Published:
Nashua Reports Second Quarter 2006 Results
Nashua Corporation (NASDAQ: NSHA), a
manufacturer and marketer of labels, thermal specialty papers and imaging
products, today announced financial results for the second quarter ended
June 30, 2006.
Net sales for the second quarter of 2006 were $65.5 million, compared to
$67.3 million for the second quarter of 2005. Gross margin for the second
quarter of 2006 was $9.5 million, or 14.5%, compared to $11.4 million, or
17%, for the second quarter of 2005. Loss from continuing operations
before income taxes was $1.6 million in the second quarter of 2006 compared
to income from continuing operations before income taxes of $0.5 million in
the second quarter of 2005. Loss from continuing operations was $1.0
million in the second quarter of 2006, or $0.16 per share, compared to
income from continuing operations of $0.3 million, or $0.05 per share, in
the second quarter of 2005. Net income for the second quarter of 2005,
which included income of $1.1 million, or $0.18 per share, from
discontinued operations related to the exit of the toner business and the
settlement of tax issues with the Internal Revenue Service, was $1.4
million or $0.23 per share. Earnings before interest, taxes, depreciation
and amortization (EBITDA) were $0.2 for the second quarter of 2006 compared
to $2.5 million for the second quarter of 2005.
Net sales for the six months ended June 30, 2006, were $130.3 million,
compared to $135 million for the first half of 2005. Gross margin for the
first half of 2006 was $19.2 million, or 14.8%, compared to $21.9 million,
or 16.2%, for the first half of 2005. Loss from continuing operations
before income taxes for the first six months of 2006 was $2.5 million,
compared to loss from continuing operations before income taxes of $0.2
million in the first half of 2005. Loss from continuing operations for the
first half of 2006 was $1.5 million, or $0.25 per share, compared to a loss
from continuing operations of $0.1 million, or $0.02 per share, for the
first half of 2005. Net loss, including discontinued operations, was $0.5
million, or $0.09 per share, for the first half of 2006 compared to a net
loss of $0.2 million, or $0.04 per share, for the first half of 2005.
EBITDA was $2.1 million for the first six months of 2006 compared to $4.0
million for the same period in 2005.
Commenting on the Company's second quarter performance, Thomas Brooker,
President and Chief Executive Officer of Nashua, said, "The declines in
sales, margin and net income in the second quarter are disappointing and
reflect intense competition in the industry and the effect of actions taken
by Nashua to position the Company to deliver improved performance. The
decline in income in the second quarter resulted partially from costs
associated with the consolidation of Label manufacturing operations into
Florida, Tennessee and Nebraska facilities. This project is expected to be
completed by the end of the third quarter. In addition, we incurred
incremental one-time costs associated with the consolidation of our coated
paper manufacturing into a smaller space at the Merrimack, New Hampshire
facility and severance and incremental pension costs associated with the
Company's defined benefit plans. Liquidation of assets of Nashua's
previously-owned toner business continued during the second quarter,
enabling the Company to reduce bank debt by approximately $5 million since
December 31, 2005."
Nashua entered into a non-binding letter of intent for the sale of the
Merrimack, New Hampshire facilities and currently is negotiating a purchase
and sale agreement as well as a lease agreement for space in Merrimack.
There is no guarantee that the sale will close. Also, Nashua has entered
into a purchase and sale agreement for the sale of Company property in
Nashua, New Hampshire for $2.0 million, which is expected to close in the
fourth quarter of 2006.
Executive Assessment
Commenting on his first two months at Nashua, Brooker said, "Since coming
on board as President and Chief Executive Officer the majority of my time
has been spent getting to know Nashua. I've spoken at length to people
across the business and with customers, and I've immersed myself in our
strategic plans and assessed the work underway to deliver increased value
to shareholders.
"My first impression is a good one. We have a knowledgeable and
experienced team. Our customer relationships are strong and we have a
reputation for delivering high-quality products and for delivering on our
promises. Nashua occupies a solid position in our core businesses, and
while we continue to realign and consolidate operations, most of the costs
associated with these changes are behind us. Our wide-format business is
growing well and we've established a leadership position in Radio Frequency
Identification (RFID) devices that is opening new opportunities for Nashua
to serve our customers.
