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Nashua Reports Fourth Quarter and 2003 Year End Results
NASHUA, N.H.–(BUSINESS WIRE)–Feb. 11, 2004–Nashua Corporation (NYSE: NSH), a premier 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, 2003.Net sales for the fourth quarter of 2003 were $75.2 million, compared to $75.0 million for the fourth quarter of 2002. Gross margin for the quarter was $13.8 million, or 18.3%, compared to $14.1 million, or 18.9%, for the fourth quarter of 2002. The Company reported a net loss for the fourth quarter of 2003 of $0.9 million, or $0.15 per share, compared with net income of $0.4 million, or $0.07 per share, for the fourth quarter of 2002. The results for the fourth quarter of 2003 included a one-time non-cash charge for postretirement healthcare benefits for New Hampshire-based union employees ($1.6 million), severance costs ($1.0 million) – partially offset by savings ($0.5 million) – and a one-time charge related to the settlement of certain commitments under the CEO’s employment contract ($0.3 million). These charges were previously disclosed by the Company in its January 21, 2004 news release. The fourth quarter results for 2002 included a net non-cash gain of $0.2 million related to the curtailment of pension and postretirement plans.
Net sales for the year ended December 31, 2003, were $288.9 million, compared to $283.2 million for the year ended December 31, 2002. Gross margin for the full year was $53.8 million, or 18.6%, compared to $56.1 million, or 19.8%, for 2002. Net income for the full year was $0.1 million, or $0.02 per share, compared to $2.3 million, or $0.40 per share, for 2003.
Andrew Albert, Chairman, President and Chief Executive Officer of Nashua Corporation said, “For the year 2003, Nashua reported increased sales and remained profitable in the face of intense competition and continued overcapacity in the paper industry. On balance, Nashua continues to perform acceptably and is taking decisive actions to both contain costs and grow by making strategic investments that improve plant utilization, leverage our national sales and marketing resources, expand our business offerings, and strengthen our relationships with customers.”
Highlights for the year included:
— The acquisition of the operations of the Label Company in St. Louis, Missouri, which provides additional flexibility for Nashua’s Label segment while enhancing the Company’s relationship with a longstanding customer and providing additional volume for Nashua’s Coating operations within its Specialty Paper segment.
— Expansion of Nashua’s supermarket and wide format product lines through several small acquisitions that were completed in the fourth quarter of 2003. These acquisitions also enabled the Company to leverage its marketing and sales resources.
— Strategic investments in equipment and information technology, which provide enhanced capabilities to service customers while increasing efficiency and reducing costs. These investments included new label printing and processing equipment and enhancements to the Company’s leading edge “Nashua Advantage” web-based ordering system and the introduction of a new “E Catalogue” that gives customers an easy and efficient way to order Nashua products.
Albert stated, “Investments to provide customers with a wider array of products and reduction of costs through equipment and information systems upgrades will continue to be a primary focus in 2004.”
Business Segment Highlights
Nashua’s Label segment, which prints and converts product for grocery, food service, retail, transportation, entertainment and general industrial markets, reported sales for the fourth quarter of 2003 of $27.1 million, gross margin of $4.9 million, or 18.0%, and pre-tax operating income of $1.7 million. Sales for the fourth quarter of 2002 were $26.6 million, gross margin was $4.4 million, or 16.5%, and pre-tax operating income was $1.2 million.
“Sales in our Label segment increased approximately 2% in the fourth quarter of 2003 compared to the fourth quarter of 2002. The increase is mainly attributable to the addition of a supermarket products business acquired in February 2003,” said Albert. “Margins improved due to a combination of manufacturing efficiencies and lower material costs. The improved profitability of the Label segment for the fourth quarter reflects the positive effect of our investments in equipment and continuing cost containment initiatives.”
The Company’s Specialty Paper Products segment, which includes Nashua’s paper coating and converting business, reported sales for the fourth quarter of 2003 of $43.0 million, compared to $43.4 million for the fourth quarter of 2002. Gross margins for the quarter were $7.5 million, or 17.6%, compared to $8.7 million, or 20%, for the fourth quarter of 2002. Pre-tax operating income for the fourth quarter of 2003 was $0.6 million, compared to pre-tax income of $1.7 million for the fourth quarter of 2002.
