COURIER Corp - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - COURIER Corp	Financial_Report.xls
EX-32.1 - EX-32.1 - COURIER Corp	a15-6169_1ex32d1.htm
EX-32.2 - EX-32.2 - COURIER Corp	a15-6169_1ex32d2.htm
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EX-31.1 - EX-31.1 - COURIER Corp	a15-6169_1ex31d1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 28, 2015

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

For the transition period from to

Commission file number 1-34268

COURIER CORPORATION

(Exact name of registrant as specified in its charter)

Massachusetts		04-2502514
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

15 Wellman Avenue, North Chelmsford, Massachusetts		01863
(Address of principal executive offices)		(Zip Code)

(978) 251-6000

(Registrant’s telephone number, including area code)

NO CHANGE

(Former name, former address and former fiscal year, if changed since last report)

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

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

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

Large accelerated filer o

Accelerated filer x

Non- accelerated filer o

(Do not check if a smaller reporting company)

Smaller reporting company o

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

Yes o No x

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

Class		Outstanding at May 4, 2015
Common Stock, $1 par value		11,516,746 shares

COURIER CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

(Dollars in thousands except per share amounts)

	QUARTER ENDED						SIX MONTHS ENDED
	March 28,			March 29,			March 28,			March 29,
	2015			2014			2015			2014

Net sales	$	60,580		$	60,580		$	127,074		$	132,840
Cost of sales	51,102			50,070			100,108			104,583

Gross profit	9,478			10,510			26,966			28,257

Selling and administrative expenses (Note A)	25,618			11,429			39,805			24,544
Impairment charge, net (Note G)	434			1,870			434			1,870

Operating income (loss) from continuing operations	(16,574		)	(2,789		)	(13,273		)	1,843

Interest expense, net	691			108			828			283

Pretax income (loss) from continuing operations	(17,265		)	(2,897		)	(14,101		)	1,560

Income tax provision (benefit) (Note C)	(1,709		)	(339		)	(341		)	1,297

Net income (loss) from continuing operations	(15,556		)	(2,558		)	(13,760		)	263

Loss from discontinued operation, net of tax (Note I)	—			(812		)	—			(986		)

Net income (loss)	(15,556		)	(3,370		)	(13,760		)	(723		)

Less: Loss attributable to noncontrolling interests	(49		)	—			(49		)	—

Net income (loss) attributable to Courier common stockholders	$	(15,507	)	$	(3,370	)	$	(13,711	)	$	(723	)

Net income (loss) per share (Note J)
Basic:
Net income (loss) from continuing operations	$	(1.37	)	$	(0.23	)	$	(1.22	)	$	0.02
Net loss from discontinued operation	—			(0.07		)	—			(0.09		)
Net income (loss)	(1.37		)	(0.30		)	(1.22		)	(0.06		)
Less: Net loss attributable to noncontrolling interests	—			—			—			—
Net loss attributable to Courier common stockholders	$	(1.37	)	$	(0.30	)	$	(1.21	)	$	(0.06	)
Diluted:
Net income (loss) from continuing operations	$	(1.37	)	$	(0.23	)	$	(1.22	)	$	0.02
Net loss from discontinued operation	—			(0.07		)	—			(0.09		)
Net income (loss)	(1.37		)	(0.30		)	(1.22		)	(0.06		)
Less: Net loss attributable to noncontrolling interests	—			—			—			—
Net loss attributable to Courier common stockholders	$	(1.37	)	$	(0.30	)	$	(1.21	)	$	(0.06	)

Cash dividends declared per share	$	0.21		$	0.21		$	0.42		$	0.42

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

COURIER CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF

COMPREHENSIVE INCOME (UNAUDITED)

(Dollars in thousands)

	QUARTER ENDED						SIX MONTHS ENDED
	March 28,			March 29,			March 28,			March 29,
	2015			2014			2015			2014

Net loss	$	(15,556	)	$	(3,370	)	$	(13,760	)	$	(723	)

Other comprehensive income (loss), net of tax:
Amounts reclassified from accumulated other comprehensive income	19			—			—			48
Translation adjustments (Note F)	(1,007		)	—			(1,007		)	—
Change in fair value of derivative (Note H)	175			—			112			—
Other comprehensive income (loss)	(813		)	—			(895		)	48
Comprehensive income (loss)	(16,369		)	(3,370		)	(14,655		)	(675		)
Less comprehensive loss attributable to noncontrolling interests (Note F)	(452		)	—			(452		)	—
Comprehensive income (loss) attributable to Courier stockholders	$	(16,821	)	$	(3,370	)	$	(15,107	)	$	(675	)

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

COURIER CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)

(Dollars in thousands)

	March 28,		September 27,
	2015		2014
ASSETS
Current assets:
Cash and cash equivalents	$	1,646	$	4,144
Investments	1,129		1,024
Accounts receivable, less allowance for uncollectible accounts of $321 at March 28, 2015 and $296 at September 27, 2014	35,582		48,200
Inventories (Note B)	46,239		38,239
Deferred income taxes	4,007		4,021
Recoverable income taxes	6,804		2,974
Other current assets	1,615		1,400

Total current assets	97,022		100,002

Property, plant and equipment less accumulated depreciation: $236 at March 28, 2015 and $231 at September 27, 2014	80,869		83,145

Goodwill (Notes A, F and G)	24,003		16,880

Other intangibles, net (Notes A, F and G)	4,227		1,946

Prepublication costs, net (Note A)	5,393		5,711

Long-term investments (Notes F and H)	2,629		6,429

Other assets	2,880		2,403

Total assets	$	217,023	$	216,516

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

COURIER CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)

(Dollars in thousands)

	March 28,			September 27,
	2015			2014
LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Current maturities of capital lease obligations (Notes D and F)	$	3,742		$	2,618
Current maturities of long-term debt (Notes D and F)	1,199			—
Accounts payable	14,274			11,124
Accrued payroll	6,820			8,610
Accrued taxes	1,128			1,051
Termination fee reimbursement (Note A)	10,000			—
Other current liabilities	10,129			8,918

Total current liabilities	47,292			32,321

Long-term debt (Notes D and F)	24,148			24,508
Capital lease obligations (Notes D and F)	5,261			5,839
Deferred income taxes	1,857			1,286
Contingent consideration (Note G)	—			1,415
Other liabilities	7,990			6,731

Total liabilities	86,548			72,100

Stockholders’ equity (Notes L and N):
Preferred stock, $1 par value-authorized 1,000,000 shares; none issued	—			—
Common stock, $1 par value-authorized 18,000,000 shares; issued 11,532,000 at March 28, 2015 and 11,424,000 at September 27, 2014	11,532			11,424
Additional paid-in capital	23,077			21,617
Retained earnings	93,362			111,901
Accumulated other comprehensive loss	(1,019		)	(526		)
Total Courier stockholders’ equity	126,952			144,416

Noncontrolling interest (Note F)	3,523			—

Total equity	130,475			144,416

Total liabilities and stockholders’ equity	$	217,023		$	216,516

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

COURIER CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands)

	SIX MONTHS ENDED
	March 28,			March 29,
	2015			2014
Operating Activities:
Net income (loss) from continuing operations	$	(13,760	)	$	263
Loss from discontinued operation, net of tax (Note I)	—			(986		)
Net loss	(13,760		)	(723		)
Adjustments to reconcile net income (loss) to cash provided from operating activites:
Depreciation of property, plant and equipment	10,250			10,812
Amortization of prepublication costs	1,573			1,816
Amortization of intangible assets	334			464
Impairment charge (Note G)	1,742			4,500
Change in fair value of loans receivable (Note F)	581			—
Change in fair value of contingent consideration (Note G)	(1,415		)	(2,280		)
Change in fair value of derivative (Note H)	(161		)	—
Stock-based compensation	639			743
Deferred income taxes	(564		)	(282		)
Changes in assets and liabilities - net of acquisition:
Termination fee reimbursement (Note A)	10,000			—
Accounts receivable	13,228			11,638
Inventory	(7,781		)	(2,050		)
Accounts payable	1,164			(2,646		)
Accrued and recoverable taxes	(3,398		)	(5,340		)
Other elements of working capital	(2,388		)	(2,647		)
Other long-term, net	(533		)	91
Cash provided from operating activities	9,511			14,096

Investment Activities:
Capital expenditures	(3,199		)	(7,532		)
Acquisition of business, net of cash acquired (Note F)	(482		)	—
Prepublication costs (Note A)	(1,255		)	(1,479		)
Loan receivable and other investments (Notes F and G)	(605		)	(4,917		)
Proceeds on disposition of assets (Note I)	275			—
Life insurance proceeds	—			387
Cash used for investment activities	(5,266		)	(13,541		)

Financing Activities:
Proceeds from capital lease financing (Note D)	—			10,488
Repayments under capital lease financing (Note D)	(330		)	(740		)
Other long-term debt borrowings (repayments) (Note D)	(2,415		)	(1,242		)
Cash dividends	(4,828		)	(4,842		)
Proceeds from stock plans	943			175
Cash provided from (used for) financing activities	(6,630		)	3,839

Effect of exchange rate on cash and cash equivalents	(113		)	—

Increase (decrease) in cash and cash equivalents	(2,498		)	4,394

Cash and cash equivalents at the beginning of the period	4,144			57

Cash and cash equivalents at the end of the period	$	1,646		$	4,451

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

COURIER CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unaudited Financial Statements

The consolidated condensed balance sheet as of March 28, 2015 and the consolidated condensed statements of operations and statements of comprehensive income for the three-month and six-month periods ended March 28, 2015 and March 29, 2014 and the statements of cash flows for the six-month periods ended March 28, 2015 and March 29, 2014 are unaudited. In the opinion of management, all adjustments, consisting of normal recurring items, considered necessary for a fair presentation of such financial statements have been recorded. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“generally accepted accounting principles”) have been condensed or omitted. The balance sheet data as of September 27, 2014 was derived from audited year-end financial statements, but does not include disclosures required by generally accepted accounting principles. It is suggested that these interim financial statements be read in conjunction with the Company’s most recent Annual Report on Form 10-K for the year ended September 27, 2014.

Agreement and Plan of Merger

On February 5, 2015, the Company entered into an Agreement and Plan of Merger with RR Donnelley (the “RRD Merger Agreement”). Under the terms of the RRD Merger Agreement, the Company’s shareholders will have the option to elect to receive either $23.00 in cash or 1.3756 RR Donnelley common shares for each outstanding share of the Company they own. Such elections are subject to pro ration so that a total of 8.0 million shares of RR Donnelley common stock, representing approximately 51% of the total merger consideration based on the price of RR Donnelley stock on the date of the RRD Merger Agreement, will be issued in the merger. The completion of the transaction is subject to customary closing conditions, including regulatory approval and approval by Courier’s shareholders. One of the conditions to closing was met on March 23, 2015 with the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The transaction is expected to close in the Company’s third quarter of fiscal 2015.

