<PAGE> 1
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 September 30, 1994
-----------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1984 For the transition period from to
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Commission file number 1-5492-1
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NASHUA CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 02-0170100
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(State of incorporation) (I.R.S. Employer
Identification Number)
44 Franklin Street
P.O. Box 2002
Nashua, New Hampshire 03061-2002
- - ---------------------------------------- -----------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (603) 880-2323
--------------------------
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
----- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class November 4, 1994
- - ------------------------------ -----------------------------------
Common Stock, par value $1.00 6,372,710 shares (excluding, 23,860
shares held in treasury)
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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<TABLE>
NASHUA CORPORATION AND SUBSIDIARIES
-----------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(In thousands)
<CAPTION>
Sept. 30, 1994 December 31,
ASSETS: (Unaudited) 1993
- - ------- --------------- ---------------
<S> <C> <C>
Cash and cash equivalents $ 11,516 $ 5,883
Accounts receivable 42,687 47,657
Inventories
Materials and supplies 13,416 11,793
Work in process 5,003 4,875
Finished goods 12,996 17,000
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31,415 33,668
Other current assets 24,720 22,573
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Total current assets 110,338 109,781
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Plant and equipment 132,922 164,742
Accumulated depreciation (62,924) (93,509)
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69,998 71,233
Other assets 46,618 38,051
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Total assets $226,954 $219,065
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LIABILITIES AND SHAREHOLDERS' EQUITY:
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Notes and loans payable $ 1,800 $ 2,900
Current maturities of long-term debt - 2,500
Accounts payable 33,770 29,951
Accrued expenses 29,685 48,669
Income taxes payable 2,736 2,033
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Total current liabilities 67,991 86,053
Long-term debt 40,323 20,342
Other long-term liabilities 25,254 19,547
Common stock and additional capital 18,269 17,586
Retained earnings 80,567 82,166
Cumulative translation adjustment (4,665) (5,844)
Treasury stock, at cost (785) (785)
Commitments and contingencies
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Total liabilities and shareholders' equity $226,954 $219,065
======== ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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<TABLE>
NASHUA CORPORATION AND SUBSIDIARIES
-----------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
---------------------------------------------------------------------
(UNAUDITED)
-----------
<CAPTION>
(In thousands, except per share data) Three Months Ended Nine Months Ended
--------------------- --------------------
(Restated) (Restated)
Sept. 30, Oct. 1, Sept. 30, Oct. 1,
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $127,852 $133,332 $363,377 $369,856
Cost of products sold 94,537 97,300 272,002 273,781
Research, selling, distribution and
administrative expenses 28,945 27,908 80,645 80,858
Restructuring and other unusual charges - - 2,600 -
Interest expense 668 435 1,695 1,784
Interest income (218) (63) (316) (229)
-------- -------- -------- --------
Income from continuing operations
before income taxes 3,920 7,752 6,751 13,662
Income taxes 1,564 2,898 2,633 5,233
-------- -------- -------- --------
Income from continuing operations 2,356 4,854 4,118 8,429
Income (loss) from discontinued operations - (463) (2,295) 2,463
-------- -------- -------- --------
Net income 2,356 4,391 1,823 10,892
Retained earnings, beginning of period 79,355 110,109 82,166 105,880
Dividends (1,144) (1,136) (3,422) (3,408)
-------- -------- -------- --------
Retained earnings, end of period $ 80,567 $113,364 $ 80,567 $113,364
======== ======== ======== ========
Earnings(loss) per common and common
equivalent share:
Income from continuing operations $ .37 $ .76 $ .65 $ 1.33
Income (loss) from discontinued operations - (.07) (.36) .39
-------- -------- -------- --------
Net income $ .37 $ .69 $ .29 $ 1.72
======== ======== ======== ========
Dividends per common share $ .18 $ .18 $ .54 $ .54
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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<TABLE>
NASHUA CORPORATION AND SUBSIDIARIES
