-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EWJ6q7ICcJZqCsfHZShFRqtLmQPCcLTKniUCchE7Un7MTFkRdXMhAIjijg7YqRHA 1tlS1q8HYXh0kKXLljoC1w== 0000950123-01-001604.txt : 20010224 0000950123-01-001604.hdr.sgml : 20010224 ACCESSION NUMBER: 0000950123-01-001604 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20010220 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BALDWIN TECHNOLOGY CO INC CENTRAL INDEX KEY: 0000805792 STANDARD INDUSTRIAL CLASSIFICATION: PRINTING TRADES MACHINERY & EQUIPMENT [3555] IRS NUMBER: 133258160 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-09334 FILM NUMBER: 1549890 BUSINESS ADDRESS: STREET 1: 40 RICHARDS AVENUE STREET 2: ONE NORWALK WEST CITY: NORWALK STATE: CT ZIP: 06854 BUSINESS PHONE: 2038387470 MAIL ADDRESS: STREET 1: 40 RICHARDS AVENUE CITY: NORWALK STATE: CT ZIP: 06854 10-Q/A 1 y45727e10-qa.txt BALDWIN TECHNOLOGY COMPANY, INC. 1 FORM 10-Q/A 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, 2000 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.) Twelve Commerce Drive, Shelton, Connecticut 06484 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 203-402-1000 (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 and 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, 2000 ----- ------------------------------- Class A Common Stock $0.01 par value 12,914,647 Class B Common Stock $0.01 par value 1,810,883
2 BALDWIN TECHNOLOGY COMPANY, INC. INDEX
Page ---- Part I Financial Information Item 1 Financial Statements - Restated Consolidated Balance Sheets at September 30, 2000 (unaudited) and June 30, 2000 1-2 Consolidated Statements of Income for the three months ended September 30, 2000 (unaudited) and 1999 (unaudited) 3 Consolidated Statements of Changes in Shareholders' Equity for the three months ended September 30, 2000 (unaudited) 4 Consolidated Statements of Cash Flows for the three months ended September 30, 2000 (unaudited) and 1999 (unaudited) 5 - 6 Notes to Consolidated Financial Statements (unaudited) 7 - 11 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 12 - 15 Item 3 Quantitative and Qualitative Disclosures About Market Risk 16 Part II Other Information Item 6 Exhibits and Reports on Form 8-K 16 Signatures 17
3 BALDWIN TECHNOLOGY COMPANY, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) ASSETS
September 30, 2000 June 30, 2000 ------------------ ----------------- (Unaudited) (Restated-See Note 1) CURRENT ASSETS: Cash and cash equivalents $ 10,728 $ 7,914 Accounts receivable trade, net of allowance for doubtful accounts of $1,606 ($1,705 at June 30, 2000) 34,613 36,369 Notes receivable, trade 8,520 9,449 Inventories 33,936 37,354 Prepaid expenses and other 8,513 7,312 --------- --------- Total Current Assets 96,310 98,398 --------- --------- MARKETABLE SECURITIES: Cost $794 ($805 at June 30, 2000) 776 843 --------- --------- PROPERTY, PLANT AND EQUIPMENT, at cost: Land and buildings 3,865 4,056 Machinery and equipment 3,705 5,064 Furniture and fixtures 4,613 4,991 Leasehold improvements 148 244 Capital leases 1,309 1,422 --------- --------- 13,640 15,777 Less: Accumulated depreciation and amortization (6,903) (8,305) --------- --------- Net Property, Plant and Equipment 6,737 7,472 --------- --------- PATENTS, TRADEMARKS AND ENGINEERING DRAWINGS at cost, less accumulated amortization of $5,623 ($6,394 at June 30, 2000) 3,155 3,873 GOODWILL, less accumulated amortization of $10,222 ($10,352 at June 30, 2000) 28,144 29,561 DEFERRED TAXES 14,020 14,878 OTHER ASSETS 7,936 5,010 --------- --------- TOTAL ASSETS $ 157,078 $ 160,035 ========= =========
The accompanying notes to consolidated financial statements are an integral part of these statements. 1 4 BALDWIN TECHNOLOGY COMPANY, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, 2000 June 30, 2000 ------------------ ------------- (Unaudited) (Restated-See Note 1) CURRENT LIABILITIES: Loans payable $ 6,759 $ 4,801 Current portion of long-term debt 139 6,515 Accounts payable, trade 11,203 14,188 Notes payable, trade 10,810 10,358 Accrued salaries, commissions, bonus and profit-sharing 5,406 6,151 Customer deposits 8,671 8,965 Accrued and withheld taxes 1,667 2,195 Income taxes payable 4,322 2,168 Other accounts payable and accrued liabilities 16,746 14,836 --------- --------- Total current liabilities 65,723 70,177 --------- --------- LONG TERM LIABILITIES: Long-term debt 15,228 11,882 Other long-term liabilities 7,289 7,607 --------- --------- Total long-term liabilities 22,517 19,489 --------- --------- Total liabilities 88,240 89,666 --------- --------- SHAREHOLDERS' EQUITY: Class A Common Stock, $.01 par, 45,000,000 shares authorized, 16,458,849 shares issued 165 165 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 57,496 57,496 Retained Earnings 26,266 25,629 Cumulative translation adjustment (1,840) (380) Unrealized gain (loss) on investments net of $8 of deferred taxes ($15 at June 30, 2000) (10) 23 Less: Treasury stock, at cost: Class A - 3,538,602 shares (3,191,302 at June 30, 2000) Class B - 189,117 shares (13,259) (12,584) --------- --------- Total shareholders' equity 68,838 70,369 --------- --------- COMMITMENTS AND CONTINGENCIES --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 157,078 $ 160,035 ========= =========