On January 16, 2015, the Company entered into an Agreement and Plan of Merger (the “Quad Merger Agreement”) with Quad/Graphics, Inc. (“Quad”) and subsequently terminated the Quad Merger Agreement on February 5, 2015. In accordance with the terms of the Quad Merger Agreement, upon termination, the Company paid Quad a $10 million termination fee. Under the terms of the RRD Merger Agreement, RR Donnelley reimbursed the Company the entire $10 million termination fee. For accounting purposes, recognition of the $10 million reimbursement from RR Donnelley has been deferred until the transaction closes and as such, the deferral of the reimbursement was included in Current Liabilities in the accompanying Consolidated Condensed Balance Sheet at March 28, 2015.

Discontinued Operations

The Company sold one of the businesses in its publishing segment, Federal Marketing Corporation, d/b/a Creative Homeowner (“Creative Homeowner”), in September 2014 (see Note I). Creative Homeowner was classified as a discontinued operation in the Company’s financial statements for all periods presented.

Goodwill and Other Intangibles

On November 18, 2014, the Company acquired a 60% ownership interest in Digital Page Gráfica E Editora (“Digital Page”), a Sao Paulo-based digital printing firm serving the education market in Brazil, and recorded goodwill of approximately $8.9 million (see Note F). “Other intangibles” include trade names, customer lists, and technology. Trade names with indefinite lives are not subject to amortization and are reviewed at least annually at the end of the fiscal year or whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. The Company recorded $3.7 million of amortizable intangible assets in the first quarter of fiscal 2015 with the acquisition of Digital Page (see Note F).

Other intangible assets are being amortized over two to ten-year periods. Total amortization expense for intangibles was approximately $176,000 and $233,000 in the second quarters and $334,000 and $464,000 in the first six months of fiscal years 2015 and 2014, respectively. Annual amortization expense is expected to be approximately $304,000 in fiscal 2015, $235,000 in fiscal 2016, $205,000 in fiscal 2017, and $200,000 in fiscal years 2018 through 2020.

Fair Value Measurements

Certain assets and liabilities are required to be recorded at fair value on a recurring basis, while other assets and liabilities are recorded at fair value on a nonrecurring basis, generally as a result of impairment charges (see Note G). Fair value is determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. Assets measured at fair value on a nonrecurring basis include long-lived assets and goodwill and other intangible assets. The three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies, is:

Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants.

Fair Value of Financial Instruments

Financial instruments consist primarily of cash, investments in mutual funds, accounts receivable, investment in convertible promissory notes (see Note H), accounts payable, and debt obligations. At March 28, 2015 and September 27, 2014, the fair value of the Company’s cash, accounts receivable and accounts payable approximated their carrying values due to the short maturity of these instruments. The fair value of the Company’s revolving credit facility approximates its carrying value due to the variable interest rate and the Company’s current rate standing. The Company does not use financial instruments for trading or speculative purposes.

Prepublication Costs

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

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 63% and 62% of the Company’s inventories at March 28, 2015 and September 27, 2014, respectively. Other inventories, primarily in the publishing segment, are determined on a first-in, first-out (FIFO) basis. Inventories consisted of the following:

	(000’s Omitted)
	March 28, 2015		September 27, 2014
Raw materials	$	12,382	$	9,652
Work in process	13,460		10,326
Finished goods	20,397		18,261
Total	$	46,239	$	38,239

C. INCOME TAXES

In calculating the provision for income taxes on an interim basis, the Company uses an estimate of the annual effective tax rate based upon the facts and circumstances known and applies that rate to its ordinary year-to-date earnings or losses. The effect of discrete items, such as unusual or infrequently occurring events, is recognized in the interim period in which the discrete item occurs. The Company recorded discrete items in the first and second quarters of fiscal 2015 of $0.8 million and $13.0 million, respectively, for transaction costs, which are generally not deductible for income tax purposes, relating to the pending acquisition of the Company discussed in Note A. In addition, in the second quarter of fiscal 2015, the Company recorded two discrete items; an impairment charge and a related adjustment to the fair value of contingent consideration, which are not deductible for income tax purposes (see Note G).

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

	(000’s Omitted)
	Six Months Ended
	March 28, 2015					March 29, 2014
Federal taxes at statutory rates	$	(4,936	)	35.0	%	$	546		35.0	%
State taxes, net of federal tax benefit	(23		)	0.2		138			8.9
Federal manufacturer’s deduction	40			(0.3	)	(141		)	(9.1	)
Impairment charge and change in fair value of contingent consideration (Note G)	(116		)	0.8		716			45.9
Transaction costs (Note A)	4,701			(33.3	)	—			—
Other	(7		)	—		38			2.4
Total	$	(341	)	2.4	%	$	1,297		83.1	%

D. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

The Company has a $100 million long-term revolving credit facility in place under which the Company can borrow at a rate not to exceed LIBOR plus 2.25%. In December 2014, the Company extended the maturity date of this credit facility from March 2016 to December 2019. At March 28, 2015, the Company had $24.0 million in borrowings under this facility at an interest rate of 1.4%. The revolving credit facility contains restrictive covenants including provisions relating to the incurrence of additional indebtedness and a quarterly test of EBITDA to debt service. The Company was in compliance with all such covenants at March 28, 2015. The facility also provides for a commitment fee not to exceed 3/8% per annum on the unused portion. The revolving credit facility is used by the Company for both its long-term and short-term financing needs.

In the first quarter of fiscal 2014, the Company entered into a $10.5 million master security lease agreement for printing and binding equipment in its Kendallville, Indiana digital print facility. The Company accounted for this transaction as a capital lease obligation, which expires in October 2017. At March 28, 2015, $7.2 million of debt was outstanding under this arrangement and the implicit interest rate was 1.8%. Depreciation expense was calculated on a straight-line basis over the estimated useful life of the assets under the capital lease and such depreciation was approximately $750,000 and $700,000 in the first six months of fiscal years 2015 and 2014, respectively.

In November 2014, the Company acquired Digital Page (see Note F) and assumed various capital lease and other debt obligations. Current maturities under the capital lease obligations and other debt of $1.1 million and $1.2 million, respectively, were included in the accompanying consolidated condensed balance sheet at March 28, 2015. The long-term portion of this debt of $0.9 million includes principal payments under Digital Page’s capital leases of $0.7 million due through June 2017.

E. OPERATING SEGMENTS

The Company has two operating segments: book manufacturing and publishing. The book manufacturing segment offers a full range of services from production through storage and distribution for religious, educational and trade book publishers. In November 2014, Company acquired a 60% ownership interest in

Digital Page Gráfica E Editora (“Digital Page”), a Sao Paulo-based digital printing firm serving the education market in Brazil, which has been included as a reporting unit within the book manufacturing segment (see Note F). The publishing segment consists of Dover Publications, Inc. and Research & Education Association, Inc. (“REA”). In September 2014, the Company sold its Creative Homeowner business (see Note I), which had been included in the publishing segment. Creative Homeowner was classified as a discontinued operation in the Company’s financial statements and, as such, was not reflected in the net sales and operating income (loss) in the table below.

Segment performance is evaluated based on several factors, of which the primary financial measure is operating income. For segment reporting purposes, operating income is defined as gross profit (sales less cost of sales) less selling and administrative expenses, and includes severance and other restructuring costs but excludes stock-based compensation. The Company recorded $13.8 million for transaction costs in the first six months of fiscal 2015 relating to the pending acquisition of the Company discussed in Note A. Such costs are not allocated to the business segments. As such, segment performance is evaluated exclusive of interest, income taxes, stock-based compensation, impairment charges, other income and certain transaction costs associated with the pending acquisition. The elimination of intersegment sales and related profit represents sales from the book manufacturing segment to the publishing segment.

The following table provides segment information from continuing operations for the three-month and six-month periods ended March 28, 2015 and March 29, 2014.

	(000’s Omitted)
	Quarter Ended						Six Months Ended
	March 28,			March 29,			March 28,			March 29,
	2015			2014			2015			2014
Net sales:
Book manufacturing	$	55,224		$	55,355		$	114,869		$	120,931
Publishing	7,548			8,128			16,563			16,713
Elimination of intersegment sales	(2,192		)	(2,903		)	(4,358		)	(4,804		)
Total	$	60,580		$	60,580		$	127,074		$	132,840

Pretax income (loss):
Book manufacturing operating income (loss)	$	(2,700	)	$	(718	)	$	1,535		$	4,592
Publishing operating income (loss)	(141		)	211			117			(201		)
Impairment charge and reduction in fair value of contingent consideration (Note G)	(434		)	(1,870		)	(434		)	(1,870		)
Transaction costs (Note A)	(13,015		)	—			(13,815		)	—
Stock-based compensation	(274		)	(385		)	(639		)	(743		)
Elimination of intersegment profit	(10		)	(27		)	(37		)	65
Interest expense, net	(691		)	(108		)	(828		)	(283		)
Total	$	(17,265	)	$	(2,897	)	$	(14,101	)	$	1,560

F. BUSINESS ACQUISITION

On November 18, 2014, the Company acquired 60% of the outstanding stock of Digital Page Gráfica E Editora (“Digital Page”), a Sao Paulo-based digital printing firm, and the founder of Digital Page continues to own 40% of the business and actively manage the operations. The investment in Digital Page complements the Company’s license of its custom publishing platform to Santillana, the largest Spanish/Portuguese educational publisher in the world as Digital Page has a multiyear commercial print agreement with Santillana. Under the investment agreement, as revised in August 2014, the Company invested a total of 20 million Brazilian Reals or $7.7 million. During the first quarter of fiscal 2014, the Company funded two loans to Digital Page totaling approximately 10 million Brazilian Reals which were secured by the pledge of the equity interest in Digital Page. The principal amount of the loans was credited towards the total purchase price, which was a non-cash investing activity for the first quarter of fiscal 2015. The Company then made a capital contribution of approximately 10 million Brazilian Reals to Digital Page upon closing of which 1.25 million was paid directly to the founding shareholder. The acquisition was accounted for as a business combination and, accordingly, Digital Page’s financial results are included as a reporting unit within the book manufacturing segment in the

consolidated financial statements from the date of acquisition and are reported on a one-month lag to facilitate accurate reporting. In the second quarter and first half of fiscal 2015, sales of $3.8 million and operating income of $0.3 million, prior to reflecting the 40% noncontrolling interest, were included in the accompanying consolidated condensed financial statements. Pro forma information related to this acquisition is not included because the impact on the Company’s consolidated results of operations is considered to be immaterial. Acquisition costs of approximately $150,000 were included in selling and administrative expenses in the first six months of fiscal 2015.

