-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, hFXEEdsmPWe2FdxSRJfb84lhjO4pWyLCJ1/cEjRbLYyeEt1D5kW4YhGFJDWroYxF qfUOIWPGWREymiNrMetxHw== 0000950135-94-000227.txt : 19940404 0000950135-94-000227.hdr.sgml : 19940404 ACCESSION NUMBER: 0000950135-94-000227 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NASHUA CORP CENTRAL INDEX KEY: 0000069680 STANDARD INDUSTRIAL CLASSIFICATION: 2670 IRS NUMBER: 020170100 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-05492 FILM NUMBER: 94519666 BUSINESS ADDRESS: STREET 1: 44 FRANKLIN ST STREET 2: PO BOX 2002 CITY: NASHUA STATE: NH ZIP: 03061-2002 BUSINESS PHONE: 6038802323 MAIL ADDRESS: STREET 1: 44 FRANKLIN STREET STREET 2: P.O. BOX 2002 CITY: NASHUA STATE: NH ZIP: 03061-2002 10-K 1 FORM 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1993 ----------------- OR -- ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from ______________ to ______________ Commission File Number 1-5492-1 -------- NASHUA CORPORATION - ------------------------------------------------------------------------------ (Exact name of registrant as specified in its Charter) Delaware 02-0170100 - ---------------------------------------- --------------------------------------- (State of incorporation) (I.R.S. Employer Identification Number) 44 Franklin Street P.O. Box 2002 Nashua, New Hampshire 03061-2002 - ---------------------------------------- --------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (603) 880-2323 ---------------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange Title of each class on which registered ------------------- --------------------- Common Stock, par value $1.00 New York Stock Exchange Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K (X). Continued 2 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------- The aggregate market value of voting stock held by non-affiliates of the registrant as of March 18, 1994 was approximately $177,843,791. The number of shares outstanding of the registrant's Common Stock as of March 18, 1994 was 6,321,950 (excluding 24,610 shares held in treasury). DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Proxy Statement dated March 21, 1994 for the annual meeting of stockholders to be held on April 22, 1994 are incorporated by reference into Part III of this report. 3 PART I ITEM 1. BUSINESS - ----------------- GENERAL - ------- Nashua Corporation provides products and services in four business segments: coated products, photofinishing, computer products and office supplies. Foreign sales and export sales from the United States totaled $190.3 million and represented 34 percent of the Company's total sales in fiscal 1993. Nashua was incorporated in Massachusetts in 1904 and changed its state of incorporation to Delaware in 1957. The Company has its principal executive offices at 44 Franklin Street, P.O. Box 2002, Nashua, New Hampshire 03061-2002 (Telephone: (603) 880- 2323). References to the "Company" or to "Nashua" refer to Nashua Corporation and its consolidated subsidiaries, unless the context otherwise requires. In the fourth quarter of 1993, the Company recorded restructuring and other unusual charges of $48.5 million ($32.1 million after-tax). These charges principally reflect the Company's decision to channel resources from its Computer Products businesses to other operations by selling or otherwise liquidating the oxide, diskette and thin-film manufacturing operations and costs associated with personnel reductions in the remaining businesses. The charges include approximately $31.7 million related to the write-down of plant and equipment and other assets, primarily utilized in the Computer Products Group, to net realizable value. The estimate of such charges was finally determined on March 15, 1994. The charges also include $12.1 million in severance and other costs related to personnel reductions. The remainder of the charges includes provisions for consolidation of facilities and other accrued expenses incidental to the restructuring decision. As part of the restructuring plan, the Company has offered an early retirement program and, depending on the actual number of acceptances, expects to record a pretax charge of approximately $3.5 million in the first half of 1994. Most of the expenditures under the restructuring plan are expected to be incurred by the end of 1994. The Company expects to realize annualized savings in personnel, facilities and other costs (exclusive of the oxide, diskette and thin-film manufacturing businesses) by more than $8.0 million pretax by the end of 1994. In addition, depreciation and amortization expense in 1994, excluding additions, is expected to be reduced by approximately $6.0 million primarily relating to the write-down of the Computer Product Group assets. In March 1994, the Company executed a letter of intent to sell its thin-film disk operation to an investor group comprised of William J. Almon, Prudential Private Equity Investors III, L.P. and others for $20 million. Mr. Almon has extensive experience in the disk drive industry having been president of Conner Peripherals and, prior to that, vice president of storage for IBM. On completion of the sale, Nashua will receive $15 million in cash and a $5 million short-term note, secured by assets of the thin-film business. Completion of the sale is expected in late April. Also in March 1994, the Company executed a letter of intent to sell certain assets of its oxide disk and head disk assembly (HDA) operations in Merrimack, New Hampshire to Sequel, Inc. The sale price of these assets approximates their net book value. The Note entitled "Information About Operations" to the Company's Consolidated Financial Statements, which appears on page 33 of this Form 10-K contains financial information concerning Nashua's business segments. -2- 4 COATED PRODUCTS - --------------- Nashua's coated products segment consists of the manufacture and sale of graphic products, labels and tapes. Graphic Products. The Company's graphic products consist of thermosensitive label papers, dry-gummed label papers, carbonless papers, and facsimile and other thermal papers. Graphic products revenues were $60.4 million for 1993, $56.4 million for 1992 and $54.5 million for 1991. Nashua's thermosensitive label papers are coated with an adhesive which is activated when heat is applied. These products are usually sold through fine paper merchants who, in turn, resell these products to printers who convert the papers into labels for use principally in the pharmaceutical industry. Nashua's thermosensitive label papers are also used in the bakery industry and the meat packaging industry. Davac [Registered] dry-gummed label paper is a paper which is coated with a moisture-activated adhesive. Davac [Registered] dry-gummed label paper is sold primarily to fine paper merchants and business forms manufacturers. It is ultimately converted into various types of labels and stamps. Nashua's competitors in the thermosensitive and dry-gummed label industries include Brown-Bridge Company (a division of Kimberly Clark Corporation) and Ivex Corporation. Nashua's carbonless paper is a coated paper used in the production of multi-part business forms which produce multiple copies without carbon paper. The product is sold in sheet form through fine paper merchants and in roll form directly to the printing industry, where it is converted into multi-part business forms. In 1991, the Company introduced Stallion[TRADEMARK] carbonless paper, a product which allows xerographic duplication of carbonless papers. Within the carbonless paper market, Nashua generally competes with larger integrated manufacturers that have more capital resources and benefit from greater economies of scale. These competitors include Appleton Papers, Inc., The Mead Corporation and Minnesota Mining and Manufacturing Company. Nashua's thermal papers develop an image upon contact with either a heated stylus or heat-activated dot matrix print head. A major application for these papers is for use in facsimile machines. This application is expected to be adversely affected in the future by the increased use of plain paper facsimile machines. Thermal papers are also used in portable electronic data terminals, airline and package identification systems, professional and personal computer printers, medical and industrial recording charts and for conversion to labels. Nashua markets facsimile papers through multiple channels, including office equipment and supply dealers, original equipment manufacturers, paper merchants, mail-order direct marketers, small-roll converters, and Nashua's office supplies segment. Other thermal papers are sold to printers, office equipment dealers, small-roll converters, original equipment manufacturers and to Nashua's Label Division for further converting. The thermal paper industry is highly competitive and price sensitive. Nashua's competitors include major integrated companies such as Appleton Papers, Inc., Kanzaki Paper Mfg. Co., Ltd., Jujo Paper Co., Ltd. as well as several small-roll converters in Japan. Label. Nashua's Label Division manufactures electronic data processing and thermal pressure sensitive labels and roll stock for those labels. Nashua sells labels through distributors and directly to -3- 5 end-users and sells roll stock to the label converting industry. Significant uses of such labels include grocery scale marking, inventory control and address labels. Nashua is a major supplier of labels to the supermarket industry and labels for use in the distribution and transportation of products. Nashua's label business is extremely price sensitive and highly competitive, and includes competitors such as Avery/Dennison Corporation and Uarco, Inc. Label revenues were $72.0 million for 1993, $66.8 million for 1992 and $64.4 million for 1991. Tape. Nashua's tape products include duct tape and masking tape for various industrial and consumer uses. Additionally, Nashua sells foil duct and strapping tape which it acquires from other manufacturers. Tape revenues were $52.2 million for 1993, $52.2 million for 1992 and $52.9 million for 1991. Nashua sells both duct and foil tapes through industrial supply distributors, primarily for use in the heating, cooling and air conditioning and asbestos removal industries. Nashua has a prominent market position in the sale of duct tape. The masking tape market is highly competitive and Nashua sells its products through mill supply houses as well as directly for end use by appliance and automobile manufacturers. Both duct and masking tapes are also sold through manufacturers' representatives to large retail chains for resale to consumers and general industrial users. Nashua has begun to market duct tapes directly to retail superstores. Additionally, Nashua has significant tape sales overseas. Nashua's key competitors in the duct tape business are Tesa Tape, Inc., Polyken Tapes, Inc. and Shuford Mills, Inc. Supplies and Materials. Nashua depends on outside suppliers for most of the raw materials used by the coated products group, including paper to be converted and chemicals to be used in producing the various coatings Nashua applies. The Company purchases these materials from several suppliers and believes that adequate supplies are available. PHOTOFINISHING - -------------- Nashua provides mail-order photofinishing services to amateur photographers at its processing facilities in the United States, the United Kingdom and Canada. Nashua develops and prints film received by mail and also sells film and associated products to its base of customers. Nashua operates predominantly under the trade name York Photo Labs in the United States, Truprint and York Photo Labs in the United Kingdom and Scot Foto and York Photo in Canada. Nashua is the market leader in the mail-order photofinishing business in all three countries. Demand for photofinishing services is generally the strongest during the third quarter due to increased picture taking by the public during the summer months. Supplies and Materials. The principal materials used by Nashua's photofinishing business include color print paper, photo developing chemicals and color print films, all of which are available from several manufacturers. Competition. The Company's major mail order photofinishing competitors include District Photo, Inc., Mystic Color Labs Inc. and Seattle FilmWorks, Inc. in the United States, Grunwick Processing Laboratories Limited in the United Kingdom and Chas Abel Photo Services, Ltd. in Canada, as well as -4- 6 numerous other national, regional and local processors in all three countries. The mail-order segment of the photofinishing market is not expected to be significantly affected by the growth of minilabs as long as a substantial price differential exists between minilabs and mail-order photofinishing. COMPUTER PRODUCTS - ----------------- Nashua manufactures and markets magnetic disk media which is used in computer disk drives to record and store digital information in data processing, word processing and telecommunications systems. Disks are manufactured by the coating or other deposition of small magnetic particles in a thin layer over a substrate of aluminum or polyester film. All disks manufactured by Nashua fall into one of three product categories: thin-film rigid disks, iron-oxide rigid disks or flexible disks. As mentioned above, in 1993 a restructuring charge was recorded to reflect the Company's decision to channel resources from its Computer Products business to its other operations. In March 1994, the Company executed a letter of intent to sell its thin- film disk operation and a letter of intent to sell certain assets of its oxide disk and head disk assembly operations. Nashua depends on outside suppliers for the continued availability of materials and components for all of its computer products. The Company has access to two or more suppliers for all essential raw materials and components. Export sales of disk media products were approximately $95 million in 1993, $77 million in 1992 and $46 million in 1991. Thin-Film. Nashua's thin-film rigid disks are manufactured at its Santa Clara, California facility for sale principally to disk drive manufacturers for use in disk drive assemblies. Nashua's thin-film disks are produced in 95mm and 65mm diameters using aluminum substrates obtained from Nashua's Champaign, Illinois plant. Small diameter thin-film disks are used mainly in microcomputers and personal computers in fixed storage applications and generally have greater storage capacity and are more expensive than larger diameter iron-oxide rigid disks. The physical and magnetic differences among product types are dictated by the different computer drive designs of the various drive manufacturers. The products differ in physical size, cost, storage density and other parameters. The Company works closely with disk-drive manufacturers in media design and development to improve product compatibility and to meet evolving opportunities, needs and standards. Significant engineering efforts and lead time are often required to become qualified as an approved supplier to a disk drive manufacturer for new or modified products. At the same time, product life cycles are becoming shorter, resulting in greater capital requirements to successfully introduce new products. Thin-film disks are sold primarily to a limited number of large disk-drive manufacturers on a direct basis by Nashua. The demand for disks from those manufacturers can vary significantly and the loss of any such manufacturer as a customer could have a material adverse affect on the segment. Thin-film revenues were $77.3 million for 1993, $57.2 million for 1992 and $22.8 million for 1991. Competition in the marketplace for thin-film disks is intense and is based on quality, price, rapid product development and customer service. Intense competition and rapid technological change, resulting -5- 7 in continually shorter life cycles for certain disk products, has created significant variation in sales and profitability of the segment. Additionally, certain of Nashua's customers, principally Conner Peripherals, Inc. and Seagate Technologies, Inc., also manufacture thin-film disks for their own use and expansion of their production could lower their demand for thin-film disks from outside suppliers. Nashua's major competitors in the thin-film rigid disk business are Komag, Inc., Akashic Memories Corporation, Mitsubishi Electric Corporation, Fuji Electric Co., Ltd., HMT Technologies Corporation, Showa Denko K.K. and Denki Kogaku Kogyo K.K. Iron-Oxide. Nashua manufactures iron-oxide rigid disks at one of its Merrimack, New Hampshire facilities. Nashua also remanufactures computer head disk assemblies which incorporate oxide disks. Oxide disks are used mainly in large computer systems for removable and fixed data storage. They are produced by Nashua principally in 14-inch and 8-inch diameters for use as single disks, single disk cartridges or in combination as disk packs. Iron-oxide disks incorporate coatings and technology which pre-date thin-film technology and, as a result, are being used less for new disk drives and increasingly for rebuilding head disk assemblies of existing computers or for replacement disk packs or cartridges. Correspondingly, the market for iron-oxide disks is contracting rapidly. Nashua sells its single iron-oxide disks primarily on a direct basis to disk drive manufacturers. Disk packs and cartridges are sold to dealers and distributors for resale under the Nashua brand and private labels and to computer systems manufacturers. Additionally, certain iron-oxide disks are incorporated into head disk assemblies which are remanufactured and sold by Nashua and other head disk assembly remanufacturers. Nashua's major competitors in the iron-oxide disk market are Sequel, Inc. and Media Technology, Inc. Flexible. Flexible disks, both diskettes and microdiskettes, are manufactured at the Company's Nashua, New Hampshire facility. Additionally, certain microdiskettes sold by Nashua are manufactured by outside suppliers. Flexible disk products are used for removable data storage in personal computers and word processing equipment. Nashua's diskettes and microdiskettes are sold to dealers and distributors under Nashua and private labels and under private labels to original equipment manufacturers. While the market for diskettes is contracting significantly, the market for microdiskettes appears to be steady or expanding. Nashua's major flexible disk competitors are Minnesota Mining and Manufacturing Company, Maxell Corporation of America, Hanny Magnetics, Ltd., Sony Corporation, BASF Corporation, TDK Corporation and KAO Corporation. OFFICE SUPPLIES - --------------- Nashua's office supplies segment markets toners, developers, facsimile paper, copying paper, remanufactured laser printer cartridges, and other supplies and products used in the office. Certain of these products are manufactured by Nashua. -6- 8 Marketing. Nashua markets its copier-related and other office products to its national and government accounts through a network of approximately 250 dealers located throughout the United States. These dealers also purchase Nashua's office products for resale directly to end users. The Company also sells certain products through its own sales force to office supply distributors