Published: February 14, 2006
Nashua Reports Fourth Quarter and 2005 Year End Results
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, 2005.
Net sales for the fourth quarter of 2005 were $74.2 million, compared to
$73.2 million for the fourth quarter of 2004. Gross margin for the fourth
quarter of 2005 was $11.4 million, or 15.3%, compared to $12.5 million, or
17.1%, for the fourth quarter of 2004. Income from continuing operations
before taxes for the fourth quarter of 2005 was $39,000 compared to
$413,000 for the fourth quarter of 2004. Nashua reported a net loss for the
fourth quarter of 2005 of $31,000, or $0.01 per share, compared to net
income of $246,000, or $0.04 per share, for the fourth quarter of 2004.
Earnings before interest, taxes, depreciation and amortization, also known
as EBITDA, was $3.0 million for the fourth quarter of 2005 compared to $2.8
million for the fourth quarter of 2004.
Net sales for the year ended December 31, 2005 were $294.9 million,
compared to $289.2 million for the year ended December 31, 2004. Gross
margin for fiscal year 2005 was $47.6 million, or 16.1%, compared to $53.9
million, or 18.6%, for 2004. Loss from continuing operations for fiscal
year 2005 was $0.6 million, or $0.10 per share, compared to income from
continuing operations of $3.8 million, or $0.63 per share, for fiscal year
2004. Income from discontinued operations for fiscal year 2005 was $1.2
million, or $0.20 per share; there were no discontinued operations in 2004.
Net income for fiscal year 2005 was $0.6 million, or $0.10 per share,
compared to $3.8 million, or $0.63 per share, for fiscal year 2004. EBITDA
was $10.4 million for fiscal year 2005, compared to $15.1 million for
fiscal year of 2004.
Adjusting income (loss) to exclude incremental 2005 costs associated with
the exit from the toner and developer business and certain special income
items for 2004, non-GAAP adjusted pre-tax income for the fourth quarter of
2005 and 2004, respectively, and the twelve months ended December 31, 2005
and December 31, 2004, respectively, would be as follows:
Periods ended December 31, respectively Three Months Twelve Months
in thousands (unaudited) 2005 2004 2005 2004
------ ------ ------ ------
Income (loss) from continuing operations
before income taxes $ 39 $ 413 $ (830) $6,158
Add back:
Accelerated depreciation related to the
exit of the toner business 580 - 1,740 -
Severance related to exit of toner
business (109) - 1,536 -
Severance related to Omaha 74 - 74 -
Curtailment of postretirement benefits - - 385 -
Annuitization of retiree death benefits - (48) - (971)
Interest income related to 1993 IRS
settlement - - - (333)
------ ------ ------ ------
Non-GAAP income from continuing
operations before income taxes $ 584 $ 365 $2,905 $4,854
====== ====== ====== ======
Commenting on Nashua's 2005 performance, Andrew Albert, Nashua's President
and Chief Executive Officer said, "Nashua achieved a slight increase in
sales in the fourth quarter and full year compared to the same periods in
2004. However, this positive result was offset by lower margins that
resulted from continued overcapacity in the industry, particularly in more
mature industry segments, and to sharply rising fuel and freight costs."
Albert stated, "We are focused on containing costs and operating more
efficiently in response to industry conditions, and have a defined strategy
to create greater shareholder value. This strategy encompasses improving
sales and growing margins by developing value-added products and services,
enhancing our customer relationships and entering promising markets. In
addition, a continued focus on manufacturing and administrative cost
containment in both the Specialty Paper and Label segments is central to
our continued progress."
Albert concluded, "We also anticipate generating cash that we believe will
be significantly in excess of our anticipated needs from the sale of real
estate and from the liquidation of the toner and carbonless assets. Thus,
we seek to achieve our value objective by focusing on businesses with
positive long-term characteristics while generating free cash from
non-strategic asset sales that can be utilized to make acquisitions, stock
repurchases and/or return value in cash directly to shareholders."
