UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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NASHUA CORPORATION
- -------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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[Logo of Nashua Corporation]
NASHUA'S SUCCESSFUL TURNAROUND
April, 2000
FORWARD LOOKING STATEMENT
This shareholder presentation contains forward-looking statements as that
term is defined in the private Securities Litigation Reform Act of 1995.
When used in this presentation, the words "accelerates," "will be," "to
be," "estimated," "expected," "anticipated," "budgeted," "projections,"
"projected," "projected impact on earnings per share," and similar
expressions are intended to identify such forward-looking statements. Such
forward-looking statements are subject to risks and uncertainties, which
could cause actual results to differ materially from those anticipated.
Such risks and uncertainties include, but are not limited to, failure to
complete the Rittenhouse acquisition or to achieve its anticipated
synergies, the Company's future capital needs and resources, fluctuations
in customer demand, intensity of competition from other vendors, timing and
acceptance of new product introductions, delays or difficulties in programs
designed to increase sales and profitability, general economic and industry
conditions, the settlement of various tax issues, and other risks set forth
in the Company's filings with the Securities and Exchange Commission.
Estimates and projections contained herein, including forward-looking
forecasts of potential future revenues, expenses and synergies were
prepared in the ordinary course of Nashua's business and in connection with
its acquisition of Rittenhouse and, as such, are not necessarily in
accordance with generally accepted accounting principles. They reflect
judgments made as of the date of such estimates. Actual results will
inevitably vary. Nashua has presented these estimates in this presentation
solely to inform stockholders of the Company's analyses in connection with
Nashua's April 25, 2000 annual stockholders meeting (the "Annual Meeting").
Investors should consider the cautionary statements contained herein if
considering these forward-looking statements prior to the Annual Meeting.
Nashua undertakes no obligation whatsoever to update publicly any of these
estimates after April 25, 2000 and has no intention of doing so.
2
THE NASHUA TURNAROUND: 1996 - 2000
Focused Company on core specialty coated products, labels and imaging
supplies businesses; EBITDA in these businesses improved by $9.5 million,
from $0.5 million (1996) to $10 million (1999)
Divested 4 non-core businesses, generating $129 million in cash
* Eliminated $68 million in debt
* Reinvested $23 million in core businesses
* Repurchased $14 million in common stock
Currently have approximately $30 million in cash ($17 million set aside for
adverse patent ruling)
Rittenhouse acquisition will accelerate Nashua's growth
* Nearly doubles revenues
* Significantly accretive to EPS
Board carefully considered all options for increasing shareholder returns;
will act on Rights Plan vote
3
KEY ACTIONS TAKEN BY COMPANY
* Developed and implemented strategic plans for each core business unit
* Divested non-strategic businesses/product lines
Year Divestiture
- ---- -----------
1996 Tape Products Division
European mail order photofinishing business
Cerion Technologies
1997 Marginally profitable commodity products (drums, liquid toners,
diskettes)
1998 Remaining mail order photofinishing businesses
1999 Thermal fax manufacturing
2000 Remanufactured laser printer cartridge operations
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FROM FINANCIAL CRISIS (1995) TO STABILITY (1999)
Improved Nashua's total EBITDA by $28.7 million, from a negative $20.1
million (1995) to $8.6 million (1999)
Increased gross operating margin from 14.3% (1995) to 24% (1999)
Reduced SG&A expenses by more than $5 million since 1995
Reduced debt from $69 million (1995) to $1 million (1999)
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REFOCUSED AND IMPROVED MANUFACTURING CAPABILITIES
* Shifted capabilities from commodity products to specialized niche markets
* Invested in equipment, facilities and technical processes to meet more
stringent market requirements
Initiative (1996-1999) Capital Expenditure
- ---------------------- -------------------
Label $11 million
Toner/Developer $ 9 million
Specialty Coated Products $ 4 million
-------------------
$23 million
* Decentralized R&D to focus on development of new products
Between 1995-1999, new products rose from 3% to 21% of total sales
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NASHUA BUSINESS SUMMARY
Specialty Coated Toner and Developer
Products Division (SCPD) Label Division Division
------------------------ -------------- -------------------
Description: Specialty coated Pressure-sensitive Toners and developers
products for printing, labels for a wide primarily for
labeling and ticketing variety of product Ricoh-compatible and
applications identification Xerox-compatible copiers
applications and printers
Products: Thermal papers, inkjet Supermarket and Toners, fusers and
papers, dry gum paper, industrial thermal developers
heat seal products, cut labels, EDP, information
sheet paper labels and roll stock
1999 Sales: $66 million(1) $79 million $31 million
- ---------------
(1) 1999 sales include inter-company sales
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RITTENHOUSE ACQUISITION
CHRONOLOGY OF TRANSACTION
May, 1999 Nashua CEO calls Rittenhouse CEO re: joint
possibilities following initial discussion
between paper divisions
June - October 1999 Both companies studied transaction focusing
on complementary nature of businesses and
compatibility. Visits to primary
manufacturing plants.
