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 30, 2007

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 is a large accelerated filer, an accelerated filer or a non-accelerated filer (as defined in Exchange Act Rule 12b-2).

Large accelerated filer o

Accelerated filer x

Non-accelerated filer o

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 issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at August 7, 2007
Common Stock, $1 par value		12,561,332 shares

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

	QUARTER ENDED				NINE MONTHS ENDED
	June 30,		June 24,		June 30,		June 24,
	2007		2006		2007		2006
Net sales	$	73,411	$	70,424	$	214,059	$	185,635
Cost of sales	48,986		48,310		145,860		127,115

Gross profit	24,425		22,114		68,199		58,520

Selling and administrative expenses	13,402		12,560		41,106		35,363
Interest expense (income), net	419		168		1,117		(80		)

Pretax income	10,604		9,386		25,976		23,237

Provision for income taxes (Note C)	3,923		3,330		9,663		8,301

Net income	$	6,681	$	6,056	$	16,313	$	14,936

Net income per share (Note D):

Basic	$	0.53	$	0.49	$	1.31	$	1.21

Diluted	$	0.53	$	0.48	$	1.29	$	1.19

Cash dividends declared per share	$	0.18	$	0.12	$	0.54	$	0.36

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

COURIER CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)

	June 30,		September 30,
ASSETS	2007		2006
Current assets:
Cash and cash equivalents	$	1,345	$	1,483
Accounts receivable, less allowance for uncollectible accounts of $1,754 at June 30, 2007 and $1,593 at September 30, 2006	46,832		46,002
Inventories (Note B)	40,304		29,565
Deferred income taxes	3,886		3,703
Other current assets	1,953		1,110

Total current assets	94,320		81,863

Property, plant and equipment, less accumulated depreciation of $138,413 at June 30, 2007 and $129,323 at September 30, 2006	92,926		85,248

Goodwill (Note A)	55,200		55,406

Other intangibles, net (Note A)	13,090		13,691

Prepublication costs (Note A)	10,303		9,327

Other assets	1,752		1,653

Total assets	$	267,591	$	247,188

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

COURIER CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)

	June 30,		September 30,
LIABILITIES AND STOCKHOLDERS’ EQUITY	2007		2006
Current liabilities:
Current maturities of long-term debt	$	88	$	88
Accounts payable	16,903		15,778
Accrued payroll	7,589		9,534
Accrued taxes	558		3,362
Other current liabilities	6,784		6,928

Total current liabilities	31,922		35,690

Long-term debt	27,251		17,222
Deferred income taxes	10,116		8,913
Other liabilities	3,089		3,037

Total liabilities	72,378		64,862

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 12,561,000 at June 30, 2007 and 12,445,000 at September 30, 2006	12,561		12,445

Additional paid-in capital	11,795		8,592
Retained earnings	170,857		161,289

Total stockholders’ equity	195,213		182,326

Total liabilities and stockholders’ equity	$	267,591	$	247,188

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 30,			June 24,
	2007			2006
Operating Activities:
Net income	$	16,313		$	14,936
Adjustments to reconcile net income to cash provided from operating activities:
Depreciation and amortization	14,201			10,857
Stock-based compensation	1,101			1,055
Deferred income taxes	1,351			1,236
Changes in current assets and liabilities:
Accounts receivable	(830		)	1,497
Inventory	(10,739		)	(1,205		)
Accounts payable	1,125			(2,110		)
Accrued taxes	(2,804		)	(1,002		)
Other elements of working capital	(3,057		)	(2,007		)
Other, net	(173		)	(153		)

Cash provided from operating activities	16,488			23,104

Investment Activities:
Capital expenditures	(17,920		)	(14,821		)
Business acquisition, net of cash acquired	—			(51,164		)
Prepublication costs	(4,327		)	(2,737		)

Cash used for investment activities	(22,247		)	(68,722		)

Financing Activities:
Long-term debt borrowings, net	10,029			16,793
Cash dividends	(6,745		)	(4,439		)
Proceeds from stock plans	1,806			936
Excess tax benefits from stock-based compensation	531			—

Cash provided from financing activities	5,621			13,290

Decrease in cash and cash equivalents	(138		)	(32,328		)

Cash and cash equivalents at the beginning of the period	1,483			34,038

Cash and cash equivalents at the end of the period	$	1,345		$	1,710

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 balance sheet as of June 30, 2007, the statements of income for the three-month and nine-month periods ended June 30, 2007 and June 24, 2006, and the statements of cash flows for the nine-month periods ended June 30, 2007 and June 24, 2006 are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been recorded. Such adjustments consisted only of normal recurring items.

