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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—$172,551,513

Indicate the number of shares outstanding of each of the registrant's classes of common stock as of December 8, 2003 (reflects three-for-two stock split effected in the form of a 50% stock dividend, except for treasury shares, which was announced by the registrant on November 6, 2003, was payable to shareholders of record on November 17, 2003, and was distributed on December 5, 2003)

Common Stock, $1 par value—7,932,164

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's proxy statement for the annual meeting of stockholders scheduled to be held on January 15, 2004 (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 two business segments: full-service book manufacturing and specialty book publishing. In fiscal 2003, Courier sold all of the assets of Courier Custom Publishing, Inc. which comprised all of the remaining activities of the customized education segment.

        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 book manufacturing markets are religious, educational and specialty trade books with products including Bibles, educational texts and consumer books. Revenues from this segment accounted for approximately 85% of Courier's consolidated revenues in 2003.

        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 2003. 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.

        Additional segment information, including the amounts of 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-18 and F-19 included in this Annual Report on Form 10-K.

        On December 17, 2002, the Company sold the assets of its wholly owned subsidiary, Courier Custom Publishing, Inc. Courier Custom Publishing provided customized coursepacks and textbooks. The disposition was accounted for as a discontinued operation. Additional information is contained in Note H in the Notes to Consolidated Financial Statements on pages F-16 and F-17 included in this Annual Report on Form 10-K. 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. The Home School was a direct marketer of educational materials to families engaged in educating children at home and had been 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 over 500 book-manufacturing customers. Courier's salespeople operate out of sales offices located in New York, New York, Chicago, Illinois, Philadelphia, Pennsylvania, Hayward, California, North Chelmsford, Massachusetts and North Bergen and North Caldwell, New Jersey.

        Sales to The Gideons International aggregated approximately 27% of consolidated sales in 2003, 26% in 2002 and 25% in 2001. Sales to Pearson plc aggregated approximately 18% of 2003 consolidated sales, 15% in 2002 and 13% in 2001. The loss of either of these customers or a significant reduction in order volumes from them would have a material adverse effect on the Company. No other customer accounted for more than 10% of consolidated sales. The Company distributes products around the world; export sales, as a percentage of consolidated sales, were approximately 22% in 2003, 21% in 2002 and 19% in 2001.

        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.

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.

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        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.

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 2003, 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 2004. 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 1,420 persons at September 27, 2003 compared to 1,455 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 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 27, 2003. Courier considers its plants and other facilities to be well maintained and suitable for the purposes intended.

(1)

Also houses warehousing and end-user fulfillment operations supporting the book manufacturing segment.

(2)

In March 2003, the Company announced an agreement to sell approximately 200,000 square feet of unoccupied and underutilized portions of its multi-building manufacturing complex in Westford, MA. The carrying value of this portion of the property is nominal. The Company will continue its current levels of book manufacturing at the site. The agreement contains a number of significant contingencies. Assuming these contingencies can be resolved, the sale is anticipated to close in fiscal 2004.

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. Each lease contains an option to purchase the equipment upon expiration of the lease at a price of $225,866 and $161,658 in 2004 and 2008, respectively. Capital expenditures amounted to approximately $10.9 million in 2003, $4.9 million in 2002 and $12.8 million in 2001. Capital expenditures in 2003 were primarily for new equipment to increase productivity and lower costs in the book manufacturing segment. This amount also includes $4.5 million of payments on a major new press scheduled for delivery next spring to expand the Company's four-color printing capacity. Fiscal 2004 capital expenditures are expected to increase to $13 to $15 million. This includes approximately $9 million for the completion of the four-color press project including a related planned building expansion. Courier considers its equipment to be in good operating condition and adequate for its present needs.

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ENCUMBRANCES AND RENTAL OBLIGATIONS

        For a description of encumbrances on certain properties and equipment, see Note D of Notes to Consolidated Financial Statements on page 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-12 of this Annual Report on Form 10-K.

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 27, 2003.

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-21 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-22 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-23 through F-29 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 Notes A and L of Notes to Consolidated Financial Statements, which appear on pages F-7 through F-9 and F-20 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 27, 2003.

Item 8. Financial Statements and Supplementary Data.

        The information required by this Item is contained on pages F-1 through F-20 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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Item 9A. 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 annual 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. The Company continually reviews its disclosure controls and procedures, and its internal controls over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that its systems evolve with its business. In designing and evaluating the disclosure controls and procedures, the Company's management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurances of achieving the desired control objectives, and management necessarily was required to apply its judgment in designing and evaluating the controls and procedures.

