FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ Mark one ]
[ X ] Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For quarter ended September 30, 1994
OR
[ ] Transition Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission file number 1-9334
BALDWIN TECHNOLOGY COMPANY, INC
(Exact name of registrant as specified in its charter)
Delaware 13-3258160
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
65 Rowayton Avenue, Rowayton, Connecticut 06853
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 203-838-7470
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days:
YES X . NO .
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding at October 31, 1994
Class A Common Stock
$0.01 par value 15,976,230
Class B Common Stock
$0.01 par value 1,865,000
Total number of pages in this document 10
BALDWIN TECHNOLOGY COMPANY, INC.
INDEX
Page
Part I Financial Information
Consolidated Balance Sheet -
September 30, 1994 and June 30, 1994 1
Consolidated Statement of Income -
Three months ended
September 30, 1994 and 1993 2
Consolidated Statement of Changes in
Shareholders' Equity - three months
ended September 30, 1994 3
Consolidated Statement of Cash Flows -
Three Months ended
September 30, 1994 and 1993 4-5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7-8
Part II Other Information
Item 6 Exhibits and Reports on Form 8-K 9
Signatures 10
PART I FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
(Unaudited)
September 30, June 30,
1994 1994
ASSETS
CURRENT ASSETS:
Cash $ 9,450 $ 9,768
Short-term interest bearing securities 2,948 8,766
Accounts receivable trade, net of allowance for
doubtful accounts of $2,510 ($3,209 at June 30, 1994) 36,106 31,253
Notes receivable trade 14,573 12,411
Inventories 35,208 32,939
Prepaid expenses and other 7,953 8,263
Total current assets 106,238 103,400
MARKETABLE SECURITIES, at cost:
(Market $1,081; $1,190 at June 30, 1994) 923 918
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land and buildings 2,317 2,284
Machinery and equipment 8,774 8,516
Furniture and fixtures 5,193 5,075
Leasehold improvement 1,752 1,615
Capital leases 7,511 7,295
25,547 24,785
Less: Accumulated depreciation and amortization 18,051 17,172
Net property, plant and equipment 7,496 7,613
PATENTS, TRADEMARKS AND ENGINEERING DRAWINGS at cost,
less accumulated amortization of $2,763 ($2,584 at
June 30, 1994) 6,041 6,123
GOODWILL, less accumulated amortization of $8,124
($7,579 at June 30, 1994) 61,017 60,584
OTHER ASSETS 8,463 8,578
TOTAL ASSETS $190,178 $187,216
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Loans payable $ 7,050 $ 5,891
Current portion of long-term debt 135 142
Accounts payable, trade 10,489 11,472
Notes payable, trade 10,321 11,079
Accrued salaries, commissions, bonus and profit-sharing 7,737 7,861
Customer deposits 6,062 4,139
Accrued and withheld taxes 1,647 1,742
Income taxes payable 3,759 4,374
Other accounts payable and accrued liabilities 12,042 11,602
Total current liabilities 59,242 58,302
LONG-TERM LIABILITIES:
Long-term debt 32,063 32,230
Other long-term liabilities 9,029 8,604
Total long-term liabilities 41,092 40,834
Total liabilities 100,334 99,136
SHAREHOLDERS' EQUITY:
Class A Common Stock, $.01 par, 45,000,000 shares
authorized, 16,011,586 shares issued
(16,010,706 at June 30, 1994) 160 160
Class B Common Stock, $.01 par, 4,500,000 shares
authorized, 2,000,000 shares issued 20 20
Capital contributed in excess of par value 54,841 54,837
Retained earnings 36,815 35,980
Cumulative translation adjustment (739) (1,900)
Less: Treasury stock, at cost:
Class A - 75,356 shares (21,756 at June 30, 1994)
Class B - 135,000 shares (135,000 at June 30, 1994) (1,253) (1,017)
Total shareholders' equity 89,844 88,080
COMMITMENTS ------ ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $190,178 $187,216
The accompanying notes to consolidated financial statements
are an integral part of these statements.