and to original equipment manufacturers for resale under their brand names. During 1993, the Company expanded its distribution capabilities to include direct mail, by acquiring certain assets of Wang Laboratories' "Wang Express." These assets include a business-to-business catalog since renamed "Nashua Express." The catalog includes many of the Company's existing office products, as well as other peripheral personal computer products. Supplies and Materials. Materials necessary for Nashua's manufacture of toners and developers, as well as most products Nashua purchases in finished form (including papers, certain toners and developers, and word processing supplies), are readily available from a variety of sources. The availability of used laser printer cartridges could have an impact on the remanufacture of laser printer cartridges. Competition. In its toner and developer business, Nashua's competitors include Xerox Corporation and Eastman Kodak Company, which have the advantage of selling supplies for use in machines manufactured by them. Competition in the office supplies business, particularly for toner, is intense with more sophisticated toner formulas and shorter product life cycles presenting obstacles to timely product development and marketing. The Company's primary competitor for its remanufactured laser printer cartridges is Canon, Inc. which manufactures new laser printer cartridges principally for sale to large original equipment manufacturers for resale under their brand names. Competitors in the direct mail catalog business include Inmac, Gobal Computer Supplies, Office Max and Office Depot. RESEARCH AND DEVELOPMENT - ------------------------ Nashua's research and development efforts have been instrumental in the development of many of the products it markets. Nashua's research and development expenditures were $12.7 million in 1993, $11.9 million in 1992 and $10.2 million in 1991. ENVIRONMENTAL MATTERS - --------------------- The Company (and its competitors) are subject to various environmental laws and regulations. These include the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act ("CERCLA"), the Resource Conservation and Recovery Act ("RCRA"), the Clean Water Act and other state and local counterparts of these statutes. The Company believes that its operations have been and continue to be operating in compliance in all material respects with the applicable environmental laws and regulations. (Violation of these laws and regulations could result in substantial fines and penalties.) Nevertheless, in the past and potentially in the future, the Company has and could receive notices of alleged environmental violations. The Company has endeavored to promptly remedy any such violations upon notification. For the past three years the Company has spent approximately $1 million per year in order to ensure its operations remain in compliance with pertinent environmental laws and regulations. In addition, for those sites which the Company has received notification of the need to remediate, the -7- 9 Company has assessed its liability and accrued what it considers to be the most likely amount within the estimated range of remediation costs. At December 31, 1993 this amount was $1.5 million. Liability of "potentially responsible parties" (PRP) under CERCLA and RCRA, however, is joint and several, and actual remediation expenses at sites where the Company is a PRP may exceed current estimates. The Company believes that based on the facts currently known, its financial position and the estimated environmental accrual recorded, its remediation expense with respect to those sites and on-going costs of compliance are not likely to have a material adverse effect on its liquidity, consolidated financial position or results of operations. EMPLOYEES - --------- Nashua and its subsidiaries had approximately 4,000 full-time employees at March 1, 1994. Most of the hourly employees of Nashua's Office Supplies and Coated Products segments are members of one of several unions, principally the United Paperworkers International Union. FOREIGN OPERATIONS - ------------------ Nashua has Photofinishing subsidiaries in Canada and the United Kingdom. Nashua had export sales of approximately $128.9 million in 1993. Nashua includes revenues and other financial data from its foreign operations in its business segment reporting according to the nature of the product sold. The Note to the Company's Consolidated Financial Statements entitled "Information About Operations", which appears on page 33 of this Form 10-K, contains additional information regarding Nashua's foreign operations during the last three years, including identifiable assets, net sales and operating income by geographic area. Nashua's international sales are subject to risks that generally do not affect businesses operating wholly within a single country. These include political risks associated with doing business in foreign countries, exchange control and import limitations which may impede the free movement of goods and funds from one country to another and currency exchange rate risks. Nashua's foreign business generally is adversely affected as the United States dollar strengthens against the foreign currencies of the countries in which it does business. From time-to-time Nashua enters into various foreign exchange contracts and options during the year to mitigate the risk of foreign currency fluctuations with respect to foreign currency denominated transactions. ITEM 2. PROPERTIES - ------- ------------- Nashua's manufacturing facilities are located in the United States, Canada and the United Kingdom. Nashua considers its properties to be in good operating condition and suitable for the production of its products. -8- 10 The principal manufacturing facilities of the Company are listed by industry segment, location and principal products produced. Except as otherwise noted, each of these facilities is owned by the Company. PRINCIPAL PROPERTIES --------------------
SQUARE PRINCIPAL LOCATION FOOTAGE PRODUCTS PRODUCED - -------- ------- ----------------- OFFICE SUPPLIES - --------------- Nashua, New Hampshire 178,000 dry toners and developers Chelmsford, Massachusetts 35,000 (1) liquid toners Merrimack, New Hampshire 8,000 chemicals Exeter, New Hampshire 77,000 (1) remanufactured laser printer cartridges COATED PRODUCTS - --------------- Watervliet, New York 365,000 pressure sensitive tapes Merrimack, New Hampshire 427,000 carbonless paper, facsimile paper, thermosensitive and dry-gummed label papers Nashua, New Hampshire 30,000 chemicals Omaha, Nebraska 170,000 pressure sensitive labels and laminate paper COMPUTER PRODUCTS - ----------------- Nashua, New Hampshire 50,000 flexible disks Merrimack, New Hampshire 110,000 rigid disks, disk packs and cartridges, head disk assemblies and OPC drums Champaign, Illinois 32,000 aluminum substrates for computer disks Santa Clara, California 67,000 (1) thin-film rigid disks PHOTOFINISHING - -------------- Parkersburg, West Virginia 81,000 (1) photofinishing Newton Abbot, United Kingdom 46,000 (1) photofinishing Saskatoon, Saskatchewan, Canada 15,000 photofinishing Telford, United Kingdom 38,000 (1) photofinishing
___________________________ (1) Leased facilities -9- 11 ITEM 3. LEGAL PROCEEDINGS - ------- ----------------- As reported in the Company's Form 8-K dated January 25, 1994, Nashua has received a final ruling with respect to the arbitration of claims associated with the Company's sale of its international office systems business to Gestetner PLC in 1990. As a result of this ruling, Nashua has paid Gestetner $1.8 million including interest. In January 1994, Nashua settled allegations in Harry E. Aine's Complaint with the United States International Trade Commission that Nashua had infringed U.S. patent RE 32,464. The Settlement Agreement is subject to the Commission's termination of its investigation into the matter. Nashua is a defendant in various litigation proceedings, none of which are expected to have a material effect on its financial position. See "Item 1 - Environmental Matters" for a description of certain environmental matters. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------- --------------------------------------------------- Not applicable ITEM - EXECUTIVE OFFICERS OF THE REGISTRANT - ------ ------------------------------------ Set forth below are the present executive officers of the Company, their ages and their positions held with the Company:
NAME AGE POSITION - ---- --- -------- Charles E. Clough 63 Chairman and Chief Executive Officer William E. Mitchell 50 President and Chief Operating Officer John G. Barnes 54 Vice President Joseph R. Kershaw 60 Vice President William Luke 46 Vice President-Finance and Chief Financial Officer Francis J. Lunger 48 Vice President, Finance and Administration John J. Montesi 59 Vice President
Mr. Clough has been Chief Executive Officer and Chairman of Nashua since prior to 1988. He also was President until September 1993. Mr. Mitchell has been President and Chief Operating Officer since September 1993 when he joined the Company. Prior to September 1993, he was a Senior Vice President of Raychem Corporation. Mr. Barnes has been Vice President since prior to 1988. He has had operating responsibility for various divisions and now has responsibility for international sales. -10- 12 Mr. Kershaw has been Vice President since prior to 1988. He has had responsibility for various divisions and now has responsibility for the graphic products division. Mr. Luke has been Vice President-Finance and Chief Financial Officer since prior to 1988. Mr. Lunger has been Vice President, Finance and Administration since February 1994 when he joined the Company. Prior to joining the Company he was Vice President and General Manager for Raychem Corporation. Mr. Montesi has been Vice President since prior to 1988. He has had responsibility for various divisions since 1989 and now has responsibility for the computer products divisions. From prior to 1988 to September 1989 he had operating responsibility for research and development. Executive officers are generally elected to their offices each year by the Board of Directors shortly after the Annual Meeting of Shareholders. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS - ------- -------------------------------------------------------------------- Reference is made to the Note entitled "Quarterly Operating Results and Common Stock Information (Unaudited)" to the Company's Consolidated Financial Statements, which appears on page 35 of this Form 10-K. ITEM 6. SELECTED FINANCIAL DATA - ------- ----------------------- -11- 13 (In thousands, except per share data, price range, number of employees and percentages)
1993 1992 1991 1990 1989 --------- --------- --------- --------- --------- OPERATIONS Net sales $555,666 $552,479 $526,112 $589,461 $549,264 Gross margin percentage 24.6% 23.7% 22.3% 24.9% 23.9% Selling, distribution and administrative expenses as a percentage of sales 18.9% 19.4% 19.5% 18.0% 16.8% Income before interest expense and taxes as a percentage of sales(1) (2) 3.5% 2.4% 1.0% 6.0% 5.8% Income before taxes as a percentage of sales(1) (2) 3.1% 1.9% 0.7% 5.7% 5.2% Income as a percentage of sales(1) (2) 1.9% 1.0% 0.1% 3.5% 3.2% Effective tax rate (benefit) (31.0)% 49.2% 84.0% 38.6% 38.3% Income (loss) before income taxes(1) $(31,402) $10,452 $ 3,451 $ 33,875 $ 28,461 Income (loss) after taxes (1) (21,681) 5,308 552 20,795 17,567 Cumulative effect of accounting principle changes - (10,131) - - - Income from discontinued operations 2,512 - - - 2,518 Net income (loss) (19,169) (4,823) 552 20,795 20,085 Earnings per share: Income (loss) (1) $ (3.42) $ .84 $ .09 $ 2.73 $ 1.84 Cumulative effect of accounting principle changes - (1.60) - - - Discontinued operations .40 - - - .27 Net income (loss) (3.02) (.76) .09 2.73 2.11 FINANCIAL POSITION Working capital $ 23,728 $ 40,630 $ 35,974 $ 17,207 $118,021 Total assets 219,065 236,699 243,200 239,474 319,118 Long-term debt 20,342 27,865 25,386 10,404 19,392 Total debt 25,742 31,065 30,386 10,404 26,411 Total capital employed 118,865 148,217 160,098 144,330 262,257 Total debt as a percentage of capital employed 21.7% 21.0% 19.0% 7.2% 10.1% Shareholders' equity $ 93,123 $117,152 $129,712 $133,926 $235,846 Shareholders' equity per common share 14.74 18.57 20.64 21.32 25.53 OTHER SELECTED DATA Investment in plant and equipment $ 26,620 $ 23,602 $ 18,223 $ 26,292 $ 18,922 Depreciation and amortization 24,864 23,552 24,181 23,743 22,785 Dividends per common share .72 .72 .72 .69 .57 Return on average shareholders' equity(3) (4) 8.7% 4.1% 0.4% 11.2% 8.7% Common stock price range: High $ 31-3/4 $ 31-1/4 $ 37 $ 44-7/8 $ 42-7/8 Low 25-1/4 21 18-1/8 30-1/2 28-3/4 Year-end closing price 27-1/2 28-3/8 23-1/8 34-3/8 35-1/4 Number of employees 4,011 4,145 3,869 4,506 6,978 Average common and common equivalent shares 6,343 6,325 6,332 7,617 9,537 See Restructuring and Other Unusual Charges, Changes in Business, Income Taxes and Postretirement Benefits Notes to Consolidated Financial Statements for a description of certain matters relevant to this data. (1) Income is from continuing operations and before the cumulative effect of accounting principle changes. (2) In 1993, income before interest expense and taxes as a percentage of sales, income before taxes as a percentage of sales and income as a percentage of sales are shown before the restructuring and other unusual charges of $48.5 million. These percentages including the restructuring and other unusual charges are (5.3) percent, (5.7) percent, and (3.9) percent, respectively. (3) In 1993, the return on average shareholders' equity is from continuing operations and before the restructuring and other unusual charges of $48.5 million. The return on average shareholders' equity from continuing operations, including the restructuring and other unusual charges is (20.9) percent. (4) In 1992, the return on average shareholders' equity is before the cumulative effect of accounting principle changes. The return on average shareholders' equity including the cumulative effect of accounting principle changes is (3.9) percent.
-12- 14 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND - ------- --------------------------------------------------------------- RESULTS OF OPERATIONS --------------------------------------------------------------- RESULTS OF CONTINUING OPERATIONS - 1993 COMPARED TO 1992 Net sales were $555.7 million, substantially unchanged from 1992. The Company incurred a net loss from continuing operations of $21.7 million which included restructuring and other unusual charges of $32.1 million after-tax. This compared to a net loss from continuing operations of $4.8 million in 1992 which is after the adoption of Statement of Financial Accounting Standards (SFAS) No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions" and SFAS No. 109 "Accounting for Income Taxes" which resulted in a net charge of $10.1 million. Also included in the 1992 results is a $1.2 million pretax gain on the sale of Maxtor Corporation common shares acquired by Nashua in partial settlement of claims against the bankrupt MiniScribe Corporation and a $.9 million pretax gain relating to the settlement of litigation against the auditors and certain managers and advisors of MiniScribe. Net sales for the year increased in all groups except Photofinishing. Operating income for the year, adjusted to exclude the restructuring and other unusual charges, improved in all groups except Office Supplies. In the fourth quarter of 1993, the Company recorded restructuring and other unusual charges of $48.5 million ($32.1 million after-tax). These charges principally reflect the Company's decision to channel resources from its Computer Products businesses to other operations by selling or otherwise liquidating the oxide, diskette and thin-film manufacturing operations and costs associated with personnel reductions in the remaining businesses. The charges include approximately $31.7 million related to the write-down of plant and equipment and other assets, primarily utilized in the Computer Products Group, to net realizable value. The estimate of such charges was finally determined on March 15, 1994. The charges also include $12.1 million in severance and other costs related to personnel reductions. The remainder of the charges includes provisions for consolidation of facilities and other accrued expenses incidental to the restructuring decision. As part of the restructuring plan, the Company has offered an early retirement program and, depending on the actual number of acceptances, expects to record a pretax charge of approximately $3.5 million in the first half of 1994. Most of the expenditures under the restructuring plan are expected to be incurred by the end of 1994. The Company expects to realize annualized savings in personnel, facilities and other costs (exclusive of the oxide, diskette and thin-film manufacturing businesses) by more than $8.0 million pretax by the end of 1994. In addition, depreciation and amortization expense in 1994, excluding additions, is expected to be reduced by approximately $6.0 million primarily relating to the write-down of the Computer Product Group assets. Net sales for the Coated Products Group increased 5 percent from 1992 due to higher label and facsimile volumes. Operating income, before pretax restructuring and other unusual charges of $2.1 million, increased 26 percent compared to last year due to higher facsimile volume, lower carbonless paper manufacturing costs and reduced postretirement benefit expense resulting from changes to the Company's postretirement plans. The Computer Products Group's net sales increased 4 percent compared to 1992 as thin-film volume increased for the year offsetting lower diskette and oxide volume. Before pretax restructuring and other unusual charges of $36.7 million, the group had operating income of $.1 million which included a fourth quarter thin-film inventory write-down of $1.1 million. This compared to an operating loss last year of $7.5 million which included a $2.1 million pretax gain from the sale of the Maxtor shares and settlement -13- 15 of the MiniScribe litigation. Increased year-over-year thin-film volume was the primary reason for the improved operating results in the current year. The volatility of the computer and disk drive industry will continue to influence the group's results. The Office Supplies Group's net sales increased 3 percent compared to 1992 as the inclusion of sales from the acquired business-to-business catalog (Nashua Express) for six months more than offset the decline in toner, developer and paper sales for the year. Operating income, before pretax restructuring and other unusual charges of $1.4 million, decreased 70 percent from 1992 due to lower margins on toner, developers and laser toner cartridges, as well as weak margins for Nashua Express. Management expects these lower levels of earnings to continue at least through the first quarter of 1994. Net sales in the Photofinishing Group decreased 8 percent from 1992 due to a decline in the value of the British pound, and lower prices and volume in the United States. Operating income, before pretax restructuring and other unusual charges of $.8 million, increased 8 percent as higher volume and lower marketing expenses in the United Kingdom more than offset the effect of lower sales in the U.S. and a weaker exchange rate. Administrative expenses increased moderately in 1993 compared to 1992, after excluding the $2.1 million pretax gain from the sale of Maxtor shares and settlement of the MiniScribe litigation, due to higher litigation costs associated with the Aine patent case and to overall wage increases. Selling and distribution expense as a percentage of sales was lower than last year as selling and distribution expense in the Computer Products Group remained relatively constant on increased sales. In addition, the Office Supplies Group had lower sales which generally have a higher associated selling and distribution expense. Research and development expense for 1993 increased 7 percent due to increased spending in the Coated Products Group. The effective tax rate for the Company was a benefit of 31.0 percent in 1993 versus a charge of 49.2 percent in 1992. The tax benefit was less than the U.S. statutory rate, primarily due to the unfavorable impact of non-deductible goodwill. In April 1990, the Company sold the international portion of its Office Systems and Supplies Group to Gestetner Holdings PLC (Gestetner). Under the terms of the Purchase Agreement, Gestetner raised certain objections to the purchase price totaling $15.3 million, excluding interest, which were submitted to arbitration. In January 1994, the arbitrator issued a final ruling which resulted in a total payment by Nashua of $1.8 million, including interest, to Gestetner. Resolution of the purchase price allowed the Company to recognize an after-tax gain from discontinued operations of $2.5 million. In November 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 112 "Employers Accounting for Postemployment Benefits," which must be adopted no later than calendar year 1994. The Company will adopt this statement in 1994 and based on its current analysis does not expect such adoption to have a material effect on the financial statements. RESULTS OF CONTINUING OPERATIONS - 1992 COMPARED TO 1991 Net sales were $552.5 million, a 5 percent increase compared to 1991. Income before the cumulative effect of accounting principle changes was $5.3 million compared to $.6 million in 1991. -14- 16 Income before the cumulative effect of accounting principle changes included a $1.2 million pretax gain on the sale of Maxtor Corporation common shares acquired by Nashua in partial settlement of claims against the bankrupt MiniScribe Corporation and a $.9 million pretax gain relating to the settlement of litigation against the auditors and certain managers and advisors of MiniScribe. In 1990, Nashua recorded a $3.4 million pretax charge in writing-off MiniScribe's receivables when it filed for protection from its creditors. The increases in net sales and income before the cumulative effect of accounting principle changes were primarily attributable to the Computer Products Group. Net sales were higher in all groups except for Photofinishing, while operating income declined in all groups except for Computer Products which substantially reduced its loss. Net sales for the Coated Products Group increased 2 percent from 1991 as higher label and facsimile paper volume was offset partially by lower dry-gummed paper sales. Operating income was down 23 percent due to lower facsimile paper prices and the additional postretirement expense recorded due to the adoption of Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" (SFAS 106). In the Computer Products Group, net sales increased 25 percent as thin-film disk volume increased substantially from 1991, more than offsetting the continued decline in oxide disk sales. The operating loss decreased 68 percent from 1991, primarily due to increased thin-film volume and improved manufacturing performance. Operating income for 1992 included a $2.1 million pretax gain from the sale of the Maxtor shares and settlement of the MiniScribe litigation. The Office Supplies Group's net sales increased 2 percent from 1991 as increased laser cartridge and toner sales were partly offset by lower copier paper prices and volume. Operating income declined 29 percent from 1991 due to lower paper prices and higher toner manufacturing and product development costs. Net sales in the Photofinishing Group were down slightly from 1991 as lower volume in the United States and the United Kingdom was largely offset by favorable exchange rates for the year as a whole. Operating income declined 19 percent reflecting higher marketing costs in the U.K. and increased processing costs in the U.S. The rollfilm processing markets in the U.S., U.K. and Canada declined in 1992 after several years of growth. In an effort to mitigate this change, the group has expanded its promotion of reprints, enlargements and photo-related merchandise. Administrative expenses increased slightly compared to 1991, after excluding the $2.1 million pretax gain from the sale of the Maxtor shares and settlement of the MiniScribe litigation, due to the additional postretirement expense recorded in accordance with the adoption of SFAS 106. Selling and distribution expense as a percentage of sales remained essentially unchanged from 1991. Research and development expense increased $1.7 million primarily due to thin-film disk, toner, and laser cartridge drum product development efforts. Interest expense increased in 1992 compared to 1991 due to higher debt levels, and interest income increased due to higher average cash and short-term investment balances in 1992 resulting from the private debt placement at the end of 1991. The effective tax rate for the Company was 49.2 percent in 1992 versus 84.0 percent in 1991. The effective tax rate was higher than the U.S. statutory rate, primarily due to the provision for foreign dividends under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109), and the unfavorable impact of non-deductible goodwill. -15- 17 In 1992, the Company adopted SFAS 109 which changed the Company's method of accounting for income taxes from the deferred method to an asset and liability approach. Previously, the Company deferred the past tax effects of timing differences between financial reporting and taxable income. The asset and liability approach requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities and of tax carryforwards. The Company adopted this statement prospectively and the adjustments to the January 1, 1992 balance sheet resulted in a net charge of $.8 million. This amount is reflected in net income for 1992 as the cumulative effect of a change in accounting principle. It primarily represents the impact of adjusting prepaid and deferred taxes to reflect the 1992 statutory tax rates as opposed to the tax rates that were in effect when the prepaid and deferred taxes originated. The adoption of this statement had no effect on pretax operating income for 1992. In 1992, the Company adopted SFAS 106 which requires the accrual of the costs of providing non-pension postretirement benefits, primarily medical coverage, during the employee's active service period. The Company elected to immediately recognize the accumulated liability, measured as of January 1, 1992. This resulted in a one-time charge of $9.4 million, after reduction for income taxes of $6.3 million. The pro forma effect of the change on years prior to 1992 was not determinable. Prior to 1992, the Company recognized expense in the year the benefits were provided. EFFECT OF INFLATION AND CHANGING PRICES The Company believes that results of operations as reported in its historical cost financial statements reasonably match current costs, except for depreciation, with revenues generated in the period. Depreciation expense based on the current costs of plant and equipment would be significantly higher than depreciation expense reported in the historical financial statements; however, such expense would not affect cash provided by operating activities. LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION Working capital decreased approximately $16.9 million in 1993, primarily as a result of recording an accrual for restructuring and other unusual charges of $16.8 million in the fourth quarter. At year end, the ratio of total debt to equity increased slightly to 28 percent from 27 percent in 1992. The ratio of long-term debt to equity decreased to 22 percent from 24 percent in the prior year. The Company generated approximately $35 million in cash from operating activities in 1993, investing $27 million in plant and equipment. During 1993 the Company repaid its remaining Senior Note and made its first repayment of its 9.17 percent senior notes. Cash dividends were $.72 per share in 1993 reflecting an $.18 per share dividend each quarter. The Company relies primarily on cash provided by operating activities to fund its normal additions to plant and equipment. The Company expects the majority of the restructuring cash requirements, approximately $16.8 million, to be incurred in 1994 and to be funded from continuing operations, the existing revolving credit facility of $27 million and the sale of certain Computer Products Group assets. Borrowings under the revolving credit facility, which are subject to covenant restrictions, were $5 million at December 31, 1993. -16- 18 The Company had $34.3 million of deferred tax assets and $5.6 million of deferred tax liabilities at December 31, 1993. The deferred tax assets include $3.3 million of loss and tax credit carryforwards which expire as follows: $.6 million in 1999, $.1 million in 2000, $2.4 million in 2001 and $.2 million in 2002. These carryforwards relate primarily to the U.S. and would require a minimum of approximately $10 million in cumulative U.S. taxable income prior to the carryforwards' expiration in order to be fully utilized. The remainder of the deferred tax assets pertain to net deductible temporary differences between financial and taxable bases of assets and liabilities such as accruals not yet paid or reserves not yet deductible for tax purposes. In the past, taxable income has generally been higher than the income reported for financial purposes. The Company expects this relationship to continue in the future, exclusive of the impact of the 1993 restructuring charge; however, if necessary, the Company would be able to carryback or carryforward net deductible temporary differences in order to utilize excess losses in any particular year. Based on Board of Directors approval in 1989, at December 31, 1993, the Company was authorized to repurchase up to an additional 564,955 shares of its common stock at the prevailing market rate. This authorization does not specify an expiration date. The Company (and its competitors) are subject to various environmental laws and regulations. These include the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act ("CERCLA"), the Resource Conservation and Recovery Act ("RCRA"), the Clean Water Act and other state and local counterparts of these statutes. The Company believes that its operations have been and continue to be operating in compliance in all material respects with the applicable environmental laws and regulations. (Violation of these laws and regulations could result in substantial fines and penalties.) Nevertheless, in the past and potentially in the future, the Company has and could receive notices of alleged environmental violations. The Company has endeavored to promptly remedy any such violations upon notification. For the past three years the Company has spent approximately $1 million per year in order to ensure its operations remain in compliance with pertinent environmental laws and regulations. In addition, for those sites which the Company has received notification of the need to remediate, the Company has assessed its liability and accrued what it considers to be the most likely amount within the estimated range of remediation costs. At December 31, 1993 this amount was $1.5 million. Liability of "potentially responsible parties" (PRP) under CERCLA and RCRA, however, is joint and several, and actual remediation expenses at sites where the Company is a PRP may exceed current estimates. The Company believes that based on the facts currently known, its financial position and the estimated environmental accrual recorded, its remediation expense with respect to those sites and on-going costs of compliance are not likely to have a material adverse effect on its liquidity, consolidated financial position or results of operations. -17- 19 ITEM. 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - -------- ------------------------------------------- CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
Year Ended December 31, (In thousands, except per share data) 1993 1992 1991 -------- -------- -------- Net sales $555,666 $552,479 $526,112 -------- -------- -------- Cost of products sold 419,211 421,440 409,016 Selling, distribution and administrative expenses 104,899 106,957 102,344 Research and development expense 12,684 11,893 10,207 Restructuring and other unusual charges 48,500 - - Interest expense 2,088 2,690 1,744 Interest income (314) (953) (650) -------- ------- -------- Total costs and expenses 587,068 542,027 522,661 -------- ------- -------- Income (loss) from continuing operations before income taxes and cumulative effect of accounting principle changes (31,402) 10,452 3,451 Income taxes (benefit) (9,721) 5,144 2,899 Income (loss) from continuing operations before cumulative effect of accounting principle changes (21,681) 5,308 552 Cumulative effect on prior years of changes in accounting principles for: Postretirement health care and other benefits, net - (9,367) - Income taxes - (764) - -------- ------- -------- Income (loss) from continuing operations (21,681) (4,823) 552 -------- ------- -------- Income from discontinued operations 2,512 - - -------- ------- -------- Net income (loss) (19,169) (4,823) 552 -------- ------- -------- Retained earnings, beginning of year 105,880 129,055 133,030 Dividends (4,545) (4,537) (4,527) Retirement of treasury shares - (13,815) - -------- ------- -------- Retained earnings, end of year $ 82,166 $105,880 $129,055 ========= ======== ======== Earnings (loss) per common and common equivalent share: Income (loss) from continuing operations before cumulative effect of accounting principle changes $ (3.42) $ .84 $ .09 Cumulative effect on prior years of changes in accounting principles for: Postretirement health care and other benefits, net - (1.48) - Income taxes - (.12) - Discontinued operations .40 - - -------- ------- -------- Net income (loss) $ (3.02) $ (.76) $ .09 ========= ======== ========
The accompanying notes are an integral part of the consolidated financial statements. -18- 20 C O N S O L I D A T E D B A L A N C E S H E E T
December 31, (In thousands, except share data) 1993 1992 --------- --------- ASSETS Current Assets Cash and cash equivalents $ 5,883 $ 12,212 Accounts receivable 47,657 48,730 Inventories Materials and supplies 11,793 13,611 Work in process 4,875 5,898 Finished goods 17,000 11,550 -------- -------- 33,668 31,059 Other current assets 22,573 19,471 -------- -------- 109,781 111,472 -------- -------- Plant and Equipment Land 1,447 1,452 Buildings and improvements 39,492 38,847 Machinery and equipment 110,439 110,787 Construction in progress 13,364 5,713 -------- -------- 164,742 156,799 Accumulated depreciation (93,509) (68,018) -------- -------- 71,233 88,781 -------- -------- Other Assets 38,051 36,446 -------- -------- Total Assets $219,065 $236,699 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Notes and loans payable $ 2,900 $ 700 Current maturities of long-term debt 2,500 2,500 Accounts payable 29,951 35,019 Accrued expenses 48,669 30,329 Income taxes payable 2,033 2,294 -------- -------- 86,053 70,842 -------- -------- Long-Term Debt Borrowings under revolving credit agreement 5,000 5,000 Senior note - 5,000 9.17% senior notes 15,000 17,500 Other long-term debt 342 365 -------- -------- 20,342 27,865 -------- --------
-19- 21 C O N S O L I D A T E D B A L A N C E S H E E T
December 31, (In thousands, except share data) 1993 1992 ------- ------- Other Long-Term Liabilities 19,547 20,840 -------- -------- Shareholders' Equity Preferred stock, par value $1.00: 2,000,000 shares authorized and unissued - - Common stock, par value $1.00: Authorized 40,000,000 shares Issued 6,340,430 shares in 1993 and 6,333,690 shares in 1992 6,340 6,334 Additional capital 11,246 11,130 Retained earnings 82,166 105,880 Cumulative translation adjustment (5,844) (5,393) Treasury stock, at cost (785) (799) -------- -------- 93,123 117,152 -------- -------- Commitments and Contingencies Total Liabilities and Shareholders' Equity $219,065 $236,699 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. -20- 22 C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W S
Year Ended December 31, (In thousands) 1993 1992 1991 --------- --------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $(19,169) $ (4,823) $ 552 Adjustments to reconcile net income (loss) to cash provided by operating activities: Depreciation and amortization 24,864 23,552 24,181 Deferred income taxes (13,684) 2,615 (1,707) Write-down of fixed assets to net realizable value 23,200 - - Cumulative effect on prior years of changes in accounting principles - 10,131 - Gain on sale of Maxtor stock and MiniScribe settlement - (2,076) - Proceeds from sale of Maxtor stock and MiniScribe settlement - 2,970 - Change in operating assets and liabilities, net of effects from acquisitions of businesses: Accounts receivable 1,054 (9,988) 10,107 Inventories (93) (300) 4,506 Other assets 6,318 (705) (549) Accounts payable (4,952) 1,339 (4,075) Accrued expenses 18,773 (2,504) (6,138) Other long-term liabilities (1,289) (1,444) 2,675 Income taxes payable (149) (218) 23 ------- -------- -------- Cash provided by operating activities 34,873 18,549 29,575 CASH FLOWS FROM INVESTING ACTIVITIES Investment in plant and equipment (26,620) (23,602) (18,223) Acquisitions of businesses (4,286) (3,659) (564) ------- -------- -------- Cash used in investing activities (30,906) (27,261) (18,787) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings 9,900 15,910 28,000 Repayment of borrowings (15,223) (15,231) (8,046) Dividends paid (4,545) (4,537) (4,527) Proceeds and tax benefits from shares issued under stock option plans (129) 487 117 Purchase and reissuance of treasury stock 14 13 (160) ------- -------- -------- Cash provided by (used in) financing activities (9,983) (3,358) 15,384 Cash applied to activities of discontinued operations (248) (5,161) (3,623) Effect of exchange rate changes on cash (65) (572) (45) ------- -------- -------- Increase (decrease) in cash and cash equivalents (6,329) (17,803) 22,504 Cash and cash equivalents at beginning of year 12,212 30,015 7,511 ------- -------- -------- Cash and cash equivalents at end of year $ 5,883 $12,212 $30,015 ======= ======= ======= Interest paid $ 2,051 $ 2,891 $ 1,135 ======= ======= ======= Income taxes paid $ 5,355 $ 3,560 $ 3,624 ======= ======= =======
