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 March 31, 1997
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 April 30, 1997
Class A Common Stock
$0.01 par value 15,288,881
Class B Common Stock
$0.01 par value 1,835,883
Total number of pages in this document 14
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BALDWIN TECHNOLOGY COMPANY, INC.
INDEX
Page
Part I Financial Information
Consolidated Balance Sheet -
March 31, 1997 and June 30, 1996 1
Consolidated Statement of Income -
Three months and nine months ended
March 31, 1997 and 1996 2
Consolidated Statement of Changes in
Shareholders' Equity - Nine months
ended March 31, 1997 3
Consolidated Statement of Cash Flows -
Nine months ended March 31, 1997 and 1996 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 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.
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
(Unaudited)
March 31, June 30,
1997 1996
ASSETS
CURRENT ASSETS:
Cash $ 8,663 $ 9,781
Short-term securities 10 13
Accounts receivable trade, net of allowance for
doubtful accounts of $1,955 ($2,503 at June 30, 1996) 40,092 53,894
Notes receivable, trade 14,908 9,827
Inventories 28,678 42,049
Prepaid expenses and other 7,580 8,724
Total current assets 99,931 124,288
MARKETABLE SECURITIES:
Cost $655 ($742 at June 30, 1996) 777 984
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land and buildings 3,174 7,995
Machinery and equipment 7,234 10,176
Furniture and fixtures 5,888 5,746
Leasehold improvements 1,349 1,280
Capital leases 6,311 7,192
23,956 32,389
Less: Accumulated depreciation and amortization 16,391 19,075
Net property, plant and equipment 7,565 13,314
PATENTS, TRADEMARKS AND ENGINEERING DRAWINGS at cost,
less accumulated amortization of $4,460 ($3,957 at
June 30, 1996) 5,104 5,414
GOODWILL, less accumulated amortization of $6,895
($12,218 at June 30, 1996) 31,487 64,381
OTHER ASSETS 9,951 8,959
TOTAL ASSETS $154,815 $217,340
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Loans payable $ 10,378 $ 9,704
Current portion of long-term debt 6,346 492
Accounts payable, trade 13,651 17,500
Notes payable, trade 11,521 10,793
Accrued salaries, commissions, bonus and profit-sharing 7,134 9,769
Customer deposits 6,847 6,686
Accrued and withheld taxes 1,618 2,780
Income taxes payable 4,025 5,557
Other accounts payable and accrued liabilities 16,368 14,957
Total current liabilities 77,888 78,238
LONG-TERM LIABILITIES:
Long-term debt 20,432 33,576
Other long-term liabilities 5,243 8,470
Total long-term liabilities 25,675 42,046
Total liabilities 103,563 120,284
SHAREHOLDERS' EQUITY:
Class A Common Stock, $.01 par, 45,000,000 shares
authorized, 16,391,683 shares issued
(16,391,683 at June 30, 1996) 164 164
Class B Common Stock, $.01 par, 4,500,000 shares
authorized, 2,000,000 shares issued 20 20
Capital contributed in excess of par value 57,185 57,185
Retained earnings 143 44,149
Cumulative translation adjustment (409) 49
Unrealized gain on investments net of $63,000 of
deferred taxes ($124,000 at June 30, 1996) 59 118
Less: Treasury stock, at cost:
Class A - 1,102,802 shares (818,156 at June 30, 1996)
Class B - 164,117 shares (164,117 at June 30, 1996) (5,910) (4,629)
Total shareholders' equity 51,252 97,056
COMMITMENTS ------ ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $154,815 $217,340
The accompanying notes to consolidated financial statements
are an integral part of these statements.