The accompanying notes to consolidated financial statements are an integral part of these statements. 2 5 BALDWIN TECHNOLOGY COMPANY, INC. CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
For the three months ended September 30, -------------------- 2000 1999 ------- ------- (Restated-See Note 1) Net Sales $ 44,960 $ 45,496 Cost of goods sold 30,807 31,961 -------- -------- Gross Profit 14,153 13,535 -------- -------- Operating Expenses: General and administrative 5,332 5,002 Selling 4,208 4,289 Engineering 2,990 3,071 Research and Development 1,207 943 -------- -------- 13,737 13,305 -------- -------- Operating income 416 230 -------- -------- Other (income) expense: Interest expense 424 525 Interest income (67) (87) Royalty income (1,339) (957) Other expense, net 417 259 -------- -------- (565) (260) -------- -------- Income before income taxes 981 490 Provision for income taxes 344 176 -------- -------- Net income $ 637 $ 314 ======== ======== Net income per share: Basic and diluted $ 0.04 $ 0.02 ======== ======== Weighted average shares outstanding: Basic 15,019 16,222 ======== ======== Diluted 15,019 16,222 ======== ========
The accompanying notes to consolidated financial statements are an integral part of these statements. 3 6 BALDWIN TECHNOLOGY COMPANY, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARES) (UNAUDITED) (RESTATED - SEE NOTE 1)
Capital Class A Class B Con- Common Stock Common Stock tributed ------------ ------------ in Excess Shares Amount Shares Amount Of Par ------- ------ ------ ------ ------ Balance at June 30, 2000 16,458,849 $ 165 2,000,000 $ 20 $ 57,496 Net income for the three months ended September 30, 2000 Translation adjustment Unrealized loss on available-for-sale securities, net of tax Comprehensive loss Purchase of treasury stock ---------- ------- --------- --------- --------- Balance at September 30, 2000 16,458,849 $ 165 2,000,000 $ 20 $ 57,496 ========== ======== ========= ========= =========
Unrealized Cumulative Gain (Loss) Treasury Stock Comprehensive Retained Translation on -------------- Income Earnings Adjustment Investments Shares Amount (Loss) -------- ---------- ----------- ------ ------ ------ Balance at June 30, 2000 $ 25,629 $ (380) $ 23 (3,380,419) $ (12,584) Net income for the three months ended September 30, 2000 637 $ 637 Translation adjustment (1,460) (1,460) Unrealized loss on available-for-sale securities, net of tax (33) (33) ----------- Comprehensive loss $ (856) =========== Purchase of treasury stock (347,300) (675) ---------- ----------- ---------- ---------- ----------- Balance at September 30, 2000 $ 26,266 $ (1,840) $ (10) (3,727,719) $ (13,259) ========= ========== ========== ========== ===========
The accompanying notes to consolidated financial statements are an integral part of these statements 4 7 BALDWIN TECHNOLOGY COMPANY, INC. CONSOLIDATED STATEMENTS OF CASH FLOW (IN THOUSANDS) (UNAUDITED)
For the three months ended September 30, ------------------------------ 2000 1999 (Restated-See Note 1) Cash Flows from operating activities: Net Income $ 637 $ 314 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 871 958 Accrued retirement pay 188 170 Provision for losses on accounts receivable 0 9 Loss from disposition of business 650 0 Changes in assets and liabilities: Accounts and notes receivables, net (1,199) 1,040 Inventories (1,823) (692) Prepaid expenses and other (1,221) (151) Other Assets (118) (120) Customer deposits 1,765 1,346 Accrued compensation (60) (689) Accounts and notes payable, trade (638) (893) Income taxes payable 145 (126) Accrued and withheld taxes (408) (371) Other accounts payable and accrued liabilities 1,695 (632) Interest payable (28) 308 ------ ------ Net cash provided by operating activities 456 471 ------- ------ Cash flows from investing activities: Proceeds from disposition of business, net 3,985 0 Additions of property, net (350) (454) Additions of patents, trademarks and drawings, net (67) (118) ------- ------ Net cash provided (used) by investing activities 3,568 (572) ------- ------ Cash flows from financing activities: Long-term borrowings 11,005 6,305 Long-term debt repayments (13,676) (5,064) Short-term borrowings 2,253 698 Short-term debt repayments (19) (671) Principal payments under capital lease obligations (3) (64) Other long-term liabilities (485) 385 Treasury stock purchased (65) (486) ------- ------- Net cash (used) provided by financing activities (990) 1,103 ------- ------- Effects of exchange rate changes (220) 1,098 ------- ------- Net increase in cash and cash equivalents 2,814 2,100 Cash and cash equivalents at beginning of year 7,914 10,673 ------- ------- Cash and cash equivalents at end of period $10,728 $12,773 ======= =======
The accompanying notes to consolidated financial statements are an integral part of these statements. 5 8 BALDWIN TECHNOLOGY COMPANY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