The accompanying notes are an integral part of the consolidated financial statements. -21- 23 N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF CONSOLIDATION: The accompanying consolidated financial statements include the accounts of Nashua Corporation and its subsidiaries (the Company), all of which are wholly-owned. CASH EQUIVALENTS: The Company considers all highly liquid investment instruments purchased with a maturity of three months or less to be cash equivalents. At December 31, 1993 and 1992 the Company held $1.9 million and $5.2 million, respectively, of various money market instruments carried at cost, which approximated market. . ACCOUNTS RECEIVABLE: The consolidated balance is net of allowance for doubtful accounts of $1.9 million and $2.4 million, at December 31, 1993 and 1992, respectively. The Computer Products small-rigid-disk business is inherently concentrated with a limited number of original equipment manufacturers who, as a consequence, may have significant outstanding receivable balances. The Company closely monitors these receivables and provides allowances as required. At December 31, 1993 and 1992, these receivables, net of allowances, were approximately $13.6 million and $11.1 million, respectively, and are considered fully collectible. INVENTORIES: Inventories are carried at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method for 80 percent and 76 percent of the inventories at December 31, 1993 and 1992, respectively, and by the last-in, first-out (LIFO) method for the balance. Had the FIFO method been used to cost all inventories, the inventory balances would have been approximately $2.5 million and $2.4 million higher at December 31, 1993 and 1992, respectively. PLANT AND EQUIPMENT: Plant and equipment are stated at cost. Expenditures for maintenance and repairs are charged to operations, while additions, renewals and betterments of plant and equipment are capitalized. Items which are fully depreciated, sold, retired, or otherwise disposed of, together with the related accumulated depreciation, are removed from the accounts and, where applicable, the related gain or loss is recognized. For financial reporting purposes, depreciation is computed using the straight-line method over the following estimated useful lives of the assets: Buildings and improvements 5-40 years Machinery and equipment 3-20 years
As part of the restructuring charge recorded in 1993, fixed assets were reduced by $23.2 million. See the Restructuring and Other Unusual Charges note for information on the total restructuring charge. Capitalized interest related to projects under construction is not significant. GOODWILL: Included in "Other Assets" is the excess of cost over the fair value of net assets acquired (goodwill), which is being amortized on a straight-line basis over periods ranging from 5 to 20 years. -22- 24 Goodwill amounted to $14.7 million and $23.1 million at December 31, 1993 and 1992, respectively, which is net of accumulated amortization of $4.5 million and $10.5 million, respectively. As part of the restructuring charge recorded in 1993, goodwill was reduced by $6.7 million. See the Restructuring and Other Unusual Charges note for information on the total restructuring charge. In 1992, as a result of the Company adopting Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," goodwill was reduced by $3.3 million due to the recording of previously acquired net operating losses. INCOME TAXES: Prepaid or deferred income taxes result principally from the use of different methods of depreciation and amortization for income tax purposes, the recognition of expenses for financial reporting purposes in years different from those in which the expenses are deductible for income tax purposes and the recognition of prior year net operating tax losses. FOREIGN CURRENCY TRANSLATION: The functional currency of the Company's foreign subsidiaries is the local currency. Accordingly, assets and liabilities of these subsidiaries have been translated using exchange rates prevailing at the appropriate balance sheet date, and income statement items have been translated using average monthly exchange rates. Translation adjustments resulting from this process have been recorded directly in "Shareholders' Equity," and will be included in income upon sale or liquidation of ownership interest in the underlying foreign investment. ENVIRONMENTAL EXPENDITURES: Environmental expenditures relating to on-going operations are expensed when incurred unless the expenditures extend the life, increase the capacity or improve the safety or efficiency of the property; mitigate or prevent environmental contamination that has yet to occur and improve the property compared with its original condition; or are incurred in preparing for sale that property currently held for sale. Expenditures relating to site assessment, remediation and monitoring are accrued and expensed when the costs are both probable and the amount can be reasonably estimated. These estimates are based on in-house or third party studies considering current technologies, remediation alternatives and current environmental standards. In addition, if there are other participants and the liability is joint and several, the financial stability of the other participants is considered in determining the Company's accrual. Insurance and other recoveries relating to these expenditures are recorded separately once the amount is agreed to by both parties and collection is assured. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE: Earnings per common and common equivalent share are computed based on the total of the weighted average number of common shares and the weighted average number of common equivalent shares outstanding during the period presented. RESTRUCTURING AND OTHER UNUSUAL CHARGES In the fourth quarter of 1993, the Company recorded restructuring and other unusual charges of $48.5 million ($32.1 million after- tax). These charges principally reflect the Company's decision to channel resources from its Computer Products businesses to other operations by selling or otherwise liquidating the oxide, diskette and thin-film manufacturing operations and costs associated with personnel reductions in the remaining businesses. The charges include approximately $31.7 million related to the write-down of plant and equipment and other assets, primarily utilized in the Computer Products Group, to net -23- 25 realizable value. The estimate of such charges was finally determined on March 15, 1994. The charges also include $12.1 million in severance and other costs related to personnel reductions. The remainder of the charges includes provisions for consolidation of facilities and other accrued expenses incidental to the restructuring decision. As part of the restructuring plan, the Company has offered an early retirement program and, depending on the actual number of acceptances, expects to record a pretax charge of approximately $3.5 million in the first half of 1994. Most of the expenditures under the restructuring plan are expected to be incurred by the end of 1994. The Company expects to realize annualized savings in personnel, facilities and other costs (exclusive of the oxide, diskette and thin-film manufacturing businesses) by more than $8.0 million pretax by the end of 1994. In addition, depreciation and amortization expenses in 1994, excluding additions, is expected to be reduced by approximately $6.0 million, primarily relating to the write-down of the Computer Products Group assets. At December 31, 1993, "Accrued expenses" includes $16.8 million relating to restructuring and other unusual charges. CHANGES IN BUSINESS ACQUISITION: In July 1993, the Company acquired, for approximately $4 million in cash, certain assets of Wang Laboratories, Inc.'s consumable office and computer supplies business. The assets purchased by the Company were inventory, equipment and certain intangible assets including a business-to-business catalog offering consumable office and computer supplies such as paper, toner, and magnetic media. The acquisition was accounted for as a purchase, with the purchase price allocated primarily to inventory and equipment. On a pro forma basis, the results of operations of the Company would not have been significantly different had this acquisition occurred as of January 1, 1993. DISCONTINUED OPERATIONS: In April 1990, the Company sold the international portion of its Office Systems and Supplies Group to Gestetner Holdings PLC (Gestetner). Under the terms of the Purchase Agreement, Gestetner raised certain objections to the purchase price totaling $15.3 million, excluding interest, which were submitted to arbitration. In January 1994, the arbitrator issued a final ruling which resulted in a total payment by Nashua of $1.8 million, including interest, to Gestetner. Resolution of the purchase price allowed the Company to recognize an after-tax gain from discontinued operations of $2.5 million. INDEBTEDNESS The Company maintains a $27 million revolving credit facility under an agreement dated March 27, 1992, as amended. Borrowings of $5 million were outstanding under the terms of this facility at December 31, 1993 and 1992. Amounts outstanding on March 27, 1995, under the terms of the facility may be converted into a term loan payable in equal quarterly installments through March 1998. Prior to conversion to a term loan, interest on amounts outstanding is payable at either LIBOR plus 7/8 percent or the agent bank's "Reference Rate" at the Company's election, or, if amounts outstanding were borrowed under competitive bid, interest is payable at the quoted rate. The Company is required to pay an annual commitment fee of 1/2 percent on the unused portion of the facility and 3/8 percent on any loans advanced under competitive bids. The agreement contains restrictive covenants which relate primarily to interest coverage, minimum working capital, leverage and tangible net worth. The Company is in compliance with these covenants. -24- 26 On September 13, 1991, the Company entered into a senior note agreement, as amended, with an insurance company under which the Company borrowed $20 million at a fixed rate of 9.17 percent. The first mandatory payment of $2.5 million occurred in 1993. The remaining balance of the notes will become due beginning in 1994 with the final payment due in 2001. The senior notes contain restrictive covenants which relate principally to additional debt, tangible net worth and fixed charges coverage. The Company is in compliance with these covenants. At December 31, 1992, the Company had a $5 million serialized senior note due to an insurance company at a fixed interest rate of 11-7/8 percent which was paid in 1993. The Company's notes and loans payables are borrowed from commercial banks on an "as offered" basis. The borrowings and repayments occur daily and contain no specific terms other than due dates and interest rates. The due dates are generally overnight and interest rates are based on current market rates. The fair value of the Company's total debt at December 31, 1993 is approximately $2.5 million higher than the carrying amount. The fair value is based on management's estimate of current rates available to the Company for similar debt with the same remaining maturity. Following is the combined aggregated amount of minimum principal payments for each of the five years subsequent to December 31, 1993, for all long-term indebtedness: 1994 - $2.5 million; 1995 - $1.3 million; 1996 - $1.7 million; 1997 - $4.7 million; 1998 - $3.4 million; thereafter - $9.2 million. INCOME TAXES The domestic and foreign components of income from continuing operations before income taxes and cumulative effect of accounting principle changes are as follows:
(In thousands) 1993 1992 1991 ---- ---- ---- Domestic $(37,982) $ 5,567 $(1,346) Foreign 6,580 4,885 4,797 -------- -------- ------- Consolidated $(31,402) $ 10,452 $ 3,451 ======== ======== =======
Income tax expense (benefit) charged to continuing operations consists of the following:
(In thousands) 1993 1992 1991 Current: United States $ 2,197 $ 1,841 $ 1,498 Foreign 2,640 1,055 2,177 State and local 95 36 931 -------- -------- ------- Total current 4,932 2,932 4,606 -------- -------- ------- Deferred: United States (14,435) 1,083 (1,789) Foreign 83 1,129 82 -------- -------- ------- Total deferred (14,352) 2,212 (1,707) -------- -------- ------- Changes in statutory tax rates (301) - - -------- -------- ------- Income tax expense (benefit) $ (9,721) $ 5,144 $ 2,899 ======== ======== =======
-25- 27 Deferred tax liabilities (assets) are comprised of the following:
(In thousands) 1993 1992 ---- ---- Depreciation $ 5,468 $ 3,139 Other 85 150 -------- -------- Gross deferred tax liabilities 5,553 3,289 -------- -------- Restructuring and other unusual charges (16,783) - Pension and postretirement benefits (7,531) (7,953) Loss and credit carryforwards (3,349) (3,338) Workers compensation accrual (1,536) (1,559) Inventory reserve (1,526) (915) Bad debt reserve (1,183) (955) Other (2,379) (3,055) -------- -------- Gross deferred tax assets (34,287) (17,775) Deferred tax assets valuation allowance - 72 -------- -------- $(28,734) $(14,414) ======== ========
Reconciliations between income taxes from continuing operations computed using the United States statutory income tax rate (benefit) and the Company's effective tax rate (benefit) are as follows:
1993 1992 1991 ---- ---- ---- United States statutory rate (benefit) (35.0)% 34.0% 34.0% Goodwill 9.9 7.7 19.6 Dividend income .7 5.2 - State and local income taxes, net of federal tax benefit (4.3) - 14.3 Unutilized foreign tax credits - - 11.0 Rate difference-foreign subsidiaries (.4) 1.3 6.3 Other, net (1.9) 1.0 (1.2) ----- --- ---- Effective tax rate (benefit) (31.0)% 49.2% 84.0% ===== ==== ====
The Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," in 1992 which changed the Company's method of accounting for income taxes from the deferred method to an asset and liability approach. Previously, the Company deferred the past tax effects of timing differences between financial reporting and taxable income. The asset and liability approach requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities and of tax carryforwards. The Company adopted this statement prospectively and the adjustments to the January 1, 1992 balance sheet resulted in a net charge of $.8 million. This amount is reflected in net income for 1992 as the cumulative effect of a change in accounting principle. It primarily represents the impact of adjusting prepaid and deferred taxes to reflect the 1992 statutory tax rate as opposed to the tax rates that were in effect when the prepaid and deferred taxes originated. The adoption of this statement had no effect on pretax operating income for 1992. Significant components of deferred income tax expense under the accounting standard used in 1991 are as follows: -26- 28 (In thousands) Depreciation $(1,108) Amortization of intangible assets 31 Recognition of expenses (652) Inventory valuation allowances 75 Other, net (53) ------- Total deferred income tax expense $(1,707) =======
At December 31, 1993, $14.0 million and $14.7 million of tax assets were included in "Other current assets" and "Other Assets," respectively. At December 31, 1992, $10.8 million and $3.7 million of tax assets were included in "Other current assets" and "Other Assets," respectively. At December 31, 1993 the Company has $3.3 million of net operating loss and tax credit carryforwards, which are primarily limited to offset future domestic taxable earnings. The carryforwards expire as follows: $.6 million in 1999, $.1 million in 2000, $2.4 million in 2001 and $.2 million in 2002. It is management's intention to reinvest undistributed earnings of foreign subsidiaries which aggregate approximately $22 million, based on exchange rates at December 31, 1993. These earnings could become subject to additional tax if they were remitted as dividends, if foreign earnings were lent to the Company or if the Company should sell its stock in the subsidiaries. It is not practicable to estimate the amount of additional tax that might be payable on undistributed foreign earnings. SHAREHOLDERS' EQUITY The Company is authorized to issue 200,000 shares of Series A Participating Preferred Stock and has in effect a Rights Agreement under which holders of the Company's common stock received a dividend of one preferred stock purchase right for each outstanding share of common stock. Each Right entitles the registered holder to purchase from the Company one one-hundredth share of the Company's Series A Participating Preferred Stock, at a price of $90.00. The Rights do not detach or become exercisable until the tenth business day following the public announcement that a person has acquired, or obtained the right to acquire, 10 percent or more of the outstanding common stock of the Company, or the commencement of a tender or exchange offer which would result in the acquisition of beneficial ownership of 10 percent or more of the Company's common stock. The Rights Agreement provides that if any person or group were to acquire 10 percent or more of the Company's common stock, then shareholders other than the acquiring person would be entitled to purchase, at the Rights' then-current exercise price, a number of additional Company shares having a market value of twice the Rights' exercise price, unless the acquiring person purchases at least 85 percent of Nashua's common stock in a cash tender offer for all shares. The Company's Board of Directors may, at their option, exchange one Company share of common stock for each Right (other than the Rights held by the acquiring person) if the acquiring person has acquired more than 10 percent but less than 50 percent of the Company's common stock. The Rights Agreement further provides that, upon the occurrence of certain events including transactions in which the Company is acquired and certain self-dealing transactions with the Company by an acquirer, each Right entitles the holder thereof (other than the acquirer) to purchase shares of capital stock of either the Company or of the acquirer having a value equal to twice the then-current exercise price of the Rights. At any time prior to a person's acquiring beneficial ownership of 10 percent or more of the Company's common stock, the Continuing Directors, by a two-thirds vote, may authorize the Company to redeem the Rights at any time at a redemption price of five cents per Right. -27- 29 The Rights will expire on September 2, 1996, unless earlier redeemed by the Company. In addition to the Rights attaching to the common stock outstanding, Rights will be issued with each common share that is issued prior to the time the Rights become exercisable or expire. In 1989, the Board of Directors authorized the Company to repurchase up to 1,000,000 shares of its common stock. As of December 31, 1993, the Company had purchased approximately 435,000 shares under this program. The following summarizes the changes in selected shareholders' equity accounts for each of the three years in the period ended December 31, 1993:
