##### 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, 2008oro

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

02-0170100(State or other jurisdiction
    of
    incorporation or organization)

(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
  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


5,599,642   Form 10-K:




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##### 





TABLE OF
    CONTENTS
   
 PagePART IItem 1.


Business


3Item 1A.


Risk Factors


8Item 1B.


Unresolved Staff Comments


12Item 2.


Properties


13Item 3.


Legal Proceedings


13Item 4.


Submission of Matters to a Vote of Security
    Holders


14PART IIItem 5.


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


14Item 6.


Selected Financial Data


15Item 7.


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


15Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


28Item 8.


Financial Statements and Supplementary Data


29Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


61Item 9A.


Controls and Procedures


61Item 9A(T).


Controls and Procedures


61Item 9B.


Other Information


62PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


63Item 11.


Executive Compensation


63Item 12.


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


63Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


63Item 14.


Principal Accountant Fees and Services


63PART IVItem 15.


Exhibits and Financial Statement Schedules


63Ex-4.12 Amendment Agreement to Second Amended and Restated Credit Agreement, dated as of March 30, 2009, by and among Nashua Corporation and Bank of America, N.A.Ex-10.11 Amended and Restated Change of Control and Severance Agreement (John L. Patenaude)Ex-10.13 Amended and Restated Change of Control and Severance Agreement (Thomas G. Brooker)Ex-10.16 Amended and Restated Change of Control and Severance Agreement (Todd McKeown)Ex-10.18 Management Incentive Plan. Revised December 30, 2008Ex-10.20 Executive officer 2009 salariesEx-10.21 Summary of compensation arrangements with DirectorsEx-21.01 Subsidiaries of the RegistrantEx-23.01 Consent of Independent Registered Public Accounting FirmEx-31.01 Certificate of Chief Executive OfficerEx-31.02 Certificate of Chief Financial OfficerEx-32.01 Certificate of the Chief Executive OfficerEx-32.02 Certificate of the Chief Financial Officer   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
  
    In the third quarter of 2008, we closed our Cranbury, New Jersey
    facility in our Specialty Paper Products segment.
    For the third quarter ended September 28, 2008, we
    recognized a goodwill impairment charge of $14.1 million
    related to our Specialty Paper Products segment.
    During 2008, we replaced certain leased distribution centers
    with public warehouses.
    In December 2008, we closed our Jacksonville, Florida label
    converting facility and consolidated operations into our
    Tennessee and Nebraska facilities in our Label Products segment.
    During 2008, we streamlined our workforce and eliminated 25
    positions in our selling, general and administrative areas. We
    recognized $1.1 million of severance expense associated
    with the reduction in workforce.   3




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Operating
    Segments
        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  Form 10-K.
  Research
    and Development
    Environmental
    Matters
  and/or
   6




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Executive
    Officers
    Name

Age

PositionThomas G. Brooker


50


President and Chief Executive OfficerJohn L. Patenaude


59


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


42


Corporate Controller and Chief Accounting OfficerDonald A. Granholm


54


Vice President  Supply Chain and Human Resources
    ManagementThomas M. Kubis


48


Vice President of OperationsWilliam Todd McKeown


43


Vice President of Sales and MarketingMichael D. Travis


49


Vice President of Marketing              7




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Employees
      Approximate #of EmployeesUnion

Covered


Location

Expiration DateUnited Steelworkers of America


98


Omaha, NE


March 31, 2012United Steelworkers of America


69


Merrimack, NH


April 5, 2009United Commercial Food Workers


33


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 and may be impacted by the
    financial crisis in the global economy.
   8




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
    deteriorating general economic conditions, which result in lower
    sales or movement of products by our customers causing our sales
    to decline;
    the availability of financing due to changes in the banking and
    financing industry could cause certain of our customers,
    especially in the retail and construction industry, to be
    impacted by adverse conditions whereby customer sales decline
    and/or
    customer reduction in size of their business through either
    store closures or the consolidation of warehouses causing our
    sales to decline;
    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 bond, carbonless, ribbons, heat
    seal and dry gum products, due to changing technologies and a
    decrease in demand due to slowness in the economy;
    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;
    our ability to pass on increased freight cost due to fuel price
    fluctuations; and
    our ability to pass on manufacturing cost increases.        We may
    be required to record a significant impairment charge if the
    carrying value of our goodwill exceeds its fair
    value.
   9




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Our
    credit facility contains financial covenants, and our failure to
    comply with any of those covenants could materially adversely
    impact us.
        If the
    financial condition of our customers declines, our credit risk
    could increase.
    Increases
    in raw material costs or the unavailability of raw materials may
    adversely affect our profitability.
     10




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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.
    We
    depend 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.
        Litigation
    relating to our intellectual property rights could have an
    adverse impact on our business.
   11




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Our
    information systems are critical to our business, and a failure
    of those systems could materially harm us.
    Failure
    to maintain effective internal controls over financial reporting
    and disclosure controls and procedures could adversely affect
    our business and the market price of our common stock, and
    impair our ability to timely file our reports with the
    Securities and Exchange Commission.
    Item 1B.
    Unresolved
    Staff Comments   12




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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


paper productsJefferson City, Tennessee


198,000


paper productsVernon, California (leased)


61,000


paper productsLabel Products SegmentOmaha, Nebraska


170,000


label productsJefferson City, Tennessee


60,000


label productsJacksonville, Florida (leased)