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 30, 2006 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 Form 10-K and Annual Report for the year ended September 30, 2006.

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 years for Research & Education Association, Inc. (“REA”), four years for Dover Publications, Inc. (“Dover”) and five years for Federal Marketing Corporation d/b/a Creative Homeowner (“Creative Homeowner”).

Goodwill and Other Intangibles

The Company evaluates possible impairment annually or whenever events or circumstances indicate that the carrying value of the assets may not be recoverable. There were no such events or circumstances in the period presented. Other intangibles include customer lists related to the fiscal 2006 acquisitions of Creative Homeowner and Moore-Langen Printing Company, Inc. (“Moore Langen”), which are being amortized over 15-year and 10-year periods, respectively (Note G). Amortization expense related to customer lists in the third quarters of fiscal 2007 and 2006 was approximately $200,000 and $140,000, respectively, and for the first nine months of fiscal 2007 and 2006 was approximately $600,000 and $150,000, respectively.

New Accounting Pronouncements

In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN No. 48”), an interpretation of FASB Statement No. 109, “Accounting for Income Taxes.” FIN No. 48 applies to fiscal years beginning after December 15, 2006; the Company’s 2008 fiscal year. In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (“SFAS 158”), which will be effective at the end of the Company’s 2007 fiscal year. The Company does not believe the adoption of either FIN No. 48 or SFAS 158 will have a material effect on its consolidated financial position, results of operations or cash flows.

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 46% and 37% of the Company’s inventories at June 30, 2007 and September 30, 2006, 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 30, 2007		September 30, 2006
Raw materials	$	5,344	$	3,910
Work in process	10,065		6,295
Finished goods	24,895		19,360
Total	$	40,304	$	29,565

C. INCOME TAXES

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

	(000’s Omitted)
	Quarter Ended
	June 30, 2007					June 24, 2006
Federal taxes at statutory rates	$	3,711		35.0	%	$	3,284		35.0	%
State taxes, net of federal benefit	329			3.1		268			2.9
Federal manufacturers’ deduction	(91		)	(0.9	)	(84		)	(0.9	)
Tax benefit of export related income	(44		)	(0.4	)	(200		)	(2.1	)
Stock-based compensation (Note F)	17			0.2		38			0.4
Other	1			-		24			0.2
Total	$	3,923		37.0	%	$	3,330		35.5	%

	(000’s Omitted)
	Nine Months Ended
	June 30, 2007					June 24, 2006
Federal taxes at statutory rates	$	9,092		35.0	%	$	8,133		35.0	%
State taxes, net of federal benefit	828			3.2		678			2.9
Federal manufacturers’ deduction	(223		)	(0.9	)	(198		)	(0.9	)
Tax benefit of export related income	(100		)	(0.4	)	(422		)	(1.8	)
Stock-based compensation (Note F)	39			0.2		113			0.5
Other	27			0.1		(3		)	-
Total	$	9,663		37.2	%	$	8,301		35.7	%

D. NET INCOME PER SHARE

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

	(000’s Omitted)
	Quarter Ended		Nine Months Ended
	June 30, 2007	June 24, 2006	June 30, 2007	June 24, 2006
Average shares outstanding for basic	12,491	12,333	12,451	12,309
Effect of potentially dilutive shares	217	274	233	273
Average shares outstanding for diluted	12,708	12,607	12,684	12,582

E. 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 and REA, as well as Creative Homeowner since its acquisition in April 2006 (Note G).

In evaluating segment performance, management primarily focuses on income or loss before taxes, stock-based compensation and other income. The elimination of intersegment sales and related profit represents sales from the book manufacturing segment to the specialty publishing segment. Corporate expenses that are allocated to the segments include various support functions such as information technology services, finance, legal, human resources and engineering, and include depreciation and amortization expense related to corporate assets.

The following table provides segment information for the quarter and nine-month periods ended June 30, 2007 and June 24, 2006.

