##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 10-K
  ANNUAL
    REPORT
    PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
  (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, 2006oro

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
 o o þ
  Rule 12b-2 o þ
      Class

Number of SharesCommon Stock, $1.00 par value


6,258,809   Form 10-K:




---



##### 



TABLE OF
    CONTENTS
  PagePART IItem 1.


Business


3Item 1A.


Risk
    Factors


8Item 1B.


Unresolved Staff
    Comments


12Item 2.


Properties


12Item 3.


Legal
    Proceedings


12Item 4.


Submission of
    Matters to a Vote of Security Holders


15PART IIItem 5.


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


15Item 6.


Selected Financial
    Data


16Item 7.


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


17Item 7A.


Quantitative and
    Qualitative Disclosures About Market Risk


35Item 8.


Financial
    Statements and Supplementary Data


36Item 9.


Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


68Item 9A.


Controls and
    Procedures


68Item 9B.


Other
    Information


68PART IIIItem 10.


Directors,
    Executive Officers and Corporate Governance


68Item 11.


Executive
    Compensation


68Item 12.


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


69Item 13.


Certain
    Relationships and Related Transactions, and Director
    Independence


69Item 14.


Principal
    Accountant Fees and Services


69PART IVItem 15.


Exhibits and
    Financial Statement Schedules


69EX-10.21 Executive officer 2007 salariesEX-10.22 Summary of Compensation Arrangements with DirectorsEX-21.1 Subsidiaries of Nashua CorporationEX-23.1 Consent of Independent Registered Public Accounting FirmEX-31.1 Section 302 Certification of C.E.O.EX-31.2 Section 302 Certification of C.F.O.EX-32.1 Section 906 Certification of C.E.O.EX-32.2 Section 906 Certification of C.F.O.   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. Form 10-K
  Recent
    Developments
    Form 10-K.
       3




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##### Table of Contents



Operating
    Segments
        Form 10-K.
  Label
    Products Segment
          Specialty
    Paper Products Segment
  point-of-sale
  point-of-sale
 4




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##### Table of Contents



point-of-sale pay-at-the-pump,
  print-for-pay end-users
        Information
    About Major Customers
   5




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##### Table of Contents



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




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##### Table of Contents



and/or
    Executive
    Officers
    Name

Age

PositionThomas G. Brooker


48


President and Chief Executive
    OfficerJohn L. Patenaude


57


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


40


Corporate Controller and Chief
    Accounting OfficerThomas M. Kubis


46


Vice President of OperationsWilliam Todd McKeown


41


Vice President of Sales and
    MarketingMichael D. Travis


47


Vice President of Marketing            7




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##### Table of Contents



Employees
      Approximate #of EmployeesUnion

Covered


Location

Expiration DateUnited Steelworkers of America


76


Omaha, NE

March 31, 2012United Steelworkers of America


63


Merrimack, NH

April 5, 2009United Commercial Food Workers


48


Vernon, CA

March 5, 2008   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.
   8




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##### Table of Contents




    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;
    our ability to pass on increased freight cost due to fuel price
    fluctuations;
    our ability to pass on utility cost increases; and
    slower than projected market growth in the radio frequency
    identification label market and ability to capture market share.      Increases
    in raw material costs or the unavailability of raw materials may
    adversely affect our profitability.
     9




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##### Table of Contents



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 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.
       10




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##### Table of Contents



We may
    be involved in litigation relating to our intellectual property
    rights, which may have an adverse impact on our
    business.
      Our
    information systems are critical to our business, and a failure
    of those systems could materially harm us.
    The
    financial viability of Katun Corporation is critical to the
    indemnification relative to the Ricoh patent infringement
    litigation and the receipt of future royalty streams from the
    sale of toner formulations to Katun.
    Compliance
    with changing regulation of corporate governance and public
    disclosure may result in additional risks and
    expenses.
   11




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##### Table of Contents



Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties      Principal
    Properties
  Total SquareLocation

Footage


Nature of Products ProducedCorporateNashua, New Hampshire (leased)


8,000


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


3,000
(1)

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


converted paper productsPark Ridge, Illinois (leased)


8,000
(1)

none (administrative offices)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 productsSan Francisco, California
    (leased)


1,000


none (administrative offices)     (1)
    
    Our Specialty Paper Products segment and corporate staff share
    approximately 11,000 square feet of office space in Park
    Ridge, Illinois.  Item 3.
    Legal
    Proceedings  Cerion
   12




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##### Table of Contents



Ricoh
  No. 03-CV-2612
  patents-in-suit. patents-in-suit.
 13




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##### Table of Contents



patents-in-suit;
        Environmental
   14




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##### Table of Contents



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


Year2006High

$
8.62


$
10.29


$
7.50


$
8.48


$
10.29Low

$
6.20


$
6.70


$
5.70


$
5.96


$
5.702005High

$
11.95


$
9.75


$
9.39


$
8.01


$
11.95Low

$
8.47


$
8.40


$
5.75


$
5.50


$
5.50     (b) Issuer
    Purchases of Equity Securities during the Quarter ended
    December 31, 2006
    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(2)


or Programs(3)


Plans or ProgramsNovember 1 through 30


5,831


$
7.11



5,831



494,169December 1 through 31


9,598


$
7.86



9,598



484,571Total


15,429







15,429     (1)
    
    We repurchased an aggregate of 15,429 shares of our common
    stock pursuant to the repurchase program that we publicly
    announced on November 6, 2006 (the Program).(2)
    
    Exclusive of fees and costs.(3)
    
    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. 15




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##### Table of Contents



Item 6.
    Selected
    Financial Data    Nashua
    Corporation and Subsidiaries
  Five-Year
    Financial Review (1)
  December 31,2006


2005


2004


2003


2002(In thousands, except per share data, number ofemployees and percentages)Operations(2)(3)Net sales

$
269,043


$
272,585


$
268,731


$
267,164


$
260,068Gross margin percentage


15.1
%


16.4
%


18.6
%


18.5
%


19.5
%Selling, distribution, general and
    administrative expenses as a percentage of sales


16.0
%


15.4
%


16.0
%


16.9
%


17.1
%Income from continuing operations
    before income taxes as a percentage of sales


1.5
%


0.5
%


2.4
%


0.0
%


1.1
%Income from continuing operations
    as a percentage of sales


0.8
%


0.2
%


1.5
%


0.0
%


0.7
%Effective tax rate


51.0
%


50.2
%


38.5
%


53.6
%


39.5
%Income from continuing operations
    before income taxes

$
4,092


$
1,322


$
6,500


$
125


$
2,951Income from continuing operations
    after income taxes

$
2,006


$
658


$
3,998


$
58


$
1,785Income (loss) from discontinued
    operations(4)

$
262


$
(62
)

$
(211
)

$
44


$
531Gain of disposal of discontinued
    operations

$
1,331


$



$



$



$
Net income

$
3,599


$
596


$
3,787


$
102


$
2,316Basic and diluted earnings (loss)
    per common share:Income from continuing operations
    per common share

$
0.32


$
.11


$
0.67


$
0.01


$
0.31Income (loss) from discontinued
    operations per common share(4)

$
0.26


$
(0.01
)

$
(0.04
)

$
0.01


$
0.09Net income per common share

$
0.58


$
0.10


$
0.63


$
0.02


$
0.40Income from continuing operations
    per common share assuming dilution

$
0.32


$
0.11


$
0.65


$
0.01


$
0.30Income (loss) from discontinued
    operations per common share assuming dilution(4)

$
0.26


$
(0.01
)

$
(0.03
)