The acquisition of Digital Page was recorded by allocating the consideration paid to the identified assets acquired, including intangible assets and liabilities assumed, based on their estimated fair value at the acquisition date. The excess of the fair value of the consideration paid over the net amounts assigned to the fair value of the assets acquired and liabilities assumed was recorded as goodwill, which is not tax deductible.

The acquisition-date fair value of the consideration transferred, including the $482,000 paid directly to the founding shareholder, was as follows:

	(000’s Omitted)
Cash consideration	$	3,535
Conversion of principal of loans	4,168
Total fair value of consideration transferred	$	7,703

Based on these valuations, the preliminary purchase price allocation was as follows:

	(000’s Omitted)
Cash	$	3,053
Accounts receivable	1,051
Inventories	239
Machinery and equipment	5,227
Goodwill	8,896
Identified intangibles	3,694
Other assets	1,110
Accounts payable and accrued liabilities	(5,874		)
Capital leases and other debt obligations	(4,462		)
Deferred income tax liability	(1,256		)
Total fair value of net assets acquired	11,678
Less: Noncontrolling interest	(3,975		)
Total fair value of consideration transferred	$	7,703

The fair value of the acquired identifiable intangible assets, deferred taxes and tax obligations are provisional pending receipt of the final valuations for those assets and liabilities. The Company expects to finalize the preliminary estimates of the fair value of the intangible assets, deferred taxes, and tax obligations by the end of this fiscal year.

G. GOODWILL IMPAIRMENT CHARGE

The Company evaluates possible impairment annually at the end of its fiscal year or whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable (a “triggering event”). These tests are performed at the reporting unit level, which is the operating segment or one level below the operating segment. The goodwill impairment test is a two-step test. In the second quarter of fiscal 2015, the Company determined there was a triggering event for FastPencil, which had been acquired in April 2013 and is a reporting unit within the book manufacturing segment. Revenue growth for this start-up business had been slower than projected at acquisition and the Company performed the step-one impairment test on FastPencil’s goodwill. After performing the step-one test, the Company determined that the fair value of FastPencil was below its carrying value and as such the second step was required. In arriving at this conclusion, the Company used a valuation methodology based on a discounted cash flow and a market value approach (Level 3 in the three-tier hierarchy — see Note A). Key assumptions and estimates included revenue and operating income forecasts and the assessed growth rate after the forecast period. The second step of the impairment test for FastPencil included estimating the fair value of the tangible and identified intangible assets and liabilities of the impaired reporting unit. The implied fair value of goodwill is the residual of the total fair value of the reporting unit less the accumulated fair value of identified tangible and intangible

assets and liabilities. Based on the results of these valuations, the Company concluded it was necessary to record a goodwill impairment charge of $1.0 million at the end of the second quarter of fiscal 2015 as well as an impairment charge of $0.7 million for FastPencil’s other intangible assets, representing all of the remaining goodwill and intangible assets of FastPencil. In addition, at March 28, 2015, the Company performed a fair value assessment of the related contingent “earn out” consideration payable and recorded a reduction in the liability of $1.3 million. The net impact of the impairment of FastPencil’s goodwill and the reduction in the contingent consideration payable was a charge of $434,000 in the second quarter of fiscal 2015; both adjustments are non-cash and the goodwill impairment and reduction in the contingent consideration liability are not deductible for income tax purposes. In April 2015, the Company sold 100% of its stock in FastPencil to one of the founders of FastPencil and expects to recognize a small gain on the sale.

H. FAIR VALUE MEASUREMENTS

Certain assets and liabilities are required to be recorded at fair value on a recurring basis. The Company’s only assets and liabilities adjusted to fair value on a recurring basis are short-term investments in mutual funds, a long-term investment in convertible promissory notes and contingent consideration. In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company is required to record certain assets and liabilities on a nonrecurring basis, generally as a result of acquisitions or the remeasurement of assets resulting in impairment charges (see Note G).

Long-term investments in the accompanying consolidated condensed balance sheet include convertible promissory notes of $2.0 million issued by Nomadic Learning Limited, a startup business focused on corporate and educational learning. At March 28, 2015, a fair value assessment was performed using a discounted cash flow model and the fair value approximated the carrying value of the notes. In addition, a fair value assessment of the conversion feature embedded in the convertible promissory notes was performed at March 28, 2015 resulting in a fair value of $0.6 million reflected in “Long-term investments” and “Accumulated other comprehensive loss” in the accompanying consolidated balance sheet.

The following table shows the assets and liabilities carried at fair value measured on a recurring basis as of March 28, 2015 and September 27, 2014 classified in one of the three levels described in Note A:

	(000’s Omitted)
	Total Carrying Value			Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
As of March 28, 2015:
Short-term investments in mutual funds	$	1,129		$	1,129		—
Convertible promissory notes:
Investment in notes receivable	2,000						$	2,000
Embedded derivative	629						629

As of September 27, 2014:
Short-term investments in mutual funds	$	1,016		$	1,016	—	—
Convertible promissory notes:
Investment in notes receivable	1,500			—		—	$	1,500
Embedded derivative	468			—		—	468
Forward foreign exchange contracts	8					8
Contingent consideration liability (Note G)	(1,415		)	—		—	(1,415		)

The following table reflects fair value measurements using significant unobservable inputs (Level 3):

	(000’s omitted)
	Convertible Promissory Notes		Embedded Derivative		Contingent Consideration Liability
Balance at September 27, 2014	$	1,500	$	468	$	(1,415	)
Change in fair value	—		161		1,415
Amounts paid	500		—		—
Balance at March 28, 2015	$	2,000	$	629	—

Balance at September 28, 2013	$	500	—		$	(4,960	)
Change in fair value	—		—		2,280
Amounts paid	500		—		—
Balance at March 29, 2014	$	1,000	$	—	$	(2,680	)

I. DISCONTINUED OPERATIONS

In September 2014, the Company sold Creative Homeowner, which was a separate reporting unit within its publishing segment, for $1.0 million. Proceeds received from the sale were $450,000 in fiscal 2014, $275,000 in the first half of fiscal 2015 and the balance due before the end of fiscal 2015. The following table summarizes the operating results of this discontinued operation for the six-month period ended March 29, 2014.

	(000’s Omitted)
Revenues	$	1,399

Pretax loss from operations	$	(1,568	)
Income tax provision (benefit)	(582		)
Net loss from discontinued operations	$	(986	)

J. NET INCOME PER SHARE

The following is a reconciliation of the outstanding shares used in the calculation of basic and diluted net income per share. Potentially dilutive shares, calculated using the treasury stock method, consist of shares issued under the Company’s stock option plans. In the second quarter and first six months of fiscal 2015, 203,000 and 237,000, respectively, of potentially dilutive shares were excluded due to the Company incurring losses in those periods. In the second quarter of fiscal 2014, 221,000 of potentially dilutive shares were excluded due to the Company incurring a loss in that period.

	(000’s Omitted)
	Quarter Ended		Six Months Ended
	March 28, 2015	March 29, 2014	March 28, 2015	March 29, 2014

Weighted average shares for basic	11,335	11,314	11,305	11,299
Effect of potentially dilutive shares	—	—	—	233
Weighted average shares for diluted	11,335	11,314	11,305	11,532

K. SHARE REPURCHASE PROGRAM

In November 2013, the Company announced the approval by its Board of Directors for the repurchase of up to $10 million of the Company’s outstanding common stock. In fiscal 2014, the Company repurchased 153,150 shares of common stock for approximately $2.0 million under this program. This program expired on November 21, 2014.

L. STOCK ARRANGEMENTS

The Company records stock-based compensation expense for the cost of stock options and stock grants as well as shares issued under the Company’s 1999 Employee Stock Purchase Plan, as amended. The fair value of each option awarded is calculated on the date of grant using the Black-Scholes option-pricing model. Stock-based compensation recognized in selling and administrative expenses in the accompanying financial statements in the second quarters of fiscal 2015 and 2014 was $274,000 and $385,000, respectively. The related tax benefit recognized in the second quarters of fiscal 2015 and 2014 was $96,000 and $137,000, respectively. For the first six months of fiscal 2015 and 2014, stock-based compensation was $639,000 and $743,000, respectively, and the related tax benefit recognized was $233,000 and $264,000 respectively. Unrecognized stock-based compensation cost at March 28, 2015 was $1.6 million, to be recognized over a weighted-average period of 2.1 years.

The Company annually issues a combination of stock options and stock grants to its key employees under the Courier Corporation 2011 Stock Option and Incentive Plan (the “2011 Plan”). Stock options and stock grants generally vest over three years. Options and grants relating to fiscal 2014 were awarded in November 2014; 34,896 stock options were awarded under the 2011 Plan with an exercise price of $13.44 per share, which was the stock price on the date of grant, and a weighted-average fair value of $3.03 per share. In addition, 45,132 stock grants were awarded in November 2014 with a weighted-average fair value of $13.44 per share. In the second quarter of fiscal 2015, 4,558 options were exercised at a weighted-average exercise price of $13.71 per share. Also in the second quarter of fiscal 2015, 53,179 options that had been issued under the Courier Corporation 2010 Stock Equity Plan for Non-Employee Directors were exercised at a weighted-average exercise price of $13.71 per share.

The weighted average Black-Scholes fair value assumptions for stock options awarded under the 2011 Plan in fiscal 2015 were as follows:

Estimated life of options (years)	10
Risk-free interest rate	2.6	%
Expected volatility	42	%
Expected dividend yield	6.0	%

M. RESTRUCTURING COSTS

In fiscal 2011, the Company recorded restructuring costs of $7.7 million in the book manufacturing segment associated with closing and consolidating its Stoughton, Massachusetts manufacturing facility due to the impact of technology and competitive pressures affecting the one-color paperback books in which the plant specialized. Restructuring costs included $2.3 million for employee severance and benefit costs, $2.1 million for an early withdrawal liability from a multi-employer pension plan, and $3.3 million for lease termination and other facility closure costs. As of March 28, 2015, remaining payments of approximately $2.4 million will be made over periods ranging from less than one year for the building lease obligation to 17 years for the liability related to the multi-employer pension plan. At March 28, 2015, approximately $0.8 million of the restructuring payments were included in “Other current liabilities” and $1.7 million were included in “Other liabilities” in the accompanying consolidated condensed balance sheet.

