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 December 31, 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 January 31, 1997
Class A Common Stock
$0.01 par value 15,289,881
Class B Common Stock
$0.01 par value 1,835,883
Total number of pages in this document 14
BALDWIN TECHNOLOGY COMPANY, INC.
INDEX
Page
Part I Financial Information
Consolidated Balance Sheet -
December 31, 1996 and June 30, 1996 1
Consolidated Statement of Income -
Three months and six months ended
December 31, 1996 and 1995 2
Consolidated Statement of Changes in
Shareholders' Equity - Six months
ended December 31, 1996 3
Consolidated Statement of Cash Flows -
Six months ended December 31, 1996 and 1995 4-5
Notes to Consolidated Financial Statements 6-8
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9-12
Part II Other Information
Item 4 Submission of Matters to a Vote of
Security Holders 13
Item 6 Exhibits and Reports on Form 8-K 13
Signatures 14
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)
December 31, June 30,
1996 1996
ASSETS
CURRENT ASSETS:
Cash $ 7,404 $ 9,781
Short-term securities 1,976 13
Accounts receivable trade, net of allowance for
doubtful accounts of $2,059 ($2,503 at June 30, 1996) 42,488 53,894
Notes receivable, trade 14,495 9,827
Inventories 28,335 42,049
Prepaid expenses and other 6,860 8,724
Total current assets 101,558 124,288
MARKETABLE SECURITIES, at cost:
Cost $700 ($742 at June 30, 1996) 860 984
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land and buildings 3,347 7,995
Machinery and equipment 7,739 10,176
Furniture and fixtures 6,156 5,746
Leasehold improvements 1,322 1,280
Capital leases 7,046 7,192
25,610 32,389
Less: Accumulated depreciation and amortization 17,601 19,075
Net property, plant and equipment 8,009 13,314
PATENTS, TRADEMARKS AND ENGINEERING DRAWINGS at cost,
less accumulated amortization of $4,300 ($3,957 at
June 30, 1996) 5,320 5,414
GOODWILL, less accumulated amortization of $6,977
($12,218 at June 30, 1996) 32,313 64,381
OTHER ASSETS 10,772 8,959
TOTAL ASSETS $158,832 $217,340
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Loans payable $ 13,022 $ 9,704
Current portion of long-term debt 6,391 492
Accounts payable, trade 10,862 17,500
Notes payable, trade 13,070 10,793
Accrued salaries, commissions, bonus and profit-sharing 6,285 9,769
Customer deposits 6,962 6,686
Accrued and withheld taxes 1,682 2,780
Income taxes payable 5,153 5,557
Other accounts payable and accrued liabilities 16,198 14,957
Total current liabilities 79,625 78,238
LONG-TERM LIABILITIES:
Long-term debt 20,593 33,576
Other long-term liabilities 5,292 8,470
Total long-term liabilities 25,885 42,046
Total liabilities 105,510 120,284
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 (deficit) earnings (602) 44,149
Cumulative translation adjustment 2,338 49
Unrealized gain on investments net of $82,000 of
deferred taxes ($124,000 at June 30, 1996) 78 118
Less: Treasury stock, at cost:
Class A - 1,085,802 shares (818,156 at June 30, 1996)
Class B - 164,117 shares (164,117 at June 30, 1996) (5,861) (4,629)
Total shareholders' equity 53,322 97,056
COMMITMENTS ------ ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $158,832 $217,340
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 of dollars except per share data)
(Unaudited)
For the three months For the six months
ended December 31, ended December 31,
1996 1995 1996 1995
Net sales $61,094 $65,816 $118,635 $118,651
Cost of goods sold 41,859 44,258 80,818 79,946
Gross Profit 19,235 21,558 37,817 38,705
Operating expenses:
General and administrative 6,501 7,506 13,030 12,966
Selling 5,453 6,691 10,808 12,077
Engineering 3,699 3,580 7,310 6,397
Research and development 1,786 1,748 3,616 2,971
Provision for loss on
the disposition of
Misomex (Note 3) 46,036 46,036
Restructuring Charge (Note 4) 3,000 3,000
63,475 22,525 80,800 37,411
Operating (loss) income (44,240) (967) (42,983) 1,294
Other (income) expense
Interest expense 898 1,080 1,808 2,018
Interest income (96) (162) (208) (249)