"Growing revenue is a top priority at Nashua, and we will be reorganizing
the sales team and adding new people over the next several months to
accomplish this objective. We will be expanding and better leveraging our
teams to increase sales to existing customers and to a wider circle of
prospects. In addition, we will be working with customers on a
'consultative selling' basis and using our expertise to help them find new
ways to use our products and industry knowledge to succeed. As we increase
revenue, bottom line growth will follow as a result of better utilization
of our manufacturing and distribution assets. Accomplishing the sales
reorganization flawlessly, cross training members of our current sales team
and bringing new people on board and quickly making them productive are key
focus areas for Nashua. We will continue to review all facets of our
organization and make additional changes to streamline operations, reduce
cost and improve profitability.
Brooker concluded, "While our results were disappointing this quarter and
we continue to face significant challenges arising from intense competition
and industry overcapacity, many of the pieces needed for Nashua to improve
business performance and deliver increased value to shareholders are in
place."
Business Segment Highlights
Nashua's Label segment, which prints and converts product for the grocery,
food service, retail, transportation, entertainment and general industrial
markets, reported net sales for the second quarter of 2006 of $26.7
million, gross margin of $3.8 million, or 14.3%, and pre-tax income of $0.8
million. Net sales for the second quarter of 2005 were $26.6 million,
gross margin was $3.8 million, or 14.1%, and pre-tax income was $1.2
million.
Brooker stated, "Sales for the Label segment have been relatively flat
compared to last year. As a percentage, margins increased slightly but
continued to be impacted negatively as we incur costs associated with
closing our St. Louis manufacturing plant and transferring work to other
facilities. In addition, we are in the process of moving to a new leased
manufacturing facility in Jacksonville, Florida and shutting down the St.
Augustine, Florida plant."
Nashua's Specialty Paper segment, which includes the paper coating and
converting businesses, produces a wide range of applications for labeling,
packaging, ticketing and point of sale transactions as well as carbonless
papers and thermal, dry gum and heal-seal products for use in the
transportation, retail, gaming, shipping and delivery, entertainment,
medical and distribution industries. Specialty Paper reported net sales
for the second quarter of 2006 of $39.7 million, gross margin of $5.5
million, or 13.9%, and pre-tax loss of $0.2 million. Net sales for the
second quarter of 2005 were $41.4 million, gross margin was $7.6 million,
or 18.4%, and pre-tax income was $1.5 million.
Brooker stated, "Revenues in the Specialty Paper segment declined as we
experienced lower sales in the thermal point of sale product line. In
addition, segment sales were lower than a year ago as this quarter's
results do not include the coated carbonless business which was sold in the
fourth quarter of 2005. Sales of wide-format products increased year over
year, and Nashua continues to invest in our wide format business where we
have solid growth prospects. Margins and pre-tax income in the segment
were negatively impacted by the costs associated with moving slitting
equipment into a smaller coating manufacturing space at our Merrimack, New
Hampshire facility, severance in our coating operations, together which
approximate $700,000, and start-up costs associated with our New Jersey
wide-format converting facility."
Use of Non-GAAP Measures
EBITDA is presented as supplemental information that the management of
Nashua believes may be useful to some investors in evaluating the Company
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. The Company's products include
thermal coated papers, pressure-sensitive labels, colored copier papers,
bond, point of sale, ATM and wide format papers, entertainment tickets, as
well as 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 "plan," "should," "will," "expects,"
"anticipates" 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, 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, and other risks set forth in the
Company'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 the Company's estimates
only as of the date of this press release and should not be relied upon as
representing the Company's estimates as of any subsequent date. While the
Company may elect to update forward-looking statements at some point in the
future, the Company specifically disclaims any obligation to do so, even if
its estimates change.