The following table depicts the remaining accrual balances for these restructuring costs.

	(000’s omitted)
	Accrual at		Charges	Costs			Accrual at
	September 27,		or	Paid or			March 28,
	2014		Reversals	Settled			2015
Employee severance, post-retirement and other benefit costs	$	88	—	$	(24	)	$	64
Early withdrawal from multi-employer pension plan	1,926		—	(38		)	1,888
Lease termination, facility closure and other costs	765		—	(185		)	580
Total	$	2,779	—	$	(247	)	$	2,532

N. EQUITY

The Company’s equity as of March 28, 2015 and September 27, 2014, and changes during the six month period ended March 28, 2015, were as follows:

	(000’s omitted)
	Company Stockholders’ Equity			Noncontrolling Interest			Total Equity
Balance at September 27, 2014	$	144,416		—			$	144,416
Net income (loss)	(13,711		)	(49		)	(13,760		)
Cash dividends	(4,828		)	—			(4,828		)
Noncontrolling interest in acquired business (Note F)	—			3,975			3,975
Changes in other comprehensive income (loss)	(492		)	(403		)	(895		)
Stock-based compensation	639			—			639
Other stock plan activity	928			—			928
Balance at March 28, 2015	$	126,952		$	3,523		$	130,475

The Company’s equity as of March 29, 2014 and September 28, 2013, and changes during the six month period ended March 29, 2014, were as follows:

	(000’s omitted)
	Company Stockholders’ Equity			Noncontrolling Interest	Total Equity
Balance at September 28, 2013	$	146,044		—	$	146,044
Net income (loss)	(723		)	—	(723		)
Cash dividends	(4,842		)	—	(4,842		)
Changes in other comprehensive income	48			—	48
Stock-based compensation	743			—	743
Other stock plan activity	365			—	365
Balance at March 29, 2014	$	141,635		—	$	141,635

Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF
	FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Critical Accounting Policies and Estimates:

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

Accounts Receivable. Management performs ongoing credit evaluations of the Company’s customers and adjusts credit limits based upon payment history and the customer’s current creditworthiness. Collections and payments from customers are continuously monitored. A provision for estimated credit losses is determined based upon historical experience and any specific customer collection risks that have been identified. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

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

Goodwill and Other Intangibles. Other intangibles include customer lists and technology, which are amortized on a straight-line basis over periods ranging from two to ten years and indefinite-lived trade names. The Company evaluates possible impairment of goodwill and other intangibles at the reporting unit level, which is the operating segment or one level below the operating segment, on an annual basis or whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. The Company completed its annual impairment test at September 27, 2014, which resulted in no change to the nature or carrying amounts of its intangible assets, with the exception of FastPencil, a reporting unit within the book manufacturing segment. The Company concluded it was necessary to record a goodwill impairment charge of $4.5 million at the end of the second quarter of fiscal 2014 and $0.3 million at the end of the fourth quarter of fiscal 2014, as well as an impairment charge of $1.2 million for FastPencil’s other intangible assets at the end of the fourth quarter of fiscal 2014. At the end of the second quarter of fiscal 2015, an impairment charge of $1.7 million was recorded representing the remainder of FastPencil’s goodwill and other intangible assets. Changes in market conditions or poor operating results could result in a decline in the fair value of the Company’s goodwill and other intangible assets thereby potentially requiring an impairment charge in the future.

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

Overview:

Courier Corporation, founded in 1824, is among America’s leading book manufacturers and a leader in content management and customization in new and traditional media. The Company also publishes books under two brands offering award-winning content and thousands of titles. The Company has two operating segments: book manufacturing and publishing. The book manufacturing segment streamlines the process of bringing books from the point of creation to the point of use. Courier offers services from prepress and production through storage and distribution, as well as innovative content management, customization and state-of-the-art digital print capabilities. The publishing segment consists of Dover Publications, Inc. (“Dover”) and Research & Education Association, Inc. (“REA”). Dover publishes over 10,000 titles in more than 30 specialty categories including children’s books, literature, art, music, crafts, mathematics, science, religion and architecture. REA publishes test preparation and study-guide books and software for high school, college and graduate students, and professionals.

On January 16, 2015, the Company entered into an Agreement and Plan of Merger (the “Quad Merger Agreement”) with Quad/Graphics, Inc. (“Quad”) pursuant to which the Company’s shareholders would have received $20.50 per share, consisting of cash and shares of Quad common stock. On January 26, 2015, the Company received an unsolicited proposal from R.R. Donnelley & Sons Company (“RR Donnelley”) to acquire the Company for $23.00 per share, consisting of cash and shares of RR Donnelley common stock.

On February 5, 2015, the Company terminated the Quad Merger Agreement and simultaneously entered into an Agreement and Plan of Merger with RR Donnelley (the “RRD Merger Agreement”). Under the terms of the RRD Merger Agreement, the Company’s shareholders will have the option to elect to receive either $23.00 in cash or 1.3756 RR Donnelley common shares for each outstanding share of Courier they own. Such elections are subject to pro ration so that a total of 8.0 million shares of RR Donnelley common stock, representing approximately 51% of the total merger consideration based on the price of RR Donnelley stock on the date of the RRD Merger Agreement, will be issued in the merger. The completion of the transaction is subject to customary closing conditions, including approval by Courier’s shareholders. One of the conditions to closing was met on March 23, 2015 with the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the Company expects the transaction to close in the second quarter of calendar 2015.

In accordance with the terms of the Quad Merger Agreement, upon termination, the Company paid Quad a $10 million termination fee. Under the terms of the RRD Merger Agreement, RR Donnelley reimbursed the Company the entire $10 million termination fee. The $10 million termination fee paid to Quad was included in selling and administrative expenses in the second quarter of fiscal 2015. For accounting purposes, recognition of the $10 million reimbursement from RR Donnelley has been deferred until the transaction closes and as such, the deferral of the reimbursement was included in current liabilities in the accompanying consolidated condensed balance sheet at March 28, 2015.

Results of Continuing Operations:

FINANCIAL HIGHLIGHTS

(dollars in thousands except per share amounts)

	Quarter Ended								Six Months Ended
	March 28, 2015			March 29, 2014			% Change		March 28, 2015			March 29, 2014			% Change

Net sales	$	60,580		$	60,580		0	%	$	127,074		$	132,840		-4.3	%
Cost of sales	51,102			50,070			2.1	%	100,108			104,583			-4.3	%
Gross profit	9,478			10,510			-9.8	%	26,966			28,257			-4.6	%
As a percentage of sales	15.6		%	17.3		%			21.2		%	21.3		%

Selling and administrative expenses	25,618			11,429			124.1	%	39,805			24,544			62.2	%
Impairment charge, net	434			1,870			-76.8	%	434			1,870			-76.8	%
Operating income (loss)	(16,574		)	(2,789		)			(13,273		)	1,843
Interest expense, net	691			108					828			283
Pretax income (loss)	(17,265		)	(2,897		)			(14,101		)	1,560
Income tax provision (benefit)	(1,709		)	(339		)			(341		)	1,297
Net income (loss)	$	(15,556	)	$	(2,558	)			$	(13,760	)	$	263

Net income (loss) per diluted share	$	(1.37	)	$	(0.23	)			$	(1.22	)	$	0.02

Revenues from continuing operations in the second quarter of fiscal 2015 were $60.6 million, the same as last year. For the first six months, revenues were $127.1 million, down 4% from the same period last year. Book manufacturing segment sales for the quarter of $55.2 million were comparable to last year’s second quarter, as growth in the religious market and sales at Digital Page since its acquisition were offset by lower sales in the U.S. education market. For the first six months of fiscal 2015, book manufacturing sales decreased 5% to $114.9 million with lower sales in each of the three U.S. markets the Company serves. In the publishing segment, revenues were down 7% in the second quarter and down 1% in the first half of fiscal 2015 to $7.5 million and $16.6 million, respectively, compared to the corresponding periods last year.

In the second quarter of fiscal 2015, the Company reported a loss of $15.6 million compared with a loss of $2.6 million in the same period last year. For the first six months, the loss was $13.8 million compared to net income of $263,000 in the corresponding period of fiscal 2014. Results in fiscal 2015 include approximately $13 million, or $1.14 per diluted share, and $13.8 million, or $1.21 per diluted share, for the second quarter and first six months, respectively, for transaction costs associated with the pending acquisition of the Company, which are generally not deductible for income tax purposes. Fiscal 2015 year-to-date results also included losses on foreign currency translation related to the Company’s acquisition of Digital Page of $1.1 million, or $0.06 per diluted share. Results in last year’s second quarter included a $4.5 million impairment charge to the goodwill of FastPencil, acquired in April 2013. Results for the second quarter of fiscal 2014 also included a $2.6 million reduction in the contingent “earn out” consideration payable in the FastPencil acquisition due to a lower probability of FastPencil meeting the revenue targets during the earn out period. The net impact of the impairment of FastPencil’s goodwill and the reduction in the contingent consideration payable was a charge of $1.9 million. In the second quarter of fiscal 2015, the Company recorded a $1.7 million impairment charge representing the remainder of FastPencil’s goodwill and other intangible assets, as well as eliminating the balance of the related contingent consideration liability of $1.3 million, the net impact of which was a charge of $0.4 million. These goodwill impairments and adjustments to the contingent consideration liability are not deductible for income tax purposes. In April 2015, subsequent to the end of the fiscal 2015 second quarter, the Company sold FastPencil.

