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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 April 1, 1994
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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
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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
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (603) 880-2323
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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
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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 May 3, 1994
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Common Stock, par value $1.00 6,331,330 shares (excluding 23,830 shares held in
treasury)
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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NASHUA CORPORATION AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEETS
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(In thousands)
April 1, 1994 December 31,
ASSETS: (Unaudited) 1993
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Cash and cash equivalents $ 6,585 $ 5,883
Accounts receivable 37,079 47,657
Inventories
Materials and supplies 10,867 11,793
Work in process 3,007 4,875
Finished goods 12,778 17,000
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26,652 33,668
Other current assets 16,739 22,573
Net current assets of discontinued operations 18,661 -
-------- --------
Total current assets 105,716 109,781
-------- --------
Plant and equipment 124,516 164,742
Accumulated depreciation (58,829) (93,509)
-------- --------
65,687 71,233
Other assets 30,739 38,051
Net non-current assets of discontinued operations 13,644 -
-------- --------
Total assets $215,786 $219,065
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LIABILITIES AND SHAREHOLDERS' EQUITY:
Notes and loans payable $ 6,350 $ 2,900
Current maturities of long-term debt 2,500 2,500
Accounts payable 28,159 29,951
Accrued expenses 39,348 48,669
Income taxes payable 273 2,033
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Total current liabilities 76,630 86,053
Long-term debt 25,334 20,342
Other long-term liabilities 25,240 19,547
Common stock and additional capital 17,764 17,586
Retained earnings 77,575 82,166
Cumulative translation adjustment (5,972) (5,844)
Treasury stock, at cost (785) (785)
Commitments and contingencies -------- --------
Total liabilities and shareholders' equity $215,786 $219,065
======== ========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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NASHUA CORPORATION AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
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(Unaudited)
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(In thousands, except per share data)
Three Months Ended
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(Restated)
April 1, April 2,
1994 1993
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Net sales $112,823 $116,199
Cost of products sold 86,672 87,934
Research, selling, distribution and
administrative expenses 24,983 25,979
Restructuring and other unusual charges 2,600 -
Interest expense 478 670
Interest income (43) (90)
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Income (loss) from continuing operations before income taxes (1,867) 1,706
Income taxes (benefit) (709) 674
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Income (loss) from continuing operations (1,158) 1,032
Income (loss) from discontinued operations (2,295) 1,607
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Net income (loss) (3,453) 2,639
Retained earnings, beginning of period 82,166 105,880
Dividends (1,138) (1,136)
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Retained earnings, end of period $ 77,575 $107,383
========= ========
Earnings(loss) per common and common equivalent share:
Income (loss) from continuing operations $ (.18) $ .17
Income (loss) from discontinued operations (.36) .25
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Net income (loss) $ (.54) $ .42
========= ========
Dividends per common share $ .18 $ .18
========= ========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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NASHUA CORPORATION AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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(Unaudited)
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(In thousands)
Three Months Ended
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April 1, 1994 April 2, 1993
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Cash flows from operating activities:
Net income (loss) $ (3,453) $ 2,639
Adjustments to reconcile net income (loss) to
cash provided by (used in) operating activities:
Depreciation and amortization 3,963 5,884
Net change in working capital (671) (1,161)
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Cash provided by (used in) operating activities (161) 7,362
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Cash flows from investing activities:
Investment in plant and equipment (4,810) (5,135)
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Cash used in investing activities (4,810) (5,135)
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Cash flows from financing activities:
Proceeds from borrowings 9,900 8,200
Repayment of borrowings (1,458) (14,087)
Dividends paid (1,138) (1,136)
Proceeds and tax benefits from shares
issued under stock option plans 178 42
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Cash provided by (used in) financing activities 7,482 (6,981)
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Cash applied to activities of discontinued operations (1,792) (113)
Effect of exchange rate changes on cash (17) 12
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Increase (decrease) in cash and cash equivalents 702 (4,855)
Cash and cash equivalents at beginning of period 5,883 12,212
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Cash and cash equivalents at end of period $ 6,585 $ 7,357
========= ========
Interest paid $ 945 $ 1,226
========= ========
Income taxes paid $ 25 $ 614
========= ========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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Earnings Per Common and Common Equivalent Share
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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.
