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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Form 10-K

Commission file number 0-7597

Courier Corporation
A Massachusetts corporation

I.R.S. Employer Identification No. 04-2502514

15 Wellman Avenue
North Chelmsford, Massachusetts 01863
Telephone No. 978-251-6000

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1 par value

        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 ý No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ý No o

        State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business day of the registrant's most recently completed second fiscal quarter.

Common Stock, $1 par value—$129,579,285

        Indicate the number of shares outstanding of each of the registrant's classes of common stock as of November 22, 2002

Common Stock, $1 par value—5,213,867

DOCUMENTS INCORPORATED BY REFERENCE

        Portions of the registrant's proxy statement for the annual meeting of stockholders scheduled to be held on January 16, 2003 (Part III).

PART I

Item 1.    Business.

INTRODUCTION

        Courier Corporation and its subsidiaries ("Courier" or the "Company") are among America's leading book manufacturers and specialty publishers. Courier Corporation, founded in 1824, was incorporated under the laws of Massachusetts on June 30, 1972. The Company has three business segments: full-service book manufacturing, customized education and specialty publishing.

        The book manufacturing segment focuses on streamlining and enhancing the process of bringing books from the point of creation to the point of use. Based on sales, Courier is the fifth largest book manufacturer in the United States and largest in the Northeast, offering services from content management, prepress and production through storage and distribution. Courier's principal markets are religious, educational and specialty trade books with products including Bibles, educational texts and consumer books. Revenues from this segment accounted for approximately 84% of Courier's consolidated revenues in fiscal 2002.

        The customized education segment responds to the need for greater choice in education. Courier Custom Publishing offers solutions that enable educators to provide students with customized teaching materials including multi-publisher custom books as well as out-of-print book reproductions and books authored by professors. Revenues in this segment accounted for less than 1% of consolidated revenues in fiscal 2002.

        The specialty publishing segment consists of Dover Publications, Inc. ("Dover"), acquired by Courier on September 22, 2000. Dover publishes over 8,000 titles in more than 30 specialty categories ranging from literature and poetry classics to paper dolls, and from musical scores to typographical fonts. Revenues in this segment were approximately 18% of consolidated sales in fiscal 2002.

        Additional segment information, including the amounts of net sales, earnings or loss before taxes, and total assets, for each of the last three fiscal years, is contained in the Notes to Consolidated Financial Statements on pages F-17 and F-18 included in this Annual Report on Form 10-K.

        Dover sells its products through most American bookstore chains, independent booksellers, children's stores, craft stores and gift shops, as well as a diverse range of distributors around the world. Dover also sells its books directly to customers through its specialty catalogs and over the Internet at www.doverpublications.com. The combination of Dover's publishing, sales and distribution skills with Courier's book manufacturing, digital content conversion, and e-commerce skills are providing a powerful end-to-end publishing solution for Courier.

        In March 2001, Courier sold substantially all of the assets of The Home School and ceased operating this business. The Company had purchased the assets of The Home School Books & Supplies in September 1997. Results of The Home School were included in the customized education segment prior to its sale.

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BUSINESS SEGMENTS

BOOK MANUFACTURING SEGMENT

        Courier's book manufacturing segment produces hard and softcover books, as well as related services involved in managing the process of creating and distributing these products for publishers, religious organizations and other information providers. Courier provides book manufacturing and related services from six facilities in Westford, Stoughton and North Chelmsford, Massachusetts; Philadelphia, Pennsylvania; North Bergen, New Jersey; and Kendallville, Indiana.

        Courier's book manufacturing operations consist of both electronic and conventional film processing, platemaking, printing and binding of soft and hard bound books. Each of Courier's six facilities have certain specialties adapted to the needs of the market niches Courier serves, such as short-run book manufacturing, printing on lightweight paper and 4-color book manufacturing. These services are primarily sold to publishers of educational, religious and consumer books.

