-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DXrRelWXNutjKrFd06pUMrzs/duyG7+GplIPnW79ulJMEtKdpiski5E8rVcRvviy KlQxI9mq8okXZ46gT+VlVQ== 0000950135-98-005890.txt : 19981116 0000950135-98-005890.hdr.sgml : 19981116 ACCESSION NUMBER: 0000950135-98-005890 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19981002 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NASHUA CORP CENTRAL INDEX KEY: 0000069680 STANDARD INDUSTRIAL CLASSIFICATION: CONVERTED PAPER & PAPERBOARD PRODS (NO CONTAINERS/BOXES) [2670] IRS NUMBER: 020170100 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05492 FILM NUMBER: 98748597 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-Q 1 NASHUA CORPORATION 1 FORM 10-Q --------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 --------------- [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended OCTOBER 2, 1998 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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) (IRS Employer Identification No.) 44 FRANKLIN STREET 03061-2002 NASHUA, NEW HAMPSHIRE (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (603) 880-2323 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, and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date. AS OF NOVEMBER 5, 1998, THE COMPANY HAD 6,336,525 SHARES OF COMMON STOCK, EXCLUDING 458,122 SHARES IN TREASURY, PAR VALUE $1 PER SHARE, OUTSTANDING. -1- 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS NASHUA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
October 2, 1998 December 31, ASSETS: (Unaudited) 1997 - ------- --------------- ------------ Cash and cash equivalents $ 38,553 $ 3,736 Accounts receivable 18,668 14,915 Inventories Materials and supplies 5,106 6,196 Work in process 2,026 3,650 Finished goods 7,787 4,791 -------- -------- 14,919 14,637 Other current assets 12,081 12,362 Net current assets of discontinued operations -- 120 -------- -------- Total current assets 84,221 45,770 -------- -------- Plant and equipment 78,698 81,020 Accumulated depreciation (40,207) (40,605) -------- -------- 38,491 40,415 -------- -------- Intangible assets 2,005 2,010 Accumulated amortization (1,404) (1,081) -------- -------- 601 929 -------- -------- Investment in unconsolidated affiliate -- 7,524 Other assets 16,132 10,930 Net non-current assets of discontinued operations 1,276 41,194 -------- -------- Total assets $140,721 $146,762 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY: - ------------------------------------- Current maturities of long-term debt $ 511 $ 511 Accounts payable 10,913 12,595 Accrued expenses 27,722 13,772 Income taxes payable -- -- -------- -------- Total current liabilities 39,146 26,878 -------- -------- Long-term debt 1,149 3,489 Other long-term liabilities 20,880 21,373 -------- -------- Total long-term liabilities 22,029 24,862 -------- -------- Common stock and additional capital 20,980 18,845 Retained earnings 64,607 76,935 Treasury stock, at cost (6,041) (758) -------- -------- Total shareholders' equity 79,546 95,022 -------- -------- Commitments and contingencies -------- -------- Total liabilities and shareholders' equity $140,721 $146,762 ======== ========
The accompanying notes are an integral part of the condensed consolidated financial statements. -2- 3 NASHUA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (UNAUDITED)
(In thousands, except per share data) Three Months Ended Nine Months Ended ------------------------ ------------------------- Oct. 2, Sept. 26, Oct. 2, Sept. 26, 1998 1997 1998 1997 -------- ------- -------- --------- Net sales $ 42,420 $42,603 $126,987 $130,260 Cost of products sold 31,528 32,956 97,145 100,122 -------- ------- -------- -------- Gross margin 10,892 9,647 29,842 30,138 Research, selling, distribution and administrative expenses 9,785 11,160 30,729 34,742 Restructuring and other unusual items 15,000 900 15,000 3,654 Interest expense 24 34 246 112 Interest income (524) (68) (1,201) (332) -------- ------- -------- -------- Loss from continuing operations before income tax benefit (13,393) (2,379) (14,932) (8,038) Income taxes (benefit) (5,326) (1,248) (5,899) (3,174) -------- ------- -------- -------- Loss from continuing operations (8,067) (1,131) (9,033) (4,864) Income (loss) from discontinued operations, net of taxes (2,261) (1,962) (4,347) (1,563) Gain on disposal of discontinued operation, net of taxes -- -- 1,052 -- -------- ------- -------- -------- Net loss (10,328) (3,093) (12,328) (6,427) Retained earnings, beginning of period 74,935 82,423 76,935 85,757 -------- ------- -------- -------- Retained earnings, end of period 64,607 79,330 64,607 79,330 ======== ======= ======== ======== Earnings per share: Income (loss) from continuing operations $ (1.27) $ (0.18) $ (1.41) $ (0.76) Income (loss) from discontinued operation (0.35) (0.30) (0.68) (0.24) Gain on disposal of discontinued operation -- -- .16 -- -------- ------- -------- -------- Net loss per common share $ (1.62) $ (0.48) $ (1.93) $ (1.00) ======== ======= ======== ======== Average common shares 6,374 6,386 6,404 6,384 ======== ======= ======== ======== Income (loss) per common share from continuing operations assuming dilution $ (1.27) $ (0.18) $ (1.41) $ (0.76) ======== ======= ======== ======== Net income (loss) per common share assuming dilution $ (1.62) $ (0.48) $ (1.93) $ (1.00) ======== ======= ======== ======== Average common and potential common shares 6,374 6,386 6,404 6,384 ======== ======= ======== ========
