##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2007oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number 1-05492
 NASHUA CORPORATION
 (Exact name of registrant as
    specified in its charter)
  Massachusetts(State or other jurisdiction
    of
    incorporation or organization)

02-0170100(I.R.S. Employer
    Identification No.)11 Trafalgar Square, Suite 201,
    Nashua, New Hampshire(Address of principal
    executive offices)

03063(Zip Code)   Registrants telephone number, including area code
 (603) 880-2323
  Securities registered pursuant to Section 12(b) of the
    Act:
   Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, $1.00 par value

NASDAQ Global Market   Securities registered pursuant to Section 12(g) of the
    Act:
  None
  (Title
    of Class)
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer o
    Smaller
    reporting
    company þ   Rule 12b-2 o þ
      Class

Number of SharesCommon Stock, $1.00 par value


5,640,636   Form 10-K:




---



##### 





TABLE OF
    CONTENTS
   
 PagePART IItem 1.


Business


3Item 1A.


Risk Factors


8Item 1B.


Unresolved Staff Comments


11Item 2.


Properties


12Item 3.


Legal Proceedings


12Item 4.


Submission of Matters to a Vote of Security
    Holders


13PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


13Item 6.


Selected Financial Data


14Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


14Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


29Item 8.


Financial Statements and Supplementary Data


30Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


60Item 9A.


Controls and Procedures


60Item 9A(T)


Controls and Procedures


60Item 9B.


Other Information


61PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


61Item 11.


Executive Compensation


61Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


61Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


62Item 14.


Principal Accountant Fees and Services


62PART IVItem 15.


Exhibits and Financial Statement Schedules


62EX-10.19 Executive officer 2008 salariesEX-10.20 Summary of compensation arrangements with DirectorsEX-21.01 Subsidiaries of the RegistrantEX-23.01 Consent of Independent Registered Public Accounting FirmEX-31.01 Section 302 certification of CEOEX-31.02 Section 302 certification of CFOEX-32.01 Section 906 certification of CEOEX-32.02 Section 906 certification of CFO   2




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##### Table of Contents



PART I  Item 1.
    Business  General
    (603) 880-2323. www.nashua.com Form 10-K, Form 10-Q, Form 8-K 1-800-SEC-0330. (http://www.sec.gov) Form 10-K
  Recent
    Developments
  
    We continued to streamline management as we eliminated the
    position of President of the Coated business during the first
    quarter of 2007.
    In May 2007, we renegotiated our credit agreement which now
    provides a revolving credit facility of $28 million and
    established a $10 million term loan.
    In May 2007, we commenced a tender offer in which we sought to
    acquire up to 1,900,000 shares of our common stock at a
    price of $10.50 per share. The tender offer expired on
    June 28, 2007, at which time 751,150 shares were
    tendered at a price of $10.50 per share for an aggregate
    purchase price of $7.9 million.
    During 2007, we added a net of 6 representatives to our sales
    force as we continue to focus on top line growth.
    In March 2007, the Cerion shareholder lawsuit was favorably
    concluded. As a result, under the terms of our directors and
    officers insurance policy, the insurance company refunded the
    litigation cost that we had previously incurred in the defense
    of the matter.
    The Ricoh patent lawsuit filed against the company and other
    defendants was settled.  Operating
    Segments
       3




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##### Table of Contents



Form 10-K.
  Label
    Products Segment
          Specialty
    Paper Products Segment
         4




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pay-at-the-pump,
          Information
    About Major Customers and Products
    Intellectual
    Property
   5




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Manufacturing
    Operations
    
    Merrimack, New Hampshire
    Omaha, Nebraska
    Jefferson City, Tennessee
    Vernon, California
    Jacksonville, Florida  Form 10-K.
  Research
    and Development
    Environmental
    Matters
  and/or
   6




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Executive
    Officers
    Name

Age

PositionThomas G. Brooker


49


President and Chief Executive OfficerJohn L. Patenaude


58


Vice President  Finance, Chief Financial Officer and
    TreasurerMargaret M. Callan


41


Corporate Controller and Chief Accounting OfficerDonald A. Granholm


53


Vice President  Supply Chain ManagementThomas M. Kubis


47


Vice President of OperationsWilliam Todd McKeown


42


Vice President of Sales and MarketingMichael D. Travis


48


Vice President of Marketing                  7




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Employees
      Approximate #of EmployeesUnion

Covered


Location

Expiration DateUnited Steelworkers of America


97


Omaha, NE

March 31, 2012United Steelworkers of America


77


Merrimack, NH

April 5, 2009United Commercial Food Workers


39


Vernon, CA

March 7, 2011   Forward-Looking
    and Cautionary Statements
  Form 10-K Form 10-K Form 10-K
  Item 1A.
    Risk
    Factors  Form 10-K
  We
    face significant competition.
    
    increasing pricing pressures from competitors in the markets for
    our products;
    a faster decline than anticipated in the more mature, higher
    margin product lines, such as heat seal and dry- gum products,
    due to changing technologies;
    natural disasters such as hurricanes, floods, earthquakes and
    pandemic events, which could cause our customers to close a
    number or all of their stores or operations for an extended
    period of time causing our sales to be reduced during the period
    of closure;
    our ability to pass on raw material price increases to customers; 8




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
    our ability to pass on increased freight cost due to fuel price
    fluctuations; and
    our ability to pass on manufacturing cost increases.        Increases
    in raw material costs or the unavailability of raw materials may
    adversely affect our profitability.
      A
    decline in returns on the investment portfolio of our defined
    benefit plans, changes in mortality tables and interest rates
    could require us to increase cash contributions to the plans and
    negatively impact our financial statements.
   9




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We are
    dependent on key personnel and on the retention and recruiting
    of key personnel for our future success.
      New
    technologies or changes in consumer preferences may affect our
    ability to compete successfully.
        We may
    be involved in litigation relating to our intellectual property
    rights, which may have an adverse impact on our
    business.
     10




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##### Table of Contents



Our
    information systems are critical to our business, and a failure
    of those systems could materially harm us.
    Compliance
    with changing regulation of corporate governance and public
    disclosure may result in additional risks and
    expenses.
    Item 1B.
    Unresolved
    Staff Comments   11




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Item 2.
    Properties      Principal
    Properties
  Total SquareLocation

Footage


Nature of Products ProducedCorporateNashua, New Hampshire (leased)


8,000


none (corporate offices)Park Ridge, Illinois (leased)


11,000


none (administrative offices)Specialty Paper Products SegmentMerrimack, New Hampshire (leased)


156,000


coated paper productsJefferson City, Tennessee


198,000


converted paper productsVernon, California (leased)


61,000


converted paper productsCranbury, New Jersey (leased)


31,000


none (warehousing)Plymouth, Massachusetts (leased)


7,000


none (sales and warehousing offices)Kent, Washington (leased)


10,000


none (warehousing)Label Products SegmentOmaha, Nebraska


170,000


label productsJefferson City, Tennessee


60,000


label productsJacksonville, Florida (leased)


42,000


label products   Item 3.
    Legal
    Proceedings  Ricoh
  No. 03-CV-2612
    Environmental
   12




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##### Table of Contents



State
    Street Bank and Trust
    Other
    Item 4.
    Submission
    of Matters to a Vote of Security Holders   PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities  (a)
    Market
    Information, Holders and Dividends    1st


