<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 June 30, 1995
----------------------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1984
For the transition period from to
--------------------- ---------------------
Commission file number 1-5492-1
------------
NASHUA CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 02-0170100
- --------------------------------------- ------------------------------------------------
(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
------------------------------------------------
</TABLE>
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 Outstanding at August 4, 1995
- ----------------------------- -----------------------------------------
Common Stock, par value $1.00 6,373,980 shares (excluding 23,590 shares
held in treasury)
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
<TABLE>
NASHUA CORPORATION AND SUBSIDIARIES
-----------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<CAPTION>
(In thousands)
June 30, 1995 December 31,
ASSETS: (Unaudited) 1994
- ------- ------------- ------------
<S> <C> <C>
Cash and cash equivalents $ 10,492 $ 10,219
Accounts receivable 50,429 40,811
Inventories
Materials and supplies 16,621 15,713
Work in process 4,390 4,942
Finished goods 13,826 13,506
--------- ---------
34,837 34,161
Other current assets 26,053 22,971
--------- ---------
Total current assets 121,811 108,162
--------- --------
Plant and equipment 142,467 129,590
Accumulated depreciation (65,237) (58,733)
--------- ---------
77,230 70,857
Intangible assets 44,664 23,297
Accumulated amortization (7,429) (5,772)
--------- ---------
37,235 17,525
Other assets 26,836 31,281
--------- ---------
Total assets $ 263,112 $ 227,825
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
- ------------------------------------
Notes and loans payable $ 150 $ 200
Current maturities of long-term debt 475 450
Accounts payable 38,582 27,374
Accrued expenses 24,920 22,107
Income taxes payable 5,265 11,242
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Total current liabilities 69,392 61,373
Long-term debt 75,725 49,166
Other long-term liabilities 24,590 24,590
Common stock and additional capital 18,681 18,667
Retained earnings 79,374 79,744
Cumulative translation adjustment (3,899) (4,928)
Treasury stock, at cost (751) (787)
Commitments and contingencies
---------- ---------
Total liabilities and shareholders' equity $ 263,112 $ 227,825
========== =========
</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 Six Months Ended
--------------------------- --------------------------
June 30, July 1, June 30, July 1,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 137,057 $ 122,702 $ 261,382 $ 235,525
Cost of products sold 101,100 90,793 196,380 177,465
Research, selling, distribution and
administrative expenses 31,547 26,717 59,246 51,700
Restructuring charges - - - 2,600
Interest expense 1,453 549 2,904 1,027
Interest income (175) (55) (396) (98)
---------- ----------- ---------- ----------
Income from continuing operations
before income taxes 3,132 4,698 3,248 2,831
Income taxes 1,269 1,778 1,315 1,069
---------- ---------- --------- ----------
Income from continuing operations 1,863 2,920 1,933 1,762
Income (loss) from discontinued operations - - - (2,295)
---------- ---------- ------------ ----------
Net income (loss) 1,863 2,920 1,933 (533)
Retained earnings, beginning of period 78,662 77,575 79,744 82,166
Dividends (1,151) (1,140) (2,303) (2,278)
---------- ---------- --------- ----------
Retained earnings, end of period $ 79,374 $ 79,355 $ 79,374 $ 79,355
========== ========== ========= ==========
Earnings (loss) per common and common
equivalent share:
Income from continuing operations $ .29 $ .46 $ .30 $ .28
Income (loss) from discontinued operations - - - (.36)
---------- ---------- --------- ----------
Net income (loss) $ .29 $ .46 $ .30 $ (.08)
========== ========== ========= ==========
Dividends per common share $ .18 $ .18 $ .36 $ .36
========== ========== ========= ==========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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<PAGE> 4
<TABLE>
NASHUA CORPORATION AND SUBSIDIARIES
-----------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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(UNAUDITED)
-----------
<CAPTION>
(In thousands)
Six Months Ended
-----------------------------
June 30, July 1,
1995 1994
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<S> <C> <C>
Cash flows from operating activities of continuing operations:
Net income (loss) $ 1,933 $ (533)
Adjustments to reconcile net income (loss) to cash
provided by continuing operating activities:
Depreciation and amortization 8,859 7,412
Loss from discontinued operations - 2,295
Net change in working capital 462 (7,880)
--------- ---------
Cash provided by continuing operating activities 11,254 1,294
--------- ---------
Cash flows from investing activities of continuing operations:
Investment in plant and equipment (7,531) (7,273)
Acquisition of business (25,861) -
--------- ---------
Cash used in investing activities (33,392) (7,273)
--------- ---------
Cash flows from financing activities of continuing operations:
Proceeds from borrowings 32,800 17,400
Repayment of borrowings (6,266) (13,014)
Dividends paid (2,294) (2,278)
Proceeds and tax benefits from shares
issued under stock option plans 5 177
Purchase and reissuance of treasury stock 36 -
--------- ---------
Cash provided by financing activities 24,281 2,285
--------- ---------
Proceeds from sale of discontinued operations 5,950 11,115
Cash applied to activities of discontinued operations (7,900) (4,597)
Effect of exchange rate changes on cash 80 209
--------- ---------
Increase in cash and cash equivalents 273 3,033
Cash and cash equivalents at beginning of period 10,219 5,883
--------- ---------
Cash and cash equivalents at end of period $ 10,492 $ 8,916
========= =========
Interest paid $ 4,517 $ 1,015
========= =========
Income taxes paid $ 6,551 $ 58
========= ========
</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, as applicable, the
weighted average number of common equivalent shares outstanding during the
period.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------ -------------------------
June 30, July 1, June 30, July 1,
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Common shares outstanding 6,373,815 6,331,123 6,373,631 6,326,284
Common share equivalents 4 17,132 250 24,011
</TABLE>
Stock Options
- -------------
At June 30, 1995, options for 405,744 shares of common stock were outstanding.
Stock options for an additional 253,050 shares may be awarded under the
Company's 1987 Stock Option Plan and stock options for an additional 217,000
shares may be awarded under the Company's 1993 Stock Incentive Plan.
Acquisition
- -----------
On January 13, 1995, the Company acquired certain photofinishing operations
from Nexus Photo Ltd. The acquisition includes mail- order photofinishing
operations in France, Belgium, The Netherlands and Spain, and a wholesale film
processing business in Northern Ireland. The following unaudited pro forma
data summarize the consolidated results of operations for the periods indicated
as if the operations had been combined at the beginning of the periods
presented, after giving effect to certain pro forma adjustments. The pro forma
data do not purport to be indicative of the results which would actually have
been attained if the combination had been in effect for the periods indicated
or which may be attained in the future.
<TABLE>
<CAPTION>
Six Months Ended
---------------------------
(In thousands, June 30, July 1,
except per share data) 1995 1994
-------- --------
<S> <C> <C>
Net sales $263,276 $255,958
Income from
continuing operations 2,116 1,564
Net income (loss) 2,116 (731)
Earnings (loss) per common
and common equivalent share:
Income from
continuing operations $ .33 $ .25
Net income (loss) $ .33 $ (.11)
</TABLE>
Included in the pro forma net loss for the six months ended July 1, 1994 was a
loss from discontinued operations of $2.3 million, on $.36 per share.
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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, 1994.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (consisting solely of normal
recurring adjustments) necessary to present fairly the financial position as of
June 30, 1995, the results of operations for the three-month and six-month
periods ended June 30, 1995 and July 1, 1994, and cash flows for the six- month
periods ended June 30, 1995 and July 1, 1994.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Net sales for the second quarter of 1995 increased 12 percent to $137.1 million
compared to the second quarter of 1994, and for the first six months of 1995
increased 11 percent to $261.4 million compared to the same period of 1994,
reflecting increased revenue in all three business segments. Net income for
the second quarter of 1995 was $1.9 million, versus $2.9 million for the same
quarter last year, as lower operating results in the Commercial Products and
Photofinishing Groups more than offset significantly improved Precision
Technologies results. Income from continuing operations for the six month
period increased to $1.9 million compared to $1.8 million in the prior year.