The accompanying notes are an integral part of the condensed consolidated financial statements. -3- 4 NASHUA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands)
Nine Months Ended -------------------------- Oct. 2, Sept. 26, 1998 1997 -------- --------- Cash flows from operating activities of continuing operations: Net loss $(12,328) $ (6,427) Adjustments to reconcile net loss to cash provided by (used in) continuing operating activities: Depreciation and amortization 4,681 5,643 Loss from discontinued operation 4,347 1,232 Gain on sale of discontinued operation (1,052) -- Restructuring and unusual charges -- 3,654 One time charge related to damages award in Ricoh litigation 15,000 -- Net change in working capital and other assets (14,766) (6,125) -------- -------- Cash used in continuing operating activities (4,118) (2,023) -------- -------- Cash flows from investing activities of continuing operations: Investment in plant and equipment (4,418) (3,671) Retirement of fixed assets -- (1,567) Proceeds from the sale of fixed assets 825 -------- -------- Cash used in investing activities of continuing operations (4,418) (4,413) -------- -------- Cash flows from financing activities of continuing operations: Repayment of borrowings (2,340) (569) Proceeds and tax benefits from shares issued under stock option plans 2,135 -- Purchase of treasury stock (5,283) -- -------- -------- Cash used in financing activities of continuing operations (5,488) (569) -------- -------- Proceeds from the sale of discontinued operation 49,858 -- Cash provided by activities of discontinued operation (1,021) (3,544) Effect of exchange rate changes on cash 4 (57) -------- -------- Increase (decrease) in cash and cash equivalents 34,817 (10,606) Cash and cash equivalents at beginning of period 3,736 20,018 -------- -------- Cash and cash equivalents at end of period $ 38,553 $ 9,412 ======== ======== Interest paid $ 189 $ 189 ======== ======== Income taxes paid $ 6,441 $ 2,420 ======== ========
The accompanying notes are an integral part of the condensed consolidated financial statements. -4- 5 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS INDEBTEDNESS On August 17, 1998, the Company amended its credit agreement with Citizen's Bank, New Hampshire, decreasing the amount of available funds under the secured line of credit from $18 million to $8 million and amending the consolidated tangible net worth covenant from $70 million to $60 million in order to obtain the lender's approval in respect to the Company's open market stock repurchase program of up to one million shares of the Company's common stock as detailed in the Shareholder's Equity section of these Notes to Condensed Consolidated Financial Statements. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE The Company adopted Statement of Financial Accounting Standards No. 128, "Earnings per Share" for the Company's year ended December 31, 1997 financial statements. As the Company has recorded net losses for the three and nine month periods ended October 2, 1998 and September 26, 1997, any common stock equivalents would be antidilutive; therefore, Basic Earnings per Share and Diluted Earnings per Share are equivalent under FAS 128. COMMITMENTS AND CONTINGENCIES In April 1994, Ricoh Company, Ltd., Ricoh Electronics, Inc. and Ricoh Corporation ("Ricoh") brought a lawsuit in the United States District Court, District of New Hampshire ("District Court"), alleging the Company's infringement of U.S. patents 4,611,730 and 4,878,603 relating to certain toner cartridges for Ricoh copiers. In March 1997, the District Court decided to enjoin Nashua from manufacturing, using or selling its NT-50 and NT-6750 toner cartridges. Sales of these products in 1996 amounted to one percent of Nashua's total sales. The Company disagrees with the District Court's decision and has appealed to the United States Court of Appeals for the Federal Circuit ("Court of Appeals"). On September 30, 1998, the District Court issued an order awarding damages in the amount of $7,549,000 related to the Company's sales of NT-50 