(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 fourth quarter of fiscal 2003 that has materially affected, or that is reasonably likely to materially affect, the Company's internal control over financial reporting.

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

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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.

        The Company has adopted a code of ethics entitled "Courier Corporation Business Conduct Guidelines," which is applicable to the Company's directors, officers, and employees. These Business Conduct Guidelines are available on the Company's Internet website, located at www.courier.com.

        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 15, 2004. 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 15, 2004. 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 27, 2003:

(1)

111,487 shares of these 351,802 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 15, 2004. Such information is incorporated herein by reference.

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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 15, 2004. Such information is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services

        Information called for by Item 14 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 15, 2004. Such information is incorporated herein by reference.

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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

*

Exhibit is furnished herewith.

+

Designates a Company compensation plan or arrangement.

(b)   Reports on Form 8-K

        Filed July 17, 2003, reporting under Item 12 a press release dated July 17, 2003 reporting financial results for the quarter ended June 28, 2003.

        Filed August 12, 2003, reporting under Item 11 a notice to employees dated August 8, 2003 regarding a change in investment, trustee and record keeping services for the Courier Profit Sharing and Savings Plan.

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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 4, 2003.

        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 4, 2003.

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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 27, 2003 and September 28, 2002, 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 27, 2003. 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 27, 2003 and September 28, 2002, and the results of its operations and its cash flows for each of the three years in the period ended September 28, 2003 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.

/s/ Deloitte & Touche LLP

Boston, Massachusetts
November 17, 2003

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

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") print, publish and sell books. Courier has two business segments: full-service book manufacturing and specialty book publishing. On December 17, 2002, the Company sold the assets of Courier Custom Publishing, Inc., which comprised all of the activities of the customized education segment (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. Certain amounts for fiscal years 2002 and 2001 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. At September 27, 2003 and September 28, 2002, the fair market value of the Company's financial instruments approximated their carrying values.

        Interest income from these instruments was $200,000 in 2003 and $12,000 in 2002 and is included in the caption "Interest Expense, net" in the accompanying Consolidated Statements of Income.

        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 2001 was approximately $170,000. No interest was capitalized in 2003 and 2002. The Company provides for depreciation of property, plant and equipment on a straight-line basis over periods ranging from 10 to 40 years on buildings and improvements and from 3 to 11 years on equipment and furnishings.

        Leasehold improvements 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:    At the beginning of fiscal 2002, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets," which changed the accounting for goodwill and certain other intangible assets from an amortization method to an impairment-only approach. The transitional impairment test required by SFAS No. 142 was completed in 2002 resulting in no change to the nature or carrying amounts of its intangible assets. The Company evaluates possible impairment annually or whenever events or circumstances indicate that the carrying value of the assets may not be recoverable.

        Goodwill has been allocated $9.2 million and $15.6 million, net of accumulated amortization of $2.1 million and $0.9 million, to the book manufacturing and specialty publishing segments, respectively. There has been no change in the carrying amount of goodwill during the year or in the allocation of goodwill by reportable segment.

        Prior to 2002, goodwill arising from business acquisitions was amortized using the straight-line method over 20 years. Had the Company accounted for goodwill in accordance with SFAS No. 142 in

F-7

2001, net income would have increased by $1,050,000 to $14,267,000 from $13,217,000 and net income per diluted share would have increased by $0.13 from $1.70 to $1.83.

        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 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 to cost of sales 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 for 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 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 November 6, 2003, the Company announced a three-for-two stock split effected in the form of a 50% stock dividend, except for treasury shares, which was distributed on December 5, 2003. Also, 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 both of these dividends. Weighted average shares outstanding and per share amounts presented in the accompanying financial statements for periods prior to the stock splits have been restated to give effect to these stock splits.

        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.

        Stock-Based Compensation:    Pursuant to SFAS No. 123, "Accounting for Stock-Based Compensation," as amended by SFAS No. 148, the Company applies the recognition and measurement principles of APB Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations. Accordingly, because the number of shares is fixed and the exercise price of the stock options equals the market price of the underlying stock on the date of grant, no compensation expense has been recognized. Had compensation cost for grants under the ESPP and for stock options granted

F-8

after 1995 been determined under the provisions of SFAS No. 123, the Company's net income would have been as follows:

        The pro forma effect on net income and net income per diluted share for 2002 and 2001 is not representative of the pro forma effect on net income in future years, because it does not take into consideration pro forma compensation expense related to options granted prior to fiscal 1996. For purposes of pro forma disclosures, the fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model (see Note F).

        New Accounting Pronouncements:    In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002 and was adopted by the Company effective in fiscal 2003. Adoption of this standard did not have a material effect on the Company's financial statements.