Included in the 1994 year-to-date results from continuing operations were
charges of $.9 million related to a potential acquisition of a non-U.S.
photofinishing business and a restructuring charge of $2.6 million associated
with the Company's early retirement program.
The Commercial Product Group's second quarter sales increased 2 percent to
$83.4 million versus the same period of 1994, the result of significantly
higher copier paper volume as well as increased remanufactured laser printer
cartridge and toner volumes, offset by sales declines in other product areas.
Sales of labels, facsimile paper, tapes and diskettes all declined in the
second quarter of 1995, as volume decreases more than offset the impact of
higher selling prices. Sales for the first six months of 1995 increased 4
percent compared to the same period of 1994, primarily attributable to higher
sales of labels, toner, copier paper and remanufactured laser printer
cartridges. Operating profits in the second quarter of 1995 were $2.0 million,
23 percent lower than the second quarter of 1994, due to higher raw material
costs and a less favorable product mix, partially offset by the strong demand
for copier paper and selected selling price increases. The group's operating
profit for the six months increased from $2.8 million before restructuring
charges in 1994 to $3.1 million in 1995, due primarily to the volume
improvements in the first quarter of 1995, and administrative cost savings
associated with restructuring actions taken in 1994.
Photofinishing Group sales for the second quarter and first six months of 1995
increased 28 percent and 22 percent, respectively, from the comparable 1994
periods. The inclusion of the European mail-order and Northern Ireland-based
wholesale processing operations acquired in January 1995, and the favorable
exchange impact of a weaker U.S. dollar versus the British pound, more than
offset the impact of significantly lower U.S. mail-order volumes for the year
and lower average prices in the second quarter. The U.S. business continues to
be affected by aggressive discounting
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<PAGE> 7
in the direct mail channel and competing retail channels. Operating profit for
the second quarter of 1995 was $2.7 million, a decrease of 35 percent from
1994, as lower sales and increased promotional expense in the U.S., and higher
costs and reduced third- party income in the U.K., offset the inclusion of the
European and Irish operating results. For the six months, operating profit
declined 49 percent to $3.4 million due to the unfavorable factors noted above
and the timing of the completion of the European acquisition which occurred
after the peak holiday volume period.
Precision Technologies recorded net sales of $5.7 million and $10.5 million for
the second quarter and first six months of 1995, respectively, significantly
higher than the comparable 1994 periods. Operating income rose to $1.1 million
and $1.7 million, respectively, in the three and six month periods this year
versus small losses last year. The improved sales and profitability reflect
significantly higher sales volumes and improved manufacturing efficiencies as
the operation continues to broaden its product offerings and customer base.
Management believes Precision Technologies will continue to benefit from the
general strength of the computer disk drive industry at least through the end
of 1995.
Administrative expenses increased by 18 percent and 6 percent in the second
quarter and first six months of 1995, respectively, compared to the same 1994
periods, as the impact of including the European and Irish operations was only
partially offset by cost savings associated with restructuring actions taken in
early 1994. Selling expenses increased as a percentage of sales in both the
second quarter and year-to-date periods of 1995 compared to 1994, due to the
inclusion of the acquired photofinishing businesses, which generally have a
higher ratio of selling expense to sales than the Company's other businesses,
and to higher promotional spending in the U.S. photofinishing operation.
Research and development spending in 1995 has remained fairly consistent with
1994 spending levels as the Company maintains the increased focus on new
product development it began last year.
In the fourth quarter of 1993, the Company recorded a restructuring charge of
$11.8 million related to the integration and streamlining of the operations of
the Commercial Products Group, including work force reductions, as well as
consolidation of facilities and the write-down of certain assets. As part of
the restructuring plan, the Company offered certain of its employees an early
retirement program and recorded an additional restructuring charge of $2.6
million in the first quarter of 1994.