2nd


3rd


4thQuarter


Quarter


Quarter


Quarter


Year2007High

$
9.38


$
10.79


$
13.41


$
12.40


$
13.41Low

$
7.27


$
8.22


$
10.25


$
10.30


$
7.272006High

$
8.62


$
10.29


$
7.50


$
8.48


$
10.29Low

$
6.20


$
6.70


$
5.70


$
5.96


$
5.70  13




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##### Table of Contents



(b)
    Issuer
    Purchases of Equity Securities during the Quarter ended
    December 31, 2007    Maximum Number (orApproximate DollarTotal Number of


Value) of SharesShares Purchased as


(or Units) that MayTotal Number


Average


Part of Publicly


Yet Be Purchasedof Shares


Price Paid


Announced Plans


Under thePeriod

Purchased(1)


per Share


or Programs(2)


Plans or ProgramsSeptember 29 through November 2














384,271November 3 through November 30














384,271December 1 through December 31














384,271Total










     (1)
    
    We repurchased an aggregate of 115,729 shares of our common
    stock pursuant to the repurchase program that we publicly
    announced on November 6, 2006 (the Program).(2)
    
    Our Board of Directors approved the repurchase by us of up to an
    aggregate of 500,000 shares of our common stock pursuant to
    the Program.      Item 6.
    Selected
    Financial Data    Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations    Overview
     14




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
    We continued to streamline the management of the business as we
    eliminated the position of President of the Coated business
    during the first quarter of 2007. We recognized
    $0.2 million of severance in connection with this change,
    which was offset by savings of $0.2 million during the year.
    In May 2007, we renegotiated our credit agreement which now
    provides a revolving credit facility of $28 million and
    established a $10 million term loan.
    In May 2007, we commenced a tender offer in which we sought to
    acquire up to 1,900,000 shares of our common stock at a
    price of $10.50 per share. The tender offer expired on
    June 28, 2007 at which time 751,150 shares were
    tendered at a price of $10.50 per share for an aggregate of
    $7.9 million.
    During 2007, we added a net of 6 representatives to our sales
    force as we continue to focus on top line growth.
    In March 2007, the Cerion litigation was favorably concluded. As
    a result, under the terms of our officers and directors
    insurance policy, the insurance company refunded the litigation
    cost that we had previously incurred in the defense of the
    matter.
    The Ricoh patent lawsuit filed against the company and other
    defendants was settled.    
    On May 4, 2006, Thomas Brooker joined us as Chief Executive
    Officer and President replacing Andrew Albert in these
    capacities. Mr. Albert remained with us as Chairman of the
    Board.
    During the first quarter, we:  
    Renegotiated our credit agreements with our lenders LaSalle Bank
    National Association and Bank of America;
    Entered into a definitive agreement with Katun Corporation
    relative to the sale of certain assets of our toner and
    developer business;
    Exited our coated carbonless business selling certain assets
    including inventory, customer list and certain trademarks to
    Nekoosa Coated Products LLC, incurring severance and inventory
    write downs in the process; and
    Froze pension benefits for hourly employees in Omaha, Nebraska.  
    During the second quarter, we:  
    Consolidated our manufacturing space in Merrimack, New Hampshire
    to approximately 156,000 square feet; and
    Sold assets of our toner and developer business of our former
    Imaging Supplies segment. 15




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##### Table of Contents




    During the third quarter, we:  
    Streamlined senior management to be more aligned with customer
    needs and expected future revenue growth. We recognized a
    $.7 million severance charge associated with this change;
    Closed our St. Louis, Missouri label converting facility and
    consolidated the converting of labels into facilities located in
    Jacksonville, Florida, Jefferson City, Tennessee and Omaha,
    Nebraska;
    Moved our St. Augustine, Florida label converting facility to a
    new state-of-the-art facility in Jacksonville, Florida;
    Froze pension benefits for certain hourly employees in
    Merrimack, New Hampshire. We recognized a pension curtailment
    loss of $.8 million; and
    Froze benefits and terminated future benefits under our
    postretirement benefit plans for certain hourly employees
    located in Merrimack, New Hampshire. We recognized a
    postretirement curtailment gain of $.2 million.  
    During the fourth quarter, we:  
    Sold our real estate located in Nashua, New Hampshire for
    $2.0 million;
    Sold our real estate located in Merrimack, New Hampshire for
    $17.1 million, net of expenses. We recognized a gain on the
    sale of $9.0 million. We deferred the remainder of the gain
    on the sale, approximately $3.3 million, over the five-year
    duration of the lease for the portion of the Merrimack property
    we leased back;
    Consolidated the Label and Converting sales force and provided
    training to allow sales representatives to focus on increasing
    sales with existing and prospective customers through a
    consultative process;
    Implemented a share repurchase program approving a repurchase of
    up to 500,000 shares. As of December 31, 2006, we had
    repurchased 15,429 shares of our common stock; and
    Received a favorable ruling from the Supreme Court of Illinois
    relative to the Cerion shareholder litigation.  
    During 2006 we reduced bank debt from approximately
    $26.0 million at December 31, 2005 to
    $2.0 million at December 31, 2006. 16




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Consolidated
    Results of Operations
  The
    consolidated results of operations should be read in conjunction
    with the individual segment results.
  For the Years Ended


2007 vs. 2006December 31,


Dollar


Percent2007


2006


Change


Change(In millions)Net salesLabel Products

$
115.5


$
109.7


$
5.8



5.3Specialty Paper Products


160.3



162.5



(2.2
)


(1.4
)Other


4.1



2.5



1.6



64.0Eliminating


(7.1
)


(5.7
)


(1.4
)


24.6Consolidated net sales


272.8



269.0



3.8



1.4Gross marginLabel Products


21.0



16.3



4.7



28.8Specialty Paper Products


26.5



24.1



2.4



10.0Other


.7



.2



.5



250.0Consolidated gross margin


48.2



40.6



7.6



18.7Gross margin %


17.7
%


15.1
%






Selling and distribution expenses


24.1



23.9



.2



.8General and administrative expenses


17.0



19.1



(2.1
)


(11.0
)Research and development expenses


.8



.6



.2



33.3Net loss on curtailment of pension and postretirement benefits






.6



(.6
)


Other income


(1.2
)


(1.2
)






Gain on sale of real estate






(9.0
)


9.0



Impairment of intangible assets






.6



(.6
)


Loss from equity investments


.2



.4



(.2
)


(50.0
)Interest expense, net


.9



1.5



(.6
)


(40.0
)Income from continuing operations before income taxes


6.5



4.1



2.4



58.5Income from discontinued operations, net of taxes


.3



1.6



(1.3
)


(81.3
)Net income

$
4.1


$
3.6


$
.5



13.9     
    The increase from 2006 to 2007 was primarily due to a
    $5.8 million increase in sales in our Label Products
    segment partially offset by $2.2 million decrease in sales
    in our Specialty Paper Products segment.
    Net sales for both of our business segments are discussed in
    detail under Results of Operations by Reportable Operating
    Segment.    
    The margin percent in 2007 compared to 2006 improved in both of
    our operating segments. The increases were primarily
    attributable to higher sales volume and reduced manufacturing
    costs.
    Gross margin changes for both of our business segments are
    discussed in detail under Results of Operations by
    Reportable Operating Segment. 17




