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, 1995 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, 1995 Class A Common Stock $0.01 par value 16,197,827 Class B Common Stock $0.01 par value 1,835,883 Total number of pages in this document 10 BALDWIN TECHNOLOGY COMPANY, INC. INDEX Page Part I Financial Information Consolidated Balance Sheet - September 30, 1995 and June 30, 1995 1 Consolidated Statement of Income - Three months ended September 30, 1995 and 1994 2 Consolidated Statement of Changes in Shareholders' Equity - Three months ended September 30, 1995 3 Consolidated Statement of Cash Flows - Three Months ended September 30, 1995 and 1994 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, 1995 1995 ASSETS CURRENT ASSETS: Cash $ 12,271 $ 12,719 Short-term securities 966 470 Accounts receivable trade, net of allowance for doubtful accounts of $2,622 ($2,897 at June 30, 1995) 41,925 46,478 Notes receivable, trade 11,756 16,916 Inventories 41,188 39,824 Prepaid expenses and other 6,889 8,496 Total current assets 114,995 124,903 MARKETABLE SECURITIES, at cost: Market $936 ($971 at June 30, 1995) 847 971 PROPERTY, PLANT AND EQUIPMENT, at cost: Land and buildings 6,484 2,348 Machinery and equipment 9,134 8,941 Furniture and fixtures 5,773 5,855 Leasehold improvements 1,718 1,734 Capital leases 7,722 7,837 30,831 26,715 Less: Accumulated depreciation and amortization 19,627 19,538 Net property, plant and equipment 11,204 7,177 PATENTS, TRADEMARKS AND ENGINEERING DRAWINGS at cost, less accumulated amortization of $3,420 ($3,243 at June 30, 1995) 5,326 5,355 GOODWILL, less accumulated amortization of $10,214 ($9,734 at June 30, 1995) 61,359 61,477 OTHER ASSETS 9,425 9,887 TOTAL ASSETS $203,156 $209,770 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Loans payable $ 9,754 $ 9,188 Current portion of long-term debt 453 160 Accounts payable, trade 13,340 14,895 Notes payable, trade 9,392 12,637 Accrued salaries, commissions, bonus and profit-sharing 8,079 9,680 Customer deposits 5,495 5,410 Accrued and withheld taxes 1,982 2,321 Income taxes payable 3,487 4,389 Other accounts payable and accrued liabilities 10,919 12,648 Total current liabilities 62,901 71,328 LONG-TERM LIABILITIES: Long-term debt 33,207 29,868 Other long-term liabilities 9,386 9,686 Total long-term liabilities 42,593 39,554 Total liabilities 105,494 110,882 SHAREHOLDERS' EQUITY: Class A Common Stock, $.01 par, 45,000,000 shares authorized, 16,041,683 shares issued (16,011,586 at June 30, 1995) 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 55,001 54,881 Retained earnings 42,624 41,631 Cumulative translation adjustment 1,942 4,174 Less: Treasury stock, at cost: Class A - 193,856 shares (174,256 at June 30, 1995) Class B - 164,117 shares (164,117 at June 30, 1995) (2,085) (1,978) Total shareholders' equity 97,662 98,888 COMMITMENTS ------ ------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $203,156 $209,770 The accompanying notes to consolidated financial statements are an integral part of these statements. - 1 - BALDWIN TECHNOLOGY COMPANY, INC. CONSOLIDATED STATEMENT OF INCOME (in thousands, except per share data) (Unaudited) For the three months ended September 30, 1995 1994 Net sales $52,835 $47,639 Cost of goods sold 35,688 31,280 Gross Profit 17,147 16,359 Operating expenses: General and administrative 5,460 5,419 Selling 5,386 4,760 Engineering 2,817 2,716 Research and development 1,223 1,339 14,886 14,234 Operating income 2,261 2,125 Other (income) expense Interest expense 938 821 Interest income (87) (113) Other income, net (429) (253) 422 455 Income before taxes 1,839 1,670 Provision for income taxes 846 835 Net income $ 993 $ 835 Net income per common and common equivalent share $ 0.06 $ 0.05 Weighted average number of shares outstanding 17,829 17,916 The accompanying notes to consolidated financial statements are an integral part of these statements. - 2 - BALDWIN TECHNOLOGY COMPANY INC. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (in thousands, except share data) (Unaudited) (PART 1 OF 2 PART TABLE) Capital Class A Class B Contributed Common Stock Common Stock in Excess Shares Amount Shares Amount of Par Balance at June 30, 1995 16,011,586 $160 2,000,000 $20 $54,881 Net income for the three months Stock options exercised 30,097 120 Purchase of treasury stock Translation adjustment Balance at September 30, 1995 16,041,683 $160 2,000,000 $20 $55,001 BALDWIN TECHNOLOGY COMPANY INC. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (in thousands, except share data) (Unaudited) (PART 2 OF 2 PART TABLE) Cumulative Treasury Stock Retained Translation -------------------- Earnings Adjustment Shares Amount -------- ----------- --------- -------- Balance at June 30, 1995 $41,631 $4,174 (338,373) $(1,978) Net income for the three months 993 Stock options exercised Purchase of treasury stock (19,600) (107) Translation adjustment (2,232) -------- ---------- --------- -------- Balance at September 30, 1995 $42,624 $ 1,942 (357,973) $(2,085) -------- ---------- --------- -------- -------- ---------- --------- -------- The accompanying notes to consolidated financial statements are an integral part of these statements. - 3 - 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, 1995 1994 Cash Flows from operating activities: Income from operations $ 993 $ 835 Adjustments to reconcile net income to net cash provided by operating activities - Depreciation and amortization 1,061 1,161 Accrued retirement pay 70 85 Provision for losses on accounts receivable (9) 19 Changes in assets and liabilities net of effects from subsidiary purchase - Accounts and notes receivable, net 6,053 (6,556) Inventories (1,874) (1,845) Prepaid expenses and other 1,412 384 Customer deposits 92 1,877 Accrued compensation (1,286) (208) Accounts and notes payable, trade (2,739) (1,861) Income taxes payable (858) (604) Accrued and withheld taxes (331) (127) Other accounts payable and accrued liabilities (1,931) (144) Interest payable 404 503 Net cash provided (used) by operating activities 1,057 (6,481) Cash flows from investing activities: Additions of property, net (4,490) (356) Additions of patents, trademarks and drawings, net (99) (70) Other assets (144) 158 Net cash used by investing activities (4,733) (268) Cash flows from financing activities: Long-term borrowings 4,779 1,000 Long-term debt repayment (788) (1,198) Short-term borrowings 1,671 984 Short-term debt repayment (894) Stock options exercised 120 4 Principal payments under capital lease obligations (74) (129) Treasury stock purchased (107) (236) Other long-term liabilities (510) 26 Net cash provided by financing activities 4,197 451 Effects of exchange rate changes (473) 162 Net increase (decrease) in cash and cash equivalents 48 (6,136) Cash and cash equivalents at beginning of year 13,189 18,534 Cash and cash equivalents at end of period $13,237 $12,398 The accompanying notes to consolidated financial statements are an integral part of these statements. - 4 - BALDWIN TECHNOLOGY COMPANY, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) Supplemental disclosures of cash flow information: For the three months ended September 30, 1995 1994 (in thousands) Cash paid during the period for:- Interest $ 335 $ 318 Income taxes $1,748 $1,450 Supplemental schedule of non-cash investing and financing activities: For the three months ended September 30, 1995:- - --------------------------------------------- There were no significant non-cash transactions for the three months ended September 30, 1995. The Company entered into capital lease agreements of $14,629 for the three months ended September 30, 1995. 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 doubtful accounts. 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. 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. - 5 - 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, 1995 are not necessarily indicative of the results that may be expected for the year ending June 30, 1996. 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, 1995 and 1994, net income was divided by the total of the weighted average number of common shares outstanding and common stock equivalents, which consisted of 158,326 shares for stock options (105,184 shares in 1994), 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, 1995 and 1994 were 17,829,023 and 17,915,744 respectively. Common stock equivalents calculated for fully diluted earnings per share were not significantly different from those calculated for primary earnings per share. Note 2 - Inventories: Inventories consist of the following:- September 30, June 30, 1995 1995 ------------ ----------- Raw material $19,475,000 $17,897,000 In process 12,751,000 10,602,000 Finished goods 8,962,000 11,325,000 ----------- ----------- $41,188,000 $39,824,000 ----------- ----------- ----------- ----------- Inventories decreased $510,000 due to translation effects of exchange from June 30, 1995 to September 30, 1995. - 6 - 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, 1995 vs Three Months Ended September 30, 1994 - ----------------------------------------------------- Net sales for the three months ended September 30, 1995 increased by $5,196,000, or 10.9% to $52,835,000 from $47,639,000 for the three months ended September 30, 1994. Currency rate fluctuations attributable to the Company's overseas operations accounted for an increase of $1,979,000 in net sales for the current period. Product volume accounted for the remainder of the change. In terms of local currency, sales were up throughout the European Sector. Sales were up 21.8% in Germany, were up 3.0% in Sweden and were up 26.4% in the United Kingdom. Local currency Asian Sector sales were down 8.8% in Japan, down 32.3% in China and were down 46.9% in Hong Kong. Sales in Australia were up A$ 3,180,000 from A$ 60,000 in September 30, 1994. In the Americas Sector, net sales increased 1.9%. Gross profit for the three month period ended September 30, 1995 was $17,147,000 (32.5% of net sales), as compared to $16,359,000 (34.3% of net sales) for the three month period ended September 30, 1994, an increase of $788,000 or 4.8%. Currency rate fluctuations increased gross profit by $508,000 with the remainder due to volume changes, product mix and other factors. Gross profit was lower as a percentage of sales when compared to the prior year due primarily to decreased sales in Japan and sales of products that contribute lower