SOURCE: Nashua

February 15, 2007 16:05 ET

Nashua Reports Fourth Quarter and 2006 Year End Results

NASHUA, NH -- (MARKET WIRE) -- February 15, 2007 -- Nashua Corporation (NASDAQ: NSHA), a manufacturer and marketer of labels, thermal and specialty papers, and imaging products, today announced financial results for the fourth quarter and year ended December 31, 2006.

Net sales for the fourth quarter of 2006 were $69.3 million, compared to $69.1 million for the fourth quarter of 2005. Gross margin for the fourth quarter of 2006 was $10.7 million, or 15.4%, compared to $10.9 million, or 15.8%, for the fourth quarter of 2005. Income from continuing operations before taxes for the fourth quarter of 2006 was $8.5 million compared to $0.2 million for the fourth quarter of 2005. Nashua reported income from continuing operations for the fourth quarter of 2006 of $4.9 million, or $0.79 per share, compared to income from continuing operations of $0.3 million, or $0.05 per share, for the fourth quarter of 2005. Income from discontinued operations for the fourth quarter of 2006 was $0.4 million as compared to a loss of $0.3 million in the fourth quarter of 2005. Net income was $5.3 million, or $0.86 per share, for the fourth quarter of 2006 compared to a loss of $31,000, or $0.0 per share, in the fourth quarter of 2005. Earnings before interest, taxes, depreciation and amortization, also known as EBITDA, from continuing operations, which included the gain from the sale of real estate in Merrimack, New Hampshire was $10.7 million for the fourth quarter of 2006 compared to $2.3 million for the fourth quarter of 2005.

The fourth quarter results included a gain of $9.0 million related to the sale of the Merrimack real estate, $0.2 million of income related to the curtailment of the postretirement benefits for certain hourly employees, and an expense related to an impairment of intangible assets of $0.6 million.

Net sales for the year ended December 31, 2006 were $269.0 million, compared to $272.6 million for the year ended December 31, 2005. Gross margin for the year ended December 31, 2006 was $40.7 million, or 15.1%, compared to $44.6 million, or 16.4%, for the year ended December 31, 2005. Income from continuing operations for the year ended December 31, 2006 was $2.1 million, or $0.34 per share, compared to net income from continuing operations of $1.0 million, or $0.17 per share, for the year ended December 31, 2005. Income from discontinued operations for the year ended December 31, 2006 was $1.5 million, or $0.24 per share, compared to a net loss of $0.4 million, or $0.07 per share for the year ended December 31, 2005. Net income for the year ended December 31, 2006 was $3.6 million, or $0.58 per share, compared to $0.6 million, or $0.10 per share, for the year ended December 31, 2005. EBITDA from continuing operations was $12.1 million for the year ended December 31, 2006, compared to $9.6 million for the year ended December 31, of 2005.

The proceeds from the sale of real estate in Nashua and Merrimack, New Hampshire and the liquidation of the assets of the toner business were utilized to reduce Nashua's bank debt from approximately $29 million at the end of 2005 to approximately $5 million at the end of 2006. In November 2006, the Company implemented a stock repurchase program demonstrating its commitment to enhancing shareholder value.

Business Segment Highlights

Label Products:

Nashua's Label Products segment, which prints and converts product for grocery, food service, retail, transportation, entertainment and general industrial markets, reported net sales for the fourth quarter of 2006 of $28.6 million, gross margin of $4.5 million, or 15.6%, and pre-tax operating income of $0.8 million. Net sales for the fourth quarter of 2005 were $29.3 million, gross margin was $4.5 million, or 15.3%, and pre-tax operating income was $1.7 million. Net sales for fiscal year 2006 were $109.7 million, gross margin was $16.3 million, or 14.9%, and pre-tax income was $3.5 million. Net sales for 2005 were $109 million, gross margin was $16.1 million, or 14.8%, and pre-tax income was $5.4 million.

The sales growth was fueled by strong sales in the Radio Frequency Identification (RFID) product line, which increased from $581,000 in 2005 to $1.5 million in 2006. Sales growth in the industrial barcode, retail shelf and ticket product lines for the year offset declines in the supermarket and Inform product lines. Margins for the year were negatively impacted by severance and plant consolidation costs due to the closure of the label converting plant in St. Louis, Missouri and consolidation of manufacturing into plants located in Omaha, Nebraska; Jefferson City, Tennessee and a new facility located in Jacksonville, Florida. Pre-tax income for the quarter and year for the Label business was impacted by a one-time $0.6 million impairment expense related to intangible assets. The Company also incurred losses of $0.4 million related to its investment in Tec Print LLC.

