Nashua Reports Fourth-Quarter and Year End 2000 Results; Announces Nominees for Board Election

NASHUA, N.H.--(BUSINESS WIRE)--March 1, 2001-- 

-- Sales for the year grew to $253.1 million from $170.8 million 
last year 

-- Net sales for the fourth quarter increased to $67.1 million 
from $42.0 million 

-- Gross margin for the year increased to $50.8 million from
41.0 million; gross margin for the quarter increased to $12.4 
million from $9.9 million 

-- Net income from continuing operations for the year rose to 
5.4 million, compared with a net loss of $0.4 million 

-- Seven incumbents and Mark E. Schwarz nominated for election to 
Board 

Nashua Corporation (NYSE: NSH), a premier manufacturer and marketer of labels, thermal specialty papers and imaging products, today announced financial results for the fourth quarter and year ended December 31, 2000. The results represent the consolidated results of Nashua and Rittenhouse Paper Company, which was acquired on April 17, 2000. 

Nashua also announced that the Board of Directors at its regular meeting on February 27, named seven incumbents and Mark E. Schwarz -- President, Newcastle Partners -- for election at the Company's 2001 annual meeting. In addition to Schwarz, the nominees include: Andrew B. Albert, Sheldon A. Buckler, Avrum Gray, John M. Kucharski, George R. Mrkonic, Jr., Peter J. Murphy, and James F. Orr III. 

For the fourth quarter ended December 31, 2000, sales rose to $67.1 million, a 60% increase compared with fourth-quarter 1999 sales of $42.0 million, reflecting the inclusion of the Rittenhouse business. Gross margin for the quarter was $12.4 million, or 18.5% as a percentage of revenue, compared with $9.9 million, or 23.7%, reported the same quarter a year earlier. The Company also reported unusual income of $0.4 million in the fourth quarter. Restructuring and unusual income includes a $1.0 million reversal of an accrual as the result of the final settlement of a patent infringement suit offset by $0.6 million of severance expense for workforce reductions. Nashua's fourth-quarter tax expense of $1.7 million includes an adjustment relating to the write-off of the tax asset associated with expired tax losses and the deductibility of goodwill based on the Company's decision to treat the Rittenhouse acquisition as a stock purchase versus an asset purchase. The Company reported a net loss from continuing operations of $3.6 million, or $0.64 per share, compared with a net loss of $1.8 million, or $0.32 per share, in the fourth quarter 1999. Excluding restructuring and unusual income, earnings before interest, taxes, depreciation and amortization (EBITDA) were $1.0 million, compared with $.8 million in the fourth quarter of 1999. Under terms of Nashua's Revolving Credit and Term Loan Agreements, the Company is required to comply with various covenants, which utilize EBITDA as a basis for computation. The Company was not in compliance with certain covenants in the fourth quarter, and its lenders have waived compliance with those covenants for the quarter. The Company and its lenders established more favorable covenants for the Company for 2001. 

For the year ended December 31, 2000, sales increased 48% to $253.1 million from $170.8 million in 1999. Gross margin for the full year was $50.8 million, or 20.1% as a percentage of sales, compared with last year's $41.0 million, or 24%. Net income from continuing operations rose to $5.4 million, or $0.95 per share versus a net loss of $0.4 million, or $0.07 per share, a year ago. The year-end results include an $18.6 million pretax gain resulting from the annuitization of a certain portion of the Company's pension obligation and unusual income of $1.0 million related to the reversal of a loss accrual related to the final settlement of patent litigation. The unusual income was more than offset by restructuring and unusual charges related to the exit from the remanufactured laser cartridge business, and workforce reductions in both the Toner business and Corporate staff. 

Andrew Albert, Nashua's Chairman and Chief Executive Officer, said, "The year 2000 was a year of transition for Nashua as we successfully acquired and began integrating Rittenhouse's operations and reshaping our core businesses in Paper, Label and Toner. However, with continued margin pressures caused by higher costs for raw materials, start-up costs for certain products, underutilized toner capacity, environmental and other Label related charges, and increased competition, the combined Company turned in a less than satisfactory financial performance. It was a year that underscores the need to continue to change our business." 