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BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)
(Unaudited)
For the three months For the nine months
ended March 31, ended March 31,
1997 1996 1997 1996
Net sales $58,318 $63,812 $176,953 $182,463
Cost of goods sold 39,031 43,102 119,849 123,048
Gross Profit 19,287 20,710 57,104 59,415
Operating expenses:
General and administrative 7,291 6,747 20,321 19,713
Selling 5,390 6,547 16,198 18,624
Engineering 3,451 3,547 10,761 9,944
Research and development 1,761 1,812 5,377 4,783
Provision for loss on
the disposition of
Misomex (Note 3) 46,036
Restructuring Charge (Note 4) 3,000
17,893 18,653 98,693 56,064
Operating income (loss) 1,394 2,057 (41,589) 3,351
Other (income) expense
Interest expense 854 1,056 2,662 3,074
Interest income (97) (178) (305) (427)
Other income, net (669) (656) (1,596) (1,197)
Minority interest (73) (73)
15 222 688 1,450
Income (loss) before taxes 1,379 1,835 (42,277) 1,901
Provision for income taxes 634 844 1,729 2,254
Net income (loss) $ 745 $ 991 $(44,006) $ (353)
Net income (loss) per common
and common equivalent share $ 0.04 $ 0.06 $ (2.55) $ (0.02)
Weighted average number of
shares outstanding 17,128 17,783 17,263 17,915
The accompanying notes to consolidated financial statements
are an integral part of these statements.
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PAGE
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<TABLE>
<CAPTION>
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands, except share data)
(Unaudited)
Capital
Class A Class B Contributed Cumulative Unrealized
Common Stock Common Stock in Excess Retained Translation Gain on Treasury Stock
Shares Amount Shares Amount of Par Earnings Adjustment Investments Shares Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 nine months (44,006)
Purchase of treasury stock (156,400) (481)
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 (59)
Translation adjustment (458)
Balance at March 31, 1997 16,391,683 $164 2,000,000 $20 $57,185 $ 143 $ (409) $ 59 (1,266,919) $(5,910)
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
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BALDWIN TECHNOLOGY COMPANY, INC. CONSOLIDATED STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(in thousands)
(Unaudited)
For the nine months
ended March 31,
1997 1996
Cash Flows from operating activities:
Loss from operations $(44,006) $ (353)
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization 3,502 3,526
Accrued retirement pay (310) 138
Provision for losses on accounts receivable 287 36
Provision for loss on the disposition of Misomex 46,036
Restructuring charge 3,000
Changes in assets and liabilities net of
effects from the acquisition and dispositions -
Accounts and notes receivable, net (3,715) 5,627
Inventories 1,440 (3,298)
Prepaid expenses and other (495) 256
Customer deposits 1,202 1,909
Accrued compensation (1,105) (251)
Accounts and notes payable, trade 1,883 (1,138)
Income taxes payable (1,174) (899)
Accrued and withheld taxes (179) 528
Other accounts payable and accrued liabilities 1,489 (1,647)
Interest payable 532 636
Net cash provided by operating activities 5,387 8,070
Cash flows from investing activities:
Acquisitions of subsidiaries, net of cash acquired (543) (4,798)
Additions of property, net (955) (5,567)
Additions of patents, trademarks and drawings, net (339) (379)
Other assets 194 (181)
Net cash used by investing activities (1,643) (10,925)
Cash flows from financing activities:
Long-term borrowings 3,765 10,334
Long-term debt repayment (8,599) (7,777)
Short-term borrowings 6,475 7,021
Short-term debt repayment (4,610) (7,465)
Principal payments under capital lease
obligations (199) (323)
Other long-term liabilities (561) (827)
Treasury stock purchased (481) (2,470)
Stock options exercised 120
Net cash used by financing activities (4,210) (1,387)
Effects of exchange rate changes (655) (737)
Net decrease in cash and
cash equivalents (1,121) (4,979)
Cash and cash equivalents at beginning of year 9,794 13,189
Cash and cash equivalents at end of period $ 8,673 $ 8,210
The accompanying notes to consolidated financial statements are an integral
part of these statements.
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BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Supplemental disclosures of cash flow information:
For the nine months
ended March 31,
1997 1996
(in thousands)
Cash paid during the period for:
Interest $ 2,130 $ 2,438
Income taxes $ 3,361 $ 3,118
Supplemental schedule of non-cash investing and financing activities:
For the nine months ended March 31, 1997:
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.
All previously capitalized patent costs that had been recorded in
other assets have been realized as royalties at March 31, 1997. See
comments below for March 31, 1996.