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##### Table of Contents




    The $.2 million increase was due to an increase in selling
    expenses of $.6 million partially offset by a decrease in
    distribution expenses of $.4 million. Selling expenses
    increased in 2007 primarily due to increased commission related
    to increased commissionable sales and higher travel expenses
    related to the additional sales representatives hired during the
    year partially offset by reduced external marketing expense.
    Distribution expenses decreased primarily as the result of
    increased sales to customers who take title to the product
    purchased at our manufacturing locations especially in our Label
    Products segment.    
    The decrease in general and administrative expenses in 2007
    compared to 2006 was primarily due to reduced employee costs as
    a result of our streamlining of senior management as well as
    reduced telephone and legal expenses. The savings were partially
    offset by increased management incentive cost. General and
    administrative expenses for 2006 were negatively impacted by
    severance expense related to the streamlining of senior
    management, utility expenses for unused manufacturing space
    located in Merrimack, New Hampshire and expenses related to the
    impairment of intangible assets.    
    The $.2 million increase was primarily the result of
    increased personnel costs.    
    The loss of $.6 million in 2006 resulted from a loss of
    $.8 million related to the freezing of our defined benefit
    pension plan for certain hourly employees which more than offset
    the gain from the curtailment of our medical postretirement
    benefits for certain hourly employees in our Specialty Paper
    Products segment located in Merrimack, New Hampshire.    
    Other income in 2007 includes amortization of the deferred gain
    from the sale of New Hampshire real estate in 2006 and royalty
    income related to the 2006 sale of toner formulations.
    Other income in 2006 includes income from the rental of
    warehouse space previously unutilized by us in our Merrimack,
    New Hampshire facility included in the Specialty Paper Products
    segment. Our Merrimack facilities were sold on November 29,
    2006.         18




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##### Table of Contents




    The $.6 million decrease in net interest expense was due to
    a decrease in interest expense of $.9 million and a
    $.1 million increase in interest income partially offset by
    a $.4 million expense related to the change in the fair
    value of our interest rate swap. The decrease in interest
    expense is the result of a reduction in debt while the increase
    in interest income is related to an increase in our cash balance
    as a result of our restated credit agreement. Our restated
    credit agreement and interest rate swap are discussed in detail
    under Liquidity, Capital Resources and Financial
    Condition.    
    The $2.4 million increase in our pre-tax income from 2006
    to 2007 was primarily due to increased gross margin in both
    operating segments and lower general and administrative expenses.          Results
    of Operations by Reportable Operating Segment
  Label
    Products Segment
  Dollar


PercentFor the Years Ended


Change


ChangeDecember 31,


2007 vs.


2007 vs.2007


2006


2006


2006(In millions)Net sales

$
115.5


$
109.7


$
5.8



5.3Gross margin


21.0



16.3



4.7



28.8Gross margin %


18.2
%


14.9
%






     
    The $5.8 million, or 5.3 percent, increase in net
    sales in 2007 compared to 2006 resulted primarily from an
    $8.8 million increase in our automatic identification
    product line, a $.3 million increase in our pharmacy
    product line and a $1.5 million increase in other
    miscellaneous product lines. The increases were partially offset
    by decreases of $2.3 million in our retail shelf product
    line, $1.5 million in our EDP product line and
    $1.0 million in our supermarket scale product line. The
    increase in our automatic identification product line was
    primarily due to increased volume from existing customers and
    new business. The decrease in our retail shelf product line
    resulted from lost business, a portion of which is now provided
    by the customer itself. The decrease in sales of our EDP product
    line is primarily the result of market erosion as a result of
    changing technology. The decrease in our supermarket scale
    product line was the result of reduced business from several
    customers. 19




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##### Table of Contents




    The gross margin increase of $4.7 million in 2007 compared
    to 2006 was primarily due to reduced overhead spending and
    increased sales volume in 2007. The gross margin in 2006 was
    unfavorably impacted by severance expense related to
    restructuring of the Omaha, Nebraska workforce and the
    St. Louis, Missouri plant closure, the St. Louis,
    Missouri plant closure expenses and higher pension and workers
    compensation expenses.  Specialty
    Paper Products Segment
  Dollar


PercentFor the Years Ended


Change


ChangeDecember 31,


2007 vs.


2007 vs.2007


2006


2006


2006(In millions)Net sales

$
160.3


$
162.5


$
(2.2
)


(1.4
)Gross margin


26.5



24.1



2.4



10.0Gross margin %


16.5
%


14.8
%






     
    The $2.2 million, or 1.4 percent, decrease in net
    sales in 2007 compared to 2006 was primarily due to decreased
    sales of $3.1 million in our ribbon and laser cartridge
    product line, $2.4 million in our financial product line,
    $2.2 million in our IBM branded product line,
    $.6 million in our wide-format product line,
    $.7 million in our coated carbonless product line,
    $.6 million in our heatseal product line, $.8 million
    in our carbonless product line, $.5 million in our core
    bond product line and $1.1 million in other miscellaneous
    product lines. The decrease was partially offset by increases of
    $6.3 million in our thermal point of sale product line,
    $1.8 million in our thermal facesheet product line,
    $1.0 million in our thermal film product line and
    $.7 million in our thermal ticket and tag product line. The
    decreases in our ribbon and laser cartridge and financial
    products product lines resulted from the loss of several major
    customers. The decrease in our IBM branded product line related
    to a transfer to our unbranded thermal point of sale product
    line and lower pricing to a major customer. The decrease in our
    wide-format product line was primarily due to market erosion in
    one of our mature products. The decrease in our coated
    carbonless product line was the result of the exit of that
    portion of our coated business in the first quarter of 2006. The
    net sales increase in our thermal point of sale product line was
    related to the transfer from our IBM branded products to
    unbranded products and increased sales to existing and new
    customers. The increase in our thermal facesheet product line
    resulted primarily from increased sales of a new product and
    increased sales to existing customers.    
    The gross margin percentage increase in 2007 compared to 2006
    was due primarily to higher sales volume and lower manufacturing
    costs in our thermal point of sale product lines partially
    offset by increased overhead and raw material prices in our
    wide-format product line. Gross margin for 2006 was unfavorably
    impacted by Merrimack, New Hampshire manufacturing space
    consolidation costs and severance related to our exit of the
    coated carbonless business. 20




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##### Table of Contents



Discontinued
    Operations
    For the Year Ended December 31,2007


2006(In thousands)Toner and developer:Income, net of taxes

$



$
91Gain on disposal, net of taxes






1,330Toner and developer discontinued operations, net of income taxes






1,421Loss from environmental exposure, net of taxes






(180
)Gain from liquidation on foreign subsidiary, net of income taxes






352Gain from reimbursement of insurance deductible, net of taxes


289



Income from discontinued operations, net of income taxes

$
289


$
1,593           For the Year EndedDecember 31,2007


2006(In thousands)Net sales

$



$
7,459Income before income taxes


500



2,802Income taxes


211



1,209Income from discontinued operations

$
289


$
1,593  21




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##### Table of Contents



Liquidity,
    Capital Resources and Financial Condition
    For the Year Ended December 31Cash Provided by (Used in):

2007


2006(In millions)Operating activities

$
7.9


$
5.1Investing activities


(1.5
)


18.7Financing activities


.7



(24.2
)Increase (decrease) in cash and cash equivalents

$
7.1


$
(0.4
)   Cash
    provided by operating activities
      Cash
    provided by and used in investing activities
      Cash
    provided by and used in financing activities
   22