42,000


none (unused)   Item 3.
    Legal
    Proceedings  Environmental
    State
    Street Bank and Trust
   13




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and/or
  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


Year2008High

$
12.58


$
11.50


$
10.44


$
8.89


$
12.58Low

$
8.93


$
8.51


$
7.73


$
3.07


$
3.072007High

$
9.38


$
10.79


$
13.41


$
12.40


$
13.41Low

$
7.27


$
8.22


$
10.25


$
10.30


$
7.27    14




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(b)
    Issuer
    Purchases of Equity Securities during the Quarter ended December
    31, 2008    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 27 through October 31














1,000,000November 1 through November 28


2,029


$
5.09



2,029



997,971November 29 through December 31


133,515


$
4.78



133,515



864,456Total


135,544







135,544     (1)
    
    We repurchased an aggregate of 135,544 shares of our common
    stock pursuant to the repurchase program that we publicly
    announced on October 30, 2008 (the Program).(2)
    
    Our Board of Directors approved the repurchase by us of up to an
    aggregate of 1,000,000 shares of our common stock pursuant
    to the Program. The Program does not have a fixed expiration
    date.  Item 6.
    Selected
    Financial Data    Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations    Overview
        
    We closed our Cranbury, New Jersey facility in our Specialty
    Paper Products segment.
    We replaced certain leased distribution centers with public
    warehouses.
    We incurred a $14.1 million goodwill impairment charge in
    the third quarter of 2008 related to our Specialty Paper
    Products segment.
    In December 2008, we closed our Jacksonville, Florida facility
    and consolidated operations into our Tennessee and Nebraska
    facilities in our Label Products segment.
    We streamlined our workforce and eliminated 25 positions in our
    selling, general and administrative areas. We recognized
    $1.1 million of severance expense associated with the
    reduction in workforce. 15




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
    We incurred a tax charge of $4.3 million in the fourth
    quarter as a result of increasing the valuation reserve on
    deferred tax assets.
    We announced to our employees not covered by contractual
    agreements that we would suspend matching contributions to our
    defined contribution 401(k) plan.      
    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 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 six 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. 16




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Consolidated
    Results of Operations
  The
    consolidated results of operations should be read in conjunction
    with the individual segment results.
  2008 vs. 2007For the Years Ended December 31,


Dollar


Percent2008


2007


Change


Change(In millions)Net salesLabel Products

$
105.1


$
115.5


$
(10.4
)


(9.0
)Specialty Paper Products


162.3



160.3



2.0



1.2Other


4.4



4.1



.3



7.3Eliminating


(6.9
)


(7.1
)


.2



2.8Consolidated net sales


264.9



272.8



(7.9
)


(2.9
)Gross marginLabel Products


13.3



21.0



(7.7
)


(36.7
)Specialty Paper Products


25.3



26.5



(1.2
)


(4.5
)Other


.8



.7



.1



14.3Consolidated gross margin


39.4



48.2



(8.8
)


(18.3
)Gross margin %


14.9
%


17.7
%






Selling and distribution expenses


25.9



24.1



1.8



7.5General and administrative expenses


14.9



17.0



(2.1
)


(12.4
)Research and development expenses


.7



.8



(.1
)


(12.5
)Other income


(1.0
)


(1.2
)


.2



16.7Impairment of goodwill


14.1







14.1



100.0Loss from equity investments


.2



.2







Interest expense, net


1.0



.9



.1



11.1Income (loss) from continuing operations before income taxes


(16.4
)


6.5



(22.9
)


(352.3
)Income from discontinued operations, net of taxes






.3



(.3
)


(100.0
)Net income (loss)

$
(19.8
)

$
4.1


$
(23.9
)


(582.9
)     
    The decrease from 2007 to 2008 was primarily due to a
    $10.4 million decrease in sales in our Label Products
    segment partially offset by a $2.0 million increase 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 Operating
    Segment.    
    The margin percent in 2008 compared to 2007 decreased in both of
    our operating segments. The decreases were primarily
    attributable to lower sales volume in our Label Products
    segment, the cost of closing our Florida label facility and the
    integration of the Florida manufacturing into our Tennessee and
    Nebraska label facilities, unfavorable sales mix and higher
    manufacturing costs in both of our operating segments.
    Gross margin changes for both of our business segments are
    discussed in detail under Results of Operations by
    Operating Segment.   17




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
    The $1.8 million increase was due to an increase in
    distribution expenses of $1.9 million partially offset by a
    decrease in selling expenses of $.1 million. Distribution
    expenses increased primarily due to severance related to the
    closure of distribution facilities and the change in our New
    Jersey facility from a manufacturing facility to a distribution
    facility in January 2008, the subsequent closure of the New
    Jersey distribution facility in July 2008 and the subsequent
    buyout of our Cranbury, New Jersey lease in December 2008 within
    our Specialty Paper Products segment. Selling expenses decreased
    primarily due to lower personnel costs as a result of reductions
    in workforce.    
    The decrease in general and administrative expenses in 2008 from
    2007 was primarily due to lower management incentive cost, as
    well as reduced legal and pension expenses partially offset by
    severance charges related to a reduction in workforce and higher
    stock compensation expenses.      
    Other income in 2008 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.        
    The $.1 million increase in net interest expense was due to
    a $.2 million increase in expense related to the change in
    the fair value of our interest rate swap and a $.1 million
    decrease in interest income partially offset by a
    $.2 million decrease in interest expense. The decrease in
    interest expense is the result of a reduction in debt as well as
    lower interest rates which also resulted in lower interest
    income. Our interest rate swap is discussed in detail under
    Liquidity, Capital Resources and Financial Condition.    
    The change in our pre-tax income from 2007 to 2008 was primarily
    due to the $14.1 million expense for the impairment of
    goodwill in our Specialty Paper Products segment in addition to
    charges related to the closure of our Florida facility in our
    Label Products segment, charges related to closure of our
    Cranbury, New Jersey facility and severance charges related to a
    reduction in workforce.   18