Three Months Ended
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April 1, April 2,
1994 1993
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Common shares outstanding 6,322,513 6,310,152
Common share equivalents 30,414 25,978
Stock Options
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At April 1, 1994 options for 484,885 shares of common stock were
outstanding. Stock options for an additional 226,135 shares may be
awarded under the Company's 1987 Stock Option Plan and stock options for
an additional 232,000 shares may be awarded under the Company's 1993 Stock
Incentive Plan.
Restructuring and Other Unusual Charges
---------------------------------------
As part of the first quarter, 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. The total charge is
greater than the $3.5 million previously indicated due to the
higher-than-expected level of participation. In addition, as discussed
below, the Company has entered into agreements to sell the thin-film disk,
oxide disk and head disk assembly operations. Based on the
progress-to-date, the Company continues to expect to realize annualized
savings in personnel, facilities and other costs (exclusive of the oxide,
diskette and thin-film manufacturing businesses) of more than $8.0 million
pretax by the end of 1994.
Segments
--------
As part of the Company's restructuring actions, 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, technologies and industry risks. The remaining operation from
the Computer Products Group, Precision Technologies, will be reported
separately.
Discontinued Operations
-----------------------
In the first quarter, the Company entered into separate agreements to sell
its thin-film disk operation and certain assets of its oxide disk and head
disk assembly operation. As a result, the Company is classifying these
businesses as discontinued operations. In the fourth quarter of 1993, the
Company recorded restructuring and other unusual charges which included
the write-down of the assets of these operations to their net realizable
values. As such, no loss on disposal of the discontinued operations was
recorded in the first quarter of 1994.
The agreement to sell the net assets of the thin-film disk operation to an
investor group includes the retention of a minimum of $10 million of
accounts receivable upon closing, an additional contingent
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cash payment of up to $5 million based on 1994 operating results and a $5
million subordinated three year note. The oxide disk and head disk
assembly operation sale of inventory and fixed assets approximates net
book value. Both of these transactions are expected to close during the
second quarter.
The results of operations for the thin-film disk, oxide disk and head disk
assembly operations have been reported separately as discontinued
operations in the condensed consolidated statement of operations and are
summarized as follows:
Three Months Ended
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(In thousands) April 1, 1994 April 2, 1993
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Net sales $19,243 $ 27,832
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Income (loss) before income taxes $(3,279) $ 2,657
Income taxes (benefit) (984) 1,050
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Income (loss) from discontinued operations $(2,295) $ 1,607
======= ========
Income (loss) before taxes for the three months ended April 1, 1994
includes a $3.1 million charge relating to the Company's early retirement
program.
The net assets of the discontinued operations in the April 1, 1994
condensed consolidated balance sheet include:
(In thousands)
Accounts receivable $13,996
Inventories 5,492
Deferred tax assets 5,283
Accounts payable (3,020)
Accrued expenses (3,925)
Other 835
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Net current assets of discontinued operations $18,661
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Plant and equipment, net $ 6,605
Deferred tax assets 6,783
Other 256
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Net non-current assets of discontinued operations $13,644
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Other
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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 contain all adjustments (consisting
solely of normal recurring adjustments) necessary to present fairly the
financial position as of April 1, 1994, the results of operations for the
three-month periods ended April 1, 1994 and April 2, 1993, and cash flows
for the three-month periods ended April 1, 1994 and April 2, 1993.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
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CONDITION AND RESULTS OF OPERATIONS
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Net sales of $112.8 million for the first quarter of 1994 decreased 2.9
percent due to lower revenues in all groups. In the first quarter of
1994, a loss from continuing operations of $1.2 million was incurred
compared with income from continuing operations of $1.0 million in the
first quarter of 1993. The loss was in part due to a $2.6 million pretax
charge relating to the Company's early retirement program and a $.9
million pretax charge relating to costs incurred on a potential
acquisition of a non-U.S. photofinishing business.