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##### Table of Contents



December 31, 2007Covenant

Requirement

Compliance Maintain a fixed charged coverage ratio

Not less than 1.5 to 1.0

14.8 to 1.0 Maintain a funded debt to adjusted EBITDA ratio

Less than 2.75 to 1.0

1.1 to 1.0     Fiscal Year Ending December 31,2008


2009


2010


2011


2012


2024


Total(In thousands)Term portion of long-term debt

$
1,875


$
2,500


$
2,500


$
2,500


$
625


$



$
10,000Industrial revenue bond






















2,800



2,800$
1,875


$
2,500


$
2,500


$
2,500


$
625


$
2,800


$
12,800  23




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##### Table of Contents



Litigation
    and Other Matters
  Ricoh
  No. 03-CV-2612
 24




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##### Table of Contents



Environmental
    State
    Street Bank and Trust
    Other
    Application
    of Critical Accounting Policies
    and/or
 25




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##### Table of Contents



Accounts
    Receivable  Allowance for Doubtful Accounts
    Inventories 
    Slow Moving and Obsolescence
    Goodwill
    and Amortizable Intangible Assets
      Pension
    and Other Postretirement Benefits
   26




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##### Table of Contents



Stock
    Based Compensation
     27




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##### Table of Contents



Deferred
    Tax Assets
      Environmental
    Reserves
    clean-up;
  New
    Accounting Pronouncements
     28




---



##### Table of Contents



Item 7A.
    Quantitative
    and Qualitative Disclosure About Market Risk   29




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  NASHUA
    CORPORATION AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  Year Ended December 31,2007


2006(In thousands, except per share data)Net sales

$
272,799


$
269,043Cost of products sold


224,545



228,389Gross margin


48,254



40,654Selling and distribution expenses


24,088



23,894General and administrative expenses


16,991



19,085Research and development expenses


806



644Net loss on curtailment of pension and postretirement plans






580Loss from equity investment


200



440Gain on sale of real estate






(8,976
)Impairment of intangible assets






565Interest expense


765



1,640Interest income


(179
)


(23
)Change in fair value of interest rate swap


295



(106
)Other income


(1,196
)


(1,181
)Income from continuing operations before income taxes


6,484



4,092Provision for income taxes


2,633



2,086Income from continuing operations


3,851



2,006Income from discontinued operations, net of taxes


289



1,593Net income

$
4,140


$
3,599Per share amounts:Income from continuing operations per common share

$
0.67


$
0.32Income from discontinued operations per common share


0.05



0.26Net income per common share

$
0.72


$
0.58Income from continuing operations per common share-assuming
    dilution

$
0.66


$
0.32Income from discontinued operations per common share-assuming
    dilution


0.05



0.26Net income per common share-assuming dilution

$
0.71


$
0.58Average shares outstanding:Common shares


5,743



6,140Common shares-assuming dilution


5,817



6,194    30




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  CONSOLIDATED
    BALANCE SHEETS
  December 31,2007


2006(In thousands, except share data)ASSETSCurrent assetsCash and cash equivalents

$
7,388


$
289Accounts receivable, net


29,375



29,568Inventories:Raw materials


9,079



11,919Work in process


2,565



2,625Finished goods


8,354



9,22019,998



23,764Other current assets


2,828



2,67059,589



56,291Plant and equipment:Land


986



986Buildings and improvements


16,409



16,151Machinery and equipment


53,512



52,995Construction in progress


189



27871,096



70,410Accumulated depreciation


(47,805
)


(44,011
)23,291



26,399Goodwill


31,516



31,516Intangibles, net of amortization


331



606Loans to related parties






1,071Other assets


12,975



11,732Total assets

$
127,702


$
127,615LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesAccounts payable

$
14,432


$
16,620Accrued expenses


9,185



8,639Current portion of long-term debt


1,875



Current portion of notes payable to related parties


31



8325,523



25,342Long-term debt, less current portion


10,925



4,750Notes payable to related parties, less current portion


18



285Other long-term liabilities


29,728



28,211Commitments and contingencies (see Note 10)Shareholders equity:Common stock, par value $1.00; authorized
    20,000,000 shares; issued and outstanding
    5,640,636 shares in 2007 and 6,344,178 shares in 2006


5,641



6,344Additional paid-in capital


14,562



15,998Retained earnings


59,648



61,358Accumulated other comprehensive loss:Minimum pension liability adjustment, net of tax


(18,343
)


(14,673
)61,508



69,027Total liabilities and shareholders equity

$
127,702


$
127,615    31




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF SHAREHOLDERS EQUITY
  AccumulatedAdditional





OtherCommon Stock


Paid-In


Retained


ComprehensiveShares


Par Value


Capital


Earnings


Income (Loss)


Total(In thousands, except share data)Balance, December 31, 2005


6,259,084


$
6,259


$
15,764


$
57,860


$
(26,149
)

$
53,734Stock options exercised and related tax benefit


52,850



52



242











294Stock-based compensation










42











42Restricted stock issued


95,000



95



(95
)










Restricted stock forfeited


(47,327
)


(47
)


47











Purchase and retirement of treasury shares


(15,429
)


(15
)


(2
)


(101
)






(118
)Adjustments to initially apply SFAS No. 158, net of tax


















1,082



1,082Comprehensive income:Net income














3,599







3,599Minimum pension liability adjustment, net of tax


















10,394



10,394Comprehensive income






















13,993Balance, December 31, 2006


6,344,178


$
6,344


$
15,998


$
61,358


$
(14,673
)

$
69,027Stock options exercised and related tax benefit


85,150



85



596











681Stock-based compensation










232











232Restricted stock issued


148,000



148



(148
)










Restricted stock forfeited


(88,673
)


(88
)


88







Purchase and retirement of treasury shares


(100,300
)


(100
)


(260
)


(445
)






(805
)Purchase and retirement of treasury shares  tender
    offer


(751,150
)


(751
)


(2,009
)


(5,405
)






(8,165
)Other


3,431



3



65











68Comprehensive income:Net income














4,140







4,140Minimum pension liability adjustment, net of tax


















(3,670
)


(3,670
)Comprehensive income






















470Balance, December 31, 2007


5,640,636


$
5,641


$
14,562


$
59,648


$
(18,343
)

$
61,508    32




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##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Year Ended December 31,2007


2006(In thousands)Cash Flows from Operating ActivitiesNet income

$
4,140


$
3,599Adjustments to reconcile net income to cash provided by
    operating activities:Depreciation and amortization


4,608



6,803Amortization of deferred gain


(674
)


(56
)Change in fair value of interest rate swap


295



(106
)Impairment of intangible assets






565Deferred income taxes


1,309



2,606Stock based compensation


261



42Excess tax benefit from exercised stock based compensation


(125
)


(35
)Net loss on curtailment of pension and postretirement plans






580Loss (gain) on sale/disposal of fixed assets


65



(11,969
)Equity in loss from unconsolidated joint ventures


200



440Contributions to pension plans (see Note 11)


(5,339
)


(1,793
)Change in operating assets and liabilities, net of effects from
    acquisition of businesses:Accounts receivable


95



4,354Inventories


3,766



(1,529
)Other assets and other current assets


(315
)


(1,394
)Accounts payable


(2,188
)


1,628Accrued expenses


546



(1,000
)Other long-term liabilities


1,202



2,340Cash provided by operating activities


7,846



5,075Cash Flows from Investing ActivitiesInvestment in plant and equipment


(1,346
)


(2,785
)Investment in unconsolidated joint venture


(146
)


(424
)Proceeds from sale of plant and equipment


6



21,927Cash (used in) provided by investing activities


(1,486
)


18,718Cash Flows from Financing ActivitiesNet repayments on revolving portion of long-term debt


(1,950
)


(21,400
)Principal repayment on note payable to related parties


(71
)


(333
)Proceeds from repayment on loan to related party (see
    Note 14)


1,049



Proceeds from refinancing


10,000



23,350Repayment on refinancing of long-term debt






(25,950
)Proceeds from shares exercised under stock option plans


556



259Excess tax benefit from exercised stock based compensation


125



35Purchase and retirement of treasury shares


(805
)


(118
)Purchase and retirement of treasury shares  tender
    offer


(8,165
)


Cash provided by (used in) financing activities


739



(24,157
)Increase (decrease) in cash and cash equivalents


7,099



(364
)Cash and cash equivalents at beginning of year


289



653Cash and cash equivalents at end of year

$
7,388


$
289Supplemental Disclosures of Cash Flow InformationInterest paid

$
959


$
1,702Income taxes paid, net

$
1,952


$
942    33




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##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 Years ended December 31, 2007 and 2006
  Note 1:
    Summary
    of Significant Accounting Policies  Description
    of the Company
    Segment
    and Related Information
        Basis of
    Consolidation
    Use of
    Estimates
    Reclassifications
    Cash
    Equivalents
    Accounts
    Receivable
    Inventories
  first-in, last-in,
 34




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Plant and
    Equipment
      Buildings and improvements


5  40 yearsMachinery and equipment


3  20 years     Goodwill
    and Intangible Assets
        Stock-Based
    Compensation
     35




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Postretirement
    Benefits
    Revenue
    Recognition
    Environmental
    Expenditures
      Shipping
    Costs
    Research
    and Development
    Income
    Taxes
     36




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Concentrations
    of Credit Risk
      Concentrations
    of Labor
    Concentrations
    of Supply
    Fair
    Value of Financial Instruments
    Earnings
    per Common and Common Equivalent Shares
    Repurchased
    Shares
   37




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  New
    Accounting Pronouncements
        Note 2:
    Discontinued
    Operations    For the Year Ended December 31,2007


2006(In thousands)Toner and developer:Income, net of taxes

$



$
91Gain on disposal, net of taxes






1,330Toner and developer discontinued operations, net of income taxes






1,421Loss from environmental exposure, net of taxes






(180
)Gain from liquidation on foreign subsidiary, net of income taxes






352Gain from reimbursement of insurance deductible, net of taxes


289



Income from discontinued operations, net of income taxes

$
289


$
1,593  38




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          For the Year Ended December 31,2007


2006(In thousands)Net sales

$



$
7,459Income before income taxes


500



2,802Income taxes


211



1,209Income from discontinued operations

$
289


$
1,593     Note 3:
    Goodwill
    and Other Intangible Assets    (In thousands)Specialty Paper Products

$
14,142Label Products


17,374Total Goodwill

$
31,516  39




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    At December 31, 2007WeightedGross





AverageCarrying


Accumulated


AmortizationAmount


Amortization


Period(In thousands)Trademarks and trade names

$
211


$
88



15 yearsCustomer relationships and lists


829



631



12 yearsCustomer contracts


450



440



5 years$
1,490


$
1,159   At December 31, 2006WeightedGross





AverageCarrying


Accumulated


AmortizationAmount


Amortization


Period(In thousands)Trademarks and trade names

$
560


$
384



9 yearsLicensing agreement


230



218



5 yearsCustomer relationships and lists


1,372



1,064



12 yearsCustomer contracts


620



520



4 yearsNon-competition agreements


100



95



5 yearsPatented technology


90



85



5 years$
2,972


$
2,366   (In thousands)Amortization Expense:For the year ended December 31, 2006

$
652For the year ended December 31, 2007

$
225Estimated for the year ending:December 31, 2008

$
71December 31, 2009

$
47December 31, 2010

$
39December 31, 2011

$
34December 31, 2012

$
31December 31, 2013 and thereafter

$
109      40




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 4:
    Indebtedness          December 31, 2007Covenant

Requirement

Compliance


Maintain a fixed charged coverage ratio

Not less than 1.5 to 1.0


14.8 to 1.0


Maintain a funded debt to adjusted EBITDA ratio

Less than 2.75 to 1.0


1.1 to 1.0     Fiscal Year Ending December 31,2008


2009


2010


2011


2012


2024


Total(In thousands)Term portion of long-term debt

$
1,875


$
2,500


$
2,500


$
2,500


$
625


$



$
10,000Industrial revenue bond






















2,800



2,800$
1,875


$
2,500


$
2,500


$
2,500


$
625


$
2,800


$
12,800  41




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Note 5:
    Notes
    Payable to Related Parties      Note 6:
    Income
    Taxes    2007


2006(In thousands)Current:United States

$
1,073


$
1,374State


251



527Total current


1,324



1,901Deferred:United States


1,110



(143
)State


199



328Total deferred


1,309



185Provision for income taxes, continuing operations

$
2,633


$
2,086  42




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2007


2006(In thousands)Depreciation

$
(725
)

$
(914
)Other (Discontinued Operations)


(611
)


(643
)Gross deferred tax liabilities


(1,336
)


(1,557
)Pension and postretirement benefits


9,287



7,536State net operating loss carryforwards and other state credits


1,690



1,805Alternative minimum tax and general business credits


1,109



1,527Accrued expenses


278



639Inventory reserves


478



556Bad debt reserves


351



289Other


1,082



775Gross deferred tax assets


14,275



13,127Deferred tax asset valuation allowance


(1,959
)


(1,763
)Deferred tax assets, net


12,316



11,364Net deferred tax assets

$
10,980


$
9,807     2007


2006United States federal statutory rate


35.0
%


35.0
%State taxes, net of federal tax benefit


4.8



4.8Adjustment for deferred tax asset






3.2Change in valuation allowance


3.0



7.2Other


(2.2
)


.8Effective tax rate


40.6
%


51.0
%        43




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            Note 7:
    Shareholders
    Equity      Note 8:
    Stock
    Option and Stock Award Plans    40-day 40-day 40-day
 44




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    40-day 40-day 40-day 40-day
    40-day 40-day 40-day
       45




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      2007


2006Weighted





WeightedAverage





AverageExercise





ExerciseShares


Price


Shares


PriceOutstanding beginning of year


400,950


$
6.65



494,525


$
6.79Exercised


(85,150
)


6.52



(52,850
)


4.86Forfeited  exercisable


(24,000
)


12.78



(37,725
)


10.30Expired










(3,000
)


16.00Outstanding and exercisable at end of year


291,800


$
6.18



400,950


$
6.65     Options Outstanding & ExercisableWeightedWeighted Average


AverageOptions

Remaining


ExerciseRange of Exercise Prices

at 12/31/07

Contractual Life


Price$ 4.01 - $ 4.38

108,800


3.1 years


$
4.18$ 5.70 - $ 6.63

86,400


3.1 years


$
6.13$ 6.65 - $ 6.70

40,800


4.2 years


$
6.66$ 8.06 - $ 8.63

27,700


2.4 years


$
8.15$ 9.61 - $11.63

19,600


4.0 years


$
9.78$12.37 - $16.00

8,500


0.7 years


$
15.37$ 4.01 - $16.00

291,800


3.2 years


$
6.18     2007


2006Restricted stock outstanding at beginning of year


183,673



136,000Granted


151,431



95,000Forfeited


(88,673
)