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Results
    of Operations by Operating Segment
  Label
    Products Segment
  Dollar


PercentFor the Years Ended


Change


ChangeDecember 31,


2008 vs.


2008 vs.2008


2007


2007


2007(In millions)Net sales

$
105.1


$
115.5


$
(10.4
)


(9.0
)Gross margin


13.3



21.0



(7.7
)


(36.7
)Gross margin %


12.7
%


18.2
%






     
    The $10.4 million, or 9.0 percent, decrease in net
    sales in 2008 compared to 2007 resulted primarily from an
    $8.9 million decrease in our automatic identification
    product line, a $2.0 million decrease in our supermarket
    scale product line and a $1.6 million decrease in our EDP
    product line. The decreases were partially offset by increases
    of $.9 million in our ticket product line, $.9 million
    in our RFID product line, $.2 million in our pharmacy
    product line and $.1 million in our prime label product
    line. The decrease in our automatic identification product line
    was primarily the result of decreased volume from existing
    customers due to the impact of the economic downturn and the
    loss of a major customer. The decrease in our supermarket scale
    product line was mainly the result of lost business. The
    decrease in our EDP product line resulted primarily from lost
    business due to our customers conversion to alternate
    label technologies. The increase in our ticket product line was
    primarily due to increased volume from new and existing
    customers.    
    The gross margin decrease of $7.7 million in 2008 compared
    to 2007 was partially due to the lower sales volume and
    competitive pricing pressure on new business as well as overall
    increased spending. The gross margin in 2008 was unfavorably
    impacted by the recognition of a lease liability, severance and
    other expenses related to the closure of our Jacksonville,
    Florida facility. In addition to the plant closure cost, we
    incurred manufacturing inefficiencies due to the transfer of
    business to our Tennessee and Nebraska manufacturing facilities. 19




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##### Table of Contents



Specialty
    Paper Products Segment
  Dollar


PercentFor the Years Ended


Change


ChangeDecember 31,


2008 vs.


2008 vs.2008


2007


2007


2007(In millions)Net sales

$
162.3


$
160.3


$
2.0



1.2Gross margin


25.3



26.5



(1.2
)


(4.5
)Gross margin %


15.6
%


16.5
%






     
    The $2.0 million, or 1.2 percent, increase in net
    sales in 2008 compared to 2007 was primarily due to increased
    sales of $10.9 million in our thermal point of sale product
    line mainly due to new business and increased sales to an
    existing customer. The increased point of sale thermal sales
    were partially offset by decreases of $2.4 million in our
    wide-format product line, $1.5 million in our thermal
    facesheet product line, $1.5 million in our retail product
    line, $.8 million in our heat seal product line,
    $.8 million in our financial product line, $.6 million
    in our core bond product line, $.4 million in our ribbon
    product line and $.9 million in other miscellaneous product
    lines. The decrease in our wide-format product line was the
    result of overall softness in the construction industry. The
    thermal facesheet and retail product line decreases were
    primarily the result of lower sales to major customers.    
    The gross margin percentage decrease in 2008 compared to 2007
    was due primarily to raw material price increases in our thermal
    facesheet product line, higher sales volume at lower selling
    prices partially offset by savings associated with the
    transformation of our Cranbury, New Jersey facility from
    manufacturing to distribution.  Discontinued
    Operations
      Liquidity,
    Capital Resources and Financial Condition
   20




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For the Year Ended December 31Cash Provided by (Used in):

2008


2007(In millions)Operating activities

$
(1.5
)

$
7.9Investing activities


(1.8
)


(1.5
)Financing activities


(2.5
)


.7Increase (decrease) in cash and cash equivalents

$
(5.8
)

$
7.1   Cash used
    in and provided by operating activities
      Cash used
    in investing activities
      Cash used
    in and provided by financing activities
       21




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Requirement

Ratio atat December 31,

December 31,Covenant

2008

2008 Maintain a fixed charge coverage ratio

Not less than 1.5 to 1.0

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

Less than 2.5 to 1.0

2.6 to 1.0     
    the termination date is changed from March 30, 2012 to
    March 29, 2010;
    advances under the revolving credit facility are limited to
    75 percent of eligible accounts receivable and
    40 percent of eligible inventory, and eligible inventory is
    limited to $6 million;
    the revolving credit facility is decreased from $28 million
    to $15 million until June 30, 2009, when it will
    increase to $17 million;
    the interest rate on borrowings is increased to LIBOR plus
    335 basis points or prime plus 110 basis points;
    the fee for the unused line of credit is 75 basis points; 22




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
    annual capital expenditures are limited to
    $2 million; and
    equipment and fixtures are added to the collateral securing the
    loan.      2009


2024


TotalTerm portion of long-term debt

$
8,125


$



$
8,125Industrial revenue bond






2,800



2,800$
8,125


$
2,800


$
10,925                23




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Litigation
    and Other Matters
  Environmental
   24




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State
    Street Bank and Trust
    and/or
  Other
    Application
    of Critical Accounting Policies
    and/or
  Accounts
    Receivable  Allowance for Doubtful Accounts
   25




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Inventories 
    Slow Moving and Obsolescence
    Goodwill
    and Amortizable Intangible Assets
      Pension
    and Other Postretirement Benefits
     26




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Stock
    Based Compensation
      Deferred
    Tax Assets
     27




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##### Table of Contents



Environmental
    Reserves
    clean-up;
  New
    Accounting Pronouncements
        Item 7A.
    Quantitative
    and Qualitative Disclosure About Market Risk   28




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##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  NASHUA
    CORPORATION AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  Year Ended December 31,2008


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

$
264,903


$
272,799Cost of products sold


225,498



224,545Gross margin


39,405



48,254Selling and distribution expenses


25,937



24,088General and administrative expenses


14,857



16,991Research and development expenses


666



806Loss from equity investment


192



200Impairment of goodwill


14,142



Interest expense


535



765Interest income


(98
)


(179
)Change in fair value of interest rate swap


538



295Other income


(958
)


(1,196
)Income (loss) from continuing operations before income taxes


(16,406
)


6,484Provision for income taxes


3,358



2,633Income (loss) from continuing operations


(19,764
)


3,851Income from discontinued operations, net of $211,000 of taxes






289Net income (loss)

$
(19,764
)

$
4,140Per share amounts:Income (loss) from continuing operations per common share

$
(3.65
)

$
0.67Income from discontinued operations per common share






0.05Net income (loss) per common share

$
(3.65
)

$
0.72Income (loss) from continuing operations per common
    share-assuming dilution

$
(3.65
)

$
0.66Income from discontinued operations per common share-assuming
    dilution






0.05Net income (loss) per common share-assuming dilution

$
(3.65
)

$
0.71Average shares outstanding:Common shares


5,414



5,743Common shares-assuming dilution


5,414



5,817    29




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##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  CONSOLIDATED
    BALANCE SHEETS
  December 31,2008


2007(In thousands, except share data)ASSETSCurrent assetsCash and cash equivalents

$
1,592


$
7,388Accounts receivable, net


27,469



29,375Inventories:Raw materials


8,902



9,079Work in process


3,329



2,565Finished goods


9,554



8,35421,785



19,998Other current assets


5,599



2,82856,445



59,589Plant and equipment:Land


986



986Buildings and improvements


15,591



16,409Machinery and equipment


53,181



53,512Construction in progress


506



18970,264



71,096Accumulated depreciation


(50,110
)


(47,805
)20,154



23,291Goodwill


17,374



31,516Intangibles, net of amortization


260



331Other assets


5,970



12,975Total assets

$
100,203


$
127,702LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesAccounts payable

$
11,968


$
14,432Accrued expenses


8,900



9,185Current portion of long-term debt


8,125



1,875Current portion of notes payable to related parties


18



3129,011



25,523Long-term debt, less current portion


2,800



10,925Notes payable to related parties, less current portion






18Other long-term liabilities


46,879



29,728Commitments and contingencies (see Note 10)Shareholders equity:Common stock, par value $1.00; authorized
    20,000,000 shares; issued and outstanding
    5,607,642 shares in 2008 and 5,640,636 shares in 2007


5,608



5,641Additional paid-in capital


15,076



14,562Retained earnings


39,705



59,648Accumulated other comprehensive loss:Minimum pension liability adjustment, net of tax


(38,876
)


(18,343
)21,513



61,508Total liabilities and shareholders equity

$
100,203


$
127,702    30




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF SHAREHOLDERS EQUITY
 AND
    COMPREHENSIVE LOSS
  AccumulatedAdditional





OtherCommon Stock


Paid-In


Retained


ComprehensiveShares


Par Value


Capital


Earnings


Loss


Total(In thousands, except share data)Balance, 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
)

$
61,508Stock options exercised and related tax benefit


7,550



7



55











62Stock-based compensation










888











888Restricted stock issued


118,000



118



(118
)










Restricted stock forfeited


(23,000
)


(23
)


23











Purchase and retirement of treasury shares


(135,544
)


(135
)


(334
)


(179
)






(648
)Comprehensive loss:Net loss














(19,764
)






(19,764
)Minimum pension liability adjustment, net of tax


















(20,533
)


(20,533
)Comprehensive loss






















(40,297
)Balance, December 31, 2008


5,607,642


$
5,608


$
15,076


$
39,705


$
(38,876
)

$
21,513    31




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Year Ended December 312008


2007(In thousands)Cash Flows from Operating ActivitiesNet income (loss)

$
(19,764
)

$
4,140Adjustments to reconcile net income (loss) to cash provided by
    (used in) operating activities:Depreciation and amortization


4,445



4,608Amortization of deferred gain


(674
)


(674
)Change in fair value of interest rate swap


538



295Impairment of goodwill


14,142



Deferred income taxes


4,818



1,309Stock based compensation


888



261Excess tax benefit from exercised stock based compensation


(14
)


(125
)Loss on sale/disposal of fixed assets


411



65Equity in loss from unconsolidated joint venture


192



200Contributions to pension plans (see Note 11)


(4,888
)


(5,339
)Change in operating assets and liabilities, net of effects from
    acquisition of businesses:Accounts receivable


1,906



95Inventories


(1,787
)


3,766Other assets


(633
)


(315
)Accounts payable


(2,464
)


(2,188
)Accrued expenses


(285
)


546Other long-term liabilities


1,642



1,202Cash provided by (used in) operating activities


(1,527
)


7,846Cash Flows from Investing ActivitiesInvestment in plant and equipment


(1,648
)


(1,346
)Investment in unconsolidated joint venture


(129
)


(146
)Proceeds from sale of plant and equipment






6Cash used in investing activities


(1,777
)


(1,486
)Cash Flows from Financing ActivitiesNet repayments on revolving portion of long-term debt






(1,950
)Net repayments on term portion of long-term debt


(1,875
)


Principal repayment on note payable to related parties


(31
)


(71
)Proceeds from repayment on loan to related party






1,049Proceeds from refinancing






10,000Proceeds from shares exercised under stock option plans


48



556Excess tax benefit from exercised stock based compensation


14



125Purchase and retirement of treasury shares


(648
)


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






(8,165
)Cash provided by (used in) financing activities


(2,492
)


739Increase (decrease) in cash and cash equivalents


(5,796
)


7,099Cash and cash equivalents at beginning of year


7,388



289Cash and cash equivalents at end of year

$
1,592


$
7,388Supplemental Disclosures of Cash Flow InformationInterest paid

$
445


$
959Income taxes paid, net

$
61


$
1,952    32




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 Years ended December 31, 2008 and 2007
  Note 1:
    Summary
    of Significant Accounting Policies  Description
    of the Company
    Segment
    and Related Information
        Basis of
    Consolidation
    Use of
    Estimates
    Cash
    Equivalents
    Accounts
    Receivable
   33




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Inventories
  first-in, last-in,
  Plant and
    Equipment
      Buildings and improvements


5  40 yearsMachinery and equipment


3  20 years     Goodwill
    and Intangible Assets
      Stock-Based
    Compensation
     34




---



##### 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
   35




---



##### 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
   36




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Repurchased
    Shares
    New
    Accounting Pronouncements
        Note 2:
    Discontinued
    Operations     37




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 3:
    Goodwill
    and Other Intangible Assets  non-amortizable
        Specialty PaperProducts


Label Products


Total(In thousands)Aggregate amount of goodwill acquired

$
14,142


$
17,374


$
31,516Impairment charge


(14,142
)






(14,142
)Balance as of December 31, 2008

$



$
17,374


$
17,374     At December 31, 2008WeightedGross





AverageCarrying


Accumulated


AmortizationAmount


Amortization


Period(In thousands)Trademarks and trade names

$
211


$
101



15 yearsCustomer relationships and lists


829



679



12 years$
1,040


$
780   38




---



##### 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   (In thousands)Amortization Expense:For the year ended December 31, 2007

$
225For the year ended December 31, 2008

$
71Estimated for the year ending:December 31, 2009

$
47December 31, 2010

$
39December 31, 2011

$
34December 31, 2012

$
31December 31, 2013

$
30December 31, 2014 and thereafter

$
79     Note 4:
    Indebtedness     39




---



##### Table of Contents



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

Ratio atCovenant

December 31, 2008

December 31, 2008 Maintain a fixed charge coverage ratio

Not less than 1.5 to 1.0

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

Less than 2.5 to 1.0

2.6 to 1.0     
    The termination date is changed from March 30, 2012 to
    March 29, 2010;
    advances under the revolving credit facility are limited to
    75 percent of eligible accounts receivable and
    40 percent of eligible inventory, and eligible inventory is
    limited to $6 million;
    the revolving credit facility is decreased from $28 million
    to $15 million until June 30, 2009, when it will
    increase to $17 million;
    the interest rate on borrowings is increased to LIBOR plus
    335 basis points or prime plus 110 basis points;
    the fee for the unused line of credit is 75 basis points;
    annual capital expenditures are limited to
    $2 million; and
    equipment and fixtures are added to the collateral securing the
    loan.   40




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2009


2024


TotalTerm portion of long-term debt

$
8,125


$



$
8,125Industrial revenue bond






2,800



2,800$
8,125


$
2,800


$
10,925             mark-to-market mark-to-market
  Note 5:
    Lease
    Exit Charges   41




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (In thousands)Balance as of December 31, 2007

$
Provision for lease exit charges


1,374Reduction of lease exit charges


(298
)Balance as of December 31, 2008

$
1,076   Note 6:
    Income
    Taxes    2008


2007(In thousands)Current:Federal

$
(1,460
)

$
1,073State






251Total current


(1,460
)


1,324Deferred:Federal


4,343



1,110State


475



199Total deferred


4,818



1,309Provision for income taxes, continuing operations

$
3,358


$
2,633  42




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2008


2007(In thousands)Depreciation

$
(304
)

$
(725
)Other


(614
)


(611
)Gross deferred tax liabilities


(918
)


(1,336
)Pension and postretirement benefits


14,947



9,287State net operating loss carryforwards and other state credits


1,767



1,690Alternative minimum tax and general business credits


1,528



1,109Accrued expenses


743



278Inventory reserves


565



478Bad debt reserves


266



351Other


1,648



1,082Gross deferred tax assets


21,464



14,275Deferred tax asset valuation allowance


(14,384
)


(1,959
)Deferred tax assets, net


7,080



12,316Net deferred tax assets

$
6,162


$
10,980     2008


2007United States federal statutory rate

$
(5,742
)


(35.0
)%

$
2,268



35.0
%State taxes, net of federal tax benefit


309



1.9



310



4.8Goodwill impairment


5,609



34.2







Change in valuation allowance


4,293



26.2



195



3.0Other items


(1,111
)


(6.8
)


(140
)


(2.2
)$
3,358



20.5
%

$
2,633



40.6
%      43




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        more-than-likely-not
    Note 7:
    Shareholders
    Equity           44




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 8:
    Stock
    Option and Stock Award Plans    40-day 40-day 40-day
  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)
      40-day 40-day 40-day
      2008


2007Weighted





WeightedAverage





AverageExercise





ExerciseShares


Price


Shares


PriceOutstanding beginning of year


291,800


$
6.18



400,950


$
6.65Exercised


(7,550
)


6.36



(85,150
)


6.52Forfeited  exercisable


(7,000
)


15.93



(24,000
)


12.78Expired


(1,500
)


12.75







Outstanding and exercisable at end of year


275,750


$
5.90



291,800


$
6.18  46




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2008


2007Restricted stock outstanding at beginning of year


246,431



183,673Granted


166,570



151,431Forfeited


(23,000
)


(88,673
)Vested


(1,143
)


Restricted stock outstanding at end of year


388,858



246,431Weighted average fair value per restricted share at grant date

$
5.95


$
5.12Weighted average share price at grant date

$
10.50


$
10.54     Grant Year2008


2007Volatility of Share Price


48.9
%


44.0
%Dividend yield






Interest rate


2.6
%


4.6
%Expected forfeiture


9.9
%


9.9
%Valuation methodology


Monte Carlo
    Simulation



Monte Carlo
    Simulation  47




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 9:
    Earnings
    Per Share    Year Ended12/31/08


12/31/07In thousands except per share dataNumeratorIncome from continuing operations

$
(19,764
)

$
3,851Income from discontinued operations






289Net income

$
(19,764
)

$
4,140DenominatorBasicWeighted-average number of common shares outstanding


5,397



5,740Other


17



3Denominator for basic earnings per share


5,414



5,743DilutedBasic weighted-average shares outstanding


5,397



5,743Common stock equivalents


17



74Denominator for dilutive earnings per share


5,414



5,817Per share amountsBasicIncome from continuing operations

$
(3.65
)

$
0.67Income from discontinued operations






0.05Net income

$
(3.65
)

$
0.72DilutedIncome from continuing operations

$
(3.65
)

$
0.66Income from discontinued operations






.05Net income

$
(3.65
)

$
0.71    48




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 10:
    Commitments
    and Contingencies  Lease
    Agreements
    Beyond2009


2010


2011


2012


2013


2013


Total(In thousands)Non-cancelable operating leases

$
1,821


$
1,531


$
1,288


$
224


$
95


$
26


$
4,985       Contingencies
    Environmental
   49




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  State
    Street Bank and Trust
    and/or
  Other
    Note 11:
    Postretirement
    Benefits  Defined
    Contribution Plan
        Pension
    Plans
   50




---



##### Table of Contents



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


Postretirement Benefits2008


2007


2008


2007(In thousands)Change in benefit obligationProjected benefit obligation at beginning of year

$
96,977


$
97,905


$
498


$
814Service cost


500



509







1Interest cost


5,949



5,773



27



42Actuarial gain


3,145



(2,590
)


(96
)


(209
)Expenses paid from assets


(500
)


(500
)






Benefits paid


(4,446
)


(4,120
)


(68
)


(150
)Projected benefit obligation at end of year

$
101,625


$
96,977


$
361


$
498Change in plan assetsFair value of plan assets at beginning of year

$
72,237


$
75,284


$



$
Actual return on plan assets


(12,765
)


(4,576
)






Employer contribution


5,198



5,649



68



150Benefits paid


(4,446
)


(4,120
)


(68
)


(150
)Fair value of plan assets at end of year

$
60,224


$
72,237


$



$
Reconciliation of funded statusFunded status

$
(41,401
)

$
(24,740
)

$
(361
)

$
(498
)Unrecognized net actuarial (gain)/loss


50,902



30,427



(1,155
)


(1,143
)Unrecognized prior service cost










(679
)


(749
)Net amount recognized

$
9,501


$
5,687


$
(2,195
)

$
(2,390
)The amount recognized in our consolidated balance sheets
    consists of the following:Pension/postretirement liability

$
(41,401
)

$
(24,740
)

$
(361
)

$
(498
)Accumulated other comprehensive loss (income)


50,902



30,427



(1,834
)


(1,892
)Net amount recognized

$
9,501


$
5,687


$
(2,195
)

$
(2,390
)  51




---



##### Table of Contents



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


Postretirement Benefits2008


2007


2008


2007Weighted-average assumptions used to determine net benefit
    costs:Discount rate


6.25
%


6.00
%


6.25
%


6.00
%Expected return on plan assets


8.00
%


8.50
%






   Pension Benefits


Postretirement Benefits2008


2007


2008


2007Weighted-average assumptions used to determine benefit
    obligations at year end:Discount rate


6.00
%


6.25
%


6.00
%


6.25
%         One year


(17.8
)%Five years


0.9
%Ten years


3.5
%  52




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2008


2008 TargetAsset CategoryEquity Securities


31
%


22
%Fixed Income


34
%


18
%Hedge funds


19
%


29
%Other


16
%


2
%       For the Year endedDecember 31,2008


2007(In millions)InvestmentsDomestic equities

$
15.1


$
33.7International equities


3.5



8.6High yield bonds






6.5Fixed income/bond investments


21.2



22.1Hedge funds


11.7



Cash


8.7



1.3Total

$
60.2


$
72.2       Retirement Plan


Hourly


Supplementalfor Salaried


Employees


ExecutiveEmployees


Retirement Plan


Retirement Plan


Postretirement


Total(In millions)2009

$
2.6


$
2.0


$
.3


$
.1


$
5.02010


2.9



2.1



.3



.1



5.42011


3.0



2.2



.3



.1



5.62012


3.3



2.3



.3



.1



6.02013


3.5



2.5



.3



.1



6.42014-2018


19.9



14.8



1.2



.1



36.0  53




---



##### Table of Contents



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


Postretirement Benefits2008


2007


2008


2007(In thousands)Components of net periodic (income) costService cost

$
500


$
509


$
1


$
1Interest cost


5,949



5,773



27



42Expected return on plan assets


(6,529
)


(6,413
)






Amortization of prior service cost (credit)


4



4



(69
)


(69
)Recognized net actuarial (gain) loss


1,459



1,744



(85
)


(74
)Net periodic (income) cost

$
1,383


$
1,617


$
(126
)

$
(100
)     2008


2007PBO


ABO


Plan Assets


PBO


ABO


Plan Assets(In millions)Supplemental Executive Retirement Plan

$
3.0


$
3.0


$



$
3.0


$
3.0


$
Hourly Employees Retirement Plan of Nashua Corporation

$
44.2


$
44.2


$
27.2


$
42.1


$
42.1


$
31.7Retirement Plan for Salaried Employees of Nashua Corporation

$
54.5


$
54.5


$
33.1


$
51.9


$
51.9


$
40.5             Note 12:
    Information
    About Operations     54




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  point-of-sale
        point-of-sale
      Net Sales


Gross Margin


Identifiable Assets2008


2007


2008


2007


2008


2007(In millions)By Segment:Label Products

$
105.1


$
115.5


$
13.3


$
21.0


$
44.1


$
46.6Specialty Paper Products


162.3



160.3



25.3



26.5



38.6



53.9Other(1)


4.4



4.1



.8



.7







Reconciling Items:Eliminations


(6.9
)


(7.1
)














Corporate assets


















17.5



27.2Consolidated

$
264.9


$
272.8


$
39.4


$
48.2


$
100.2


$
127.7     (1)
    
    Includes activity from operations which falls below the
    quantitative thresholds for a segment. 55




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##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Depreciation &Capital Expenditures


Amortization2008


2007


2008


2007(In millions)Label Products

$
.6


$
.4


$
2.1


$
2.0Specialty Paper Products


.6



.7



2.0



2.1Reconciling Items:Corporate


.5



.2



.3



.5Consolidated

$
1.7


$
1.3


$
4.4


$
4.6     Net Sales FromContinuing Operations


Long-Lived Assets2008


2007


2008


2007(In millions)By Geographic AreaUnited States

$
264.9


$
272.8


$
36.1


$
57.1Reconciling Items:Discontinued Operations










1.5



1.5Deferred tax assets










6.2



9.5Consolidated

$
264.9


$
272.8


$
43.8


$
68.1    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


Unaudited3/28/08


6/27/08


9/26/08


12/31/08(In thousands, except per share data)2008Net sales

$
63,926


$
67,003


$
66,239


$
67,735Gross margin


9,858



11,327



10,558



7,662Net income (loss)(1)


(353
)


300



(13,689
)


(6,022
)Earnings per common share:Net income (loss)


(0.07
)


0.06



(2.52
)


(1.11
)Net income (loss), assuming dilution


(0.07
)


0.05



(2.52
)


(1.11
)2007Net sales

$
65,169


$
67,688


$
67,610


$
72,332Gross margin


11,449



12,298



11,564



12,943Income from continuing operations


637



1,252



852



1,110Income from discontinued operations


289











Net income


926



1,252



852



1,110Earnings per common share:Continuing operations


0.10



0.21



0.16



0.20Discontinued operations


0.05











Net income


0.15



0.21



0.16



0.20Continuing operations, assuming dilution


0.10



0.20



0.16



0.20Discontinued operations, assuming dilution


0.05











Net income, assuming dilution


0.15



0.20



0.16



0.20     (1)
    
    We recorded an impairment charge related to goodwill in the
    third quarter of 2008 in the amount of $14.1 million. We
    recorded an increase in the valuation allowance on deferred
    income taxes in the fourth quarter of 2008 in the amount of
    $4.3 million.  Note 14:
    Related
    Parties  Leases
    with Related Parties
    Loans to
    Related Parties
   57




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##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 15:
    Fair
    Value Measurements    157-1 157-2. FSP 157-1 FSP 157-2
      Level 1:
    Quoted prices in active markets for identical assets or
    liabilities.Level 2:
    Observable inputs other than Level 1 prices, such as quoted
    prices for similar assets or liabilities; quoted prices in
    markets that are not active; or other inputs that are observable
    or can be corroborated by observable market data for
    substantially the full term of the related assets or liabilities.Level 3:
    Unobservable inputs that are supported by little or no market
    activity and that are significant to the fair value of the
    assets or liabilities.    Total Carrying


Fair Value Measurements at December 31, 2008 UsingValue at


Quoted Prices in


Significant Other


SignificantDecember 31,


Active Markets


Observable Inputs


Unobservable Inputs2008


(Level 1)


(Level 2)


(Level 3)(In thousands of dollars)Interest rate swap liability

$
678


$



$
678


$
    58




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##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   59




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
          Fair Value Measurements Accounting for
    Uncertainty in Income Taxes
  ERNST &
    YOUNG LLP
    60




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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.   61




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##### Table of Contents



Changes
    in Internal Control Over Financial Reporting
    Item 9B.
    Other
    Information    
    the termination date of the credit facility is changed from
    March 30, 2012 to March 29, 2010;
    advances under the revolving credit facility are limited to
    75 percent of eligible accounts receivable and
    40 percent of eligible inventory, and eligible inventory is
    limited to $6 million;
    the revolving credit facility is decreased from $28 million
    to $15 million until June 30, 2009, when it will
    increase to $17 million;
    the interest rate on borrowings is increased to LIBOR plus
    335 basis points or prime plus 110 basis points;
    the fee for the unused line of credit is 75 basis points;
    annual capital expenditures are limited to
    $2 million; and
    equipment and fixtures are added to the collateral securing
    borrowings under the credit facility.      Form 10-K
 62




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##### Table of Contents



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    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, 2008 and 2007
    Consolidated balance sheets at December 31, 2008 and 2007
    Consolidated statements of shareholders equity and other
    comprehensive income (loss) for each of the two years ended
    December 31, 2008 and 2007 63




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##### Table of Contents




    Consolidated statements of cash flows for each of the two years
    ended December 31, 2008 and 2007
    Notes to Consolidated Financial Statements
    Report of Independent Registered Public Accounting Firm  Financial statements schedule:
    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, 2003.4
.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. 64




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##### Table of Contents



4
.12*

Amendment Agreement to Second Amended and Restated Credit
    Agreement, dated as of March 30, 2009, by and among Nashua
    Corporation and Bank of America, N.A.+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

2008 Value Creation Incentive Plan. Incorporated by reference to
    our Proxy Statement dated March 21, 2008.+10
.06

Form of Restricted Stock Agreement under the 2007 Value Creation
    Incentive Plan. Incorporated by reference to our current report
    on
    Form 8-K
    dated as of August 1, 2007 and filed on August 6, 2007.+10
.07

Form of Restricted Stock Agreement under the 2008 Value Creation
    Incentive Plan. Incorporated by reference to our current report
    on
    Form 8-K
    dated and filed on April 28, 2008.+10
.08

2008 Directors Plan. Incorporated by reference to our
    Proxy Statement dated March 21, 2008.+10
.09

Forms of Restricted Stock Unit Agreement under the
    2008 Directors Plan. Incorporated by reference to our
    current report on
    Form 8-K
    dated and filed on April 28, 2008.+10
.10

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
.11*

Amended and Restated Change of Control and Severance Agreement,
    dated as of December 23, 2008 by and between Nashua
    Corporation and John L. Patenaude.+10
.12

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
.13*

Amended and Restated Change of Control and Severance Agreement,
    by and between Nashua Corporation and Thomas G. Brooker, dated
    as of December 23, 2008.+10
.14

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.+10
.15

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
.16*

Amended and Restated Change of Control and Severance Agreement,
    by and between Nashua Corporation and Todd McKeown, dated as of
    December 23, 2008.+10
.17

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
.18*

Management Incentive Plan. Revised December 30, 2008.10
.19

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
.20*

Executive officer 2009 salaries.10
.21*

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. 65




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##### Table of Contents



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. 66




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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 31, 2009/s/  John
    L. PatenaudeJohn
    L. Patenaude

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

March 31, 2009/s/  Margaret
    M. CallanMargaret
    M. Callan

Corporate Controller and
    Chief Accounting Officer
    (principal accounting officer)

March 31, 2009/s/  Andrew
    B. AlbertAndrew
    B. Albert

Chairman of the Board

March 31, 2009/s/  L.
    Scott BarnardL.
    Scott Barnard

Director

March 31, 2009/s/  Clinton
    J. ColemanClinton
    J. Coleman

Director

March 31, 2009/s/  Avrum
    GrayAvrum
    Gray

Director

March 31, 2009/s/  Michael
    T. LeathermanMichael
    T. Leatherman

Director

March 31, 2009/s/  George
    R. Mrkonic, Jr.George
    R. Mrkonic, Jr.

Director

March 31, 2009/s/  Mark
    E. SchwarzMark
    E. Schwarz

Director

March 31, 2009  67