$
0.01


$
0.09Net income per common share
    assuming dilution

$
0.58


$
0.10


$
0.62


$
0.02


$
0.39Financial
    Position(2)Working capital

$
30,949


$
32,049


$
31,662


$
22,296


$
21,011Total assets

$
127,615


$
144,919


$
150,960


$
151,676


$
146,188Non-current portion of long-term
    debt

$
4,750


$
25,250


$
27,350


$
24,200


$
23,000Total debt

$
4,750


$
28,750


$
30,750


$
27,600


$
25,000Total long-term obligations,
    including other long-term liabilities

$
33,246


$
63,395


$
51,369


$
51,987


$
48,759Total capital employed

$
73,777


$
82,484


$
96,698


$
88,797


$
87,018Total debt as a percentage of
    capital employed


6.4
%


34.9
%


31.8
%


31.1
%


28.7
%Shareholders equity

$
69,027


$
53,734


$
65,948


$
61,197


$
62,018Shareholders equity per
    common share

$
10.88


$
8.59


$
10.62


$
10.37


$
10.66Other Selected
    Data(2)Investment in plant and equipment
    (excluding acquisitions)

$
2,785


$
3,845


$
6,599


$
4,307


$
4,349Depreciation and amortization

$
6,803


$
9,466


$
7,900


$
7,942


$
7,581Return on average
    shareholders equity


5.9
%


1.0
%


6.0
%


0.2
%


3.5
%Common stock price range:High

$
10.29


$
11.95


$
11.65


$
9.50


$
10.20Low

$
5.70


$
5.50


$
8.20


$
6.75


$
5.40Year-end closing price

$
8.15


$
7.02


$
11.36


$
8.50


$
8.78Number of employees from continuing
    operations


784



823



830



850



945Number of employees from
    discontinued operations






57



76



79



81Average common shares outstanding,
    basic


6,140



6,090



6,011



5,869



5,783     (1)
    
    See Note 13 to our
    Consolidated Financial Statements for Selected Quarterly
    Financial Data required under Item 302 of
    Regulation S-K.(2)
    
    See Note 2 to our Consolidated
    Financial Statements for a description of business changes
    relevant to this data.(3)
    
    Net income from continuing
    operations includes restructuring and unusual income of
    $.1 million (<.1 percent of sales) for 2003 and
    2002. Net income from continuing operations for 2006 includes a
    $.6 million net loss related to the curtailment of pension
    and postretirement benefits for certain hourly employees in
    Merrimack, New Hampshire. Net income from discontinued
    operations for 2005 includes a $.4 million net loss related
    to the curtailment of pension benefits for certain employees in
    our former Imaging Supplies segment. Net income from continuing
    operations for 2004 includes a $1.0 million net gain
    related to the settlement of postretirement death benefits. Net
    income from continuing operations for 2003 includes a
    $1.6 million net loss related to postretirement healthcare
    benefits for union employees located in New Hampshire. Net
    income from continuing operations for 2002 includes a
    $.2 million net gain on the curtailment of pension and
    postretirement benefit plans.(4)
    
    Income (loss) from discontinued
    operations for each of the years presented includes results of
    our toner and developer business. Income from discontinued
    operations for 2006 also includes income from the liquidation of
    our former Photo UK entity and a loss related to environmental
    issues resulting from our previously exited Computer Products
    business. Income from discontinued operations for 2005 also
    includes a tax benefit related to the settlement of an
    outstanding Internal Revenue Service audit from the years 1995
    through 2000. 16




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##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations    Overview
        
    On May 4, 2006, Thomas Brooker joined us as Chief Executive
    Officer and President replacing Andrew Albert in these
    capacities. Mr. Albert remains 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;
    Sold assets of our toner and developer business of our former
    Imaging Supplies segment; and
    Opened a wide-format converting facility in Cranbury, New Jersey
    to service our customers in the Mid-Atlantic and New England
    regions.  
    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; 17




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##### Table of Contents




    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 have
    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 the year we reduced bank debt from approximately
    $26.0 million at December 31, 2005 to
    $2.0 million at December 31, 2006.    
    During the fourth quarter of 2005, the Label Products segment
    completed a study of manufacturing requirements as part of its
    program to operate more effectively and reduce costs. As a
    result of this analysis, meaningful cost reductions in wages and
    benefits were identified and negotiated with our hourly
    employees in Nebraska.
    On September 13, 2005, we effected a move of the listing of
    our common stock from the New York Stock Exchange to the NASDAQ
    Global Market. Our common stock is listed on the NASDAQ Global
    Market under the symbol NSHA.
    In June 2005, we acquired certain assets of Label Systems
    International (LSI) in St. Augustine, Florida. The asset
    acquisition expanded our manufacturing base and enabled us to
    enter the retail shelf, pharmacy and laser toner cartridge
    product lines. Operating activity relating to the assets of LSI
    is reported in our Label Products segment.
    In April 2005, we announced plans to exit our toner and
    developer business and we entered into a definitive agreement
    with Katun in January 2006.
    We made progress in the RFID initiatives throughout 2005 and had
    sales in the initial year of production of approximately
    $.6 million. Our list of RFID customers includes nationally
    recognized consumer products goods manufacturers and other
    companies and organizations involved in RFID systems. In
    addition, we established a solid foundation for growth by
    signing formal working relationships with Alien
    Technologies®
    and Printronix, Inc. Operating activity relating to this product
    line is reported in our Label Products segment.
    In the second quarter of 2005, we moved our wide-format
    converting facility from the Morristown, Tennessee facility to a
    56,000 square foot Jefferson City, Tennessee facility,
    which we acquired in December 2004.
    During 2005, we continued resolving legacy issues, and in June
    2005, we reached a favorable settlement with the Internal
    Revenue Service for the tax disputes dating from the years
    1995-2000. 18




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##### Table of Contents




    In December 2004, we purchased property consisting of land and
    building contiguous to our Jefferson City, Tennessee campus to
    be utilized for manufacturing by our Specialty Paper Products
    segment. We moved our wide-format manufacturing from Morristown,
    Tennessee to Jefferson City, Tennessee during the second quarter
    of 2005. The acquisition was financed by the issuance of
    industrial revenue bonds by the Industrial Revenue Board of
    Jefferson City, Tennessee, which are supported by an irrevocable
    letter of credit in the amount of $2.8 million issued by
    our lenders. Proceeds in excess of the cost of the building were
    utilized to retrofit the building and purchase equipment
    utilized in Jefferson City, Tennessee.
    In December 2004, we executed a purchase and sale agreement with
    Southern New Hampshire Services to sell our land and buildings
    located in Nashua, New Hampshire for $2.0 million. The sale
    closed in November 2006.
    During the third quarter of 2004, we recognized a
    $1.0 million non-cash pre-tax gain related to the transfer
    of the liability for retiree death benefits to Minnesota Life, a
    subsidiary of Securian Financial Group. As part of the
    transaction, Minnesota Life assumed the liability for, and the
    administration of, death benefits for approximately 580 of our
    retirees. The agreement was effective October 1, 2004 and
    included a $2.4 million one-time premium payment to
    Minnesota Life.  Consolidated
    Results of Operations
  The
    consolidated results of operations should be read in conjunction
    with the individual segment results.
  Percent ChangeFor the Years Ended December 31,


2006 vs.