        Courier's book manufacturing sales force of 18 people is responsible for all of the Company's sales to almost 500 book-manufacturing customers. Courier's salespeople operate out of sales offices located in New York, Chicago, Philadelphia, Hayward, California, North Chelmsford, Massachusetts and North Bergen and North Caldwell, New Jersey.

        Sales to The Gideons International aggregated approximately 26% of consolidated sales in fiscal 2002, 25% in fiscal 2001 and 26% in fiscal 2000. Sales to Pearson plc aggregated approximately 15% of fiscal 2002 consolidated sales, 13% in fiscal 2001 and 17% in fiscal 2000. The loss of either of these customers would have a material adverse effect on the Company. No other customer accounted for more than 10% of fiscal 2002 consolidated sales. The Company distributes products around the world; export sales, as a percentage of consolidated sales, were approximately 21% in fiscal 2002, 19% in fiscal 2001 and 18% in fiscal 2000.

        All phases of Courier's business are highly competitive. The printing industry, exclusive of newspapers, includes approximately 45,000 establishments. While most of these establishments are relatively small, several of the Company's competitors are considerably larger or are affiliated with companies that are considerably larger and have greater financial resources than Courier. In recent years, consolidation of both customers and competitors within the Company's markets has increased pricing pressures. The major competitive factors in Courier's book manufacturing business in addition to price are product quality, speed of delivery, customer service, availability of appropriate printing capacity, related services and technology support.

CUSTOMIZED EDUCATION SEGMENT

        Courier Custom Publishing specializes in providing custom books for college professors who have created personally tailored curriculum that precisely matches the needs of their courses. These custom books range from reading anthologies, combining materials from multiple sources, to out-of-print books to self-authored original teaching materials. Courier obtains copyright permissions from the publishers or authors and prepares electronic masters from which these custom books are produced.

        Courier Custom Publishing markets its custom book services directly to professors nationwide as well as to college bookstores and campus print shops. It utilizes direct marketing techniques to professors, including mailings and e-mail, backed up by a series of highly targeted web sites. The

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web sites include www.custombook.com, www.anthologypro.com, www.ceopress.com, www.eruditionbooks.com, www.bookhound.com, and www.coursepack.com. Direct marketing efforts to professors are supported by an internal direct response staff located in North Chelmsford, Massachusetts. Student purchases of custom books from Courier Custom Publishing are made over the web at www.custombookstore.com or by phone. Sales to college bookstores and campus print shops are made through direct marketing and a supporting web site, www.coursepackconnection.com.

        Courier Custom Publishing's competition is primarily from university bookstores and printshops that perform copyright clearance and coursepack production in-house for the university, and from large college textbook publishers who offer custom publishing services. Courier Custom Publishing distinguishes its products and services on the basis of convenience and high-quality book manufacturing.

        The Home School, which Courier sold in March 2001, was a direct marketer of educational materials to families engaged in educating children at home and was included in the customized education segment prior to its sale.

SPECIALTY BOOK PUBLISHING SEGMENT

        Dover, acquired by the Company in September 2000, is a publisher of books in over 30 specialty categories, including fine and commercial arts, children's books, crafts, musical scores, graphic design, mathematics, physics and other areas of science, puzzles, games, social science, stationery items, and classics of literature for both juvenile and adult markets, including the Dover Thrift Editions. In 2002, a new line of scholarly hardcover books valuable to scientists and mathematicians was launched under the name of Dover Phoenix Editions.

        Dover sells its products through most American bookstore chains, independent booksellers, children's stores, craft stores and gift shops, as well as a diverse range of distributors around the world. Dover has also sold its books directly to consumers for over 50 years through its specialty catalogs and, since 2001, over the Internet at www.doverpublications.com. Dover mails its proprietary catalogs to over 500,000 consumers. In 2002, Dover launched www.DoverDirect.com, which is a business-to-business site for its retailers and distributors.