Other income, net (357) (112) (927) (541)
445 806 673 1,228
(Loss) income before taxes (44,685) (1,773) (43,656) 66
Provision for income taxes 622 564 1,095 1,410
Net loss $(45,307) $(2,337) $(44,751) $ (1,344)
Net loss per common
and common equivalent share $ (2.62) $ (0.13) $ (2.58) $ (0.07)
Weighted average number of
shares outstanding 17,298 18,132 17,329 17,981
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)
Capital
Class A Class B Contributed Retained Cumulative Unrealized
Common Stock Common Stock in Excess (Deficit) Translation Gain on Treasury Stock
Shares Amount Shares Amount of Par Earnings Adjustment Investments Shares Amount
Balance at June 30, 1996 16,391,683 $164 2,000,000 $20 $57,185 $44,149 $49 $118 (982,273)$(4,629)
Net loss for the six months (44,751)
Purchase of treasury stock (139,400) (432)
Stock received in the settle-
-ment of an indemnification
claim made under the Acrotec
Stock Purchase Agreement (128,246) (800)
Unrealized loss on
available for sale
securities, net of tax (40)
Translation adjustment 2,289
Balance at December 31, 1996 16,391,683 $164 2,000,000 $20 $57,185 $ (602) $ 2,338 $ 78 (1,249,919) $(5,861)
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 six months
ended December 31,
1996 1995
Cash Flows from operating activities:
Loss from operations $(44,751) $(1,344)
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization 2,549 2,303
Accrued retirement pay 448 236
Provision for losses on accounts receivable 212 (41)
Provision for loss on the disposition of Misomex 46,036
Restructuring charge 3,000
Changes in assets and liabilities net of
effects from the disposition in 1996 and
acquisition in 1995 -
Accounts and notes receivable, net (3,699) 6,042
Inventories 2,786 (3,370)
Prepaid expenses and other 667 1,152
Customer deposits 856 (41)
Accrued compensation (2,364) (1,073)
Accounts and notes payable, trade (268) (82)
Income taxes payable (362) (619)
Accrued and withheld taxes (266) 295
Other accounts payable and accrued liabilities 930 (2,344)
Interest payable 184 76
Net cash provided by operating activities 2,958 4,190
Cash flows from investing activities:
Acquisitions of subsidiaries, net of cash acquired (4,798)
Additions of property, net (712) (5,189)
Additions of patents, trademarks and drawings, net (292) (171)
Other assets (224) (441)
Net cash used by investing activities (1,228) (10,599)
Cash flows from financing activities:
Long-term borrowings 3,777 10,334
Long-term debt repayment (8,483) (6,683)
Short-term borrowings 6,218 3,545
Short-term debt repayment (2,498) (4,584)
Principal payments under capital lease
obligations (130) (220)
Other long-term liabilities (497) (474)
Treasury stock purchased (432) (419)
Stock options exercised 120
Net cash (used) provided by financing activities (2,045) 1,619
Effects of exchange rate changes (99) (432)
Net decrease in cash and
cash equivalents (414) (5,222)
Cash and cash equivalents at beginning of year 9,794 13,189
Cash and cash equivalents at end of period $ 9,380 $ 7,967
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 six months
ended December 31,
1996 1995
(in thousands)
Cash paid during the period for:
Interest $ 1,624 $ 1,942
Income taxes $ 1,599 $ 2,074
Supplemental schedule of non-cash investing and financing activities:
For the six months ended December 31, 1996:
The Company recorded a provision for the disposition of its Misomex
pre-press operations in a non-cash transaction in the amount of
$46,036,000. In conjunction with the disposition the related assets
and liabilities of the pre-press operations were reduced to fair value
less the estimated costs of disposal and recorded in "Other assets".
(See Note 3 - Notes to Consolidated Financial Statements.)
The Company reclassified $6,250,000 of its 8.17% Senior Notes to
"Current portion of long-term debt" from "Long-term debt" as the first
scheduled installment became current.
The Company entered into capital lease agreements of $1,942 for the
six months ended December 31, 1996.