Said Albert, “The fourth quarter sales decline in the Specialty Paper segment resulted from the sale of the marginal cut sheet paper product line in the third quarter, together with declines in the mature dry gum, heat seal, carbonless and bond point of sale (POS) paper product lines. These declines were offset by increases in the thermal and wide format product lines. Margins decreased as a result of sales mix, severance cost and higher than forecasted workers’ compensation claims. Net income for the fourth quarter was negatively impacted by lower margins and one time severance costs.”
Nashua’s Imaging Supplies, or Toner, segment reported sales for the fourth quarter of 2003 of $6.4 million, compared to $5.9 million for the fourth quarter of 2002. Gross margins for the quarter were $1.3 million, or 21%, compared to $1.1 million, or 18.8%, in the fourth quarter of 2002. Pre-tax income for the fourth quarter of 2003 was $0.4 million, compared to a $0.1 million loss for the fourth quarter of 2002.
“Sales in the fourth quarter were positively impacted by greater resin and Ricoh-compatible toner sales. Increased volumes had a favorable impact on margins for the fourth quarter. We are encouraged by the strengthening of sales and margin in the fourth quarter,” said Albert.
Use of Non-GAAP
EBITDA is presented in the tables accompanying this release as supplemental information which 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.
Guidance
In discussing the expectations for the coming year, Albert said, “Sales, margin and expense control are key to achieving our 2004 budgeted goals. We expect sales to increase and to be in a range between $294 million and $310 million. Also, we expect net income for the year to be in the range between $3.0 million, or $.51 per share, and $3.4 million, or $.57 per share.”
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, 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 U http://www.nashua.com/U.
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” 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, the settlement of various tax issues, 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.
Fourth Quarter 2003 Earnings Results NASHUA CORPORATION SUMMARY RESULTS OF OPERATIONS Periods ended December 31, respectively (unaudited) In thousands, except per share Three Months Twelve Months amounts 2003 2002 2003 2002 --------------------------------------------------------------------- Net sales $ 75,207 $ 74,984 $288,906 $283,190 Cost of products sold 61,445 60,836 235,101 227,102 -------- -------- -------- -------- Gross margin $ 13,762 $ 14,148 $ 53,805 $ 56,088 Gross margin % 18.3% 18.9% 18.6% 19.8% Selling, distribution and administrative expenses 12,481 12,640 47,768 47,839 Research 590 724 2,469 3,139 Loss from equity investment 219 24 523 59 Interest expense, net 327 327 1,295 1,492 Restructuring and unusual income (a) (68) (64) (68) (88) Net (gain) loss on curtailment of postretirement plans (b) 1,646 (181) 1,599 (181) -------- -------- -------- -------- Income (loss) before income taxes (1,433) 678 219 3,828 Income tax provision (benefit) (544) 252 117 1,512 -------- -------- -------- -------- Net income (loss) $ (889) $ 426 $ 102 $ 2,316 -------- -------- -------- -------- Basic earnings per share: Net income (loss) per common share $ (0.15) $ 0.07 $ 0.02 $ 0.40 -------- -------- -------- -------- Average common shares 5,901 5,815 5,869 5,783 -------- -------- -------- -------- Diluted earnings per share: Net income (loss) per common share assuming dilution $ (0.15) $ 0.07 $ 0.02 $ 0.39 -------- -------- -------- -------- Average common and potential common shares 5,901 5,932 5,999 5,873 -------- -------- -------- -------- (a) Net restructuring and unusual income for the three and twelve months ended December 31, 2003 of $68,000 and the three and twelve months ended December 31, 2002 of $64,000 and $88,000 represent net reductions to our previously established restructuring reserve. (b) Net (gain) loss on curtailment of postretirement plans for the three and twelve months ended December 31, 2003 of $1.6 million represents a loss with respect to postretirement healthcare benefits for union employees located in New Hampshire. Net (gain) loss on curtailment of postretirement plans for the three and twelve months ended December 31, 2002 of $.2 million represents a net gain