        The publishing market is comprised of approximately 63,000 publishers, which is double the number in 1990. Many of these publishers are very small, but a few are much larger than Dover or are part of organizations that are much larger. In addition, newer sources of competition have emerged with large retailers launching or expanding publishing operations and new web-based publishing businesses starting up, which compete in the specialty book publishing market, including publishing of electronic books. Dover distinguishes its products by offering an extremely wide variety of high quality books at modest prices.

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MATERIALS AND SUPPLIES

        Courier purchases its principal raw materials, primarily paper, but also plate materials, ink, adhesives, cover stock, casebinding materials and cartons, from numerous suppliers, and is not dependent upon any one source for its requirements. Many of Courier's book manufacturing customers purchase their own paper and furnish it at no charge to Courier for book production. Dover purchases a significant portion of its books from Courier's book manufacturing operations. During fiscal year 2002, paper prices decreased slightly.

ENVIRONMENTAL REGULATIONS

        The Company's operations are subject to federal, state and local environmental laws and regulations relating to, among other things: air emissions; waste generation, handling, management and disposal; wastewater treatment and discharge; and remediation of soil and groundwater contamination. The Company periodically makes capital expenditures so that its operations comply, in all material respects, with applicable environmental laws and regulations. No significant expenditures for this purpose are anticipated in fiscal 2003. The Company does not believe that its compliance with applicable environmental laws and regulations will have a material impact on the Company's earnings or competitive position.

EMPLOYEES

        The Company employed 1,455 persons at September 28, 2002 compared to 1,504 a year ago.

OTHER

        Courier's overall business is not significantly seasonal in nature, although demand is normally highest in the Company's fourth quarter. Educational publishers in the book manufacturing segment, the customized education segment's products and services, and Dover's business all contribute to this higher fourth quarter demand. There is no portion of Courier's business subject to cancellation of government contracts or renegotiation of profits.

        Courier holds no material patents, licenses, franchises or concessions that are important to its operations, but does have trademarks, service marks, and Universal Resource Locators (URL's) on the World Wide Web in connection with each of its businesses. Substantially all of Dover's publications are protected by copyright, either in its own name, in the name of the author of the work, or in the name of a predecessor publisher from whom rights were acquired.

        The Company makes available free of charge copies of its Annual Report on Form 10-K, as well as all other reports required to be filed by Section 13(a) or 15(d) of the Securities Exchange Act of 1934, via the Internet at www.courier.com or upon written request to Robert P. Story, Jr., Senior Vice President and Chief Financial Officer, Courier Corporation, 15 Wellman Avenue, North Chelmsford, MA 01863.

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Item 2.    Properties.

REAL PROPERTIES

        The following schedule lists the facilities owned or leased by Courier at September 28, 2002. Courier considers its plants and other facilities to be well maintained and suitable for the purposes intended.

(1)

Also houses Courier Custom Publishing as well as warehousing and end-user fulfillment operations supporting the book manufacturing segment.

(2)

The Company is continuing its efforts to sell the old, unoccupied and underutilized portions of its multi-building manufacturing complex in Westford, MA. This area encompasses approximately 200,000 square feet.

EQUIPMENT

        The Company's products are manufactured on equipment that in most cases is owned by the Company, although it leases computers, image setters and other electronic prepress equipment which are subject to more rapid obsolescence. In addition, it leases two printing presses where the lessor holds title. Capital expenditures amounted to approximately $4.9 million in 2002, $12.8 million in 2001 and $16.3 million in 2000. Capital expenditures in fiscal 2002 were primarily for factory automation equipment to improve productivity. Fiscal 2003 capital expenditures are expected to be approximately $10 to $12 million. Courier considers its equipment to be in good operating condition and adequate for its present needs.

ENCUMBRANCES AND RENTAL OBLIGATIONS

        For a description of encumbrances on certain properties and equipment, see Note D of Notes to Consolidated Financial Statements on pages F-10 and F-11 of this Annual Report on Form 10-K. Information concerning leased properties and equipment is disclosed in Note E of Notes to Consolidated Financial Statements, which appears on page F-11 of this Annual Report on Form 10-K.

5

Item 3.    Legal Proceedings.