2005 Highlights
The following are the highlights of Nashua's 2005 performance:
-- In April, Nashua announced its plan to exit the toner and developer
business by the end of the first quarter of 2006. That process is
proceeding on schedule, and in January 2006, an agreement was executed with
Katun Corporation to sell certain formulations and assets. In December 2004
Nashua entered into a purchase and sale agreement for $2 million, subject
to financing, to sell the Nashua, New Hampshire real estate involved in
toner and developer operations. The manufacturing facilities located in
Merrimack, New Hampshire have also been listed for sale. Nashua continues
to anticipate a positive cash flow from the toner liquidation with the
potential for revenue from future royalties.
-- In June 2005, Nashua acquired certain assets of Label Systems
International (LSI) in St. Augustine, Florida. The acquisition expanded
Nashua's manufacturing base and enabled its Label business to enter the
retail shelf, pharmacy and laser toner cartridge product lines cost-
effectively.
-- Nashua made substantial progress in its Radio Frequency Identification
(RFID) initiatives throughout the year and had sales in the initial year of
production of approximately $600,000. RFID products and solutions, which
use specialized radio-based identification technology to manage business
processes such as inventory control and parts distribution, represent an
exciting growth opportunity for Nashua. Nashua's list of RFID customers
includes nationally recognized consumer products goods manufacturers, and
other companies and organizations involved in RFID systems. In addition,
during 2005, Nashua established a solid foundation for future growth by
signing formal working relationships with Alien Technologies® and
Printronix, Inc., two RFID industry leaders.
-- In the fourth quarter of 2005, Nashua's Label segment completed a
study of manufacturing requirements as part of its program to operate more
effectively and reduce costs. As a result of this analysis, meaningful cost
reductions in wages and benefits were identified, negotiated and
implemented. Also, plans were developed to reduce the number of Label
segment manufacturing locations from four to three by closing the St.
Louis, Missouri plant, and consolidating operations into the Tennessee,
Nebraska and Florida facilities. These consolidations are expected to
result in cost savings of over $1 million per year. The one time cost in
2006 of the closure of the St. Louis plant is estimated at $600,000.
-- In January 2006, Nashua completed plans to exit the coated carbonless
business, which includes the sale of certain carbonless assets to Nekoosa
Coated Products LLC. Carbonless coating, a declining market, accounted for
approximately one percent of Nashua's 2005 sales, and was projected to have
a double digit decline in sales in 2006.
-- During 2005, Nashua continued resolving legacy issues by reaching a
favorable settlement with the Internal Revenue Service for the tax disputes
dating from the years 1995-2000.
Business Segment Highlights
Nashua's Label (Label) 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 2005 of
$29.3 million, gross margin of $4.5 million, or 15.4%, and pre-tax
operating income of $1.7 million. Net sales for the fourth quarter of 2004
were $26.6 million, gross margin was $4.4 million, or 16.7%, and pre-tax
operating income was $1.7 million. Net sales for fiscal year 2005 were $109
million, gross margin was $16.1 million, or 14.8%, and pre-tax operating
income was $5.4 million. Net sales for 2004 were $104.3 million, gross
margin was $18.8 million, or 18%, and pre-tax operating income was $7.6
million.
Commenting on the Label segment, Albert said, "Our Label business generated
increased sales for both the fourth quarter of 2005 and full year.
Importantly, while gross margin was lower in the fourth quarter than it was
a year ago, it was higher than earlier in 2005 as a result of both a focus
on cost containment and the effects of a concerted effort to operate more
efficiently. Going forward, we believe Label's performance will be
positively affected by a lower cost structure at the Omaha plant and a more
streamlined manufacturing platform following the closing of the St. Louis
plant. In addition, we currently anticipate sales growth for our RFID
products."