For the six months ended December 31, 1995:
The Company acquired the capital stock of Acrotec AB and subsidiaries
(Acrotec) in a purchase transaction for consideration of $7,848,000
($5,660,000 in cash and 350,000 shares of the Company's Class A Common
Stock). The fair value of the acquired assets excluding goodwill was
$16,915,000 and the liabilities assumed were $12,539,000. The excess
of the purchase price over the net assets acquired of $3,472,000 was
recorded as goodwill.
A restructuring charge was expensed during the second quarter of the
fiscal year in a non-cash transaction of $3,000,000, recorded as a
current liability in "Other accounts payable and accrued liabilities".
See Note 4 in Notes to Consolidated Financial Statements.
The Company entered into capital lease agreements of $49,315 for the
six months ended December 31, 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.
- 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, and control 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 and six
month periods ended December 31, 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 and six month periods ended December
31, 1996 and 1995, net income was divided by the total of the weighted
average number of common shares outstanding and common stock
equivalents, in order to calculate net income per share. Common stock
equivalents for the three month periods ended December 31, 1996 and
1995 consisted of no (0) shares and 116,228 shares, respectively, for
stock options. The weighted average number of common and common
equivalent shares outstanding for the three month periods ended
December 31, 1996 and 1995 were 17,298,381 and 18,132,011,
respectively. Common stock equivalents for the six month periods
ended December 31, 1996 and 1995 consisted of no (0) shares and
137,277 shares, respectively, for stock options. For the six month
periods ended December 31, 1996 and 1995 the weighted average number
of common and common equivalent shares were 17,328,710 and 17,980,517,
respectively. Common stock equivalents calculated for fully diluted
earnings per share were not materially different from those calculated
for primary.
Note 2 - Inventories:
Inventories consist of the following:-
December 31, June 30,
1996 1996
Raw material $14,459,000 $19,443,000
In process 7,962,000 14,236,000
Finished goods 5,914,000 8,370,000
$28,335,000 $42,049,000
Inventories decreased $411,000 due to translation effects of
exchange from June 30, 1996 to December 31, 1996 and decreased in
total by $10,517,000 due to the planned disposition of Misomex (See
Note 3 - Notes to Consolidated Financial Statements); $4,464,000,
$1,596,000 and $4,457,000 in raw materials, work in process and
finished goods, respectively.
Note 3 - Disposition of Misomex pre-press operations:
As previously indicated in the Company's Annual Report to
Shareholders, the Company was evaluating several options with regard
to its Misomex pre-press operations. During the quarter ended
December 31, 1996 the Company wrote down the net assets of its Misomex
operation to their estimated fair values concurrent with the Company's
decision to dispose of such operations. On February 10, 1997, the
Company signed a Letter of Intent with an investor group to sell
substantially all the assets of its Misomex pre-press operations for a
price of $4,000,000 plus the assumption of certain liabilities. The
transaction is subject to the results of due diligence, the execution
of a definitive purchase agreement and certain other contingencies.
Upon closing, Baldwin will retain a fifteen percent (15%) interest in
the Misomex operation.
- 6 -
Under the terms of the Letter of Intent the proceeds of the sale
are expected to be received in the form of a nine percent (9%)
subordinated note with a term of seven years carrying a one-year
moratorium on interest payments and with level annual principal
payments beginning at the end of year four.
Based upon the terms of the Letter of Intent, the Company valued
the pre-press business at fair value less the estimated costs of
disposal by recording a charge of $46,036,000 for the quarter ended
December 31, 1996. This charge included $30,819,000 of goodwill,
$24,885,000 of net current and non-current assets, the discount to
present value of the note receivable, accruals for estimated
professional fees and other estimated disposal costs. The net
realizable value of the pre-press operations is reflected in "Other
assets" in the amount of $1,912,000 in the December 31, 1996
Consolidated Balance Sheet.
The following proforma condensed Consolidated Statement of Income
of the Company reflects the removal of the results of the Company's
pre-press operations for the six month period ended December 31, 1996
and the fiscal year ended June 30, 1996, including provision for loss
on disposal.
Six
months ended Year ended
December 31, June 30,
1996 1996
Net sales $104,274,000 $226,069,000
Gross profit 33,178,000 73,193,000
Operating expenses 29,009,000 60,938,000
Provision for loss on
disposal of Misomex 46,036,000
Restructuring charge 3,000,000
Operating (loss) income (41,867,000) 9,256,000
Other expenses 714,000 1,641,000
Pre tax (loss) income $(42,581,000) $ 7,615,000
Note 4 - Restructuring Reserves:
A restructuring reserve was charged to income for the quarter
ended December 31, 1995 in the amount of $3,000,000. The reserve was
established in order to accrue the costs associated with a planned
workforce rationalization of the Company's German operations as well
as to accrue for dealer claims associated with changes made to the
European dealer network and distribution system.