and NT-6750 toner cartridges through December 3, 1995, additional damages relating to the Company's sales of such products through March 1997, certain of Ricoh's costs relative to the suit, and interest on such damages. The Company recorded a $15 million pretax charge in the third quarter of 1998 related to this damages award. The Company plans to appeal the District Court's decision on the issue of damages. The Company has adequate financial resources to pay the District Court's award of damages should it's appeal be unsuccessful. In connection with the above-mentioned damages award, in the fourth quarter of 1998, the Company posted a $16 million bond and placed $5 million in escrow to secure such bond. The $5 million is classified as restricted cash in the balance sheet. RECLASSIFICATION Certain amounts from the prior year have been reclassified to conform to the current year presentation. STOCK OPTIONS At October 2, 1998, options for 635,320 shares of common stock were outstanding. Stock options for an additional 120,523 shares may be awarded under the Company's 1996 Stock Incentive Plan. SHAREHOLDER'S EQUITY -5- 6 On June 24, 1998, the Company's Board of Directors authorized the repurchase from time to time in the open market of up to one million shares of its common stock, subject to financial and market conditions, Securities and Exchange Commission rules and regulations and financial covenant limitations with the Company's lender. During the third quarter of 1998, Nashua repurchased 346,000 shares of the Company's common stock in open market transactions. BUSINESS CHANGES-DISCONTINUED OPERATION In the third quarter of 1998, the Company recognized a $2.3 million charge net of $.9 million in taxes, of which a portion relates to Nashua's share of Cerion Technologies, Inc. ("Cerion") losses and the remainder is a charge to reduce the investment in Cerion to net realizable value. On September 15, 1998, Cerion announced its decision to cease operations on or about November 15, 1998. Consequently, the Company has accounted for the investment as a discontinued operation. For the nine months ended October 2, 1998, the Company recognized a $4.2 million charge net of $2 million in taxes of which a portion relates to Nashua's share of Cerion losses and the remainder is a charge to reduce the investment in Cerion to net realizable value. OTHER These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial position as of October 2, 1998, the results of operations for the three and nine month periods ended October 2, 1998 and September 26, 1997 and cash flows for the nine month period ended October 2, 1998 and September 26, 1997. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CORPORATE MATTERS In the third quarter of 1998, the Company recognized a $2.3 million charge net of $.9 million in taxes, of which a portion relates to Nashua's share of Cerion losses and the remainder is a charge to reduce the investment in Cerion to net realizable value. On September 15, 1998, Cerion announced its decision to cease operations on or about November 15, 1998. Consequently, the Company has accounted for the investment as a discontinued operation. For the nine months ended October 2, 1998, the Company recognized a $4.2 million charge net of $2 million in taxes, of which a portion relates to Nashua's share of Cerion losses and the remainder is a charge to reduce the investment in Cerion to net realizable value. -6- 7 RESULTS OF OPERATIONS Sales of $42.4 million for the third quarter of 1998 were $.2 million lower than comparable sales in the third quarter of 1997. The sales decline is due to lower volume for diskettes, toner and paper products in the Imaging Supplies Division, more than offsetting year-over-year sales increases in both the Label Products and Specialty Coated Products Divisions. The increase in gross margin from the third quarter of 1997 to the current quarter is due to increased margins related to new products in the Imaging Supplies and Specialty Coated Products Divisions and significant cost reductions in the manufacturing process in the Label Products Division and improved volume in both the Label Products and Specialty Coated Products Divisions. Sales of $127 million for the first nine months of 1998 were 2.5% lower than sales of $130.3 million for the comparable period in 1997, primarily due to lower toner and paper volume in the Imaging Supplies Division more than offsetting sales increases in the Specialty Coated Products and Label Products Divisions. The volume declines experienced in the Imaging Supplies Division for the third quarter and the first nine months of 1998 when compared to the same periods of 1997 were largely attributable to the impact of weak Asian markets on several key customers, the