Albert was elected to his present position on December 15, 2000, succeeding Gerald Garbacz, who retired after serving five years as Nashua's Chairman and Chief Executive Officer. 

In commenting on the Company's business direction, Albert said, "My primary objective is to make the tough decisions that will enable the Company to establish a base for ongoing earnings successes. We are actively working to find a solution to address continuing weakness in the Toner business. More broadly, we will continue to leverage our industry knowledge and focus on four keys to future growth and profitability: strengthening customer relationships, broadening our product range, developing new market opportunities and bringing products to market faster. 

"We achieved many successes this year in addition to the Rittenhouse acquisition. We reduced our cost structure, streamlined our operations, achieved business integration targets and stabilized our liquidity position. We also settled the patent infringement lawsuit, which eliminated a liability and a distraction in our business," Albert said. 

"We enter 2001 with a clear appreciation of the problems we face in our industry and a plan to improve Nashua's business performance," concluded Albert. 

Business Segment Highlights 

The Specialty Paper segment reported fourth-quarter 2000 sales of $38.2 million compared with $16.0 million a year ago. Gross margins for the quarter were $7.1 million, or 18.5%, compared with $3.0 million, or 18.6%, for the same period in 1999. 

Albert commented, "Overall, this segment performed well in 2000. In the fourth quarter, our Merrimack coating operation continued to perform well, however, there was weakness in our paper converting performance. Paper converting is Nashua's most commoditized business and therefore highly susceptible to the extremely competitive market conditions that prevailed throughout the industry. As part of the overall business consolidation, we've decided to close our DeKalb, Illinois facility by April 1, and transfer manufacturing to our Tennessee plant. We anticipate that this move will save approximately $1 million on an annualized basis." 

The Label segment reported fourth-quarter sales of $29.2 million compared with $20.5 million for the same period last year. Gross margins for the quarter were $5.0 million, or 17%, compared with $4.1 million, or 20.1%, for the same period last year. 

Commenting on the Label segment, Albert, said, "The segment had satisfactory fourth-quarter performance. We recently promoted Tom Pagel to Vice President of the Corporation and President of the Label segment. He brings more than 20 years experience in the label business and we expect this business to prosper under Tom's direction." 

The Imaging Supplies segment reported fourth-quarter sales of $4.7 million compared with $10.0 million for the same period last year. Gross margins for the quarter were $0.3 million, or 6.1% compared with $2.8 million, or 28.3% for the same period last year. Fourth-quarter sales for the prior year included $1.9 million related to the laser remanufactured cartridge business, which was discontinued in 2000. 

Albert said, "The Toner business has been our weakest product line, and we are continuing to address its problems vigorously. With the loss of a major customer contract earlier in 2000, we implemented a 15% workforce reduction in October to reduce our cost structure. This action resulted in a $0.5 million restructuring charge. Overall, Toner continues to be a weak business segment. We're continuing to monitor this situation closely and will take additional measures to improve business performance." 

Looking ahead, Albert concluded, "The fundamentals of our business are solid. Our key goal will be to provide consistent, sustainable earnings as well as to continue to generate positive cash flow. Capital expenditures will be maintained at a conservative level to improve cash flow. The Company will focus on value-added products in growth markets and streamlining processes to reduce costs and improve customer service. These actions will ensure a healthier business and improve shareholder returns going forward." 

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, copier papers, bond, point of sale, ATM and wide format papers, entertainment tickets, as well as toners and developers and ribbons for use in imaging devices. Additional information about Nashua Corporation can be found on the World Wide Web 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," "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, failure to achieve the Rittenhouse transaction's synergies, the settlement of various tax issues, and other risks set forth in the Company's filings with the Securities and Exchange Commission. 