Specialty Paper Products:

Nashua's Specialty Paper Products segment, which includes its paper coating and converting businesses, reported net sales for the fourth quarter of 2006 of $42.0 million, gross margin of $6.3 million, or 15.0%, and pre-tax operating income of $0.9 million. Net sales for the fourth quarter of 2005 were $40.8 million, gross margin was $6.5 million, or 15.8%, and pre-tax operating income was $0.5 million. Net sales for fiscal year 2006 were $162.5 million, gross margin was $24.1 million, or 14.9%, and pre-tax operating income was $0.5 million. Net sales for fiscal year 2005 were $166.7 million, gross margin was $28.4 million, or 17.1%, and pre-tax operating income was $4.1 million.

The Specialty Paper segment had sales growth of 3% on a quarter-to-quarter basis. The increase was driven by improved sales in the coating business. Margins for the quarter improved due to increased sales of products such as our wide-format offerings. Wide-format product sales of $32 million represented a 9% increase on a year-over-year basis. The decrease in sales for the year was primarily a result of lower sales of financial and ribbon product lines and the exit of the carbonless product line by the coated business during the year.

Margins in the Specialty Paper segment were negatively impacted by the cost associated with the exit from the carbonless product line and the one-time cost associated with the consolidation of space within the Merrimack facility. In addition, the margins were negatively impacted by the startup cost associated with opening the new wide-format facility located in Cranbury, New Jersey.

Operating income for the year for the Specialty Paper segment was also impacted by pension curtailment cost associated with the freeze of the pension benefits for certain hourly employees.

Thomas Brooker, Nashua's President and Chief Executive Officer, stated, "Legacy issues addressed during 2006 position the Company to aggressively pursue our strategy to create more opportunities in existing and prospect accounts. This strategy is directed at generating sales growth, pursuing higher-margin business and increasing plant utilization rates. We are increasing the size of the sales force and representatives are focused on markets and applications that match up best to our expertise. Our nationwide manufacturing and distribution network provides the flexibility and responsiveness customers require. We have existing capacity in our manufacturing facilities that will allow us to service new opportunities."

Brooker continued, "I believe Nashua is well positioned to deliver improved performance."

Use of Non-GAAP

EBITDA is presented as supplemental information, which the management of Nashua believes, may be useful to some investors in evaluating Nashua because it is widely used as a measure of evaluating a company's operating performance, as well as to evaluate its operating cash flow. EBITDA is used by management in the computation of ratios utilized for financing purposes and for planning and forecasting in future periods. EBITDA is calculated by adding net interest expense, income tax expense, depreciation and amortization back into net income. EBITDA should not be considered a substitute either for net income, as an indicator of Nashua's operating performance, or for cash flow, as a measure of Nashua's liquidity. In addition, because all companies may not calculate EBITDA in exactly the same manner, the presentation here may not be comparable to other similarly titled measures of other companies.

About Nashua

Nashua Corporation manufactures and markets a wide variety of specialty imaging products and services to industrial and commercial customers to meet various print application needs. Nashua's products include thermal coated papers, pressure-sensitive labels, bond, point of sale, ATM and wide format papers, entertainment tickets, as well as toners, developers, and ribbons for use in imaging devices. Additional information about Nashua Corporation can be found at www.nashua.com.

Forward-Looking Statements

This press release contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. When used in this press release, the words "will," "believe" 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, Nashua'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, and other risks set forth in Nashua's filings with the Securities and Exchange Commission, and the information set forth herein should be read in light of such risks. In addition, any forward-looking statements represent Nashua estimates only as of the date of this press release and should not be relied upon as representing Nashua estimates as of any subsequent date. While Nashua may elect to update forward-looking statements at some point in the future, Nashua specifically disclaims any obligation to do so, even if its estimates change.


Fourth Quarter 2006 Earnings Results

NASHUA CORPORATION SUMMARY RESULTS OF OPERATIONS



Periods ended December 31,
 respectively
Dollars in thousands, except per    Three Months          Twelve Months
 share amounts (Unaudited)         2006       2005       2006       2005
                                ---------  ---------  ---------  ---------

Net sales                       $  69,287  $  69,061  $ 269,043  $ 272,585
Cost of products sold              58,594     58,142    228,389    227,972
                                ---------  ---------  ---------  ---------
Gross margin                    $  10,693  $  10,919  $  40,654  $  44,613
Gross margin %                       15.4%      15.8%      15.1%      16.4%