For the three months ended September 30, -------------------------- 2000 1999 ---- ---- Cash paid during the period for: Interest $396 $217 Income Taxes $458 $327
The Company did not enter into any capital lease agreements for either of the three month periods ended September 30, 2000 or 1999. DISCLOSURE OF ACCOUNTING POLICY: For purposes of the statement of cash flows, the Company considers all highly liquid instruments (cash and short term securities) 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. 6 9 BALDWIN TECHNOLOGY COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION: 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 accompanying unaudited consolidated financial statements include the accounts of Baldwin and its subsidiaries and have been prepared in accordance with generally accepted accounting principles for interim financial information and in compliance with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These financial statements reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary to present a fair statement of the results for the interim periods. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company's latest annual report on Form 10-K for the year ended June 30, 2000. Operating results for the three months ended September 30, 2000 are not necessarily indicative of the results that may be expected for the year ending June 30, 2001. All significant intercompany transactions have been eliminated in consolidation. This quarterly report on Form 10-Q/A is being filed as a result of an error in the application of the newly issued Financial Accounting Standards Board Statement No. 133 ("FAS 133") "Accounting for Derivative Instruments and Hedging Activities". Effective July 1, 2000, the Company adopted FAS 133 and had previously recognized a cumulative effect adjustment increasing net income by $426,000. Upon reviewing this calculation, the Company erred in calculating the effect of adopting FAS 133 and has now determined that the adoption of FAS 133 did not result in a cumulative effect type adjustment on income. Accordingly, the financial statements for the quarter ended September 30, 2000 have been restated to correct this error. The impact of this change is to reduce the previously reported amounts of cumulative effect of a change in accounting principle, net income, retained earnings and cumulative translation adjustment by $426,000, and basic and diluted income per share by $0.03. NOTE 2 - EARNINGS PER SHARE: Basic earnings per share, is computed by dividing net income for the period by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution securities that could share in the earnings of an entity, and is computed by dividing net income for the period by the weighted average number of common shares outstanding plus potentially dilutive common stock equivalents. The weighted average shares outstanding used to compute diluted income per share include zero shares for each of the three months ended September 30, 2000 and 1999, which represent outstanding options to purchase the Company's common stock. Options to purchase the Company's common stock in the amount of 1,920,000 and 2,182,000 were not included in the computation of diluted earnings per share for the three months ended September 30, 2000 and 1999 respectively, because the exercise prices were greater than the average market price of the common stock for the respective periods. 7 10 NOTE 3 - INVENTORIES: Inventories consist of the following:-
September 30, 2000 June 30, 2000 ------------------ ------------- (Unaudited) Raw material $17,645,000 $19,559,000 In process 8,193,000 9,633,000 Finished Goods 8,098,000 8,162,000 ----------- ----------- $33,936,000 $37,354,000 =========== ===========
Inventories decreased by $1,144,000 due to translation effects of foreign currency from June 30, 2000 to September 30, 2000. NOTE 4 - DERIVATIVES: In June 1998, the Financial Accounting Standards Board issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). The effective date of FAS 133 was July 1, 2000 for the Company. FAS 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. Management of the Company anticipates that, due to its limited use of derivative instruments, the adoption of FAS 133 will not have a significant effect on the Company's results of operations in future periods. At July 1, 2000, the adoption of FAS 133, did not result in a cumulative effect type adjustment on income. A pre-tax gain of $345,000 was recognized during the quarter related to a derivative which did not qualify as a hedge and was settled after the end of the quarter for no additional material gain or loss. The balance of the Company's derivative financial instruments are not material. On occasion the Company holds certain derivative instruments that are designated and qualify as hedging instruments pursuant to FAS 133. The objective of these derivatives is to eliminate or minimize the impact of transaction effects of currency rate fluctuations on the Company's consolidated financial results. If a derivative is designated as a fair value hedge, the changes in the fair value of the derivative