Nashua's Specialty Paper Products (Paper) segment, which includes its paper
coating and converting businesses, reported net sales for the fourth
quarter of 2005 of $40.8 million, gross margin of $6.4 million, or 15.7%,
and pre-tax operating income of $0.5 million. Net sales for the fourth
quarter of 2004 were $43.9 million, gross margin was $7.4 million, or
16.9%, and pre-tax operating income was $1.1 million. Net sales for fiscal
year 2005 were $166.7 million, gross margin was $28.4 million, or 17.0%,
and pre-tax operating income was $4.1 million. Net sales for fiscal year
2004 were $168 million, gross margin was $31.2 million, or 18.6%, and
pre-tax operating income was $6.2 million.
Commenting on the Specialty Paper segment, Albert said, "Flat sales were
primarily a result of lower sales of coated thermal, and mature dry gum and
carbonless product lines, which were offset by gains in our value-added
Point of Sale (POS) security products and the Dietzgen graphic and
engineering wide-format product lines, where we continue to have healthy
growth. Sales in Dietzgen products in the engineering, design and
architectural arena clearly have fulfilled the promise we saw for them when
Nashua acquired certain assets of Dietzgen in 2002. Sales in this product
line have grown from $6 million in 2002 to approximately $29 million in
2005. We currently anticipate further growth ahead, and are scheduled to
open a New Jersey plant during the second quarter of 2006 that we believe
will enhance our service capabilities to our mid-Atlantic and New England
customers. Dietzgen is also enlarging its product offering through an
expanded color graphics line, thus filling a growing customer requirement."
Nashua's Imaging Supplies, or Toner segment reported net sales for the
fourth quarter of 2005 of $5.5 million, gross margin of $0.4 million, or
7.3%, and a pre-tax loss of $0.2 million. Net sales for the fourth quarter
of 2004 were $4.5 million, gross margin was $0.7 million, or 15.6%, and
pre-tax operating loss was $0.2 million. For fiscal year 2005, net sales
were $23.9 million, gross margin was $2.9 million, or 12.1%, and pre-tax
operating loss was $2.2 million. Net sales for fiscal year 2004 were $22.1
million, gross margin was $3.9 million, or 17.6 %, and pre-tax operating
loss was $0.2 million.
Nashua is on schedule to complete its previously announced exit of the
Toner segment by the end of the first quarter of 2006.
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.
Non-GAAP adjusted pre-tax income is provided as supplemental information
that management of Nashua believes may be useful to some investors in
evaluating it because of the one-time events and cost which may not truly
reflect Nashua's operating performance. Non-GAAP adjusted pre-tax income is
calculated by adding back special costs, which include accelerated
depreciation, severance and pension curtailment costs associated with the
exit of the Toner business. Non-GAAP adjusted pre-tax income also adjusts
income for one-time interest income and a one-time gain from the
annuitization of death benefits. Non-GAAP adjusted income should not be
considered a substitute either for net income, as an indicator of Nashua's
financial performance, or for cash flow, as a measure of Nashua's
liquidity.
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 "should," "will," "expect," "anticipate,"
"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.
NASHUA CORPORATION SUMMARY RESULTS OF OPERATIONS
Periods ended December 31,
respectively
Dollars in thousands, except Three Months Twelve Months
per share amounts(Unaudited) 2005 2004 2005 2004
-------- -------- -------- --------
Net sales $ 74,204 $ 73,240 $294,864 $289,217
Cost of products sold 62,822 60,706 247,281 235,345
-------- -------- -------- --------
Gross margin $ 11,382 $ 12,534 $ 47,583 $ 53,872
Gross margin % 15.3% 17.1% 16.1% 18.6%
Selling, distribution and
administrative expenses 10,624 11,275 43,173 45,133
Research 326 544 1,547 2,126
Loss from equity investment 34 - 34 416
Interest expense, net (1) 468 350 1,758 1,010
Special (income) charges(2) (109) - 1,516 -