The Company entered into capital lease agreements of $1,885 for the
nine months ended March 31, 1997.
For the nine months ended March 31, 1996:
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. The change in the
related liability is recorded as a change in "Other accounts payable
and accrued liabilities" for cash flow purposes. (See Note 4 - Notes
to Consolidated Financial Statements.)
The Company successfully defended a patent which, under the terms of
the patent purchase agreement with the patent's inventor, entitles the
Company to indemnification of a portion of the legal fees incurred to
defend the patent infringement. Accordingly, the Company reclassified
from patents to long term assets $693,000 of legal fees. These
previously capitalized patent costs will be realized as royalties
become payable to the patent's inventor. At March 31, 1996, "Other
assets" included $267,000 of such costs.
The Company entered into capital lease agreements of $80,927 for the
nine months ended March 31, 1996.
Disclosure of accounting policy:
For purposes of the statement of cash flows, the Company considers all
highly liquid instruments with original maturities of three months or
less to be cash equivalents.
The accompanying notes to consolidated financial statements are an
integral part of these statements.
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BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - General:
Baldwin Technology Company, Inc. (Baldwin, or the Company) is
engaged primarily in the development, manufacture and sale of material
handling, accessory, 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 nine
month periods ended March 31, 1997 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 nine month periods ended March
31, 1997 and 1996, 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 March 31, 1997 and 1996
consisted of no (0) shares and 18,476 shares, respectively, for stock
options. The weighted average number of common and common equivalent
shares outstanding for the three month periods ended March 31, 1997
and 1996 were 17,128,264 and 17,783,312, respectively. Common stock
equivalents for the nine month periods ended March 31, 1997 and 1996
consisted of no (0) shares and 97,676 shares, respectively, for stock
options. For the nine month periods ended March 31, 1997 and 1996,
the weighted average number of common and common equivalent shares
were 17,262,870 and 17,914,971, respectively. Common stock
equivalents calculated for fully diluted earnings per share were not
materially different from those calculated for primary.
In February of 1997, Financial Accounting Standard ("FAS") No.
128, Earnings Per Share ("EPS") was released by the Fiancial
Accounting Standards Board and will be effective for the Company's
financial statements reported during the fiscal year ending June 30,
1998. The effect of adoption of this standard is not anticipated to
have a material impact. On a proforma basis at March 31, 1997,
quarterly net income and net losses for the nine months per common and
common equivalent share would be the same for "basic" and "diluted"
EPS as calculated under FAS No. 128 and for "primary" and "fully
diluted" EPS under the current generally accepted accounting
principle.
Note 2 - Inventories:
Inventories consist of the following:-
March 31, June 30,
1997 1996
Raw material $15,913,000 $19,443,000
In process 7,451,000 14,236,000
Finished goods 5,314,000 8,370,000
$28,678,000 $42,049,000
Inventories decreased $2,129,000 due to translation effects of
exchange from June 30, 1996 to March 31, 1997 and decreased by
$9,802,000 due to the reclassification of inventories to "Other
assets" for the planned disposition of Misomex (See Note 3 - Notes to
Consolidated Financial Statements). Misomex inventories reclassified
consisted of $4,010,000, $1,476,000 and $4,316,000 of raw materials,
work in process and finished goods, respectively.
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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, less the estimated
costs of disposal, concurrent with the 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. Negotiations and the Letter of
Intent with the investor group were mutually terminated on February
28, 1997. The Company continues to be committed to the divestiture of
Misomex and is actively pursuing discussions with other interested
parties.
The net realizable value of the pre-press operations is reflected
in "Other assets" in the amount of $1,383,000 in the March 31, 1997
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 nine month period ended March 31, 1997
and the fiscal year ended June 30, 1996.
