<PAGE> 1
FORM 10-Q
-----------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
APRIL 3, 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 MAY 6, 1998, THE COMPANY HAD 6,707,723 SHARES OF COMMON
STOCK, EXCLUDING 24,074 SHARES IN TREASURY, PAR VALUE $1 PER SHARE, OUTSTANDING.
-1-
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
NASHUA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
April 3, 1998 December 31,
ASSETS: (Unaudited) 1997
- ------- ------------- ------------
<S> <C> <C>
Cash and cash equivalents $ 8,593 $ 3,736
Accounts receivable 16,831 14,915
Inventories
Materials and supplies 4,192 6,196
Work in process 2,359 3,650
Finished goods 7,166 4,791
-------- --------
13,717 14,637
Other current assets 10,564 12,362
Net current assets of discontinued operations 615 120
-------- --------
Total current assets 50,320 45,770
-------- --------
Plant and equipment 79,667 81,020
Accumulated depreciation (39,282) (40,605)
-------- --------
40,385 40,415
-------- --------
Intangible assets 2,058 2,010
Accumulated amortization (1,116) (1,081)
-------- --------
942 929
-------- --------
Investment in unconsolidated affiliate 7,261 7,524
Other assets 11,640 10,930
Net non-current assets of discontinued operations 34,142 41,194
-------- --------
Total assets $144,690 $146,762
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current maturities of long-term debt $ 2,611 $ 511
Accounts payable 11,776 12,595
Accrued expenses 11,534 13,772
-------- --------
Total current liabilities 25,921 26,878
-------- --------
Long-term debt 3,405 3,489
Other long-term liabilities 20,841 21,373
-------- --------
Total long-term liabilities 24,246 24,862
-------- --------
Common stock and additional capital 19,137 18,845
Retained earnings 76,144 76,935
Treasury stock, at cost (758) (758)
-------- --------
Total shareholders' equity 94,523 95,022
-------- --------
Commitments and contingencies
-------- --------
Total liabilities and shareholders' equity $144,690 $146,762
======== ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
<PAGE> 3
<TABLE>
<CAPTION>
NASHUA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(UNAUDITED)
(In thousands, except per share data) Three Months Ended
-----------------------
April 3, March 28,
1998 1997
-------- ---------
<S> <C> <C>
Net sales $44,486 $44,431
Cost of products sold 34,735 34,230
------- -------
Gross margin 9,751 10,201
Research, selling, distribution and
administrative expenses 10,492 11,564
Equity in net (income) loss of Cerion Technologies 263 (25)
Interest expense 113 57
Interest income (8) (177)
------- -------
Loss from continuing operations before income
tax benefit (1,109) (1,218)
Income tax benefit (466) (377)
------- -------
Loss from continuing operations (643) (841)
Loss from discontinued operation (148) (552)
------- -------
Net loss (791) (1,393)
Retained earnings, beginning of period 76,935 78,328
------- -------
Retained earnings, end of period 76,144 76,935
======= =======
Earnings per share:
Loss from continuing operations $ (0.10) $ (0.13)
Loss from discontinued operation (0.02) (0.09)
------- -------
Net loss per common share $ (0.12) $ (0.22)
======= =======
Average common shares 6,391 6,378
======= =======
Net loss per common share from continuing
operations assuming dilution $ (0.10) $ (0.13)
======= =======
Net loss per common share assuming dilution $ (0.12) $ (0.22)
======= =======
Average common and potential common shares 6,391 6,378
======= =======
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
<PAGE> 4
<TABLE>
<CAPTION>
NASHUA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
Three Months Ended
-----------------------
April 3, March 28,
1998 1997
-------- ---------
<S> <C> <C>
Cash flows from operating activities of continuing operations:
Net loss $ (791) $(1,393)
Adjustments to reconcile net loss to cash provided by
(used in) continuing operating activities:
Depreciation and amortization 1,737 1,780
Equity in net (income) loss of Cerion Technologies 263 (25)
Loss from discontinued operations 148 552
Net change in working capital and other assets (3,210) (8,783)
------- -------
Cash used in continuing operating activities (1,853) (7,869)
------- -------
Cash flows from investing activities of continuing operations:
Investment in plant and equipment (2,007) (1,491)
Retirement of fixed assets -- 173
------- -------
Cash used in investing activities of continuing operations (2,007) (1,318)
------- -------
Cash flows from financing activities of continuing operations:
Proceeds from borrowings 2,100 --
Repayment of borrowings (84) (137)
Proceeds and tax benefits from shares issued under stock
option plans 292 --
------- -------
Cash provided by (used in) financing activities of continuing
operations 2,308 (137)
------- -------
Proceeds from the sale of discontinued operation 6,000 --
Cash provided by activities of discontinued operation 409 3,708
Effect of exchange rate changes on cash 5 (134)
------- -------
Increase (decrease) in cash and cash equivalents 4,857 (5,750)
Cash and cash equivalents at beginning of period 3,736 20,018
------- -------
Cash and cash equivalents at end of period $ 8,593 $14,268
======= =======
Interest paid $ 102 $ 42
======= =======
Income taxes paid $ 51 $ 1,663
======= =======
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
<PAGE> 5
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 month periods
ended April 3, 1998 and March 28, 1997, any common stock equivalents would be
antidilutive; therefore, Basic Earnings per Share and Diluted Earnings per Share
are equivalent under FAS 128.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 132
In February 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 132, "Employers' Disclosures about Pensions
and Other Postretirement Benefits". This statement will be effective for fiscal
years beginning after December 15, 1997. SFAS 132 amends FASB Statements No. 87,
88 and 106 in that it revises employers' disclosures about pension and
postretirement benefit plans.
RECLASSIFICATION
Certain amounts from the prior year have been reclassified to conform to the
current year presentation.