2005 vs.2006


2005


2004


2005


2004(In millions)Net salesLabel Products

$
109.7


$
109.0


$
104.3



.6



4.5Specialty Paper Products


162.5



166.7



168.0



(2.5
)


(0.8
)Other


2.5



1.6



1.6



56.2



Eliminating


(5.7
)


(4.7
)


(5.2
)


21.3



(9.6
)Consolidated Net Sales


269.0



272.6



268.7



(1.3
)


1.5Gross marginLabel Products


16.3



16.1



18.8



1.2



(14.4
)Specialty Paper Products


24.1



28.4



31.2



(15.1
)


(9.0
)Other


.2







.1







Eliminating






.1











Consolidated Gross margin


40.6



44.6



50.1



(9.0
)


(11.0
)Gross margin %


15.1
%


16.4
%


18.6
%






Selling and distribution expenses


23.9



24.3



23.8



(1.6
)


2.1General and administrative expenses


19.1



17.6



19.3



8.5



8.8Research and development expenses


.6



.6



.8







(25.0
)Net loss (gain) on
    settlement/curtailment of pension and postretirement benefits


.6







(1.0
)






Other income


(1.2
)


(1.0
)


(.7
)


(2.0
)


(42.9
)Gain on sale of real estate


(9.0
)














Impairment of intangible assets


.6















Loss from equity investments


.4







.4







Interest expense, net


1.5



1.8



1.0



(16.7
)


(80.0
)Income before income taxes from
    continuing operations


4.1



1.3



6.5



215.4



80.0Income (loss) from discontinued
    operations, net of taxes


1.6



(.1
)


(.2
)






(50.0
)Net income

$
3.6


$
.6


$
3.8



500.0



(84.2
)  19




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##### Table of Contents




    The decrease from 2005 to 2006 was due to decreased sales in our
    Specialty Paper Products segment which was partially offset by
    increased sales in our Label Products segment.
    Net sales for both of our business segments is discussed in
    detail under Results of Operations by Reportable Operating
    Segment.    
    The margin percent in 2006 compared to 2005 deteriorated in both
    of our operating segments. These decreases were primarily
    attributable to increased defined benefit pension costs, the
    opening of our Cranbury, New Jersey and Jacksonville, Florida
    facilities, the exit of the coated carbonless business and the
    consolidation of manufacturing space and facilities in both of
    our segments.
    Gross margin changes, for both of our business segments, are
    discussed in detail under Results of Operations by
    Reportable Operating Segment.    
    The $.4 million decrease in selling and distribution
    expenses from 2005 to 2006 was due to decreases of
    $1.1 million in our Specialty Paper Products segment, which
    was partially offset by increases of $.7 million in our
    Label Products segment. The decrease in 2006 compared to 2005
    was primarily due to lower distribution costs related to lower
    sales volume in our Specialty Paper Products segment, as well as
    decreased commission expenses also related to lower sales volume.
    Selling and distribution expenses for each of our business
    segments are discussed in detail under Results of
    Operations by Reportable Operating Segment.    
    The increase in general and administrative expenses in 2006
    compared to 2005 was driven by increases of $1.2 million in
    corporate expenses, which are unallocated to our segments, and
    $.4 million in our Label Products segment partially offset
    by a $.1 million decrease in our Specialty Paper Products
    segment. The increase for 2006 compared to 2005 for unallocated
    corporate expenses, Label Products and Specialty Paper Products
    segments, collectively, was primarily due to increased defined
    benefit pension cost and employee severance costs which was
    partially offset by decreased employee and bank costs in our
    Specialty Paper Products segment. The increase in our defined
    benefit pension expense related directly to the application of a
    lower discount rate and the effect of updated mortality tables
    in 2006.
    General and administrative expenses for both of our business
    segments are discussed under Results of Operations by
    Reportable Operating Segment.    
    Research and development expenses for both of our business
    segments are discussed under Results of Operations by
    Reportable Operating Segment.   20




---



##### Table of Contents




    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 more than offsetting
    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.
    The gain of $1.0 million in 2004 from the curtailment of
    postretirement benefits resulted from the settlement of
    postretirement death benefits.          
    The decrease in net interest expense in 2006 from 2005 was
    primarily due to a reduction in debt related to the use of
    proceeds from the sale of property in the fourth quarter of 2006
    in addition to the recognition of a
    mark-to-market
    adjustment related to our interest rate swap entered into in the
    first quarter of 2006.
    The increase in interest expense from 2004 to 2005 related
    primarily to increased interest rates on bank debt and lower
    interest income recognized in 2004 related to the settlement of
    a 1993 interest matter with the Internal Revenue Service.    
    The $2.8 million increase in our pre-tax income from 2005
    to 2006 was primarily due to the gain on the sale of our
    Merrimack facility included in our Specialty Paper Products
    segment which was partially offset by company-wide increased
    defined benefit pension expenses. In addition, we recognized
    decreased gross margins in our Specialty Paper Products segment
    resulting primarily from lower sales volume as well as increased
    costs associated with exiting the carbonless product line in
    addition to consolidating space in our Merrimack facility.
    The $5.2 million decrease in our pre-tax income from 2004
    to 2005 was primarily due to lower gross margins in both of our
    segments which were partially offset by decreased general,
    administrative and research and development expenses.   21




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##### Table of Contents



Results
    of Operations by Reportable Operating Segment
  Label
    Products Segment
  Percent ChangeFor the Years Ended December 31,


2006 vs.


2005 vs.2006


2005


2004


2005


2004(In millions)Net sales

$
109.7


$
109.0


$
104.3



.6



4.5Gross margin


16.3



16.1



18.8



1.2



(14.4
)Gross margin %


14.9
%


14.8
%


18.0
%






Selling and distribution expenses


7.3



6.7



6.3



9.0



6.3General and administrative expenses


4.4



4.0



4.5



10.0



(11.1
)Research and development


.1















Impairment of intangible assets


.6















Loss from equity investment


.4







.4







Income from continuing operations
    before income taxes

$
3.5


$
5.4


$
7.6



(35.2
)


(28.9
)     
    The $.7 million, or .6 percent, increase in net sales
    in 2006 compared to 2005 resulted primarily from a
    $1.1 million increase in our ticket product line, $1.0
    increase in our retail shelf product line, $.9 million
    increase in our RFID product line and a $.4 million
    increase in the automatic identification product line which was
    partially offset by declines of $1.1 million in our
    supermarket scale product line, $.8 million in the pharmacy
    product line and $.8 million in our other product lines.
    The increase in our ticket product line sales resulted primarily
    from incremental volume gained from existing customers. The
    increase in our retail shelf and automatic identification
    product lines resulted primarily from the acquisition of certain
    assets of LSI and incremental business from existing customers.
    The RFID sales increase is a result of unit volume growth
    associated with the new product line. The decreased sales in our
    supermarket scale and pharmacy product lines are primarily a
    result of lost business.
    The $4.7 million, or 4.5 percent, increase in net
    sales in 2005 compared to 2004 resulted primarily from a
    $10.2 million increase in our automatic identification
    product line, $1.2 million increase in the pharmacy product
    line, $.6 million increase in our RFID product line and a
    $.1 million increase in other product lines which was
    partially offset by declines of $4.4 million in our
    supermarket scale product 22




---



##### Table of Contents



line, $1.6 million in the retail shelf product line and
    $1.4 million in our EDP product line. The increase in
    automatic identification label sales resulted primarily from
    incremental volume gained from new customers, the acquisition of
    certain assets of LSI and incremental business from existing
    customers. The increase in the pharmacy product line results
    from the acquisition of certain assets of LSI. The 2005 RFID
    sales increase is a result of our initial progress in entering
    into the new product line. The decreased sales in our
    supermarket scale and retail shelf product lines are primarily a
    result of lost business, a portion of which is now produced by
    the customer itself. The decreased sales in our EDP product line
    are due to market erosion as a result of printer technology
    changes and lost business.    
    The gross margin increase of $.2 million in 2006 compared
    to 2005 was primarily related to increased selling price which
    was partially offset by unabsorbed fixed plant costs and
    severance related to the facility consolidation project from
    St. Louis, Missouri to the plants in Florida, Tennessee and
    Nebraska, severance related to the negotiated union contract
    with Nebraska hourly employees, unabsorbed fixed cost at the
    Florida facility and increased employee defined benefit pension
    costs.
    The gross margin decrease of $2.7 million in 2005 compared
    to 2004 was primarily related to increased raw material costs,
    which have only partially been passed on to customers due to
    competitive market conditions, as well as unabsorbed fixed plant
    costs at our Florida facility, which was part of our June 2005
    acquisition of certain assets of LSI, and increased employee
    pension and workers compensation costs.           23




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##### Table of Contents



Specialty
    Paper Products Segment
  Percent ChangeFor the Years Ended December 31,


2006 vs.


