FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ Mark one ]
[ X ] Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For quarter ended December 31, 1996
OR
[ ] Transition Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission file number 1-9334
BALDWIN TECHNOLOGY COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3258160
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
65 Rowayton Avenue, Rowayton, Connecticut 06853
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 203-838-7470
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days:
YES X . NO .
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding at January 31, 1997
Class A Common Stock
$0.01 par value 15,289,881
Class B Common Stock
$0.01 par value 1,835,883
Total number of pages in this document 14
<PAGE>
BALDWIN TECHNOLOGY COMPANY, INC.
INDEX
Page
Part I Financial Information
Consolidated Balance Sheet -
December 31, 1996 and June 30, 1996 1
Consolidated Statement of Income -
Three months and six months ended
December 31, 1996 and 1995 2
Consolidated Statement of Changes in
Shareholders' Equity - Six months
ended December 31, 1996 3
Consolidated Statement of Cash Flows -
Six months ended December 31, 1996 and 1995 4-5
Notes to Consolidated Financial Statements 6-8
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9-12
Part II Other Information
Item 4 Submission of Matters to a Vote of
Security Holders 13
Item 6 Exhibits and Reports on Form 8-K 13
Signatures 14
CAUTIONARY STATEMENT -- This Form 10-Q may contain statements which
constitute "forward-looking" information as that term is defined in
the Private Securities Litigation Reform Act of 1995 or by the
Securities and Exchange Commission ("SEC") in its rules,
regulations and releases. Baldwin Technology Company, Inc. (the
"Company") cautions investors that any such forward-looking
statements made by the Company are not guarantees of future
performance and that actual results may differ materially from
those in the forward-looking statements. Some of the factors that
could cause actual results to differ materially from estimates
contained in the Company's forward-looking statements are set forth
in Exhibit 99 to Form 10-K for the year ended June 30, 1996.
<TABLE>
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
(Unaudited)
<CAPTION>
December 31, June 30,
1996 1996
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $ 7,404 $ 9,781
Short-term securities 1,976 13
Accounts receivable trade, net of allowance for
doubtful accounts of $2,059 ($2,503 at June 30, 1996) 42,488 53,894
Notes receivable, trade 14,495 9,827
Inventories 28,335 42,049
Prepaid expenses and other 6,860 8,724
Total current assets 101,558 124,288
MARKETABLE SECURITIES, at cost:
Cost $700 ($742 at June 30, 1996) 860 984
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land and buildings 3,347 7,995
Machinery and equipment 7,739 10,176
Furniture and fixtures 6,156 5,746
Leasehold improvements 1,322 1,280
Capital leases 7,046 7,192
25,610 32,389
Less: Accumulated depreciation and amortization 17,601 19,075
Net property, plant and equipment 8,009 13,314
PATENTS, TRADEMARKS AND ENGINEERING DRAWINGS at cost,
less accumulated amortization of $4,300 ($3,957 at
June 30, 1996) 5,320 5,414
GOODWILL, less accumulated amortization of $6,977
($12,218 at June 30, 1996) 32,313 64,381
OTHER ASSETS 10,772 8,959
TOTAL ASSETS $158,832 $217,340
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Loans payable $ 13,022 $ 9,704
Current portion of long-term debt 6,391 492
Accounts payable, trade 10,862 17,500
Notes payable, trade 13,070 10,793
Accrued salaries, commissions, bonus and profit-sharing 6,285 9,769
Customer deposits 6,962 6,686
Accrued and withheld taxes 1,682 2,780
Income taxes payable 5,153 5,557
Other accounts payable and accrued liabilities 16,198 14,957
Total current liabilities 79,625 78,238
LONG-TERM LIABILITIES:
Long-term debt 20,593 33,576
Other long-term liabilities 5,292 8,470
Total long-term liabilities 25,885 42,046
Total liabilities 105,510 120,284
SHAREHOLDERS' EQUITY:
Class A Common Stock, $.01 par, 45,000,000 shares
authorized, 16,391,683 shares issued
(16,391,683 at June 30, 1996) 164 164
Class B Common Stock, $.01 par, 4,500,000 shares
authorized, 2,000,000 shares issued 20 20
Capital contributed in excess of par value 57,185 57,185
Retained (deficit) earnings (602) 44,149
Cumulative translation adjustment 2,338 49
Unrealized gain on investments net of $82,000 of
deferred taxes ($124,000 at June 30, 1996) 78 118
Less: Treasury stock, at cost:
Class A - 1,085,802 shares (818,156 at June 30, 1996)
Class B - 164,117 shares (164,117 at June 30, 1996) (5,861) (4,629)
Total shareholders' equity 53,322 97,056
COMMITMENTS ------ ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $158,832 $217,340