Selling, distribution and
 administrative expenses           10,382     10,312     42,979     41,975
Research and development
 expenses                             122        142        644        562
Loss from equity investment           250         34        440         34
Interest expense, net                 290        468      1,511      1,758
Other income (1)                     (237)      (199)    (1,181)    (1,038)
Impairment of intangible assets       565          -        565          -
Gain on sale of real estate        (8,976)         -     (8,976)         -
Net (gain) loss on curtailment
 of pension and postretirement
 plans (2)                           (153)         -        580          -
                                ---------  ---------  ---------  ---------
   Income from continuing
    operations before income
    taxes (benefit)                 8,450        162      4,092      1,322

Income tax provision (benefit)      3,555       (143)     1,955        304
                                ---------  ---------  ---------  ---------
   Income from continuing
    operations                      4,895        305      2,137      1,018

Income (loss) from discontinued
 operations, net of taxes (3)         404       (336)     1,462       (422)
                                ---------  ---------  ---------  ---------
   Net income (loss)            $   5,299  $     (31) $   3,599  $     596
                                =========  =========  =========  =========

Earnings per share:
   Income from continuing
    operations                  $    0.79  $    0.05  $    0.34  $    0.17

   Income (loss) from
    Discontinued operations          0.07      (0.05)      0.24      (0.07)
                                ---------  ---------  ---------  ---------

Net income per common share     $    0.86  $       -  $    0.58  $    0.10
                                =========  =========  =========  =========
Average common shares               6,164      6,105      6,140      6,090
                                =========  =========  =========  =========

Income per common share from
 continuing operations assuming
 dilution                       $    0.79  $    0.05  $    0.34  $    0.17
Income (loss) per common share
 from discontinued operations
 assuming dilution                   0.06      (0.05)      0.24      (0.07)
                                ---------  ---------  ---------  ---------

Net income per common share
 assuming dilution              $    0.85  $       -  $    0.58  $    0.10
                                =========  =========  =========  =========
Average common and potential
 common shares                      6,204      6,162      6,194      6,191
                                =========  =========  =========  =========


(1) Other income for the three and twelve months ended December 31, 2005
and 2006 represents income from the rental of unused warehouse space at our
New Hampshire facilities.

(2) Net gain on curtailment of pension and postretirement plans for the
three months ended December 31, 2006 represents an adjustment to the loss
of $0.9 million related to the curtailment of pension benefits for certain
hourly employees included in our Specialty Paper Products segment. The net
loss on curtailment of pension and postretirement plans for the twelve
months ended December 31, 2006 represents $0.7 million related to the
curtailment of pension benefits which more than offset a gain of $0.2
million related to the curtailment of postretirement medical and life
insurance benefits.

(3) Income from discontinued operations for the three months ended December
31, 2006 includes the results of our Toner and Developer business which we
exited effective March 31, 2006 and the sale of related real estate located
in Nashua, New Hampshire. Loss from discontinuted operations for the three
months ended December 31, 2005 represents the results of our Toner and
Developer business. Income from discontinued operations for the twelve
months ended December 31, 2006 includes the results of our Toner and
Developer business, income from the liquidation of our Photo UK entity, and
a loss related to environmental issues resulting from our previously exited
Computer Products business. Loss from discontinued operations for the
twelve months ended December 31, 2005 represents the results of our Toner
and Developer business and a $1.2 million tax benefit related to the
settlement of an outstanding Internal Revenue Service audit from the years
1995-2000.




Fourth Quarter 2006 Earnings Results

NASHUA CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS


                                                  (Unaudited)
                                                  December 31  December 31
Dollars in thousands                                  2006         2005
                                                  -----------  -----------

Assets
   Cash and cash equivalents                      $       289  $       653
   Accounts receivable                                 29,568       33,922
   Inventories                                         23,764       22,284
   Other current assets                                 2,670        2,980
                                                  -----------  -----------
      Total current assets                             56,291       59,839

   Plant and equipment, net                            26,399       36,462
   Goodwill, net of amortization                       31,516       31,516
   Intangibles, net of amortization                       606        1,773
   Other assets                                        12,803       15,329
                                                  -----------  -----------
      Total assets                                $   127,615  $   144,919
                                                  ===========  ===========

Liabilities and Shareholders' Equity
   Accounts payable                               $    16,620  $    14,992
   Accrued expenses                                     8,639        8,965
   Current maturities of long-term debt                     -        3,500
   Current maturities of notes payable                     83          333
                                                  -----------  -----------
      Total current liabilities                        25,342       27,790

   Long-term debt                                       4,750       25,250
   Notes payable                                          285          368
   Other long-term liabilities                         28,211       37,777
                                                  -----------  -----------
      Total long-term liabilities                      33,246       63,395

   Common stock and additional capital                 22,342       22,023
   Treasury stock                                           -            -
   Retained earnings                                   61,358       57,860
   Accumulated other comprehensive loss:
      Minimum pension liability adjustment (a)        (14,673)     (26,149)
                                                  -----------  -----------
      Total shareholders' equity                       69,027       53,734
                                                  -----------  -----------

      Total liabilities and shareholders' equity  $   127,615  $   144,919
                                                  ===========  ===========

(a) Our minimum pension liability adjustment represents a decrease in our
minimum pension liability resulting from changes to our pension plans in
2006.