October 1999 Management and Lazard Freres present to
Nashua Board assessment of several
acquisition opportunities. Board
determines to pursue Rittenhouse.
November 1999 - January 2000 Active negotiations between parties with
significant discussion about Rittenhouse
financial performance, potential synergies,
assets to be included in sale.
January - March 2000 Due diligence with financial, legal,
accounting and environmental advisors
March 22, 2000 Acquisition approved by Nashua Board and
Purchase Agreement signed. (Lazard Freres
provided fairness opinion to Nashua Board
of Directors.)
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STRATEGIC RATIONALE FOR RITTENHOUSE ACQUISITION
Strategic acquisition which strengthens Nashua's core businesses
* Complementary products in specialty paper and pressure-sensitive
labels
* Creates #1 integrated player in high-growth specialized direct
thermal market
Makes Rittenhouse an integrated manufacturer and fills up Nashua's thermal
manufacturing capacity
Leverages core competencies of both companies and expands product offerings
to our respective customers
* Will also optimize our manufacturing equipment utilization and
increase productivity
Offers strong opportunities for operational and corporate synergies,
generating significant earnings expansion
* Accretive in 2000 by approximately $0.37 per share on an annualized
basis
* Accretive in 2001 by approximately $0.77 per share
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RITTENHOUSE TRANSACTION OVERVIEW
Price: $57 million in cash for common stock(1)
Contingent
Payout: Payout based on attaining targeted EBITDA for 2000
of $10.3 million excluding Nashua's synergies; $4 million
if actual EBITDA is 80% of target EBITDA increasing
linearly to a maximum of $6 million if actual EBITDA is
120% of target EBITDA
Management: Jerry Garbacz continues as Chairman and CEO of Nashua
Rittenhouse's President and CEO Andy Albert becomes
President and COO of Nashua
Financing: Fleet Bank-New Hampshire (Nashua's bank)
LaSalle Bank (Rittenhouse's bank)
- $35 million revolving credit line
- $20 million term loan due June, 2005
- ----------------
(1) Subject to post-closing adjustments
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RITTENHOUSE PAPER COMPANY
Private company founded in 1915 with an outstanding reputation
* Owned by Andy Albert and Simon Blattner since 1983
* Grew business from $30 million in 1983 to $140 million in 1999
Key Locations:
* Park Ridge, Illinois (corporate offices)
* DeKalb, Illinois
* Jefferson City, Tennessee
* Los Angeles, California
Employees: 580
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RITTENHOUSE BUSINESS SUMMARY
Paper Labels Imaging
----- ------ -------
Description: Manufactures and markets Manufactures a wide Manufactures and markets
a wide range of specialty assortment of thermal ribbons for use in
thermal, carbonless and pressure-sensitive imaging devices
bond papers labels and venue tickets
for both commercial and
consumer use
Products: Papers for point of sale Transportation labels; Ribbons for point of
equipment (blank and bar code labels; sale equipment;
custom printed); supermarket labels; financial equipment
financial equipment retail shelf tags, (ATMs, teller machines,
(ATMs, teller machines, entertainment tickets; encoding machines);
proofing machines); stickers office equipment
office equipment (fax (computer printers, bar
machines, calculators); code and facsimile TTR)
hospitality systems
(guest check, Verifone);
engineering/architectural
printers (wide format)
1999 Sales: $95.2 million $35.2 million $8.7 million
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RITTENHOUSE FINANCIALS
($ Millions)
Budget
1998 1999 2000
---- ---- ------
Total Net Sales $136.6 $139.1 $156.9
Gross Margin 22.8% 24.6% 25.2%
Normalized EBITDA(1) $6.7 $7.6 $10.3
- -------------------
(1) Normalized EBITDA adjusts for one-time events and restructures
Rittenhouse as a single entity and excludes certain partnership
transactions
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U.S. PRESSURE SENSITIVE LABEL MARKET
1999 -- $3.47 billion
$ Millions
% Total Market
[EDGAR REPRESENTATION OF GRAPHIC MATERIAL]
+ Nashua's Current Target Market
* Rittenhouse's Current Target Market
Information from various industry sources
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BENEFITS FROM COMBINATION
Customers
- ---------
o Expanded product line for customers
o Enhanced cross-selling opportunities
o Nashua provides the research and development capabilities to provide
Rittenhouse customers with new products for niche applications
New Markets for Nashua
- ----------------------
o Retail markets
o Point of sale markets
o Financial markets (ATMs, etc.)