<TABLE>
The details of the Company's restructuring reserve remaining at December 31,
1994 and the activity recorded in the first six months of 1995 are as follows:
<CAPTION>
Balance Balance
Dec. 31, 1995 1995 June 30,
(In thousands) 1994 Provision Charges 1995
--------- --------- ------- ----------
<S> <C> <C> <C> <C>
Provisions related to severance costs $1,550 $ - $1,080 $ 470
Provisions related to employees not terminated 150 - 125 25
Provision for assets to be sold or discarded 1,250 - 1,000 250
------ ------ ------ ------
$2,950 $ - $2,205 $ 745
====== ====== ====== ======
</TABLE>
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As of June 30, 1995, the provision related to severance costs represents
payments to be made in 1995 to former employees. The provision for assets to
be sold or discarded represents costs associated with holding vacated portions
of certain corporate and manufacturing facilities during the period until the
property can be sold or otherwise disposed of. There were no material changes
during 1995 to the Company's original estimate of the costs associated with the
restructuring actions.
The effective tax rate of 40.5 percent for the first six months of 1995 is
higher than the U.S. statutory rate of 35 percent due primarily to the
unfavorable impact of non-deductible goodwill and state income taxes.
Working capital increased $5.6 million to $52.4 million from December 31, 1994.
Increases in accounts receivable, inventories, accounts payable and accrued
expenses from December 31, 1994 are primarily attributable to the acquisition
of the European photofinishing businesses. The Company also received $6.0
million from the payment of a note received in connection with the 1994 sale of
the Computer Products Group. The Company has borrowed an additional $33
million of its $75 million revolving credit facility during 1995, with
approximately $25.7 million being used to acquire the European photofinishing
business and the remainder being used to fund tax payments associated with
discontinued operations. At June 30, 1995, borrowings under the $75 million
revolving credit facility were $60 million.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
<TABLE>
On April 28, 1995, the Annual Meeting of the stockholders of Nashua Corporation
was held. The following individuals were elected Directors of the Company by
the votes cast for and withheld from those individuals as indicated below:
<CAPTION>
For Withheld
--- --------
<S> <C> <C>
Joseph A. Baute 5,643,220 63,026
Sheldon A. Buckler 5,657,313 48,933
Richard E. Carter 5,654,461 51,785
Thomas W. Eagar 5,651,584 54,662
Charles S. Hoppin 5,640,776 65,470
John M. Kucharski 5,656,798 49,448
William E. Mitchell 5,634,770 71,476
James F. Orr III 5,657,848 48,398
James Brian Quinn 5,643,347 62,899
</TABLE>
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<PAGE> 9
ITEM 5. OTHER INFORMATION
- -----------------------------
On August 10, 1995, Nashua Corporation announced that William E. Mitchell had
announced his intention to resign as president and chief executive officer,
effective September 8, 1995. Francis J. Lunger, Nashua Corporation's vice
president and chief administrative officer will serve as president and chief
executive officer while the Board of Directors evaluates candidates to assume
the president and chief executive responsibilities.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits
None.
(b) 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> 10
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: August 11, 1995 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
CONSOLIDATED CONDENSED FIANCIAL STATEMENTS OF NASHUA CORPORATION FOR THE SIX
MONTHS ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 10,492
<SECURITIES> 0
<RECEIVABLES> 50,429
<ALLOWANCES> 0
<INVENTORY> 34,837
<CURRENT-ASSETS> 26,093
<PP&E> 142,467
<DEPRECIATION> 65,237
<TOTAL-ASSETS> 263,112
<CURRENT-LIABILITIES> 69,392
<BONDS> 75,725
<COMMON> 18,681
0
0
<OTHER-SE> 74,724
<TOTAL-LIABILITY-AND-EQUITY> 263,112
<SALES> 261,382
<TOTAL-REVENUES> 261,382
<CGS> 196,380
<TOTAL-COSTS> 58,850
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,904
<INCOME-PRETAX> 3,248
<INCOME-TAX> 1,315
<INCOME-CONTINUING> 1,933
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,933
<EPS-PRIMARY> .30
<EPS-DILUTED> 0
</TABLE>