        In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." This interpretation sets forth expanded disclosure requirements in the financial statements about a guarantor's obligations under certain guarantees that it has issued. It also clarifies that, under certain circumstances, a guarantor is required to recognize a liability for the fair value of the obligation at the inception of the guarantee. The initial liability recognition provisions were applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements of FIN 45 were effective for financial statements for interim or annual periods ending after December 15, 2002. The implementation of this interpretation did not have a material impact on the Company's consolidated financial position or results of operations.

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 44% and 46% of the Company's inventories at September 27, 2003

F-9

and September 28, 2002, 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 both fiscal 2003 and 2002.

C. Income Taxes

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

        The provision for income taxes from continuing operations consisted of the following:

F-10

        The following is a summary of the significant components of the Company's deferred tax assets and liabilities as of September 27, 2003 and September 28, 2002:

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

D. Long-Term Debt

        At September 27, 2003 and September 28, 2002, long-term debt consisted of an obligation under an industrial development bond arrangement totaling $674,000 and $752,000, respectively, including current maturities of $81,000 and $78,000, respectively. This industrial bond arrangement bears interest at a 3% rate. Scheduled aggregate principal payments of this obligation are $81,000 in 2004, $83,000 in 2005, $85,000 in 2006, $88,000 in 2007, $91,000 in fiscal 2008 and $246,000 thereafter. The industrial bond arrangement provides for a lien on the assets acquired with the proceeds.

        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 2006. The revolving credit facility is used by the Company for both its long-term and short-term financing needs.

        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. These fees are included in the caption "Interest expense, net" in the accompanying Consolidated Statements of Income.

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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 $4,103,000 in 2003, $4,256,000 in 2002 and $5,239,000 in 2001. As of September 27, 2003, minimum annual rental commitments under the Company's long-term operating leases are approximately $3,679,000 in 2004, $2,728,000 in 2005, $1,305,000 in 2006, $1,249,000 in 2007 and $693,000 in the aggregate thereafter. The Company leases one of its facilities from a corporation owned in part by an executive of one of the Company's subsidiaries. The lease agreement requires annual payments of approximately $276,000 through July 2007. At September 27, 2003 and September 28, 2002, the Company had letters of credit outstanding of $1,007,000 and $773,000, 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 Incentive Plans:    The Company's stock incentive plans provide for the granting of stock options and stock grants up to a total of 1,226,250 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. During 2002 and 2001, 3,750 and 7,500 shares, respectively, of restricted stock were granted which vest over a five-year period. Amortization expense relating to the 2003, 2002 and 2001 stock grants was $159,000, $133,000 and $111,000, respectively.

        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 2003 amounted to a total of $110,000 for the six outside directors; in addition, the three committee chair fees amounted to a total of $25,000 for 2003. The plan, as approved by stockholders, provides a total of 562,500 shares for the issuance of such options.

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        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 27, 2003:

        Employee Stock Purchase Plan:    The Company's 1999 Employee Stock Purchase Plan ("ESPP"), approved by stockholders in January 1999, covers an aggregate of 225,000 shares of Company common

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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 2003, 18,324 shares were issued under the plan at an average price of $24.01 per share. Since inception, 113,513 shares have been issued. At September 27, 2003, an additional 111,487 shares were reserved for future issuances.

        Stockholders' Rights Plan:    In March 1999, the Board of Directors adopted a ten-year stockholders' rights plan. Under the plan, the Company's stockholders of record at March 19, 1999 received a right to purchase a unit ("Unit") consisting of one one-thousandth of a share of preferred stock for each share of common stock held on that date with an exercise price of $100, subject to adjustment. Until such rights become exercisable, one such right will also attach to subsequently issued shares of common stock. The rights become exercisable if (1) a person or group acquires 15% or more of the Company's common stock, (2) upon commencement of a tender or exchange offer which would result in a person or group beneficially owning 15% or more of the Company's common stock, or (3) upon the Company's Board of Directors determining that a person is an "adverse person" (as that term is defined in the plan). When exercisable, under certain conditions, each right entitles the holder thereof to purchase Units of the Company's preferred stock or shares of common stock of the acquirer, in each case having a market value at that time of twice the right's exercise price. The Board of Directors will be entitled to redeem the rights at one cent per right, under certain circumstances. The rights expire in 2009.

        Stock-Based Compensation:    For purposes of pro forma disclosures presented in Note A, the fair value of each option grant was estimated on the date of the grant using the Black-Scholes option-pricing model.

        The following key assumptions were used to value options issued: