Net sales for the second quarter of 2009 were $61.2 million, compared to $67.0 million for the second quarter of 2008. Gross margin for the second quarter of 2009 was $8.9 million, or 14.5%, compared to $11.3 million, or 16.9%, for the second quarter of 2008. Loss before income taxes was $0.3 million in the second quarter of 2009 compared to income before income taxes of $0.5 million in the second quarter of 2008. Net loss was $0.3 million in the second quarter of 2009, or $0.06 per share, compared to net income of $0.3 million, or $0.06 per share, in the second quarter of 2008. Earnings before interest, taxes, depreciation and amortization and special charges (adjusted EBITDA) were $1.9 million for the second quarter of 2009 compared to $1.4 million for the second quarter of 2008. The results for the second quarter of 2008 include severance expense of $0.6 million related to a reduction in workforce and $0.2 million of environmental-related expense. The results for the second quarter of 2009 include special charges of $1.2 million related to the proposed merger of the company with Cenveo, Inc., severance expense of $0.2 million related to workforce reductions, and environmental expenses of $0.1 million.

Net sales for the six months ended July 3, 2009 were $123.7 million, compared to $130.9 million for the first six months of 2008. Gross margin for the first six months of 2009 was $17.8 million, or 14.4%, compared to $21.2 million, or 16.2%, for the first six months of 2008. Loss before income taxes for the first six months of 2009 was $0.6 million compared to a loss before income taxes of $0.1 million in the first six months of 2008. Net loss was $0.6 million for the first six months of 2009, or $0.12 per share, compared to net loss of $0.1 million, or $0.01 per share, for the first six months of 2008. Adjusted EBITDA was $2.9 million for the first six months of 2009 compared to $2.4 million for the first six months of 2008.

Business Segment Highlights

Nashua's Label Products segment, which prints and converts product for the grocery, food service, retail, transportation, entertainment and general industrial markets, reported net sales for the second quarter of 2009 of $27.6 million and gross margin of $2.9 million, or 10.4%. Net sales for the second quarter of 2008 were $25.1 million and gross margin was $4.0 million, or 15.8%.

Label Products segment sales increased 9.8 percent mainly due to increased sales in automatic identification and pharmacy product lines. Gross margins were lower due to an inventory adjustment and competitive pricing pressures in the marketplace.

Nashua's Specialty Paper Products segment, which includes the paper coating and converting businesses, produces a wide range of applications for labeling, packaging, ticketing and point of sale transactions, thermal, dry gum and heat-seal products for use in the transportation, retail, gaming, shipping and delivery, entertainment, medical and distribution industries. The Specialty Paper Products segment reported net sales for the second quarter of 2009 of $34.6 million and gross margin of $5.8 million, or 16.7%. Net sales for the second quarter of 2008 were $42.6 million and gross margin was $7.2 million, or 16.8%.

Sales in the Specialty Paper Products segment decreased approximately 19 percent. The decline was mainly attributable to lower sales in the wide format product line as a result of softness in the construction industry; decline in the thermal point of sale product line due to softness in retail sectors; and decline in the thermal facesheet product line due to softness in the overall label market. Gross margins declined as a result of the lower volumes and severance cost.

Thomas Brooker, President and Chief Executive Officer, stated, "Given the status of the economy and the markets we serve, the company has performed well."

On May 6, 2009, the company entered into an Agreement and Plan of Merger with Cenveo, Inc. and NM Acquisition Corp., a wholly owned subsidiary of Cenveo. Consummation of the merger is subject to the approval of the Merger Agreement by our shareholders at a special shareholder meeting to be held at the company's Park Ridge, Illinois office on September 15, 2009.

Use of Non-GAAP Measures

Adjusted EBITDA is presented as supplemental information that the management of Nashua believes may be useful to some investors in evaluating the Company because it is widely used as a measure of evaluating a company's operating performance, as well as to evaluate its operating cash flow. Adjusted EBITDA is used by management in the computation of ratios utilized for financing purposes and for planning and forecasting in future periods. Adjusted EBITDA is calculated by adding net interest expense, income tax expense, depreciation and amortization back into net income. Adjusted 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 Adjusted 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.