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
- 1 -<PAGE>
<TABLE>
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED STATEMENT OF INCOME
(in thousands of dollars except per share data)
(Unaudited)
<CAPTION>
For the three months For the six months
ended December 31, ended December 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $61,094 $65,816 $118,635 $118,651
Cost of goods sold 41,859 44,258 80,818 79,946
Gross Profit 19,235 21,558 37,817 38,705
Operating expenses:
General and administrative 6,501 7,506 13,030 12,966
Selling 5,453 6,691 10,808 12,077
Engineering 3,699 3,580 7,310 6,397
Research and development 1,786 1,748 3,616 2,971
Provision for loss on
the disposition of
Misomex (Note 3) 46,036 46,036
Restructuring Charge (Note 4) 3,000 3,000
63,475 22,525 80,800 37,411
Operating (loss) income (44,240) (967) (42,983) 1,294
Other (income) expense
Interest expense 898 1,080 1,808 2,018
Interest income (96) (162) (208) (249)
Other income, net (357) (112) (927) (541)
445 806 673 1,228
(Loss) income before taxes (44,685) (1,773) (43,656) 66
Provision for income taxes 622 564 1,095 1,410
Net loss $(45,307) $(2,337) $(44,751) $ (1,344)
Net loss per common
and common equivalent share $ (2.62) $ (0.13) $ (2.58) $ (0.07)
Weighted average number of
shares outstanding 17,298 18,132 17,329 17,981
</TABLE>
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 Retained Cumulative Unrealized
Common Stock Common Stock in Excess (Deficit) Translation Gain on Treasury Stock
Shares Amount Shares Amount of Par Earnings Adjustment Investments Shares Amount
<S> <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 six months (44,751)
Purchase of treasury stock (139,400) (432)
Stock received in the settle-
-ment of an indemnification
claim made under the Acrotec
Stock Purchase Agreement (128,246) (800)
Unrealized loss on
available for sale
securities, net of tax (40)
Translation adjustment 2,289
Balance at December 31, 1996 16,391,683 $164 2,000,000 $20 $57,185 $ (602) $ 2,338 $ 78 (1,249,919) $(5,861)
The accompanying notes to consolidated financial statements
are an integral part of these statements.
</TABLE>
- 3 -<PAGE>
<TABLE>
BALDWIN TECHNOLOGY COMPANY, INC. CONSOLIDATED STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(in thousands)
(Unaudited)
<CAPTION>
For the six months
ended December 31,
1996 1995
<S> <C> <C>
Cash Flows from operating activities:
Loss from operations $(44,751) $(1,344)
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization 2,549 2,303
Accrued retirement pay 448 236
Provision for losses on accounts receivable 212 (41)
Provision for loss on the disposition of Misomex 46,036
Restructuring charge 3,000
Changes in assets and liabilities net of
effects from the disposition in 1996 and
acquisition in 1995 -
Accounts and notes receivable, net (3,699) 6,042
Inventories 2,786 (3,370)
Prepaid expenses and other 667 1,152
Customer deposits 856 (41)
Accrued compensation (2,364) (1,073)
Accounts and notes payable, trade (268) (82)
Income taxes payable (362) (619)
Accrued and withheld taxes (266) 295
Other accounts payable and accrued liabilities 930 (2,344)
Interest payable 184 76
Net cash provided by operating activities 2,958 4,190
Cash flows from investing activities:
Acquisitions of subsidiaries, net of cash acquired (4,798)
Additions of property, net (712) (5,189)
Additions of patents, trademarks and drawings, net (292) (171)
Other assets (224) (441)
Net cash used by investing activities (1,228) (10,599)
Cash flows from financing activities:
Long-term borrowings 3,777 10,334
Long-term debt repayment (8,483) (6,683)
Short-term borrowings 6,218 3,545
Short-term debt repayment (2,498) (4,584)
Principal payments under capital lease
obligations (130) (220)
Other long-term liabilities (497) (474)
Treasury stock purchased (432) (419)
Stock options exercised 120
Net cash (used) provided by financing activities (2,045) 1,619
Effects of exchange rate changes (99) (432)
Net decrease in cash and
cash equivalents (414) (5,222)
Cash and cash equivalents at beginning of year 9,794 13,189
Cash and cash equivalents at end of period $ 9,380 $ 7,967
</TABLE>
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,
1996 1995
(in thousands)
Cash paid during the period for:
Interest $ 1,624 $ 1,942
Income taxes $ 1,599 $ 2,074
Supplemental schedule of non-cash investing and financing activities:
For the six months ended December 31, 1996:
The Company recorded a provision for the disposition of its Misomex
pre-press operations in a non-cash transaction in the amount of
$46,036,000. In conjunction with the disposition the related assets
and liabilities of the pre-press operations were reduced to fair value
less the estimated costs of disposal and recorded in "Other assets".