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BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)
(Unaudited)
For the three months
ended September 30,
1994 1993
Net sales $47,639 $46,412
Cost of goods sold 31,280 30,219
Gross Profit 16,359 16,193
Operating expenses:
General and administrative 5,419 5,195
Selling 4,760 4,724
Engineering 2,716 2,578
Research and development 1,339 1,430
14,234 13,927
Operating income 2,125 2,266
Other (income) expense
Interest expense 821 1,062
Interest (income) (113) (79)
Other (income) expense, net (253) (74)
455 909
Income before taxes 1,670 1,357
Provision for income taxes 835 727
Net income $ 835 $ 630
Net income per common and
common equivalent share $ 0.05 $ 0.04
Dividends declared
Per share - Class A
Per share - Class B
Weighted average number of
shares outstanding 17,916 17,974
The accompanying notes to consolidated financial statements
are an integral part of these statements.
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BALDWIN TECHNOLOGY COMPANY INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands, except share data)
(Unaudited)
Capital
Class A Class B Contributed Cumulative
Common Stock Common Stock in Excess Retained Translation Treasury Stock
Shares Amount Shares Amount of Par Earnings Adjustment Shares Amount
Balance at June 30, 1994 16,010,706 $160 2,000,000 $20 $54,837 $35,980 $(1,900) (156,756) $(1,017)
Net income for the three months 835
Stock options exercised 880 4
Purchase of treasury stock (53,600) (236)
Translation adjustment 1,161
Balance at September 30, 1994 16,011,586 $160 2,000,000 $20 $54,841 $36,815 $ (739) (210,356) $(1,253)
The accompanying notes to consolidated financial statements
are an integral part of these statements.
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BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(in thousands)
(Unaudited)
For the three months
ended September 30,
1994 1993
Cash Flows from operating activities:
Income from continuing operations $ 835 $ 630
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization 1,161 1,217
Accrued retirement pay 85 52
Provision for losses on accounts receivable 19 73
Changes in assets and liabilities net of
effects from subsidiary purchase -
Accounts and notes receivable, net (6,556) (1,421)
Inventories (1,845) (2,020)
Prepaid expenses and other 384 (1,115)
Customer deposits 1,877 613
Accrued compensation (208) (561)
Accounts and notes payable, trade (1,861) (1,310)
Income taxes payable (604) 7
Accrued and withheld taxes (127) (300)
Other accounts payable and accrued liabilities (144) 250
Interest payable 503 (4)
Net cash used by continuing operations (6,481) (3,889)
Cash flows from investing activities:
Additions of property, net (356) (433)
Additions of patents, trademarks and drawings, net (70) (96)
Other assets 158 (215)
Net cash used by investing activities (268) (744)
Cash flows from financing activities:
Long-term borrowings 1,000 110
Long-term debt repayment (1,198) (2,535)
Short-term borrowings 984 4,240
Short-term debt repayment (2,852)
Stock options exercised 4
Principal payments under capital lease
obligations (129) (187)
Treasury stock purchased (236)
Other long-term liabilities 26 51
Net cash provided (used) by financing activities 451 (1,173)
Effects of exchange rate changes 162 123
Net decrease in cash and
cash equivalents (6,136) (5,683)
Cash and cash equivalents at beginning of year 18,534 19,676
Cash and cash equivalents at end of period $12,398 $13,993
The accompanying notes to consolidated financial statements
are an integral part of these statements.
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BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Supplemental disclosures of cash flow information:
For the three months
ended September 30,
1994 1993
(in thousands)
Cash paid during the period for:-
Interest $1,324 $1,066
Income taxes $1,450 $ 691
Supplemental schedule of non-cash investing and financing activities:
For the three months ended September 30, 1994:-
During the quarter ended September 30, 1994, the Company wrote off
accounts receivable, related to a Japanese customer that had filed for
reorganization, of approximately $700,000 against the allowance for bad debt
account. This action was taken based upon the terms of the reorganization
settlement.
The Company entered into capital lease agreements of $47,715 for the
three months ended September 30, 1994.
For the three months ended September 30, 1993:-
There were no significant non-cash transactions for the quarter ended
September 30, 1993.
The Company entered into capital lease agreements of $59,480 for the
three months ended September 30, 1993.
Disclosure of accounting policy:
For purposes of the statement of cash flows, the Company considers all
highly liquid instruments with original maturities of three months or less to
be cash equivalents.
The accompanying notes to consolidated financial statements
are an integral part of these statements.
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BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - General:
Baldwin Technology Company, Inc. (Baldwin, or the Company) is engaged
primarily in the development, manufacture and sale of material handling,
accessory, control and pre-press equipment for the printing industry.