STOCK OPTIONS
At April 3, 1998, options for 807,820 shares of common stock were outstanding.
Stock options for an additional 58,075 shares may be awarded under the Company's
1996 Stock Incentive Plan.
SUBSEQUENT EVENTS
The process of selling Nashua's entire photofinishing business was completed on
April 9, 1998. Net after tax proceeds on the disposal of the Company's
photofinishing business are estimated to be $42 million which the Company
expects will result in a small gain to be recognized in the second quarter of
1998.
On April 6, 1998, the Company sold its United Kingdom-based Microsharp imaging
technology operation and expects to realize a small gain from the transaction in
the second quarter of 1998. The Company's United States-based projection screen
development, now called Nashua Projection Systems, is continuing the process of
qualifying its products for rear projection applications.
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.
<PAGE> 6
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 April 3,
1998, the results of operations for the three month periods ended April 3, 1998
and March 28, 1997 and cash flows for the three month periods ended April 3,
1998 and March 28, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CORPORATE MATTERS
The process of selling Nashua's entire photofinishing business was completed on
April 9, 1998. Net after tax proceeds on the disposal of the Company's
photofinishing business are estimated to be $42 million which the Company
expects will result in a small gain to be recognized in the second quarter of
1998.
On April 6, 1998, the Company sold its United Kingdom-based Microsharp imaging
technology operation and expects to realize a small gain from the transaction in
the second quarter of 1998. The Company's United States-based projection screen
development, now called Nashua Projection Systems, is continuing the process of
qualifying its products for rear projection applications.
RESULTS OF OPERATIONS
Net sales for the first quarter of 1998 were $44.5 million, compared with $44.4
million in the first quarter of 1997. Sales growth in the Label and Specialty
Coated Products divisions offset the sales decline in the Imaging Supplies
Division. In the first quarter of 1998, the Company reported a net loss of $.8
million ($.12 per share), compared to a net loss of $1.4 million ($.22 per
share) in the first quarter of 1997. Net loss from continuing operations of $.6
million ($.10 per share) in 1998 improved $.2 million over the prior year first
quarter loss of $.8 million ($.13 per share). Pretax loss from continuing
operations improved from a $1.2 million loss in 1997 to a $1.1 million loss in
1998, the result of $.6 million savings from reduced administrative expenses and
lower expenses in the development of the Microsharp screen technology offset by
$.2 million higher net interest expense and $.3 million loss from the Company's
investment in Cerion Technology.
In the first quarter of 1998, sales increased over the prior year period in
thermal paper and labels, label roll stock and remanufactured laser printer
cartridges. The sales gains were offset by lower toner sales which reflected the
loss of a substantial non-U.S. customer at the end of the first quarter of 1997
and reduced shipments in the current quarter to the Imaging Supplies Division's
dealer network. The reduced shipments for the quarter resulted from the
outsourcing of the division's order entry and logistics operations, which
lowered dealer's ongoing inventory requirements.
Research, selling, distribution and administrative expenses for the first
quarter of 1998 decreased 9.3 percent or $1.1 million versus the same period of
1997. Research expense decreased $.3 million due to the reduced spending for the
Microsharp screen technology and headcount reductions. Selling and distribution
expense decreased less than 1 percent and was primarily due to the impact of
lower sales in the Commercial Products Group. Administrative expenses decreased
$.7 million primarily due to the elimination of the NCPG group structure
subsequent to the first quarter of 1997 and lower professional fees.
<PAGE> 7
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 in Corporate and the Commercial
Products Group. Details of the charges related to continuing operations and the
activity recorded during the first quarter of 1998 follows.
<TABLE>
<CAPTION>
Balance Current Current Balance
(In thousands) Dec. 31, Period Period April 3,
1997 Provision Charges 1998
-------- --------- ------- --------
<S> <C> <C> <C> <C>
Provisions for severance related to workforce reductions $1,913 $ - $674 $1,239
Provisions for assets to be sold or discarded 750 - 174 576
Other 365 - 118 247
------ ----- ---- ------
Total $3,028 $ - $966 $2,062
====== ===== ==== ======
</TABLE>
All charges, excluding asset write-downs, are principally cash in nature and are
expected to be funded from operations.
The estimated annual effective income tax benefit of 42 percent for the first
quarter of 1998 is higher than the U.S. statutory rate principally due to the
unfavorable impact of state income taxes.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
Working capital increased $5.5 million from December 31, 1997, primarily due to
the $6.0 million increase in cash from the sale of the Northern Ireland
photofinishing operation. The Company expects that a portion of the proceeds
will be reinvested in the continuing businesses with the remainder distributed
to shareholders.
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. Under Illinois law, the
plaintiffs would ordinarily have thirty days in which to file a notice of
appeal of the Court's ruling.
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," "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, 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
patent litigation brought against the Company by Ricoh Company, Ltd. and the
Cerion securities litigation and other risks detailed in the Company's filings
with the Securities and Exchange Commission.
<PAGE> 8
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.01 Financial Data Schedule for the period ended April 3, 1998.
27.02 Restated Financial Data Schedule for the period ended March 28, 1997
27.03 Restated Financial Data Schedule for the period ended
December 31, 1996
27.04 Restated Financial Data Schedule for the period ended
December 31, 1995
(b) Reports on Form 8-K
On March 26, 1998, the Company filed a Form 8-K regarding the sale of its
Northern Ireland film processing operation.
On April 21, 1998, the Company filed a Form 8-K regarding the sale of its
photofinishing subsidiaries in the United States, United Kingdom and Canada
and its photofinishing operation in Northern Ireland.
<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: May 14, 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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<NET-INCOME> (791)
<EPS-PRIMARY> (.12)
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