reduction of volume in the dealer agent channel and the delay in introduction of new products. In the third quarter of 1998, the Company reported a net loss from continuing operations of $8.1 million compared to a net loss of $1.1 million in the third quarter of 1997. The third quarter 1998 results included a one-time, unusual pretax charge of $15 million and the third quarter 1997 results included a $.9 million restructuring charge. Excluding these charges, pretax results improved by $3 million in 1998 due to improved divisional operating performance, reduced corporate expenses and increased interest income from the investment of cash generated by the sale of the Company's Photofinishing Group. Research, selling, distribution and administrative expenses decreased $1.4 million or 12% for the third quarter of 1998 and $4.0 million or 11.6%, for the first nine months of 1998 when compared to the same periods in 1997. Research expenses were lower mainly due to decreased Projection System development expenses in both the U.K. and U.S. The decrease in selling and distribution expenses is a factor of lower sales, partially offset by higher freight rates. Administrative costs are lower due to the impact of the restructuring activities over the past twelve months. Net restructuring and other unusual charges of $4.3 million were recorded in the full year of 1997 related to the sale of excess real estate in Nashua, NH and other business unit and functional realignments. Details of the charges related to continuing operations and the activity recorded during the third quarter of 1998 follows:
Balance Current Balance July 3, Period Oct. 2, (In thousands) 1998 Charges 1998 ------- ------- ------- Provisions for severance related to workforce reductions $ 883 $141 $742 Provisions for assets to be sold or discarded 348 291 57 Other 181 12 169 ------ ---- ---- Total $1,412 $444 $968 ====== ==== ====
All charges, excluding asset writedowns, are principally cash in nature and are expected to be funded from operations or current cash balances. The estimated annual effective income tax benefit of 39.5 percent for the first nine months of 1998 is higher than the U.S. statutory rate principally due to the inclusion of state income taxes. LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION -7- 8 Working capital increased $26.2 million from December 31, 1997, primarily from net proceeds generated by the sale of the Company's Photofinishing Group. The Company expects that a portion of the proceeds will be reinvested in its continuing businesses. In addition, the Company repurchased 346,000 shares of the Company's common stock for $5.3 million in open market transactions during the third quarter of 1998 pursuant to the Company's open market stock repurchase program of up to one million shares of the Company's common stock as detailed in the Shareholder's Equity section of these Notes to Condensed Consolidated Financial Statements. The Company recorded a $15 million charge in the third quarter related to a damages award in the patent infringement lawsuit brought against the Company by Ricoh. The Company is appealing this decision, but, if unsuccessful, has adequate financial resources to pay the Court's award of damages. In the fourth quarter of 1998, the Company posted a $16 million bond and placed $5 million in escrow to secure such bond in response to the damages award. The $5 million is classified as restricted cash in the balance sheet. On August 17, 1998, the Company amended its credit agreement with Citizen's Bank, New Hampshire, decreasing the amount of available funds under the secured line of credit from $18 million to $8 million and amending the consolidated tangible net worth covenant from $70 million to $60 million in order to obtain the lender's approval in respect to the Company's open market stock repurchase program. OTHER MATTERS YEAR 2000 The Year 2000 (Y2K) issue is the result of computer programs being written for, or microprocessors using, two digits (rather than four) to define the applicable year. Company computer programs that have date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000, which could result in system failures or miscalculations. The Company is currently working to mitigate the Y2K issue and has established processes for assessing the risks and associated costs. The Company categorizes its Y2K efforts as follows: hardware, software, embedded processors, vendors and customers. Progress in assessing and remediating information technology systems (hardware and software) and non-information technology systems (embeded processors) will be tracked in phases including assessment, identification of non-compliant systems, risk assessment, project plan development, remediation, testing and verification. The