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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 July 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 ______
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 5, 1994
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Common Stock, par value $1.00 6,346,310 shares (excluding,
23,850 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)
July 1, 1994 December 31,
(Unaudited) 1993
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ASSETS
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Cash and cash equivalents $ 8,916 $ 5,883
Accounts receivable 41,848 47,657
Inventories
Materials and supplies 11,593 11,793
Work in process 5,279 4,875
Finished goods 11,233 17,000
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28,105 33,668
Other current assets 23,049 22,573
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Total current assets 101,918 109,781
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Plant and equipment 127,221 164,742
Accumulated depreciation (58,803) (93,509)
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68,418 71,233
Other assets 43,271 38,051
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Total assets $213,607 $219,065
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LIABILITIES AND SHAREHOLDERS' EQUITY:
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Notes and loans payable $ 300 $ 2,900
Current maturities of long-term debt 3,501 2,500
Accounts payable 34,355 29,951
Accrued expenses 32,325 48,669
Income taxes payable 445 2,033
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Total current liabilities 70,926 86,053
Long-term debt 26,327 20,342
Other long-term liabilities 25,249 19,547
Common stock and additional capital 17,763 17,586
Retained earnings 79,355 82,166
Cumulative translation adjustment (5,228) (5,844)
Treasury stock, at cost (785) (785)
Commitments and contingencies
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Total liabilities and shareholders' equity $213,607 $219,065
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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 Six Months Ended
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(Restated) (Restated)
July 1, July 2, July 1, July 2,
1994 1993 1994 1993
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Net sales $122,702 $120,325 $235,525 $236,524
Cost of products sold 90,793 88,547 177,465 176,481
Research, selling, distribution and
administrative expenses 26,717 26,971 51,700 52,950
Restructuring and other unusual charges - - 2,600 -
Interest expense 549 679 1,027 1,349
Interest income (55) (76) (98) (166)
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Income from continuing operations
before income taxes 4,698 4,204 2,831 5,910
Income taxes 1,778 1,661 1,069 2,335
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Income from continuing operations 2,920 2,543 1,762 3,575
Income (loss) from discontinued operations - 1,319 (2,295) 2,926
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Net income (loss) 2,920 3,862 (533) 6,501
Retained earnings, beginning of period 77,575 107,383 82,166 105,880
Dividends (1,140) (1,136) (2,278) (2,272)
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Retained earnings, end of period $ 79,355 $110,109 $ 79,355 $110,109
========= ======== ======== ========
Earnings (loss) per common and common
equivalent share:
Income (loss) from continuing operations $ .46 $ .40 $ .28 $ .57
Income (loss) from discontinued operations - .21 (.36) .46
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Net income (loss) $ .46 $ .61 $ (.08) $ 1.03
========= ======== ======== ========
Dividends per common share $ .18 $ .18 $ .36 $ .36
========= ======== ======== ========
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)
Six Months Ended
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July 1 1994 July 2, 1993
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Cash flows from continuing operating activities:
Income from continuing operations $ 1,762 $ 3,575
Adjustments to reconcile income from continuing
operations to cash provided by continuing
operating activities:
Depreciation and amortization 7,412 6,947
Net change in working capital (7,880) 6,039
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Cash provided by continuing operating activities 1,294 16,561
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Cash flows from investing activities of continuing operations:
Investment in plant and equipment (7,273) (5,828)
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Cash used in investing activities (7,273) (5,828)
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Cash flows from financing activities of continuing operations:
Proceeds from borrowings 17,400 -
Repayment of borrowings (13,014) (10,713)
Dividends paid (2,278) (2,272)
Proceeds and tax benefits from shares
issued under stock option plans 177 69
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Cash provided by (used in) financing activities 2,285 (12,916)
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Proceeds from sale of discontinued operations 11,115 -
Cash applied to activities of discontinued operations (4,597) (1,591)
Effect of exchange rate changes on cash 209 (19)
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Increase (decrease) in cash and cash equivalents 3,033 (3,793)
Cash and cash equivalents at beginning of period 5,883 12,212
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Cash and cash equivalents at end of period $ 8,916 $ 8,419
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Interest paid $ 1,015 $ 1,239
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Income taxes paid $ 58 $ 2,511
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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 Six Months Ende
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July 1, July 2, July 1, July 2,
1994 1993 1994 1993
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Common shares outstanding 6,331,123 6,311,395 6,326,284 6,310,797
Common share equivalents 17,132 27,938 24,011 27,481
Stock Options
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At July 1, 1994, options for 567,715 shares of common stock were outstanding.
Stock options for an additional 150,705 shares may be awarded under the
Company's 1987 Stock Option Plan and stock options for an additional 224,000
shares may be awarded under the Company's 1993 Stock Incentive Plan.
Restructuring and Other Unusual Charges
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In 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. In addition, as discussed below, the
Company has sold its thin-film disk, oxide disk and head disk assembly
operations in the second quarter of 1994. Based on the progress-to-date, the
Company continues to expect to realize savings in personnel, facilities and
other costs (exclusive of the oxide, diskette and thin-film manufacturing
businesses) from its restructuring actions at an annualized rate of
approximately $8.0 million pretax by the end of 1994.
Segments
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As part of the Company's restructuring actions in the first quarter, the Office
Supplies and Coated Products segments were combined into a new segment, the
Commercial Products Group. These two segments were combined as they share
similar customers, technologies and industry risks. The remaining operation
from the Computer Products Group, Precision Technologies, will be reported
separately.
Discontinued Operations
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During the second quarter of 1994, the Company disposed of its Computer
Products businesses in two separate transactions for amounts not materially
different from estimates included in the restructuring charge recorded as of
the fourth quarter of 1993. As a result, the Company has classified these
businesses as discontinuing operations. On May 19, 1994, the Company sold
certain assets and liabilities of its thin-film disk operation. The Company
received net cash proceeds of $10.0 million and a $4.9 million subordinated
three-year note. In addition, the Company may receive additional cash proceeds
of up to $5.0 million contingent on future operating results of the thin-film
disk operation. On May 13, 1994, the Company sold certain assets of its oxide
disk and head disk assembly operation. The purchase price included $1.1
million of cash, plus future royalty payments based on sales.
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The results of operations for the discontinued thin-film disk, oxide disk and
head disk assembly operations have been reported separately in the condensed
consolidated statement of operations and are summarized as follows:
Six Months Ended
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(In thousands) July 1, 1994 July 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
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Income (loss) before taxes for the six months ended July 1, 1994 includes a
$3.1 million charge relating to the Company's early retirement program.
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
July 1, 1994, the results of operations for the three-month and six-month
periods ended July 1, 1994 and July 2, 1993, and cash flows for the six-month
periods ended July 1, 1994 and July 2, 1993.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
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CONDITION AND RESULTS OF OPERATIONS
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Net sales for the second quarter of 1994 were $122.7 million, a 2 percent
increase over the second quarter last year, as increased sales in the
Commercial Products Group were partially offset by lower sales in the
Photofinishing and Precision Technologies Groups. Net income from continuing
operations for the quarter was $2.9 million versus $2.5 million in the prior
year due to improvements in the Commercial Products and Photofinishing Groups
partially offset by lower volume in Precision Technologies. Net sales for the
first six months were essentially flat at $235.5 million verses $236.5 million
last year. Increases in Commercial Products were more than offset by decreases
in the other two groups. Income from continuing operations for the first six
months decreased to $1.8 million from $3.6 million for the same period last
year. The decrease was principally the result of a $2.6 million pretax charge
relating to the Company's early retirement program and a $.9 million pretax
charge relating to costs incurred in the first quarter related to a potential
acquisition of a non-U.S. Photofinishing business.
In the fourth quarter of 1993, the Company recorded restructuring and other
unusual charges of $48.5 million largely as a result of the Company's decision
to dispose of its Computer Products businesses. In the second quarter of 1994,
the Company disposed of these businesses for amounts not materially different
from estimates included in the restructuring charge recorded in 1993. At the
end of the second quarter of 1994, the Company has substantially completed its
restructuring activities except for the consolidation of certain facilities.
Management is currently reviewing several options and anticipates completing
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these actions by year end. The Company expects to realize savings in
personnel, facilities and other costs (exclusive of the oxide, diskette and
thin-film manufacturing businesses) from its restructuring actions at an
annualized rate of approximately $8.0 million pretax by the end of 1994.
The Commercial Products Group's second quarter sales increased 6 percent to
$82.1 million, due to significantly higher duct tape, label and copier toner
volumes and the inclusion of sales from the office supplies catalog (Nashua
Express), which was acquired in July 1993. The increases were partially offset
by lower carbonless paper and diskette sales. For the first six months of
1994, sales increased 2 percent to $160.3 million, primarily attributable to
higher duct tape sales volumes and the inclusion of Nashua Express, offset by
significantly lower diskette and copier paper volumes. The Group had operating
income of $2.6 million for the second quarter, an increase of 47 percent from
the second quarter last year, primarily as a result of higher tape and label
volumes, offset by weak Nashua Express sales volume, higher development costs
associated with the remanufactured cartridges business and increased selling
expenses. For the six months, operating income declined to $.2 million from
$2.6 million for the same period a year ago, as the impact of improved sales
volumes was more than offset by the aforementioned $2.6 million charge relating
to early retirements, weak Nashua Express sales and significantly higher
product development costs for the remanufactured laser cartridge business.
Sales for the Photofinishing Group for the second quarter and first six months
of 1994 declined approximately 4 percent. Lower U.S. and Canadian order
volumes and the unfavorable effect of a weaker British pound than in the year
ago period offset generally favorable pricing in the U.S. and U.K. Operating
income increased by 6.4 percent and 3.4 percent for second quarter and first
six months of 1994, respectively, primarily due to improved manufacturing
productivity in the U.K., favorable promotional pricing and reduced marketing
expenses.
Lower sales to its principal customer accounted for Precision Technologies'
sales decline of 21 percent and 13 percent, respectively, for the second
quarter and first six months of 1994. The Group recorded small operating
losses in the second quarter and year-to-date periods of 1994, versus operating
profits last year, due to reduced sales volume and a sales mix of lower margin
products.
Administrative expense for the second quarter and for the first six months was
substantially the same as the comparable periods last year as cost savings
related to the restructuring were offset by the inclusion of Nashua Express
acquired in the third quarter of 1993. Selling and distribution expense as a
percentage of sales was relatively constant for the second quarter and the
first six months compared to the same period one year ago. Research and
development expense increased 36% in the second quarter from the second quarter
in 1993 and 37% for the first six months as compared to the first six months in
1993, primarily due to increased spending on new product development.
The effective income tax rate of 38 percent for the first six months of 1994 is
higher than the U.S. statutory rate of 35 percent, primarily due to the
unfavorable impact of non-deductible goodwill amortization and state income
taxes.
Working capital increased by $7.3 million to $31.0 million from December 31,
1993. The Company received proceeds of $11.1 million in the second quarter
from the sale of the discontinued Computer Products Group which was used to
fund operations and restructuring actions, primarily severance payments related
to the Company's early retirement program. In July, 1994, the Company replaced
its revolving credit facility with a new facility increasing the credit
available to the Company under commitment to $40 million. The terms of the
facility are substantially similar to those in the Company's previous facility.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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On April 22, 1994, 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:
For Withheld
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Joseph A. Baute 5,292,546 276,118
Richard E. Carter 5,292,581 276,083
Charles E. Clough 5,276,280 292,384
Thomas W. Eagar 5,294,691 273,973
Charles S. Hoppin 5,294,921 273,743
John M. Kucharski 5,294,921 273,743
William E. Mitchell 5,097,461 471,203
Guy W. Nichols 5,292,604 276,060
James F. Orr III 5,294,721 273,943
James Brian Quinn 5,293,446 275,218
ITEM 5. OTHER INFORMATION
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As of July 25, 1994 Nashua Corporation announced that William E. Mitchell,
formerly Nashua's president and chief operating officer, was named chief
executive officer. Mitchell succeeds Charles E. Clough who functioned as the
Company's chief executive officer for the past 11 years. Clough remains the
Company's non-executive chairman of the board.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits
4.01 Note Agreement dated as of July 29, 1994
(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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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: August 12, 1994 By: /s/ W. Luke
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W. Luke
Vice President-Finance
(principal financial and duly
authorized officer)
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