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, 1993
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, 1994
Class A Common Stock
$0.01 par value 15,986,317
Class B Common Stock
$0.01 par value 1,994,000
Total number of pages in this document 11
<PAGE>
BALDWIN TECHNOLOGY COMPANY, INC.
INDEX
Page
Part I Financial Information
Consolidated Balance Sheet -
December 31, 1993 and June 30, 1993 1
Consolidated Statement of Income -
Three months and six months ended
December 31, 1993 and 1992 2
Consolidated Statement of Changes in
Shareholders' Equity - Six months
ended December 31, 1993 3
Consolidated Statement of Cash Flows -
Six months ended December 31, 1993 and 1992 4-5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7-9
Part II Other Information
Item 4 Submission of Matters to a Vote of
Security Holders 10
Item 6 Exhibits and Reports on Form 8-K 10
Signatures 11
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,
1993 1993
ASSETS
CURRENT ASSETS:
Cash $ 8,622 $ 12,859
Short-term interest bearing securities 3,312 6,817
Accounts receivable trade, net of allowance for
doubtful accounts of $2,117 ($1,831 at June 30, 1993) 29,103 34,455
Notes receivable trade 10,793 12,799
Inventories 35,415 33,907
Prepaid expenses and other 6,776 4,383
Total current assets 94,021 105,220
MARKETABLE SECURITIES, at cost:
(Market $866; $932 at June 30, 1993) 829 849
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land and buildings 2,166 2,119
Machinery and equipment 8,156 8,334
Furniture and fixtures 4,778 4,818
Leasehold improvement 1,582 1,574
Capital leases 6,825 7,001
23,507 23,846
Less: Accumulated depreciation and amortization 15,462 14,782
Net property, plant and equipment 8,045 9,064
PATENTS, TRADEMARKS AND ENGINEERING DRAWINGS at cost,
less accumulated amortization of $2,273 ($1,975 at
June 30, 1993) 6,125 5,924
GOODWILL, less accumulated amortization of $6,408
($5,786 at June 30, 1993) 58,428 61,831
OTHER ASSETS 7,088 5,591
TOTAL ASSETS $174,536 $188,479
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Loans payable $ 6,093 $ 9,069
Current portion of long-term debt 155 7,188
Accounts payable, trade 9,468 12,655
Notes payable, trade 12,269 13,489
Accrued salaries, commissions, bonus and profit-sharing 6,071 7,538
Customer deposits 3,534 3,447
Accrued and withheld taxes 1,518 1,859
Income taxes payable 2,724 2,676
Other accounts payable and accrued liabilities 12,007 12,885
Total current liabilities 53,839 70,806
LONG-TERM LIABILITIES:
Long-term debt 32,012 25,998
Other long-term liabilities 8,414 8,811
Total long-term liabilities 40,426 34,809
Total liabilities 94,265 105,615
SHAREHOLDERS' EQUITY:
Class A Common Stock, $.01 par, 45,000,000 shares
authorized, 16,007,373 shares issued
(16,000,707 at June 30, 1993) 160 160
Class B Common Stock, $.01 par, 4,500,000 shares
authorized, 2,000,000 shares issued 20 20
Capital contributed in excess of par value 54,824 54,795
Retained earnings 32,843 31,848
Cumulative translation adjustment (7,409) (3,792)
Less: Treasury stock, at cost:
Class A - 21,056 shares
Class B - 6,000 shares (167) (167)
Total shareholders' equity 80,271 82,864
COMMITMENTS ------ ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $174,536 $188,479
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,
1993 1992 1993 1992
Net sales $45,446 $53,910 $ 91,858 $104,376
Cost of goods sold 29,921 35,034 59,484 67,268
Gross Profit 15,525 18,876 32,374 37,108
Operating expenses:
General and administrative 4,900 5,399 9,557 10,528
Selling 4,439 4,558 9,163 8,369
Engineering 2,355 2,449 4,933 5,146
Research and development 1,409 1,859 2,839 3,384
Technical service 671 516 1,327 1,861
13,774 14,781 27,819 29,288
Operating income 1,751 4,095 4,555 7,820
Other (income) expense
Interest expense 919 1,591 1,981 3,280
Interest (income) (69) (60) (148) (165)
Other (income) expense, net 141 65 605 974
991 1,596 2,438 4,089
Income from continuing
operations before taxes 760 2,499 2,117 3,731
Provision for income taxes 395 1,374 1,122 2,052
Income from continuing
operations 365 1,125 995 1,679
Cumulative effect of change
in accounting for income
taxes (Note 3) 1,229
Net income $ 365 $ 1,125 $ 995 $ 2,908
Income (Loss) per share from:
Continuing operations $ 0.02 $ 0.07 $ 0.06 $ 0.10
Cumulative effect of change
in accounting for income
taxes 0.07
Net income per common and
common equivalent share $ 0.02 $ 0.07 $ 0.06 $ 0.17
Dividends declared
Per share - Class A
Per share - Class B
Weighted average number of
shares outstanding 18,072 17,410 18,017 17,242
The accompanying notes to consolidated financial statements
are an integral part of these statements.
