<PAGE> 1
FORM 10-Q
---------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
OCTOBER 2, 1998
or
[ ] 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 1-5492-1
NASHUA CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 02-0170100
(State of Incorporation) (IRS Employer Identification No.)
44 FRANKLIN STREET 03061-2002
NASHUA, NEW HAMPSHIRE (Zip Code)
(Address of principal executive offices)
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, 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.
AS OF NOVEMBER 5, 1998, THE COMPANY HAD 6,336,525 SHARES OF COMMON
STOCK, EXCLUDING 458,122 SHARES IN TREASURY, PAR VALUE $1 PER SHARE,
OUTSTANDING.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NASHUA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
October 2, 1998 December 31,
ASSETS: (Unaudited) 1997
- ------- --------------- ------------
<S> <C> <C>
Cash and cash equivalents $ 38,553 $ 3,736
Accounts receivable 18,668 14,915
Inventories
Materials and supplies 5,106 6,196
Work in process 2,026 3,650
Finished goods 7,787 4,791
-------- --------
14,919 14,637
Other current assets 12,081 12,362
Net current assets of discontinued operations -- 120
-------- --------
Total current assets 84,221 45,770
-------- --------
Plant and equipment 78,698 81,020
Accumulated depreciation (40,207) (40,605)
-------- --------
38,491 40,415
-------- --------
Intangible assets 2,005 2,010
Accumulated amortization (1,404) (1,081)
-------- --------
601 929
-------- --------
Investment in unconsolidated affiliate -- 7,524
Other assets 16,132 10,930
Net non-current assets of discontinued operations 1,276 41,194
-------- --------
Total assets $140,721 $146,762
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
- -------------------------------------
Current maturities of long-term debt $ 511 $ 511
Accounts payable 10,913 12,595
Accrued expenses 27,722 13,772
Income taxes payable -- --
-------- --------
Total current liabilities 39,146 26,878
-------- --------
Long-term debt 1,149 3,489
Other long-term liabilities 20,880 21,373
-------- --------
Total long-term liabilities 22,029 24,862
-------- --------
Common stock and additional capital 20,980 18,845
Retained earnings 64,607 76,935
Treasury stock, at cost (6,041) (758)
-------- --------
Total shareholders' equity 79,546 95,022
-------- --------
Commitments and contingencies
-------- --------
Total liabilities and shareholders' equity $140,721 $146,762
======== ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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NASHUA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands, except per share data) Three Months Ended Nine Months Ended
------------------------ -------------------------
Oct. 2, Sept. 26, Oct. 2, Sept. 26,
1998 1997 1998 1997
-------- ------- -------- ---------
<S> <C> <C> <C> <C>
Net sales $ 42,420 $42,603 $126,987 $130,260
Cost of products sold 31,528 32,956 97,145 100,122
-------- ------- -------- --------
Gross margin 10,892 9,647 29,842 30,138
Research, selling, distribution and
administrative expenses 9,785 11,160 30,729 34,742
Restructuring and other unusual items 15,000 900 15,000 3,654
Interest expense 24 34 246 112
Interest income (524) (68) (1,201) (332)
-------- ------- -------- --------
Loss from continuing operations before income
tax benefit (13,393) (2,379) (14,932) (8,038)
Income taxes (benefit) (5,326) (1,248) (5,899) (3,174)
-------- ------- -------- --------
Loss from continuing operations (8,067) (1,131) (9,033) (4,864)
Income (loss) from discontinued operations, net of taxes (2,261) (1,962) (4,347) (1,563)
Gain on disposal of discontinued operation, net of taxes -- -- 1,052 --
-------- ------- -------- --------
Net loss (10,328) (3,093) (12,328) (6,427)
Retained earnings, beginning of period 74,935 82,423 76,935 85,757
-------- ------- -------- --------
Retained earnings, end of period 64,607 79,330 64,607 79,330
======== ======= ======== ========
Earnings per share:
Income (loss) from continuing operations $ (1.27) $ (0.18) $ (1.41) $ (0.76)
Income (loss) from discontinued operation (0.35) (0.30) (0.68) (0.24)
Gain on disposal of discontinued operation -- -- .16 --
-------- ------- -------- --------
Net loss per common share $ (1.62) $ (0.48) $ (1.93) $ (1.00)
======== ======= ======== ========
Average common shares 6,374 6,386 6,404 6,384
======== ======= ======== ========
Income (loss) per common share from
continuing operations assuming dilution $ (1.27) $ (0.18) $ (1.41) $ (0.76)
======== ======= ======== ========
Net income (loss) per common share assuming dilution $ (1.62) $ (0.48) $ (1.93) $ (1.00)
======== ======= ======== ========
