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, 1996
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, 1996
Class A Common Stock
$0.01 par value 15,473,727
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, 1996 and June 30, 1996 1
Consolidated Statement of Income -
Three months ended
September 30, 1996 and 1995 2
Consolidated Statement of Changes in
Shareholders' Equity - Three months
ended September 30, 1996 3
Consolidated Statement of Cash Flows -
Three Months ended
September 30, 1996 and 1995 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
CAUTIONARY STATEMENT -- This Form 10-Q may contain statements which
constitute "forward-looking" information as that term is defined in
the Private Securities Litigation Reform Act of 1995 or by the
Securities and Exchange Commission ("SEC") in its rules,
regulations and releases. Baldwin Technology Company, Inc. (the
"Company") cautions investors that any such forward-looking
statements made by the Company are not guarantees of future
performance and that actual results may differ materially from
those in the forward-looking statements. Some of the factors that
could cause actual results to differ materially from estimates
contained in the Company's forward-looking statements are set forth
in Exhibit 99 to Form 10-K for the year ended June 30, 1996.
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,
1996 1996
ASSETS
CURRENT ASSETS:
Cash $ 6,572 $ 9,781
Short-term securities 142 13
Accounts receivable trade, net of allowance for
doubtful accounts of $2,400 ($2,503 at June 30, 1996) 49,971 53,894
Notes receivable, trade 12,860 9,827
Inventories 41,083 42,049
Prepaid expenses and other 9,201 8,724
Total current assets 119,829 124,288
MARKETABLE SECURITIES, at cost:
Cost $735 ($742 at June 30, 1996) 960 984
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land and buildings 8,023 7,995
Machinery and equipment 10,327 10,176
Furniture and fixtures 5,714 5,746
Leasehold improvements 1,328 1,280
Capital leases 7,110 7,192
32,502 32,389
Less: Accumulated depreciation and amortization 19,329 19,075
Net property, plant and equipment 13,173 13,314
PATENTS, TRADEMARKS AND ENGINEERING DRAWINGS at cost,
less accumulated amortization of $4,141 ($3,957 at
June 30, 1996) 5,420 5,414
GOODWILL, less accumulated amortization of $12,712
($12,218 at June 30, 1996) 65,152 64,381
OTHER ASSETS 8,900 8,959
TOTAL ASSETS $213,434 $217,340
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Loans payable $ 13,404 $ 9,704
Current portion of long-term debt 491 492
Accounts payable, trade 13,022 17,500
Notes payable, trade 11,669 10,793
Accrued salaries, commissions, bonus and profit-sharing 8,807 9,769
Customer deposits 6,160 6,686
Accrued and withheld taxes 2,654 2,780
Income taxes payable 3,857 5,557
Other accounts payable and accrued liabilities 17,064 14,957
Total current liabilities 77,128 78,238
LONG-TERM LIABILITIES:
Long-term debt 30,520 33,576
Other long-term liabilities 8,507 8,470
Total long-term liabilities 39,027 42,046
Total liabilities 116,155 120,284
SHAREHOLDERS' EQUITY:
Class A Common Stock, $.01 par, 45,000,000 shares
authorized, 16,391,683 shares issued
(16,391,683 at June 30, 1996) 164 164
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 57,185 57,185
Retained earnings 44,705 44,149
Cumulative translation adjustment (20) 49
Unrealized gain on investments net of $107,000 of
deferred taxes ($124,000 at June 30, 1996) 110 118
Less: Treasury stock, at cost:
Class A - 894,956 shares (818,156 at June 30, 1996)
Class B - 164,117 shares (164,117 at June 30, 1996) (4,885) (4,629)
Total shareholders' equity 97,279 97,056
COMMITMENTS ------ ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $213,434 $217,340
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,
1996 1995
Net sales $57,541 $52,835
Cost of goods sold 38,959 35,688
Gross Profit 18,582 17,147
Operating expenses:
General and administrative 6,529 5,460
Selling 5,355 5,386
Engineering 3,611 2,817
Research and development 1,830 1,223
17,325 14,886
Operating income 1,257 2,261
Other (income) expense
Interest expense 910 938
Interest income (112) (87)
Other income, net (570) (429)
228 422
Income before taxes 1,029 1,839
Provision for income taxes 473 846
Net income $ 556 $ 993
Net income per common and
common equivalent share $ 0.03 $ 0.06
Weighted average number of
shares outstanding 17,359 17,829
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, 1996 16,391,683 $164 2,000,000 $20 $57,185
Net income for the three months
Purchase of treasury stock
Unrealized loss on
available for sale
securities, net of tax
Translation adjustment
Balance at
September 30, 1996 16,391,683 $164 2,000,000 $20 $57,185
BALDWIN TECHNOLOGY COMPANY INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands, except share data)
(Unaudited)
PART 2 of 2 PART TABLE
Cumulative Unrealized
Retained Translation Gain on Treasury Stock