Book Manufacturing Segment

SEGMENT HIGHLIGHTS

(dollars in thousands)

	Quarter Ended								Six Months Ended
	March 28, 2015			March 29, 2014			% Change		March 28, 2015			March 29, 2014			% Change

Net sales	$	55,224		$	55,355		0	%	$	114,869		$	120,931		-5	%
Cost of sales	48,570			48,135			1	%	94,233			99,351			-5	%
Gross profit	6,654			7,220			-8	%	20,636			21,580			-4	%
As a percentage of sales	12.0		%	13.0		%			18.0		%	17.8		%

Selling and administrative expenses	9,354			7,938			18	%	19,101			16,988			12	%
Operating income (loss)	$	(2,700	)	$	(718	)			$	1,535		$	4,592		-67	%

Within the book manufacturing segment, the Company focuses on three key U.S. publishing markets: education, religious and specialty trade. In the second quarter of fiscal 2015, sales to the education market were $17 million, down from $21 million for the same period last year, with most of the decline attributable to lower sales of college textbooks. For the first six months of fiscal 2015, educations sales of $47 million were down 6% from last year with the decrease entirely attributable to elementary and high school textbooks. Sales to the religious market were $18 million in the second quarter, up 8% from last year, with sales to the Company’s largest religious customer up 18% from last year’s second quarter after an unusually slow first quarter. On a year-to-date basis, sales to this customer were down 13%. The volume of orders from this customer fluctuates from quarter to quarter within a long-term pattern of low single-digit growth. For the first six months of fiscal 2015, sales to the religious market were down 17% to $29 million. Sales to the specialty trade market were down 2% in the second quarter to $15 million, while year-to-date sales of $31 million were down 1% from the same period last year. In addition to the U.S. publishing markets, the Company also provides digital printing capabilities in Brazil with the acquisition of Digital Page on November 18, 2014. Since Digital Page’s results are reported on a one-month lag, second quarter and year-to-date revenue includes sales for the period from the acquisition date through February 2015, which amounted to approximately $4 million.

In the second quarter of fiscal 2015, cost of sales in the book manufacturing segment increased less than 1% to $48.6 million on comparable sales levels. For the year-to-date, cost of sales decreased 5%, or $5.1 million, compared to the same six month period last year, largely due to the decline in sales volume. Gross profit for the second quarter decreased $0.6 million to $6.7 million compared with the corresponding period in fiscal 2014 and, as a percentage of sales, decreased to 12.0% from 13.0%, principally due to lower sales in the education market and an unfavorable sales mix. For the first six months of fiscal 2015, gross profit decreased by $0.9 million, reflecting the sales levels, but increased slightly as a percentage of sales to 18.0% from 17.8%, despite a highly competitive pricing environment, as a result of lower depreciation expense and improved productivity.

Selling and administrative expenses for the segment increased $1.4 million in the second quarter and $2.1 million in the first half of fiscal 2015 compared to the same periods last year, primarily due to operating and amortization expenses commencing in the second quarter in relation to the acquisition of the Brazilian printer, Digital Page. Foreign currency exchange losses of approximately $1.1 million associated with the investment in Brazil also contributed to the year-to-date increase in selling and administrative expenses.

The book manufacturing segment reported an operating loss of $2.7 million in the second quarter of fiscal 2015 compared with $718,000 in the same period last year. For the year to date, operating income in the book manufacturing segment was $1.5 million in fiscal 2015, down from $4.6 million for the first six months of last year. Results for the quarter and first half of fiscal 2015 reflect lower sales, a highly competitive pricing environment and foreign currency exchange losses associated with the acquisition of Digital Page in Brazil.

Publishing Segment

SEGMENT HIGHLIGHTS

(dollars in thousands)

	Quarter Ended								Six Months Ended
	March 28, 2015			March 29, 2014			% Change		March 28, 2015			March 29, 2014			% Change

Net sales	$	7,548		$	8,128		-7.1	%	$	16,563		$	16,713		-0.9	%
Cost of sales	4,715			4,809			-2.0	%	10,198			10,100			-1.0	%
Gross profit	2,833			3,319			-14.6	%	6,365			6,613			-3.8	%
As a percentage of sales	37.5		%	40.8		%			38.4		%	39.6		%

Selling and administrative expenses	2,974			3,108			-4.3	%	6,248			6,814			-8.3	%
Operating income (loss)	$	(141	)	$	211				$	117		$	(201	)

The Company’s publishing segment revenues were down 7% in the second quarter to $7.5 million and down 1% to $16.6 million for the first six months of fiscal 2015, compared to the corresponding prior year periods. Sales at REA in the quarter were $1.1 million compared to $1.5 million in last year’s second quarter and for the year to date were $1.9 million, down from $2.2 million for the first six months of fiscal 2014. The decrease in sales at REA reflects steps taken last year to narrow the focus of its new product development to key test preparation markets, such as AP, CLEP and GED. Sales at Dover in the second quarter of fiscal 2015 were down 4% to $6.4 million compared to the same period last year. Despite the shortfall in the second quarter, which historically is the slowest seasonal period for Dover, sales on a year-to-date basis of $14.7 million were up over the $14.5 million for the corresponding prior year period. This increase reflects growth in sales to online retailers and the success of its Creative Haven line of adult coloring books. Dover entered this emerging category in 2013 and revenues have risen steadily, with sales doubling in the first six months of fiscal 2015.

Cost of sales in this segment decreased 2% to $4.7 million in the second quarter and increased 1% to $10.2 million for the first six months of fiscal 2015 compared to the corresponding periods last year, reflecting the level of sales and product mix. Gross profit decreased 15% to $2.8 million compared to last year’s second quarter and, as a percentage of sales, decreased to 37.5% from 40.8%. For the first six months of fiscal 2015, gross profit decreased 4% to $6.4 million and, as a percentage of sales, decreased to 38.4% from 39.6%. The decline in both the second quarter and first six months of fiscal 2015 resulted from lower sales and product mix.

Previous cost structure measures benefitted selling and administrative expenses for the segment, which were down 4% in the second quarter and 8% for the first six months from the comparable prior year periods. The first quarter of last year included approximately $100,000 related to actions taken to reduce overhead at REA and refocus new product development.

The publishing segment reported a loss of $141,000 in the second quarter of fiscal 2015 compared to operating income of $211,000 in the corresponding period last year. Despite the second-quarter loss, the segment remained modestly profitable for the year to date, with income of $117,000 versus a loss of $201,000 in the first half of last year. Major factors for the improvement included previous cost containment measures and the success of the Creative Haven product line.

Total Consolidated Company

Interest expense, net of interest income, was $691,000 in the second quarter of fiscal 2015 compared to $108,000 of net interest expense in the same period last year. For the first six months of fiscal 2015, interest expense, net of interest income was $828,000 compared to $283,000 in the first half of fiscal 2014. Interest expense in the second quarter and first six months included $530,000 attributable to Digital Page for capital lease and other financing costs since its acquisition on November 18, 2014. Average debt under the revolving credit facility in the second quarter and first half of fiscal 2015 was approximately $22 million at an average annual interest rate of 1.4%, generating interest expense of approximately $75,000 in the second quarter and $160,000 in the first six months of the year. Average debt under the revolving credit facility in the second quarter and first half of fiscal 2014 was approximately $24 million at an average annual interest rate of 1.4%, generating interest expense of approximately $85,000 in the second quarter and $171,000 in the first six months of last year. In the first quarter of fiscal 2014, the Company entered into a capital lease arrangement

for certain assets in its Kendallville, Indiana digital print facility. At March 28, 2015, $7.2 million of debt was outstanding under this arrangement at an implicit interest rate of 1.8%. Interest expense under the capital lease was approximately $32,000 and $45,000 in the second quarters of fiscal 2015 and 2014, respectively, and approximately $65,000 and $60,000 in the first six months of fiscal 2015 and 2014, respectively. In addition, approximately $48,000 and $58,000 of interest expense was amortized in the first six months of fiscal years 2015 and 2014, respectively, associated with the restructuring costs incurred in fiscal 2011. Interest expense also includes commitment fees and other costs associated with maintaining the Company’s $100 million revolving credit facility.

The tax benefit in the first half of fiscal 2015 includes the impact of the goodwill and other intangible assets impairment charges and corresponding reduction in the related contingent consideration liability for FastPencil. The goodwill impairment charge and reduction in the contingent consideration liability are not deductible for income tax purposes. The first half of fiscal 2014 was similarly impacted by a goodwill impairment charge and reduction in the related contingent consideration liability for FastPencil. The Company’s effective tax rate in fiscal 2015 was also impacted by nondeductible transaction costs of $13.8 million in the first six months associated with the pending acquisition of the Company. Excluding the impact of these items, the effective tax rate for continuing operations for the first six months of fiscal 2015 was 35% compared to 38% in the same period last year, reflecting a lower effective state tax rate.

For purposes of computing net income (loss) per diluted share, weighted average shares outstanding of 11.3 million for the second quarter of fiscal 2015 were comparable to the same period last year. In the second quarter of fiscal years 2015 and 2014, approximately 237,000 and 221,000, respectively, of potentially dilutive shares were excluded due to the Company incurring losses in those periods. For the first six months of fiscal 2015, weighted average shares outstanding were 11.3 million, excluding approximately 203,000 of potentially dilutive shares due to the Company incurring a loss in that period. For the first six months of fiscal 2014, weighted average shares outstanding were 11.5 million, including approximately 233,000 of potentially dilutive shares in the calculation of net income per diluted share from continuing operations.

Restructuring Costs

In fiscal 2011, the Company recorded restructuring costs of $7.7 million in the book manufacturing segment associated with closing and consolidating its Stoughton, Massachusetts manufacturing facility due to the impact of technology and competitive pressures affecting the one-color paperback books in which the plant specialized. Restructuring costs included $2.3 million for employee severance and benefit costs, $2.1 million for an early withdrawal liability from a multi-employer pension plan, and $3.3 million for lease termination and other facility closure costs. As of March 28, 2105, remaining payments of approximately $2.4 million will be made over periods ranging from less than one year for the building lease obligation to 17 years for the liability related to the multi-employer pension plan. At March 28, 2015, approximately $0.8 million of the restructuring payments were included in “Other current liabilities” and $1.7 million were included in “Other liabilities” in the accompanying consolidated balance sheet.

The following table depicts the remaining accrual balances for these restructuring costs.

	(000’s omitted)
	Accrual at		Charges	Costs			Accrual at
	September 27,		or	Paid or			March 28,
	2014		Reversals	Settled			2015
Employee severance, post-retirement and other benefit costs	$	88	—	$	(24	)	$	64
Early withdrawal from multi-employer pension plan	1,926		—	(38		)	1,888
Lease termination, facility closure and other costs	765		—	(185		)	580
Total	$	2,779	—	$	(247	)	$	2,532

Liquidity and Capital Resources:

During the first six months of fiscal 2015, operations provided $9.5 million of cash, compared to $14.1 million in the first half of last year. A net loss of $13.8 million included transaction costs associated with the pending acquisition of the Company of $13.8 million. Reimbursement of the $10 million termination fee included in these costs was received in the second quarter but recognition has been deferred for accounting purposes until the pending acquisition by RR Donnelley closes. Cash provided from operations in the first half of fiscal 2015 also included a $1.7 million non-cash impairment charge and a $1.3 million reduction in the related contingent consideration liability. Depreciation and amortization were $12.2 million compared with $13.1 million in the first six months of fiscal 2014.