o Entertainment markets
o Engineering and architectural markets
Management
- ----------
o Rittenhouse adds industry experience and management depth to Nashua
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BENEFITS FROM COMBINATION
Manufacturing
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o Vertical integration
o Increased use of thermal coating capacity for ticket and label products
o Increased use of lamination capacity in Omaha, NE
o Complementary label equipment increases manufacturing flexibility and
expands product scope
o Nashua has presses with 18"-23" web width
o Rittenhouse primarily has presses with 7"-16" web width
o Rittenhouse is installing a 26" 7-color offset/2-color flexographic
press
o Nashua - long run capabilities
o Rittenhouse - short run capabilities
o More efficient use of offcut materials
o Geographic dispersion of facilities
o Increases national coverage for labels
o Creates more effective logistics
o Increased purchasing power
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PRODUCT AND SUBSTITUTION SYNERGIES
* Nashua will provide Rittenhouse with various coated and laminated paper
products
* Sales by Nashua's SCP and Label Divisions of "drop in" products to
Rittenhouse are estimated to be approximately $10 million on an
annualized basis for FY 2000
($ Millions) FY2000 FY2001
- ------------ ------ ------
Sales
SCPD $4.8 $6.1
Label $5.2 $6.1
------ ------
Total Sales $10.0 $12.2
Gross Margin Increase From Synergies $3.4 $4.0
* The probability of achieving these inter-company sales synergies is
high since comparable Nashua products are currently purchased by
Rittenhouse
* These opportunities represent a direct replacement of product that
require little engineering work in order to qualify the product
The product and substitution synergies were prepared by the respective
managements of the two companies in connection with their respective
evaluations of the transactions.
Gross margin increase from synergies is based on Rittenhouse's purchase of
these products at 1999 purchase prices, Nashua's 1999 standard costs and
estimated fixed cost absorption.
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CORPORATE OVERHEAD SYNERGIES
o Corporate overhead reduction was estimated by eliminating redundant
non-manufacturing positions between Nashua and Rittenhouse
o No cost savings have been included from eliminating duplicative
auditors, banks, lawyers, consultants and other third-party service
providers
o Expected cost savings in 2000 are assumed to be offset by timing,
severance and other related transition costs. Corporate overhead
reduction is projected to take full effect in FY2001
o Expected annual cost savings of approximately $2.4 million have been
projected
19
PRO FORMA INCOME STATEMENT
(Excludes Nashua's remanufactured laser cartridge business)
$ in millions
Combined (Annualized)
Projections 12/31/99(1) 2000 Projections(2) 2001
Net Sales $300.0 100.9% $314.5 100.0% $327.8 100.0%
Cost of Sales 226.0 75.3% 233.5 74.2% 241.4 73.6%
Gross Profit 74.0 24.7% 81.0(3) 25.8% 86.4(3) 26.4%
SG&A 65.7 21.9% 66.4 21.1% 64.9(4) 19.8%
Goodwill Amortization 0.0 0.0% 1.5 0.5% 1.7 0.5%
EBIT 8.3 2.8% 13.1 4.2% 19.8 6.0%
Net Interest Expense 5.1 1.6% 3.8 1.2%
EBT NM(5) 8.0 2.5% 16.0 4.9%
Taxes 3.2 1.0% 6.4 2.0%
Net Income $4.8 1.5% $9.6 2.9%
EPS (assuming 5.6mm shares) $0.86 $1.71
EBITDA $16.9 $23.7 $31.1
(1) Combined before synergies and impact of transaction
(2) Excludes the impact of pre-tax gains from the pension annuitization
($16 million - $18 million) and pre-tax loss from the closure of the
remanufactured laser cartridge business ($1.5 million - $2.5 million)
(3) Includes operational synergies of $3.4 million in 2000 annualized and
$4.0 million in 2001 (see page 18)
(4) Includes overhead synergies of $2.4 million in fiscal year 2001
(5) NM = Not Meaningful
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COMBINED PRO FORMA AND PROJECTED BALANCE SHEETS
$ in millions
12/31/99 Projected Projected
Pro forma 2000(1) 2001
--------- --------- ---------
Current assets $97.3 $ 85.7 $ 88.8
Net PP&E 53.6 57.3 56.9
Goodwill (purchase) 24.1 22.9 25.8
Total assets 188.1 177.6 181.8
Total current liabilities 56.3 39.5 40.8
Long term debt (exist) 1.0 0 0
Long term debt (new) 43.5 46.5 39.7
Other long term liabilities 20.4 20.3 20.3