        In the ordinary course of business, the Company is subject to various legal proceedings and claims. The Company believes that the ultimate outcome of these matters will not have a material adverse effect on its financial statements.

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

        There were no matters submitted to a vote of security holders during the quarter ended September 28, 2002.

PART II

Item 5.    Market for the Registrant's Common Equity and Related Stockholder Matters.

        The information required by this Item is contained in the section captioned "Selected Quarterly Financial Data (Unaudited)" which appears on page F-20 of this Annual Report on Form 10-K.

Item 6.    Selected Financial Data.

        The information required by this Item is contained in the section captioned "Five-Year Financial Summary" appearing on page F-21 of this Annual Report on Form 10-K.

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations.

        The information required by this Item is contained in the section captioned "Management's Discussion and Analysis" on pages F-22 through F-27 of this Annual Report on Form 10-K.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk.

        The Company does not hold any derivative financial instruments, derivative commodity instruments or other financial instruments except as noted in Note A of Notes to Consolidated Financial Statements, which appears on pages F-7 through F-9 of this Annual Report on Form 10-K. The Company engages neither in speculative nor derivative trading activities. The Company is exposed to market risk for changes in interest rates on invested funds as well as borrowed funds. The Company's revolving bank credit facility bears interest at a floating rate. There were no borrowings under this facility at September 28, 2002.

Item 8.    Financial Statements and Supplementary Data.

        The information required by this Item is contained on pages F-1 through F-19 of this Annual Report on Form 10-K.

Item 9.    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

        None.

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PART III

Item 10.    Directors and Executive Officers of the Registrant.

        Courier's executive officers, together with their ages and all positions and offices with the Company presently held by each person named, are as follows:

        The terms of office of all of the above executive officers continue until the first meeting of the Board of Directors following the next annual meeting of stockholders and the election or appointment and qualification of their successors, unless any officer sooner dies, resigns, is removed or becomes disqualified.

        Mr. Conway III was elected Chairman of the Board in September 1994 after serving as acting Chairman since December 1992. He has been Chief Executive Officer since December 1992 and President since July 1988.

        Mr. Nichols became an executive officer of Courier in June 1989. He was elected a Director of the Company in March 1995 and became Senior Vice President of the Company in November 1996. He became Chairman of National Publishing Company in December 1999. He had previously been President of National Publishing Company since 1976.

        Mr. Story became Senior Vice President and Chief Financial Officer in April 1989. He joined Courier in November 1986 as Vice President and Treasurer. He was elected a Director of the Company in February 1995.

        Mr. Folger has been Controller since 1982 and became Vice President in November 1992.

        Mr. Tobin became Vice President of Courier Corporation and Executive Vice President of Courier Companies in October 2000, and Executive Vice President of National Publishing Company in March 2002. He joined Courier Companies as National Sales Manager in 1994 and became Vice President of Sales and Marketing in 1997.

7

        All other information called for by Item 10 is contained in the definitive Proxy Statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders scheduled to be held on Thursday, January 16, 2003. Such information is incorporated herein by reference.

Item 11.    Executive Compensation.

        Information called for by Item 11 is contained in the definitive Proxy Statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders scheduled to be held on Thursday, January 16, 2003. Such information is incorporated herein by reference.

Item 12.    Security Ownership of Certain Beneficial Owners and Management.

        The following equity compensation plan information is as of September 28, 2002:

(1)

86,541 shares of these 327,360 shares were reserved for future issuance under the Company's Employee Stock Purchase Plan.

        All other information called for by Item 12 is contained in the definitive Proxy Statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders scheduled to be held on Thursday, January 16, 2003. Such information is incorporated herein by reference.

Item 13.    Certain Relationships and Related Transactions.

        Information called for by Item 13 is contained in the definitive Proxy Statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders scheduled to be held on Thursday, January 16, 2003. Such information is incorporated herein by reference.