2005 vs.2006


2005


2004


2005


2004(In millions)Net sales

$
162.5


$
166.7


$
168.0



(2.5
)


(0.8
)Gross margin


24.1



28.4



31.2



(15.1
)


(9.0
)Gross margin %


14.8
%


17.0
%


18.6
%






Selling and distribution expenses


16.6



17.6



17.5



(5.7
)


0.6General and administrative expenses


7.1



7.2



7.5



16.4



(10.3
)Research and development expenses


.5



.6



.7



(16.7
)


(14.3
)Loss on curtailment of pension and
    postretirement plans


.6















Other income


(1.2
)


(1.1
)


(.7
)


(9.1
)


(57.1
)Income from continuing operations
    before income taxes

$
.5


$
4.1


$
6.2



(88.0
)


(33.9
)     
    The $4.2 million, or 2.5 percent, decrease in net
    sales in 2006 compared to 2005 was primarily due to sales
    decreases of $3.9 million in our non-retail thermal
    point-of-sale
    (POS) product line, $3.0 million in our coated carbonless
    product line, $1.6 million in our financial product line,
    $.8 million in our retail POS product line,
    $.7 million in our bond product line and $.4 million
    in our miscellaneous other product lines. The decreases were
    partially offset by sales increases of $3.0 million in our
    thermal facesheet product line, $2.8 million in our
    wide-format product line and $.4 million in our thermal
    ticket and tag product line. The net sales decrease in our
    non-retail thermal product line was primarily due to lower unit
    volume sold. The net sales decrease in our coated carbonless
    product line was the result of the exit and sale of certain
    assets of the coated carbonless product line in February 2006.
    The net sales decrease in our financial product line was
    primarily a result of lower sales volume from a major customer.
    The net sales decrease in the retail POS product line resulted
    primarily from the decreased unit volume to a major customer.
    The net sales increase in our thermal face sheet products was
    primarily due to increased sales volume from existing customers.
    The net sales increase in our wide-format products resulted from
    new customer business.
    The $1.3 million, or .8 percent, decline in net sales
    in 2005 compared to 2004 was primarily due to sales decreases of
    $7.0 million in our non-retail thermal POS product line,
    $2.6 million in our thermal ticket and tag product line,
    $2.5 million in our carbonless product line,
    $1.6 million in our bond product line, $1.2 million in
    our dry gum product line, and $.6 million in our thermal
    face sheet product line. The decreases were partially offset by
    sales increases of $6.0 million in our wide-format product
    line, $3.7 million in our retail product line,
    $2.7 million in our ribbon and laser cartridge product
    line, $1.3 million in our fraud prevention product line,
    and $.5 million of other miscellaneous product lines. The
    net sales decrease in our thermal product line was due to the
    combination of lower unit volume and reduced pricing. The net
    sales decrease in the thermal ticket and tag products results
    primarily from the loss of airline ticket business as well as
    lower volume to other key customers. The continued shift in
    technology resulted in lower sales of dry-gum and carbonless
    products. The net sales decrease in our thermal face sheet
    products was primarily due to lower volume. The net sales
    increase in our wide-format products resulted from new customer
    business. The net sales increase in the ribbon and laser
    cartridge product line resulted from the acquisition of certain
    assets of LSI. The net sales increase in our retail product line
    was due to increased sales to a key customer who had reduced its
    purchases the prior year. 24




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##### Table of Contents




    The gross margin percentage decrease in 2006 compared to 2005
    was due primarily to competitive pricing related to thermal
    products used in POS applications and face sheet sold to
    laminators, lower absorption of production costs due to
    increased spending related to manufacturing space consolidation
    costs, severance related to the exit of the coated carbonless
    business and increased utility costs.
    The gross margin percentage decrease in 2005 compared to 2004
    was primarily due to higher raw material costs which have only
    partially been passed on to customers, an unfavorable product
    mix resulting from sales declines in the mature and higher
    margin dry-gum and carbonless product lines and lower absorption
    of production costs in our paper coating operations due to the
    decrease in production volume. The decrease in gross margin
    percentage also resulted from competitive pricing conditions for
    thermal products used in POS applications and thermal face sheet
    sold to laminators.         25




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##### Table of Contents



Discontinued
    Operations
    For the Year Ended December 31,2006


2005


2004(In thousands)Toner and developer:Income (loss), net of taxes

$
91


$
(1,297
)

$
(211
)Gain on disposal, net of taxes


1,330







Toner and developer discontinued
    operations, net of income taxes


1,421



(1,297
)


(211
)Gain from reversal of tax accrual
    related to IRS audits






1,235



Loss from environmental exposure,
    net of taxes


(180
)






Gain from liquidation on foreign
    subsidiary, net of income taxes


352







Income (loss) from discontinued
    operations, net of income taxes

$
1,593


$
(62
)

$
(211
)         For the Year EndedDecember 31,2006


2005


2004(In thousands)Net sales

$
7,459


$
22,279


$
20,486Income (loss) before income taxes


2,802



(2,152
)


(342
)Income taxes (benefit)


1,209



(2,090
)


(131
)Income (loss) from discontinued
    operations

$
1,593


$
(62
)

$
(211
)   Liquidity,
    Capital Resources and Financial Condition
   26




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##### Table of Contents



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

2006


2005


2004(In millions)Operating activities

$
5.1


$
6.6


$
1.2Investing activities


18.7



(4.3
)


(5.5
)Financing activities


(24.2
)


(2.5
)


4.0Decrease in cash and cash
    equivalents

$
(0.4
)

$
(0.2
)

$
(0.3
)   Cash
    provided by operating activities
        Cash
    provided by and used in investing activities
       27




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##### Table of Contents



Cash
    provided by and used in financing activities
              December 31, 2006Covenant

Requirement

Compliance Maintain a fixed
    charged coverage ratio

Not less than 1.5 to 1.0

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

Less than 2.75 to 1.0

0.7 to 1.0    28




---



##### Table of Contents



2009


2024


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

$
1,950


$



$
1,950Industrial revenue bond






2,800



2,800$
1,950


$
2,800


$
4,750     mark-to-market
          Future
    obligations
    Contractual
    Obligations
  Less Than








More ThanTotal


1 Year


1-3 Years


3-5 Years


5 Years(In thousands)Capital lease obligations

$
8


$
8


$



$



$
Non-cancelable operating leases


7,961



1,892



4,514



1,555



Long-term debt obligations


5,118



83



2,199



36



2,800$
13,087


$
1,983


$
6,713


$
1,591


$
2,800    29




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##### Table of Contents



Litigation
    and Other Matters
  Cerion
    Ricoh
  No. 03-CV-2612
  patents-in-suit.
 30




---



##### Table of Contents



patents-in-suit.
      patents-in-suit;
        Environmental
   31




---



##### Table of Contents



Application
    of Critical Accounting Policies
    and/or
  Accounts
    Receivable  Allowance for Doubtful Accounts
    Inventories 
    Slow Moving and Obsolescence
   32




---



##### Table of Contents



Goodwill
    and Amortizable Intangible Assets
      Pension
    and Other Postretirement Benefits
       33




---



##### Table of Contents



Stock
    Based Compensation
        Deferred
    Tax Assets
    Environmental
    Reserves
   34




---



##### Table of Contents



clean-up;
  New
    Accounting Pronouncements
     Item 7A.  Quantitative
    and Qualitative Disclosures About Market Risk  Interest
    Rate Risks
     35




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  NASHUA
    CORPORATION AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  Year Ended December 31,2006


2005


2004(In thousands, except per share data)Net sales

$
269,043


$
272,585


$
268,731Cost of products sold


228,389



227,972



218,654Gross margin


40,654



44,613



50,077Selling and distribution expenses


23,894



24,329



23,788General and administrative expenses


19,085



17,646



19,295Research and development expense


644



562



780Net loss (gain) on curtailment of
    pension and postretirement plans


580







(971
)Loss from equity investment


440



34



416Gain on sale of real estate


(8,976
)






Impairment of intangible assets


565







Interest expense


1,511



1,758



1,323Interest income










(313
)Other income


(1,181
)


(1,038
)


(741
)Income from continuing operations
    before income taxes


4,092



1,322



6,500Provision for income taxes


2,086



664



2,502Income from continuing operations


2,006



658



3,998Income (loss) from discontinued
    operations, net of taxes


1,593



(62
)


(211
)Net income

$
3,599


$
596


$
3,787Per share amounts:Income from continuing operations
    per common share

$
0.32


$
0.11


$
0.67Income (loss) from discontinued
    operations per common share


0.26



(0.01
)


(0.04
)Net income per common share

$
0.58


$
0.10


$
0.63Income from continuing operations
    per common share-assuming dilution

$
0.32


$
0.11


$
0.65Income (loss) from discontinued
    operations per common share- assuming dilution


0.26



(0.01
)


(0.03
)Net income per common
    share-assuming dilution

$
0.58


$
0.10


$
0.62Average shares outstanding:Common shares


6,140



6,090



6,011Common shares-assuming dilution


6,194



6,191



6,130    36




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  CONSOLIDATED
    BALANCE SHEETS
  December 31,2006


2005(In thousands, except share data)ASSETSCurrent assetsCash and cash equivalents

$
289


$
653Accounts receivable


29,568



33,922Inventories:Raw materials


11,919



11,789Work in process


2,625



3,145Finished goods


9,220



7,35023,764



22,284Other current assets


2,670



2,98056,291



59,839Plant and equipment:Land


986



1,322Buildings and improvements


16,151



32,553Machinery and equipment


52,995



70,851Construction in progress


278



14270,410



104,868Accumulated depreciation


(44,011
)


(68,406
)26,399



36,462Goodwill


31,516



31,516Intangibles, net of amortization


606



1,773Loans to related parties


1,071



1,015Other assets


11,732



14,314Total assets

$
127,615


$
144,919LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent liabilitiesAccounts payable

$
16,620


$
14,992Accrued expenses


8,639



8,965Current maturities of long-term
    debt






3,500Current maturities of notes
    payable to related parties


83



33325,342



27,790Long-term debt, less current
    portion


4,750



25,250Notes payable to related parties


285



368Other long-term liabilities


28,211



37,777Commitments and contingencies (see
    Note 10)Shareholders equity:Common stock, par value $1.00;
    authorized 20,000,000 shares; issued and outstanding
    6,344,178 shares in 2006 and 6,259,084 shares in 2005


6,344



6,259Additional paid-in capital


15,998



15,764Retained earnings


61,358



57,860Accumulated other comprehensive
    loss:Minimum pension liability
    adjustment, net of tax


(14,673
)


(26,149
)69,027



53,734Total liabilities and
    shareholders equity

$
127,615


$
144,919    37




---



##### 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,
    2003


5,902,734


$
5,903


$
14,515


$
53,477


$
(12,698
)

$
61,197Stock options exercised and
    related tax benefit


170,100



170



1,105











1,275Restricted stock issued


136,000



136



(136
)










Comprehensive income:Net income














3,787







3,787Minimum pension liability
    adjustment, net of tax


















(311
)


(311
)Comprehensive income






















3,476Balance, December 31,
    2004


6,208,834



6,209



15,484



57,264



(13,009
)


65,948Stock options exercised and
    related tax benefit


50,250



50



280











330Comprehensive loss:Net income














596







596Minimum pension liability
    adjustment, net of tax


















(13,140
)


(13,140
)Comprehensive loss






















(12,544
)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
)

$
69,027    38




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Year Ended December 31,2006


2005


2004(In thousands)Cash Flows from Operating
    ActivitiesNet income

$
3,599


$
596


$
3,787Adjustments to reconcile net income
    to cash provided by operating activities:Depreciation and amortization


6,803



9,466



7,900Impairment of intangible assets


565







Deferred income taxes


2,606



(834
)


2,371Stock based compensation


42







Excess tax benefit from stock-based
    compensation arrangements


(35
)






Tax benefit from exercised stock
    options






59



187Net loss (gain) on curtailment of
    pension and postretirement plans


580



385



(971
)(Gain) loss on sale/disposal of
    fixed assets


(11,969
)


109



8Equity in loss from unconsolidated
    joint ventures


440



34



416Death benefit premiums purchase
    (see Note 11)










(2,416
)Contributions to pension plans (see
    Note 11)


(1,793
)






Gain on tax settlement






(1,235
)


Change in operating assets and
    liabilities, net of effects from acquisition of businesses:Restricted cash






1,202



(1,202
)Accounts receivable


4,354



381



(1,836
)Inventories


(1,529
)


3,369



(2,459
)Other assets, other current assets
    and loans to related parties


(1,450
)


(109
)


823Accounts payable


1,628



(5,432
)


(3,723
)Accrued expenses


(1,000
)


(2,596
)


(1,455
)Other long-term liabilities


2,234



1,203



(177
)Cash provided by operating
    activities


5,075



6,598



1,253Cash Flows from Investing
    ActivitiesInvestment in plant and equipment


(2,785
)


(3,845
)


(6,599
)Investment in unconsolidated joint
    venture


(424
)


(50
)


Proceeds from sale of plant and
    equipment


21,927



20



67Business acquisitions, net of cash
    acquired






(466
)


(126
)Proceeds from surrender of retired
    executive life insurance policies










1,117Cash provided by (used in)
    investing activities


18,718



(4,341
)


(5,541
)Cash Flows from Financing
    ActivitiesNet proceeds from (repayments on)
    revolving portion of long-term debt


(21,400
)


1,400



3,750Principal repayments on term
    portion of long-term debt






(3,400
)


(3,400
)Principal repayment on note payable
    to related parties


(333
)


(759
)


(250
)Proceeds from Industrial Revenue
    Bond










2,800Proceeds from refinancing


23,350







Repayment on refinancing of
    long-term debt


(25,950
)






Proceeds from shares exercised
    under stock option plans


259



271



1,089Excess tax benefit from exercised
    stock based compensation


35







Treasury stock purchase


(118
)






Cash (used in) provided by
    financing activities


(24,157
)


(2,488
)


3,989Decrease in cash and cash
    equivalents


(364
)


(231
)


(299
)Cash and cash equivalents at
    beginning of year


653



884



1,183Cash and cash equivalents at end of
    year

$
289


$
653


$
884Supplemental Disclosures of Cash
    Flow InformationInterest paid (net of amount
    capitalized)

$
1,702


$
1,624


$
1,068Income taxes paid, net

$
942


$
410


$
282Supplemental Schedule of
    Non-Cash Investing and Financing
    ActivitiesFair value of assets acquired in
    acquisitions

$



$
4,653


$
208Note payable with Label Systems
    International Inc.