Earnings Adjustment Investments Shares Amount
Balance at June 30, 1996 $44,149 $49 $118 (982,273) $(4,629)
Net income for the three
months 556
Purchase of treasury stock (76,800) (256)
Unrealized loss on
available for sale
securities, net of tax (8)
Translation adjustment (69)
Balance at
September 30, 1996 $44,705 $ (20) $110 (1,059,073)$(4,885)
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,
1996 1995
Cash Flows from operating activities:
Income from operations $ 556 $ 993
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization 1,282 1,061
Accrued retirement pay 209 70
Provision for losses on accounts receivable 99 (9)
Changes in assets and liabilities net of
effects from subsidiary purchase -
Accounts and notes receivable, net 464 6,053
Inventories 926 (1,874)
Prepaid expenses and other (484) 1,412
Customer deposits (524) 92
Accrued compensation (939) (1,286)
Accounts and notes payable, trade (3,406) (2,739)
Income taxes payable (1,681) (858)
Accrued and withheld taxes (123) (331)
Other accounts payable and accrued liabilities 327 (1,931)
Interest payable 521 404
Net cash (used) provided by
operating activities (2,773) 1,057
Cash flows from investing activities:
Additions of property, net (415) (4,490)
Additions of patents, trademarks and drawings, net (187) (99)
Other assets 20 (144)
Net cash used by investing activities (582) (4,733)
Cash flows from financing activities:
Long-term borrowings 3,026 4,779
Long-term debt repayment (6,099) (788)
Short-term borrowings 4,858 1,671
Short-term debt repayment (1,103) (894)
Stock options exercised 120
Principal payments under capital lease
obligations (65) (74)
Treasury stock purchased (256) (107)
Other long-term liabilities (77) (510)
Net cash provided by financing activities 284 4,197
Effects of exchange rate changes (9) (473)
Net (decrease) increase in cash and
cash equivalents (3,080) 48
Cash and cash equivalents at beginning of year 9,794 13,189
Cash and cash equivalents at end of period $ 6,714 $13,237
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,
1996 1995
(in thousands)
Cash paid during the period for:-
Interest $ 389 $ 335
Income taxes $2,273 $1,748
Supplemental schedule of non-cash investing and financing activities:
For the three months ended September 30, 1996:-
There were no significant non-cash transactions for the three months
ended September 30, 1996.
The Company did not enter into any capital lease agreements for the
three months ended September 30, 1996.
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.
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, 1996 are not
necessarily indicative of the results that may be expected for the year
ending June 30, 1997.
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, 1996 and 1995, net income was
divided by the total of the weighted average number of common shares
outstanding and common stock equivalents, which consisted of no shares for
stock options (158,326 shares in 1995), 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, 1996 and 1995 were 17,359,039
and 17,829,023, 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,
1996 1996
Raw material $16,570,000 $19,443,000
In process 19,484,000 14,236,000
Finished goods 5,029,000 8,370,000
$41,083,000 $42,049,000
Inventories decreased by $40,000 due to translation rates in effect at
September 30, 1996 when compared to rates at June 30, 1996.
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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, 1996 vs Three Months
Ended September 30, 1995.
Net sales for the three months ended September 30, 1996 increased by
$4,706,000, or 8.9% to $57,541,000 from $52,835,000 for the three months
ended September 30, 1995. Acquisitions increased net sales by $7,735,000
while currency rate fluctuations attributable to the Company's overseas
operations decreased net sales by $2,174,000 for the current period. Product
volume accounted for the remainder of the change. In terms of local
currency, sales were mixed in the European Sector. Sales were down 30.1% in
Germany, were down 10.6% in Sweden and were up 15.2% in the United Kingdom.
Local currency Asian Sector sales were up 27.6% in Japan and down in
Australia by A$ 3,128,000. In the Americas Sector, net sales increased 1.0%.
Gross profit for the three month period ended September 30, 1996 was
$18,582,000 (32.3% of net sales), as compared to $17,147,000 (32.5% of net
sales) for the three month period ended September 30, 1995, an increase of
$1,435,000 or 8.4%. Acquisitions added $2,630,000 to gross profit and
currency rate fluctuations decreased gross profit by $674,000 in the current
period. Gross profit was lower as a percentage of sales when compared to the
prior year due primarily to lower sales in Germany and weaker margins at
Misomex the effects of which were almost offset by increased sales in Japan
that carry higher gross profit rates.