Since December 31, 1995, charges of $543,000 have been made
against the severance reserve. At the time the severance benefits
were accrued, management expected the restructuring would take place
over a twelve month period due to German law restrictions regarding
employee terminations. Two factors have affected the utilization of
this reserve. As is customary in Germany, the Company's first actions
were to terminate those employees with the least seniority as the
required notice period is shorter. These employees also tend to have
lower severance costs since the severance cost is a function of both
salary level and duration of employment. In addition, certain of the
process changes being implemented in the German operations are behind
schedule which affect the pace of terminations. Charges to the
severance reserve for the three month period ended December 31, 1996
were $35,000. There has been no movement in the reserve for dealer
claims as the parties have been unable to negotiate a settlement and
the matter is likely to be resolved in the courts. Restructuring
reserves, except for the long-term portion of the excess facility
sublease subsidy of $103,000 recorded in "Other long-term
liabilities", were included in "Other accounts payable and accrued
liabilities".
- 7 -
Restructuring reserves consist of the following:-
December 31, June 30,
1996 1996
Severance $ 957,000 $1,052,000
Dealer Claims 1,500,000 1,500,000
Excess facility sublease
subsidy 193,000 263,000
$2,650,000 $2,815,000
Note 5 - Common Stock:
Stock Options:-
On November 22, 1996, five (5) eligible non-employee Directors of
the Company were automatically granted non-qualified options for a
total of 4,470 shares of Class A Common Stock and 530 shares of Class
B Common Stock under the Company's 1990 Directors' Stock Option Plan
at exercise prices of $2.5625 and $3.20 per share, respectively, the
fair market values on the date of grant. Restrictions, as described
in the Company's 1991 Proxy Statement, are similar to the 1986 Stock
Option Plan, as amended and restated (the "1986 Plan"), with the
exception of the dates of exercise, vesting and termination.
On October 15, 1996, the Board of Directors adopted, subject to
stockholder approval, the 1996 Stock Option Plan (the "1996 Plan").
The 1996 Stock Plan was approved on November 19, 1996 at the Company's
Annual Meeting under the terms and conditions as set forth in Exhibit
A to the Company's Proxy Statement dated October 16, 1996. No options
have been granted under the 1996 Plan. On October 14, 1996 the
Company's 1986 Stock Option Plan, as amended and restated, terminated.
On October 7, 1996 the Board of Directors granted non-qualified
options to purchase 352,500 shares of the Company's Class A Common
Stock and 120,000 shares of Class B Common Stock to certain executives
under the Company's 1986 Plan at exercise prices of $3.00 and $3.75
per share, respectively, the fair market values on the date of grant.
The options granted are otherwise identical with regard to
restrictions on options previously granted.
- 8 -
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.
Six Months Ended December 31, 1996 vs. Six Months
Ended December 31, 1995.
Net sales of $118,635,000 for the six months ended December 31,
1996 were flat as compared to $118,651,000 for the six months ended
December 31, 1995. Currency rate fluctuations attributable to the
Company's overseas operations decreased net sales by $4,710,000 (85.7%
of which relates to a weaker Japanese Yen). The Acrotec acquisition
added $7,735,000 to sales for the current six month period. Product
volume changes were primarily responsible for the remainder of the
difference. In terms of local currency and after excluding the impact
of acquisitions, sales generally decreased in the European Sector.
Sales were down 19.3% in Germany and were down 10.0% in Sweden. In
the Asian Sector, local currency sales increased by 38.7% in Japan and
decreased in Australia. In the Americas Sector, net sales decreased
by 13.2%.
Gross profit for the six month period ended December 31, 1996 was
$37,817,000 (31.9% of net sales) as compared to $38,705,000 (32.6% of
net sales) for the six month period ended December 31, 1995, a
decrease of $888,000 or 2.3%. Gross profit decreased by $1,328,000 on
fluctuations in currency rates. Acquisitions added $2,630,000 to
gross profit. The remainder of the difference was 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
the effects of lower sales levels in the Americas Sector and in
Germany and weaker margins at Misomex, the effects of which were
partially offset by increased sales of products with stronger
contribution rates in Japan.