and the hedged item attributable to the hedged risk are recognized in earnings. If the derivative is designated as a cash flow hedge, the effective portions of changes in fair value of the derivative are recorded in other comprehensive income ("OCI") and are recognized in the income statement when the hedged item affects earnings. Ineffectiveness related to cash flow hedges is recognized in earnings. When deemed necessary, the Company uses forward contracts to manage the above objectives, whenever forward purchase and sale contracts or firm commitments designated in a currency other than the functional currency, may have a material impact on the cash flow from the transaction due to exchange rate fluctuations. When they qualify under FAS 133, these forward contracts are designated as cash flow hedging instruments. Hedge ineffectiveness, determined in accordance with FAS 133 had no material impact on earnings for the three months ended September 30, 2000. The entire $345,000 pre-tax gain was the result of a derivative instrument, that did not qualify as a hedge pursuant to FAS 133. 8 11 NOTE 5 -- PROVISION FOR LOSS ON THE DISPOSITION OF PRE-PRESS OPERATIONS: In June 1997, the Company sold all of the outstanding shares of its former Pre-Press Operations ("PPO") to Kaber Imaging, Inc. ("Kaber" or "Buyer"). The Company recorded a loss on this disposition in the amount of $42,407,000 in the fiscal year ended June 30, 1997. When the Company acquired the PPO, in July 1991, the Company assumed the existing guarantees that were being provided by the previous owner. The guarantees consisted of two parts: 1.) a guarantee to Forsakring Pensiongaranti ("FPG"), a Swedish pension obligation surety bond firm, in the form of a guarantee bond covering the quasi Swedish government retirement plan, and 2.) a direct guarantee to a group of individual employees who were members of a separate plan. The assumption by Kaber of the pension obligations was unconditional. The purchase and sale agreement for the sale of the PPO to Kaber, in June, 1997 included provisions for the Buyer to assume all pension liabilities related to the PPO, to use their best efforts to gain the release of the Company from the guarantees and to reimburse the Company for any and all costs incurred by the Company associated with the guarantees. At the time that PPO was sold to Kaber, management conducted due diligence of Kaber and believed that Kaber had the financial ability to satisfy these guarantees. Subsequent to the sale of the PPO to Kaber, Kaber and related domestic subsidiaries filed for protection in the U.S. under Chapter 11 of the bankruptcy code in February 1999 which caused similar filings in Kaber's foreign subsidiaries including Sweden. During the period of July, 1997 through February, 1999, Kaber failed to gain the release of the Company from the guarantees which remained in place. In March 1999, The Company was contacted by FPG, the surety bond holder, to fulfill the Company's guarantee of the pension obligation. Neither Kaber, nor their Swedish subsidiaries, which were in liquidation, possessed the financial capability to fulfill its obligation. Based on the demands from FPG, and representatives of the members of the separate plan and Kaber's bankruptcy, the Company recognized the liability in its financial results by establishing a reserve in the amount of $2,400,000 in the third quarter of fiscal year ended June 30, 1999. The Company has made payments to FPG of $1,567,000 and is in the process of resolving the amount of the benefits due to the members of the separate group, for which the remaining $833,000 accrual was established. Accordingly, the remaining balance of $833,000 is included as a current liability in "Other accounts payable and accrued liabilities". NOTE 6 -- RESTRUCTURING CHARGE AND RELATED RESERVE: For the year ended June 30, 2000, the Company recorded a pre-tax restructuring charge in the amount of $5,664,000. This charge was recorded in order to account for the estimated costs associated with the planned consolidation of production into certain facilities, resulting in a reduction in total employment, primarily in the United States. Prior to the restructuring, the Company was managed in a decentralized manner through geographically dispersed autonomous business units. Given that many of the Company's significant customers have been consolidating on a global basis, management decided to restructure the Company along functional lines on a global basis. Rather than have product development and production activities at each decentralized business unit, the restructuring plan included the centralization of these activities into single product line development and production facilities. Products that were previously being produced at multiple facilities, are being consolidated with similar product lines at existing facilities. The corporate headquarters were vacated and relocated to the Shelton facility in order to take advantage of the space created by the downsizing previously noted. 9 12