Common Stock Cumulative Par Additional Translation Treasury Stock (In thousands, except share data) Shares Value Capital Adjustment Shares Cost --------- -------- ---------- ----------- --------- ----------- BALANCE, DECEMBER 31, 1990 6,674,699 $6,675 $10,558 $(1,497) (392,422) $(14,840) Stock options exercised and related tax benefit 7,064 7 110 Translation adjustments and gains and losses from certain inter-company balances (196) Purchase of treasury shares (5,727) (160) --------- ------ ------- ------- -------- -------- BALANCE, DECEMBER 31, 1991 6,681,763 6,682 10,668 (1,693) (398,149) (15,000) Stock options exercised and related tax benefit 24,610 25 462 Translation adjustments and gains and losses from certain inter-company balances (3,700) Purchase of treasury shares (44) (1) Reissuance of treasury shares 510 14 Retirement of treasury shares (372,683) (373) 372,683 14,188 --------- ------ ------- ------- -------- -------- BALANCE, DECEMBER 31, 1992 6,333,690 6,334 11,130 (5,393) (25,000) (799) Stock options exercised and related tax benefit 6,740 6 116 Translation adjustments and gains and losses from certain inter-company balances (451) Purchase of treasury shares (120) (3) Reissuance of treasury shares 530 17 --------- ------ ------- ------- -------- -------- BALANCE, DECEMBER 31, 1993 6,340,430 $6,340 $11,246 $(5,844) (24,590) $ (785) ========= ====== ======= ======= ======== ========
STOCK OPTION AND STOCK AWARD PLANS The Company has three stock compensation plans at December 31, 1993: the 1980 Stock Award Plan (1980 plan), the 1987 Stock Option Plan (1987 plan) and the 1993 Stock Incentive Plan (1993 plan). Awards can no longer be granted under the 1980 plan. Awards under the 1987 plan and 1993 plan are made at the discretion of the Executive Salary Committee of the Board of Directors. Stock options awarded under the 1980 plan which are outstanding at December 31, 1993, are currently exercisable and expire on the tenth anniversary of the date of grant. -28- 30 Under the 1987 plan, nonqualified stock options and incentive stock options may be awarded. Stock options under the 1987 plan become exercisable either (a) 50 percent on the first anniversary of grant, and the remainder on the second anniversary of grant, (b) 100 percent at six months from the date of grant or (c) 100 percent at one year from the date of grant. Nonqualified stock options expire ten years and one day from the date of grant, and incentive stock options expire ten years from the date of grant. Under the 1993 plan, non-statutory stock options and incentive stock options may be awarded. Stock options under the 1993 plan become exercisable either (a) 50 percent on the first anniversary of grant and the remainder on the second anniversary of grant, or (b) 100 percent at one year from the date of grant. Non-statutory stock options expire 10 years and one day from the date of grant, and incentive stock options expire ten years from the date of grant. In the event of a change of control, as defined in the 1987 plan and the 1993 plan, the option holder may, with respect to stock option agreements which so provide, have a limited right with respect to options under the plans to elect to surrender the options and receive cash or shares equal in value to the difference between the option price and the larger of either the highest reported price per share on the New York Stock Exchange during the sixty-day period before the change in control or, if the change in control is the result of certain defined transactions, the highest price per share paid in such defined transactions. Because the exercise price of all stock options awarded under these plans has been equal to the quoted market price of the Company's common stock at date of grant, no compensation expense has been recorded for these awards. A summary of the status of the Company's stock option plans follows:
Outstanding Option Price Exercisable Options Per Share Options ----------- ------------ ----------- December 31, 1990 389,370 5.13-38.38 339,920 Options granted 60,600 25.50-34.63 - Options that became exercisable - 32.75-34.63 59,400 Options exercised (5,500) 9.56-31.63 (5,500) Options lapsed and cancelled (15,300) 28.38-38.38 (11,900) ------- ------------ ------- December 31, 1991 429,170 $5.13-38.38 381,920 Options granted 43,600 28.13 - Options that became exercisable - 25.50-34.63 45,850 Options exercised (24,646) 5.13-19.38 (24,646) Options lapsed and cancelled (52,734) 25.50-34.63 (45,134) ------- ------------ ------- December 31, 1992 395,390 $11.81-38.38 357,990 Options granted 113,800 25.75-30.25 - Options that became exercisable - 25.50-34.63 25,350 Options exercised (6,740) 11.81-25.50 (6,740) Options lapsed and cancelled (6,380) 25.75-34.63 (2,900) ------- ------------ ------- December 31, 1993 496,070 11.81-38.38 373,700 ======= ============ =======
-29- 31 COMMITMENTS AND CONTINGENCIES Rent expense for office equipment, facilities and vehicles was $2.5 million, $2.9 million and $2.7 million for 1993, 1992 and 1991, respectively. At December 31, 1993, the Company was committed, under non-cancelable operating leases, to minimum annual rentals for the next five years as follows: 1994 - $2.0 million; 1995 - $1.7 million; 1996 - $1.3 million; 1997 - $1.0 million; 1998 - $1.0 million; thereafter - $9.1 million. At December 31, 1993, the Company was obligated under approximately $6.5 million in standby letters of credit. The Company is involved in certain environmental matters and has been designated by the Environmental Protection Agency (EPA) as a "potentially responsible party" (PRP) for certain hazardous waste sites. In addition, the Company has been notified by certain state environmental agencies that some of the Company sites not addressed by the EPA require remedial action. These sites are in various stages of investigation and remediation. Due to the unique physical characteristics of each site, the technology employed, the extended timeframes of each remediation, the interpretation of applicable laws and regulations and the financial viability of other potential participants, the ultimate cost to the Company of remediation for each site is difficult to determine. At December 31, 1993, based on the facts currently known and the Company's prior experience with these matters, the Company has concluded that there is at least a reasonable possibility that site assessment, remediation and monitoring costs will be incurred by the Company with respect to those sites which can be reasonably estimated in the aggregate range of $1.1 million to $1.6 million. This range is based, in part, on an allocation of certain sites' costs which, due to the joint and several nature of the liability, could increase if the other PRP's are unable to bear their allocated share. At December 31, 1993 the Company has accrued $1.5 million which represents, in the Company's view, the most likely amount within the range stated above. Based on information currently available to the Company, management believes that it is probable that the major responsible parties will fully pay the costs apportioned to them. The Company believes that, based on its financial position and the estimated environmental accrual recorded, its remediation expense with respect to those sites is not likely to have a material adverse effect on its consolidated financial position or results of operations. In November 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 112 "Employers Accounting for Postemployment Benefits," which must be adopted no later than calendar year 1994. The Company will adopt this statement in 1994 and based on its current analysis does not expect such adoption to have a material effect on the financial statements. POSTRETIREMENT BENEFITS PENSION PLANS: The Company and its subsidiaries have several pension plans which cover approximately 80 percent of its employees. Benefits under these plans are generally based on years of service and the levels of compensation during those years. The Company's policy is to fund amounts deductible for income tax purposes. Assets of the plans are invested in interest-bearing cash equivalent instruments, fixed-income securities and common stocks. -30- 32 Net periodic pension cost from continuing operations for the plans includes the following components:
(In thousands) 1993 1992 1991 Service cost-benefits earned during the period $ 2,884 $ 2,929 $ 2,941 Interest cost on projected benefit obligation 7,196 6,749 6,642 Actual return on plan assets (17,554) (10,814) (17,292) Net amortization and deferral 10,839 4,754 11,034 ------- ------- ------- Net periodic pension cost $ 3,365 $ 3,618 $ 3,325 ======= ======= =======
The following sets forth the funded status of the plans and the amounts recognized in the Company's consolidated balance sheet at December 31, 1993:
Accumulated Benefit Obligation ---------------------------------- (In thousands) Less Than Exceeds Assets Assets --------- ------- Actuarial present value of: Vested benefit obligation $41,286 $58,490 ------- ------- Accumulated benefit obligation $41,519 $58,686 ------- ------- Projected benefit obligation $41,837 $60,759 ------- ------- Market value of plan assets $47,992 $55,695 ------- ------- Plan assets in excess of (less than) projected benefit obligation $ 6,155 $(5,064) Unrecognized transition (asset) obligation (2,389) 3,324 Unrecognized prior service costs 448 3,712 Unrecognized net gain (1,199) (7,029) Additional liability - (1,027) ------- ------- Prepaid (accrued) pension cost $ 3,015 $(6,084) ======= =======
The following sets forth the funded status of the plans and the amounts recognized in the Company's consolidated balance sheet at December 31, 1992:
Accumulated Benefit Obligation ---------------------------------- (In thousands) Less Than Exceeds Assets Assets --------- ------- Actuarial present value of: Vested benefit obligation $35,329 $50,961 -------- -------- Accumulated benefit obligation $35,731 $51,511 -------- -------- Projected benefit obligation $36,136 $54,039 -------- -------- Market value of plan assets $37,806 $47,422 -------- -------- Plan assets in excess of (less than) projected benefit obligation $ 1,670 $ (6,617) Unrecognized transition (asset) obligation (2,673) 3,740 Unrecognized prior service costs 329 2,786 Unrecognized net (gain) loss 385 (4,225) Additional liability - (1,044) -------- -------- Accrued pension cost $ (289) $ (5,360) ======== ========
-31- 33 Approximately $4.2 million and $5.1 million of the accrued pension cost for 1993 and 1992, respectively, are included in "Other Long-Term Liabilities" in the accompanying consolidated balance sheet. The significant actuarial assumptions used for the plans' valuations were:
1993 1992 ---- ---- Weighted-average discount rate 7.3% 7.8% Expected long-term rate of return on plan assets 9.1% 9.1% Rate of increase in future compensation levels 4.7% 5.6%
RETIREE HEALTH CARE AND OTHER BENEFITS: The Company provides certain health care and other benefits to eligible retired employees and spouses. Salaried participants generally become eligible for retiree health care benefits after reaching age 60 with ten years of service. Benefits, eligibility and cost-sharing provisions for hourly employees vary by location or bargaining unit. Generally, the medical plans pay a stated percentage of most medical expenses, reduced for any deductibles and payments made by government programs and other group coverage. In 1992, the cost of providing most of these benefits was shared with retirees, except for a group of retirees at one manufacturing facility. In 1993, the plan was changed to share the cost of these benefits with all retirees, resulting in an unrecognized benefit which is being amortized over the future service period of the active retirees. The following table sets forth the funded status of the plans, reconciled to the accrued postretirement benefit cost recognized in the Company's balance sheet:
(In thousands) 1993 1992 Accumulated postretirement benefit obligation: Retirees $ 5,864 $ 7,325 Fully eligible active plan participants 2,400 6,048 Other active participants 2,918 2,945 --------- --------- Market value of plan assets - - Accumulated postretirement benefit obligation in excess of plan assets (11,182) (16,318) Unrecognized prior service benefit (4,821) - Unrecognized net loss 70 - --------- --------- Accrued postretirement benefit cost $ (15,933) $ (16,318) ========= =========
Approximately $15.1 million and $15.6 million of accrued postretirement benefits for 1993 and 1992, respectively, are included in "Other Long-Term Liabilities" in the accompanying consolidated balance sheet. Net periodic postretirement benefit cost included the following components:
(In thousands) 1993 1992 ---- ---- Service cost of benefits earned $ 162 $ 284 Interest cost on accumulated postretirement benefit obligation 791 1,208 Amortization of prior service benefit (554) - ---------- --------- Net periodic postretirement benefit cost $ 399 $ 1,492 ========== =========
-32- 34 For measurement purposes, a 9 or 9.5 percent annual rate of increase in the per capita claims cost of medical benefits was assumed for the various plans in 1994. These rates were assumed to decrease gradually to 6.5 percent in 1998 and remain at that level thereafter. The discount rate used in determining the accumulated postretirement benefit obligation was 7.25 percent. If the health care cost trend rate were increased 1 percent in each future year, the accumulated postretirement benefit obligation as of December 31, 1993 would have increased by 2 percent. The effect of this assumed change on the aggregate of service and interest cost for 1993 would have been an increase of 4 percent. The Company adopted Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," in 1992 which requires the accrual of the cost of providing non-pension postretirement benefits ("postretirement benefits"), primarily medical coverage, during the employee's active service period. The Company elected to immediately recognize the accumulated liability, measured as of January 1, 1992. This resulted in a one-time charge of $9.4 million, after reduction for income taxes of $6.3 million. The pro forma effect of the change on years prior to 1992 was not determinable. Prior to 1992, the Company recognized expense in the year the benefits were provided. Postretirement health care and other benefit costs charged to expense in 1991 were not material. INFORMATION ABOUT OPERATIONS The Company conducts business in four segments: Coated Products, Computer Products, Office Supplies and Photofinishing. Net sales, operating income and identifiable assets of the Company's four business segments and the geographic areas in which they operate are set forth below:
Net Sales Operating Income Identifiable Assets (In millions) 1993 1992 1991 1993(b) 1992(c) 1991 1993 1992 1991 ---- ---- ---- ------- ------- ---- ---- ---- ---- BY BUSINESS Coated Products $184.6 $175.4 $171.8 $ 3.4 $ 4.4 $5.7 $63.2 $59.8 $64.1 Computer Products 111.6 107.2 85.7 (36.6) (7.5)(d) (23.1) 33.6 60.7 57.6 Office Supplies 110.8 108.0 106.0 - 4.8 6.8 41.4 41.5 34.8 Photofinishing 148.7 161.9 162.6 16.2 15.8 19.5 47.5 53.5 73.3 Corporate expenses, including interest, and assets - - - (14.4) (7.0) (5.4) 33.4 21.2 13.4 ------ ------ ------ ------ ----- ---- ------ ------ ------ Consolidated $555.7 $552.5 $526.1 $(31.4) $10.5 $3.5 $219.1 $236.7 $243.2 ====== ====== ====== ====== ===== ==== ====== ====== ====== BY GEOGRAPHIC AREA United States(a) $494.3 $480.6 $455.5 $(26.9) $12.8 $4.1 $153.0 $182.0 $180.7 Europe 52.4 61.7 61.3 8.4 2.2 1.6 26.7 30.3 43.7 Other 9.0 10.2 9.3 1.5 2.5 3.2 6.0 4.8 5.4 Eliminations, corporate expenses, including interest, and assets - - - (14.4) (7.0) (5.4) 33.4 19.6 13.4 ------ ------ ------ ------ ----- ---- ------ ------ ------ Consolidated $555.7 $552.5 $526.1 $(31.4) $10.5 $3.5 $219.1 $236.7 $243.2 ====== ====== ====== ====== ===== ==== ====== ====== ======
-33- 35 Sales between business segments are insignificant. Intrasegment sales between geographic areas are generally priced at the lowest price offered to unaffiliated customers. (a) Net sales includes export sales as follows:
(In millions) 1993 1992 1991 Far East $ 80.3 $ 55.2 $28.2 Europe 24.0 30.1 21.2 Other 24.6 25.5 21.2 ------ ------ ----- Total $128.9 $110.8 $70.6 ====== ====== ===== (b) Includes restructuring and other unusual charges of $2.1 million, $36.7 million, $1.4 million, $.8 million and $7.5 million, for Coated Products, Computer Products, Office Supplies, Photofinishing and Corporate, respectively. (c) In 1992, the Company adopted Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," which reduced operating income approximately $.8 million, primarily in Coated Products. (d) Includes a $1.2 million pretax gain on the sale of Maxtor Corporation common shares and a $.9 million pretax gain relating to the settlement of litigation against the auditors and certain advisors of MiniScribe Corporation.
Capital expenditures and depreciation and amortization by business segment are set forth below:
Depreciation and Capital Expenditures Amortization 1993 1992 1991 1993 1992 1991 ---- ---- ---- ---- ---- ---- Coated Products $ 8.1 $ 4.7 $ 4.8 $ 5.0 $ 4.9 $ 4.5 Computer Products 13.2 11.6 6.6 10.1 10.4 12.3 Office Supplies 2.5 4.1 2.4 3.9 2.3 2.1 Photofinishing 2.9 3.2 4.4 5.9 6.0 5.3 ------ ----- ----- ----- ----- ----- Consolidated $ 26.7 $23.6 $18.2 $24.9 $23.6 $24.2 ====== ===== ===== ===== ===== =====
-34- 36 QUARTERLY OPERATING RESULTS AND COMMON STOCK INFORMATION (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA) 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Year ------- ------- ------- ------- ---- 1993 Net sales $141.1 $141.7 $147.9 $125.0 $555.7 Gross profit 34.1 37.5 39.5 25.4 136.5 Income (loss) from continuing operations(1) 2.6 3.9 4.4 (32.6) (21.7) Income from discontinued operations - - - 2.5 2.5 Net income (loss)(1) 2.6 3.9 4.4 (30.1) (19.2) Earnings (loss) per common and common equivalent share: Continuing operations(1) .42 .61 .69 (5.14) (3.42) Discontinued operations - - - .40 .40 Net income (loss)(1) .42 .61 .69 (4.74) (3.02) Dividends .18 .18 .18 .18 .72 Market price High 29-7/8 29-5/8 31-3/4 31-3/4 31-3/4 Low 25-1/4 25-3/8 27-3/8 25-3/8 25-1/4 ------ ------ ------ ------ ------ 1992 Net sales $120.8 $135.3 $151.2 $145.2 $552.5 Gross profit 26.7 31.5 38.2 34.6 131.0 Income before cumulative effect of accounting principle changes (2)(3) 0.1 0.2 2.8 2.2 5.3 Net income (loss) (2)(3) (10.0) 0.2 2.8 2.2 (4.8) Earnings per common and common equivalent share: Income before cumulative effect of accounting principle changes (2)(3)(4) $ .01 $ .03 $ .44 $ .35 $ .84 Net income (loss) (2)(3)(4) (1.59) .03 .44 .35 (.76) Dividends .18 .18 .18 .18 .72 Market price High 31-1/4 31 24-7/8 28-3/8 31-1/4 Low 23-1/4 23-1/2 21 21-1/2 21 ------ ------ ------ ------ ------ (1)The fourth quarter includes a $48.5 million pretax ($32.1 million after-tax) charge relating to restructuring and other unusual charges. (2)The third quarter includes a $1.2 million pretax gain on the sale of Maxtor Corporation common shares, acquired by Nashua in partial settlement of claims against the bankrupt MiniScribe Corporation. The Company had taken a $3.4 million pretax charge to its 1990 earnings when MiniScribe filed for protection from creditors. (3)The fourth quarter includes a $.9 million pretax gain relating to the settlement of litigation against the auditors and certain managers and advisors of MiniScribe Corporation and a $.9 million charge for estimated environmental remediation costs. (4)Earnings (loss) per common and common equivalent share for the year is more than the sum of the quarterly earnings per common and common equivalent share due to the change in shares and earnings each quarter.