Company's Y2K project team has completed the risk assessment phase for all major systems, including hardware, software and embedded processors. Remediation efforts of approximately one-third of the Company's major systems have been completed. The Company expects that a large portion of the Company's internal remediation work will be completed by July 1999. The Company will use internal and external resources to remediate and test its systems, and to develop contingency plans to mitigate risks associated with the Y2K issue. The Company has initiated communications with significant vendors and customers to coordinate the Y2K issue and is in the process of determining the Company's vulnerability if these companies fail to remediate their Y2K issues. The Company is in the initial phase of reviewing responses and expects to have analyzed such response by March 1999. There can be no guarantee that the systems of other companies will be timely remediated, or that other companies' failure to remediate Y2K issues would not have a material adverse effect on the Company. Costs incurred to date in addressing the Y2K issue have not been material and are being funded through operating cash flows. Based on current information, costs to remediate and test the Company's systems are not expected to be material. The Company has not yet developed a contingency plan for dealing with the operational problems and costs (including loss of revenues) that would be reasonably likely to result from failure by the Company and certain third parties to achieve Y2K compliance on a timely basis. The Company currently plans to complete its analysis of the problems and costs associated with the failure to achieve Y2K compliance and to establish a contingency plan in the event of such a failure by December 31, 1999. The Company presently believes that with remediation, Y2K risks can be mitigated. However, although the Company is not currently aware of any material internal operational or financial Y2K related issues, the Company cannot provide assurances that the computer systems, products, services or other systems upon which the Company depends will be Y2K ready on schedule, that the costs of its Y2K program will not become material or that the Company's contingency plans will be adequate. The Company is currently unable to evaluate accurately the magnitude, if any, of the Y2K related issues arising from the Company's vendors and customers. If any such risks (either with respect to the Company or its vendors or customers) materialize, the Company could experience serious consequences to its business which could have material adverse effects on the Company's financial condition, results of operations and liquidity. The foregoing assessment of the impact of the Y2K problem on the Company is based on management's best estimates as of the date of this Quarterly Report, which are based on numerous assumptions as to future events. There can be no assurance that these estimates will prove accurate, and actual results could differ materially from those estimated if these assumptions prove inaccurate. -8- 9 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In August and September 1996, two individual plaintiffs initiated lawsuits in the Circuit Court of Cook County, Illinois against the Company, Cerion, certain directors and officers of Cerion, and the Company's underwriter, on behalf of classes consisting of all persons who purchased the common stock of Cerion between May 24, 1996 and July 9, 1996. These two complaints were consolidated. In March 1997, the same individual plaintiffs joined by a third plaintiff filed a Consolidated Amended Class Action Complaint (the "Consolidated Complaint"). The Consolidated Complaint alleged that, in connection with Cerion's initial public offering, the defendants issued materially false and misleading statements and omitted the disclosure of material facts regarding, in particular, certain significant customer relationships. In October 1997, the Court, on motion by the defendants, dismissed the Consolidated Complaint. The plaintiffs filed a Second Amended Consolidated Complaint alleging substantially similar claims as the Consolidated Complaint seeking damages and injunctive relief. On May 6, 1998, the Court, on motion by the defendants, dismissed with prejudice the Second Amended Consolidated Complaint. The plaintiffs have filed a notice of appeal of the Court's ruling. The Company continues to believe that this lawsuit is without merit and plans to vigorously defend itself in this matter on appeal. In April 1994, Ricoh Company, Ltd., Ricoh Electronics, Inc. and Ricoh Corporation ("Ricoh") brought a lawsuit in the United States District Court, District of New Hampshire ("District Court"), alleging the