related to changes to the Nashua Corporation Retirement Plan for Salaried Employees, the Supplement Executive Retirement Plan and postretirement benefit plans.Fourth Quarter 2003 Earnings Results NASHUA CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET December December 31 31 Dollars in thousands 2003 2002 ----------------------------------------------------------- Assets Cash and cash equivalents $ 1,183 $ 1,085 Accounts receivable 31,665 29,918 Inventories 22,735 20,434 Other current assets 5,205 4,985 -------- -------- Total current assets 60,788 56,422 Plant and equipment, net 40,777 42,369 Goodwill, net of amortization 31,471 29,462 Intangibles, net of amortization 1,781 1,672 Other assets 16,859 16,263 -------- -------- Total assets $151,676 $146,188 -------- -------- Liabilities and Shareholders' Equity Accounts payable $ 20,474 $ 17,931 Accrued expenses 14,368 15,230 Current maturities of long-term debt 3,400 2,000 Current maturities of notes payable 250 250 -------- -------- Total current liabilities 38,492 35,411 Long-term debt 24,200 23,000 Notes payable 960 1,210 Other long-term liabilities 26,827 24,549 -------- -------- Total long-term liabilities 51,987 48,759 Common stock and additional capital 20,418 20,074 Retained earnings 53,477 53,375 Accumulated other comprehensive loss: Minimum pension liability adjustment(a) (12,698) (11,431) -------- -------- Total shareholders' equity 61,197 62,018 -------- -------- Total liabilities and shareholders' equity $151,676 $146,188 -------- -------- (a) Our minimum pension liability adjustment for the year ended December 31, 2003 represents an increase in our pension liability resulting from a decline in the discount rate and expected return on plan assets utilized to compute our pension liability. Our minimum pension liability adjustment for the year ended December 31, 2002 represents an increase in our pension liability resulting from a decline in the fair market values of equities held by company- sponsored pension plans and a decline in the discount rate and expected return on plan assets.Fourth Quarter 2003 Earnings Results NASHUA CORPORATION RECONCILIATION OF NET INCOME TO EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION Periods ended December 31, respectively Three Months Twelve Months Dollars in thousands (unaudited) 2003 2002 2003 2002 --------------------------------------------------------------------- Net income (loss) $ (889) $ 426 $ 102 $ 2,316 Add back: Interest expense, net 327 327 1,295 1,492 Income tax provision (benefit) (544) 252 117 1,512 Depreciation on fixed assets 1,896 1,853 7,461 7,294 Amortization of intangible assets 122 99 481 287 -------- -------- -------- -------- Earnings before interest, taxes, depreciation and amortization $ 912 $ 2,957 $ 9,456 $ 12,901 -------- -------- -------- --------Fourth Quarter 2003 Earnings Results NASHUA CORPORATION SELECTED FINANCIAL DATA Periods ended December 31, respectively Dollars in thousands Three Months Twelve Months (unaudited) 2003 2002 2003 2002 --------------------------------------------------------------------- NET SALES Label Products $ 27,080 $ 26,591 $101,801 $100,837 Specialty Paper Products 42,960 43,438 169,023 160,736 Imaging Supplies 6,352 5,857 $ 23,459 24,042 Reconciling Items: Eliminations (1,185) (902) (5,379) (2,456) Other(a) - - 2 31 -------- -------- -------- -------- Net sales $ 75,207 $ 74,984 $288,906 $283,190 -------- -------- -------- -------- PRETAX INCOME Label Products $ 1,725 $ 1,190 $ 5,844 $ 5,529 Specialty Paper Products 565 1,668 4,372 6,534 Imaging Supplies 370 (63) 444 911 Reconciling Items: Other income (loss)(a) (17) (1) (19) 6 Unallocated corporate expenses (2,171) (2,034) (7,596) (7,929) Interest expense, net (327) (327) (1,295) (1,492) Restructuring and unusual income 68 64 68 88 Net gain (loss) on curtailment of post retirement plans (1,646) 181 (1,599) 181 -------- -------- -------- -------- Total pretax income (loss) $ (1,433) $ 678 $ 219 $ 3,828 -------- -------- -------- -------- Depreciation and amortization $ 2,018 $ 1,952 $ 7,942 $ 7,581 -------- -------- -------- -------- Investment in plant and equipment $ 1,022 $ 1,733 $ 4,307 $ 4,349 -------- -------- -------- -------- (a) Represents other operating activity which falls below the quantitative threshold for a reportable segment.
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