	(000’s Omitted)
	Quarter Ended						Nine Months Ended
	June 30, 2007			June 24, 2006			June 30, 2007			June 24, 2006
Net sales:
Book manufacturing	$	58,497		$	57,700		$	168,923		$	155,365
Specialty publishing	17,917			15,243			52,835			36,426
Elimination of intersegment sales	(3,003		)	(2,519		)	(7,699		)	(6,156		)
Total	$	73,411		$	70,424		$	214,059		$	185,635

Income before taxes:
Book manufacturing	$	10,147		$	8,731		$	23,915		$	21,232
Specialty publishing	844			1,120			3,014			3,269
Stock-based compensation	(375		)	(359		)	(1,101		)	(1,055		)
Elimination of intersegment profit	(12		)	(106		)	148			(209		)
Total	$	10,604		$	9,386		$	25,976		$	23,237

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 quarter of fiscal 2007 and 2006 was $375,000 and $359,000, respectively, and the related tax benefit recognized was $118,000 and $87,000, respectively. For the first nine months of 2007 and 2006, stock-based compensation was $1,101,000 and $1,055,000, respectively, and the related tax benefit recognized was $342,000 and $255,000, respectively. Unrecognized stock-based compensation cost at June 30, 2007 was $1.8 million, to be recognized over a weighted-average period of 1.8 years.

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. For the first nine months of fiscal 2007, a total of 11,093 such shares were granted with a weighted-average fair value of $38.46; no such shares were issued in the third quarter. During the third quarter and year-to-date fiscal 2007, 2,001 restricted stock grants vested with a weighted-average fair value of $43.04. At June 30, 2007, non-vested restricted stock grants outstanding were 45,062 shares with a weighted-average grant-date fair value of $34.51.

The following table provides stock option activity under this plan in the first nine months of fiscal 2007:

			Weighted Average			Aggregate
	Option Shares		Exercise Price		Remaining Term (yrs)	Intrinsic Value
Outstanding at September 30, 2006	401,891		$	21.69
Issued	5,384		38.82
Exercised	(65,240	)	15.64			$	1,601,000
Outstanding at June 30, 2007	342,035		$	23.11	3.0	$	5,777,000

Exercisable at June 30, 2007	275,958		$	19.84	2.6	$	5,564,000
Available for future grants	255,948

The fair value of each option grant was estimated using the Black-Scholes option-pricing model on the date of the grant. The key assumptions used to value the options granted to date in fiscal 2007 were a risk-free interest rate of 4.7%, expected volatility of 27%, a dividend yield of 1.9%, and an expected life of 5 years.

Directors’ Option Plan: 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. Directors may also elect to receive their annual retainer and committee chair fees as shares of stock in lieu of cash; 4,338 such shares were issued in the second quarter of fiscal 2007 with a fair market value of $39.18 per share.

The following table provides activity under the directors’ option plans in the first nine months of fiscal 2007:

			Weighted Average			Aggregate
	Option Shares		Exercise Price		Remaining Term (yrs)	Intrinsic Value
Outstanding at September 30, 2006	185,127		$	25.78
Issued	38,064		39.18
Exercised	(40,794	)	19.67			$	800,000
Outstanding at June 30, 2007	182,397		$	29.95	2.6	$	1,834,000

Exercisable at June 30, 2007	182,397		$	29.95	2.6	$	1,834,000
Available for future grants	93,282

The key assumptions used to value the 38,064 options issued in the second quarter were a risk-free interest rate of 4.7%, expected volatility of 27%, a dividend yield of 1.8%, and an expected life of 5 years.

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, 2007, 9,529 shares were issued under the ESPP at a price of $32.47 per share.

G. BUSINESS ACQUISITIONS

On October 17, 2005, the Company acquired Moore Langen, an Indianapolis-based printer specializing in book covers, in a $15 million cash transaction. The acquisition was accounted for as a purchase, and accordingly, Moore Langen’s financial results were included in the book manufacturing segment in the consolidated financial statements from the date of acquisition.