Company's infringement of U.S. patents 4,611,730 and 4,878,603 relating to certain toner cartridges for Ricoh copiers. In March 1997, the District Court decided to enjoin Nashua from manufacturing, using or selling its NT-50 and NT-6750 toner cartridges. Sales of these products in 1996 amounted to one percent of Nashua's total sales. The Company disagrees with the District Court's decision and has appealed to the United States Court of Appeals for the Federal Circuit ("Court of Appeals"). On September 30, 1998, the District Court issued an order awarding damages in the amount of $7,549,000 related to the Company's sales of NT-50 and NT-6750 toner cartridges through December 3, 1995, additional damages relating to the Company's sales of such products through March 1997, certain of Ricoh's costs relative to the suit, and interest on such damages. The Company recorded a $15 million pretax charge in the third quarter of 1998 related to this damages award. The Company plans to appeal the District Court's decision on the issue of damages. The Company has adequate financial resources to pay the District Court's award of damages should it's appeal be unsuccessful. ITEM 5. OTHER INFORMATION FACTORS WHICH MAY AFFECT FUTURE RESULTS This report may contain forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. When used in this report, the words "believe," "expects," "will," "to be" and similar expressions are intended to identify such forward-looking statements. Any such forward-looking statements and the Company's future results of operations and financial condition are subject to risks and uncertainties which could cause actual results to differ materially from those anticipated and from past results. Such risks and uncertainties include, but are not limited to, the Company's future capital -9- 10 needs, stock market conditions, price of the Company's stock, fluctuations in customer demand, intensity of competition from other vendors, timing and acceptance of new product introductions, general economic and industry conditions, delays or difficulties in programs designed to increase sales and return the Company to profitability, the possibility of a final award of material damages in the Cerion securities litigation and other risks detailed in the Company's filings with the Securities and Exchange Commission. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 4.01 First Amendment to Revolving Credit Promissory Note between Citizen's Bank New Hampshire and Nashua Corporation dated August 17, 1998. 4.02 First Amendment to Loan and Security Agreement between Citizen's Bank New Hampshire and Nashua Corporation dated August 17, 1998. 27.01 Financial Data Schedule for the period ended October 2, 1998. 27.02 Restated Financial Data Schedule for the period ended September 26, 1997. (b) Reports on Form 8-K On October 15, 1998, the Company filed a Form 8-K to report a damage award in the Ricoh litigation. -10- 11 SIGNATURES Pursuant to the requirements 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 ------------------------------------------------- (Registrant) Date: November 13, 1998 By: /s/ John L. Patenaude ------------------- --------------------------------------------- John L. Patenaude Vice President-Finance, Chief Financial Officer and Treasurer (principal financial and duly authorized officer) -11- EX-4.01 2 FIRST AMENDMENT TO REVOLVING CREDIT PROM. NOTE 1 EXHIBIT 4.01 FIRST AMENDMENT TO REVOLVING CREDIT PROMISSORY NOTE The First Amendment to Revolving Credit Promissory Note (the "Amendment") is dated as of this 17th day of August, 1998, by and between Nashua Corporation, a Delaware corporation, with a mailing address at 44 Franklin Street, Nashua, New Hampshire 03061 (hereinafter sometimes referred to as "Parent"), and Nashua Photo Inc., a Delaware corporation (hereinafter each of these enterprises including Parent is sometimes referred to in the singular as a "Maker" and collectively with Parent as the "Makers") and Citizens Bank New Hampshire, a guaranty savings bank organized under the laws of New Hampshire, with a place of business at 875 Elm Street, Manchester, New Hampshire 03101 (hereinafter referred to as the "Bank"). In consideration of the mutual promises, covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. RECITALS. 1.1 Borrowers and Bank executed a Revolving Credit Promissory Note, dated March 28, 1997 in the original principal amount of up to Eighteen Million Dollars ($18,000,000.00) (the "Note"). 1.2 In connection with the Note Borrowers and Bank executed a Loan and Securities Agreement, dated March 28, 1997 as amended by a First Amendment to Loan and Security Agreement of even date (the "Loan Agreement") and certain other agreements, instruments and documents in connection with the Note, the Loan Agreement and herewith (the "Instruments"). 