The Company's stock is traded on the New York Stock Exchange. At December 31, 1993, there were 1,634 record holders of Nashua's common stock. -35- 37 REPORT OF INDEPENDENT ACCOUNTANTS Price Waterhouse To the Board of Directors and Shareholders of Nashua Corporation In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations and retained earnings and of cash flows present fairly, in all material respects, the financial position of Nashua Corporation and its subsidiaries at December 31, 1993 and 1992 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in the Income Taxes and Postretirement Benefits notes to the financial statements, the Company changed its method of accounting for income taxes by adopting Financial Accounting Standards Board ("FASB") Statement No. 109, "Accounting for Income Taxes," and its accounting for non-pension benefit plans by adopting FASB Statement No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," in 1992. Price Waterhouse Boston, Massachusetts February 1, 1994, except as to the Restructuring and Other Unusual Charges note, which is as of March 15, 1994. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND - ------- --------------------------------------------------------------- FINANCIAL DISCLOSURE -------------------- None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - -------- -------------------------------------------------- The section entitled "Nominees for Election as Directors", which appears on pages 2 through 4 of the Company's Proxy Statement dated March 21, 1994, is incorporated by reference in this Form 10-K. See also the section entitled "Executive Officers of the Registrant" appearing in Part I hereof. -36- 38 ITEM 11. EXECUTIVE COMPENSATION - -------- ---------------------- The section entitled "Compensation of Directors and Executive Officers", which appears on pages 3 through 9 of the Company's Proxy Statement dated March 21, 1994, is incorporated by reference in this Form 10-K. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - -------- -------------------------------------------------------------- The sections entitled "Security Ownership of Management" and "Security Ownership of Certain Beneficial Owners", which appear on pages 10 through 12 of the Company's Proxy Statement dated March 21, 1994, are incorporated by reference in this Form 10-K. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------- ---------------------------------------------- None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K - -------- --------------------------------------------------------------- (a) The following documents are filed as part of this report: (1) Consolidated Financial Statements Report of Independent Accountants (See page 36) Consolidated Balance Sheet at December 31, 1993 and 1992 (See pages 19 and 20) Consolidated Statement of Operations and Retained Earnings for each of the three years in the period ended December 31, 1993 (See page 18) Consolidated Statement of Cash Flows for each of the three years in the period ended December 31, 1993 (See page 21) Notes to Consolidated Financial Statements (See pages 22 through 35) (2) Financial Statement Schedules: Report of Independent Accountants on Financial Statement Schedules For the three years ended December 31, 1993: Schedule V - Property, Plant and Equipment Schedule VI - Accumulated Depreciation and Amortization of Property, Plant and Equipment Schedule VIII - Valuation and Qualifying Accounts Schedule IX - Short-Term Borrowings Schedule X - Supplementary Income Statement Information -37- 39 All other schedules are omitted because they are not applicable or the required information is shown in the Consolidated Financial Statements or the Notes thereto.
(3) Exhibits: --------- 3.01 Composite Certificate of Incorporation of the Company, as amended. Exhibit to the Company Annual Report on Form 10-K for the year ended December 31, 1989, and incorporated herein by reference. 3.02 By-laws of the Company, as amended. Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1989, and incorporated herein by reference. 4.01 Note Agreement dated as of September 13, 1991. Exhibit to the Company's Form 10-K for the year ended December 31, 1991, and incorporated herein by reference. 4.02 Amendment No. 1 dated as of December 31, 1991 to the Note Agreement dated September 13, 1991. 4.03 Amendment No. 2 dated as of January 27, 1994 to the Note Agreement dated September 13, 1991. 4.04 Credit Agreement dated March 27, 1992. Exhibit to the Company's Form 10-Q dated March 27, 1992, and incorporated herein by reference. 4.05 First Amendment dated as of December 31, 1993 to the Credit Agreement dated March 27, 1992. 4.06 Rights Agreement dated as of August 22, 1986 between the Company and The First National Bank of Boston. Exhibit to the Company's Form 8-K dated August 22, 1986, and incorporated herein by reference. 4.07 Amendment No. 1, dated April 22, 1988 to the Rights Agreement dated as of August 22, 1986 between the Company and The First National Bank of Boston. Exhibit to the Company's Form 8 dated May 3, 1988, and incorporated herein by reference. 4.08 Amendment No. 2, dated May 17, 1989 to the Rights Agreement dated as of August 22, 1986 between the Company and the First National Bank of Boston. Exhibit to the Company's Form 8-K dated May 17, 1989 and incorporated herein by reference. 4.09 Amendment No. 3, dated October 27, 1989 to the Rights Agreement dated as of August 22, 1986 between the Company and the First National Bank of Boston. Exhibit to the Company's Form 8-K dated October 31, 1989 and incorporated herein by reference. 4.10 Amendment No. 4, dated March 22, 1993 to the Rights Agreement dated as of August 22, 1986 between the Company and the First National Bank of Boston. Exhibit to the Company's Form 8-K dated March 22, 1993 and incorporated herein by reference.
-38- 40 10.01 Management Incentive Compensation Program of the Company, as amended 1993. Exhibit to the Company's Form 10-K for the year ended December 31, 1992 and incorporated herein by reference. 10.02 Certain deferred incentive compensation payments may be paid under documents previously filed as Exhibits to the Company's Annual Reports on Form 10-K for the years ended December 31, 1988, December 31, 1990 and the Company's Form 10-Q for the quarterly period ended June 30, 1989, and are incorporated herein by reference. 10.03 Nashua Corporation Supplemental Compensation Plan (as amended February 24, 1994). 10.04 1987 Stock Option Plan of the Company. Exhibit to the Company's Proxy Statement dated March 24, 1987, and incorporated herein by reference. 10.05 Amendments to Nashua Corporation 1987 Stock Option Plan effective as of April 28, 1989. Exhibit to the Company's Form 10-Q for the quarterly period ended June 30, 1989, and incorporated herein by reference. 10.06 1993 Stock Option Plan of the Company. Exhibit to the Company's Proxy Statement dated March 19, 1993, and incorporated herein by reference. 10.07 Severance Agreement dated March 8, 1988 between the Company and Charles E. Clough. Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1987, and incorporated herein by reference. 10.08 Severance Agreement dated March 8, 1988 between the Company and John G. Barnes. Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1987, and incorporated herein by reference. 10.09 Severance Agreement dated March 8, 1988 between the Company and John J. Montesi. Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1987, and incorporated herein by reference. 10.10 Severance Agreement dated March 8, 1988 between the Company and William Luke. Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1987, and incorporated herein by reference. 10.11 Severance Agreement dated March 8, 1988 between the Company and Joseph R. Kershaw. Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1987, and incorporated herein by reference. 10.12 Employment Agreement dated as of April 28, 1989 between the Company and Charles E. Clough. Exhibit to the Company's Form 10-Q for the quarterly period ended June 30, 1989, and incorporated herein by reference. 10.13 Employment Agreement dated as of April 28, 1989 between the Company and John G. Barnes. Exhibit to the Company's Form 10-Q for the quarterly period ended June 30, 1989, and incorporated herein by reference.
-39- 41 10.14 Employment Agreement dated as of April 28, 1989 between the Company and Joseph R. Kershaw. Exhibit to the Company's Form 10-Q for the quarterly period ended June 30, 1989, and incorporated herein by reference. 10.15 Employment Agreement dated as of April 28, 1989 between the Company and William Luke. Exhibit to the Company's Form 10-Q for the quarterly period ended June 30, 1989, and incorporated herein by reference. 10.16 Employment Agreement dated as of February 6, 1994 between the Company and Francis J. Lunger. 10.17 Letter agreement dated July 21, 1993 between the Company and William E. Mitchell. Exhibit to the Company's Form 10-Q for the quarterly period ended October 1, 1993, and incorporated by reference. 10.18 Employment Agreement dated as of September 1, 1993 between the Company and William E. Mitchell. Exhibit to the Company's Form 10-Q for the quarterly period ended October 1, 1993, and incorporated by reference. 10.19 Employment Agreement dated as of April 28, 1989 between the Company and John J. Montesi. Exhibit to the Company's Form 10-Q for the quarterly period ended June 30, 1989, and incorporated herein by reference. 10.20 Stock Appreciation Right Agreement dated March 20, 1992 between the Company and Charles E. Clough with respect to 15,000 shares of the Company. Exhibit to the Company's Form 10-K for the year ended December 31, 1991, and incorporated herein by reference. 11.01 Statement regarding Computation of Earnings Per Share and Common Equivalent Share. 21.01 Subsidiaries of the Registrant. 23.01 Consent of Independent Accountants. 24.01 Powers of Attorney.
(b) Reports on Form 8-K: No reports on Form 8-K were filed or required to be filed by the Company during the fourth quarter of the fiscal year ended December 31, 1993. -40- 42 SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NASHUA CORPORATION Date: March 29, 1994 By WILLIAM LUKE ------------------------ William Luke Vice President-Finance and Chief Financial Officer
SIGNATURE TITLE DATE --------- ----- ---- Charles E. Clough Chairman and March 29, 1994 - ---------------------- Chief Executive Officer Charles E. Clough William E. Mitchell President and March 29, 1994 - ---------------------- Chief Operating Officer William E. Mitchell Francis J. Lunger Vice President, Finance and March 29, 1994 - ---------------------- Administration Francis J. Lunger William Luke Vice President-Finance March 29, 1994 - ---------------------- and Chief Financial Officer William Luke Joseph R. Matson Corporate Controller March 29, 1994 - ---------------------- Joseph R. Matson Joseph A. Baute* Director - ---------------------- Joseph A. Baute Richard E. Carter* Director - ---------------------- Richard E. Carter Thomas W. Eagar* Director - ---------------------- Thomas W. Eagar Charles S. Hoppin* Director - ---------------------- Charles S. Hoppin John M. Kucharski* Director - ---------------------- John M. Kucharski Guy W. Nichols* Director - ---------------------- Guy W. Nichols James Brian Quinn* Director - ---------------------- James Brian Quinn *By William Luke March 29, 1994 ------------------ William Luke Attorney-In-Fact
-41- 43 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES TO THE BOARD OF DIRECTORS OF NASHUA CORPORATION Our audits of the consolidated financial statements referred to in our report dated February 1, 1994, except as to the Restructuring and Other Unusual Charges note, which is as of March 15, 1994, appearing on page 36 of this Annual Report on Form 10-K also included an audit of the Financial Statement Schedules listed in Item 14(a) of this Form 10-K. In our opinion, these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Price Waterhouse Boston, Massachusetts February 1, 1994, except as to the Restructuring and Other Unusual Charges note, which is as of March 15, 1994. -42- 44 SCHEDULE V NASHUA CORPORATION AND SUBSIDIARIES PROPERTY, PLANT AND EQUIPMENT (1)
(In Thousands) Balance at Additions Sales and Balance at Beginning at Cost Retirements End of of Period (2) (3) Period ---------- ----------- -------------- ----------- Year ended December 31, 1993 Land $ 1,452 $ - $ (5) $ 1,447 Building and Improvements 38,847 2,114 (1,469) 39,492 Machinery and Improvements 110,787 18,547 (18,895) 110,439 Construction in Progress 5,713 15,020 (7,369) 13,364 ------- ------ ------- ------- $156,799 $35,681 $(27,738) $164,742 ======== ======= ======== ======== Year ended December 31, 1992: Land $ 1,511 $ - $ (59) $ 1,452 Buildings and Improvements 37,560 2,702 (1,415) 38,847 Machinery and Equipment 102,941 24,589 (16,743) 110,787 Construction in Progress 7,827 20,044 (22,158) 5,713 -------- ------- -------- -------- $149,839 $47,335 $(40,375) $156,799 ======== ======= ======== ======== Year ended December 31, 1991: Land $ 1,341 $ 170 $ - $ 1,511 Buildings and Improvements 35,102 2,778 (320) 37,560 Machinery and Equipment 105,241 17,783 (20,083) 102,941 Construction in Progress 10,523 12,418 (15,114) 7,827 -------- ------- --------- -------- $152,207 $33,149 $(35,517) $149,839 ======== ======= ======== ======== (1) Amounts include the effects of certain foreign exchange rate fluctuations. (2) Additions at cost related to construction in progress are net of reclassifications to buildings and improvements and machinery and equipment. (3) Amounts include removal from the accounts of items which are fully depreciated.
45 SCHEDULE VI NASHUA CORPORATION AND SUBSIDIARIES ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT (1)
(In thousands) Additions Balance Charged to Sales and Balance Beginning Costs and Retirements Restructuring End of Description of Period Expenses (2) Charge Period - ----------- ----------- ------------ -------------- ------------- -------- Year ended December 31, 1993: Building and Improvements $17,730 $ 2,943 $(1,431) $ 2,297 $21,539 Machinery and Equipment 50,288 19,188 (18,409) 20,903 71,970 ------ ------ ------- ------ ------ $68,018 $22,131 $(19,840) $23,200 $93,509 ======= ======= ======== ======= ======= Year ended December 31, 1992: Buildings and Improvements $16,617 $ 2,485 $(1,372) $ - $17,730 Machinery and Equipment 46,904 18,240 (14,856) - 50,288 ------ ------ ------- ------- ------ $63,521 $20,725 $(16,228) $ - $68,018 ======= ======= ======== ======= ======= Year ended December 31, 1991: Buildings and Improvements $14,537 $2,398 $(318) $ - $16,617 Machinery and Equipment 47,117 19,005 (19,218) - 46,904 ------ ------ ------- ------ ------ $61,654 $21,403 $(19,536) $ - $63,521 ======= ======= ======== ======= ======= (1) Amounts include the effects of certain foreign exchange rate fluctuations. (2) Amounts include removal from the accounts of items which are fully depreciated.
46 SCHEDULE VIII NASHUA CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS ALLOWANCE FOR DOUBTFUL ACCOUNTS
(In Thousands) Deductions- Additions Uncollectible Balance at Charged to Accounts Balance at Beginning Costs and Charged to End of of Period Expenses Reserves Period ---------- ---------- ---------- -------- Year ended December 31, 1993 $2,433 $ 836 $(1,386) $1,883 ====== ====== ======== ====== Year ended December 31, 1992 $2,634 $ 654 $ (855) $2,433 ====== ====== ======== ====== Year ended December 31, 1991 $2,224 $ 884 $ (474) $2,634 ====== ====== ======== ======
47 SCHEDULE IX NASHUA CORPORATION AND SUBSIDIARIES SHORT-TERM BORROWINGS
(In thousands, except interest rates) Weighted Average Maximum Amount Payable Interest Rate in Amount Average Amount Weighted Average to Banks at Effect at end of Outstanding Outstanding Interest Rate End of Period Period During Period During Period (1) During Period (2) --------------- ---------------- ------------- ----------------- ----------------- Year ended December 31, 1993 $2,500 4.125% $8,100 $2,036 4.2% Year ended December 31, 1992 $ - - $3,000 $ 31 3.7% Year ended December 31, 1991 $ - - $7,000 $ 468 7.0% (1) Computed by averaging daily outstanding balances. (2) The interest rates are estimated by dividing the interest expense on short-term borrowings by the average outstanding short- term debt for the period.