The consolidated financial statements include the accounts of Baldwin
and its subsidiaries and reflect all adjustments (consisting of only normal
recurring adjustments) which are, in the opinion of management, necessary to
present a fair statement of the results for the interim periods. Operating
results for the three month period ended September 30, 1994 are not
necessarily indicative of the results that may be expected for the year
ending June 30, 1995.
All significant intercompany transactions have been eliminated in
consolidation. Net income per share is based on the weighted average number
of common shares and common stock equivalents outstanding during the period.
For the three month periods ended September 30, 1994 and 1993, net income was
divided by the total of the weighted average number of common shares
outstanding and common stock equivalents, which consisted of 105,184 shares
for stock options (no shares in 1993), in order to calculate net income per
share. The weighted average number of common equivalent shares outstanding
for the three month periods ended September 30, 1994 and 1993 were 17,915,744
and 17,973,651 respectively. Common stock equivalents calculated for fully
diluted earnings per share were not significantly different from those
calculated for primary.
Note 2 - Inventories:
Inventories consist of the following:-
September 30, June 30,
1994 1994
Raw material $15,730,000 $13,991,000
In process 10,570,000 10,032,000
Finished goods 8,908,000 8,916,000
$35,208,000 $32,939,000
Inventories increased $424,000 due to translation effects of exchange
from June 30, 1994 to September 30, 1994.
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BALDWIN TECHNOLOGY COMPANY, INC.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position and
consolidated financial statements.
Three Months Ended September 30, 1994 vs Three Months
Ended September 30, 1993.
Net sales for the three months ended September 30, 1994 increased by
$1,227,000, or 2.6% to $47,639,000 from $46,412,000 for the three months
ended September 30, 1993. Currency rate fluctuations attributable to the
Company's overseas operations accounted for an increase of $1,699,000 in net
sales for the current period. Product volume accounted for the remainder of
the change. In terms of local currency, sales changes were mixed within the
European Sector. Sales were up 4.2% in Germany, were up 5.1% in Sweden and
were down 2% in the United Kingdom. Local currency Asian Sector sales were
down 16.9% in Japan, down 6.4% in China but were up 86.7% in Australia and 1%
in Hong Kong. In the Americas Sector, net sales increased 10.4%.
Gross profit for the three month period ended September 30, 1994 was
$16,359,000 (34.3% of net sales), as compared to $16,193,000 (34.9% of net
sales) for the three month period ended September 30, 1993, an increase of
$166,000 or 1%. Currency rate fluctuations increased gross profit by
$511,000 with the remainder due to volume changes, product mix and other
factors.
Selling, general and administrative expenses were $10,179,000 (21.4% of
net sales), for the three month period ended September 30, 1994 as compared
to $9,919,000 (21.4% of net sales) for the same period of the prior year.
The increase of $260,000 or 2.6% in these expenses includes currency rate
fluctuations which increased these expenses by $282,000 in the current
period. Other operating expenses decreased $117,000 over the same period of
the prior year after currency rate fluctuations of $164,000, which increased
other operating expenses, were removed.
Interest expense for the three month period ended September 30, 1994 was
$821,000 as compared to $1,062,000 for the three month period ended September
30, 1993. Decreased interest expense resulted from lower levels of
indebtedness and lower interest rates due to the Company's fiscal 1993 second
quarter debt refinancing. Currency rate fluctuations increased interest
expense by $17,000 for the current period. Interest income was $113,000 and
$79,000 for the three month periods ended September 30, 1994 and September
30, 1993, respectively. Other income and expense includes net foreign
currency transaction gains (losses) of $103,000 and ($25,000) for the three
months ended September 30, 1994 and 1993, respectively. Currency rate
fluctuations decreased other income by $20,000 for the current period.
The Company's effective tax rate on income before taxes was 50% for the
three month period ended September 30, 1994, as compared to 53.55% for the
three month period ended September 30, 1993. The difference in effective
rates reflects increased domestic income. The current period's effective
rate reflects the impact of foreign source income which is taxed at
substantially higher rates than domestic income.
Net income for the three month period ended September 30, 1994 increased
by 32.5% to $835,000 from $630,000 for the three month period ended September
30, 1993, or to $0.05 and $0.04 per share, respectively. Currency rate
fluctuations increased net income by $14,000 for the current period.