- 2 -<PAGE>
<TABLE>
BALDWIN TECHNOLOGY COMPANY INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands, except share data)
(Unaudited)
<CAPTION>
Capital
Class A Class B Contributed Cumulative
Common Stock Common Stock in Excess Retained Translation Treasury Stock
Shares Amount Shares Amount of Par Earnings Adjustment Shares Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1993 16,000,707 $160 2,000,000 $20 $54,795 $31,848 $(3,792) (27,056) $(167)
Net income for the six months 995
Stock options exercised 6,666 29
Translation adjustment (3,629)
Transaction gain on hedge of
net investment in foreign
subsidiaries 12
Balance at December 31, 1993 16,007,373 $160 2,000,000 $20 $54,824 $32,843 $(7,409) (27,056) $(167)
<FN>
The accompanying notes to consolidated financial statements are an integral part of thes
</TABLE>
- 3 -<PAGE>
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,
1993 1992
Cash Flows from operating activities:
Income from continuing operations $ 995 $ 1,679
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization 2,377 2,679
Accrued retirement pay 207 319
Provision for losses on accounts receivable 507 (169)
Changes in assets and liabilities net of
effects from subsidiary purchase -
Accounts and notes receivable, net 5,732 (2,684)
Inventories (2,399) 11
Prepaid expenses and other (2,547) (1,653)
Customer deposits 151 1,299
Accrued compensation (1,314) (1,116)
Accounts and notes payable, trade (3,575) (2,574)
Income taxes payable 133 (2,640)
Accrued and withheld taxes (273) (330)
Other accounts payable and accrued liabilities (806) 299
Interest payable 317 3
Net cash (used) by operating activities (495) (4,877)
Cash flows from investing activities:
Additions of property, net (539) (541)
Additions of patents, trademarks and drawings, net (570) (579)
Other assets (1,576) 54
Net cash (used) by investing activities (2,685) (1,066)
Cash flows from financing activities:
Long-term borrowings 31,000 269
Long-term debt repayment (32,238) (6,226)
Short-term borrowings 10,707 6,693
Short-term debt repayment (13,400) (1,972)
Principal payments under capital lease
obligations (432) (684)
Other long-term liabilities 106 297
Sale of treasury stock 3,200
Stock options exercised 29
Net cash (used) provided by financing activities (4,228) 1,577
Effects of exchange rate changes (334) (265)
Net (decrease) increase in cash
and cash equivalents (7,742) (4,631)
Cash and cash equivalents at beginning of year 19,676 10,747
Cash and cash equivalents at end of period $11,934 $ 6,116
The accompanying notes to consolidated financial statements
are an integral part of these statements.
- 4 -<PAGE>
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Supplemental disclosures of cash flow information:
For the six months
ended December 31,
1993 1992
(in thousands)
Cash paid during the period for:
Interest $ 1,664 $ 3,284
Income taxes $ 1,029 $ 4,727
Supplemental schedule of non-cash investing and financing activities:
For the six months ended December 31, 1993:
There were no significant non-cash transactions for the six months
ended December 31, 1993.