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Item 14.    Controls and Procedures

(a)  Evaluation of disclosure controls and procedures

        As required by new Rule 13a-15 under the Securities Exchange Act of 1934, within the 90 days prior to the date of this 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. In connection with the new rules, we currently are in the process of further reviewing and documenting our disclosure controls and procedures, including our internal controls and procedures for financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.

(b)  Changes in internal controls

        There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their most recent evaluation.

PART IV

Item 15.    Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a)  Documents filed as part of this report

9

10

11

12

13

*

Exhibit is furnished herewith.

+

Designates a Company compensation plan or arrangement.

(b)  Reports on Form 8-K

        None.

14

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) 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, on December 5, 2002.

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities indicated, on December 5, 2002.

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CERTIFICATION

I, James F. Conway III, certify that:

1.

I have reviewed this annual report on Form 10-K of Courier Corporation;

2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

c)

presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.

The registrant's other certifying officer and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

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CERTIFICATION

I, Robert P. Story, Jr., certify that:

1.

I have reviewed this annual report on Form 10-K of Courier Corporation;

2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

c)

presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.

The registrant's other certifying officer and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

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CERTIFICATIONS
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906
Of the Sarbanes-Oxley Act of 2002

The undersigned officer of Courier Corporation (the "Company") hereby certifies that the Company's Annual Report on Form 10-K for the fiscal year ended September 28, 2002 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certification is provided solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

        The undersigned officer of Courier Corporation (the "Company") hereby certifies that the Company's Annual Report on Form 10-K for the fiscal year ended September 28, 2002 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certification is provided solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of Courier Corporation, North Chelmsford, MA:

        We have audited the accompanying consolidated balance sheets of Courier Corporation and subsidiaries (the "Company") as of September 28, 2002 and September 29, 2001, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for each of the three years in the period ended September 28, 2002. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 28, 2002 and September 29, 2001, and the results of its operations and its cash flows for each of the three years in the period ended September 28, 2002 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

F-1

COURIER CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

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

F-2

COURIER CORPORATION

CONSOLIDATED BALANCE SHEETS

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

F-3

COURIER CORPORATION

CONSOLIDATED BALANCE SHEETS

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

F-4

COURIER CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

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

F-5

COURIER CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

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

F-6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A.    Summary of Significant Accounting Policies

        Business:    Courier Corporation and its subsidiaries ("Courier" or the "Company") are focused on streamlining and enhancing the process by which printed books and digital content reach end-user markets, primarily for educational, religious, and specialty book publishers. Courier has three business segments: full-service book manufacturing, customized education and, beginning in fiscal 2001 with the acquisition of Dover Publications, Inc. ("Dover"), specialty publishing (see Note H).

        Principles of Consolidation and Presentation:    The consolidated financial statements, prepared on a fiscal year basis, include the accounts of Courier Corporation and its subsidiaries after elimination of all significant intercompany transactions. Such financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("generally accepted accounting principles"), which require the use of certain estimates and assumptions. Fiscal years 2002 and 2001 were 52-week periods compared with fiscal year 2000 which was a 53-week period. Certain amounts for fiscal years 2001 and 2000 have been reclassified in the accompanying financial statements in order to conform to the current year's classification.

        Financial Instruments:    Financial instruments consist primarily of cash, accounts receivable, accounts payable and debt obligations. The Company classifies as cash and cash equivalents amounts on deposit in banks and cash invested temporarily in various instruments with maturities of three months or less at time of purchase. The Company estimates the fair value of financial instruments based on interest rates available to the Company and by comparison to quoted market prices. At September 28, 2002 and September 29, 2001, the fair market value of the Company's financial instruments approximated their carrying values.

        Property, Plant and Equipment:    Property, plant and equipment are recorded at cost, including interest on funds borrowed to finance the acquisition or construction of major capital additions. Interest capitalized in fiscal years 2001 and 2000 was approximately $170,000 and $102,000, respectively. No interest was capitalized in fiscal year 2002. The Company provides for depreciation of property, plant and equipment on a straight-line basis over periods ranging from 3 to 11 years, except for depreciation on buildings and improvements which is based on estimated useful lives ranging from 10 to 40 years.