Average common and potential common shares 6,374 6,386 6,404 6,384
======== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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NASHUA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------
Oct. 2, Sept. 26,
1998 1997
-------- ---------
<S> <C> <C>
Cash flows from operating activities of continuing operations:
Net loss $(12,328) $ (6,427)
Adjustments to reconcile net loss to cash provided by
(used in) continuing operating activities:
Depreciation and amortization 4,681 5,643
Loss from discontinued operation 4,347 1,232
Gain on sale of discontinued operation (1,052) --
Restructuring and unusual charges -- 3,654
One time charge related to damages award in Ricoh litigation 15,000 --
Net change in working capital and other assets (14,766) (6,125)
-------- --------
Cash used in continuing operating activities (4,118) (2,023)
-------- --------
Cash flows from investing activities of continuing operations:
Investment in plant and equipment (4,418) (3,671)
Retirement of fixed assets -- (1,567)
Proceeds from the sale of fixed assets 825
-------- --------
Cash used in investing activities of continuing operations (4,418) (4,413)
-------- --------
Cash flows from financing activities of continuing operations:
Repayment of borrowings (2,340) (569)
Proceeds and tax benefits from shares issued under stock
option plans 2,135 --
Purchase of treasury stock (5,283) --
-------- --------
Cash used in financing activities of continuing operations (5,488) (569)
-------- --------
Proceeds from the sale of discontinued operation 49,858 --
Cash provided by activities of discontinued operation (1,021) (3,544)
Effect of exchange rate changes on cash 4 (57)
-------- --------
Increase (decrease) in cash and cash equivalents 34,817 (10,606)
Cash and cash equivalents at beginning of period 3,736 20,018
-------- --------
Cash and cash equivalents at end of period $ 38,553 $ 9,412
======== ========
Interest paid $ 189 $ 189
======== ========
Income taxes paid $ 6,441 $ 2,420
======== ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
INDEBTEDNESS
On August 17, 1998, the Company amended its credit agreement with Citizen's
Bank, New Hampshire, decreasing the amount of available funds under the secured
line of credit from $18 million to $8 million and amending the consolidated
tangible net worth covenant from $70 million to $60 million in order to obtain
the lender's approval in respect to the Company's open market stock repurchase
program of up to one million shares of the Company's common stock as detailed in
the Shareholder's Equity section of these Notes to Condensed Consolidated
Financial Statements.
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share" for the Company's year ended December 31, 1997 financial
statements. As the Company has recorded net losses for the three and nine month
periods ended October 2, 1998 and September 26, 1997, any common stock
equivalents would be antidilutive; therefore, Basic Earnings per Share and
Diluted Earnings per Share are equivalent under FAS 128.
COMMITMENTS AND CONTINGENCIES
In April 1994, Ricoh Company, Ltd., Ricoh Electronics, Inc. and Ricoh
Corporation ("Ricoh") brought a lawsuit in the United States District Court,
District of New Hampshire ("District Court"), alleging the Company's
infringement of U.S. patents 4,611,730 and 4,878,603 relating to certain toner
cartridges for Ricoh copiers. In March 1997, the District Court decided to
enjoin Nashua from manufacturing, using or selling its NT-50 and NT-6750 toner
cartridges. Sales of these products in 1996 amounted to one percent of Nashua's
total sales. The Company disagrees with the District Court's decision and has
appealed to the United States Court of Appeals for the Federal Circuit ("Court
of Appeals"). On September 30, 1998, the District Court issued an order awarding
damages in the amount of $7,549,000 related to the Company's sales of NT-50 and
NT-6750 toner cartridges through December 3, 1995, additional damages relating
to the Company's sales of such products through March 1997, certain of Ricoh's
costs relative to the suit, and interest on such damages. The Company recorded a
$15 million pretax charge in the third quarter of 1998 related to this damages
award. The Company plans to appeal the District Court's decision on the issue of
damages. The Company has adequate financial resources to pay the District
Court's award of damages should it's appeal be unsuccessful. In connection with
the above-mentioned damages award, in the fourth quarter of 1998, the Company
posted a $16 million bond and placed $5 million in escrow to secure such bond.