The Commercial Products Group's first quarter sales decreased 2.2 percent
to $78.1 million compared to the first quarter of 1993, primarily
attributable to lower diskette and copier paper volume. The lower volumes
were partially offset by higher sales of duct tape and facsimile paper and
the inclusion of sales by Nashua Express which was acquired in July 1993.
The group had an operating loss of $2.4 million in 1994 compared with
operating income of $.8 million for the same period last year. The loss
was a result of weak Nashua Express sales, high product development and
process improvement-related costs in the remanufactured laser cartridge
business unit and the aforementioned $2.6 million charge relating to the
early retirement program.
Net sales decreased 4.5 percent in the Photofinishing Group to $31.4
million compared to the first quarter last year. Higher order volume in
the U.K. was more than offset by promotional pricing and lower volume in
the U.S. Operating income for the first quarter of 1994 remained
essentially unchanged at $2.6 million from the first quarter last year
as higher volume and improved productivity in the U.K. offset the price
and volume declines in the U.S.
Precision Technologies' first quarter sales declined 3.3 percent to $3.3
million compared to the same period in 1993 due to reduced sales to
Nashua's thin-film disk operation, reported as part of discontinued
operations. A small operating loss was incurred compared to a small
operating profit in the first quarter last year due to lower prices on
disk substrates.
Administrative expense for the first quarter remained flat compared to the
first quarter in 1993. Selling and distribution expense as a percentage
of sales decreased due to lower copier paper, diskette and toner sales,
which, in general, have a higher associated selling and distribution
expense. Research and development expense increased 38.6 percent compared
to the first quarter last year due to increased spending on remanufactured
laser cartridge development programs.
The estimated annual effective income tax rate of 38 percent for the first
quarter of 1994 is higher than the U.S. statutory rate of 35 percent
primarily due to the unfavorable impact of non-deductible goodwill.
Working capital increased by $5.4 million to $29.1 million from December
31, 1993 as liabilities were funded, in part, by a $5 million increase in
long-term debt. At April 1, 1994 borrowings under the $27 million
revolving credit facility, which are subject to covenant restrictions,
were $10 million.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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As reported in the Company's Form 8-K dated January 25, 1994, Nashua has
received a final ruling with respect to the arbitration of claims
associated with the Company's sale of its international office systems
business to Gestetner PLC in 1990. As a result of this ruling, Nashua has
paid Gestetner $1.8 million including interest.
In January 1994, Nashua settled allegations in Harry E. Aine's Complaint
with the United States International Trade Commission that Nashua had
infringed U.S. patent RE 32,464 for an immaterial amount.
In April 1994, Ricoh Company, Ltd. and Ricoh Corporation ("Ricoh") filed a
Complaint with the United States District Court, District of New
Hampshire, alleging Nashua's infringement of U.S. patents 4,611,730 and
4,878,603 relating to certain toner cartridges for Ricoh copiers. The
Complaint seeks damages and injunctive relief. The products involved
constitute an insignificant amount of Nashua's sales. The Company
believes it has substantial defenses and intends to defend the action
vigorously.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits
None.
(b) Reports on Form 8-K
On January 25, 1994, the Company filed a report on Form 8-K
including the Press Release issued regarding the resolution of the
Office Systems business sale arbitration.
On February 2, 1994, the Company filed a report on Form 8-K
including the Press Release issued regarding its fourth quarter and
year-end results, including the Company's restructuring plans.
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SIGNATURES
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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
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(Registrant)
Date: May 6, 1994 By: /s/ W. Luke
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W. Luke
Vice President-Finance
(principal financial and duly
authorized officer)
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