Net (gain) loss on curtailment of
post retirement plans(3) - (48) 385 (971)
-------- -------- -------- --------
Income (loss) from continuing
operations before income taxes
(benefit) 39 413 (830) 6,158
Income tax provision (benefit) 70 167 (191) 2,371
-------- -------- -------- --------
Income (loss) from continuing
operations (31) 246 (639) 3,787
Income from discontinued operations,
net of taxes(4) - - 1,235 -
-------- -------- -------- --------
Net income (loss) $ (31) $ 246 $ 596 $ 3,787
======== ======== ======== ========
Earnings per share:
Income (loss) from continuing
operations $ (0.01) $ 0.04 $ (0.10) $ 0.63
Income from discontinued operations - - 0.20 -
-------- -------- -------- --------
Net income (loss) per common share $ (0.01) $ 0.04 $ 0.10 $ 0.63
======== ======== ======== ========
Average common shares 6,105 6,059 6,090 6,011
======== ======== ======== ========
Income (loss) per common share from
continuing operations assuming
dilution $ (0.01) $ 0.04 $ (0.10) $ 0.62
Income per common share from
discontinued operations assuming
dilution - - 0.20 -
-------- -------- -------- --------
Net income (loss) per common share
assuming dilution $ (0.01) $ 0.04 $ 0.10 $ 0.62
======== ======== ======== ========
Average common and potential common
shares 6,105 6,193 6,090 6,130
======== ======== ======== ========
(1) Net interest expense for the twelve months ended December 31, 2004
includes interest income of $300,000 related to interest due from the
Internal Revenue Service on a 1993 tax issue resolved in favor of
Nashua.
(2) Special (income) charges for the three months and twelve months ended
December 31, 2005 represents a provision for severance related to a
workforce reduction associated with our decision to exit the toner and
developer business included in our Imaging Supplies segment.
(3) Net loss on curtailment of postretirement plans for the twelve months
ended December 31, 2005 represents a loss related to the curtailment
of pension benefits for hourly employees included in our Imaging
Supplies segment. The net gain on curtailment of postretirement plans
for the twelve months ended December 31, 2004 represents a one-time
non-cash pretax gain representing the difference between the removal
of the retiree death benefit liability and the premium paid to
Minnesota Life to assume the liability.
(4) Net income from discontinued operations for the twelve months ended
December 31, 2005 represents a $1.2 million tax benefit related to the
settlement of outstanding Internal Revenue Service audits from the
years 1995-2000.
NASHUA CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
December 31 December 31
Dollars in thousands 2005 2004
--------- ---------
Assets
Cash and cash equivalents $ 653 $ 884
Restricted cash - 1,202
Accounts receivable 33,922 33,501
Inventories 22,284 25,225
Other current assets 2,980 4,493
Net current assets of discontinued operation
--------- ---------
Total current assets 59,839 65,305
Plant and equipment, net 36,462 39,845
Goodwill, net of amortization 31,516 31,516
Intangibles, net of amortization 1,773 1,451
Other assets 15,329 13,243
--------- ---------
Total assets $ 144,919 $ 151,360
========= =========
Liabilities and Shareholders' Equity
Accounts payable $ 14,992 $ 16,751
Accrued expenses 8,965 13,182
Current maturities of long-term debt 3,500 3,400
Current maturities of notes payable 333 710
--------- ---------
Total current liabilities 27,790 34,043
Long-term debt 25,250 27,350
Notes payable 368 250
Other long-term liabilities 37,777 23,769
--------- ---------
Total long-term liabilities 63,395 51,369
Common stock and additional capital 22,023 21,693
Retained earnings 57,860 57,264
Accumulated other comprehensive loss:
Minimum pension liability adjustment(a) (26,149) (13,009)
--------- ---------
Total shareholders' equity 53,734 65,948
--------- ---------
Total liabilities and shareholders' equity $ 144,919 $ 151,360
========= =========
(a)Our minimum pension liability adjustment represents an increase in our
minimum pension liability resulting from a change in the discount rate
and mortality table used in computing pension liability.