Nine
months ended Year ended
March 31, June 30,
1997 1996
Net sales $155,872,000 $226,069,000
Gross profit 50,337,000 73,193,000
Operating expenses 44,399,000 60,938,000
Provision for loss on
disposal of Misomex 46,036,000
Restructuring charge 3,000,000
Operating (loss) income (40,098,000) 9,255,000
Other expenses 726,000 1,641,000
Pre-tax (loss) income $(40,824,000) $ 7,614,000
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 $727,000 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 March 31, 1997 were
$184,000. 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 $64,000 recorded in "Other long-term liabilities",
were included in "Other accounts payable and accrued liabilities".
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Restructuring reserves consist of the following:-
March 31, June 30,
1997 1996
Severance $ 773,000 $1,052,000
Dealer Claims 1,500,000 1,500,000
Excess facility sublease
subsidy 167,000 263,000
$2,440,000 $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, having the terms and conditions set forth in
Exhibit A to the Company's Proxy Statement dated October 16, 1996, was
approved on November 19, 1996 at the Company's Annual Meeting. No
options have been granted under the 1996 Plan. On October 14, 1996
the 1986 Plan 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 to options previously granted.
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BALDWIN TECHNOLOGY COMPANY, INC.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial
position and consolidated financial statements.
Nine Months Ended March 31, 1997 vs. Nine Months
Ended March 31, 1996.
Net sales of $176,953,000 for the nine months ended March 31,
1997 decreased by $5,510,000 or 3.0% as compared to $182,463,000 for
the nine months ended March 31, 1996. Currency rate fluctuations
attributable to the Company's overseas operations decreased net sales
by $8,647,000 (72.6% of which relates to a weaker Japanese Yen).
Acquisitions added $7,754,000 to sales for the current nine 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 13.2% in Germany and were down 16.1%
in Sweden. In the Asian Sector, local currency sales increased by
31.9% in Japan and decreased in Australia. In the Americas Sector,
net sales decreased by 13.4%.
Gross profit for the nine month period ended March 31, 1997 was
$57,104,000 (32.3% of net sales) as compared to $59,415,000 (32.6% of
net sales) for the nine month period ended March 31, 1996, a decrease
of $2,311,000 or 3.9%. Gross profit decreased by $2,580,000 on
fluctuations in currency rates. Acquisitions added $2,615,000 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 gross
profit rates in Japan.
Selling, general and administrative expenses were $36,519,000
(20.6% of net sales) for the nine month period ended March 31, 1997 as
compared to $38,337,000 (21.0% of net sales) for the same period of
the prior year, a decrease of $1,818,000 or 4.8%. Currency rate
fluctuations decreased these expenses by $1,205,000 and acquisitions
increased these expenses by $1,457,000. General and administrative
expenses increased primarily due to severance expenses related to the
termination of the Chairman of the Company and increased consulting
and professional fees the effects of which were partially offset by
reduced charges for goodwill amortization and 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 $1,411,000 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 $749,000. 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 nine month period ended March 31, 1997
was $2,662,000 as compared to $3,074,000 for the nine month period
ended March 31, 1996. Currency rate fluctuations decreased interest
expense by $336,000 while acquisitions added $351,000 for the current
period. Decreased interest expense resulted from lower levels of
working capital related indebtedness used by the Company's European
operations and a decrease in long-term debt. Interest income was
$305,000 and $427,000 for the nine month periods ended March 31, 1997
and March 31, 1996, respectively. Currency rate fluctuations
decreased interest income by $80,000 and acquisitions increased
interest income by $21,000 for the current period. Other income
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<PAGE>
increased from $1,197,000 to $1,596,000 and included foreign currency
transaction gains of $129,000 and $418,000 for the nine month periods
ended March 31, 1997 and 1996, respectively, with the remainder of the
change due to increased royalty income. The effects of currency rate
fluctuations decreased other income by $(18,000) for the current
period.