Weighted average equivalent shares outstanding during the three month periods
ended September 30, 1994 and September 30, 1993 were 17,915,744 and
17,973,651, respectively.
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Liquidity and Capital Resources at September 30, 1994
Liquidity and Working Capital
On October 29, 1993, the Company completed the refinancing of it's long-
term debt with the issuance of $25,000,000 of 8.17% senior notes (the "Senior
Notes") due October 29, 2000. The Senior Notes require the payment of
interest only for the first three years with equal annual principal
repayments of $6,250,000 in each of years four through seven. The proceeds
of the Senior Notes along with approximately $5,000,000 in available cash
were used to retire all of the Company's indebtedness under a Credit
Agreement with a syndicate of banks dated September 27, 1990.
In November, 1993, the Company entered into a three-year $20,000,000
Revolving Credit Agreement (the "Revolver") with NationsBank of North
Carolina, as Agent. The Senior Notes and the Revolver require the Company to
maintain certain financial covenants and have certain restrictions regarding
the payment of dividends, limiting them throughout the terms of the Senior
Notes and the Revolver to $3,000,000 plus 50% of the Company's net income
after June 30, 1993. In addition, the Company was required to pledge certain
of the shares of it's domestic subsidiaries as collateral for both the Senior
Notes and the Revolver.
Both the Senior Notes and the Revolver require the Company to maintain
a ratio of current assets to current liabilities (as those terms are defined
in the agreements) of not less than 1.4 to 1. At September 30, 1994, this
ratio was 1.79 to 1.
Net cash used by investing activities decreased by $476,000 from
$744,000 at September 30, 1993 to $268,000 at September 30, 1994 primarily
due to lower capital expenditures and a reduction in a long-term note
receivable. Net cash provided by financing activities increased by
$1,624,000 to $451,000 at September 30, 1994 as compared to net cash used by
financing activities of $1,173,000 at September 30, 1993 primarily due to the
difference in debt borrowing and repayment activity.
The Company's working capital increased from $34,998,000 at September
30, 1993, to $46,996,000 at September 30, 1994, an increase of $11,998,000 or
34.3%. Currency rate fluctuations increased working capital by $2,075,000.
The remainder of the increase was due primarily to the effects of reductions
in loans payable and the current portion of long-term debt resulting from the
Company's debt refinancing and loans made to officers to purchase Common
Stock of the Company. The Company's working capital increased by $1,898,000
or 4.2% from $45,098,000 at June 30, 1994 to $46,996,000 at September 30,
1994. Currency rate fluctuations increased working capital by $564,000.
Decreases in cash and short term securities were more than offset by
increases in trade accounts and notes receivable. The remainder of the
increase was due to increased inventory levels and decreased trade and income
tax payables which were offset by increased customer deposits.
The Company maintains relationships with foreign and domestic banks
which have extended credit facilities to the Company totaling $34,810,000,
including amounts available under the Revolver. As of September 30, 1994,
the Company had outstanding $10,415,000 under these lines of credit, of which
$3,365,000 is classified as long-term debt. Total debt levels as reported on
the balance sheet at September 30, 1994 are $199,000 higher then they would
have been if June 30, 1994 exchange rates had been used.
Net capital expenditures made to meet the normal business needs of the
Company for the three months ended September 30, 1994 and September 30, 1993,
including commitments for capital lease payments, were $426,000 and $529,000,
respectively.
The Company believes its cash flow from operations and bank lines of
credit are sufficient to finance its working capital and other capital
requirements for the near and long-term future.
Impact of Inflation
The Company's results are affected by the impact of inflation on
manufacturing and operating costs. Historically, the Company has used
selling price adjustments, cost containment programs and improved operating
efficiencies to offset the otherwise negative impact of inflation on its
operations.
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BALDWIN TECHNOLOGY COMPANY, INC
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
4.1 Baldwin Technology Company, Inc. Second Amended and
Restated 1986 Stock Option Plan (filed herewith)
27 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K. There were no reports on Form 8-K
filed for the three months ended September 30, 1994.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BALDWIN TECHNOLOGY COMPANY, INC.
BY s\ William J. Lauricella
Treasurer and
Chief Financial Officer
Dated: November 04, 1994
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