On April 28, 2006, the Company acquired Creative Homeowner, a New Jersey-based publisher and distributor of books, home plans and related products for the home and garden retail book market. The Company purchased 100% of the stock in a $37 million cash transaction. The acquisition was accounted for as a purchase, and accordingly, Creative Homeowner’s financial results were included in the specialty publishing segment in the consolidated financial statements from the date of acquisition. In the third quarter of fiscal 2007, adjustments were made to the allocation of Creative Homeowner’s purchase price to assets resulting in a reduction of approximately $200,000 to goodwill. The final allocation of purchase price to assets acquired was as follows:

Goodwill	$	16,414,000
Customer lists	11,502,000
Prepublication costs	3,046,000
Trade name	1,370,000
Accounts receivable	7,485,000
Inventory	2,876,000
Property, plant and equipment	440,000
Accounts payable	(4,863,000		)
Other liabilities assumed	(2,230,000		)
Other assets	971,000
Total purchase price	$	37,011,000

COURIER CORPORATION

Item 2. 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, 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, resulting in an impairment of their ability to make payments, 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 annually or whenever events or circumstances indicate that the carrying value of the assets may not be recoverable. The Company completed the annual impairment test at September 30, 2006 resulting in no change to the nature or carrying amounts of its intangible assets. Changes in market conditions or poor operating results could result in a decline in value thereby potentially requiring an impairment charge in the future.

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. Based upon this evaluation, adjustments may be required to amortization expense.

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”), acquired in April 2006. Dover publishes over 9,000 titles in more than 30 specialty categories ranging from literature and poetry classics 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 and distributes books, home plans and related products to the home and garden market.

Results of Operations:

	FINANCIAL HIGHLIGHTS
	(dollars in thousands except per share amounts)
	Quarter Ended								Nine Months Ended
	June 30, 2007			June 24, 2006			% Change		June 30, 2007			June 24, 2006			% Change

Net sales	$	73,411		$	70,424		4.2	%	$	214,059		$	185,635		15.3	%
Cost of sales	48,986			48,310			1.4	%	145,860			127,115			14.7	%
Gross profit	24,425			22,114			10.5	%	68,199			58,520			16.5	%
As a percentage of sales	33.3		%	31.4		%			31.9		%	31.5		%
Selling and administrative expenses	13,402			12,560			6.7	%	41,106			35,363			16.2	%
Interest expense (income), net	419			168					1,117			(80		)
Pretax income	10,604			9,386			13.0	%	25,976			23,237			11.8	%
Net income	$	6,681		$	6,056		10.3	%	$	16,313		$	14,936		9.2	%
Net income per diluted share	$	0.53		$	0.48		10.4	%	$	1.29		$	1.19		8.4	%

Revenues in the third quarter and first nine months of fiscal 2007 increased in both of the Company’s operating segments compared to the same periods last year. Book manufacturing revenues were up 1% for the third quarter and 9% year to date compared to the corresponding periods last year, including strong growth in sales to the education market. Sales in the specialty publishing segment were up 18% in the third quarter and 45% for the first nine months compared to the same periods last year, reflecting incremental sales from the April 2006 acquisition of Creative Homeowner as well as strength in sales of test-preparation books.

Business Acquisitions

On April 28, 2006, the Company acquired Creative Homeowner, a New Jersey-based publisher and distributor of books, home plans and related products for the home and garden retail book market. The acquisition was accounted for as a purchase, and accordingly, Creative Homeowner’s financial results were included in the specialty publishing segment in the consolidated financial statements from the date of acquisition. On October 17, 2005, the Company acquired Moore-Langen Printing Company, Inc. (“Moore Langen”), an Indianapolis-based printer specializing in book covers. The acquisition was accounted for as a purchase, and accordingly, Moore Langen’s financial results were included in the book manufacturing segment from the date of acquisition.

Book Manufacturing Segment

	SEGMENT HIGHLIGHTS
	(dollars in thousands except per share amounts)
	Quarter Ended								Nine Months Ended
	June 30, 2007			June 24, 2006			% Change		June 30, 2007			June 24, 2006			% Change

Net sales	$	58,497		$	57,700		1.4	%	$	168,923		$	155,365		8.7	%
Cost of sales	41,254			42,139			-2.1	%	122,951			113,076			8.7	%
Gross profit	17,243			15,561			10.8	%	45,972			42,289			8.7	%
As a percentage of sales	29.5		%	27.0		%			27.2		%	27.2		%
Selling and administrative expenses	7,144			6,972			2.5	%	22,318			21,543			3.6	%
Interest expense (income)	(48		)	(142		)			(261		)	(486		)
Pretax income	$	10,147		$	8,731		16.2	%	$	23,915		$	21,232		12.6	%