Second Quarter 2006 Earnings Results
NASHUA CORPORATION SUMMARY RESULTS OF OPERATIONS
--------- --------- --------- ---------
Periods ended June 30, and July
1, respectively
Dollars in thousands, except Three Months Six Months
per share amounts (Unaudited) 2006 2005 2006 2005
--------- --------- --------- ---------
Net sales $ 65,458 $ 67,308 $ 130,269 $ 134,954
Cost of products sold 56,000 55,892 111,023 113,090
--------- --------- --------- ---------
Gross margin $ 9,458 $ 11,416 $ 19,246 $ 21,864
Gross margin % 14.5% 17.0% 14.8% 16.2%
Selling, distribution and
administrative expenses 10,740 10,662 21,316 21,443
Research 193 112 394 349
Loss from equity investment 105 - 119 -
Interest expense, net 294 416 601 825
Other income (1) (296) (287) (658) (579)
--------- --------- --------- ---------
Income (loss) from
continuing operations
before income taxes
(benefit) (1,578) 513 (2,526) (174)
Income tax provision (benefit) (596) 204 (981) (61)
--------- --------- --------- ---------
Income (loss) from
continuing operations (982) 309 (1,545) (113)
Income (loss) from discontinued
operations, net of taxes(2) - 1,094 1,004 (104)
--------- --------- --------- ---------
Net income (loss) $ (982) $ 1,403 $ (541) $ (217)
========= ========= ========= =========
Earnings per share:
Income (loss) from continuing
operations $ (0.16) $ 0.05 $ (0.25) $ (0.02)
Income (loss) from
discontinued operations - 0.18 0.16 (0.02)
--------- --------- --------- ---------
Net income (loss) per common
share $ (0.16) $ 0.23 $ (0.09) $ (0.04)
========= ========= ========= =========
Average common shares 6,126 6,084 6,124 6,081
========= ========= ========= =========
Income (loss) per common share
from continuing operations
assuming dilution $ (0.16) $ 0.05 $ (0.25) $ (0.02)
Income (loss) per common share
from discontinued operations
assuming dilution - 0.18 0.16 (0.02)
--------- --------- --------- ---------
Net income (loss) per common
share assuming dilution $ (0.16) $ 0.23 $ (0.09) $ (0.04)
========= ========= ========= =========
Average common and potential
common shares 6,126 6,202 6,124 6,081
========= ========= ========= =========
(1) Other income for the three and six months ended June 30, 2006 and
July 1, 2005 represents income from the rental of unused warehouse
space at our New Hampshire facilities.
(2) Income from discontinued operations for the six months ended June 30,
2006 includes the results of our Toner and Developer business which
we exited effective March 31, 2006 and income from the liquidation
of our Photo UK entity. Income from discontined operations for the
three months ended July 1, 2005 represents the results of our Toner
and Developer business and a $1.2 million tax benefit related to
the settlement of outstanding Internal Revenue Service audits from
the years 1995-2000. Income from discontinued operations for the
six months ended July 1, 2005 represents the $1.2 million tax
benefit and results of our Toner and Developer buisness.
Second Quarter 2006 Earnings Results
NASHUA CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET
--------- ---------
(Unaudited) December
June 30 31
Dollars in thousands 2006 2005
--------- ---------
Assets
Cash and cash equivalents $ 515 $ 653
Accounts receivable 28,951 33,922
Inventories 22,043 22,284
Assets held for sale 54 -
Other current assets 3,657 2,980
--------- ---------
Total current assets 55,220 59,839
Plant and equipment, net 32,952 36,462
Goodwill, net of amortization 31,516 31,516
Intangibles, net of amortization 1,495 1,773
Other assets 17,869 15,329
--------- ---------
Total assets $ 139,052 $ 144,919
========= =========
Liabilities and Shareholders' Equity
Accounts payable $ 14,932 $ 14,992
Accrued expenses 7,961 8,965
Current maturities of long-term debt - 3,500
Current maturities of notes payable 83 333
--------- ---------
Total current liabilities 22,976 27,790
Long-term debt 23,500 25,250
Notes payable 326 368
Other long-term liabilities 38,921 37,777
--------- ---------
Total long-term liabilities 62,747 63,395
Common stock and additional capital 22,159 22,023
Retained earnings 57,319 57,860
Accumulated other comprehensive loss:
Minimum pension liability adjustment(a) (26,149) (26,149)
--------- ---------
Total shareholders' equity 53,329 53,734
--------- ---------
Total liabilities and shareholders' equity $ 139,052 $ 144,919
========= =========
(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.