(See Note 3 - Notes to Consolidated Financial Statements.)
The Company reclassified $6,250,000 of its 8.17% Senior Notes to
"Current portion of long-term debt" from "Long-term debt" as the first
scheduled installment became current.
The Company entered into capital lease agreements of $1,942 for the
six months ended December 31, 1996.
For the six months ended December 31, 1995:
The Company acquired the capital stock of Acrotec AB and subsidiaries
(Acrotec) in a purchase transaction for consideration of $7,848,000
($5,660,000 in cash and 350,000 shares of the Company's Class A Common
Stock). The fair value of the acquired assets excluding goodwill was
$16,915,000 and the liabilities assumed were $12,539,000. The excess
of the purchase price over the net assets acquired of $3,472,000 was
recorded as goodwill.
A restructuring charge was expensed during the second quarter of the
fiscal year in a non-cash transaction of $3,000,000, recorded as a
current liability in "Other accounts payable and accrued liabilities".
See Note 4 in Notes to Consolidated Financial Statements.
The Company entered into capital lease agreements of $49,315 for the
six months ended December 31, 1995.
Disclosure of accounting policy:
For purposes of the statement of cash flows, the Company considers all
highly liquid instruments with original maturities of three months or
less to be cash equivalents.
The accompanying notes to consolidated financial statements
are an integral part of these statements.
- 5 -
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - General:
Baldwin Technology Company, Inc. (Baldwin, or the Company) is
engaged primarily in the development, manufacture and sale of material
handling, accessory, and control equipment for the printing industry.
The consolidated financial statements include the accounts of
Baldwin and its subsidiaries and reflect all adjustments (consisting
of only normal recurring adjustments) which are, in the opinion of
management, necessary to present a fair statement of the results for
the interim periods. Operating results for the three month and six
month periods ended December 31, 1996 are not necessarily indicative
of the results that may be expected for the year ending June 30, 1997.
All significant intercompany transactions have been eliminated in
consolidation. Net income per share is based on the weighted average
number of common shares and common stock equivalents outstanding
during the period. For the three and six month periods ended December
31, 1996 and 1995, net income was divided by the total of the weighted
average number of common shares outstanding and common stock
equivalents, in order to calculate net income per share. Common stock
equivalents for the three month periods ended December 31, 1996 and
1995 consisted of no (0) shares and 116,228 shares, respectively, for
stock options. The weighted average number of common and common
equivalent shares outstanding for the three month periods ended
December 31, 1996 and 1995 were 17,298,381 and 18,132,011,
respectively. Common stock equivalents for the six month periods
ended December 31, 1996 and 1995 consisted of no (0) shares and
137,277 shares, respectively, for stock options. For the six month
periods ended December 31, 1996 and 1995 the weighted average number
of common and common equivalent shares were 17,328,710 and 17,980,517,
respectively. Common stock equivalents calculated for fully diluted
earnings per share were not materially different from those calculated
for primary.
Note 2 - Inventories:
Inventories consist of the following:-
December 31, June 30,
1996 1996
Raw material $14,459,000 $19,443,000
In process 7,962,000 14,236,000
Finished goods 5,914,000 8,370,000
$28,335,000 $42,049,000
Inventories decreased $411,000 due to translation effects of
exchange from June 30, 1996 to December 31, 1996 and decreased in
total by $10,517,000 due to the planned disposition of Misomex (See
Note 3 - Notes to Consolidated Financial Statements); $4,464,000,
$1,596,000 and $4,457,000 in raw materials, work in process and
finished goods, respectively.