gross profit in the remainder of the Asia Pacific Sector. Selling, general and administrative expenses were $10,846,000 (20.5% of net sales), for the three month period ended September 30, 1995 as compared to $10,179,000 (21.4% of net sales) for the same period of the prior year. The increase of $667,000 or 6.6% in these expenses includes currency rate fluctuations which increased these expenses by $304,000 in the current period. Other operating expenses decreased $152,000 over the same period of the prior year after currency rate fluctuations of $137,000, which increased other operating expenses, were removed. Interest expense for the three month period ended September 30, 1995 was $938,000 as compared to $821,000 for the three month period ended September 30, 1994. Increased interest expense resulted from higher levels of working capital related indebtedness in Europe and an increase in long term debt incurred to purchase a previously leased manufacturing facility in Sweden. Currency rate fluctuations increased interest expense by $68,000 for the current period. Interest income was $87,000 and $113,000 for the three month periods ended September 30, 1995 and September 30, 1994, respectively. Other income and expense includes net foreign currency transaction gains of $150,000 and $103,000 for the three months ended September 30, 1995 and 1994, respectively. Currency rate fluctuations decreased other income by $15,000 for the current period. The Company's effective tax rate on income before taxes was 46% for the three month period ended September 30, 1995, as compared to 50% for the three month period ended September 30, 1994. The difference in effective rates is due primarily to increased domestic income. The current period's effective rate reflects the impact of foreign source income which is generally taxed at substantially higher rates than domestic income. Net income for the three month period ended September 30, 1995 increased by 18.9% to $993,000 from $835,000 for the three month period ended September 30, 1994, or to $0.06 and $0.05 per share, respectively. Currency rate fluctuations increased net income by $4,000 for the current period. Weighted average equivalent shares outstanding during the three month periods ended September 30, 1995 and September 30, 1994 were 17,829,023 and 17,915,744, respectively. - 7 - Liquidity and Capital Resources at September 30, 1995 - ----------------------------------------------------- Liquidity and Working Capital - ----------------------------- The Company's long-term debt includes $25,000,000 of 8.17% senior notes (the "Senior Notes") due October 29, 2000 and a three-year $20,000,000 Revolving Credit Agreement (the "Revolver") with NationsBank of North Carolina, as Agent, which matures in November, 1996. 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 its 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, 1995, this ratio was 1.83 to 1. Net cash used by investing activities increased by $4,465,000 from $268,000 at September 30, 1994 to $4,733,000 at September 30, 1995 primarily due to the purchase of a previously leased Swedish manufacturing facility for SEK 28,400,000 ($4,100,000). Net cash provided by financing activities increased by $3,746,000 to $4,197,000 at September 30, 1995 from $451,000 at September 30, 1994 primarily due to the difference in long term debt borrowing and repayment activity of which SEK 18,400,000 ($2,647,000) relates to financing the above building purchase with the remainder related to increased working capital requirements. The Company's working capital increased from $46,996,000 at September 30, 1994, to $52,094,000 at September 30, 1995, an increase of $5,098,000 or 10.8%. Currency rate fluctuations increased working capital by $2,544,000. The remainder of the increase was due primarily to the effects of increases in inventories and trade receivables, the effects of which were offset in part by increases in bank loans and trade accounts payable. The Company's working capital decreased by $1,481,000 or 2.8% from $53,575,000 at June 30, 1995 to $52,094,000 at September 30, 1995. Currency rate fluctuations decreased working capital by $2,085,000. Decreases in receivables, net of inventory increases, were more than offset by decreases in trade accounts and other payables. The Company maintains relationships with foreign and domestic banks which have extended credit facilities to the Company totaling $35,636,000, including amounts available under the Revolver. As of September 30, 1995, the Company had outstanding $12,140,000 under these lines of credit, of which $2,386,000 is classified as long-term debt. Total debt levels as reported on the balance sheet at September 30, 1995 are $570,000 lower then they would have been if June 30, 1995 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, 1995 and September 30, 1994, including commitments for capital lease payments, were $489,000 and $426,000, 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. - 8 - BALDWIN TECHNOLOGY COMPANY, INC PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. 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, 1995. - 9 - 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 2, 1995 - 10 -