-----------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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(UNAUDITED)
-----------
<CAPTION>
(In thousands)
Nine Months Ended
----------------------------
Sept. 30, 1994 Oct. 1, 1993
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<S> <C> <C>
Cash flows from continuing operating activities:
Income from continuing operations $ 4,118 $ 8,429
Adjustments to reconcile income from continuing
operations to cash provided by continuing
operating activities:
Depreciation and amortization 11,726 10,982
Net change in working capital (19,621) 12,644
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Cash provided by (used in) continuing operating activities (3,777) 32,055
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Cash flows from investing activities of continuing operations:
Investment in plant and equipment (11,935) (10,282)
Acquisition of business - (4,286)
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Cash used in investing activities (11,935) (14,568)
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Cash flows from financing activities of continuing operations:
Proceeds from borrowings 38,400 1,500
Repayment of borrowings (22,019) (13,219)
Dividends paid (3,422) (3,408)
Proceeds and tax benefits from shares
issued under stock option plans 683 87
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Cash provided by (used in) financing activities 13,642 (15,040)
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Proceeds from sale of discontinued operations 11,115 -
Cash applied to activities of discontinued operations (3,896) (7,214)
Effect of exchange rate changes on cash 484 (91)
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Increase (decrease) in cash and cash equivalents 5,633 (4,858)
Cash and cash equivalents at beginning of period 5,883 12,212
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Cash and cash equivalents at end of period $11,516 $ 7,354
======= =======
Interest paid $ 2,038 $ 2,097
======= =======
Income taxes paid $ 2,605 $ 3,645
======= =======
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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<PAGE> 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
Earnings Per Common and Common Equivalent Share
- - -----------------------------------------------
Earnings per common and common equivalent share is computed based on the total
of the weighted average number of common shares and the weighted average number
of common equivalent shares outstanding during the period.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------ -----------------------
Sept. 30, Oct. 1, Sept. 30, Oct. 1,
1994 1993 1994 1993
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<S> <C> <C> <C> <C>
Common shares outstanding 6,348,140 6,312,478 6,334,524 6,311,357
Common share equivalents 15,021 38,546 21,294 31,629
</TABLE>
Stock Options
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At September 30, 1994, options for 521,325 shares of common stock were
outstanding. Stock options for an additional 155,685 shares may be awarded
under the Company's 1987 Stock Option Plan and stock options for an additional
224,000 shares may be awarded under the Company's 1993 Stock Incentive Plan.
Restructuring and Other Unusual Charges
- - ---------------------------------------
In the first quarter of 1994, the Company recorded a $5.7 million pretax charge
relating to the Company's early retirement program, of which $2.6 million was
included in continuing operations. In addition, as discussed below, the
Company sold its thin-film disk, oxide disk and head disk assembly operations
in the second quarter of 1994. Based on the progress-to-date, the Company
expects to realize savings in personnel, facilities and other costs (exclusive
of the oxide, diskette and thin-film manufacturing businesses) from its
restructuring actions at an annualized rate of approximately $8.0 million when
the restructuring actions are completed.
Segments
- - --------
As part of the Company's restructuring actions in the first quarter, the Office
Supplies and Coated Products segments were combined into a new segment, the
Commercial Products Group. These two segments were combined as they share
similar customers and industry risks. The remaining operation from the
Computer Products Group, Precision Technologies, is reported separately.
Discontinued Operations
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During the second quarter of 1994, the Company disposed of substantially all
its Computer Products businesses in two separate transactions for amounts not
materially different from estimates included in the restructuring charge
recorded as of the fourth quarter of 1993. As a result, the Company has
classified these businesses as discontinued operations. On May 19, 1994, the
Company sold certain assets and liabilities of its thin-film disk operation.