Fourth Quarter 2006 Earnings Results

NASHUA CORPORATION
RECONCILIATION OF NET INCOME FROM CONTINUING OPERATIONS TO EARNINGS BEFORE
INTEREST, TAXES, DEPRECIATION AND AMORTIZATION


Periods ended December 31, respectively   Three Months      Twelve Months
In thousands (Unaudited)                  2006     2005     2006     2005
                                        -------- -------  -------- --------

Net income from continuing operations   $  4,895 $   305  $  2,137 $  1,018
Add back:
   Interest expense, net                     290     468     1,511    1,758
   Income tax provision (benefit)          3,555    (143)    1,955      304
   Depreciation on fixed assets            1,194   1,489     5,271    6,052
   Amortization of intangible assets         729     201     1,220      504
                                        -------- -------  -------- --------

Earnings from continuing operations
 before interest, taxes, depreciation
 and amortization                       $ 10,663 $ 2,320  $ 12,094 $  9,636
                                        ======== =======  ======== ========




Fourth Quarter 2006 Earnings Results
NASHUA CORPORATION SELECTED FINANCIAL DATA


Periods ended December 31,
 respectively
Dollars in thousands (Unaudited)    Three Months          Twelve Months
                                   2006       2005       2006       2005
                                ---------  ---------  ---------  ---------

NET SALES

Label Products                  $  28,553  $  29,323  $ 109,731  $ 109,005
Specialty Paper Products           42,041     40,816    162,544    166,711
All Other                             361        345      2,512      1,601

Reconciling Items:
      Eliminations                 (1,668)    (1,423)    (5,744)    (4,732)
                                ---------  ---------  ---------  ---------
   Net sales                    $  69,287  $  69,061  $ 269,043  $ 272,585
                                ---------  ---------  ---------  ---------


PRETAX INCOME (LOSS)

Label Products                  $     777  $   1,674  $   3,465  $   5,423
Specialty Paper Products              878        482        532      4,144
All Other                             (62)       (64)       176         23

Reconciling Items:
      Unallocated corporate
       expenses                    (1,829)    (1,462)    (7,546)    (6,510)
      Interest expense, net          (290)      (468)    (1,511)    (1,758)
      Gain on sale of real
       estate                       8,976          -      8,976          -
                                ---------  ---------  ---------  ---------
   Total pretax income from
    continuing operations       $   8,450  $     162  $   4,092  $   1,322
                                ---------  ---------  ---------  ---------


DEPRECIATION AND AMORTIZATION

Label Products                  $   1,207  $     812  $   3,227  $   2,822
Specialty Paper Products              654        770      2,910      3,283
Reconciling Item:
      Corporate                        62        108        354        451
                                ---------  ---------  ---------  ---------
   Total depreciation and
    amortization                $   1,923  $   1,690  $   6,491  $   6,556
                                ---------  ---------  ---------  ---------

INVESTMENT IN PLANT AND
 EQUIPMENT

Label Products                  $      88  $     102  $     762  $   1,028
Specialty Paper Products               93        342      1,691      2,730
Reconciling Item:
      Corporate                       209         11        332         82
                                ---------  ---------  ---------  ---------
   Total Investment in plant
    and equipment               $     390  $     455  $   2,785  $   3,840
                                ---------  ---------  ---------  ---------

PENSION AND POSTRETIREMENT
 EXPENSE

Label Products                  $     252  $     160  $   1,108  $     643
Specialty Paper Products              244        138        975        552
Reconciling Item:
      Corporate                       291         76      1,095        234
                                ---------  ---------  ---------  ---------
   Total pension and
    postretirement expense      $     787  $     374  $   3,178  $   1,429
                                ---------  ---------  ---------  ---------

Contact Information

  • Contact:
    Tom Brooker/John Patenaude
    Nashua Corporation
    847-318-1797/603-880-2145

    Rich Coyle
    Sard Verbinnen & Co
    212-687-8080