For the six months ended December 31, 1992:
The Company adopted FAS 109, "Accounting for Income Taxes", effective
July 1, 1992. The cumulative effect on prior years was recorded as a
separate component of net income and deferred tax assets were
established in a non-cash transaction of $1,229,000.
Disclosure of accounting policy:
For purposes of the statement of cash flows, the Company considers all
highly liquid instruments to be cash equivalents.
The accompanying notes to consolidated financial statements
are an integral part of these statements.
- 5 -
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - General:
Baldwin Technology Company, Inc. (Baldwin, or the Company) is
engaged primarily in the development, manufacture and sale of material
handling, accessory, control and pre-press equipment for the printing
industry.
The consolidated financial statements include the accounts of
Baldwin and its subsidiaries and reflect all adjustments (consisting
of only normal recurring adjustments) which are, in the opinion of
management, necessary to present a fair statement of the results for
the interim periods. Operating results for the three month and six
month periods ended December 31, 1993 are not necessarily indicative
of the results that may be expected for the year ending June 30, 1994.
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, 1993 and 1992, 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, 1993 and
1992 consisted of 97,552 shares and 13,760 shares, respectively for
stock options. The weighted average number of common and common
equivalent shares outstanding for the three month periods ended
December 31, 1993 and 1992 were 18,072,362 and 17,409,898,
respectively. Common stock equivalents for the six month periods
ended December 31, 1993 and 1992 consisted of 42,782 shares and 6,880
shares, respectively for stock options. For the six month periods
ended December 31, 1993 and 1992 the weighted average number of common
and common equivalent shares were 18,017,013 and 17,242,149,
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,
1993 1993
Raw material $14,470,000 $ 13,665,000
In process 10,448,000 10,966,000
Finished goods 10,497,000 9,276,000
$35,415,000 $33,907,000
Inventories decreased $891,000 due to the translation effects of
exchange fluctuations from June 30, 1993 to December 31, 1993.
Note 3 - Common Stock:
On November 23, 1993, four (4) eligible non-employee Directors of
the Company were automatically granted non-qualified options for a
total of 3,556 shares of Class A Common Stock and 444 shares of Class
B Common Stock under the Company's 1990 Directors' Stock Option Plan
at $4.88 and $6.09, respectively, the fair market values on the date
of grant. Restrictions, as described in the Company's 1991 Proxy
Statement, are similar to restrictions which apply to options granted
pursuant to the Company's Amended and Restated 1986 Stock Option Plan,
as amended, with the exception of the dates of exercise, vesting and
termination.
- 6 -
<PAGE>
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, 1993 vs. Six Months
Ended December 31, 1992.
Net sales for the six months ended December 31, 1993 decreased by
$12,518,000 (12%) to $91,858,000 from $104,376,000 for the six months
ended December 31, 1992. Currency rate fluctuations attributable to
the Company's overseas operations decreased net sales by $3,445,000
for the current period with product volume accounting for the
remainder of the change. In terms of local currency, sales changes
were mixed within the European Sector. Sales were down 26% in
Germany, were flat in the United Kingdom and were up by 31% in Sweden.
Local currency Asian Sector sales declined 25.8%. In the Americas
Sector, net sales increased by 14.1%.
Gross profit for the six month period ended December 31, 1993 was
$32,374,000 (35.2% of net sales) as compared to $37,108,000 (35.6% of
net sales) for the six month period ended December 31, 1992, a
decrease of $4,734,000 or 12.8%. Margins decreased by $1,191,000 on
fluctuations in currency rates with the remainder due to lower volume.
Selling, general and administrative expenses were $18,720,000
(20.4% of net sales) for the six month period ended December 31, 1993
as compared to $18,897,000 (18.1% of net sales) for the same period of
the prior year, a decrease of $177,000 or .9% in these expenses.