(500
)


Liabilities assumed in acquisitions






(3,687
)


(82
)Cash paid for asset acquisitions

$



$
466


$
126    39




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 Years ended December 31, 2006, 2005 and 2004
  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
   40




---



##### 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
   41




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Year Ended December 31,2005


2004(In thousands, except per share data)Net income as reported

$
596


$
3,787Add: Stock-based employee
    compensation expense included in the determination of net income
    as reported, net of related tax effects






Deduct: Stock-based employee
    compensation expense determined under the fair value based
    method for all awards, net of related tax effects


(122
)


(78
)Pro forma net income

$
474


$
3,709Earnings per share:Basic  as reported

$
0.10


$
0.63Basic  pro forma

$
0.08


$
0.62Diluted  as reported

$
0.10


$
0.62Diluted  pro forma

$
0.08


$
0.61   Postretirement
    Benefits
    Revenue
    Recognition
    Environmental
    Expenditures
   42




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Shipping
    Costs
    Research
    and Development
    Income
    Taxes
    Concentrations
    of Credit Risk
      Concentrations
    of Labor
    Concentrations
    of Supply
   43




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Fair
    Value of Financial Instruments
    Earnings
    per Common and Common Equivalent Share
    Treasury
    Stock
    New
    Accounting Pronouncements
      Note 2:
    Discontinued
    Operations   44




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    For the Year Ended December 31,2006


2005


2004(In thousands)Toner and developer:Income (loss), net of taxes

$
91


$
(1,297
)

$
(211
)Gain on disposal, net of taxes


1,330







Toner and developer discontinued
    operations, net of income taxes


1,421



(1,297
)


(211
)Gain from reversal of tax accrual
    related to IRS audits






1,235



Loss from environmental exposure,
    net of taxes


(180
)






Gain from liquidation on foreign
    subsidiary, net of income taxes


352







Income (loss) from discontinued
    operations, net of income taxes

$
1,593


$
(62
)

$
(211
)         For the Year Ended December 31,2006


2005


2004(In thousands)Net sales

$
7,459


$
22,279


$
20,486Income (loss) before income taxes

$
2,802


$
(2,152
)

$
(342
)Income taxes (benefit)


1,209



(2,090
)


(131
)Income (loss) from discontinued
    operations

$
1,593


$
(62
)

$
(211
)     Reserve

Current

Adjustment

Current

ReserveBalance

Year

to Prior

Year

BalanceDec. 31, 2005

Provision

Provision

Utilization

Dec. 31, 2006(In thousands)Provisions for severance related
    to workforce reductions

$
1,356


$
34


$
(290
)

$
(1,100
)

$
0  45




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Note 3:
    Goodwill
    and Other Intangible Assets    (In thousands)Specialty Paper Products

$
14,142Label Products


17,374Total Goodwill

$
31,516     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, 2005

$
495For the year ended
    December 31, 2006

$
652Estimated for the year ending:December 31, 2007

$
237December 31, 2008

$
89December 31, 2009

$
50December 31, 2010

$
42December 31, 2011

$
36December 31, 2012 and
    thereafter

$
152    46




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Note 4:
    Indebtedness          December 31, 2006Covenant

Requirement

Compliance


Maintain a fixed charged coverage
    ratio

Not less than 1.5 to 1.0


2.0 to 1.0


Maintain a funded debt to adjusted
    EBITDA ratio

Less than 2.75 to 1.0


0.7 to 1.0    47




---



##### Table of Contents



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


2024


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

$
1,950


$



$
1,950Industrial revenue bond






2,800



2,800$
1,950


$
2,800


$
4,750     mark-to-market
  Note 5:
    Notes Payable
    to Related Parties    2007

2008

2009

2010

2011

Total(In thousands)Notes payable to related parties

$
83


$
83


$
83


$
83


$
36


$
368   Note 6:
    Income
    Taxes    2006


2005


2004(In thousands)Current:United States

$
1,374


$
103


$
State


527



42



Total current


1,901



145



Deferred:United States


(143
)


463



2,198State


328



56



304Total deferred


185



519



2,502Provision for income taxes,
    continuing operations

$
2,086


$
664


$
2,502  48




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2006


2005(In thousands)Depreciation

$
(914
)

$
(944
)Other


(643
)


(612
)Gross deferred tax liabilities


(1,557
)


(1,556
)Pension and postretirement benefits


7,536



13,927State net operating loss
    carryforwards and other state credits


1,805



2,257Alternative minimum tax and
    general business credits


1,527



1,528Accrued expenses


639



1,025Inventory reserves


556



587Bad debt reserves


289



393Other


775



633Gross deferred tax assets


13,127



20,350Deferred tax asset valuation
    allowance


(1,763
)


(5,659
)Deferred tax assets, net


11,364



14,691Net deferred tax assets

$
9,807


$
13,135     2006


2005


2004United States federal statutory
    rate


35.0
%


35.0
%


35.0
%State taxes, net of federal tax
    benefit


4.8



5.8



2.9Non-deductible meals and
    entertainment


.8



2.6



.5Adjustment for deferred tax asset


3.2



6.8



Valuation reserve for state income
    taxes


7.2







Other, net










.1Effective tax rate


51.0
%


50.2
%


38.5
%        49




---



##### 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 40-day
   50




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    40-day 40-day 40-day
         51




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     2006


2005


2004Weighted





Weighted





WeightedAverage





Average





AverageExercise





Exercise





ExerciseShares


Price


Shares


Price


Shares


PriceOutstanding beginning of year


494,525


$
6.79



582,225


$
7.04



806,175


$
7.58Granted


















10,000



9.61Exercised


(52,850
)


4.86



(50,250
)


5.41



(170,100
)


6.40Forfeited  exercisable


(37,725
)


10.30



(27,000
)


10.59



(58,350
)


14.98Expired


(3,000
)


16.00



(10,450
)


17.40



(5,500
)


26.02Outstanding end of year


400,950


$
6.65



494,525


$
6.79



582,225


$
7.04Options exercisable at end of year


400,950


$
6.65



494,525


$
6.79



572,225


$
7.00Weighted average fair value of
    options granted during the year





















$
3.64     Options Outstanding & ExercisableWeightedWeighted Average


AverageOptions


Remaining


ExerciseRange of Exercise Prices

at
    12/31/06


Contractual Life


Price$ 4.01 - $ 4.38


122,300



4.1 years


$
4.16$ 5.70 - $ 6.63


135,300



4.1 years


$
6.10$ 6.65 - $ 6.70


40,800



5.2 years


$
6.66$ 8.06 - $ 8.63


41,450



3.4 years


$
8.12$ 9.61 - $11.63


31,600



4.0 years


$
10.06$12.37 - $16.00


29,500



1.1 years


$
13.76$ 4.01 - $16.00


400,950



3.9 years


$
6.65     2006


2005


2004Restricted stock outstanding at
    beginning of year


136,000



136,000



Granted


95,000







136,000Forfeited


(47,327
)






Restricted stock outstanding at
    end of year


183,673



136,000



136,000Weighted average fair value per
    restricted share at grant date

$
2.81


$



$
3.47Weighted average share price at
    grant date

$
7.06


$



$
9.00    52




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Grant Year2006


2005


2004Volatility of Share Price:Options


*



*



34.0
%Restricted stock


38.5
%






33.8
%Dividend yield:Options










Restricted stock










Interest rate:Options






N/A



3.6
%Restricted stock


4.8
%






3.3
%Expected life of options






N/A



5.5 yearsValuation methodology:Options


Black-Scholes



Black-Scholes



Black-ScholesRestricted stock


Monte Carlo



Binomial Pricing Model



Binomial Pricing ModelSimulation     *
    
    No options granted during that period.  Note 9:
    Earnings
    Per Share    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   Year Ended December 31, 2005Income


Shares


Per Share(Numerator)