Selling, general and administrative expenses were $11,884,000 (20.7% of
net sales), for the three month period ended September 30, 1996 as compared
to $10,846,000 (20.5% of net sales) for the same period of the prior year,
an increase of $1,038,000 or 9.6%. Acquisitions added $1,347,000 to these
expenses and currency rate fluctuations decreased these expenses by $301,000
in the current period. Other operating expenses increased by $1,401,000 over
the same period of the prior year. Acquisitions added $765,000 to other
operating expenses and currency rate fluctuations decreased other operating
expenses by $127,000 for the period. The remainder of the increase in other
operating expenses related primarily to increased engineering and research
and development projects.
Interest expense for the three month period ended September 30, 1996 was
$910,000 as compared to $938,000 for the three month period ended September
30, 1995. Currency rate fluctuations decreased interest expense by $67,000
while acquisitions increased interest expense by $351,000 for the current
period. Decreased interest expense resulted from lower levels of working
capital related indebtedness of non-Acrotec subsidiaries and a decrease in
long term debt. Interest income was $112,000 and $87,000 for the three month
periods ended September 30, 1996 and September 30, 1995, respectively.
Acquisitions added $21,000 to interest income and currency rate fluctuations
increased interest income by $27,000. Other income and expense includes net
foreign currency transaction (losses) gains of $(92,000) and $150,000 for the
three months ended September 30, 1996 and 1995, respectively, offset by
increases in the current period for net royalty income. Currency rate
fluctuations increased other income by $43,000 for the current period.
The Company's effective tax rate on income before taxes was 46% for the
three month periods ended September 30, 1996 and September 30, 1995. The
current period's effective rate reflects the impact of foreign source income
which is generally taxed at substantially higher rates than domestic income.
Currency rate fluctuations decreased tax expense by $107,000 for the current
period.
Net income for the three month period ended September 30, 1996 decreased
by 44.0% to $556,000 from $993,000 for the three month period ended September
30, 1995, or to $0.03 from $0.06 per share. Currency rate fluctuations
decreased net income by $126,000 and acquisitions added $254,000 to net
income for the current period. Weighted average equivalent shares
outstanding during the three month periods ended September 30, 1996 and
September 30, 1995 were 17,359,839 and 17,829,023, respectively.
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Liquidity and Capital Resources at September 30, 1996
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. The Company also has a three-year
$20,000,000 Revolving Credit Agreement (the "Revolver") with NationsBank of
North Carolina, National Association, as Agent, which matures in December,
1998. 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, 1996, this
ratio was 1.55 to 1.
Net cash used by investing activities decreased by $4,151,000 from
$4,733,000 at September 30, 1995 to $582,000 at September 30, 1996 primarily
due to the fact that the prior year amount included the purchase of a Swedish
manufacturing facility for SEK 28,400,000 ($4,100,000). Net cash provided by
financing activities decreased by $3,913,000 to $284,000 at September 30,
1996 from $4,197,000 at September 30, 1995 primarily due to the decrease in
net long-term debt borrowings versus the prior year's borrowings related to
the financing of the Swedish building purchase.
The Company's working capital decreased from $52,094,000 at September
30, 1995, to $42,701,000 at September 30, 1996, a decrease of $9,393,000 or
18.0%. Cash used to finance the Acrotec acquisition, restructuring reserves
of $3,000,000 and the reclassification of a refinancing of Yen 300,000,000
($2,679,000) of long-term debt to current bank loans in order to take
advantage of lower short term interest rates were primarily responsible for
the decrease in working capital. The Company's working capital decreased by
$3,349,000 or 7.3% from $46,050,000 at June 30, 1996 to $42,701,000 at
September 30, 1996. The primary reason for the decrease in working capital
resulted from the reclassification of a refinanced long-term debt to current
bank loans as discussed above.
The Company maintains relationships with foreign and domestic banks
which have extended credit facilities to the Company totaling $37,838,000,
including amounts available under the Revolver. As of September 30, 1996,
the Company had outstanding $15,022,000 under these lines of credit, of which
$1,618,000 is classified as long-term debt. Total debt levels as reported on
the balance sheet at September 30, 1996 are $39,000 lower then they would
have been if June 30, 1996 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, 1996 and September 30, 1995,
including commitments for capital lease payments, were $602,000 and $489,000,
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 5. Other Information
On October 28, 1996 the Company entered into a new consulting agreement
with Polestar Limited, effective as of July 1, 1996, providing for the
retention of Polestar Limited to provide consulting services to the Company
for a term of two years. In consideration of such services the Company will
pay Polestar Limited a consulting fee equal to one percent (1%) of the
Company's Consolidated net income for each of the fiscal years beginning July
1, 1996 and July 1, 1997. The new consulting agreement replaces the three
consulting agreements, dated as of January 1, 1990, between Polestar Limited
and each of Baldwin Americas Corporation, Baldwin Europe Consolidated Inc.
and Baldwin Asia Pacific Corporation, respectively, which were terminated
effective as of June 30, 1996.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
10 Material Contracts - Consulting agreement
with Polestar Limited (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, 1996.
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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 1, 1996
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EXHIBIT 10