Increased marketing expenses, primarily related to trade shows and new
product introductions, as well as increases in bad debt allowances
were offset by currency rate fluctuations which lowered these expenses
by $763,000 in the current period. Other operating expenses decreased
$1,292,000 over the same period of the prior year of which $332,000
was due to currency rate fluctuations. Continued emphasis placed on
cost containment and reduction programs was responsible for reductions
in operating expense.
Interest expense for the six month period ended December 31, 1993
was $1,981,000 as compared to $3,280,000 for the six month period
ended December 31, 1992. Decreased interest expense was primarily
related to lower levels of indebtedness as well as declining interest
rates. Currency rate fluctuations decreased interest expense by
$489,000 for the current period. Interest income was $148,000 and
$165,000 for the six month periods ended December 31, 1993 and
December 31, 1992, respectively. Other income and expense includes
foreign currency transaction gains of $354,000 and $297,000 for the
six month periods ended December 31, 1993 and 1992, respectively. The
effects of currency rate fluctuations decreased other expense by
$259,000 for the current period.
The Company's effective tax rate was 53% for the six month period
ended December 31, 1993, as compared to 55% for the six month period
ended December 31, 1992. The difference in effective rates results
primarily from increased domestic income. The current period's
effective rate reflects the impact of foreign source income which is
taxed at substantially higher rates than domestic source income.
Currency rate fluctuations increased the provision for income taxes by
$346,000 for the current period.
Net income from continuing operations for the six month period
ended December 31, 1993 decreased by $684,000 or 40.7% to $995,000
from $1,679,000 for the six month period ended December 31, 1992, or
to $0.06 and $0.10 per share, respectively. Currency rate
fluctuations increased net income from continuing operations by
$306,000 for the current period. Weighted average equivalent shares
outstanding during the six month periods ended December 31, 1993 and
December 31, 1992 were 18,017,013 and 17,242,149, respectively.
- 7 -<PAGE>
Three Months Ended December 31, 1993 vs. Three Months
Ended December 31, 1992.
Net sales for the three months ended December 31, 1993 decreased
by $8,464,000 (15.7%) to $45,446,000 from $53,910,000 for the three
months ended December 31, 1992. Currency rate fluctuations
attributable to the Company's overseas operations decreased net sales
by $1,863,000 for the current period with product volume accounting
for the remainder of the change. In terms of local currency, sales
changes were mixed within the European Sector. Sales were down 32.65%
in Germany, up 7.2% in the United Kingdom and up 39% in Sweden. Local
currency Asian Sector sales declined 34.4%. In the Americas Sector,
net sales increased 13.8% for the period.
Gross profit for the three month period ended December 31, 1993
was $15,525,000 (34.2% of net sales) as compared to $18,876,000 (35%
of net sales) for the three month period ended December 31, 1992, a
decrease of $3,351,000 or 17.8%. Margins decreased $619,000 due to
currency rate fluctuations with the remainder due to lower volume.
Selling, general and administrative expenses were $9,339,000
(20.5% of net sales) for the three month period ended December 31,
1993 as compared to $9,957,000 (18.5% of net sales) for the same
period of the prior year, a decrease of $618,000 or 6.2% in these
expenses. An increase of approximately $400,000 was made to the
allowance for bad debts during the period primarily related to
receivables from a Japanese customer undergoing a financial
reorganization. Currency rate fluctuations decreased these expenses
by $219,000 in the current period. Continued emphasis on cost
containment and reduction programs was the primary reason for the
reduction in expense. Other operating expenses decreased $389,000 or
8.1% over the same period of the prior year of which $111,000 was due
to currency rate fluctuations.
Interest expense for the three month period ended December 31,
1993 was $919,000 as compared to $1,591,000 for the three month period
ended December 31, 1992. Decreased interest expense was primarily
related to lower levels of indebtedness as well as declining interest
rates. Currency rate fluctuations decreased interest expense by
$161,000 for the current period. Interest income was $69,000 and
$60,000 for the three month periods ended December 31, 1993 and
December 31, 1992, respectively. Other income and expense includes
foreign currency transaction gains of $379,000 and $484,000 for the
three month periods ended December 31, 1993 and 1992, respectively.