The $5 million is classified as restricted cash in the balance sheet.
RECLASSIFICATION
Certain amounts from the prior year have been reclassified to conform to the
current year presentation.
STOCK OPTIONS
At October 2, 1998, options for 635,320 shares of common stock were outstanding.
Stock options for an additional 120,523 shares may be awarded under the
Company's 1996 Stock Incentive Plan.
SHAREHOLDER'S EQUITY
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On June 24, 1998, the Company's Board of Directors authorized the repurchase
from time to time in the open market of up to one million shares of its common
stock, subject to financial and market conditions, Securities and Exchange
Commission rules and regulations and financial covenant limitations with the
Company's lender. During the third quarter of 1998, Nashua repurchased 346,000
shares of the Company's common stock in open market transactions.
BUSINESS CHANGES-DISCONTINUED OPERATION
In the third quarter of 1998, the Company recognized a $2.3 million charge net
of $.9 million in taxes, of which a portion relates to Nashua's share of
Cerion Technologies, Inc. ("Cerion") losses and the remainder is a charge to
reduce the investment in Cerion to net realizable value. On September 15, 1998,
Cerion announced its decision to cease operations on or about November 15, 1998.
Consequently, the Company has accounted for the investment as a discontinued
operation. For the nine months ended October 2, 1998, the Company recognized a
$4.2 million charge net of $2 million in taxes of which a portion relates to
Nashua's share of Cerion losses and the remainder is a charge to reduce the
investment in Cerion to net realizable value.
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, 1997.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments, consisting of normal recurring
adjustments, necessary to present fairly the financial position as of October 2,
1998, the results of operations for the three and nine month periods ended
October 2, 1998 and September 26, 1997 and cash flows for the nine month period
ended October 2, 1998 and September 26, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CORPORATE MATTERS
In the third quarter of 1998, the Company recognized a $2.3 million charge net
of $.9 million in taxes, of which a portion relates to Nashua's share of Cerion
losses and the remainder is a charge to reduce the investment in Cerion to net
realizable value. On September 15, 1998, Cerion announced its decision to cease
operations on or about November 15, 1998. Consequently, the Company has
accounted for the investment as a discontinued operation. For the nine months
ended October 2, 1998, the Company recognized a $4.2 million charge net of $2
million in taxes, of which a portion relates to Nashua's share of Cerion losses
and the remainder is a charge to reduce the investment in Cerion to net
realizable value.
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<PAGE> 7
RESULTS OF OPERATIONS
Sales of $42.4 million for the third quarter of 1998 were $.2 million lower than
comparable sales in the third quarter of 1997. The sales decline is due to lower
volume for diskettes, toner and paper products in the Imaging Supplies Division,
more than offsetting year-over-year sales increases in both the Label Products
and Specialty Coated Products Divisions. The increase in gross margin from the
third quarter of 1997 to the current quarter is due to increased margins related
to new products in the Imaging Supplies and Specialty Coated Products Divisions
and significant cost reductions in the manufacturing process in the Label
Products Division and improved volume in both the Label Products and Specialty
Coated Products Divisions. Sales of $127 million for the first nine months of
1998 were 2.5% lower than sales of $130.3 million for the comparable period in
1997, primarily due to lower toner and paper volume in the Imaging Supplies
Division more than offsetting sales increases in the Specialty Coated Products
and Label Products Divisions. The volume declines experienced in the Imaging
Supplies Division for the third quarter and the first nine months of 1998 when
compared to the same periods of 1997 were largely attributable to the impact of
weak Asian markets on several key customers, the reduction of volume in the
dealer agent channel and the delay in introduction of new products.