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 nine month period ended
March 31, 1997, as compared to 46% on income before restructuring
charges (See Note 4 - Notes to Consolidated Financial Statements) for
the nine month period ended March 31, 1996. Currency rate
fluctuations decreased the provision for income taxes by $156,000 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 nine month periods ended March 31, 1997 or 1996 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 nine month period ended March 31, 1997 was
$(44,006,000) versus a net loss of $(353,000) for the nine month
period ended March 31, 1996, or $(2.55) and $(0.02) per share,
respectively. Acquisitions decreased the net loss by $89,000 while
currency rate fluctuations increased the net loss by $183,000 for the
current period. Weighted average equivalent shares outstanding during
the nine month periods ended March 31, 1997 and March 31, 1996 were
17,262,870 and 17,914,971, respectively. For the nine months ended
March 31, 1997 and March 31, 1996, the net losses due to the provision
for the disposition of Misomex and restructuring charges were
$(46,036,000) or $(2.67) 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 nine month periods ended March 31, 1997 and 1996.
For the three months For the nine months
ended March 31, ended March 31,
1997 1996 1997 1996
Net sales $6,720 $7,667 $21,081 $24,502
Costs and expenses 7,095 7,988 22,572 24,511
Operating loss (375) (321) (1,491) (9)
Other expense (income), net 3 9 (38) 243
Loss before taxes $ (378) $ (330) $(1,453) $ (252)
Three Months Ended March 31, 1997 vs. Three Months
Ended March 31, 1996.
Net sales for the three months ended March 31, 1997 decreased by
$5,494,000 (8.6%) to $58,318,000 from $63,812,000 for the three months
ended March 31, 1996. Currency rate fluctuations attributable to the
Company's overseas operations decreased net sales by $3,937,000 while
acquisitions increased net sales by $19,000 for the current period.
Product volume was primarily responsible for the remainder of the change.
In terms of local currency, sales were mixed in the European Sector
increasing by 1.4% in Germany and 41.7% in the United Kingdom but
decreasing by 26.2% in Sweden. Local currency Asian Sector sales increased
20.6% in Japan. In the Americas Sector, net sales decreased 13.7% for the
period.
Gross profit for the three month period ended March 31, 1997 was
$19,287,000 (33.1% of net sales) as compared to $20,710,000 (32.5% of net
sales) for the three month period ended March 31, 1996, a decrease of
$1,423,000 or 6.9%. Gross profit decreased by $1,252,000 due to currency
rate fluctuations and by $15,000 due to acquisitions with the remainder due
primarily to volume changes, product mix and other factors. Gross profit
increased as a percentage of sales when compared to the prior year due
primarily to the effects of increased sales of products with stronger gross
profit rates in Japan.
- 10 -
<PAGE>
Selling, general and administrative expenses were $12,681,000 (21.7%
of net sales) for the three month period ended March 31, 1997 as compared
to $13,294,000 (20.8% of net sales) for the same period of the prior year,
a decrease of $613,000 or 4.6% in these expenses of which currency rate
fluctuations decreased these expenses by $604,000 and acquisitions
increased these expenses by $110,000 in the current period. General and
administrative expenses were increased primarily due to severance expenses
related to the termination of the Chairman of the Company and increased
consulting and professional fees the effects of which were partially offset
by reduced charges for goodwill amortization. Selling expenses declined
due to lower staffing and to sales volume changes in the Americas and
Europe.
Other operating expenses decreased by $147,000 or 2.7% as compared to
the same period of the prior year. Currency rate fluctuations decreased
other operating expenses by $394,000 for the current period. Increases in
both engineering and research and development expenses relate to increased
staffing.
Interest expense for the three month period ended March 31, 1997 was
$854,000 as compared to $1,056,000 for the three month period ended March
31, 1996. Currency rate fluctuations decreased interest expense by
$149,000 with the remaining decrease due primarily to lower levels of
long-term debt for the current period. Interest income was $97,000 and
$178,000 for the three month periods ended March 31, 1997 and March 31, 1996,
respectively. Other income was flat due to the offsetting effects of
foreign currency transaction (losses) versus gains of $(107,000) and
$426,000, respectively, and increased royalty income for the three month
periods ended March 31, 1997 and 1996, respectively. Currency rate
fluctuations increased other income by $50,000 for the period.
The Company's effective tax rate was 46% on income before taxes for
the three month period ended March 31, 1997, as compared to 46% on income
before taxes for the three month period ended March 31, 1996. Currency
rate fluctuations decreased the provision for income taxes by $33,000 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.