Currency rate fluctuations decreased other expense by $147,000 for the
period.
The Company's effective tax rate was 52% for the three month
period ended December 31, 1993, as compared to 55% for the three month
period ended December 31, 1992. The effective rate reflects the
impact of foreign source income which is taxed at substantially higher
rates than domestic source income. The difference in effective rates
results primarily from increased domestic source income. Currency
rate fluctuations increased the provision for income taxes by $10,000
for the current period.
Net income from continuing operations for the three month period
ended December 31, 1993 decreased by $760,000 or 68% to $365,000 from
$1,125,000 for the three month period ended December 31, 1992, or
$0.02 and $0.07 per share, respectively. Currency rate fluctuations
increased net income from continuing operations by $10,000 for the
current period. Weighted average equivalent shares outstanding during
the three month periods ended December 31, 1993 and December 31, 1992
were 18,072,362 and 17,409,898, respectively.
- 8 -
Liquidity and Capital Resources at December 31, 1993
Liquidity and Working Capital
The Company's working capital increased from $33,666,000 at
December 31, 1992, to $40,182,000 at December 30, 1993, an increase of
$6,516,000 or approximately 19.4%. Currency effects decreased working
capital by $469,000 for the period. Decreases in trade receivables
and inventories were partially offset by increases in cash and short-
term securities and to a lesser extent, other current receivables.
The decrease in current assets was more than offset by decreases in
all components of current liabilities including loans payable and the
current portion of long-term debt which decreased due to debt
repayments and the reclassification of current debt to long-term debt
due to the recently completed financing. Working capital increased by
$5,768,000 or approximately 16.8% as compared to $34,414,000 at June
30, 1993. Increases in both inventories and other current receivables
almost offset the decrease in trade receivables. Decreases in trade
and other payables, coupled with decreases in loans payable and the
current-portion of long-term debt as a result of the refinancing more
than offset the decreases in cash and short-term securities. Currency
effects decreased working capital by $909,000 for the period.
On October 29, 1993, the Company completed the refinancing
of it's long-term debt with the issuance of $25,000,000 of 8.17%
senior notes (the "Senior Notes") due October 29, 2000. The Senior
Notes require the payment of interest only for the first three years
with equal annual principal repayments in years four through seven.
The proceeds of the Senior Notes along with approximately $5,000,000
in available cash were used to retire all of the Company's
indebtedness under a Credit Agreement with a syndicate of banks dated
September 27, 1990.
In November, 1993, the Company entered into a three-year
$20,000,000 Revolving Credit Agreement (the "Revolver") with
NationsBank of North Carolina. 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 agreements to $3,000,000 plus 50% of the
Company's net income after June 30, 1993. In addition, the Company
was required to pledge certain of the shares of it's domestic
subsidiaries as collateral for both the Senior Notes and the Revolver.
Both the Senior Notes and the Revolver require the Company
to maintain a current 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, 1993, this ratio was 1.75 to 1.
The Company maintains relationships with foreign and
domestic banks which have extended credit facilities to the Company
totaling $31,000,000. As of December 31, 1993, the Company had
outstanding $12,200,000 under these lines of credit, of which
$6,107,000 is classified as long-term debt. Total debt levels as
reported on the balance sheet at December 31, 1993 are $64,000 lower
then they would have been if June 30, 1993 exchange rates had been
used.
The Company believes its cash flow from operations and
available bank lines of credit are sufficient to finance its working
capital and other capital requirements for the foreseeable 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.
- 9 -<PAGE>
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 18, 1993.
(c) A brief description of non-procedural matters voted
upon and the results of the voting follows:
Proposal 2 - Amendment and Restatement of the Company's 1986
Stock Option Plan: 22,449,477 votes for, 1,646,477 votes
against.
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K. There were no reports on Form 8-K
filed for the three months ended December 31, 1993.
- 10 -
<PAGE>
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: March 10, 1994
- 11 -