The Company received net cash proceeds of $10.0 million and a $4.9 million
subordinated three-year note. In addition, the Company may receive additional
cash proceeds of up to $5.0 million contingent on future operating results of
the thin-film disk operation. On May 13, 1994, the Company sold certain
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assets of its oxide disk and head disk assembly operation. The company
received proceeds of $1.1 million of cash, plus future royalty payments based
on sales.
<TABLE>
The results of operations for the discontinued thin-film disk, oxide
disk and head disk assembly operations have been reported as discontinued
operations in the condensed consolidated statement of operations and are
summarized as follows:
<CAPTION>
Three Months Ended Nine Months Ended
----------------------- ----------------------
(In thousands) Sept. 30, Oct. 1, Sept. 30, Oct. 1,
1994 1993 1994 1993
---------- ------- --------- -------
<S> <C> <C> <C> <C>
Net sales - $18,293 $19,243 $70,890
========== ======= ======= =======
Income (loss) before income taxes - $ (495) $(3,279) $ 4,341
Income taxes (benefit) - (32) (984) 1,878
---------- ------- ------- -------
Income (loss) from discontinued operations - $ (463) $(2,295) $ 2,463
========== ======= ======= =======
</TABLE>
Income (loss) before taxes for the nine months ended September 30, 1994
includes a $3.1 million charge relating to the Company's early retirement
program.
Other
These condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1993.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements reflecting all adjustments (consisting solely of normal
recurring adjustments) considered necessary to present fairly the financial
position as of September 30, 1994, the results of operations for the
three-month and nine-month periods ended September 30, 1994 and October 1,
1993, and cash flows for the nine-month periods ended September 30, 1994 and
October 1, 1993.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Net sales for the third quarter of 1994 were $127.9 million, 4 percent lower
than the third quarter last year, as the Company experienced sales declines in
each of its three business groups. Income from continuing operations for the
third quarter was $2.4 million versus $4.9 million in the prior year,
reflecting lower performances in each group. Net sales for the first nine
months of 1994 were $363.4 million, down 2 percent from the same period last
year. Income from continuing operations for the nine month period in 1994
decreased to $4.1 million from $8.4 million for the same period in 1993. The
decrease was primarily caused by the reduced sales level, a $2.6 million pretax
charge in the first quarter of 1994 related to the Company's early retirement
program and a $.9 million pretax charge relating to costs incurred in the first
quarter in conjunction with a potential acquisition of a non- U.S.
Photofinishing business.
In the fourth quarter of 1993, the Company recorded restructuring and other
unusual charges of $48.5 million largely as a result of the Company's decision
to dispose of substantially all its Computer Products businesses. In the
second quarter of 1994, the Company disposed of these
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<PAGE> 7
businesses for amounts not materially different from estimates included in the
restructuring charge recorded in 1993. At the end of the third quarter of
1994, the Company has substantially completed its restructuring activities
except for consolidating certain facilities. Management is currently reviewing
several options and anticipates completing these actions during the first half
of 1995. The Company expects to realize savings in personnel, facilities and
other costs (exclusive of the oxide, diskette and thin- film manufacturing
businesses) from its restructuring actions at an annualized rate of
approximately $8.0 million pretax when the restructuring actions are completed.
The Commercial Product Group's sales for the third quarter fell 4 percent to
$79.2 million due to lower volumes in the diskette, remanufactured cartridge,
and office supplies catalog businesses. The decreases were partially offset by
increased sales volume of thermal paper, label and tape products. For the
first nine months of 1994, sales were slightly lower as lower volumes of
diskettes, carbonless paper and remanufactured cartridges were offset by
increases in tape and thermal paper sales, and by the inclusion of the office
supplies catalog, which was acquired in July 1993. Operating income for the
Group was $.5 million during the third quarter of 1994, a decrease of 71
percent from the third quarter last year, due primarily to the realization of a
$.7 million benefit in 1993 related to a modification of the Company's
postretirement medical plan, 1994 expenses associated with the development of
new customer support systems, and lower remanufactured cartridge and office
supplies catalog sales than a year ago. For the nine months, operating income
declined 83 percent to $.8 million due to lower office supplies catalog sales,
significantly higher product development costs for the remanufactured cartridge
business, and the aforementioned $2.6 million charge related to the early
retirement program.