Within this segment, the Company focuses on three key markets: education, religious and specialty trade. Sales to the education market increased $5.4 million, or 23%, to $28.9 million in the third quarter of fiscal 2007 compared to the same period last year, with the greatest growth in four-color textbooks. For the first nine months, sales to this market increased by $10.8 million, or 18%, to $70.6 million compared to the corresponding period last year. Textbook demand started very slowly in the beginning of the fiscal year, but picked up strongly starting in December. The start up of the Company’s third new four-color press was completed at the end of the first quarter of fiscal 2007 and provided the necessary capacity to meet the increasing demand for educational books. Sales to the religious market were down 27% to $13.3 million in the third quarter compared to last year, following a 22% increase in the second quarter, reflecting timing issues as well as reduced orders from a large customer. On a year-to-date basis, sales to the religious market were $45.9 million, a decrease of 5% compared to the same period of fiscal 2006. Sales to the specialty trade market were up $2.5 million, or 26%, to $12.3 million for the third quarter and were up $7.3 million, or 22%, to $40.7 million for the first nine months compared to the corresponding periods last year as a result of several large one-time orders combined with share increases across a range of customers.

Cost of sales in this segment decreased by 2.1% to $41.3 million for the quarter, reflecting the efficiency of the new four-color press as well as other gains in productivity. The new press, which began operation in the Kendallville, Indiana plant in December 2006, had a smooth start up without significant additional costs. On a year-to-date basis, cost of sales increased 8.7% to $123.0 million compared to the same period last year, reflecting higher sales volume and higher health care costs. Gross profit in this segment increased by 10.8% to $17.2 million for the quarter, and as a percentage of sales increased to 29.5% from 27.0% in last year’s third quarter, reflecting high capacity utilization and the productivity gains achieved which more than offset continued pricing pressure in this segment. Gross profit for the first nine months of fiscal 2007 increased 8.7% to $46.0 million and, as a percentage of sales, was comparable to the corresponding period last year at 27.2%.

Selling and administrative expenses for the segment increased 2.5% in the third quarter to $7.1 million and as a percentage of sales was 12.2%, comparable to last year’s third quarter. For the first nine months of fiscal 2007, such expenses increased 4% to $22.3 million and, as a percentage of sales, decreased to 13.2% from 13.9% in the same period last year.

Intercompany interest income allocated to the book manufacturing segment was $48,000 in the third quarter compared to $142,000 in the same period last year with the change resulting from the high level of capital expenditures in the past year associated with the expansion of the Kendallville facility. For the first nine months, intercompany interest income allocated to this segment decreased to $261,000 compared to $486,000 last year.

Pretax income in the book manufacturing segment was $10.1 million in the third quarter of fiscal 2007, a 16.2% increase over the same period last year. For the first nine months of fiscal 2007, pretax income was $23.9 million, up 12.6% over the corresponding period of fiscal 2006.

Specialty Publishing Segment

	SEGMENT HIGHLIGHTS
	(dollars in thousands except per share amounts)
	Quarter Ended								Nine Months Ended
	June 30, 2007			June 24, 2006			% Change		June 30, 2007			June 24, 2006			% Change

Net sales	$	17,917		$	15,243		17.5	%	$	52,835		$	36,426		45.0	%
Cost of sales	10,725			8,582			25.0	%	30,758			19,988			53.9	%
Gross profit	7,192			6,661			8.0	%	22,077			16,438			34.3	%
As a percentage of sales	40.1		%	43.7		%			41.8		%	45.1		%
Selling and administrative expenses	5,880			5,231			12.4	%	17,685			12,763			38.6	%
Interest expense	468			310					1,378			406
Pretax income	$	844		$	1,120		-24.6	%	$	3,014		$	3,269		-7.8	%

Sales for the Company’s specialty publishing segment in the third quarter were $17.9 million, up 17.5% from $15.2 million in last year’s third quarter. On a year-to-date basis, sales increased 45% to $52.8 million compared to the first nine months of fiscal 2006. Creative Homeowner contributed $6.8 million and $21.0 million of sales for the third quarter and first nine months of fiscal 2007, respectively. Last year, Creative Homeowner contributed $4.4 million to sales results for the two months following its acquisition on April 28, 2006. On a comparable 13-week and nine-month basis, Creative Homeowner’s sales were down from 2006, reflecting a soft housing market and reduced traffic at home improvement centers, which constitute Creative Homeowner’s largest sales channel. Sales at Dover Publications were comparable to the prior year’s third quarter and were down 3% to $26.6 million for the first nine months compared to the same period last year. Sales gains were achieved among smaller retailers and certain larger retail chains, helped by the expansion of the new “Dover Fun Kitsä” product line and by new merchandising programs, which continue to expand placement of Dover display racks at existing and new customer locations. Sales to large booksellers however continued to fluctuate during the third quarter in response to the slow retail environment. Sales at REA continued their double-digit growth trend with an 18% increase in the third quarter to $1.8 million and a 15% increase for the first nine months to $5.3 million compared to the same periods last year. These increases reflect sales growth in the educational testing market, including new titles for high-stakes test preparation books, and by increases in direct marketing to teachers and school administrators.