Selling, general and administrative expenses were $23,838,000
(20.1% of net sales) for the six month period ended December 31, 1996
as compared to $25,043,000 (21.1% of net sales) for the same period of
the prior year, a decrease of $1,205,000 or 4.8%. Currency rate
fluctuations decreased these expenses by $601,000 and acquisitions
increased these expenses by $1,347,000. General and administrative
expenses were lower primarily due to cost savings achieved through the
consolidation of facilities and reduced staff. Selling expenses
declined due to lower staffing and generally lower expenses related to
sales volume changes in the Americas and Europe. Other operating
expenses, before the provision for loss on the disposition of Misomex
and the loss on restructuring charges (See Notes 3 and 4 - Notes to
Consolidated Financial Statements) increased by $1,558,000 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 $355,000. The remainder of the increase in
other operating expenses related primarily to increased engineering
and research and development project costs and personnel.
Interest expense for the six month period ended December 31, 1996
was $1,808,000 as compared to $2,018,000 for the six month period
ended December 31, 1995. Currency rate fluctuations decreased
interest expense by $187,000 while acquisitions added $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 $208,000 and
$249,000 for the six month periods ended December 31, 1996 and
December 31, 1995, respectively. Currency rate fluctuations decreased
interest income by $48,000 and acquisitions increased interest income
by $21,000 for the current period. Other income increased from
$541,000 to $927,000 and included foreign currency transaction gains
(losses) of $236,000 and $(8,000) for the six month periods ended
December 31, 1996 and 1995, respectively with the remainder of the
change due to increased royalty income. The effects of currency rate
fluctuations decreased other income by $(68,000) for the current
period.
- 9 -
The Company's effective tax rate was 46% on income before the
provision for loss on the disposition of Misomex (See Note 3 - Notes
to Consolidated Financial Statements) for the six month period ended
December 31, 1996, as compared to 46% on income before restructuring
charges (See Note 4 - Notes to Consolidated Financial Statements) for
the six month period ended December 31, 1995. Currency rate
fluctuations decreased the provision for income taxes by $123,000 for
the current period. The current period's effective tax rate reflects
the impact of foreign source income which is generally taxed at
significantly higher rates than domestic income. No tax benefit was
recorded for the six month periods ended December 31, 1996 or 1995 on
either the provision for loss on the disposition of Misomex or the
charge for restructuring due to the Company's tax loss carryforward
positions in Europe.
Net loss for the six month period ended December 31, 1996 was
$(44,751,000) versus a net loss of $(1,344,000) for the six month
period ended December 31, 1995, or $(2.58) and $(0.07) per share,
respectively. Acquisitions decreased the net loss by $254,000 while
currency rate fluctuations increased the net loss by $144,000 for the
current period. Weighted average equivalent shares outstanding during
the six month periods ended December 31, 1996 and December 31, 1995
were 17,328,710 and 17,980,517, respectively. For the six months
ended December 31, 1996 and December 31, 1995, the net losses due to
the provision for the disposition of Misomex and restructuring charges
were $(46,036,000) or $(2.66) per share and $(3,000,000) or $(0.17)
per share, respectively.
The following condensed income statement data sets forth the
consolidated results of the Misomex pre-press business for the three
and six month periods ended December 31, 1996 and 1995.
For the three months For the six months
ended December 31, ended December 31,
1996 1995 1996 1995
Net sales $8,206 $10,161 $14,361 $16,835
Costs and expenses 8,614 9,624 15,477 16,523
Operating (loss) income (408) 537 (1,116) 312
Other (income) expense, net (98) 92 (41) 234
(Loss) income before taxes $ (310) $ 445 $(1,075) $ 78
Three Months Ended December 31, 1996 vs. Three Months
Ended December 31, 1995.