In the third quarter of 1998, the Company reported a net loss from continuing
operations of $8.1 million compared to a net loss of $1.1 million in the third
quarter of 1997. The third quarter 1998 results included a one-time, unusual
pretax charge of $15 million and the third quarter 1997 results included a $.9
million restructuring charge. Excluding these charges, pretax results improved
by $3 million in 1998 due to improved divisional operating performance, reduced
corporate expenses and increased interest income from the investment of cash
generated by the sale of the Company's Photofinishing Group.
Research, selling, distribution and administrative expenses decreased $1.4
million or 12% for the third quarter of 1998 and $4.0 million or 11.6%, for the
first nine months of 1998 when compared to the same periods in 1997. Research
expenses were lower mainly due to decreased Projection System development
expenses in both the U.K. and U.S. The decrease in selling and distribution
expenses is a factor of lower sales, partially offset by higher freight rates.
Administrative costs are lower due to the impact of the restructuring activities
over the past twelve months.
Net restructuring and other unusual charges of $4.3 million were recorded in the
full year of 1997 related to the sale of excess real estate in Nashua, NH and
other business unit and functional realignments. Details of the charges related
to continuing operations and the activity recorded during the third quarter of
1998 follows:
<TABLE>
<CAPTION>
Balance Current Balance
July 3, Period Oct. 2,
(In thousands) 1998 Charges 1998
------- ------- -------
<S> <C> <C> <C>
Provisions for severance related to workforce reductions $ 883 $141 $742
Provisions for assets to be sold or discarded 348 291 57
Other 181 12 169
------ ---- ----
Total $1,412 $444 $968
====== ==== ====
</TABLE>
All charges, excluding asset writedowns, are principally cash in nature and are
expected to be funded from operations or current cash balances.
The estimated annual effective income tax benefit of 39.5 percent for the first
nine months of 1998 is higher than the U.S. statutory rate principally due to
the inclusion of state income taxes.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
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<PAGE> 8
Working capital increased $26.2 million from December 31, 1997, primarily from
net proceeds generated by the sale of the Company's Photofinishing Group. The
Company expects that a portion of the proceeds will be reinvested in its
continuing businesses. In addition, the Company repurchased 346,000 shares of
the Company's common stock for $5.3 million in open market transactions during
the third quarter of 1998 pursuant to the Company's open market stock repurchase
program of up to one million shares of the Company's common stock as detailed in
the Shareholder's Equity section of these Notes to Condensed Consolidated
Financial Statements.
The Company recorded a $15 million charge in the third quarter related to a
damages award in the patent infringement lawsuit brought against the Company by
Ricoh. The Company is appealing this decision, but, if unsuccessful, has
adequate financial resources to pay the Court's award of damages. In the fourth
quarter of 1998, the Company posted a $16 million bond and placed $5 million in
escrow to secure such bond in response to the damages award. The $5 million is
classified as restricted cash in the balance sheet.
On August 17, 1998, the Company amended its credit agreement with Citizen's
Bank, New Hampshire, decreasing the amount of available funds under the secured
line of credit from $18 million to $8 million and amending the consolidated
tangible net worth covenant from $70 million to $60 million in order to obtain
the lender's approval in respect to the Company's open market stock repurchase
program.
OTHER MATTERS
YEAR 2000
The Year 2000 (Y2K) issue is the result of computer programs being written for,
or microprocessors using, two digits (rather than four) to define the applicable
year. Company computer programs that have date-sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000, which could result
in system failures or miscalculations. The Company is currently working to
mitigate the Y2K issue and has established processes for assessing the risks and
associated costs.
The Company categorizes its Y2K efforts as follows: hardware, software, embedded
processors, vendors and customers. Progress in assessing and remediating
information technology systems (hardware and software) and non-information
technology systems (embeded processors) will be tracked in phases including
assessment, identification of non-compliant systems, risk assessment, project
plan development, remediation, testing and verification. The Company's Y2K
project team has completed the risk assessment phase for all major systems,
including hardware, software and embedded processors. Remediation efforts of
approximately one-third of the Company's major systems have been completed. The
Company expects that a large portion of the Company's internal remediation work
will be completed by July 1999. The Company will use internal and external
resources to remediate and test its systems, and to develop contingency plans to
mitigate risks associated with the Y2K issue.