48 SCHEDULE X NASHUA CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INCOME STATEMENT INFORMATION
(In Thousands) Year Ended December 31, ---------------------------------------------- 1993 1992 1991 -------- -------- -------- Maintenance and Repairs $14,329 $12,689 $11,114 ======= ======= ======= Advertising Costs $28,998 $34,034 $34,329 ======= ======= =======
EX-4.2 2 AMENDMENT 1 TO NOTE AGREEMENT 1 EXHIBIT 4.02 AMENDMENT NO. 1 TO NOTE AGREEMENT THIS AGREEMENT, entered into as of December 31, 1991, by and between THE PRUDENTIAL INSURANCE COMPANY OF AMERICA ("Prudential") and NASHUA CORPORATION (the "Company"). W I T N E S S E T H: WHEREAS, the parties hereto have executed and delivered that certain Note Agreement, dated as of September 13, 1991 (the "Note Agreement"); WHEREAS, Prudential is the holder of 100% of the Notes issued under the Note Agreement; and WHEREAS, the parties hereto wish to amend certain terms of the Note Agreement. NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Amendment of Paragraph 6H of the Note Agreement. Clause (iii) of paragraph 6H of the Note Agreement is hereby amended and restated as follows: "(iii) Investments in (a) commercial paper issued by any Person organized under the laws of the United States or any state thereof and rated "P-1" or higher by Moody's Investors Service, Inc. or "A-1" or higher by Standard & Poor's Corporation; (b) certificates of deposit issued by any bank (i) organized under the laws of the United States or any state thereof, (ii) the deposits of which are insured by the Federal Deposit Insurance Corporation and (iii) having combined capital and surplus aggregating in excess of Five Hundred Million Dollars ($500,000,000); (c) marketable direct obligations of, or obligations unconditionally guaranteed by, the United States government or any agency thereof; 1 2 (d) Investments issued by any Person organized under the laws of the United States or any state thereof rated "MIG-1" or "VMIG-1" by Moody's Investors Services, Inc. or "SP-1" by Standard & Poor's Corporation; (e) Investments issued by any Person organized under the laws of the United States or any state thereof rated "MIG-2" or "VMIG-2" by Moody's Investors Services, Inc. or "SP-2" by Standard & Poor's Corporation; provided, that the aggregate book value of Investments made by the Company and its Subsidiaries pursuant to this clause (e) shall not at any time exceed 20% of the book value of the aggregate Investments made by the Company and its Subsidiaries pursuant to all of subparagraph (iii); and (f) municipal securities issued by any Person organized under the laws of the United States or any state thereof which are unrated or are rated below "MIG-2" or "VMIG-2" by Moody's Investors Services, Inc. or below "SP-2" by Standard & Poor's Corporation; provided, that the obligation of the issuer thereof to make timely payment thereunder is secured by an irrevocable stand-by letter of credit in an amount equal to the full amount due on the Investment and issued by a bank organized under the laws of the United States or any state thereof, which has unsecured and unenhanced public debt outstanding rated A1 or higher by Moody's Investors Services, Inc. or A+ or higher by Standard & Poor's Corporation; provided further, that the aggregate book value of Investments made by the Company and its Subsidiaries pursuant to this clause (f) shall not at any time exceed 15% of the book value of the aggregate Investments made by the Company and its Subsidiaries pursuant to all of subparagraph (iii); provided, in each case, that such Investments are payable in the United States in United States dollars and mature with one (1) year from the date of issuance thereof; provided further, that, in the case of the Investments described in clauses (d), (e) and (f) above which grant the holder thereof the right to remarket the Investment at par, not less frequently than weekly, to the public or, in the event the Investment cannot be remarketed, to unconditionally put the Investment back to the issuer thereof at par (which repurchase obligation of the issuer is secured by a stand-by letter of credit of the type described in the first proviso to clause (f) above), such Investments may mature beyond one year from the date of issuance." 2. Effective Date. The terms of Section 1 of this Agreement shall be effective as of October 1, 1991. 3. Miscellaneous. (a) Capitalized terms not otherwise defined herein shall have the meanings 2 3 ascribed thereto in the Note Agreement. (b) On and after the date hereof, each reference in the Note Agreement and the Notes issued thereunder shall mean and be a reference to the Note Agreement as amended by This Agreement. (c) The Note Agreement, as amended by this Agreement, is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed. (d) This Agreement may be executed in any number of counterparts and by any combination of the parties hereto in separate counterparts, each of which counterparts shall be an original and all of which taken together shall constitute one and the same Agreement. IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to set their hands below as of the day and year first above written. THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: Charles E. Mather ---------------------------------- Title: Second Vice President NASHUA CORPORATION By: Daniel M. Junius ---------------------------------- Title: Treasurer EX-4.3 3 AMENDMENT 2 TO NOTE AGREEMENT 1 EXHIBIT 4.03 AMENDMENT NO. 2 TO NOTE AGREEMENT THIS AGREEMENT, entered into as of January 27, 1994 by and between THE PRUDENTIAL INSURANCE COMPANY OF AMERICA ("Prudential") and NASHUA CORPORATION (the "Company"). W I T N E S S E T H : WHEREAS, the parties hereto have executed and delivered that certain Note Agreement, dated as of September 13, 1991 (the "Note Agreement"); WHEREAS, Prudential is the holder of 100% of the Notes issued under the Note Agreement; and WHEREAS, the parties hereto wish to amend certain terms of the Note Agreement. NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Amendments to the Note Agreement. 1.1 Paragraph 6A of the Note Agreement is hereby amended to read in its entirety as follows: "6A. CURRENT RATIO. The Company will not at any time permit Consolidated Current Assets to be less than one hundred fifteen percent (115%) of Consolidated Current Liabilities." 1.2 Paragraph 6F of the Note Agreement is hereby amended: (a) to delete the word "and" at the end of clause (iv) thereof; (b) to insert the following new clause (v) immediately after clause (iv) thereof: "(v) Transfers of all the Property associated with the Company's 'computer products segment' as accounted for in accordance with Financial Accounting Standards Board 14 (Segment of Business Reporting) and as disclosed in the footnotes to the Company's annual report;" and 2 (c) to renumber the existing clause (v) thereof to become clause (vi) thereof. 1.3 The definition of "Consolidated Net Income" in paragraph 10B thereof is hereby amended: (a) to delete the word "and" at the end of clause (ix) thereof; (b) to delete the period at the end of clause (x) thereof and replace it with "; and "; and (c) to add a new clause (xi) thereto to read in its entirety as follows: "(xi) a one time charge appearing as a separate line item on the Company's income statement as 'restructuring and other charges' of up to $45,000,000 before income taxes of the Company incurred in the 4th quarter of 1993 and principally associated with the Company's write down of assets of its 'computer products segment' and the consolidation and restructuring of its office supplies and coated products segment.'" 2. Effective Date. The terms of Section 1 of this Agreement shall be effective as of December 31, 1993. 3. Miscellaneous. 3.1 Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Note Agreement. 3.2 On and after the date hereof, each reference in the Note Agreement and the Notes issued thereunder shall mean and be a reference to the Note Agreement as amended by this Agreement. 3.3 The Note Agreement, as amended by this Agreement, is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed. 3.4 This Agreement may be executed in any number of counterparts and by any combination of the parties hereto in separate counterparts, each of which counterparts shall be an original and all of which taken together shall constitute one and the same Agreement. 3 IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to set their hands below as of the day and year first above written. THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: Kevin J. Kraska ---------------------------- Title: Vice President NASHUA CORPORATION By: Daniel M. Junius ---------------------------- Title: Treasurer EX-4.5 4 1ST AMENDMENT TO CREDIT AGREEMENT 1 EXHIBIT 4.05 FIRST AMENDMENT, dated as of December 31, 1993 (this "Amendment"), to the Credit Agreement, dated as of March 27, 1992 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among NASHUA CORPORATION, a Delaware corporation (the "Company"), the several banks party to the Agreement (collectively, the "Banks"; individually, a "Bank") and CHEMICAL BANK (as successor by merger to Manufacturers Hanover Trust Company), a New York banking corporation, as agent for the Banks (in such capacity, the "Agent"). W I T N E S S E T H : WHEREAS, the Company has requested that the Agent and the Banks enter into this First Amendment as set forth herein; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: 1. Defined Terms. Unless otherwise defined herein, all capitalized terms defined in the Credit Agreement and used herein are so used as so defined. 2. Amendment to Preamble. The preamble to the Credit Agreement is hereby amended by deleting therefrom the reference to "$35,000,000" and substituting "$27,000,000" therefor. 3. Amendment of Subsection 1.1. Subsection 1.1 of the Credit Agreement is hereby amended by (a) deleting the definition of "Consolidated Quick Assets", the definition of "Consolidated Interest Coverage Ratio", and the definition of "Asset Disposition" and (b) adding thereto, in proper alphabetical order, the following defined terms: Consolidated Current Assets: at any date, all amounts which would, in conformity with GAAP, be included under current assets on a consolidated balance sheet of the Company and its Subsidiaries at such date. Consolidated Interest Coverage Ratio: for any period, the ratio of (a) the sum of (i) Consolidated Pre-tax Income plus (ii) interest expense to (b) interest expense. Consolidated Pre-tax Income: with respect to any Person, for any period which such amount is being determined, the earnings from operations before taxes based on income for such period as determined on a consolidated basis for such person and its consolidated Subsidiaries in accordance with GAAP. Asset Disposition: any transaction consisting of the sale, lease, transfer or other disposition of assets (other than (i) transactions between Subsidiaries or between the -2- 2 Company and a Subsidiary, (ii) the sale of inventory in the ordinary course of business, (iii) repurchases by the Company of its own common stock and (iv) the sale or other disposition of assets constituting the Company's Computer Products Group (as identified in the Information About Operations section of the Company's 1992 annual report); provided that the Company shall have used its best efforts to give the Agent at least five Business Days' prior written notice of such sale or other disposition, and that the Agent shall have made reasonable efforts to inform the Banks of such notice received) having a book value at the time of such transaction equal to or greater than $1,000,000. Any group of related sales, leases, transfers or other dispositions shall be treated as one transaction for purposes of determining whether the same is an Asset Disposition. 4. Amendment of Subsection 6.1. Subsection 6.1 of the Credit Agreement is hereby amended by deleting such subsection in its entirety and substituting the following therefor: "6.1 Financial Condition Covenants. (a) Consolidated Interest Coverage Ratio. Permit the Consolidated Interest Coverage Ratio to be less than 3.0 to 1 on the last day of any period of four consecutive fiscal quarters of the Company ending on or after December 31, 1993; provided that solely for purposes of this subsection 6.1(a), up to $43,000,000 of restructuring and other unusual charges incurred in the Company's 1993 fiscal year shall each be excluded from Consolidated Pre-tax Income in determining the Consolidated Interest Coverage Ratio. (b) Current Ratio. Permit the ratio of Consolidated Current Assets to Consolidated Current Liabilities to be less than (i) 1.1 to 1 at any time prior to the end of the Company's third quarter in its 1994 fiscal year and (ii) 1.2 to 1 at any time thereafter. (c) Consolidated Tangible Net Worth. Permit Consolidated Tangible Net Worth at any time to be less than the sum of $89,000,000 plus the sum of (i) 50% of Consolidated Net Income arising after December 31, 1993 and computed on a cumulative basis (without any deduction, however, for any fiscal quarter for which Consolidated Net Income is negative) through the end of the fiscal quarter immediately preceding the date of determination plus (ii) the net proceeds paid to the Company of any offering of any shares of capital stock of the Company (other than, in the case of any preferred stock requiring mandatory redemption or sinking fund payments prior to May 31, 1995, those shares which are subject to such requirement) since the Closing Date and through the end of the fiscal quarter immediately preceding the date of determination (including any such proceeds derived from the issuance of shares of capital stock of the Company (other than, in the case of any preferred stock requiring mandatory redemption or sinking fund payments prior to May 31, 1995, those shares of which that are subject to such requirement) as a result of the exercise of stock options of the Company or from the conversion of debt securities of the Company). -3- 3 (d) Consolidated Total Liabilities to Consolidated Tangible Net Worth. Permit Consolidated Total Liabilities to exceed (i) 160% of Consolidated Tangible Net Worth at any time during the period from and including January 1, 1994 to but excluding the last day of the Company's third quarter in its 1994 fiscal year and (ii) 150% of Consolidated Tangible Net Worth at all times prior to and after the period specified in clause (d)(i) above. 5. Amendment Fee. The Company hereby agrees to pay to the Agent, for the ratable benefit of the Banks, an amendment fee of $33,750, payable upon execution of this First Amendment by the Company. 6. Representations and Warranties. The Company hereby represents and warrants as of the date hereof that (a) after giving effect to this First Amendment, each of the representations and warranties made by the Company in or pursuant to Section 3 of the Credit Agreement are true and correct on and as of such date as if made on and as of such date. 7. Limited Amendment. Except as expressly amended hereby, all the provisions of the Credit Agreement are hereby affirmed and shall continue to be in full force and effect in accordance with their terms, and any amendments contained herein shall be limited precisely as drafted and shall not constitute an amendment of any other terms of provisions of the Credit Agreement. 8. Expenses. The Company agrees to pay or reimburse the Agent on demand for all its out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of this First Amendment and any other documents prepared or reviewed in connection herewith, including, without limitation, the fees and disbursements of counsel to the Agent. 9. GOVERNING LAW. THIS FIRST AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 10. Counterparts. This First Amendment may be executed by one or more of the parties to this First Amendment on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 11. Effectiveness. This First Amendment shall become effective as of the date hereof upon receipt by the Agent of counterparts hereof duly executed by the Company and the Required Banks. -4- 4 IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. NASHUA CORPORATION By: Daniel M. Junius ---------------------------- Name: Daniel M. Junius Title: Treasurer CHEMICAL BANK By: John J. Huber ---------------------------- Name: John J. Huber Title: Managing Director BANK OF MONTREAL By: John M. Denson ---------------------------- Name: John M. Denson Title: Managing Director STATE STREET BANK AND TRUST COMPANY By: L. A. Moulton ---------------------------- Name: L. A. Moulton Title: Vice President -4- EX-10.3 5 NASHUA CORP SUPPLEMENTAL COMPENSATION 1 Exhibit 10.03 NASHUA CORPORATION SUPPLEMENTAL COMPENSATION PLAN (as amended February 24, 1994) ARTICLE I. NAME, PURPOSE AND EFFECTIVE DATE 1.01 Name and Purpose. The Plan set forth herein shall be known as the "Nashua Corporation Supplemental Compensation Plan." The Plan is established and shall be maintained solely for the purpose of providing deferred compensation benefits to Eligible Employees in consideration of services rendered and to be rendered to Nashua Corporation. 1.02 Effective Date. The Plan became effective as of January 1, l987. The Plan applies only to Eligible Employees who retire or terminate employment with the Corporation on or after the Effective Date. ARTICLE II. DEFINITIONS Wherever used in this Plan, unless the context clearly indicates otherwise, the following terms shall have the following meanings: 2.01 "Beneficiary" shall mean the person or persons designated by an Eligible Employee to receive benefits under this Plan in the event of the death of the Eligible Employee. 2.02 "Executive Salary Committee" shall mean the Executive Salary Committee of the Board of Directors of Nashua Corporation. 2.03 "Corporation" shall mean Nashua Corporation, a Delaware corporation. 2.04 "Disability" means disability within the meaning of the Social Security Act. 2.05 "Eligible Employee" means any person employed by the Corporation who is included in Appendix A, which is updated as of January 1 of each year. 2.06 "Retirement" means termination of employment after age 55 with 10 or more years of service with the Corporation. Years of service with any direct or indirect subsidiary while owned or controlled by the Corporation shall count as years of service of the Corporation. 2.07 "Supplemental Compensation Account" means the individual account established for an Eligible Employee by the Corporation, reflecting all additions thereto on behalf of the Eligible Employee pursuant to Article 3. 2 -2- 2.08 "Supplemental Compensation Benefit" means the benefit payable to an Eligible Employee upon termination of employment, as provided in Section 4.01. 2.09 "Supplemental Compensation Plan Committee" means the Committee established to administer the Plan, made up of the Secretary of the Corporation and the Treasurer of the Corporation and such other individuals as may be designated from time to time by the Executive Salary Committee. Wherever used in this instrument, a masculine pronoun shall be deemed to include the masculine and feminine gender, and a singular word shall be deemed to include the singular and plural, in all cases where the context requires. ARTICLE III. SUPPLEMENTAL COMPENSATION ACCOUNT 3.01 Supplemental Compensation Account. The Corporation shall credit to each Eligible Employee's Supplemental Compensation Account, as of the last day of each fiscal year of the Corporation occurring prior to or coinciding with (if applicable) that Eligible Employee's termination of employment, an amount equal to the amount approved for that year by the Executive Salary Committee set opposite that Eligible Employee's name on Appendix A for that year as the current addition. No provision of the Plan shall be construed as indicating that the Corporation has purchased life insurance to fund the Plan or has otherwise funded the Plan. ARTICLE IV. SUPPLEMENTAL COMPENSATION BENEFIT 4.01 Termination of Employment. At Retirement or Disability an Eligible Employee's Supplemental Compensation Benefit shall be based upon the amount then credited to the Eligible Employee's Supplemental Compensation Account. No benefit shall be payable under this Plan if an Eligible Employee dies while still in the service of the Corporation. If an Eligible Employee terminates employment with the Corporation for any reason other than Retirement, Disability or death after completing at least five (5) consecutive years of employment, he shall be entitled to a Supplemental Compensation Benefit based upon the amount credited to his Supplemental Compensation Account as of the date his employment terminates. 4.02 Form of Payment. Any amounts payable to an Eligible Employee hereunder shall be payable in the form of an immediate or deferred annuity on the sole life of the Eligible Employee or on the joint lives of the Employee and any Beneficiary, but the Corporation in its discretion will determine whether to purchase an annuity contract to fund the amounts so payable. 3 - 3 - 4.03 Death Benefit After Retirement. In the event that an Eligible Employee dies after Retirement, a death benefit shall be paid under this Plan to the Eligible Employee's Beneficiary. The death benefit shall be equal to two (2) times the base rate of annual compensation payable to the Eligible Employee immediately prior to Retirement and shall be paid in a lump sum to the Beneficiary as soon as practicable. The death benefit payable under this Section 4.03 is independent of any survivor annuity payable under Section 4.02. ARTICLE V. FUNDING 5.01 Funding. There is no fund associated with this Plan. The Corporation shall be required to make payments only as benefits become due and payable. No person shall have any right, other than the right of an unsecured general creditor, against the Corporation with respect to the benefits payable hereunder. If the Corporation, acting in its sole discretion, establishes a reserve or other fund associated with this Plan, no person shall have any right to or interest in any specific amount or asset of such reserve or fund. The assets in any such reserve or funds shall be subject to the control of the Corporation and need not be used to pay benefits hereunder. ARTICLE VI. MISCELLANEOUS 6.01 Non-Guarantee of Employment. Nothing contained in this Plan shall be construed as a contract of employment between the Corporation and any Eligible Employee or as a limitation on the right of the Corporation to deal with an Eligible Employee, as to hiring, discharge, layoff, compensation, and all other conditions of employment, in all respects as though this Plan did not exist. 