Sales for the Photofinishing Group for the third quarter and first nine months
of 1994 declined 3 percent and 4 percent, respectively, from the comparable
periods of 1993. The decrease is primarily due to lower sales volumes in the
U.S. and Canada. Operating income declined 14 percent for the third quarter of
1994 and 6 percent for the first nine months of 1994 versus the comparable
periods last year primarily due to lower U.S. and Canada sales volumes and
higher promotional and manufacturing costs in the U.K.
Precision Technologies sales declined 20 percent and 15 percent for the third
quarter and first nine months of 1994, respectively. The Group recorded small
operating losses in the third quarter and year-to-date periods of 1994, versus
operating profits last year, due to reduced sales volumes to its principal
customer, the successor to the former Computer Products business.
Research, selling, distribution and administrative expense increased 4 percent
in the third quarter of 1994 from the same quarter of 1993, and were
substantially the same for the comparable nine month periods. Selling and
distribution expense as a percentage of sales increased for the third quarter
and first nine months of 1994 compared to the same period last year due to
expenses associated with the development of new customer support systems for
the Commercial Products Group. Research and development expense increased in
both the third quarter and first nine months of 1994 versus the comparable
periods of 1993, in line with the Company's objective to increase focus on new
product development.
The effective tax rate of 39 percent for the first nine months of 1994 is
higher than the U.S. statutory rate of 35 percent, primarily due to the
unfavorable impact of non-deductible goodwill amortization and state income
taxes.
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<PAGE> 8
Working capital from continuing operations increased $19.4 million from
December 31, 1993. Accounts receivable from continuing operations increased
$8.4 million from the prior year-end, primarily due to the inclusion of
third-party accounts receivable for Precision Technologies and increased sales
in the third quarter of 1994 versus the fourth quarter of 1993. The Company
had net borrowings of $16.4 million during the first nine months of 1994 and
received $11.1 million from the sale of the discontinued Computer Products
Group, both of which were used to fund continuing operations and restructuring
actions, primarily severance payments related to the Company's early retirement
program. In July 1994, the Company replaced its revolving credit facility with
a new facility increasing the credit available to the Company under commitment
to $40 million. The terms of the facility are substantially similar to those
in the Company's previous facility.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- - -----------------------------------------
No reports on Form 8-K were filed during the quarter for which this report
is filed.
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<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NASHUA CORPORATION
------------------------------------
(Registrant)
Date: November 10, 1994 By: /s/W. Luke
------------------------------------
W. Luke, Vice President-Finance
(principal financial and duly
authorized officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF THE NASHUA CORPORATION FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<EXCHANGE-RATE> 1.
<CASH> 11,516
<SECURITIES> 0
<RECEIVABLES> 42,687
<ALLOWANCES> 0
<INVENTORY> 31,415
<CURRENT-ASSETS> 110,338
<PP&E> 132,922
<DEPRECIATION> 62,924
<TOTAL-ASSETS> 226,954
<CURRENT-LIABILITIES> 67,991
<BONDS> 40,323
<COMMON> 6,382
0
0
<OTHER-SE> 87,004
<TOTAL-LIABILITY-AND-EQUITY> 226,954
<SALES> 363,377
<TOTAL-REVENUES> 363,377
<CGS> 272,002
<TOTAL-COSTS> 272,002
<OTHER-EXPENSES> 83,245
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,695
<INCOME-PRETAX> 6,751
<INCOME-TAX> 2,633
<INCOME-CONTINUING> 4,118
<DISCONTINUED> (2,295)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,823
<EPS-PRIMARY> .29
<EPS-DILUTED> 0
</TABLE>