The Company has initiated communications with significant vendors and customers
to coordinate the Y2K issue and is in the process of determining the Company's
vulnerability if these companies fail to remediate their Y2K issues. The Company
is in the initial phase of reviewing responses and expects to have analyzed such
response by March 1999. There can be no guarantee that the systems of other
companies will be timely remediated, or that other companies' failure to
remediate Y2K issues would not have a material adverse effect on the Company.
Costs incurred to date in addressing the Y2K issue have not been material and
are being funded through operating cash flows. Based on current information,
costs to remediate and test the Company's systems are not expected to be
material.
The Company has not yet developed a contingency plan for dealing with the
operational problems and costs (including loss of revenues) that would be
reasonably likely to result from failure by the Company and certain third
parties to achieve Y2K compliance on a timely basis. The Company currently plans
to complete its analysis of the problems and costs associated with the failure
to achieve Y2K compliance and to establish a contingency plan in the event of
such a failure by December 31, 1999.
The Company presently believes that with remediation, Y2K risks can be
mitigated. However, although the Company is not currently aware of any material
internal operational or financial Y2K related issues, the Company cannot provide
assurances that the computer systems, products, services or other systems upon
which the Company depends will be Y2K ready on schedule, that the costs of its
Y2K program will not become material or that the Company's contingency plans
will be adequate. The Company is currently unable to evaluate accurately the
magnitude, if any, of the Y2K related issues arising from the Company's vendors
and customers. If any such risks (either with respect to the Company or its
vendors or customers) materialize, the Company could experience serious
consequences to its business which could have material adverse effects on the
Company's financial condition, results of operations and liquidity.
The foregoing assessment of the impact of the Y2K problem on the Company is
based on management's best estimates as of the date of this Quarterly Report,
which are based on numerous assumptions as to future events. There can be no
assurance that these estimates will prove accurate, and actual results could
differ materially from those estimated if these assumptions prove inaccurate.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In August and September 1996, two individual plaintiffs initiated lawsuits in
the Circuit Court of Cook County, Illinois against the Company, Cerion, certain
directors and officers of Cerion, and the Company's underwriter, on behalf of
classes consisting of all persons who purchased the common stock of Cerion
between May 24, 1996 and July 9, 1996. These two complaints were consolidated.
In March 1997, the same individual plaintiffs joined by a third plaintiff filed
a Consolidated Amended Class Action Complaint (the "Consolidated Complaint").
The Consolidated Complaint alleged that, in connection with Cerion's initial
public offering, the defendants issued materially false and misleading
statements and omitted the disclosure of material facts regarding, in
particular, certain significant customer relationships. In October 1997, the
Court, on motion by the defendants, dismissed the Consolidated Complaint. The
plaintiffs filed a Second Amended Consolidated Complaint alleging substantially
similar claims as the Consolidated Complaint seeking damages and injunctive
relief. On May 6, 1998, the Court, on motion by the defendants, dismissed with
prejudice the Second Amended Consolidated Complaint. The plaintiffs have filed a
notice of appeal of the Court's ruling. The Company continues to believe that
this lawsuit is without merit and plans to vigorously defend itself in this
matter on appeal.
In April 1994, Ricoh Company, Ltd., Ricoh Electronics, Inc. and Ricoh
Corporation ("Ricoh") brought a lawsuit in the United States District Court,
District of New Hampshire ("District Court"), alleging the Company's
infringement of U.S. patents 4,611,730 and 4,878,603 relating to certain toner
cartridges for Ricoh copiers. In March 1997, the District Court decided to
enjoin Nashua from manufacturing, using or selling its NT-50 and NT-6750 toner
cartridges. Sales of these products in 1996 amounted to one percent of Nashua's
total sales. The Company disagrees with the District Court's decision and has
appealed to the United States Court of Appeals for the Federal Circuit ("Court
of Appeals"). On September 30, 1998, the District Court issued an order awarding
damages in the amount of $7,549,000 related to the Company's sales of NT-50 and
NT-6750 toner cartridges through December 3, 1995, additional damages relating
to the Company's sales of such products through March 1997, certain of Ricoh's
costs relative to the suit, and interest on such damages. The Company recorded a
$15 million pretax charge in the third quarter of 1998 related to this damages
award. The Company plans to appeal the District Court's decision on the issue of
damages. The Company has adequate financial resources to pay the District
Court's award of damages should it's appeal be unsuccessful.