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NASHUA CORPORATION SUMMARY RESULTS OF OPERATIONS 

---------------------------------------------------------------------- 

Periods ended December 31, 

respectively (Unaudited) 

In thousands, Three Months Twelve Months 

except per share amounts 2000 1999 2000 1999 

---------------------------------------------------------------------- 



Net sales $67,079 $41,954 $253,122 $170,844 

Cost of products sold 54,640 32,029 202,357 129,872 

-------- -------- -------- -------- 



Gross margin $12,439 $9,925 $50,765 $40,972 

Gross margin % 18.5% 23.7% 20.1% 24.0% 



Research 903 1,312 4,224 5,051 

Selling, distribution and 

administrative expenses 13,163 9,477 49,269 34,696 

Pension settlement income(a) -- -- (18,606) -- 

Restructuring and unusual 

(income) charges, net(b) (354) (1,438) 966 (1,300) 

(Income) loss from equity 

investment (4) 267 5 320 

Interest (income) expense, 

net 646 (251) 1,993 (678) 

-------- -------- -------- -------- 



Income (loss) from continuing 

operations before 

income taxes (benefit) (1,915) 558 12,914 2,883 



Income taxes(c) 1,707 2,362 7,528 3,303 

-------- -------- -------- -------- 



Income (loss) from 

continuing operations (3,622) (1,804) 5,386 (420) 

Loss from discontinued 

operations, net of taxes -- (4,001) -- (4,001) 

-------- -------- -------- -------- 



Net income (loss) $(3,622) $(5,805) $5,386 $(4,421) 

-------- -------- -------- -------- 





Basic earnings per share: 

Income (loss) from 

continuing operations $(0.64) $(0.32) $0.95 $(0.07) 

Loss from discontinued 

operations -- (0.71) -- (0.70) 

-------- -------- -------- -------- 



Net income (loss) per 

common share $(0.64) $(1.03) $0.95 $(0.77) 

-------- -------- -------- -------- 

Average common shares 5,653 5,633 5,649 5,718 

-------- -------- -------- -------- 



Diluted earnings per share: 

Income (loss) per common 

share from continuing 

operations 

assuming dilution $(0.64) $(0.32) $0.95 $(0.07) 

Loss per common share from 

discontinued operations 

assuming dilution -- (0.71) -- (0.70) 

-------- -------- -------- -------- 



Net income (loss) per common 

share assuming dilution $(0.64) $(1.03) $0.95 $(0.77) 

-------- -------- -------- -------- 

Average common and potential 

common shares 5,653 5,633 5,667 5,718 

-------- -------- -------- -------- 



(a) Pension settlement income for the year ended December 31, 2000 

represented a gain with respect to the purchase of non- 

participating annuity contracts from Principal Life Insurance 

Company settling the pension benefit obligation related to the 

retired salary and hourly employees covered under the pension 

plan. 



(b) Restructuring and unusual charges for the three months ended 

December 31, 2000 consisted primarily of income associated with 

the settlement of the Ricoh patent lawsuit, partially offset by 

severance relating to workforce reductions at Corporate and in the 

Imaging Supplies Segment. Restructuring and unusual charges for 

the year ended December 31, 2000 related primarily to the 

discontinuance of the remanufactured laser cartridge product line 

and severance charges related to workforce reductions, partially 

offset by income from the settlement of the Ricoh patent lawsuit. 



(c) Income taxes for the three months and the year ended December 31, 

2000 include an adjustment relating to the Company's decision to 

forego the treatment of the Rittenhouse acquisition as an asset 

purchase versus a stock purchase for tax purposes and the 

write-off of a net loss carryforward which will not be utilized 

for tax purposes. 



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NASHUA CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET 

----------------------------------------------------------------------- 

December 31, December 31, 

Dollars in thousands 2000 1999 

----------------------------------------------------------------------- 



Assets 

Cash and cash equivalents $ 1,035 $ 25,056 

Restricted cash - 5,000 

Accounts receivable 27,915 17,448 

Inventories 24,726 17,893 

Taxes receivable 10,708 3,608 

Other current assets 7,159 10,562 

----------- ----------- 

Total current assets 71,543 79,567 



Plant and equipment, net 54,553 40,002 

Goodwill, net of amortization 30,490 - 

Investment in unconsolidated affiliate 375 179 

Other assets 13,510 10,697 

----------- ----------- 

Total assets $ 170,471 $ 130,445 

----------- ----------- 



Liabilities and Shareholders' Equity 

Current maturities of long-term debt $ 9,806 $ 511 

Accounts payable 19,104 10,946 

Accrued expenses 20,102 30,253 

Income taxes payable - 2,295 

----------- ----------- 

Total current liabilities 49,012 44,005 



Long-term debt 35,905 511 

Other long-term liabilities 13,217 19,103 

----------- ----------- 

Total long-term liabilities 49,122 19,614 



Common stock and additional capital 22,280 22,098 

Retained earnings 64,979 59,650 

Treasury stock, at cost (14,922) (14,922) 

----------- ----------- 

Total shareholders' equity 72,337 66,826 

----------- ----------- 



Total liabilities and shareholders' equity $ 170,471 $ 130,445 

----------- ----------- 





---------------------------------------------------------------------- 

NASHUA CORPORATION SELECTED FINANCIAL DATA 

---------------------------------------------------------------------- 

Periods ended December 31, 

respectively Three Months Twelve Months 

Dollars in thousands (Unaudited) 2000 1999 2000 1999 

---------------------------------------------------------------------- 



NET SALES 



Imaging Supplies(a) $4,747 $10,003 $27,882 $41,145 

Specialty Paper Products(a) 38,249 15,993 138,838 66,329 

Label Products 29,152 20,509 105,107 78,584 





Reconciling Items: 

Eliminations (5,237) (4,611) (19,169) (15,421) 

Other(b) 168 60 464 207 

-------- -------- -------- -------- 



Net sales $67,079 $41,954 $253,122 $170,844 

-------- -------- -------- -------- 



PRETAX INCOME (LOSS) 



Imaging Supplies(a) $(1,357) $(680) $(4,223) $(1,634) 

Specialty Paper Products(a) 1,228 596 7,490 2,639 

Label Products 1,742 1,010 5,389 6,924 



Reconciling Items: 

Other(b) 313 (93) 989 (215) 

Unallocated corporate 

expenses, including interest (4,195) (1,713) (14,371) (6,131) 

Pension settlement income -- -- 18,606 -- 

Restructuring and unusual 

income (charges) 354 1,438 (966) 1,300 

-------- -------- -------- -------- 

Total pretax income (loss) $(1,915) $558 $12,914 $2,883 

-------- -------- -------- -------- 



Depreciation and amortization $2,595 $1,967 $9,304 $6,381 

-------- -------- -------- -------- 

Investment in plant and 

equipment $2,128 $3,780 $9,625 $7,855 

-------- -------- -------- -------- 



(a) For the three months ended December 31, 1999, Net Sales and Pretax 

Income (Loss) have been adjusted to reflect the transfer of cut 

paper from the Imaging Supplies Segment to the Specialty Paper 

Products Segment in the amounts of $3.3 million and ($.3) million, 

respectively. For the year ended December 31, 1999, Net Sales and 

Pretax Income (Loss) have been adjusted in the amounts of $15.6 

million and $.5 million, respectively, for this product line 

transfer. 



(b) Represents activity from the Projection Systems operating segment, 

which falls below the quantitative threshold for a reportable 

segment. 

CONTACT: 

Nashua Corporation 

Andy Albert/John Patenaude, 847-318-1710/603-880-2145 

or 

Citigate Sard Verbinnen 

Judy Brennan/Christine Seketa, 212-687-8080 

KEYWORD: NEW HAMPSHIRE 







BW2125 MAR 01,2001 

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