Second Quarter 2006 Earnings Results
NASHUA CORPORATION
RECONCILIATION OF NET INCOME FROM CONTINUING OPERATIONS TO EARNINGS BEFORE
INTEREST, TAXES, DEPRECIATION AND AMORTIZATION
------- -------- ------- -------
Periods ended June 30, and July 1, Three Six
respectively Months Months
In thousands (Unaudited) 2006 2005 2006 2005
------- -------- ------- -------
Net income/(loss) from continuing
operations $ (982) $ 309 $ (541) $ (113)
Add back:
Interest expense, net 294 416 601 825
Income tax provision (benefit) (596) 204 (981) (61)
Depreciation on fixed assets 1,332 1,508 2,739 3,102
Amortization of intangible assets 165 109 328 223
------- -------- ------- -------
Earnings from continuing operations
before interest, taxes, $ 213 $ 2,546 $ 2,146 $ 3,976
======= ======== ======= =======
depreciation and amortization
Second Quarter 2006 Earnings Results
NASHUA CORPORATION SELECTED FINANCIAL DATA
--------- --------- --------- ---------
Periods ended June 30, and July
1, respectively Three Months Six Months
Dollars in thousands 2006 2005 2006 2005
(Unaudited) --------- --------- --------- ---------
NET SALES
Label Products $ 26,700 $ 26,594 $ 52,982 $ 52,922
Specialty Paper Products 39,667 41,439 78,954 83,665
All Other 827 482 1,488 825
Reconciling Items:
Eliminations (1,736) (1,207) (3,155) (2,458)
--------- --------- --------- ---------
Other(a) - - - -
--------- --------- --------- ---------
Net sales $ 65,458 $ 67,308 $ 130,269 $ 134,954
--------- --------- --------- ---------
PRETAX INCOME (LOSS)
Label Products $ 816 $ 1,183 $ 1,289 $ 2,346
Specialty Paper Products (172) 1,523 371 1,762
All Other 115 32 252 69
Reconciling Items:
Other income (loss)(2) - - - -
Unallocated corporate
expenses (2,043) (1,809) (3,837) (3,526)
Interest expense, net (294) (416) (601) (825)
--------- --------- --------- ---------
Total pretax income (loss)
from continuing operations $ (1,578) $ 513 $ (2,526) $ (174)
--------- --------- --------- ---------
DEPRECIATION AND AMORTIZATION
Label Products $ 662 $ 680 $ 1,379 $ 1,339
Specialty Paper Products 737 824 1,494 1,758
Reconciling Item:
Corporate 98 113 194 228
--------- --------- --------- ---------
Total Depreciation and
Amortization $ 1,497 $ 1,617 $ 3,067 $ 3,325
--------- --------- --------- ---------
INVESTMENT IN PLANT AND
EQUIPMENT
Label Products $ 172 $ 252 $ 352 $ 737
Specialty Paper Products 776 924 1,250 1,895
Reconciling Item:
Corporate 62 49 74 66
--------- --------- --------- ---------
Total Investment in plant
and equipment $ 1,010 $ 1,225 $ 1,676 $ 2,698
--------- --------- --------- ---------
PENSION EXPENSE
Label Products $ 252 $ 161 $ 604 $ 322
Specialty Paper Products 244 138 487 276
Reconciling Item:
Corporate 291 45 513 90
--------- --------- --------- ---------
Total pension expense $ 787 $ 344 $ 1,604 $ 688
--------- --------- --------- ---------
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Daily NewsTags: ,Manufacturing and Production:ForestandPaperProducts, ,NASDAQ01,NASDAQ01,NH,NASHUA, NH
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