ITEM 5. OTHER INFORMATION
FACTORS WHICH MAY AFFECT FUTURE RESULTS
This report may contain forward-looking statements as that term is defined in
the Private Securities Litigation Reform Act of 1995. When used in this report,
the words "believe," "expects," "will," "to be" and similar expressions are
intended to identify such forward-looking statements. Any such forward-looking
statements and the Company's future results of operations and financial
condition are subject to risks and uncertainties which could cause actual
results to differ materially from those anticipated and from past results. Such
risks and uncertainties include, but are not limited to, the Company's future
capital
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<PAGE> 10
needs, stock market conditions, price of the Company's stock, fluctuations in
customer demand, intensity of competition from other vendors, timing and
acceptance of new product introductions, general economic and industry
conditions, delays or difficulties in programs designed to increase sales and
return the Company to profitability, the possibility of a final award of
material damages in the Cerion securities litigation and other risks detailed in
the Company's filings with the Securities and Exchange Commission.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4.01 First Amendment to Revolving Credit Promissory Note between
Citizen's Bank New Hampshire and Nashua Corporation dated
August 17, 1998.
4.02 First Amendment to Loan and Security Agreement between
Citizen's Bank New Hampshire and Nashua Corporation dated
August 17, 1998.
27.01 Financial Data Schedule for the period ended October 2,
1998.
27.02 Restated Financial Data Schedule for the period ended
September 26, 1997.
(b) Reports on Form 8-K
On October 15, 1998, the Company filed a Form 8-K to report a damage
award in the Ricoh litigation.
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<PAGE> 11
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 13, 1998 By: /s/ John L. Patenaude
------------------- ---------------------------------------------
John L. Patenaude
Vice President-Finance,
Chief Financial Officer and Treasurer
(principal financial and duly authorized officer)
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<PAGE> 1
EXHIBIT 4.01
FIRST AMENDMENT TO REVOLVING CREDIT PROMISSORY NOTE
The First Amendment to Revolving Credit Promissory Note (the "Amendment")
is dated as of this 17th day of August, 1998, by and between Nashua Corporation,
a Delaware corporation, with a mailing address at 44 Franklin Street, Nashua,
New Hampshire 03061 (hereinafter sometimes referred to as "Parent"), and Nashua
Photo Inc., a Delaware corporation (hereinafter each of these enterprises
including Parent is sometimes referred to in the singular as a "Maker" and
collectively with Parent as the "Makers") and Citizens Bank New Hampshire, a
guaranty savings bank organized under the laws of New Hampshire, with a place of
business at 875 Elm Street, Manchester, New Hampshire 03101 (hereinafter
referred to as the "Bank").
In consideration of the mutual promises, covenants and agreements herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. RECITALS.
1.1 Borrowers and Bank executed a Revolving Credit Promissory Note,
dated March 28, 1997 in the original principal amount of up to Eighteen Million
Dollars ($18,000,000.00) (the "Note").
1.2 In connection with the Note Borrowers and Bank executed a Loan and
Securities Agreement, dated March 28, 1997 as amended by a First Amendment to
Loan and Security Agreement of even date (the "Loan Agreement") and certain
other agreements, instruments and documents in connection with the Note, the
Loan Agreement and herewith (the "Instruments").
1.3 The Borrower and the Bank wish to, inter alia, decrease the
Principal Amount of the Note from Eighteen Million Dollars ($18,000,000.00) to
Eight Million Dollars ($8,000,000.00), as more specifically set forth herein.
1.4 Any term not specifically defined herein shall have the meaning set
forth in the Note.