Cost of sales in this segment increased by 25.0% to $10.7 million for the quarter and increased 53.9% to $30.8 million for the first nine months of fiscal 2007 compared to the same periods last year, reflecting the incremental impact of Creative Homeowner. Gross profit as a percentage of sales for the segment decreased in the quarter to 40.1% from 43.7% in the corresponding period last year and to 41.8% from 45.1% on a year-to-date basis compared to fiscal 2006. Creative Homeowner reduced the overall gross profit percentage in the segment because of their lower-margin distribution business as well as their reduced sales to the home center market.

Selling and administrative expenses in this segment were $5.9 million in the third quarter, an increase of 12.4% over the same period last year, primarily due to the addition of Creative Homeowner in April 2006. As a percentage of sales, selling and administrative expenses decreased to 32.8% from 34.3% in the corresponding period last year. Year to date, selling and administrative expenses increased 38.6% to $17.7 million compared to last year, reflecting the acquisition of Creative Homeowner, while as a percentage of sales, such expenses decreased to 33.5% from 35.0% in the first nine months of fiscal 2006.

Intercompany interest expense is allocated to the specialty publishing segment based on acquisition costs, reduced by cash generated by each business since acquisition. Interest expense for the third quarter of fiscal 2007 was $468,000 compared to $310,000 last year and for the first nine months was $1,378,000 versus $406,000 in the corresponding period of fiscal 2006. The increase reflects the $37 million purchase of Creative Homeowner in April 2006.

Pretax income in the specialty publishing segment for the third quarter was $0.8 million, down 25% from $1.1 million last year, with a $600,000 pretax loss at Creative Homeowner offsetting a 22% increase across the Company’s other publishing businesses. For the first nine months of fiscal 2007 pretax income was $3.0 million, down 8% from the same period last year, as a result of the loss at Creative Homeowner.

Total Consolidated Company

Interest expense, net of interest income, was $419,000 in the third quarter of fiscal 2007, compared to $168,000 in the same period of fiscal 2006. For the first nine months of fiscal 2007, interest expense, net of interest income, was $1,117,000 compared to net interest income of $80,000 in the corresponding prior year period. Average debt under the revolving credit facility in the third quarter of fiscal 2007 was approximately $25.3 million at an average annual interest rate of 5.8%, generating interest expense of approximately $370,000. Average debt under this facility for the first nine months of fiscal 2007 was approximately $23.4 million at an average annual interest rate of 5.8%, generating interest expense of approximately $1,040,000. Interest expense also includes commitment fees and other costs associated with maintaining this credit facility. Interest capitalized in the first nine months of fiscal 2007 was approximately $140,000, related primarily to the expansion of the Kendallville facility; no interest was capitalized in fiscal 2006. In the third quarter of the prior year, average debt under the revolving credit facility was approximately $17.8 million at an average annual interest rate of 5.6%, generating interest expense of approximately $250,000. Cash investments in the third quarter of fiscal 2006 averaged approximately $4.5 million invested at an average annual interest rate of 2.7% generating interest income of approximately $30,000. For the first nine months of fiscal 2006, average cash investments were $14.1 million invested at an average interest rate of 3.7% generating interest income of approximately $390,000.

The Company’s effective tax rate for the third quarter and first nine months of fiscal 2007 was 37.0% and 37.2%, respectively, compared to 35.5% and 35.7% for the corresponding periods last year, respectively. The increase in the effective tax rate reflects the phase out of the tax benefit on export related income and a slower phase in of the domestic manufacturing deduction. In addition, there was a slight increase in the Company’s effective state tax rate.

For purposes of computing net income per diluted share, weighted average shares outstanding increased by approximately 101,000 shares and 102,000 shares over last year’s third quarter and first nine months, respectively. The increases were largely due to options exercised and shares issued under the Company’s stock plans.