Investment activities in the first half of this fiscal year used $5.3 million of cash. Capital expenditures were $3.2 million and prepublication costs were $1.3 million.

On November 18, 2014, the Company acquired 60% of the outstanding stock of Digital Page Gráfica E Editora (“Digital Page”), a Sao Paulo-based digital printing firm. Under the investment agreement, as revised in August 2014, the Company invested a total of 20 million Brazilian Reals. During the first quarter of fiscal 2014, the Company funded two loans to Digital Page totaling approximately 10 million Brazilian Reals which were secured by the pledge of the equity interest in Digital Page. The principal amount of the loans was credited towards the total purchase price of $7.7 million, with $3.5 million in cash paid upon closing, of which $482,000 was paid to the founder.

In December 2014, the Company signed an agreement to sell approximately 110,000 square feet of unoccupied or underutilized portions of its multi-building manufacturing complex in Westford, Massachusetts for $1.2 million. 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, closing is anticipated in late 2015. Although the carrying value of the property is nominal, the agreement requires that the Company incur certain costs to complete the transaction, such as the separation of all utilities within the complex. If the transaction is completed, the Company anticipates realizing a gain on the sale.

Financing activities for the first six months of fiscal 2015 used approximately $6.6 million of cash. Cash dividends of $4.8 million were paid and net borrowings decreased by $2.7 million during the first half of fiscal 2015. In the first quarter of fiscal 2014, the Company entered into a $10.5 million capital lease arrangement for printing and binding equipment in its Kendallville, Indiana digital print facility. At March 28, 2015, $7.2 million of debt was outstanding under this capital lease arrangement and the implicit interest rate was 1.8%. The Company also has a $100 million long-term revolving credit facility in place under which the Company can borrow at a rate not to exceed LIBOR plus 2.25%. In December 2014, the Company extended the maturity date of this credit facility from March 2016 to December 2019. At March 28, 2015, the Company had $24.0 million in borrowings under this facility at an interest rate of 1.4%. The revolving credit facility contains restrictive covenants including provisions relating to the incurrence of additional indebtedness and a quarterly test of EBITDA to debt service. The Company was in compliance with all debt covenants at March 28, 2015. The facility also provides for a commitment fee not to exceed 3/8% per annum on the unused portion. The revolving credit facility is used by the Company for both its long-term and short-term financing needs. The Company believes that its cash on hand, cash from operations and the available credit facility will be sufficient to meet its cash requirements for at least the next twelve months.

The following table summarizes the Company’s contractual obligations and commitments at March 28, 2015 to make future payments as well as its existing commercial commitments.

			(000’s omitted)
			Payments due by period
			Less than		1 to 3		3 to 5		More than
	Total		1 Year		Years		Years		5 Years
Contractual Payments:
Debt, including capital lease obligations (1)	$	34,350	$	4,941	$	5,377	$	24,032	—
Interest due on debt (2)	204		130		74		—		—
Operating leases (3)	4,693		920		1,590		1,440		$	743
Purchase obligations (4)	882		882		—		—		—
Other liabilities (5)	9,050		1,060		3,233		725		4,032
Total	$	49,179	$	7,933	$	10,274	$	26,197	$	4,775

(1) Includes $24.0 million under the Company’s long-term revolving credit facility, which has a maturity date of December 2019, as well as capital leases and other debt associated with the acquisition of Digital Page in November 2014.

(2) Represents scheduled interest payments on the Company’s capital lease financing. Future interest on the Company’s revolving credit facility is not included because the interest rate and principal balance fluctuate on a daily basis and an estimate could differ significantly from actual interest expense.

(3) Represents amounts at September 27, 2014, except for the Stoughton, Massachusetts building lease obligation which was included in the restructuring accrual in “Other liabilities.”

(4) Represents capital commitments.

(5) Includes approximately $2.5 million of restructuring costs related to closing the Stoughton, Massachusetts facility. Operating leases exclude the Stoughton building lease obligation which is included above in “Other liabilities.”

Forward-Looking Information:

This Quarterly Report on Form 10-Q includes forward-looking statements. Statements that describe future expectations, plans or strategies are considered “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995 and releases issued by the Securities and Exchange Commission. The words “believe,” “expect,” “anticipate,” “intend,” “estimate” and other expressions which are predictions of or indicate future events and trends and which do not relate to historical matters identify forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those currently anticipated. Some of the factors that could affect actual results are discussed in Item 1A of this Form 10-Q and include, among others, pricing actions by competitors and other competitive pressures in the markets in which the Company competes, consolidation among customers and competitors, changes in customers’ demand for the Company’s products, including seasonal changes in customer orders and shifting orders to lower cost regions, increased concentration with a few customers, success in the execution of acquisitions and the performance and integration of acquired businesses including carrying value of intangible assets and contingent consideration, performance of investments in unconsolidated subsidiaries and exposure to risks of operating internationally, restructuring and impairment charges required under generally accepted accounting principles, insolvency of key customers or vendors, changes in technology including migration from paper-based books to digital, changes in market growth rates, changes in obligations of multiemployer pension plans and general changes in economic conditions, including currency fluctuations, changes in interest rates, changes in consumer confidence, changes in the housing market, and tightness in the credit markets, changes in raw material costs and availability, changes in the Company’s labor relations, changes in operating expenses including medical and energy costs, difficulties in the startup of new equipment or information technology systems, changes in copyright laws, changes in consumer product safety regulations, changes in environmental regulations, changes in tax regulations, changes in the Company’s effective income tax rate, and risks related to the pending acquisition of the Company. Although the Company believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements will prove to be accurate. The forward-looking statements included herein are made as of the date hereof, and the Company undertakes no obligation to update publicly such statements to reflect subsequent events or circumstances.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes from the information concerning the Company’s “Quantitative and Qualitative Disclosures About Market Risk” as previously reported in the Company’s Annual Report on Form 10-K for the year ended September 27, 2014. With the acquisition of 60% of the equity in Digital Page in November 2014, the Company is exposed to the impact of foreign currency fluctuations in Brazil. The exposure to foreign currency movements is limited because the operating revenues and expenses of Digital Page are substantially in the local currency in which they operate. Although operating in the local currency may limit the impact of currency rate fluctuations on the results of operations of Digital Page, fluctuations in such rates may affect the translation of these results into the Company’s condensed consolidated financial statements. The Company does not use financial instruments for trading or speculative purposes.

Item 4. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures

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

(b) Changes in internal controls over financial reporting

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

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

The Company’s consolidated results of operations, financial condition and cash flows can be adversely affected by various risks. Our business is influenced by many factors that are difficult to predict, involve uncertainties that may materially affect actual results and are often beyond our control. We discuss below the risks that we believe are material. You should carefully consider all of these factors. For other factors that may cause actual results to differ materially from those indicated in any forward-looking statement contained in this report, see Forward-Looking Information in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The first section of risk factors below, “Risks Related to our Business,” represent those faced by the Company as a standalone company and should be read in conjunction with the second section of risk factors below, “Merger Related Risks,” which represent risks the Company currently faces under the merger agreement with R. R. Donnelley & Sons Company (“RRD”).

Risks Related to Our Business

Industry competition and consolidation may increase pricing pressures and adversely impact our margins or result in a loss of customers.

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

A reduction in orders or pricing from, or the loss of, any of our significant customers may adversely impact our operating results.

We derived approximately 55% and 57% of our fiscal 2014 and 2013 revenues from continuing operations, respectively, from two major customers. We expect similar concentrations in fiscal 2015. We do business with these customers on a purchase order basis and they are not bound to purchase at particular volume levels. As a result, either of these customers could determine to reduce their order volume or pricing with us, especially if our pricing is not deemed competitive. A significant reduction in order volumes or pricing from, or the loss of, either of these customers could have a material adverse effect on our results of operations and financial condition. In addition, our publishing segment is dependent on Amazon as a primary sales channel. Any change in pricing or order volume from that customer could have a material adverse effect on our results.

A failure to successfully integrate acquired businesses may have a material adverse effect on our business or operations.

Over the past several years, we have completed several acquisitions, and may continue to make acquisitions in the future. We believe that these acquisitions provide strategic growth opportunities for us. Achieving the anticipated benefits of these acquisitions will depend in part upon our ability to integrate these businesses in an efficient and effective manner. The challenges involved in successfully integrating acquisitions include:

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

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

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

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

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

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

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

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

The consideration that we pay in connection with an acquisition could affect our financial results. If we were to proceed with one or more significant acquisitions in which the consideration included cash, we could be required to use a substantial portion of our available cash and credit facilities to consummate such acquisitions. To the extent we issue shares of stock or other rights to purchase stock, including options or other rights, our existing stockholders may experience dilution in their share ownership in our company and their earnings per share may decrease.

In addition, acquisitions may result in the incurrence of debt, large one-time write-offs and restructuring charges. They may also result in goodwill and other intangible assets that are subject to impairment tests, which could result in future impairment charges. Accounting for business combinations may involve complex and subjective valuations of the assets and liabilities recorded as a result of the business combination or other agreement, and in some instances contingent consideration, which is recorded in the Company’s Consolidated Financial Statements pursuant to the standards applicable for business combinations in accordance with accounting principles generally accepted in the United States. Differences between the

inputs and assumptions used in the valuations and actual results could have a material effect on our financial position and results of operation.

Any of these factors may materially and adversely affect our business and operations.

We could face significant liability as a result of our participation in multi-employer pension plans.

We participate in two multi-employer defined benefit pension plans for certain union employees. Multi-employer pension plans cover employees of and receive contributions from two or more unrelated employers under one or more union contracts. Our risks of participating in these types of plans include the fact that (i) plan contributions by each employer, including us, may be used to provide benefits to employees of other participating employers, (ii) if another participating employer withdraws from either plan, the unfunded obligations of the plan may be borne by the remaining participating employers, including us, and (iii) if we withdraw from participating in either plan, we may be required to pay the plan an amount based on our allocable share of the underfunded status of the plan.