        Leasehold improvements and a favorable building lease are amortized on a straight-line basis over the shorter of their useful life or the term of the lease. Expenditures for maintenance and repairs are charged against income as incurred; betterments that increase the value or materially extend the life of the related assets are capitalized. When assets are sold or retired, the cost and accumulated depreciation are removed from the accounts and any gain or loss is included in income.

        Goodwill and Other Intangible Assets:    Effective September 30, 2001, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets," which changes the accounting for goodwill and certain other intangible assets from an amortization method to an impairment-only approach. The Company evaluates possible impairment annually or whenever events or circumstances indicate that the carrying value of the

F-7

assets may not be recoverable. The Company completed the transitional impairment test and annual evaluation required by SFAS No. 142 resulting in no change to the nature or carrying amounts of its intangible assets. Prior to fiscal year 2002, goodwill arising from business acquisitions was amortized using the straight-line method over 20 years.

        At September 28, 2002, goodwill and other intangible assets were comprised of $24.9 million of goodwill and $0.6 million of other intangible assets. Other intangible assets includes approximately $0.1 million subject to amortization over a remaining seven-year life, as well as approximately $0.5 million of prepaid pension costs associated with the curtailment of the Dover pension plan (see note G).

        Had the company accounted for goodwill in accordance with SFAS No. 142 in fiscal years 2001 and 2000, net income and net income per diluted share would have been as follows:

        Long-Lived Assets:    Management periodically reviews long-lived assets for impairment and does not believe that there is any material impairment of any asset of the Company as measured in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The adoption of SFAS No. 144 in fiscal 2002 did not have a material effect on the company's consolidated financial statements.

        Prepublication Costs:    Prepublication costs, associated with the specialty publishing segment, are amortized using the straight-line method over an estimated useful life of four years.

        Income Taxes:    Deferred income tax liabilities and assets are determined based upon the differences between the financial statement and tax bases of assets and liabilities, and are measured by applying enacted tax rates and laws for the taxable years in which these differences are expected to reverse.

        Revenue Recognition:    Revenue is recognized upon shipment of goods to customers or upon the transfer of ownership for those customers whom the Company provides manufacturing and distribution services. Revenue for distribution services is recognized as services are provided. Shipping and handling fees billed to customers are classified as revenue.

        Use of Estimates:    The process of preparing financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that

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affect the reported amounts of assets and liabilities at the date of the financial statements, as well as revenues and expenses during the reporting period. Actual results may differ from these estimates.

        Net Income per Share:    Basic net income per share is based on the weighted average number of common shares outstanding each period. Diluted net income per share also includes potentially dilutive items such as options (see Note K).

        Stock Split:    On August 31, 2001, the Company distributed a three-for-two stock split effected in the form of a 50% stock dividend, except for treasury shares. Previously authorized but unissued shares were used to effect this dividend. Weighted average shares outstanding and per share amounts for periods prior to August 31, 2001 presented in the accompanying financial statements have been restated to give effect to the stock split.

        Treasury Stock:    The Company has historically used treasury stock for stock options exercised and stock grants and intends to continue to use treasury stock for such purposes.

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 45% of the Company's inventories at September 28, 2002 and September 29, 2001, respectively. Other inventories are determined on a first-in, first-out (FIFO) basis.

        On a FIFO basis, reported year-end inventories would have been higher by $5.5 million in fiscal 2002 and $5.8 million in fiscal 2001.

C. Income Taxes

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

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        The provision for income taxes consisted of the following:

        The following is a summary of the significant components of the Company's deferred tax assets and liabilities as of September 28, 2002 and September 29, 2001:

        Non-current deferred tax assets have been netted against non-current deferred tax liabilities for balance sheet classification purposes.

D. Long-Term Debt

        Long-term debt consisted of the following:

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        Scheduled aggregate principal payments of long-term debt are $78,000 in fiscal 2003, $80,000 in fiscal 2004, $83,000 in fiscal 2005, $85,000 in fiscal 2006, $88,000 in fiscal 2007 and $338,000 thereafter.

        The Company has a $60 million long-term revolving credit facility in place under which the Company can borrow at a rate not to exceed LIBOR plus 1.5%. The revolving credit facility matures in March 2005.

        The revolving credit facility contains restrictive covenants including provisions relating to the maintenance of working capital, the level of capital expenditures, the incurring of additional indebtedness and a quarterly test of EBITDA to debt service. It also provides for a commitment fee not to exceed ³/8% per annum on the unused portion. The industrial bond arrangement provides for a lien on the assets acquired with the proceeds.

E. Commitments and Contingencies

        The Company is committed under various operating leases to make annual rental payments for certain buildings and equipment. Amounts charged to operations under such leases approximated $4,256,000 in fiscal 2002, $5,239,000 in fiscal 2001 and $3,956,000 in fiscal 2000. As of September 28, 2002, minimum annual rental commitments under the Company's long-term operating leases are approximately $3,869,000 in fiscal 2003, $3,478,000 in fiscal 2004, $2,537,000 in fiscal 2005, $1,234,000 in fiscal 2006 and $1,850,000 in the aggregate thereafter. The Company leases one of its facilities from a corporation owned in part by an executive of the Company. The lease agreement requires annual payments of approximately $276,000 through July 2007. At September 28, 2002 and September 29, 2001, the Company had letters of credit outstanding of $773,000 and $909,000, respectively.

        In the ordinary course of business, the Company is subject to various legal proceedings and claims. The Company believes that the ultimate outcome of these matters will not have a material adverse effect on its consolidated financial statements.

F. Stock Arrangements

        Stock Option/Incentive Plans:    The Courier Corporation 1993 Stock Incentive Plan, as amended and restated, replaced the expiring 1983 Stock Option Plan. The 1993 Stock Incentive Plan, as amended, provides for the granting of stock options and stock grants under the plan up to a total of 817,500 shares. Under the provisions of each plan, 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. During fiscal years 2002, 2001 and 2000, 2,500, 5,000 and 27,000 shares, respectively, of restricted stock were granted which vest over a five-year period. Amortization expense relating to the fiscal years 2002, 2001 and 2000 stock grants was $133,000, $111,000 and $45,000, respectively.

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        Directors' Option Plan:    A 1989 plan, as amended and restated, allows members of the Company's Board of Directors to make an election to apply either 50% or 100% of their annual retainer fee, including the committee chair retainer, toward the annual grant of stock options to be offered at a price per share $5 below the fair market value of the Company's common stock at the time the option is granted. Retainer fees for fiscal 2002 amounted to $16,000 for each of the five outside directors; in addition, the three committee chair fees amounted to a total of $22,500 for fiscal 2002. The plan, as approved by stockholders, provides a total of 375,000 shares for the issuance of such options.

        The following is a summary of all option activity for these plans:

        The following tables present information with regards to stock options outstanding at September 28, 2002:

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        Stock Grant Plan:    The Company established a stock grant plan in 1977 entitling key employees to receive shares of common stock of the Company. Shares granted are either fully vested or vest over periods up to 5 years. The maximum number of shares of common stock that may be awarded under the stock grant plan is 298,125 and no more than 50,625 shares may be awarded in any one fiscal year. The numbers of shares granted under the plan were 1,100 in fiscal 2002 and 6,000 in fiscal 2000. No shares were granted under this plan in fiscal 2001. As of September 28, 2002, there were 142 shares available for future grants under the plan.

        Employee Stock Purchase Plan:    The Company's 1999 Employee Stock Purchase Plan ("ESPP"), approved by stockholders in January 1999, covers an aggregate of 150,000 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 beginning or end of the grant period. During fiscal 2002, 14,622 shares were issued under the plan at an average price of $24.48 per share. Since inception, 63,459 shares have been issued. At September 28, 2002, an additional 86,541 shares were reserved for future issuances.