Remaining Charge Remaining Reserve Against Reserve June 30, 2000 Reserve September 30, 2000 ------------- ------- ------------------ (In thousands) Severance $ 2,886 $ 128 $ 2,758 Facility lease termination 1,132 79 1,053 Other costs 500 500 ------- ------- ------- TOTAL PROGRAM $ 4,518 $ 207 $ 4,311 ======= ======== =======
Severance costs will be paid out through December 2001, the majority of which will be paid by July 2001. Facility lease termination costs will be paid out through July 2003. The category other costs are expected to be paid out by December 31, 2000. As of September 30, 2000, $3,546,000 is included in "Other accounts payable and accrued liabilities" and $765,000 is included in "Other long-term liabilities". NOTE 7 - BUSINESS SEGMENT INFORMATION: The Company's two reportable segments are the Graphic Products and Controls Group ("GPC"), and the Material Handling Group ("MHG"). The GPC segment includes products such as cleaning systems, water systems and other equipment designed to enhance the quality of the printed material and improve the productivity of the printing process. The MHG segment includes products which handle the materials supplied to the press and automate the handling of the printed material. The all other category is comprised of the Print On-Demand Group, which operates in the short-run digital printing market, and other activities. The accounting policies of the segments are the same as those described in the summary of significant accounting policies in the Annual Report on Form 10-K for the fiscal year ended June 30, 2000. A segment's financial performance is primarily evaluated based on the operating profit of the segment, which include inter-segment sales. The tables below present information about reportable segments for the three months ended September 30, 2000, and 1999 (in thousands):
Three months ended September 30, ------------------ Net sales: 2000 1999 ---- ---- Graphic Products and Control Groups $31,326 $32,795 Material Handling Group 13,900 13,789 All other 74 18 ------- ------- Total segments 45,300 46,602 Inter-segment sales (340) (1,106) ------- ------- Total Net Sales $44,960 $45,496 ======== =======
Three months ended September 30,_ ------------------ Operating income (loss): 2000 1999 ---- ---- Graphic Products and Controls Group $ 970 $1,456 Material Handling Group 1,468 69 All other (115) (137) ------ ------ Total segments 2,323 1,388 Corporate (1,907) (1,158) ------ ------ Total operating income 416 230 Interest expense, net (357) (438) Royalty income, net 1,339 957 Other income (expense), net (417) (259) ------ ------- Income before income taxes $ 981 $ 490 ====== ======
10 13
September 30, June 30, 2000 2000 ------------- ----------- Identifiable assets: Graphic Products and Control Groups $90,557 $92,285 Material Handling Group 38,636 45,526 All other 1,061 1,150 -------- -------- Total segments 130,254 138,961 Corporate 26,824 21,074 -------- -------- Total identifiable assets $157,078 $160,035 ========= ========
NOTE 8 - SALE OF BUSINESS: On September 27, 2000, the Company sold substantially all the assets of its Baldwin Stobb Division ("BSD") to Systems Technology, Inc., a new company formed by the management of BSD. The consideration paid for the transaction, subject to certain post-closing adjustments, is the sum of (i) $6,750,000; minus (ii) all payments received (net of disbursements paid) on behalf of BSD for the period July 1, 2000 through September 27, 2000 amounting to $2,155,000; plus (iii) $175,000 in consideration for income tax obligations to be received at a later date. The total consideration received by the Company included 307,000 shares of the Company's Class A Common Stock valued at the average fair market price of the Company's Class A Common Stock for the ten days immediately prior to closing ($1.9875 per share). The Company recorded a pre-tax loss of $650,000, including associated costs, as a result of this transaction. NOTE 9 - REVOLVING CREDIT FACILITY: On October 31, 2000 the Company reached an agreement on a $35,000,000 revolving credit facility (the "Credit Facility") with Fleet National Bank and First Union National Bank. Under this agreement the Company has $20,000,000 available with an additional $15,000,000 to become available upon obtaining certain guarantees of some of the Company's wholly-owned subsidiaries which are required to complete the entire agreement. The Credit Facility is subject to certain financial covenants and is collateralized by a substantial portion of the Company's assets. The Credit Facility allows the Company to borrow, subject to certain limitations, at variable interest rates ranging from 1.50% to 2.50% over LIBOR for a period of 3 years. The Company utilized $11,750,000 of the initial borrowings under the Credit Facility to retire the previously existing debt with Bank of America. 