We make periodic contributions to the two multi-employer plans pursuant to our union contracts, each of which was renewed in fiscal year 2013, to allow the plans to meet the pension benefit obligations to plan participants. We currently expect that we will be required to contribute approximately $357,000 to these two plans in fiscal 2015, but these contributions could significantly increase due to other employers’ withdrawals or changes in the funded status of the plans. Further, if we continue to participate in such pension plans, our contributions may increase depending on the outcome of future union negotiations and applicable law, changes in the funding status of the plans, and any reduction in participation or withdrawal by other employers from the plans. Our continued participation in these plans could have a material adverse impact on our results of operations, cash flows or financial condition. In the event that we withdraw from participation in one or both of these plans, we could be required to make a withdrawal liability payment or series of payments to the plan, which would be reflected as an expense in our consolidated statements of comprehensive income and a liability on our consolidated balance sheet. Our withdrawal liability for any multi-employer plan would depend on the funded status of the plan and the level of our prior plan contributions. Both plans are estimated to be underfunded as of March 28, 2015 and have a Pension Protection Act zone status of critical (“red”); such status identifies plans that are less than 65% funded. In addition, our contributions to the Bindery Industry Employers GCC/IBT Pension Plan represented approximately 70% of total contributions in each of the last three years. This plan currently includes only two other contributing employers. A withdrawal by one or both of these employers could materially increase the amount of our required contributions to this plan. Under our contract with the bindery union, if certain events occur we have the right to withdraw from the pension plan without the union’s consent. A future withdrawal by us from either of the two multi-employer pension plans could result in a withdrawal liability for us, the amount of which could be material to our results of operations, cash flows and financial condition.

Our investment in Brazil increases our exposure to the risks of operating internationally.

Substantially all of our operations are conducted within the United States. Investing in Brazil or elsewhere outside the United States will expose us to a number of risks, including:

· compliance with a wide variety of foreign laws and regulations, including licensing, tax, trade, intellectual property, currency, political and other business restrictions and requirements and local laws and regulations, whose interpretation and enforcement vary significantly among jurisdictions and can change significantly over time;

· additional U.S. and other regulation of non-domestic operations, including regulation under the Foreign Corrupt Practices Act and other anti-corruption laws;

· potential difficulties in managing foreign operations, obtaining accurate and timely financial information, enforcing agreements and collecting receivables through foreign legal systems;

· tariffs, duties, price controls or other restrictions on foreign currencies or trade barriers imposed by foreign countries;

· potential adverse tax consequences, including tax withholding laws and policies and restrictions on repatriation of funds to the United States;

· fluctuations in currency exchange rates;

· impact of recessions and economic slowdowns in economies outside the United States, including foreign currency devaluation, higher interest rates, inflation, and increased government regulation or ownership of traditional private businesses;

· the instability of foreign economies, governments and currencies and unexpected regulatory, economic or political changes in foreign markets; and

· developing and emerging markets may be especially vulnerable to periods of instability and unexpected changes, and consumers in those markets may have relatively limited resources to spend on products and services.

We cannot assure you that one or more of these factors will not have a material adverse effect on our investment in Brazil and our business, results of operation or financial condition.

From time to time, we may make investments in companies over which we do not have sole control, including our investment in Digital Page in Brazil.

From time to time, we may make debt or equity investments in other companies that we may not control or over which we may not have sole control. For example, we own only 60% of the Digital Page equity interests (acquired in November 2014). Investments in these businesses, among other risks, subject us to the operating and financial risks of the businesses we invest in and to the risk that we do not have sole control over the operations of these businesses. From time to time, we may make additional investments in or acquire other entities that may subject us to similar risks. Investments in entities over which we do not have sole control, including joint ventures and strategic alliances, present additional risks such as having differing objectives from our partners or the entities in which we invest, time consuming decision making and information sharing procedures or becoming involved in disputes. The benefits from such joint ventures are shared among the co-owners, so that we do not receive all the benefits from our successful joint ventures. In addition, we rely on the internal controls and financial reporting controls of these entities and their failure to maintain effectiveness or comply with applicable standards may adversely affect us.

Because a significant portion of publishing sales are made to or through retailers and distributors, the insolvency of any of these parties could have an adverse impact on our financial condition and operating results.

In our publishing segment, sales to retailers and distributors are highly concentrated on a small group, which previously included Borders Group, Inc. (“Borders”). Any bankruptcy, liquidation, insolvency or other failure of a major retailer or distributor could also have a material impact on the Company. For example, during fiscal 2014, we recorded a net bad debt expense of $825,000 related to the closing and liquidation of a primary distributor for our Creative Homeowner business. Creative Homeowner was sold in September 2014 and is included in discontinued operations in our consolidated financial statements.

Electronic delivery of content may adversely affect our business.

Electronic delivery of content offers an alternative to the traditional delivery through print. Widespread consumer acceptance of electronic delivery of books is uncertain, as is the extent to which consumers are willing to replace print materials with online hosted media content. If our customers’ acceptance of electronic delivery of books and online hosted media content continues to grow, demand for and/or pricing of our printed products may be adversely affected. Non-profit organizations have worked to encourage development of educational content that can be “open sourced” for educational purposes. If these initiatives increase the availability and utilization of free or inexpensive materials online, it may adversely impact sales, reduce demand or change customer expectations regarding pricing and delivery.

A failure to successfully adapt to changing book sales channels may have an adverse impact on our business.

Over the last several years, the “bricks & mortar” bookstore channel has experienced a significant contraction, including the bankruptcy of Borders Group, Inc. and Nebraska Book Co., the closure of many independent bookstores, and the reduction in inventory and shelf space for books in other national chains. In addition to expanding our online and direct to consumer sales, we have responded by offering over 5,000 of

our titles as ebooks, as well as seeking alternative channels for our products, such as mass merchandising chains. However, there is no guarantee that we will be able to address the challenges in these channels, including creating price competitive products that will successfully penetrate these markets and accurately predicting the volume of returns.

Declines in general economic conditions may adversely impact our business.

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

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

· Consumer demand for books can be impacted by reductions in disposable income.

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

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

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

A failure to keep pace with rapid industrial and technological change may have an adverse impact on our business.

The printing industry is in a period of rapid technological evolution. Our future financial performance will depend, in part, upon the ability to anticipate and adapt to rapid industrial and technological changes occurring in the industry and upon the ability to offer, on a timely basis, services that meet evolving industry standards. If we are unable to adapt to such technological changes, we may lose customers and may not be able to maintain our competitive position. In addition, we may encounter difficulties in the implementation and start-up of new equipment and technology.

We are unable to predict which of the many possible future product and service offerings will be important to establish and maintain a competitive position or what expenditures will be required to develop and provide these products and services. We cannot assure investors that one or more of these factors will not vary unpredictably, which could have a material adverse effect on us. In addition, we cannot assure investors, even if these factors turn out as we anticipate that we will be able to implement our strategy or that the strategy will be successful in this rapidly evolving market.

Our operating results are unpredictable and fluctuate significantly, which may adversely affect our stock price.

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

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

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

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

· the migration of educators and students towards electronic delivery of content;

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

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

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

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

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

Our financial results could be negatively impacted by impairments of goodwill or other intangible assets, or other long-lived assets.

We perform an annual assessment for impairment of goodwill and other intangible assets, as well as other long-lived assets, at the end of our fiscal year or whenever events or changes in circumstances occur that would more likely than not reduce the fair value of a reporting unit below its carrying value, including a downturn in the market value of the Company’s stock. A downward revision in the fair value of one of our acquired businesses could result in impairments of goodwill and non-cash charges. Any impairment charge could have a significant negative effect on our reported results of operations. For example, the Company concluded it was necessary to record an impairment charge of $1.7 million for FastPencil’s remaining goodwill and other intangible assets at the end of the second quarter of fiscal 2015. The impact of the impairment charge was offset in part by the reduction of $1.3 million in the related contingent consideration liability in the second quarter of fiscal 2015.

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

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

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

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

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

Energy costs and availability may negatively impact our financial results.

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

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

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

A failure to maintain or improve our operating efficiencies could adversely impact our profitability.

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

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

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

A failure to hire and train key executives and other qualified employees could adversely affect our business.

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

A lack of skilled employees to manufacture our products may adversely affect our business.

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

We are subject to various laws and regulations that may require significant expenditures.

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

Merger Related Risks

The value of the stock portion of the merger consideration is subject to changes based on fluctuations in the value of RRD common stock, and Courier stockholders may receive stock consideration with a value that, at the time received, is less than $23.00 per share of Courier common stock.

The market value of RRD common stock will fluctuate during the period before the date of the special meeting of Courier stockholders to vote on the adoption of the RRD merger agreement, during the period before Courier stockholders receive merger consideration in the form of RRD common stock, as well as thereafter.

Upon completion of the merger, each issued and outstanding share of Courier common stock will be converted into the right to receive the per share merger consideration, which is equal to $23.00 in cash or a number of RRD shares equal to the exchange ratio, which depends on the RRD closing stock price at signing. Accordingly, the actual number of shares and the value of RRD common stock delivered to Courier stockholders will depend on the stock price, and the value of the shares of RRD common stock delivered for each such share of Courier common stock may be greater than or less than, or equal to, $23.00. It is impossible to accurately predict fluctuations in the market price of RRD common stock and therefore impossible to accurately predict the value of the shares of RRD common stock that Courier stockholders will receive in the merger.

The market price of RRD common stock after the merger will continue to fluctuate and may be affected by factors different from those affecting shares of Courier common stock currently.

Upon completion of the merger, holders of Courier common stock will become holders of RRD common stock. The market price of RRD common stock may fluctuate significantly following consummation of the merger and holders of Courier common stock could lose the value of their investment in RRD common stock. In addition, the stock market has experienced significant price and volume fluctuations in recent times, which could have a material adverse effect on the market for, or liquidity of, the RRD common stock, regardless of RRD’s actual operating performance. In addition, RRD’s business differs in important respects from that of Courier, and accordingly, the results of operations of the combined company and the market price of RRD common stock after the completion of the merger may be affected by factors different from those currently affecting the independent results of operations of each of RRD and Courier.

Sales of shares of RRD common stock before and after the completion of the transaction may cause the market price of RRD common stock to fall.

The issuance of new shares of RRD common stock in connection with the transaction could have the effect of depressing the market price for RRD common stock. In addition, many Courier stockholders may decide not to hold, and instead may sell, the shares of RRD common stock they will receive in the merger. Such sales of RRD common stock could have the effect of depressing the market price for RRD common stock and may take place promptly following the merger.

Completion of the merger is subject to conditions and if these conditions are not satisfied or waived, the merger will not be completed. The RRD merger agreement can also be terminated by Courier under certain circumstances relating to a superior proposal, as described in the RRD merger agreement.

The obligations of RRD and Courier to complete the merger are subject to satisfaction or waiver, to the extent permitted under applicable law, of a number of conditions including adoption of the merger by the Courier stockholders, the approval of the listing on the Nasdaq of the RRD common stock to be issued in the

merger, the absence of an injunction prohibiting the merger, the accuracy of the representations and the warranties of the other party under the RRD merger agreement (subject to the materiality standards set forth in the RRD merger agreement), the performance by the other party of its respective obligations under the RRD merger agreement in all material respects, and in the case of RRD’s obligations to complete the merger, the absence of a material adverse effect, as described in the RRD merger agreement, on Courier following February 5, 2015.