Total Liabilities 121.2 106.4 101.0
Total Equity 66.8 71.3 80.9
- -----------------
(1) Excludes the impact of pre-tax gains from the pension annuitization
($16 million - $18 million) and pre-tax loss from the closure of the
remanufactured laser cartridge business ($1.5 million - $2.5 million)
21
PROJECTED IMPACT ON EARNINGS PER SHARE
(Excludes Nashua's remanufactured laser cartridge business)
Nashua Stand Alone Proforma Annualized Accretion
------------------ ------------------- ---------
2000 (P) (1) $0.49 $0.86 $0.37
2001 (P) $0.94 $1.71 $0.77
- ----------------
(1) Excludes the impact of pre-tax gains from the pension annuitization
($16 million - $18 million) and pre-tax loss from the closure of the
remanufactured laser cartridge business ($1.5 million - $2.5 million)
22
ACQUISITION PURCHASE PRICE EDITDA MULTIPLES
$ in millions
Rittenhouse EDITDA Synergies Total Purchase Price(3)
- ------------------ --------- ----- -----------------
@$57 @$62
1999 - $7.6 $3.4(1) $11.0 5.2x N/A
2000P - $10.3 $3.4(1) $13.7 N/A 4.5x
2000P - $10.3 $5.8(2) $16.1 N/A 3.9x
- -------------
(1) Includes only operating synergies for full year
(2) Includes operating and overhead synergies for full year
(3) Excludes closing adjustments
23
ESTIMATED IMPACT ON PROJECTED 2000 EPS OF
SHARE BUYBACK ALTERNATIVE WITHOUT ACQUISITION
DUTCH AUCTION ALTERNATIVE -- 1 million shares
Purchase price per share $0 $10 $12 $14
- ------------------------ ------ ------- ------- -------
Cash expended (thousands) $0 $10,000 $12,000 $14,000
Number of Shares(1) (thousands) 5,592 4,592 4,592 4,592
Budgeted net income (before pension
and unusual charges) (thousands) $2,740 $2,440 $2,380 $2,320
EPS $0.49 $0.53 $0.52 $0.51
- -------------
(1) Excludes restricted and treasury stock
24
NASHUA: THE WAY FORWARD
Nashua will be the #1 integrated manufacturer in high-growth specialty
thermal paper and pressure sensitive label market segments
We will build on our strong platform to capture additional opportunities
We will deliver greater shareholder value through consistent EPS growth
We will be a more valuable and attractive company
25
SUPPLEMENT TO NASHUA CORPORATION'S
PROXY STATEMENT DATED MARCH 20, 2000
ADDITIONAL PARTICIPANT
The following individual has become a participant in the solicitation of
proxies on behalf of the Board of Directors of Nashua Corporation ("Nashua"
or the "Company"):
Andrew Albert
President and Chief Executive Officer
Rittenhouse Paper Company
250 South Northwest Highway
Park Ridge, IL 60068
On March 22, 2000, Nashua announced that it had agreed to acquire all of
the stock of Rittenhouse Paper Company ("Rittenhouse"), a privately-held
company which manufactures and markets a wide range of specialty paper,
pressure-sensitive labels and imaging supplies. The purchase price is $57
million in cash subject to closing adjustments plus up to $6 million of
contingent consideration based on certain EBITDA targets for the year 2000.
Mr. Albert presently owns 50% of the outstanding shares of Rittenhouse. If
the transaction is completed, Mr. Albert will become President and Chief
Operating Officer of Nashua pursuant to an employment agreement with
Nashua. The employment agreement provides, in pertinent part, for a five
year employment period, base annual salary of $350,000 per year, plus bonus
up to 50% of base salary, and a grant of restricted stock of 100,000
shares, vesting over a period of 3 years or earlier upon death, disability
or a change of control of the Company. Mr. Albert is also entitled to
severance payments of 1.5 years annual compensation upon termination
without cause or 3 years annual compensation upon termination following a
change of control. Nashua has agreed to elect Mr. Albert to the Company's
Board of Directors at the first Board of Directors meeting following the
annual meeting of stockholders to be held on April 25, 2000. Also, since
January 1, 1999, Nashua has supplied Rittenhouse with raw materials during
the period January 1-December 31, 1999, in an amount, as recorded by
Nashua, totaling $19,000, and since January 1, 2000, to date in an amount
totaling $200,000.
Mr. Albert does not own any shares of Nashua common stock, beneficially or
otherwise, and he has not purchased or sold any Nashua common stock since
March 20, 1998.
26