(Denominator)


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

$
658



6,090


$
0.11Effect of dilutive securities
    stock options






101



Diluted EPS:Income from continuing operations,
    assuming dilution

$
658



6,191


$
0.11   53




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Year Ended December 31, 2004Income


Shares


Per Share(Numerator)


(Denominator)


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

$
3,998



6,011


$
0.67Effect of dilutive securities
    Stock options






119



(.02
)Diluted EPS:Income, assuming dilution

$
3,998



6,130


$
0.65     Note 10:
    Commitments
    and Contingencies  Lease
    Agreements
    Beyond2007


2008


2009


2010


2011


2011


Total(In thousands)Capital leases

$
8


$



$



$



$



$



$
8Non-cancelable operating leases


1,892



1,652



1,428



1,434



1,194



361



7,961$
1,900


$
1,652


$
1,428


$
1,434


$
1,194


$
361


$
7,969       Contingencies
    Cerion
   54




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Ricoh
  No. 03-CV-2612
  patents-in-suit.
 55




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  patents-in-suit.
      patents-in-suit;
        Environmental
   56




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Note 11:
    Postretirement
    Benefits  Defined
    Contribution Plan
      Pension
    Plans
    Retiree
    Health Care and Other Benefits
   57




---



##### Table of Contents



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


Postretirement Benefits2006


2005


2006


2005(In thousands)Change in benefit
    obligationProjected benefit obligation at
    beginning of year

$
101,206


$
86,693


$
2,369


$
2,285Service cost


886



784



40



59Interest cost


5,508



5,191



88



117Curtailment and plan amendments










(1,124
)


Actuarial loss (gain)


(5,539
)


11,444



(346
)


145Expenses paid from assets


(500
)










Benefits paid


(3,655
)


(2,906
)


(213
)


(237
)Projected benefit obligation at
    end of year

$
97,906


$
101,206


$
814


$
2,369Change in plan assetsFair value of plan assets at
    beginning of year

$
69,041


$
68,818


$



$
Actual return on plan assets


7,795



2,823







Employer contribution


2,103



306



213



237Settlement














Benefits paid


(3,655
)


(2,906
)


(213
)


(237
)Fair value of plan assets at end
    of year

$
75,284


$
69,041


$



$
Reconciliation of funded
    statusFunded status

$
(22,622
)

$
(32,165
)

$
(814
)

$
(2,369
)Unrecognized net actuarial
    (gain)/loss


24,277



34,652



(1,008
)


(748
)Unrecognized prior service cost






966



(818
)


(317
)Net amount recognized

$
1,655


$
3,453


$
(2,640
)

$
(3,434
)The amount recognized in our
    consolidated
    balance sheets consists of the following:Pension/postretirement liability

$
(22,622
)

$
(32,165
)

$
(814
)

$
(3,434
)Accumulated other comprehensive
    loss (income)


24,277



34,652



(1,826
)


Intangible asset






966







Net amount recognized

$
1,655


$
3,453


$
(2,640
)

$
(3,434
)   Assumptions:
  Pension Benefits


Postretirement Benefits2006


2005


2004


2006


2005


2004Weighted-average assumptions
    used to determine
    net benefit costs:Discount rate


5.5
%


6.0
%


6.0
%


5.5
%


6.0
%


6.0
%Expected return on plan assets


8.5
%


8.5
%


8.5
%










  58




---



##### Table of Contents



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

Postretirement Benefits2006

2005

2004

2006

2005

2004Weighted-average assumptions
    used to determine
    benefit obligations at year end:Discount rate


6.0
%


5.5
%


6.0
%


6.0
%


5.5
%


6.0
%     Before





AfterApplication


Adjustments


Application(In thousands)Other assets

$
12,457


$
(725
)

$
11,732Other long-term liabilities


30,018



(1,807
)


28,211Accumulated other comprehensive
    loss, net of tax


(15,755
)


1,082



(14,673
)          59




---



##### Table of Contents



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


13.1
%Five years


8.8
%Ten years


8.8
%     2006


2007 TargetAsset CategoryEquity Securities


56
%


55
%Fixed Income


44
%


45
%       (In millions)InvestmentsLarge cap equities

$
25.6Small cap equities


8.3International equities


8.5High yield bonds


5.9Fixed income/bond investments


26.7Cash


.3Total

$
75.3       Retirement Plan


Hourly


Supplementalfor Salaried


Employees


ExecutiveEmployees


Retirement Plan


Retirement Plan


Postretirement(In millions)2007

$
2.1


$
1.5


$
.3


$
.22008


2.3



1.6



.3



.22009


2.4



1.7



.3



.12010


2.7



1.9



.3



.12011


2.9



2.1



.3



.12012-2016


18.3



13.2



1.3



.2  60




---



##### Table of Contents



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


Postretirement Benefits2006


2005


2004


2006


2005


2004(In thousands)Components of net periodic
    (income) costService cost

$
886


$
784


$
834


$
40


$
59


$
58Interest cost


5,508



5,191



4,877



88



117



215Expected return on plan assets


(5,925
)


(5,865
)


(5,832
)










Amortization of prior service cost


161



268



268



(58
)


(65
)


(65
)Recognized net actuarial (gain)
    loss


2,486



1,347



858



(86
)


(145
)


(246
)Net loss (gain) on curtailment


786



385







(565
)


(19
)


(948
)Net periodic (income) cost

$
3,902


$
2,110


$
1,005


$
(581
)

$
(53
)

$
(986
)     2006


2005PBO


ABO


Plan Assets


PBO


ABO


Plan Assets(In millions)Supplemental Executive Retirement
    Plan

$
3.1


$
3.1


$



$
3.3


$
3.3


$
Hourly Employees Retirement Plan
    of Nashua Corporation

$
42.4


$
42.4


$
35.4


$
43.7


$
43.7


$
31.4Retirement Plan for Salaried
    Employees of Nashua Corporation

$
52.4


$
52.4


$
39.9


$
54.2


$
54.2


$
37.6     1-Percentage

1-PercentagePoint Increase

Point Decrease(In thousands)Effect on total of service and
    interest cost components

$
7


$
(7
)Effect on accumulated
    postretirement benefit obligation

$
123


$
(113
)        61




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Note 12:
    Information
    About Operations      point-of-sale
         62




---



##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Income fromContinuing Operations BeforeNet Sales


Income Taxes


Identifiable Assets2006


2005


2004


2006


2005


2004


2006


2005


2004(In millions)By Reportable Segment:Label Products

$
109.7


$
109.0


$
104.3


$
3.5


$
5.4


$
7.6


$
48.0


$
50.7


$
48.5Specialty Paper Products


162.5



166.7



168.0



.5



4.1



6.2



61.1



62.9



67.5Other(1)


2.5



1.6



1.6



.2







.1







8.8



11.0Reconciling Items:Eliminations


(5.7
)


(4.7
)


(5.2
)






















Unallocated corporate expenses and
    assets














(7.6
)


(6.4
)


(7.4
)


18.5



22.5



24.4Interest expense, net














(1.5
)


(1.8
)


(1.0
)










Net gain on curtailment of
    postretirement plans






















1.0











Gain on sale of real estate














9.0



















Consolidated

$
269.0


$
272.6


$
268.7


$
4.1


$
1.3


$
6.5


$
127.6


$
144.9


$
151.4     (1)
    
    Includes activity from operations which falls below the
    quantitative thresholds for a reportable segment.    Depreciation &Capital Expenditures