2. AMENDMENTS TO THE NOTE.
2.1 On page one (1) of the Note, in the top left hand corner, change the
number "18,000,000.00" to "8,000,000.00".
2.2 On page one (1) the definition of "Principal Amount" is hereby
amended in its entirety to read: "Eight Million Dollars ($8,000,000.00)
("Principal Amount")."
1
<PAGE> 2
3. VALIDITY OF ORIGINAL NOTE:
In all other respects and except as specifically amended hereby, the Note
remains unchanged and in full force and effect and Marker agrees to be bound
thereby.
4. NO FURTHER OBLIGATION.
Maker confirms and agrees that the amendments contained herein shall in no
way be construed as an obligation on the part of Bank to further amend or extend
the Note or any other Instrument. This Amendment is not a novation.
5. AUTHORITY.
Maker warrants that they have full power and authority and have taken all
necessary corporate and other action and procured all necessary consents to
execute and deliver this Amendment and perform their obligations hereunder.
IN WITNESS WHEREOF, Makers have caused this First Amendment to Revolving
Credit Promissory Note to be duly executed as the date first above written.
IN THE PRESENCE OF: MAKERS:
NASHUA CORPORATION
/s/ Linda J. Madden By: /s/ John L. Patenaude
- ---------------------------- ---------------------------------------
Witness Name: John L. Patenaude
Title: Vice-President-Finance, CEO &
Treasurer
NASHUA PHOTO INC.
/s/ Linda J. Madden By: /s/ John L. Patenaude
- ---------------------------- ---------------------------------------
Witness Name: John L. Patenaude
Title: President
2
<PAGE> 1
EXHIBIT 4.02
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
----------------------------------------------
This First Amendment to Loan and Security Agreement (the "Amendment") is
dated as of this 17th day of August, 1998, by and between Nashua Corporation, a
Delaware corporation, with a mailing address at 44 Franklin Street, Nashua, New
Hampshire 03061 (hereinafter sometimes referred to as "Parent"), and Nashua
Photo Inc., a Delaware corporation (hereinafter each of these enterprises
including Parent is sometimes referred to in the singular as a "Borrower" and
collectively with Parent as the "Borrowers") and Citizens Bank New Hampshire, a
guaranty savings bank organized under the laws of New Hampshire 03101
(hereinafter referred to as the "Bank").
In consideration of the mutual promises, covenants and agreements herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. RECITALS.
1.1 Borrowers and Bank executed a Loan and Security Agreement, dated
March 28, 1997 (the "Loan Agreement") whereby the Bank agreed to lend to
Borrowers up to an aggregate amount of Eighteen Million Dollars ($18,000,000.00)
in the form of a revolving line of credit loan and letter of credit facilities
on the terms and conditions more specifically provided therein.
1.2 In connection with the Loan Agreement Borrowers executed a
Revolving Credit Promissory Note in favor of the Bank dated March 28, 1997 in
the original principal amount of Eighteen Million Dollars ($18,000,000.00) (the
"Note") and certain other agreements, instruments and documents in connection
with the Loan Agreement, the Note and herewith (the "Instruments").
1.3 The Borrower and the Bank wish to, inter alia, decrease the
Borrower's Availability (as defined in the Loan Agreement) from Eighteen Million
Dollars ($18,000,000.00) to Eight Million Dollars ($8,000,000.00) and amend the
Consolidated Tangible Net Worth Covenant (as defined in the Loan Agreement), all
as more specifically set forth herein.
1.4 Any term not specifically defined herein shall have the meaning
set forth in the Loan Agreement.
2. AMENDMENTS.
2.1 SECTION 1.1 -- Section 1.1 of the Loan Agreement is hereby
amended in its entirety to read as follows:
1
<PAGE> 2
"1.1 Borrowers have made certain representations to Bank as
contained in this Agreement or as referenced herein, and have requested to
borrow from Bank up to an aggregate amount of Eight Million Dollars
($8,000,000.00) in the form of a revolving line of credit loan and letter of
credit facilities on the terms and conditions more specifically provided
herein."