(47,327
)Restricted stock outstanding at end of year


246,431



183,673Weighted average fair value per restricted share at grant date

$
5.12


$
2.81Weighted average share price at grant date

$
10.54


$
7.06  46




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Grant Year2007


2006Volatility of Share Price:Restricted stock


44.0
%


38.5
%Dividend yield:Restricted stock






Interest rate:Restricted stock


4.6
%


4.8
%Expected forfeiture


9.9
%


0
%Valuation methodology:Restricted stock


Monte Carlo



Monte CarloSimulation



Simulation   Note 9:
    Earnings
    Per Share    Year Ended December 31, 2007Income


Shares


Per Share(Numerator)


(Denominator)


Amount(In thousands, except per share data)Basic EPS:Income from continuing operations

$
3,851



5,743


$
0.67Effect of dilutive securities stock options






74



(0.01
)Diluted EPS:Income from continuing operations, assuming dilution

$
3,851



5,817


$
0.66   Year Ended December 31, 2006Income


Shares


Per Share(Numerator)


(Denominator)


Amount(In thousands, except per share data)Basic EPS:Income from continuing operations

$
2,006



6,140


$
0.32Effect of dilutive securities stock options






54



Diluted EPS:Income from continuing operations, assuming dilution

$
2,006



6,194


$
0.32    47




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 10:
    Commitments
    and Contingencies  Lease
    Agreements
    Beyond2008

2009

2010

2011

2012

2012

Total(In thousands)Non-cancelable operating leases

$
2,226


$
1,673


$
1,662


$
1,318


$
370






$
7,249       Contingencies
      Ricoh
  No. 03-CV-2612
   48




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Environmental
    State
    Street Bank and Trust
    Other
    Note 11:
    Postretirement
    Benefits  Defined
    Contribution Plan
     49




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Pension
    Plans
    Retiree
    Health Care and Other Benefits
   50




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Pension Benefits


Postretirement Benefits2007


2006


2007


2006(In thousands)Change in benefit obligationProjected benefit obligation at beginning of year

$
97,905


$
101,206


$
814


$
2,369Service cost


509



886



1



40Interest cost


5,773



5,508



42



88Curtailment and plan amendments














(1,124
)Actuarial gain


(2,590
)


(5,539
)


(209
)


(346
)Expenses paid from assets


(500
)


(500
)






Benefits paid


(4,120
)


(3,655
)


(150
)


(213
)Projected benefit obligation at end of year

$
96,977


$
97,906


$
498


$
814Change in plan assetsFair value of plan assets at beginning of year

$
75,284


$
69,041


$



$
Actual return on plan assets


(4,576
)


7,795







Employer contribution


5,649



2,103



150



213Benefits paid


(4,120
)


(3,655
)


(150
)


(213
)Fair value of plan assets at end of year

$
72,237


$
75,284


$



$
Reconciliation of funded statusFunded status

$
(24,740
)

$
(22,622
)

$
(498
)

$
(814
)Unrecognized net actuarial (gain)/loss


30,427



24,277



(1,143
)


(1,008
)Unrecognized prior service cost










(749
)


(818
)Net amount recognized

$
5,687


$
1,655


$
(2,390
)

$
(2,640
)The amount recognized in our consolidated 
    balance sheets consists of the following:Pension/postretirement liability

$
(24,740
)

$
(22,622
)

$
(498
)

$
(814
)Accumulated other comprehensive loss (income)


30,427



24,277



(1,892
)


(1,826
)Net amount recognized

$
5,687


$
1,655


$
(2,390
)

$
(2,640
)   Assumptions:
  Pension Benefits

Postretirement Benefits2007

2006

2007

2006Weighted-average assumptions used to determine net benefit
    costs:Discount rate


6.0
%


5.5
%


6.0
%


5.5
%Expected return on plan assets


8.5
%


8.5
%






   51




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Pension Benefits

Postretirement Benefits2007

2006

2007

2006Weighted-average assumptions used to determine 
    benefit obligations at year end:Discount rate


6.25
%


6.0
%


6.25
%


6.0
%         One year


(4.4
)%Five years


9.2
%Ten years


6.8
%     2007

2008 TargetAsset CategoryEquity Securities


58
%


55
%Fixed Income


40
%


45
%Other


2
%


    52




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      For the YearEnded December 31,2007


2006(In millions)InvestmentsLarge cap equities

$
25.0


$
25.6Small cap equities


8.7



8.3International equities


8.6



8.5High yield bonds


6.5



5.9Fixed income/bond investments


22.1



26.7Cash


1.3



.3Total

$
72.2


$
75.3       Retirement Plan

Hourly

Supplementalfor Salaried

Employees

ExecutiveEmployees

Retirement Plan

Retirement Plan

Postretirement(In millions)2008

$
2.4


$
1.8


$
.3


$
.12009


2.5



1.9



.3



.12010


2.8



2.0



.3



.12011


2.9



2.1



.3



.12012


3.2



2.3



.3



.12013-2017


19.2



13.9



1.2



.1  53




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##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Pension Benefits


Postretirement Benefits2007


2006


2007


2006(In thousands)Components of net periodic (income) costService cost

$
509


$
886


$
1


$
40Interest cost


5,773



5,508



42



88Expected return on plan assets


(6,413
)


(5,925
)






Amortization of prior service cost (credit)


4



161



(69
)


(58
)Recognized net actuarial loss (gain)


1,744



2,486



(74
)


(86
)Net loss (gain) on curtailment






786







(565
)Net periodic cost (income)

$
1,617


$
3,902


$
(100
)

$
(581
)     2007

2006PBO

ABO

Plan Assets

PBO

ABO

Plan Assets(In millions)Supplemental Executive Retirement Plan

$
3.0


$
3.0


$



$
3.1


$
3.1


$
Hourly Employees Retirement Plan of Nashua Corporation

$
42.1


$
42.1


$
31.7


$
42.4


$
42.4


$
35.4Retirement Plan for Salaried Employees of Nashua Corporation

$
51.9


$
51.9


$
40.5


$
52.4


$
52.4


$
39.9              54




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##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Note 12:
    Information
    About Operations                 55




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##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Net Sales


Gross Margin


Identifiable Assets2007


2006


2007


2006


2007


2006(In millions)By Reportable Segment:Label Products

$
115.5


$
109.7


$
21.0


$
16.3


$
46.6


$
48.0Specialty Paper Products


160.3



162.5



26.5



24.1



53.9



61.1Other(1)


4.1



2.5



.7



.2







Reconciling Items:Eliminations


(7.1
)


(5.7
)














Corporate assets


















27.2



18.5Consolidated

$
272.8


$
269.0


$
48.2


$
40.6


$
127.7


$
127.6     (1)
    
    Includes activity from operations which falls below the
    quantitative thresholds for a reportable segment.    Capital


Depreciation &Expenditures


Amortization2007


2006


2007


2006(In millions)Label Products

$
.4


$
.8


$
2.0


$
3.2Specialty Paper Products


.7



1.7



2.1



2.9Reconciling Items:Corporate


.2



.3



.5



.4Consolidated

$
1.3


$
2.8


$
4.6


$
6.5     Net Sales FromContinuing Operations


Long-Lived Assets2007


2006


2007


2006(In millions)By Geographic AreaUnited States

$
272.8


$
269.0


$
57.1


$
62.0Reconciling Items:Discontinued Operations










1.5



1.5Deferred tax assets










9.5



7.8Consolidated

$
272.8


$
269.0


$
68.1


$
71.3    56




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##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 13:
    Quarterly
    Operating Results    For the Quarter EndedUnaudited

