operate our facilities. In addition, unions represent certain groups of employees at two of our locations, and periodically, contracts with those unions come up for renewal. The outcome of those negotiations could have an adverse affect on our operations at those locations. Also, changes in federal and/or state laws may facilitate the organization of unions at locations that do not currently have unions, which could have an adverse affect on our operations.

Compliance with changing regulation of corporate governance, public disclosure and accounting matters may result in additional expenses.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and new rules subsequently implemented by the Securities and Exchange Commission and the stock exchanges, as well as new accounting pronouncements, are creating uncertainty and additional complexities for companies. To maintain high standards of corporate governance and public disclosure, we continue to invest resources to comply with evolving standards. This investment may result in increased general and administrative expenses and a diversion of management time and attention from revenue generating and cost management activities.

We are subject to various laws and regulations where we operate our business.

We are subject to federal, state and local laws and regulations affecting our business, including those promulgated under the Consumer Product Safety Act, the rules and regulations of the Consumer Products Safety Commission as well as laws and regulations relating to personal information. We may be required to make significant expenditures to comply with such governmental laws and regulations and any amendments thereto. Complying with existing or future laws or regulations may materially limit our business and increase our costs. Failure to comply with such laws may expose us to potential liability and have a material adverse effect on our results of operations.

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

There have been no material changes to the procedures by which security holders may recommend nominees to the Company’s Board of Directors.

Item 6 . Exhibits

Exhibit No.		Description
10.1*		Amendment, effective July 15, 2009, to the Courier Corporation Amended and Restated 1993 Stock Incentive Plan
10.2*		Amendment, effective July 15, 2009, to the Courier Corporation 2005 Stock Equity Plan for Non-Employee Directors
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.

SIGNATURES

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

COURIER CORPORATION
(Registrant)


August 6, 2009	By:	s/James F. Conway III
Date		James F. Conway III
		Chairman, President and
		Chief Executive Officer


August 6, 2009	By:	s/Peter M. Folger
Date		Peter M. Folger
		Senior Vice President and
		Chief Financial Officer


August 6, 2009	By:	s/Kathleen M. Leon
Date		Kathleen M. Leon
		Vice President and
		Controller

EXHIBIT INDEX

Exhibit No.		Description

10.1*		Amendment, effective July 15, 2009, to the Courier Corporation Amended and Restated 1993 Stock Incentive Plan
10.2*		Amendment, effective July 15, 2009, to the Courier Corporation 2005 Stock Equity Plan for Non-Employee Directors
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