Amortization2006


2005


2004


2006


2005


2004(In millions)Label Products

$
.8


$
1.0


$
2.1


$
3.2


$
2.8


$
2.5Specialty Paper Products


1.7



2.7



3.9



2.9



3.3



3.7Reconciling Items:Corporate


.3



.1



.2



.4



.5



.4Consolidated

$
2.8


$
3.8


$
6.2


$
6.5


$
6.6


$
6.6     Net Sales FromContinuing Operations


Long-Lived Assets2006


2005


2004


2006


2005


2004(In millions)By Geographic AreaUnited States

$
269.0


$
272.6


$
268.7


$
62.0


$
72.7


$
75.3Reconciling Items:Discontinued Operations














1.5



1.5



1.5Deferred tax assets














7.8



10.9



8.9Consolidated

$
269.0


$
272.6


$
268.7


$
71.3


$
85.1


$
85.7    63




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##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 13:
    Quarterly
    Operating Results (Unaudited)  13-week
  1st


2nd


3rd


4thQuarter


Quarter


Quarter


Quarter


Year(In thousands, except per share data)2006(1)Net 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(3)


1,004







54



535



1,593Net income (loss)(2)(3)


441



(982
)


(1,159
)


5,299



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


(.09
)


(.16
)


(.20
)


.77



.32Discontinued operations(3)


.16







.01



.09



.26Net income (loss)(2)(3)


.07



(.16
)


(.19
)


.86



.58Continuing operations, assuming
    dilution(2)


(.09
)


(.16
)


(.20
)


.77



.32Discontinued operations, assuming
    dilution(3)


.16







.01



.09



.26Net income (loss), assuming
    dilution(2)(3)


.07



(.16
)


(.19
)


.86



.582005(1)Net sales

$
67,646


$
67,308


$
68,570


$
69,061


$
272,585Gross margin


10,448



11,416



11,830



10,919



44,613Income (loss) from continuing
    operations


(422
)


309



825



(54
)


658Income (loss) from discontinued
    operations(3)


(1,198
)


1,094



18



24



(62
)Net income (loss)(3)


(1,620
)


1,403



843



(30
)


596Earnings (loss) per common share:Continuing operations


(.07
)


.05



.14



(.01
)


.11Discontinued operations(3)


(.20
)


.18



.01







(.01
)Net income (loss)(3)


(.27
)


.23



.14







.10Continuing operations, assuming
    dilution


(.07
)


.05



.14



(.01
)


.11Discontinued operations, assuming
    dilution(3)


(.20
)


.18



.01







(.01
)Net income (loss), assuming
    dilution(3)


(.27
)


.23



.14







.10     (1)
    
    We acquired certain assets of LSI in June 2005. The operations
    of LSI have been included in our quarterly operating results
    since the date of acquisition.(2)
    
    Our fourth quarter 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.(3)
    
    Income from discontinued operations, 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.  Note 14:
    Related
    Parties  Leases
    with Related Parties
    Notes Payable
    to Related Parties
   64




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##### Table of Contents



NASHUA
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Loans to
    Related Parties
    Total RelatedParty(In thousands)Acquired upon acquisition of
    Rittenhouse Paper Company on April 17, 2000

$
195Net premiums paid in 2001


214Net premiums paid in 2002


250Net premiums paid in 2003


235Net premiums paid in 2004


63Net premiums paid in 2005


58Net premiums paid in 2006


56Balance at December 31, 2006

$
1,071Collaterized cash surrender value
    of life insurance policy

$
1,027  65




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##### Table of Contents



SCHEDULE II
  NASHUA
    CORPORATION AND SUBSIDIARIES
  VALUATION
    AND QUALIFYING ACCOUNTS
  Balance atPrevious








Balance atEnd of Year


Additions(a)


Deductions(b)


End of Year(In thousands)DECEMBER 31, 2006:Allowance for doubtful accounts

$
851


$
249


$
(556
)

$
544DECEMBER 31, 2005:Allowance for doubtful accounts

$
654


$
528


$
(331
)

$
851DECEMBER 31, 2004:Allowance for doubtful accounts

$
861


$
105


$
(312
)

$
654     (a)
    
    Includes recoveries and amounts charged to costs and expenses.(b)
    
    Includes accounts deemed uncollectible. 66




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
          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).
  /s/
    67




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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  Rules 13a-15(e) 15d-15(e)
    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   68




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##### Table of Contents



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 three
    years ended December 31, 2006, 2005 and 2004
    Consolidated balance sheets at December 31, 2006 and
    December 31, 2005
    Consolidated statements of shareholders equity for each of
    the three years ended December 31, 2006, 2005 and 2004
    Consolidated statements of cash flows for each of the three
    years ended December 31, 2006, 2005 and 2004
    Notes to Consolidated Financial Statements
    Report of Independent Registered Public Accounting Firm  Financial statement schedule:
  
    Schedule II  Valuation and qualifying accounts
    for each of the three years ended December 31, 2006, 2005
    and 2004  Form 10-K.
  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. 69




---



##### Table of Contents



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.+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
    March 23, 2004.+10
.04

Change of Control and Severance
    Agreement, dated as of June 15, 2004 between Nashua Corporation
    and Thomas R. Pagel. Incorporated by reference to our Annual
    Report on Form 10-K for the year ended December 31, 2004.+10
.05

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
.06

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
.07

Change of Control and Severance
    Agreement, dated as of January 5, 2005, between Nashua
    Corporation and Donna J. DiGiovine. Incorporated by reference to
    our Quarterly Report on
    Form 10-Q
    for the quarter ended April 1, 2005.+10
.08

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. 70




---



##### Table of Contents



+10
.09

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
.10

Restricted Stock Agreements, by
    and between the Company 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
.11

Employment Agreement, by and
    between Nashua Corporation and Thomas Kubis, dated as of
    August 21, 2006. Incorporated by reference to our current
    report on
    Form 8-K
    dated August 17, 2006 and filed August 22, 2006.+10
.12

Change of Control and Severance
    Agreement, by and between Nashua Corporation and Thomas Kubis,
    dated as of August 21, 2006. Incorporated by reference to
    our current report on
    Form 8-K
    dated August 17, 2006 and filed August 22, 2006.+10
.13

Restricted Stock Agreement, by and
    between the Company and Thomas Kubis, dated as of
    September 1, 2006. Incorporated by reference to our
    Quarterly Report on
    Form 10-Q
    dated and filed November 3, 2006.+10
.14

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
.15

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
.16

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
.17

Management Incentive Plan.
    Incorporated by reference to our current report on
    Form 8-K
    dated March 14, 2007 and filed March 20, 2007.10
.18

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
.19

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
.20

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
.21*

Executive officer 2007 salaries.10
.22*

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. 71




---



##### 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 26, 2007/s/  John
    L.
    PatenaudeJohn
    L. Patenaude

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

March 26, 2007/s/  Margaret
    M. CallanMargaret
    M. Callan

Corporate Controller and
    Chief Accounting Officer 
    (principal accounting officer)

March 26, 2007/s/  Andrew
    B. AlbertAndrew
    B. Albert

Chairman of the Board

March 26, 2007/s/  L.
    Scott
    BarnardL.
    Scott Barnard

Director

March 26, 2007/s/  Avrum
    GrayAvrum
    Gray

Director

March 26, 2007/s/  Michael
    T.
    LeathermanMichael
    T. Leatherman

Director

March 26, 2007/s/  George
    R.
    Mrkonic, Jr.George
    R. Mrkonic, Jr.

Director

March 26, 2007/s/  Mark
    E. SchwarzMark
    E. Schwarz

Director

March 26, 2007  72




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##### Table of Contents



Stock
    Performance Graph
    
  2001


2002


2003


2004


2005


2006Nashua Corporation



100.00




149.57




144.80




193.52




119.60




138.85S&P 500 Index



100.00




77.90




100.24




111.15




116.61




135.02S&P Paper and Forest Products
    Index



100.00




85.63




118.04




129.73




127.09




134.57