Note 3 - Disposition of Misomex pre-press operations:
As previously indicated in the Company's Annual Report to
Shareholders, the Company was evaluating several options with regard
to its Misomex pre-press operations. During the quarter ended
December 31, 1996 the Company wrote down the net assets of its Misomex
operation to their estimated fair values concurrent with the Company's
decision to dispose of such operations. On February 10, 1997, the
Company signed a Letter of Intent with an investor group to sell
substantially all the assets of its Misomex pre-press operations for a
price of $4,000,000 plus the assumption of certain liabilities. The
transaction is subject to the results of due diligence, the execution
of a definitive purchase agreement and certain other contingencies.
Upon closing, Baldwin will retain a fifteen percent (15%) interest in
the Misomex operation.
- 6 -
Under the terms of the Letter of Intent the proceeds of the sale
are expected to be received in the form of a nine percent (9%)
subordinated note with a term of seven years carrying a one-year
moratorium on interest payments and with level annual principal
payments beginning at the end of year four.
Based upon the terms of the Letter of Intent, the Company valued
the pre-press business at fair value less the estimated costs of
disposal by recording a charge of $46,036,000 for the quarter ended
December 31, 1996. This charge included $30,819,000 of goodwill,
$24,885,000 of net current and non-current assets, the discount to
present value of the note receivable, accruals for estimated
professional fees and other estimated disposal costs. The net
realizable value of the pre-press operations is reflected in "Other
assets" in the amount of $1,912,000 in the December 31, 1996
Consolidated Balance Sheet.
The following proforma condensed Consolidated Statement of Income
of the Company reflects the removal of the results of the Company's
pre-press operations for the six month period ended December 31, 1996
and the fiscal year ended June 30, 1996, including provision for loss
on disposal.
Six
months ended Year ended
December 31, June 30,
1996 1996
Net sales $104,274,000 $226,069,000
Gross profit 33,178,000 73,193,000
Operating expenses 29,009,000 60,938,000
Provision for loss on
disposal of Misomex 46,036,000
Restructuring charge 3,000,000
Operating (loss) income (41,867,000) 9,256,000
Other expenses 714,000 1,641,000
Pre tax (loss) income $(42,581,000) $ 7,615,000
Note 4 - Restructuring Reserves:
A restructuring reserve was charged to income for the quarter
ended December 31, 1995 in the amount of $3,000,000. The reserve was
established in order to accrue the costs associated with a planned
workforce rationalization of the Company's German operations as well
as to accrue for dealer claims associated with changes made to the
European dealer network and distribution system.
Since December 31, 1995, charges of $543,000 have been made
against the severance reserve. At the time the severance benefits
were accrued, management expected the restructuring would take place
over a twelve month period due to German law restrictions regarding
employee terminations. Two factors have affected the utilization of
this reserve. As is customary in Germany, the Company's first actions
were to terminate those employees with the least seniority as the
required notice period is shorter. These employees also tend to have
lower severance costs since the severance cost is a function of both
salary level and duration of employment. In addition, certain of the
process changes being implemented in the German operations are behind
schedule which affect the pace of terminations. Charges to the
severance reserve for the three month period ended December 31, 1996
were $35,000. There has been no movement in the reserve for dealer
claims as the parties have been unable to negotiate a settlement and
the matter is likely to be resolved in the courts. Restructuring
reserves, except for the long-term portion of the excess facility
sublease subsidy of $103,000 recorded in "Other long-term
liabilities", were included in "Other accounts payable and accrued
liabilities".
- 7 -
Restructuring reserves consist of the following:-
December 31, June 30,
1996 1996
Severance $ 957,000 $1,052,000
Dealer Claims 1,500,000 1,500,000
Excess facility sublease
subsidy 193,000 263,000
$2,650,000 $2,815,000
Note 5 - Common Stock:
Stock Options:-
On November 22, 1996, five (5) eligible non-employee Directors of
the Company were automatically granted non-qualified options for a
total of 4,470 shares of Class A Common Stock and 530 shares of Class
B Common Stock under the Company's 1990 Directors' Stock Option Plan
at exercise prices of $2.5625 and $3.20 per share, respectively, the
fair market values on the date of grant. Restrictions, as described
in the Company's 1991 Proxy Statement, are similar to the 1986 Stock
Option Plan, as amended and restated (the "1986 Plan"), with the
exception of the dates of exercise, vesting and termination.
On October 15, 1996, the Board of Directors adopted, subject to
stockholder approval, the 1996 Stock Option Plan (the "1996 Plan").