Net sales for the three months ended December 31, 1996 decreased by
$4,722,000 (7.2%) to $61,094,000 from $65,816,000 for the three months
ended December 31, 1995. Currency rate fluctuations attributable to the
Company's overseas operations decreased net sales by $2,536,000 for the
current period. Product volume was primarily responsible for the remainder
of the change. In terms of local currency, sales were down throughout the
European Sector; by 10.3% in Germany, by 6.9% in the United Kingdom and by
9.6% in Sweden. Local currency Asian Sector sales increased 50.0% in
Japan. In the Americas Sector, net sales decreased 24.2% for the period.
Gross profit for the three month period ended December 31, 1996 was
$19,235,000 (31.5% of net sales) as compared to $21,558,000 (32.8% of net
sales) for the three month period ended December 31, 1995, a decrease of
$2,323,000 or 10.8%. Gross profit decreased by $654,000 due to currency
rate fluctuations with the remainder due primarily 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 the effects of lower
sales volumes in the Americas and European Sectors and weaker margins at
Misomex, the effects of which were partially offset by increased sales of
products with stronger contribution rates in Japan.
- 10 -
Selling, general and administrative expenses were $11,954,000 (19.6%
of net sales) for the three month period ended December 31, 1996 as
compared to $14,197,000 (21.6% of net sales) for the same period of the
prior year, a decrease of $2,243,000 or 15.8% in these expenses of which
currency rate fluctuations decreased these expenses by $300,000 in the
current period. General and administrative expenses were lower primarily
due to cost savings achieved through the consolidation of facilities,
reduced staffing and lower legal and consulting fees. Selling expenses
declined due to lower staffing, trade shows and generally lower expenses
related to sales volume changes in the Americas and Europe. Other
operating expenses, before the provision for loss on the disposition of
Misomex and the loss on restructuring charges (See Notes 3 and 4 - Notes to
Consolidated Financial Statements) increased by $157,000 or 2.9% over the
same period of the prior year. Increases in both engineering and research
and development expenses relate to increased staffing. Currency rate
fluctuations decreased other operating expenses by $228,000 for the current
period.
Interest expense for the three month period ended December 31, 1996
was $898,000 as compared to $1,080,000 for the three month period ended
December 31, 1995. Currency rate fluctuations decreased interest expense
by $120,000 with the remaining decrease due primarily to lower levels of
long-term debt for the current period. Interest income was $96,000 and
$162,000 for the three month periods ended December 31, 1996 and December
31, 1995, respectively. Other income increased primarily due to foreign
currency transaction gains versus (losses) of $328,000 and ($158,000) for
the three month periods ended December 31, 1996 and 1995, respectively.
Currency rate fluctuations decreased other income by $25,000 for the
period.
The Company's effective tax rate was 46% on income before the
provision for loss on the sale of Misomex (See Note 3 - Notes to
Consolidated Financial Statements) for the three month period ended
December 31, 1996, as compared to 46% on income before restructuring
charges (See Note 4 - Notes to Consolidated Financial Statements) for the
three month period ended December 31, 1995. Currency rate fluctuations
decreased the provision for income taxes by $16,000 for the current period.
The current period's effective tax rate reflects the impact of foreign
source income which is generally taxed at significantly higher rates than
domestic income. No tax benefit was recorded for the three month periods
ended December 31, 1996 or 1995 on either the provision for loss on the
disposition of Misomex or the charge for restructuring due to the Company's
tax loss carryforward positions in Europe.
Net loss for the three month period ended December 31, 1996 was
$(45,307,000) versus a net loss of $(2,337,000) for the three month period
ended December 31, 1995, or $(2.62) and $(0.13) per share, respectively.
Currency rate fluctuations increased the net loss by $18,000 for the
current period. Weighted average equivalent shares outstanding during the
three month periods ended December 31, 1996 and December 31, 1995 were
17,298,381 and 18,132,011, respectively. For the three months ended
December 31, 1996 and December 31, 1995, the net losses due to the
provision for the disposition of Misomex and the net loss due to
restructuring charges were $(46,036,000) or $(2.66) per share and
$(3,000,000) or $(0.17) per share, respectively.
Liquidity and Capital Resources at December 31, 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 and a three-year
$20,000,000 Revolving Credit Agreement (the "Revolver") with NationsBank of
North Carolina, 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 $1,000,000 plus 50% of the Company's net income
after January 1, 1997. In addition, the Company was required to pledge
certain of its shares of its domestic subsidiaries as collateral for both
the Senior Notes and the Revolver.
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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 December 31,
1996, this ratio was 1.5 to 1.