Unaudited

Unaudited

Unaudited3/30/07

6/29/07

9/28/07

12/31/07

Year(In thousands, except per share data)2007Net sales

$
65,169


$
67,688


$
67,610


$
72,332


$
272,799Gross margin


11,449



12,298



11,564



12,943



48,254Income from continuing operations


637



1,252



852



1,110



3,851Income from discontinued operations(1)


289















289Net income(1)


926



1,252



852



1,110



4,140Earnings per common share:Continuing operations


0.10



0.21



0.16



0.20



0.67Discontinued operations(1)


0.05















0.05Net income(1)


0.15



0.21



0.16



0.20



0.72Continuing operations, assuming dilution


0.10



0.20



0.16



0.20



0.66Discontinued operations, assuming dilution(1)


0.05















0.05Net income, assuming dilution(1)


0.15



0.20



0.16



0.20



0.712006Net sales

$
64,811


$
65,458


$
69,487


$
69,287


$
269,043Gross margin


9,788



9,458



10,715



10,693



40,654Income (loss) from continuing operations(2)


(563
)


(982
)


(1,213
)


4,764



2,006Income from discontinued operations(1)


1,004







54



535



1,593Net income (loss)(1)(2)


441



(982
)


(1,159
)


5,299



3,599Earnings (loss) per common share:Continuing operations(2)


(.09
)


(.16
)


(.20
)


.77



.32Discontinued operations(1)


.16







.01



.09



.26Net income (loss)(1)(2)


.07



(.16
)


(.19
)


.86



.58Continuing operations, assuming dilution(2)


(.09
)


(.16
)


(.20
)


.77



.32Discontinued operations, assuming dilution(1)


.16







.01



.09



.26Net income (loss), assuming dilution(1)(2)


.07



(.16
)


(.19
)


.86



.58     (1)
    
    Income from discontinued operations for the year ended
    December 31, 2007, as described in Note 2, represents
    the reimbursement of our deductible related to the Cerion
    litigation which was dismissed by the courts. Income from
    discontinued operations, for the year ended December 31,
    2006, as described in Note 2, represents the results of our
    toner and developer business which we exited effective
    March 31, 2006, income from the liquidation of our former
    Photo UK entity, a loss related to environmental issues
    resulting from our previously exited Computer Products business
    and a $1.2 million tax benefit related to the settlement of
    outstanding Internal Revenue Service audits from the years
    1995-2000.(2)
    
    Our fourth quarter 2006 includes an impairment of intangible
    assets, as described in Note 3, and a gain on the sale of
    our real estate located in Merrimack, New Hampshire, as
    described in Note 10.  Note 14:
    Related
    Parties  Leases
    with Related Parties
   57




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##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Notes
    Payable to Related Parties
    Loans to
    Related Parties
   58




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
          Accounting for Uncertainty in Income Taxes Share-Based Payment, Employers Accounting for Defined Benefit Pension and
    Other Postretirement Plans, an Amendment of FASB Statements
    No. 87, 88, 106 and 132(R).
  
    59




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##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure.    Item 9A.
    Controls
    and Procedures    Item 9A(T).
    Controls
    and Procedures  Disclosure
    Controls and Procedures
  Rules 13a-15(e) 15d-15(e)
  Internal
    Control Over Financial Reporting
  Managements
    Annual Report on Internal Control Over Financial
    Reporting
  Rule 13a-15(f) 15d-15(f)
  
    Pertain to the maintenance of records that in reasonable detail
    accurately and fairly reflect the transactions and dispositions
    of the assets of the company;
    Provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that receipts and expenditures of the company are being made
    only in accordance with authorizations of management and
    directors of the company; and
    Provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of the
    companys assets that could have a material effect on the
    financial statements.   60




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##### Table of Contents



Changes
    in Internal Control Over Financial Reporting
    Item 9B.
    Other
    Information   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance    Executive
    Officers of the Registrant
  Form 10-K.
  Code of
    Ethics
  Regulation S-K,
  Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters   61




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##### Table of Contents



Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence    Item 14.
    Principal
    Accountant Fees and Services   PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules  Form 10-K:
  Financial statements:
  
    Consolidated statements of operations for each of the two years
    ended December 31, 2007 and 2006
    Consolidated balance sheets at December 31, 2007 and 2006
    Consolidated statements of shareholders equity for each of
    the two years ended December 31, 2007 and 2006
    Consolidated statements of cash flows for each of the two years
    ended December 31, 2007 and 2006
    Notes to Consolidated Financial Statements
    Report of Independent Registered Public Accounting Firm  Financial Statements:
    Exhibits:
  2
.01

Agreement and Plan of Merger, dated as of March 25, 2002,
    between Nashua Corporation and Nashua MA Corporation.
    Incorporated by reference to our Definitive Proxy Statement
    filed on March 27, 2002.3
.01

Articles of Organization, as amended. Incorporated by reference
    to our Quarterly Report on
    Form 10-Q
    for the quarter ended June 28, 2002.3
.02

By-laws, as amended. Incorporated by reference to our Quarterly
    Report on
    Form 10-Q
    for the quarter ended June 28, 2002.4
.01

Credit Agreement, dated March 1, 2002, by and among Nashua
    Corporation, LaSalle Bank National Association and Fleet
    National Bank, a Bank of America Company. Incorporated by
    reference to our Current Report on
    Form 8-K
    dated March 14, 2002.4
.02

First Amendment to Credit Agreement, dated as of July 15,
    2003, by and among Nashua Corporation, Fleet National Bank, a
    Bank of America Company, and LaSalle Bank National Association.
    Incorporated by reference to our Quarterly Report on
    Form 10-Q
    for the quarter ended June 27, 2003.4
.03

Waiver and Second Amendment to Credit Agreement, dated as of
    July 24, 2003, by and among Nashua Corporation, Fleet
    National Bank, a Bank of America Company, and LaSalle Bank
    National Association. Incorporated by reference to our Quarterly
    Report on
    Form 10-Q
    for the quarter ended June 27, 2003.4
.04

Third Amendment to Credit Agreement, dated as of
    September 25, 2003, by and among Nashua Corporation, Fleet
    National Bank, a Bank of America Company, and LaSalle Bank
    National Association. Incorporated by reference to our Quarterly
    Report on
    Form 10-Q
    for the quarter ended September 26, 2003. 62




---



##### Table of Contents



4
.05

Fourth Amendment to Credit Agreement, dated as of
    December 30, 2003, by and among Nashua Corporation, Fleet
    National Bank, a Bank of America Company, and LaSalle Bank
    National Association. Incorporated by reference to our Annual
    Report on
    Form 10-K
    for the year ended December 31, 2003.4
.06

Fifth Amendment to Credit Agreement dated as of March 31,
    2004 by and among Nashua Corporation, Fleet National Bank, a
    Bank of America Company, and LaSalle Bank National Association.
    Incorporated by reference to our current report on
    Form 8-K
    dated March 31, 2004 and filed April 2, 2004.4
.07

Sixth Amendment to Credit Agreement dated as of December 9,
    2004 by and among Nashua Corporation, Fleet National Bank, a
    Bank of America Company, and LaSalle Bank National Association.
    Incorporated by reference to our current report on
    Form 8-K
    dated December 9, 2004 and filed December 15, 2004.4
.08

Seventh Amendment to Credit Agreement dated as of April 14,
    2005, among Nashua Corporation, Fleet National Bank, a Bank of
    America Company, and LaSalle Bank National Association.
    Incorporated by reference to our current report on
    Form 8-K
    dated April 14, 2005 and filed April 20, 2005.4
.09

Amended and Restated Credit Agreement, dated as of
    March 30, 2006, among Nashua Corporation, LaSalle Bank
    National Association and the lenders party hereto. Incorporated
    by reference to our current report on
    Form 8-K
    dated March 30, 2006 and filed on April 3, 2006.4
.10

First Amendment to Amended and Restated Credit Agreement, dated
    as of January 12, 2007, among Nashua Corporation, LaSalle
    Bank National Association, and the lenders party thereto.
    Incorporated by reference to our current report on
    Form 8-K
    dated January 12, 2007 and filed on January 18, 2007.4
.11

Second Amendment and Restated Credit Agreement, dated as of
    May 23, 2007, among Nashua Corporation, LaSalle Bank
    National Association, and the lenders party thereto.
    Incorporated by reference to our current report on
    Form 8-K
    dated May 23, 2007 and filed on May 29, 2007.+10
.01

Amended and Restated 1996 Stock Incentive Plan. Incorporated by
    reference to our Quarterly Report on
    Form 10-Q
    for the quarter ended April 2, 1999.+10
.02

1999 Shareholder Value Plan. Incorporated by reference to
    our Quarterly Report on
    Form 10-Q
    for the quarter ended April 2, 1999.+10
.03

2004 Value Creation Incentive Plan. Incorporated by reference to
    our Proxy Statement dated as of March 23, 2004.+10
.04

2007 Value Creation Incentive Plan. Incorporated by reference to
    our current report on
    Form 8-K
    dated as of May 4, 2007 and filed on May 8, 2007.+10
.05

Form of Restricted Stock Agreement. Incorporated by reference to
    our current report on
    Form 8-K
    dated as of August 1, 2007 and filed on August 6, 2007.+10
.06

Letter Agreement, by and between the Company and Andrew Albert,
    dated as of April 24, 2006. Incorporated by reference to
    our current report on
    Form 8-K
    dated April 24, 2006 and filed April 25, 2006.+10
.07

Change of Control and Severance Agreement, dated as of
    June 15, 2004 between Nashua Corporation and John L.
    Patenaude. Incorporated by reference to our Annual Report on
    Form 10-K
    for the year ended December 31, 2004.+10
.08

Separation and General Release Agreement, dated April 19,
    2007 between Nashua Corporation and Donna DiGiovine.
    Incorporated by reference to our current report on
    Form 8-K
    dated April 19, 2007 and filed on April 24, 2007.+10
.09

Employment Agreement, by and between Nashua Corporation and
    Thomas G. Brooker, dated as of March 12, 2006. Incorporated
    by reference to our current report on
    Form 8-K
    dated March 12, 2006 and filed on March 16, 2006.+10
.10

Change of Control and Severance Agreement, by and between Nashua
    Corporation and Thomas G. Brooker, dated as of March 12,
    2006. Incorporated by reference to our current report on
    Form 8-K
    dated March 12, 2006 and filed on March 16, 2006.+10
.11

Restricted Stock Agreements, by and between Nashua Corporation
    and Thomas G. Brooker, dated as of May 4, 2006.
    Incorporated by reference to our current report on
    Form 8-K
    dated May 4, 2006 and filed on May 5, 2006. 63




---



##### Table of Contents



+10
.12

Employment Agreement, by and between Nashua Corporation and Todd
    McKeown, dated as of September 1, 2006. Incorporated by
    reference to our current report on
    Form 8-K
    dated August 17, 2006 and filed August 22, 2006.+10
.13

Change of Control and Severance Agreement, by and between Nashua
    Corporation and Todd McKeown, dated as of September 1,
    2006. Incorporated by reference to our current report on
    Form 8-K
    dated August 17, 2006 and filed August 22, 2006.+10
.14

Restricted Stock Agreement, by and between the Company and Todd
    McKeown, dated as of September 1, 2006. Incorporated by
    reference to our Quarterly Report on
    Form 10-Q
    dated and filed November 3, 2006.+10
.15

Management Incentive Plan. Incorporated by reference to our
    current report on
    Form 8-K
    dated March 14, 2007 and filed March 20, 2007.10
.16

Form of Indemnification Agreement between Nashua Corporation and
    its directors and executive officers. Incorporated by reference
    to our Quarterly Report on
    Form 10-Q
    for the quarter ended September 27, 2002.10
.17

Indemnification Agreement, dated as of February 11, 2004,
    between Nashua Corporation and Katun Corporation. Incorporated
    by reference to our current report on
    Form 8-K
    dated and filed August 9, 2005.10
.18

Purchase and Sale Agreement, by and between Nashua Corporation
    and Equity Industrial Partners Corp., dated as of
    November 6, 2006. Incorporated by reference to our current
    report on
    Form 8-K
    dated November 6, 2006 and filed November 13, 2006.10
.19*

Executive officer 2008 salaries.10
.20*

Summary of compensation arrangements with Directors.21
.01*

Subsidiaries of the Registrant.23
.01*

Consent of Independent Registered Public Accounting Firm.31
.01*

Certificate of Chief Executive Officer pursuant to
    Rule 13a-14(a)
    or
    Rule 15d-14(a),
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.31
.02*

Certificate of Chief Financial Officer pursuant to
    Rule 13a-14(a)
    or
    Rule 15d-14(a),
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.32
.01*

Certificate of the Chief Executive Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.32
.02*

Certificate of the Chief Financial Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.     * 
    Filed herewith.+ 
    Identifies exhibits constituting management contracts or
    compensatory plans or other arrangements required to be filed as
    an exhibit to this annual report on
    Form 10-K. 64




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##### Table of Contents



SIGNATURES
    Nashua Corporation
  By:
    /s/  John
    L. Patenaude  John L. Patenaude
 Vice President-Finance and
 Chief Financial Officer
      Signature

Title

Date/s/  Thomas
    G. BrookerThomas
    G. Brooker

President and
    Chief Executive Officer
    (principal executive officer)

March 11, 2008/s/  John
    L. PatenaudeJohn
    L. Patenaude

Vice President-Finance and
    Chief Financial Officer
    (principal financial officer)

March 11, 2008/s/  Margaret
    M. CallanMargaret
    M. Callan

Corporate Controller and
    Chief Accounting Officer
    (principal accounting officer)

March 11, 2008/s/  Andrew
    B. AlbertAndrew
    B. Albert

Chairman of the Board

March 11, 2008/s/  L.
    Scott BarnardL.
    Scott Barnard

Director

March 11, 2008/s/  Avrum
    GrayAvrum
    Gray

Director

March 11, 2008/s/  Michael
    T. LeathermanMichael
    T. Leatherman

Director

March 11, 2008/s/  George
    R. Mrkonic, Jr.George
    R. Mrkonic, Jr.

Director

March 11, 2008/s/  Mark
    E. SchwarzMark
    E. Schwarz

Director

March 11, 2008  65