The 1996 Stock Plan was approved on November 19, 1996 at the Company's
Annual Meeting under the terms and conditions as set forth in Exhibit
A to the Company's Proxy Statement dated October 16, 1996. No options
have been granted under the 1996 Plan. On October 14, 1996 the
Company's 1986 Stock Option Plan, as amended and restated, terminated.
On October 7, 1996 the Board of Directors granted non-qualified
options to purchase 352,500 shares of the Company's Class A Common
Stock and 120,000 shares of Class B Common Stock to certain executives
under the Company's 1986 Plan at exercise prices of $3.00 and $3.75
per share, respectively, the fair market values on the date of grant.
The options granted are otherwise identical with regard to
restrictions on options previously granted.
- 8 -
<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, 1996 vs. Six Months
Ended December 31, 1995.
Net sales of $118,635,000 for the six months ended December 31,
1996 were flat as compared to $118,651,000 for the six months ended
December 31, 1995. Currency rate fluctuations attributable to the
Company's overseas operations decreased net sales by $4,710,000 (85.7%
of which relates to a weaker Japanese Yen). The Acrotec acquisition
added $7,735,000 to sales for the current six month period. Product
volume changes were primarily responsible for the remainder of the
difference. In terms of local currency and after excluding the impact
of acquisitions, sales generally decreased in the European Sector.
Sales were down 19.3% in Germany and were down 10.0% in Sweden. In
the Asian Sector, local currency sales increased by 38.7% in Japan and
decreased in Australia. In the Americas Sector, net sales decreased
by 13.2%.
Gross profit for the six month period ended December 31, 1996 was
$37,817,000 (31.9% of net sales) as compared to $38,705,000 (32.6% of
net sales) for the six month period ended December 31, 1995, a
decrease of $888,000 or 2.3%. Gross profit decreased by $1,328,000 on
fluctuations in currency rates. Acquisitions added $2,630,000 to
gross profit. The remainder of the difference was due to volume
changes, product mix and other factors. Gross profit was lower as a
percentage of sales when compared to the prior year due primarily to
the effects of lower sales levels in the Americas Sector and in
Germany and weaker margins at Misomex, the effects of which were
partially offset by increased sales of products with stronger
contribution rates in Japan.
Selling, general and administrative expenses were $23,838,000
(20.1% of net sales) for the six month period ended December 31, 1996
as compared to $25,043,000 (21.1% of net sales) for the same period of
the prior year, a decrease of $1,205,000 or 4.8%. Currency rate
fluctuations decreased these expenses by $601,000 and acquisitions
increased these expenses by $1,347,000. General and administrative
expenses were lower primarily due to cost savings achieved through the
consolidation of facilities and reduced staff. Selling expenses
declined due to lower staffing and generally lower expenses related to
sales volume changes in the Americas and Europe. Other operating
expenses, before the provision for loss on the disposition of Misomex
and the loss on restructuring charges (See Notes 3 and 4 - Notes to
Consolidated Financial Statements) increased by $1,558,000 over the
same period of the prior year. Acquisitions added $765,000 to other
operating expenses and currency rate fluctuations decreased other
operating expenses by $355,000. The remainder of the increase in
other operating expenses related primarily to increased engineering
and research and development project costs and personnel.
Interest expense for the six month period ended December 31, 1996
was $1,808,000 as compared to $2,018,000 for the six month period
ended December 31, 1995. Currency rate fluctuations decreased
interest expense by $187,000 while acquisitions added $351,000 for the
current period. Decreased interest expense resulted from lower levels
of working capital related indebtedness of non-Acrotec subsidiaries
and a decrease in long term debt. Interest income was $208,000 and
$249,000 for the six month periods ended December 31, 1996 and
December 31, 1995, respectively. Currency rate fluctuations decreased
interest income by $48,000 and acquisitions increased interest income
by $21,000 for the current period. Other income increased from
$541,000 to $927,000 and included foreign currency transaction gains
(losses) of $236,000 and $(8,000) for the six month periods ended
December 31, 1996 and 1995, respectively with the remainder of the
change due to increased royalty income. The effects of currency rate
fluctuations decreased other income by $(68,000) for the current
period.
- 9 -
The Company's effective tax rate was 46% on income before the
provision for loss on the disposition of Misomex (See Note 3 - Notes
to Consolidated Financial Statements) for the six month period ended
December 31, 1996, as compared to 46% on income before restructuring
charges (See Note 4 - Notes to Consolidated Financial Statements) for
the six month period ended December 31, 1995. Currency rate
fluctuations decreased the provision for income taxes by $123,000 for
the current period. The current period's effective tax rate reflects
the impact of foreign source income which is generally taxed at
significantly higher rates than domestic income. No tax benefit was
recorded for the six month periods ended December 31, 1996 or 1995 on
either the provision for loss on the disposition of Misomex or the
charge for restructuring due to the Company's tax loss carryforward
positions in Europe.
