Nashua swings to 4Q loss of US$6M after consolidating label manufacturing facilities, closing distribution centers and reducing work force by 10%
Sandy Yang
NASHUA, N.H.
,
February 24, 2009
(press release)
–
Nashua Corporation (NASDAQ: NSHA), a manufacturer and marketer of labels, thermal and specialty papers, and imaging products, today announced financial results for the fourth quarter and year ended December 31, 2008.
Net sales for the fourth quarter of 2008 were $67.7 million, compared to $72.3 million for the fourth quarter of 2007. Gross margin for the fourth quarter of 2008 was $7.7 million, or 11.3%, compared to $12.9 million, or 17.9%, for the fourth quarter of 2007. Loss from continuing operations before income taxes for the fourth quarter of 2008 was $2.9 million, compared to income from continuing operations before income taxes of $2.0 million for the fourth quarter of 2007. Net loss for the fourth quarter of 2008 was $6.0 million, or $1.11 per share, compared to net income from continuing operations of $1.1 million, or $0.21 per share, for the fourth quarter of 2007. Loss before interest, taxes, depreciation and amortization from continuing operations was $1.2 million for the fourth quarter of 2008, compared to earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations of $3.4 million for the fourth quarter of 2007. Excluding the net after tax effect of the items discussed below and a non-cash tax charge, the net loss for the fourth quarter is $0.6 million. The fourth quarter 2008 loss from continuing operations before income taxes includes severance expense of $0.4 million, a change in the fair value of the rate swap of $0.3 million and expense of $1.3 million associated with the closure of the label converting facility located in Jacksonville, Florida. Excluding these items, the fourth quarter loss from continuing operations before income taxes is $0.9 million. The net loss for the fourth quarter of 2008 includes a non-cash tax charge of $4.3 million related to the valuation reserve on deferred tax assets. Net sales for the year ended December 31, 2008 were $264.9 million, compared to $272.8 million for the year ended December 31, 2007. Gross margin for the year ended December 31, 2008 was $39.4 million, or 14.9%, compared to $48.3 million, or 17.7%, for the year ended December 31, 2007. Loss from continuing operations for the year ended December 31, 2008 was $19.8 million, or $3.65 per share, compared to income from continuing operations of $3.9 million, or $0.67 per share, for the year ended December 31, 2007. Net loss for the year ended December 31, 2008 was $19.8 million, or $3.65 per share, compared to net income of $4.1 million, or $0.72 per share, for the year ended December 31, 2007. EBITDA from continuing operations, excluding the goodwill impairment charge, was $3.2 million for the year ended December 31, 2008, compared to EBITDA for continuing operations of $12.0 million for the year ended December 31, 2007. Excluding the net after tax effect of the items discussed below and a non-cash tax charge, the net income for the year is $0.4 million. The 2008 loss from continuing operations before income taxes includes a non-cash goodwill impairment charge of $14.1 million, severance expense of $1.1 million, a change in the fair market value in the interest rate swap of $0.5 million, and expense of $1.3 million associated with the closure of the label converting facility located in Jacksonville, Florida. Excluding these items, the 2008 income from continuing operations before income taxes is $0.6 million. The 2008 net loss includes the non-cash tax charge of $4.3 million related to the valuation reserve on deferred tax assets. Business Segment Highlights Label Products: Nashua's Label Products segment, which prints and converts product for grocery, food service, retail, transportation, entertainment and general industrial markets, reported net sales for the fourth quarter of 2008 of $28.0 million and gross margin of $1.6 million, or 5.9%. Net sales for the fourth quarter of 2007 were $31.0 million and gross margin was $5.7 million, or 18.4%. For fiscal year 2008, net sales were $105.1 million and gross margin was $13.3 million, or 12.7%. For 2007, net sales were $115.5 million and gross margin was $21.0 million, or 18.2%. Label Products segment sales declined $3.0 million in the fourth quarter of 2008 as compared to the fourth quarter of 2007 due to the decline in automatic identification label sales mainly attributable to the loss of a major customer earlier in the year. Gross margins for the quarter were negatively impacted by the lower volume and the cost associated with the closure of the Jacksonville, Florida manufacturing facility. The segment incurred unabsorbed fixed cost during the transfer of manufacturing from our Florida plant to our Nebraska and Tennessee manufacturing facilities. Specialty Paper Products: Nashua's Specialty Paper Products segment reported net sales for the fourth quarter of 2008 of $39.9 million and gross margin of $5.7 million, or 14.3%. Net sales for the fourth quarter of 2007 were $41.9 million and gross margin was $7.0 million, or 16.7%. Net sales for fiscal year 2008 were $162.2 million and gross margin was $25.3 million, or 15.6%. Net sales for fiscal year 2007 were $160.3 million and gross margin was $26.6 million, or 16.6%. Specialty Paper Products segment sales declined $2.0 million in the fourth quarter of 2008 as compared to the fourth quarter of 2007 due to the decline in the sales in wide format and thermal facesheet product lines. Margins were negatively impacted by the shortfall in sales and competitive pricing pressures in the marketplace. Thomas Brooker, Nashua's President and Chief Executive Officer, stated, "Adjusted net income from operations for 2008 is $0.4 million after excluding the expenses related to the items noted in the press release. Although this result is below the expectation we had at the beginning of 2008, this has been a challenging year. We consolidated label manufacturing facilities, closed wide format distribution centers and reduced our workforce by approximately ten percent. While these were difficult decisions which had a significant negative impact on our 2008 results, they were required to allow us to enter 2009 with a lower cost structure. We continue to focus our sales efforts in targeted key markets, control expenses and improve productivity throughout our business which should allow us to grow our business profitability. Our balance sheet is financially sound and we believe that our strong financial posture will allow us to weather the recessionary storm." Use of Non-GAAP EBITDA is presented as supplemental information, which the management of Nashua believes, may be useful to some investors in evaluating Nashua because it is widely used as a measure of evaluating a company's operating performance, as well as to evaluate its operating cash flow. EBITDA is used by management in the computation of ratios utilized for financing purposes and for planning and forecasting in future periods. EBITDA is calculated by adding net interest expense, income tax expense, depreciation and amortization back into net income. EBITDA should not be considered a substitute either for net income, as an indicator of Nashua's operating performance, or for cash flow, as a measure of Nashua's liquidity. In addition, because all companies may not calculate EBITDA in exactly the same manner, the presentation here may not be comparable to other similarly titled measures of other companies. About Nashua Nashua Corporation manufactures and markets a wide variety of specialty imaging products and services to industrial and commercial customers to meet various print application needs. Nashua's products include thermal coated papers, pressure-sensitive labels, bond, point of sale, ATM and wide format papers, entertainment tickets, and ribbons for use in imaging devices. Additional information about Nashua Corporation can be found at http://www.nashua.com.
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