Amounts from prior year have been adjusted to conform to current year
presentation
NASHUA CORPORATION
RECONCILIATION OF NET INCOME TO EARNINGS BEFORE INTEREST,
TAXES, DEPRECIATION AND AMORTIZATION
Periods ended December 31,
respectively Three Months Twelve Months
In thousands (Unaudited) 2005 2004 2005 2004
------- ------- ------- -------
Net income $ (31) $ 246 $ 596 $ 3,787
Add back:
Interest expense, net 468 350 1,758 1,010
Income tax provision (benefit) 70 167 (1,426) 2,371
Depreciation on fixed assets 2,337 1,901 8,962 7,459
Amortization of intangible
assets 201 113 504 441
------- ------- ------- -------
Earnings before interest, taxes,
depreciation and amortization $ 3,045 $ 2,777 $10,394 $15,068
======= ======= ======= =======
RECONCILIATION OF GAAP PRETAX INCOME TO NON-GAAP PRETAX INCOME
Periods ended December 31,
respectively Three Months Twelve Months
In thousands (Unaudited) 2005 2004 2005 2004
------- ------- ------- -------
Income (loss) from continuing
operations before income taxes
(benefit) $ 39 $ 413 $ (830) $ 6,158
Add back:
Accelerated depreciation
related to exit of Toner
business 580 - 1,740 -
Severance related to exit of
Toner business (109) - 1,536 -
Severance related to Omaha 74 74
Curtailment of postretirement
benefits - - 385 -
Annuitization of retiree death
benefits - (48) - (971)
Interest income related to
1993 IRS settlement - - (333)
------- ------- ------- -------
Non-GAAP Income from continuing
operations before income taxes $ 584 $ 365 $ 2,905 $ 4,854
======= ======= ======= =======
NASHUA CORPORATION SELECTED FINANCIAL DATA
Periods ended December 31,
respectively
Dollars in thousands (Unaudited) Three Months Twelve Months
2005 2004 2005 2004
-------- -------- -------- --------
NET SALES
Label Products $ 29,323 $ 26,598 $109,005 $104,266
Specialty Paper Products 40,816 43,919 166,711 168,013
Imaging Supplies 5,488 4,450 23,880 22,113
Reconciling Items:
Eliminations (1,423) (1,727) (4,732) (5,175)
-------- -------- -------- --------
Net sales $ 74,204 $ 73,240 $294,864 $289,217
-------- -------- -------- --------
PRETAX INCOME (LOSS)
Label Products $ 1,674 $ 1,650 $ 5,423 $ 7,628
Specialty Paper Products 482 1,140 4,144 6,153
Imaging Supplies (1) (165) (225) (2,174) (180)
Reconciling Items:
Other income (loss)(2) (18) (2) 50 (25)
Unallocated corporate expenses (1,466) (1,848) (6,515) (7,379)
Interest expense, net (468) (350) (1,758) (1,010)
Net loss on curtailment of
post retirement plans - 48 - 971
-------- -------- -------- --------
Total pretax income (loss) from
continuing operations $ 39 $ 413 $ (830) $ 6,158
-------- -------- -------- --------
DEPRECIATION AND AMORTIZATION
Label Products $ 812 $ 645 $ 2,822 $ 2,528
Specialty Paper Products 770 932 3,283 3,636
Imaging Supplies 848 328 2,910 1,333
Reconciling Item:
Corporate 108 109 451 403
-------- -------- -------- --------
Total Depreciation and
Amortization $ 2,538 $ 2,014 $ 9,466 $ 7,900
-------- -------- -------- --------
INVESTMENT IN PLANT AND EQUIPMENT
Label Products $ 102 $ 734 $ 1,028 $ 2,102
Specialty Paper Products 342 2,056 2,730 3,926
Imaging Supplies - 89 5 341
Reconciling Item:
Corporate 11 42 82 230
-------- -------- -------- --------
Total Investment in plant and
equipment $ 455 $ 2,921 $ 3,845 $ 6,599
-------- -------- -------- --------
(1) Imaging Supplies pretax loss for the twelve months ended December 31,
2005, includes special charges of $1.5 million representing a
provision for severance related to workforce reductions and a net loss
on curtailment of pension plans of $.4 million both associated with
our decision to exit the toner and developer business.
(2) Represents other operating activity which falls below the quantitative
threshold for a reportable segment.
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