1.3 The Borrower and the Bank wish to, inter alia, decrease the Principal Amount of the Note from Eighteen Million Dollars ($18,000,000.00) to Eight Million Dollars ($8,000,000.00), as more specifically set forth herein. 1.4 Any term not specifically defined herein shall have the meaning set forth in the Note. 2. AMENDMENTS TO THE NOTE. 2.1 On page one (1) of the Note, in the top left hand corner, change the number "18,000,000.00" to "8,000,000.00". 2.2 On page one (1) the definition of "Principal Amount" is hereby amended in its entirety to read: "Eight Million Dollars ($8,000,000.00) ("Principal Amount")." 1 2 3. VALIDITY OF ORIGINAL NOTE: In all other respects and except as specifically amended hereby, the Note remains unchanged and in full force and effect and Marker agrees to be bound thereby. 4. NO FURTHER OBLIGATION. Maker confirms and agrees that the amendments contained herein shall in no way be construed as an obligation on the part of Bank to further amend or extend the Note or any other Instrument. This Amendment is not a novation. 5. AUTHORITY. Maker warrants that they have full power and authority and have taken all necessary corporate and other action and procured all necessary consents to execute and deliver this Amendment and perform their obligations hereunder. IN WITNESS WHEREOF, Makers have caused this First Amendment to Revolving Credit Promissory Note to be duly executed as the date first above written. IN THE PRESENCE OF: MAKERS: NASHUA CORPORATION /s/ Linda J. Madden By: /s/ John L. Patenaude - ---------------------------- --------------------------------------- Witness Name: John L. Patenaude Title: Vice-President-Finance, CEO & Treasurer NASHUA PHOTO INC. /s/ Linda J. Madden By: /s/ John L. Patenaude - ---------------------------- --------------------------------------- Witness Name: John L. Patenaude Title: President 2 EX-4.02 3 FISRT AMENDMENT TO LOAN & SECURITY AGREEMENT 1 EXHIBIT 4.02 FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT ---------------------------------------------- This First Amendment to Loan and Security Agreement (the "Amendment") is dated as of this 17th day of August, 1998, by and between Nashua Corporation, a Delaware corporation, with a mailing address at 44 Franklin Street, Nashua, New Hampshire 03061 (hereinafter sometimes referred to as "Parent"), and Nashua Photo Inc., a Delaware corporation (hereinafter each of these enterprises including Parent is sometimes referred to in the singular as a "Borrower" and collectively with Parent as the "Borrowers") and Citizens Bank New Hampshire, a guaranty savings bank organized under the laws of New Hampshire 03101 (hereinafter referred to as the "Bank"). In consideration of the mutual promises, covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. RECITALS. 1.1 Borrowers and Bank executed a Loan and Security Agreement, dated March 28, 1997 (the "Loan Agreement") whereby the Bank agreed to lend to Borrowers up to an aggregate amount of Eighteen Million Dollars ($18,000,000.00) in the form of a revolving line of credit loan and letter of credit facilities on the terms and conditions more specifically provided therein. 1.2 In connection with the Loan Agreement Borrowers executed a Revolving Credit Promissory Note in favor of the Bank dated March 28, 1997 in the original principal amount of Eighteen Million Dollars ($18,000,000.00) (the "Note") and certain other agreements, instruments and documents in connection with the Loan Agreement, the Note and herewith (the "Instruments"). 1.3 The Borrower and the Bank wish to, inter alia, decrease the Borrower's Availability (as defined in the Loan Agreement) from Eighteen Million Dollars ($18,000,000.00) to Eight Million Dollars ($8,000,000.00) and amend the Consolidated Tangible Net Worth Covenant (as defined in the Loan Agreement), all as more specifically set forth herein. 1.4 Any term not specifically defined herein shall have the meaning set forth in the Loan Agreement. 2. AMENDMENTS. 2.1 SECTION 1.1 -- Section 1.1 of the Loan Agreement is hereby amended in its entirety to read as follows: 1 2 "1.1 Borrowers have made certain representations to Bank as contained in this Agreement or as referenced herein, and have requested to borrow from Bank up to an aggregate amount of Eight Million Dollars ($8,000,000.00) in the form of a revolving line of credit loan and letter of credit facilities on the terms and conditions more specifically provided herein." 