6.02 Rights Under Plan. Nothing in this Plan shall be construed to limit, broaden, restrict, or grant any right to any Eligible Employee or any Beneficiary under any other plan sponsored by the Corporation, nor to grant any additional rights to any Eligible Employee or Beneficiary under any other such plan, nor in any way to limit, modify, repeal or otherwise affect the Corporation's right to amend or modify any other such plan. 6.03 Nonassignability. The Supplemental Compensation Benefit payable under this Plan shall not be subject to alienation, assignment, garnishment, execution of levy of any kind, and any attempt to cause any Supplemental Compensation Benefit to be so subjected shall not be recognized, except to the extent required by applicable law. 6.04 Plan Administration. The Plan shall be operated and administered by the Supplemental Compensation Plan Committee (or its duly authorized representative) whose decision on all matters involving the interpretation and administration of the Plan shall be final and binding. The Executive Salary Committee shall retain the right to amend or terminate the Plan. 4 - 4 - 6.05 Successor Corporation. In the event of the dissolution, merger, consolidation or reorganization of the Corporation, provision may be made by which a successor to all or a major portion of the Corporation's property or business shall continue the Plan, and the successor shall have all of the power, duties and responsibilities of the Corporation under the Plan. 6.06 Governing Law. This Plan shall be construed and enforced in accordance with, and governed by, the laws of the State of New Hampshire. NASHUA CORPORATION By Paul Buffum ------------------------------- Paul Buffum Secretary and Counsel EX-10.16 6 EMPLOYMENT AGREEMENT 1 Exhibit 10.16 EMPLOYMENT AGREEMENT AGREEMENT by and between NASHUA CORPORATION, a Delaware corporation (the "Company") and FRANCIS J. LUNGER (the "Executive"), dated as of the 6th day of February, l994. The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. CERTAIN DEFINITIONS. (a) The "Effective Date" shall be the first date during the "Change of Control Period" (as defined in Section 1(b)) on which a Change of Control occurs. Anything in this Agreement to the contrary notwithstanding, if the Executive's employment with the Company is terminated or the Executive ceases to be an officer of the Company prior to the date on which a Change of Control occurs, and it is reasonably demonstrated that such termination of employment (1) was at the request of a third party who has taken steps reasonably calculated to effect the Change of Control or (2) otherwise arose in connection with or anticipation of the Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment. (b) The "Change of Control Period" is the period commencing on the date hereof and ending on the third anniversary of such date; provided, however, that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof is hereinafter referred to as the "Renewal Date"), the Change of Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless at least 60 days prior to the Renewal Date the Company shall give notice to the Executive that the Change of Control Period shall not be so extended. 2. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change of Control" shall mean: (a) The acquisition, other than from the Company, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of l934, as amended (the "Exchange Act")) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) (a "Person") of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common 2 - 2 - Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Company Voting Securities"), provided, however, that any acquisition by (x) the Company or any of its subsidiaries, or any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries or (y) any corporation with respect to which, following such acquisition, more than 60% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Company Voting Securities immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the Outstanding Company Common Stock and Company Voting Securities, as the case may be, shall not constitute a Change of Control; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a director subsequent to the date hereof whose election or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Company (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act); or (c) Approval by the shareholders of the Company of a reorganization, merger or consolidation (a "Business Combination"), in each case, with respect to which all or substantially all of the individuals and entities who were the respective beneficial owners of the Outstanding Company Common Stock and Company Voting Securities immediately prior to such Business Combination do not, following such Business Combination, beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from Business Combination in substantially the same proportion as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and Company Voting Securities, as the case may be; or (d) (i) a complete liquidation or dissolution of the Company or of (ii) sale or other disposition of all or substantially all of the assets of the Company other than to a corporation with respect to which, following such sale or disposition, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors is then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Company Voting Securities immediately prior to such sale or disposition in substantially the same proportion as their ownership of the Outstanding Company Common Stock and Company Voting Securities, as the case may be, immediately prior to such sale or disposition. 3 - 3 - 3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company, for the period commencing on the Effective Date and ending on the third anniversary of such date (the "Employment Period"). 4. TERMS OF EMPLOYMENT. (a) Position and Duties. (i) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 90-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than 35 miles from such location. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid at a monthly rate, at least equal to twelve times the highest monthly base salary paid or payable to the Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed at least annually and shall be increased at any time and from time to time as shall be substantially consistent with increases in base salary awarded in the ordinary course of business to other peer executives of the Company and its affiliated companies. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" includes any company controlled by, controlling or under common control with the Company. (ii) Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year beginning or ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the average bonus paid or payable, including by reason of deferral, to the Executive by the Company and its affiliated companies in respect of the three 4 - 4 - fiscal years immediately preceding the fiscal year in which the Effective Date occurs (annualized for any fiscal year during the Employment Period consisting of less than twelve full months or with respect to which the Executive has been employed by the Company for less than twelve full months) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. (iii) Incentive, Savings and Retirement Plans. In addition to Annual Base Salary and Annual Bonus payable as hereinabove provided, the Executive shall be entitled to participate during the Employment Period in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive, savings and retirement benefit opportunities, in each case, less favorable, in the aggregate, than (x) the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 90-day period immediately preceding the Effective Date or (y) if more favorable to the Executive, those provided at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (iv) Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent generally applicable to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than (x) the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or (y) if more favorable to the Executive, those provided at any time after the Effective Date generally to other peer executives of the Company and its affiliated companies. (v) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vi) Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. 5 - 5 - (vii) Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (viii) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer incentives of the Company and its affiliated companies. 5. TERMINATION OF EMPLOYMENT. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" means the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or Executive's legal representative (such agreement as to acceptability not to be withheld unreasonably). (b) Cause. The Company may terminate the Executive's employment during the Employment Period for Cause. For purposes of this Agreement, "Cause" means (i) an action taken by the Executive involving willful and wanton malfeasance involving specifically a wholly wrongful and unlawful act, or (ii) the Executive being convicted of a felony. (c) Good Reason. The Executive's employment may be terminated during the Employment Period by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" means (i) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; 6 - 6 - (ii) any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) the Company's requiring the Executive to be based at any office or location other than that described in Section 4(a)(i)(B) hereof; (iv) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (v) any failure by the Company to comply with and satisfy Section 11(c) of this Agreement. For purposes of this Agreement, any good faith determination of Good Reason made by the Executive shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a termination by the Executive for any reason during the 30-day period immediately following the first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for all purposes of this Agreement. (d) Notice of Termination. Any termination by the Company for Cause or by the Executive for Good Reason shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than fifteen days after the giving of such notice). In the case of a termination of the Executive's employment for Cause, a Notice of Termination shall include a copy of a resolution duly adopted by the affirmative vote of not less than two-thirds of the entire membership of the Board at a meeting of the Board called and held for the purpose (after reasonable notice to the Executive and reasonable opportunity for the Executive, together with the Executive's counsel, to be heard before the Board prior to such vote), finding that in the good faith opinion of the Board the Executive was guilty of conduct constituting Cause. No purported termination of the Executive's employment for Cause shall be effective without a Notice of Termination. The failure by the Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason shall not waive any right of the Executive hereunder or preclude the Executive from asserting such fact or circumstance in enforcing the Executive's rights hereunder. (e) Date of Termination. "Date of Termination" means the date of receipt of the Notice of Termination or any later date specified therein, as the case may be; provided, however, that (i) if the Executive's employment is terminated by the Company other than for Cause or 7 - 7 - Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (ii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 6. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than the following obligations: (i) payment of the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (ii) payment of the product of (x) the greater of (A) the Annual Bonus paid or payable, including by reason of deferral, (and annualized for any fiscal year consisting of less than twelve full months or for which the Executive has been employed for less than twelve full months) for the most recently completed fiscal year during the Employment Period, if any, and (B) the Recent Annual Bonus (such greater amount hereafter referred to as the "Highest Annual Bonus") and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 and (iii) payment of any compensation previously deferred by the Executive (together with any accrued interest thereon) and not yet paid by the Company and any accrued vacation pay not yet paid by the Company (the amounts described in paragraphs (i), (ii) and (iii) are hereafter referred to as "Accrued Obligations"). All Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. In addition, the Executive's estate or designated beneficiaries shall be entitled to receive the Executive's Annual Base Salary for the balance of the Employment Period; provided, however, that such payments of Annual Base Salary shall be reduced by any survivor benefits paid to the Executive's estate or designated beneficiary under the Retirement Plan. Anything in this Agreement to the contrary notwithstanding, the Executive's estate and family shall be entitled to receive benefits at least equal to the most favorable benefits provided generally by the Company and any of its affiliated companies to the estates and surviving families of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect generally with respect to other peer executives and their estates and families at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect on the date of the Executive's death generally with respect to other peer executives of the Company and its affiliated companies and their families. (b) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations. All Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. In addition, the Executive shall be entitled to receive the Executive's Annual Base Salary for the balance of the Employment Period; provided, however, that such payments of Annual Base Salary shall be reduced by any benefits paid to the Executive under the Retirement Plan by reason of Disability. Anything in this Agreement to the contrary notwithstanding, the Executive shall be entitled after the Disability Effective Date to receive disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, 8 - 8 - practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and its affiliated companies and their families. (c) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive Annual Base Salary through the Date of Termination plus the amount of any compensation previously deferred by the Executive, in each case to the extent theretofore unpaid. If the Executive terminates employment during the Employment Period other than for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. (d) Good Reason; Other Than for Cause or Disability. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause or Disability, or if the Executive shall terminate employment under this Agreement for Good Reason: (i) The Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts: A. all Accrued Obligations; and B. the product of (x) three and (y) the sum of (i) Annual Base Salary and (ii) the Highest Annual Bonus; and C. a lump-sum retirement benefit equal to the difference between (a) the actuarial equivalent of the benefit under the Nashua Corporation Retirement Plan for Salaried Employees (the "Retirement Plan") and any supplemental and/or excess retirement plan providing benefits for the Executive (the "SERP") which the Executive would receive if the Executive's employment continued at the compensation level provided for in Sections 4(b)(i) and 4(b)(ii) of this Agreement for the remainder of the Employment Period, assuming for this purpose that all accrued benefits are fully vested, and (b) the actuarial equivalent of the Executive's actual benefit (paid or payable), if any, under the Retirement Plan and the SERP; for purposes of determining the amount payable pursuant to this Section 6(d)(i)C the accrual formulas and actuarial assumptions utilized shall be no less favorable than those in effect with respect to the Retirement Plan and the SERP during the 90-day period immediately prior to the Effective Date; and (ii) for the remainder of the Employment Period, or such longer period as any plan, program, practice or policy may provide, the Company shall continue benefits to 9 - 9 - the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(iv) of this Agreement if the Executive's employment had not been terminated in accordance with the most favorable plans, practices, programs or policies of the Company and its affiliated companies applicable generally to other peer executives and their families during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families. For purposes of determining eligibility of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until the end of the Employment Period and to have retired on the last day of such period. 7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plans, programs, policies or practices, provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any other agreements with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program except as explicitly modified by this Agreement. 8. FULL SETTLEMENT. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement. The Company agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to Section 9 of this Agreement), plus in each case interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Internal Revenue Code of l986, as amended (the "Code"). 9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an 10 - 10 - additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be used in arriving at such determinations, shall be made by Price Waterhouse (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within fifteen business days of the Date of Termination, if applicable, or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. The initial Gross-Up Payment, if any, as determined pursuant to this Section 9(b), shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with a written opinion that failure to report the Excise Tax on the Executive's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company; 11 - 11 - (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax, including interest or penalties with respect thereto, imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts 12 - 12 - by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. 11. SUCCESSORS. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 12. MISCELLANEOUS. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Francis J. Lunger 1499 Edgewood Drive Palo Alto, CA 94301 If to the Company: Nashua Corporation 44 Franklin Street Nashua, New Hampshire 03060 Attention: Counsel 13 - 13 - or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's failure to insist upon strict compliance with any provision hereof or the failure to assert any right the Executive may have hereunder, including, without limitation, the right to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v), shall not be deemed to be a waiver of such provision or right or any other provision or right thereof. (f) This Agreement contains the entire understanding of the Company and the Executive with respect to the subject matter hereof. The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, prior to the Effective Date, both the Executive's employment and this Agreement may be terminated by either the Company or the Executive at any time. If the Executive's employment or this Agreement is terminated prior to the Effective Date, the Executive shall have no further rights under this Agreement. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. Francis J. Lunger --------------------------------------- FRANCIS J. LUNGER NASHUA CORPORATION By Charles E. Clough ---------------------------------- Charles E. Clough Chief Executive Officer EX-11.1 7 STATEMENT RE COMPUTATION EARNINGS 1 EXHIBIT 11.01 NASHUA CORPORATION COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
(In thousands, except per share data) Year Ended December 31, ------------------------------------------ 1993 1992 1991 -------- -------- -------- Income (loss) from continuing operations before cumulative effect of accounting principle changes $(21,681) $ 5,308 $ 552 Cumulative effect on prior years of changes in accounting principles for Postretirement health care and other benefits - (9,367) - Income taxes - (764) - -------- ------- ------- Income (loss) from continuing operations (21,681) (4,823) 552 -------- ------- ------- Income from discontinued operations 2,512 - - -------- ------- ------- Net income (loss) $(19,169) $(4,823) $ 552 -------- ------- ------- Shares: Weighted average common shares outstanding during the period 6,312 6,298 6,287 Common equivalent shares 31 27 45 -------- ------- ------- 6,343 6,325 6,332 ======== ======= ======= Earnings per common share: Income (loss) from continuing operations before cumulative effect of accounting principle changes $ (3.42) $ .84 $ .09 Cumulative effect on prior years of changes in accounting principles for Postretirement health care and other benefits(1) - (1.48) - Income taxes(1) - (.12) - -------- ------- ------- Income (loss) from continuing operations (3.42) (.76) .09 Income from discontinued operations .40 - - -------- ------- ------- Net income (loss) $ (3.02) $ (.76) $ .09 ======== ======= ======= (1) Amounts are computed based on the average common and common equivalent shares outstanding in January 1992 of 6,318 (6,284 common shares and 34 common equivalent shares).
EX-21.1 8 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21.01 SUBSIDIARIES OF THE REGISTRANT Nashua Corporation, or one of its wholly-owned subsidiaries, owns beneficially, directly or indirectly, all of the capital stock in the following subsidiaries:
Jurisdiction of Domestic Incorporation - -------- --------------- Nashua Cartridge Products, Inc. (1) Massachusetts Nashua Computer Products, Inc. (1) Delaware Nashua Computer Technologies Incorporated (1) Delaware Nashua International Investments, Inc. (1) Delaware Nashua Media, Inc. (1) Delaware Nashua Photo Inc. (2) Delaware Nashua P.R., Inc. (2) Delaware Nippon Nashua Incorporated (1) Delaware Promolink Corporation (1) Delaware Jurisdiction of Foreign Incorporation - ------- --------------- Nashua Europe B.V. (2) Netherlands Nashua FSC Limited (1) Jamaica Nashua Nederland B.V. (2) Netherlands Nashua Photo Limited (3) Canada Nashua Photo Limited (3) England Postal Film Services (Country-Wide) Limited (4) England - --------------------- (1) Stock held by Nashua Corporation (2) Stock held by Nashua International Investments, Inc. (3) Stock held by Nashua Photo Inc. (4) Stock held by Nashua Photo Limited (U.K.)
All of the above listed subsidiaries are included in Nashua's consolidated financial statements. EX-23.1 9 CONSENT OF INDEPENDENT ACCOUNTANTS 1 Exhibit 23.01 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 33-13995, No. 33-67940 and No. 33-72438) of Nashua Corporation of our report dated February 1, 1994, except as to the Restructuring and Other Unusual Charges note which is as of March 15, 1994, appearing on page 36 of this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedules, which appears on page 42 of this Form 10-K. Price Waterhouse Boston, Massachusetts March 29, 1994 EX-24.1 10 POWER OF ATTORNEY 1 Exhibit 24.01 ------------- Commission File No. 1-5492-1 POWER OF ATTORNEY ----------------- Know All Men By These Presents, that each person whose signature appears below constitutes and appoints Francis J. Lunger, William Luke and Paul Buffum and each of them, as true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign Nashua Corporation's Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Signature Title Date --------- ----- ---- Joseph A. Baute Director March 23, 1994 - --------------- -------------- Joseph A. Baute Richard E. Carter Director March 24, 1994 - ----------------- -------------- Richard E. Carter Thomas W. Eagar Director March 25, 1994 - --------------- -------------- Thomas W. Eagar Charles S. Hoppin Director March 28, 1994 - ----------------- -------------- Charles S. Hoppin John M. Kucharski Director March 25, 1994 - ----------------- -------------- John M. Kucharski Guy W. Nichols Director March 23, 1994 - -------------- -------------- Guy W. Nichols James Brian Quinn Director March 25, 1994 - ----------------- -------------- James Brian Quinn
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