11 14 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 factors which have affected the Company's financial position and consolidated financial statements. On September 27, 2000, the Company sold a business in its material handling group. As a result, the revenues and corresponding expenses attributable to the divested operation are included in these consolidated financial statements only for the period the operation is owned by the Company. The effects of this transaction on financial statement amounts are discussed below where significant. FORWARD-LOOKING STATEMENTS Except for the historical information contained herein, the following statements and certain other statements contained herein are based on current expectations. Such statements are forward-looking statements that involve a number of risks and uncertainties. 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 include, but are not limited to the following: (i) the ability to obtain, maintain and defend challenges against valid patent protection on certain technology, primarily as it relates to the Company's cleaning systems, (ii) material changes in foreign currency exchange rates versus the U.S. Dollar, (iii) changes in the mix of products and services comprising revenues, (iv) a decline in the rate of growth of the installed base of printing press units and the timing of new press orders, (v) general economic conditions, either domestically or in foreign locations, (vi) the ultimate realization of certain trade receivables and the status of ongoing business levels with the Company's large OEM customers, and (vii) competitive market influences. Additional factors are set forth in Exhibit 99 to Form 10-K for the year ended June 30, 2000, which should be read in conjunction herewith. THREE MONTHS ENDED SEPTEMBER 30, 2000 VS THREE MONTHS ENDED SEPTEMBER 30, 1999 CONSOLIDATED RESULTS Net sales for the three months ended September 30, 2000 decreased by $536,000, or 1.2%, to $44,960,000 from $45,496,000 for the three months ended September 30, 1999. Currency rate fluctuations attributable to the Company's overseas operations decreased net sales by $1,313,000 in the current period. Otherwise, sales would have increased by $777,000. This increase is primarily the result of the increased sales levels of cleaning and water product systems in Sweden and increased material handling sales from the operation sold during the current period. In terms of local currency, and as compared to the same period in the prior year, net sales decreased by 37.6% in Sweden and by 6.8% in Japan. Sales increased by 51.6% in the United Kingdom, by 13.9% in Germany and by 9.1% in the United States. Gross profit for the three month period ended September 30, 2000 was $14,153,000 (31.5% of net sales), as compared to $13,535,000 (29.7% of net sales) for the three month period ended September 30, 1999, an increase of $618,000 or 4.6%. Currency rate fluctuations decreased gross profit by $463,000 in the current period. Otherwise gross profit would have increased by $1,081,000 in the current period. Gross profit was higher due primarily to increased efficiencies as a result of the Company's restructuring efforts, primarily within the United States material handling group. 12 15 Selling, general and administrative expenses amounted to $9,540,000 (21.2% of net sales), for the three month period ended September 30, 2000 as compared to $9,291,000 (20.4% of net sales) for the same period in the prior year, an increase of $249,000 or 2.7%. Currency rate fluctuations decreased these expenses by $272,000 in the current period. Otherwise, selling, general and administrative expenses would have increased by $521,000. Selling expenses increased by $99,000 which primarily related to increased compensation and travel costs, while general and administrative expenses increased by $422,000 due primarily to increased compensation costs. Engineering and research and development expenses increased by $183,000 over the same period in the prior year. Currency rate fluctuations decreased these expenses by $142,000 in the current period. Otherwise, these expenses would have increased by $325,000. The increase in these expenses relates primarily to increased product development, compensation, and consulting costs. As a percentage of net sales, engineering and research and development expenses increased by 0.5% to 9.3% for the three months ended September 30, 2000 compared to 8.8% for the same period in the prior year. Interest expense for the three month period ended September 30, 2000 was $424,000 as compared to $525,000 for the three month period ended September 30, 1999. Currency rate fluctuations decreased interest expense by $48,000 in the current period. The remainder of the decrease was primarily due to reductions in the amount of long-term, fixed-rate indebtedness outstanding during the current period which was offset slightly by rising interest rates on variable-rate debt. Interest income amounted to $67,000 and $87,000 for the three month periods ended September 30, 2000 and September 30, 1999, respectively. This reduction in interest income is primarily due to decreased cash balances during the period. Currency rate fluctuations decreased interest income by $4,000 in the current period. Other expense, net includes net foreign currency transaction gains and (losses) of $314,000 