The satisfaction of all of the required conditions could delay the completion of the merger for a significant period of time or prevent it from occurring. Any delay in completing the merger could cause RRD not to realize some or all of the benefits that RRD expects to achieve if the merger is successfully completed within its expected timeframe. Further, there can be no assurance that the conditions to the closing of the merger will be satisfied or waived or that the merger will be completed. See the risk factor entitled “Failure to complete the merger could negatively impact the stock price and the future business and financial results of Courier,’’ below.

Under certain circumstances, if a third party makes a superior proposal, as described in the RRD merger agreement, to acquire Courier, Courier could pay RRD a termination fee of $7.5 million, terminate the RRD merger agreement, and sign a merger agreement with the third party, in which case the pending merger between Courier and RRD would not be completed.

Combining the two companies may be more difficult, costly, or time consuming than expected and the anticipated benefits and cost savings of the merger may not be realized.

Courier and RRD have operated and, until the completion of the merger, will continue to operate, independently. The success of the merger, including anticipated benefits and cost savings, will depend, in part, on RRD’s ability to successfully combine and integrate the businesses of RRD and Courier. It is possible the pending nature of the merger and/or the integration process could result in the loss of key employees, higher than expected costs, diversion of management attention of both Courier and RRD, increased competition, the disruption of either company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the combined company’s ability to maintain relationships with customers, vendors, and employees or to achieve the anticipated benefits and cost savings of the merger. If RRD experiences difficulties with the integration process, the anticipated benefits of the merger may not be realized fully or at all, or may take longer to realize than expected. Integration efforts between the two companies will also divert management’s attention and resources. These integration matters could have an adverse effect on each of RRD and Courier during this transition period and for an undetermined period after completion of the merger on the combined company. In addition, the actual cost savings of the merger could be less than anticipated.

Courier’s executive officers and directors have interests in the merger that may be different from the interests of a stockholder of Courier or RRD.

When considering the recommendation of the Courier board that Courier stockholders adopt the RRD merger agreement, Courier stockholders should be aware that directors and executive officers of Courier have certain interests in the merger that may be different from or in addition to the interests of Courier stockholders and RRD stockholders generally. These interests, which arise from both contractual arrangements existing prior to the execution of the RRD merger agreement and provisions of the RRD merger agreement, include, among others, the treatment of outstanding equity awards pursuant to the RRD merger agreement, potential severance benefits and other payments, and rights to ongoing indemnification and insurance coverage by the surviving company for acts or omissions occurring prior to the merger. As a result of these interests, these directors and executive officers of Courier might be more likely to support and to vote in favor of the proposals described in the proxy statement than if they did not have these interests. Courier’s stockholders should consider whether these interests might have influenced these directors and executive officers to support or recommend adoption of the RRD merger agreement.

The RRD merger agreement limits Courier’s ability to pursue alternatives to the merger and may discourage other companies from trying to acquire Courier for greater consideration than what RRD has agreed to pay.

The RRD merger agreement contains provisions that make it more difficult for Courier to sell its business to a party other than RRD. These provisions include a general prohibition on Courier soliciting any acquisition proposal or offer for a competing transaction. In some circumstances upon termination of the RRD merger agreement, Courier may be required to pay RRD a termination fee of $7.5 million. Further, there are

only limited exceptions to Courier’s agreement that the Courier Board of Directors will not withdraw or modify in a manner adverse to RRD the recommendation of the Courier board in favor of the adoption of the RRD merger agreement and to Courier’s agreement not to enter into an agreement with respect to a superior proposal.

These provisions might discourage a third party that has an interest in acquiring Courier from considering or proposing an acquisition, even if the party were prepared to pay consideration with a higher per share cash or market value than that proposed to be received or realized in the merger, or might result in a potential competing acquirer proposing to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee or the payment of expenses that may become payable in certain circumstances.

Proposals and actions by other interested parties could negatively impact the interests of Courier stockholders and Courier.

It is unclear what additional actions other interested parties may take with respect to potential competing proposals or to prevent the RRD merger from occurring. Such potential third party actions may cause disruption in Courier’s business and could negatively impact the expected timing of the consummation of the RRD merger. In addition, Courier’s stockholders may be persuaded to vote against adoption of the RRD merger agreement as a result of such parties’ proposals and, consequently, the required stockholder approval of the RRD merger may not be obtained. If Courier stockholders were to fail to approve the RRD merger, then:

· The RRD merger agreement may be terminated without any money going to Courier stockholders;

· If the RRD merger agreement is terminated, Courier will have to pay a termination fee to RRD in cash of $7.5 million; and

· Courier may remain a stand-alone company and reject any proposed transactions with such third parties.

Failure to complete the merger could negatively impact the stock price and the future business and financial results of Courier.

If the merger is not completed for any reason, including as a result of Courier stockholders failing to adopt the RRD merger agreement, the ongoing business of Courier may be adversely affected and, without realizing any of the benefits of having completed the merger, Courier would be subject to a number of risks, including the following:

· Courier may experience negative reactions from the financial markets, including negative impacts on its stock price;

· Courier may experience negative reactions from its customers, vendors and employees;

· Courier will be required to pay certain costs relating to the merger, whether or not the merger is completed;

· The RRD merger agreement places certain restrictions on the conduct of Courier’s businesses prior to completion of the merger. Such restrictions, the waiver of which is subject to the consent of RRD (in certain cases, not to be unreasonably withheld, conditioned or delayed), may prevent Courier from taking certain specified actions during the pendency of the merger; and

· Matters relating to the merger, including integration planning, will require substantial commitments of time and resources by Courier management, which would otherwise have been devoted to day-to-day operations and other opportunities that may have been beneficial to Courier as an independent company.

In addition to the above risks, Courier may be required, under certain circumstances, to pay to RRD a termination fee of $7.5 million, which may materially adversely affect Courier’s financial results. Further, Courier could be subject to litigation related to any failure to complete the merger or related to any enforcement proceeding commenced against Courier to perform its obligations under the RRD merger agreement. If the merger is not completed, these risks may materialize and may adversely affect Courier’s businesses, financial condition, financial results, and stock price.

The shares of RRD common stock to be received by Courier stockholders as a result of the merger will have rights different from the shares of Courier common stock.

Upon completion of the merger, the Courier stockholders that receive stock consideration will no longer be stockholders of Courier but will instead become RRD stockholders, and their rights as stockholders will be governed by the terms of the RRD charter and bylaws and by Delaware corporate law. The terms of the RRD charter and bylaws and Delaware corporate law are, in some respects, different than the terms of the Courier charter and bylaws and Massachusetts corporate law, which currently govern the rights of Courier stockholders.

After the merger, Courier stockholders will have a significantly lower ownership and voting interest in RRD than they currently have in Courier and will exercise less influence over management.

It is expected that, immediately after completion of the merger, former Courier stockholders that receive stock consideration will have significantly less of an ownership percentage of RRD common stock, compared to their previous ownership percentage of Courier common stock. Consequently, former Courier stockholders will have less influence over the management and policies of RRD than they currently have over the management and policies of Courier.

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

On November 20, 2014, the Company announced the approval by its Board of Directors for the repurchase of up to $10 million of the Company’s outstanding common stock from time to time on the open market or in privately negotiated transactions, including pursuant to a Rule 10b5-1 nondiscretionary trading plan. This stock repurchase authorization is effective for a period of twelve months. Through March 28, 2015, the Company had not repurchased any shares of common stock under this program. During fiscal 2014, the Company repurchased 153,150 shares of common stock for approximately $2.0 million under a similar program which expired on November 21, 2013.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

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

Item 6. Exhibits

Exhibit No.		Description

2.1		Agreement and Plan of Merger, dated as of February 5, 2015, by and among Courier Corporation, R.R. Donnelley & Sons Company, Merger Sub and Merger LLC (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed on February 5, 2015, and incorporated herein by reference).

2.2		Agreement and Plan of Merger, dated as of January 16, 2015, by and among Courier Corporation, Quad/Graphics, Inc., Merger Sub and Merger LLC (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed on January 16, 2015, and incorporated herein by reference).

4.1		Amendment No. 2 to Shareholder Rights Agreement, dated as of February 5, 2015, by and between Courier Corporation and Computershare Trust Company, N.A. (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed on February 5, 2015, and incorporated herein by reference).

4.2		Amendment to Shareholder Rights Agreement, dated as of January 16, 2015, by and between Courier Corporation and Computershare Trust Company, N.A. (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed on January 16, 2015, and incorporated herein by reference).

31.1*		Certification of Chief Executive Officer

31.2*		Certification of Chief Financial Officer

32.1**		Certification of Chief Executive Officer

32.2**		Certification of Chief Financial Officer

101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema Document

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

*		Filed herewith.
**		Furnished herewith.

SIGNATURES

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

COURIER CORPORATION

(Registrant)

May 7, 2015	By:	/s/James F. Conway III
Date	James F. Conway III
	Chairman, President and Chief Executive Officer


May 7, 2015	By:	/s/Peter M. Folger
Date	Peter M. Folger
	Senior Vice President and Chief Financial Officer


May 7, 2015	By:	/s/Kathleen M. Leon
Date	Kathleen M. Leon
	Vice President and Controller

EXHIBIT INDEX

Exhibit No.		Description

2.1		Agreement and Plan of Merger, dated as of February 5, 2015, by and among Courier Corporation, R.R. Donnelley & Sons Company, Merger Sub and Merger LLC (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed on February 5, 2015, and incorporated herein by reference).

2.2		Agreement and Plan of Merger, dated as of January 16, 2015, by and among Courier Corporation, Quad/Graphics, Inc., Merger Sub and Merger LLC (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed on January 16, 2015, and incorporated herein by reference).

4.1		Amendment No. 2 to Shareholder Rights Agreement, dated as of February 5, 2015, by and between Courier Corporation and Computershare Trust Company, N.A. (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed on February 5, 2015, and incorporated herein by reference).

4.2		Amendment to Shareholder Rights Agreement, dated as of January 16, 2015, by and between Courier Corporation and Computershare Trust Company, N.A. (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed on January 16, 2015, and incorporated herein by reference).

31.1*		Certification of Chief Executive Officer

31.2*		Certification of Chief Financial Officer

32.1**		Certification of Chief Executive Officer

32.2**		Certification of Chief Financial Officer

101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema Document

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

*		Filed herewith.
**		Furnished herewith.

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