Liquidity and Capital Resources:

During the first nine months of fiscal 2007, operations provided approximately $16.5 million of cash. Net income was $16.3 million and depreciation and amortization was $14.2 million. Working capital used

approximately $16.3 million of cash, compared to $4.8 million in the same period last year. The year-to-date change in working capital includes a $10.7 million increase in inventories to support sales growth.

Investment activities through the third quarter of fiscal 2007 used approximately $22.2 million of cash. Capital expenditures were approximately $17.9 million, primarily for the four-color press that was installed in December 2006 in the Kendallville, Indiana facility as well as a related bindery expansion. This press is identical to the presses installed in April 2004 and December 2005. This amount also includes payments on equipment to expand printing and binding capacity in the religious book manufacturing operation in Philadelphia. For the entire fiscal year, capital expenditures are expected to be approximately $25 to $28 million. Prepublication costs in the specialty publishing segment were $4.3 million compared to $2.7 million in the first nine months of last year, primarily from the addition of Creative Homeowner. For the full fiscal year, capitalized prepublication costs are projected to be approximately $5 million.

Financing activities for the first nine months of fiscal 2007 provided approximately $5.6 million of cash. Cash dividends were $6.7 million, up 52% compared to the same period last year. Borrowings increased by $10.0 million and proceeds from stock plans were $1.8 million, primarily from the exercise of stock options. At June 30, 2007, the Company had $27.0 million in borrowings under its $100 million long-term revolving credit facility, which bears interest at a floating rate. The revolving credit facility is used by the Company for both its long-term and short-term financing needs. In November 2006, the Company increased the amount available under this facility to $100 million and extended the maturity date to March 2011. 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 2007.

The following table summarizes the Company’s contractual obligations and commitments at June 30, 2007 to make future payments as well as its existing commercial commitments.

			(000’s Omitted)
			Payments due by period (1)
			Less than		1 to 3		4 to 5		After 5
	Total		1 Year		Years		Years		Years
Contractual Payments:
Long-Term Debt (2)	$	27,339	$	88	$	140	$	27,111	$	—
Operating Leases (3)	10,432		3,103		3,727		2,056		1,546
Purchase Obligations (4)	6,229		6,229		—		—		—
Other Long-Term Liabilities	3,089		—		1,371		350		1,368
Total	$	47,089	$	9,420	$	5,238	$	29,517	$	2,914

(1) Amounts do not include interest expense.

(2) Includes the Company’s revolving credit facility.

(3) Represents amounts at September 30, 2006.

(4) Represents capital commitments.

New Accounting Pronouncements

Forward-Looking Information:

This Quarterly Report on Form 10-Q and the Company’s Annual Report on Form 10-K for the year ended September 30, 2006 include 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 such as the housing market, 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, 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 tax regulations, changes in the Company’s effective income tax rate, and general changes in economic conditions, including currency fluctuations and changes in interest rates. 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 30, 2006.

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 Exchange Act 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.

COURIER CORPORATION

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

There have been no material changes to the risk factors as previously disclosed in Item 1A in the Company’s Annual Report on Form 10-K for the year ended September 30, 2006.

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

None.

Item 3. Defaults Upon Senior Securities

None.

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

None.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit No.		Description
10.1*		Amendment, dated December 7, 2006, to Courier Corporation Amended and Restated 1993 Stock Incentive Plan.
10.2*		Amendment, dated December 7, 2006, to Restated 1989 Courier Corporation Deferred Income Stock Option Plan for Non-employee Directors.
10.3*		Amendment, dated December 7, 2006, to 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 8, 2007	By:	s/James F. Conway III
Date		James F. Conway III
		Chairman, President and
		Chief Executive Officer


August 8, 2007	By:	s/Peter M. Folger
Date		Peter M. Folger
		Senior Vice President and
		Chief Financial Officer


August 8, 2007	By:	s/Kathleen M. Leon
Date		Kathleen M. Leon
		Controller and
		Chief Accounting Officer

EXHIBIT INDEX

Exhibit No.		Description
10.1*		Amendment, dated December 7, 2006, to Courier Corporation Amended and Restated 1993 Stock Incentive Plan.
10.2*		Amendment, dated December 7, 2006, to Restated 1989 Courier Corporation Deferred Income Stock Option Plan for Non-employee Directors.
10.3*		Amendment, dated December 7, 2006, to 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.