The Net cash used by investing activities as reflected in the
Consolidated Statement of Cash Flows decreased by $9,371,000 from
$10,599,000 at December 31, 1995 to $1,228,000 at December 31, 1996
primarily due to the fact that the prior year amount included the purchase
of a Swedish manufacturing facility for SEK 28,840,000 ($4,335,000) and the
purchase of Acrotec AB and Subsidiaries, net of cash acquired, of
$4,798,000. The Net cash used by financing activities increased by
$3,664,000 to $(2,045,000) at December 31, 1996 from net cash provided of
$1,619,000 at December 31, 1995. The difference is primarily caused by
greater repayments under the Revolver ($750,000) and the fact that the
prior year amounts included new borrowings needed to finance the purchase
of the Swedish Manufacturing Facility ($2,766,000).
The Company's working capital decreased from $49,178,000 at December
31, 1995, to $21,933,000 at December 31, 1996, a decrease of $27,245,000 or
55.4%. The principal reasons for the decrease in working capital were the
write-down of $12,764,000 of net working capital in conjunction with the
planned disposition of the pre-press business and the reclassification of
$8,965,000 of long-term debt to current liabilities. Currency rate
fluctuations decreased working capital by $1,279,000 for the current
period. Increases in trade accounts and notes payable, income taxes
payable and other current liabilities more than offset the increases in
cash and trade receivables net of inventory decreases. The Company's
working capital decreased by $24,117,000 or 52.4% from $46,050,000 at
June 30, 1996 to $21,933,000 at December 31, 1996. The principal reasons
for the decrease in working capital were the same as noted above. Currency
rate fluctuations decreased working capital by $369,000 for the current
period. Decreases in accrued compensation were more than offset by
increases in other current liabilities and more than offset the change in
current assets where increases in receivables were offset by decreases in
inventory.
The Company maintains relationships with foreign and domestic banks
which have extended credit facilities to the Company totaling $37,361,000,
including amounts available under the Revolver. As of December 31, 1996,
the Company had outstanding $13,248,000 under these lines of credit, of
which $113,000 is classified as long-term debt. Total debt levels as
reported on the balance sheet at December 31, 1996 are $545,000 lower than
they would have been if June 30, 1996 exchange rates had been used. The
reported amounts for "Current portion of long-term debt" and "Long-term
Debt" at December 31, 1996 exclude $290,000 and $1,945,000, respectively,
of the Misomex mortgage note payable that has been reclassified to "other
assets" in conjunction with the planned disposition of the pre-press
business.
Net capital expenditures made to meet the normal business needs of the
Company for the six months ended December 31, 1996 and December 31, 1995,
including commitments for capital lease payments, were $1,004,000 and
$1,025,000, 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 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders was held on
November 19, 1996.
(c) A brief description of matters voted upon and the results of
the voting follows:
Proposal 1 - To elect three Class III Directors to serve for
three-year terms or until their respective successors are elected and
qualify.
SCHEDULE OF VOTES CAST FOR EACH DIRECTOR
Total Vote For Total Vote Withheld
Each Director From Each Director
Class A & B
Akira Hara 30,077,409 65,845
John T. Heald, Jr. 30,074,109 69,145
Ralph Roy Whitney, Jr. 30,065,509 77,745
Proposal 2 - To approve the Company's 1996 Stock Option Plan.
Total votes Broker
Total Votes For Against Abstentions Non-Votes
23,102,861 2,844,625 72,682 4,123,085
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.26 Third Amendment to Amended and Restated Revolving Credit
Agreement dated as of February 14, 1997 by and among Baldwin Technology
Company, Inc. and its subsidiaries, Baldwin Americas Corporation and Baldwin
Technology Limited, and NationsBank NA as agent and Lender, and Bank of
Boston Connecticut (filed herewith).
10.27 Amendment to Note Agreement dated as of February 14, 1997
by and among Baldwin Technology Company, Inc. and its subsidiaries,
Baldwin Americas Corporation and Baldwin Technology Limited, and John
Hancock Mutual Life Insurance Company, John Hancock Variable Life Insurance
Company and John Hancock Life Insurance Company of America (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 December 31, 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
Treasurer and
Chief Financial Officer
Dated: February 14, 1997
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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: February 14, 1997
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