2.2 SECTION 2.4 -- Section 2.4 of the Loan Agreement is hereby amended in its entirety to read as follows: "2.4 "Availability" shall mean the sum of Eight Million Dollars ($8,000,000.00);" 2.3 SECTION 2.23 -- Section 2.23 of the Loan Agreement is hereby amended in its entirety to read as follows: "2.23 "Instruments" shall mean the Loan Agreement as amended by the First Amendment to Loan and Security Agreement, the Note as amended by the First Amendment to Revolving Credit Promissory Note, the documents and filings evidencing the Liens, and all other instruments, documents or writings executed or delivered (or to be executed or delivered from time to time) by Borrowers to Bank in connection with the Loan as may be amended;" 2.4 SECTION 3.1 -- The first sentence of Section 3.1 of the Loan Agreement is hereby amended in its entirety to read as follows: "3.1 Bank hereby establishes a line of credit (hereinafter the "Revolving Credit") in Borrowers' favor in the amount of Borrowers' Availability, but in no event to exceed Eight Million Dollars ($8,000,000.00)." 2.5 SECTION 7A.2 -- Section 7A.2 of the Loan Agreement is hereby amended in its entirety to read as follows: "7A.2 CONSOLIDATED TANGIBLE NET WORTH. On September 30, 1998, Borrowers shall have had a Consolidated Tangible Net Worth of not less than Sixty Million Dollars ($60,000,000.00). Thereafter for the term of this Agreement, this requirement shall increase quarterly by seventy five percent (75.0%) of Borrowers' Consolidated Net Income for the prior quarter. There shall be no negative adjustment for losses. Compliance with this covenant shall be measured on a quarterly basis." 2.6 SECTION 8.10 -- Add the following new sentence to the end of Section 8.10: "Notwithstanding the above, Bank hereby consents to the repurchase by Parent of up to one million shares of Parent's common stock, provided that the above 2 3 consent shall terminate if there exists an Event of Default or an event but for the passage of time or giving of notice, or both, would become an Event of Default." 3. FEES AND EXPENSES. Borrowers will pay all of Bank's costs and expenses incurred in preparation of this Amendment and the documents and instruments executed herewith. 4. RATIFICATION. In all other respects, the Loan Agreement remains in full force and effect, and Borrowers agree to be bound thereby. Except as specifically amended herein, the terms and conditions of the Loan Agreement shall remain in full force and effect. Borrowers confirm and agree that the amendments contained herein shall in no way be construed as an obligation on the part of Bank to further amend or extend the Loan Agreement or any other Instrument. This is not a novation. 5. REAFFIRMATION. Borrowers reaffirm each and every representation and warranty made by them in the Loan Agreement. 6. AUTHORITY. Borrowers warrant that they have full power and authority, and has taken all necessary corporate and other action and procured all necessary consents to execute and deliver this Amendment and perform its obligations hereunder. IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to Loan and Security Agreement to be duly executed on their behalf by the persons signing below who are thereunto duly authorized with the intention that it be effective as of the day and year first above written. WITNESS: NASHUA CORPORATION /s/ Linda J. Madden By: /s/ John L. Patonaude - --------------------------- ----------------------------- Name: John L. Patonaude Title: Vice-President-Finance, CFO & Treasurer 3 4 NASHUA PHOTO INC. /s/ Linda J. Madden By: /s/ John L. Patenaude - -------------------------- ----------------------------------- Name: John L. Patenaude Title: President CITIZENS BANK NEW HAMPSHIRE By: - -------------------------- ----------------------------------- John Mercier Vice President STATE OF NEW HAMPSHIRE COUNTY OF HILLSBOROUGH On this the 17th day of August, 1998, before me, the undersigned officer, personally appeared John L. Patenaude, who acknowledged him/herself to be the Vice President-Finance of Nashua Corporation, a corporation, and that he/she as such Vice President-Finance, being authorized so to do, executed the foregoing instrument for the purposes therein contained on behalf of the corporation. /s/ Suzanne L. Ansara ----------------------------------------- Notary Public/Justice of the Peace My Commission Expires: February 9, 1999 4 EX-27.01 4 FINANCIAL DATA SCHEDULE 1998
5 1 U.S. DOLLARS 9-MOS DEC-31-1998 JAN-01-1998 OCT-02-1998 1 38,553 0 18,668 0 14,919 84,221 78,698 40,207 140,721 39,146 0 0 0 20,980 58,566 140,721 126,987 126,987 97,145 30,729 15,000 0 246 (14,932) (5,899) (9,033) (3,295) 0 0 (12,328) (1.93) (1.93)
EX-27.02 5 FINANCIAL DATA SCHEDULE RESTATED 1997
5 1 U.S. DOLLARS 9-MOS DEC-31-1997 JAN-01-1997 SEP-26-1997 1 3,736 0 14,915 0 14,637 45,770 81,020 40,605 146,762 26,878 0 0 0 18,845 76,177 146,762 130,260 130,260 100,122 34,742 3,654 0 112 (8,038) (3,174) (4,864) (1,563) 0 0 (6,427) (1.00) (1.00)
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