and $(353,000) for the three months ended September 30, 2000 and 1999 respectively. The current period's gain includes a $345,000 gain on a derivative financial instrument that did not qualify as a hedge pursuant to FAS 133 and a $650,000 pre-tax loss on the sale of the Baldwin Stobb division. The Company's effective tax rate on income before taxes was 35.0% for the three month period ended September 30, 2000 as compared to 35.9% for the three month period ended September 30, 1999. Currency rate fluctuations decreased the provision for income taxes by $208,000 in the current period. The decrease in the current period's effective tax rate is primarily due to increased income in tax jurisdictions for which there are tax loss carryforwards available. The Company's net income amounted to $637,000 for the three months ended September 30, 2000, as compared to $314,000 for the three months ended September 30, 1999. This increase of $323,000 is primarily due to the previously noted derivative financial instrument, increased royalty income and improved gross profit margins, offset by the loss on the sale of the Baldwin Stobb division. Currency rate fluctuations decreased net income by $387,000 in the current period. Net income per share amounted to $0.04 basic and diluted for the three months ended September 30, 2000, as compared to $0.02 basic and diluted for the three months ended September 30, 1999. SEGMENT RESULTS GRAPHIC PRODUCTS AND CONTROLS GROUP Net sales for the three months ended September 30, 2000 decreased by $1,469,000, or 4.5%, to $31,326,000 from $32,795,000 for the three months ended September 30, 1999. Currency rate fluctuations attributable to the Company's overseas operations decreased net sales for the current period by $1,631,000, otherwise, net sales would have increased by $162,000 in the current period. This increase is primarily the result of increased sales levels of cleaning and spray dampening systems. 13 16 Operating income amounted to $970,000 (3.1% of net sales) for the three months ended September 30, 2000, as compared to $1,456,000 (4.4% of net sales) for the same period in the prior year, a decrease of $486,000. Currency rate fluctuations decreased the current year's operating income by $66,000, otherwise operating income would have decreased by $420,000. This decrease is primarily the result of the overall decrease in sales levels discussed above, coupled with increased research and development expenses in the current period. MATERIAL HANDLING GROUP Net sales for the three months ended September 30, 2000 increased by $111,000, or 0.80%, to $13,900,000 from $13,789,000 for the three months ended September 30, 1999. Currency rate fluctuations attributable to the Company's overseas operations decreased net sales for the current period by $313,000, otherwise net sales would have increased by $424,000. This increase is primarily the result of increased sales levels of post-press material handling equipment, from $3,516,000 in the prior year to $5,107,000 in the current year period. Operating income amounted to $1,468,000 (10.6% of net sales) for the three months ended September 30, 2000, as compared to $69,000 (0.5% of net sales) for the same period in the prior year, an increase of $1,399,000. Currency rate fluctuations increased the current year's operating profit by $16,000. The remaining increase is primarily the result of increased sales volumes, principally from the Baldwin Stobb division sold during the current period, and the increased efficiencies as a result of the Company's restructuring efforts primarily in the United States. LIQUIDITY AND CAPITAL RESOURCES AT SEPTEMBER 30, 2000 LIQUIDITY AND WORKING CAPITAL As of September 30, 2000, the Company maintained a $25,000,000 Revolving Credit Agreement (the "Revolver") with Bank of America, N.A., as agent which matures on October 31, 2001. The Company had fully paid its 8.17% senior notes (the "Senior Notes"). On October 31, the Company entered into a new agreement with Fleet National Bank and First Union National Bank for a $35,000,000 Revolving Credit Facility (the "Credit Facility"). The Credit Facility replaced the Revolver, and requires the Company to maintain certain financial covenants, and to obtain guarantees from all of the Company's wholly-owned subsidiaries. Until all guarantees have been obtained, the availability of the Credit Facility is limited to $20,000,000. This is expected to occur by December 31, 2000. The Company's working capital increased by $2,366,000 or 8.4% from $28,221,000 at June 30, 2000 to $30,587,000 at September 30, 2000. Currency rate fluctuations decreased working capital by $1,135,000 in the current period. The primary reasons for the increase in working capital were increases in cash and prepaid expenses and reductions in trade accounts payable and the current portion of long-term debt. These increases in working capital were partially offset by reductions in inventories and trade and notes receivable and increases in loans payable and interest payable. Net cash provided by investing activities amounted to $4,178,000 for the three months ended September 30, 2000 as compared to net cash used by investing activities of $572,000 for the three months ended September 30, 1999. This increase is primarily the result of the sale of the business in the current period. Net cash used by financing activities amounted to $1,600,000 for the three months ended September 30, 2000 as compared to net cash provided by financing activities of $1,103,000 for the three months ended September 30, 1999. This decrease in cash provided by financing activities was primarily due to the payoff of the Senior Notes during the current period. 