Net income for the three month period ended March 31, 1997 was
$745,000 versus net income of $991,000 for the three month period ended
March 31, 1996, or $0.04 and $0.06 per share, respectively. Currency rate
fluctuations decreased net income by $39,000 for the current period.
Weighted average equivalent shares outstanding during the three month
periods ended March 31, 1997 and March 31, 1996 were 17,128,264 and
17,783,312, respectively.
Liquidity and Capital Resources at March 31, 1997
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.
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 March 31, 1997,
this ratio was 1.5 to 1.
- 11 -
<PAGE>
The Net cash used by investing activities as reflected in the
Consolidated Statement of Cash Flows decreased by $9,282,000 from
$10,925,000 at March 31, 1996 to $1,643,000 at March 31, 1997 primarily due
to the fact that the prior year amount included the purchase of a Swedish
manufacturing facility for SEK 28,840,000 ($4,295,000) 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 $2,823,000 to $4,210,000 at
March 31, 1997 from $1,387,000 at March 31, 1996. The difference is
primarily caused by the fact that the prior year amounts included new
borrowings associated with the acquired Acrotec Group and the purchase of
the Swedish manufacturing facility while the current year amounts reflect
lower repayments of long term debt and less treasury stock repurchase
activity.
The Company's working capital decreased from $46,421,000 at March 31,
1996, to $23,870,000 at March 31, 1997, a decrease of $22,551,000 or 48.6%.
The principal reasons for the decrease in working capital were the write-
down of $11,348,000 of net working capital in conjunction with the planned
disposition of the Misomex pre-press business and the reclassification of
$8,965,000 of long-term debt to current liabilities of which $6,250,000 was
due to scheduled repayment and the remainder due to refinancing a long-term
loan in order to obtain a more favorable interest rate. Currency rate
fluctuations decreased working capital by $2,260,000. Increases in trade
accounts and notes payable, income taxes payable and other current
liabilities offset the increases in cash and trade receivables net of
inventory decreases. The Company's working capital decreased by
$22,180,000 or 48.2% from $46,050,000 at June 30, 1996 to $23,870,000 at
March 31, 1997. The principal reasons for the decrease in working capital
were the same as noted above. Currency rate fluctuations decreased working
capital by $1,940,000. 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 partially
offset by decreases in inventory and all other current assets.
The Company maintains relationships with foreign and domestic banks
which have extended credit facilities to the Company totaling $36,024,000,
including amounts available under the Revolver. As of March 31, 1997, the
Company had outstanding $10,584,000 under these lines of credit, of which
$103,000 is classified as long-term debt. Total debt levels as reported on
the balance sheet at March 31, 1997 are $1,681,000 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
March 31, 1997 exclude $264,000 and $1,702,000, respectively, of the
Misomex mortgage note payable that has been reclassified to "Other assets"
in conjunction with the planned disposition of the Misomex pre-press
business.
Net capital expenditures made to meet the normal business needs of the
Company for the nine months ended March 31, 1997 and March 31, 1996,
including commitments for capital lease payments, were $1,294,000 and
$1,651,000, 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.
- 12 -
<PAGE>
BALDWIN TECHNOLOGY COMPANY, INC.
PART II
OTHER INFORMATION
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 March 31, 1997.
- 13 -
<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: May 14, 1997
- 14 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 8663
<SECURITIES> 10
<RECEIVABLES> 56955
<ALLOWANCES> 1955
<INVENTORY> 28678
<CURRENT-ASSETS> 99931
<PP&E> 23956
<DEPRECIATION> 16391
<TOTAL-ASSETS> 154815
<CURRENT-LIABILITIES> 77888
<BONDS> 0
0
0
<COMMON> 184
<OTHER-SE> 51068
<TOTAL-LIABILITY-AND-EQUITY> 154815
<SALES> 58318
<TOTAL-REVENUES> 58318
<CGS> 39031
<TOTAL-COSTS> 39031
<OTHER-EXPENSES> 17893
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 854
<INCOME-PRETAX> 1379
<INCOME-TAX> 634
<INCOME-CONTINUING> 745
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