2.2 SECTION 2.4 -- Section 2.4 of the Loan Agreement is hereby
amended in its entirety to read as follows:
"2.4 "Availability" shall mean the sum of Eight Million
Dollars ($8,000,000.00);"
2.3 SECTION 2.23 -- Section 2.23 of the Loan Agreement is hereby
amended in its entirety to read as follows:
"2.23 "Instruments" shall mean the Loan Agreement as amended
by the First Amendment to Loan and Security Agreement, the Note as amended by
the First Amendment to Revolving Credit Promissory Note, the documents and
filings evidencing the Liens, and all other instruments, documents or writings
executed or delivered (or to be executed or delivered from time to time) by
Borrowers to Bank in connection with the Loan as may be amended;"
2.4 SECTION 3.1 -- The first sentence of Section 3.1 of the Loan
Agreement is hereby amended in its entirety to read as follows:
"3.1 Bank hereby establishes a line of credit (hereinafter the
"Revolving Credit") in Borrowers' favor in the amount of Borrowers'
Availability, but in no event to exceed Eight Million Dollars ($8,000,000.00)."
2.5 SECTION 7A.2 -- Section 7A.2 of the Loan Agreement is hereby
amended in its entirety to read as follows:
"7A.2 CONSOLIDATED TANGIBLE NET WORTH. On September 30, 1998,
Borrowers shall have had a Consolidated Tangible Net Worth of not less than
Sixty Million Dollars ($60,000,000.00). Thereafter for the term of this
Agreement, this requirement shall increase quarterly by seventy five percent
(75.0%) of Borrowers' Consolidated Net Income for the prior quarter. There shall
be no negative adjustment for losses. Compliance with this covenant shall be
measured on a quarterly basis."
2.6 SECTION 8.10 -- Add the following new sentence to the end of
Section 8.10:
"Notwithstanding the above, Bank hereby consents to the
repurchase by Parent of up to one million shares of Parent's common stock,
provided that the above
2
<PAGE> 3
consent shall terminate if there exists an Event of Default or an event but for
the passage of time or giving of notice, or both, would become an Event of
Default."
3. FEES AND EXPENSES.
Borrowers will pay all of Bank's costs and expenses incurred in preparation
of this Amendment and the documents and instruments executed herewith.
4. RATIFICATION.
In all other respects, the Loan Agreement remains in full force and effect,
and Borrowers agree to be bound thereby. Except as specifically amended herein,
the terms and conditions of the Loan Agreement shall remain in full force and
effect. Borrowers confirm and agree that the amendments contained herein shall
in no way be construed as an obligation on the part of Bank to further amend or
extend the Loan Agreement or any other Instrument. This is not a novation.
5. REAFFIRMATION.
Borrowers reaffirm each and every representation and warranty made by them
in the Loan Agreement.
6. AUTHORITY.
Borrowers warrant that they have full power and authority, and has taken
all necessary corporate and other action and procured all necessary consents to
execute and deliver this Amendment and perform its obligations hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
Loan and Security Agreement to be duly executed on their behalf by the persons
signing below who are thereunto duly authorized with the intention that it be
effective as of the day and year first above written.
WITNESS: NASHUA CORPORATION
/s/ Linda J. Madden By: /s/ John L. Patonaude
- --------------------------- -----------------------------
Name: John L. Patonaude
Title: Vice-President-Finance,
CFO & Treasurer
3
<PAGE> 4
NASHUA PHOTO INC.
/s/ Linda J. Madden By: /s/ John L. Patenaude
- -------------------------- -----------------------------------
Name: John L. Patenaude
Title: President
CITIZENS BANK NEW HAMPSHIRE
By:
- -------------------------- -----------------------------------
John Mercier
Vice President
STATE OF NEW HAMPSHIRE
COUNTY OF HILLSBOROUGH
On this the 17th day of August, 1998, before me, the undersigned officer,
personally appeared John L. Patenaude, who acknowledged him/herself to be the
Vice President-Finance of Nashua Corporation, a corporation, and that he/she as
such Vice President-Finance, being authorized so to do, executed the foregoing
instrument for the purposes therein contained on behalf of the corporation.
/s/ Suzanne L. Ansara
-----------------------------------------
Notary Public/Justice of the Peace
My Commission Expires: February 9, 1999
4
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