14 17 The Company maintains relationships with foreign and domestic banks, which have extended credit facilities to the Company. As of September 30, 2000, these credit facilities total $44,660,000 including amounts available under the Revolver. The Company had outstanding $20,050,000 under these lines of credit, of which $13,956,000 is classified as long-term debt. Total debt levels as reported on the balance sheet at September 30, 2000 are $635,000 lower than they would have been if June 30, 2000 exchange rates had been used. 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. EURO CONVERSION Effective January 1, 1999, the "Euro" has become the new common currency for 11 countries of the European Community ("EC") (including Germany and France where the Company has operations). Other member states (including the United Kingdom and Sweden where the Company also has operations) may join in future years. Beginning January 1, 1999, transactions in the Euro became possible, with the national currencies continuing to circulate until January 1, 2002, when the Euro will become the functional currency for these 11 countries. During the transition period from January 1, 1999 to January 1, 2002, payments can be made using either the Euro or the national currencies at fixed exchange rates. Beginning January 1, 1999, the Company began conducting business with customers in both the Euro and the respective national currency. Systems and processes that are initially impacted by this dual currency requirement are customer billing and receivables, payroll and cash management activities, including cash collections and disbursements. To accomplish compliance, the Company is making the necessary systems and process changes and is also working with its financial institutions on various cash management issues. The Company's German operations have begun recording all business transactions in the Euro effective July 1, 2000. In France, the remaining affected country in which the Company operates, the Company currently has new systems and processes in place to accommodate the recording of all business transactions in the Euro, however, the actual recording will not begin until July 1, 2001. Management currently believes that the costs associated with implementing and completing the Euro conversion, as well as business and market implications, if any, associated with the Euro conversion, will not be material to its results of operations or financial condition in any year or in the aggregate. The competitive impact of increased cross-border price transparency, however, is uncertain, both with respect to products sold by the Company, as well as products and services purchased by the Company. The Company's ongoing efforts with regard to the Euro conversion, and those of its significant customers and suppliers, including financial institutions may, at some time in the future, reveal as yet unidentified or not fully understood issues that may not be addressable in a timely fashion, or that may cause unexpected competitive or market effects, all contrary to the foregoing statements. This issue, if not resolved favorably, could have a material adverse effect on the Company's results of operations or financial condition in a future period. 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. 15 18 ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK: A discussion of market risk exposures is included in Part II Item 7A, "Quantitative and Qualitative Disclosures About Market Risk" of the Company's Annual Report on Form 10-K for the year ended June 30, 2000. There have been no material changes during the three months ended September 30, 2000. PART II: OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule (Restated - filed herewith). (b) Reports on Form 8-K. There were no reports on Form 8-K filed for the three months ended September 30, 2000. 16 19 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\ James M. Rutledge -------------------------------- Vice President, Chief Financial Officer and Treasurer Dated: February 20, 2001 17 EX-27 2 y45727ex27.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS IN THE COMPANY'S CURRENT REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH UNAUDITED FINANCIAL STATEMENTS. 3-MOS JUN-30-2001 SEP-30-2000 10,728 0 44,739 1,606 33,936 96,310 13,640 6,903 157,078 65,723 0 0 0 185 68,653 157,078 44,960 44,960 30,807 30,807 0 0 424 981 344 637 0 0 0 637 .04 .04
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