Net loss for the six month period ended December 31, 1996 was
$(44,751,000) versus a net loss of $(1,344,000) for the six month
period ended December 31, 1995, or $(2.58) and $(0.07) per share,
respectively. Acquisitions decreased the net loss by $254,000 while
currency rate fluctuations increased the net loss by $144,000 for the
current period. Weighted average equivalent shares outstanding during
the six month periods ended December 31, 1996 and December 31, 1995
were 17,328,710 and 17,980,517, respectively. For the six months
ended December 31, 1996 and December 31, 1995, the net losses due to
the provision for the disposition of Misomex and restructuring charges
were $(46,036,000) or $(2.66) per share and $(3,000,000) or $(0.17)
per share, respectively.
The following condensed income statement data sets forth the
consolidated results of the Misomex pre-press business for the three
and six month periods ended December 31, 1996 and 1995.
<TABLE>
<CAPTION>
For the three months For the six months
ended December 31, ended December 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $8,206 $10,161 $14,361 $16,835
Costs and expenses 8,614 9,624 15,477 16,523
Operating (loss) income (408) 537 (1,116) 312
Other (income) expense, net (98) 92 (41) 234
(Loss) income before taxes $ (310) $ 445 $(1,075) $ 78
</TABLE>
Three Months Ended December 31, 1996 vs. Three Months
Ended December 31, 1995.
Net sales for the three months ended December 31, 1996 decreased by
$4,722,000 (7.2%) to $61,094,000 from $65,816,000 for the three months
ended December 31, 1995. Currency rate fluctuations attributable to the
Company's overseas operations decreased net sales by $2,536,000 for the
current period. Product volume was primarily responsible for the remainder
of the change. In terms of local currency, sales were down throughout the
European Sector; by 10.3% in Germany, by 6.9% in the United Kingdom and by
9.6% in Sweden. Local currency Asian Sector sales increased 50.0% in
Japan. In the Americas Sector, net sales decreased 24.2% for the period.
Gross profit for the three month period ended December 31, 1996 was
$19,235,000 (31.5% of net sales) as compared to $21,558,000 (32.8% of net
sales) for the three month period ended December 31, 1995, a decrease of
$2,323,000 or 10.8%. Gross profit decreased by $654,000 due to currency
rate fluctuations with the remainder due primarily to volume changes,
product mix and other factors. Gross profit was lower as a percentage of
sales when compared to the prior year due primarily to the effects of lower
sales volumes in the Americas and European Sectors and weaker margins at
Misomex, the effects of which were partially offset by increased sales of
products with stronger contribution rates in Japan.
- 10 -
Selling, general and administrative expenses were $11,954,000 (19.6%
of net sales) for the three month period ended December 31, 1996 as
compared to $14,197,000 (21.6% of net sales) for the same period of the
prior year, a decrease of $2,243,000 or 15.8% in these expenses of which
currency rate fluctuations decreased these expenses by $300,000 in the
current period. General and administrative expenses were lower primarily
due to cost savings achieved through the consolidation of facilities,
reduced staffing and lower legal and consulting fees. Selling expenses
declined due to lower staffing, trade shows and generally lower expenses
related to sales volume changes in the Americas and Europe. Other
operating expenses, before the provision for loss on the disposition of
Misomex and the loss on restructuring charges (See Notes 3 and 4 - Notes to
Consolidated Financial Statements) increased by $157,000 or 2.9% over the
same period of the prior year. Increases in both engineering and research
and development expenses relate to increased staffing. Currency rate
fluctuations decreased other operating expenses by $228,000 for the current
period.
Interest expense for the three month period ended December 31, 1996
was $898,000 as compared to $1,080,000 for the three month period ended
December 31, 1995. Currency rate fluctuations decreased interest expense
by $120,000 with the remaining decrease due primarily to lower levels of
long-term debt for the current period. Interest income was $96,000 and
$162,000 for the three month periods ended December 31, 1996 and December
31, 1995, respectively. Other income increased primarily due to foreign
currency transaction gains versus (losses) of $328,000 and ($158,000) for
the three month periods ended December 31, 1996 and 1995, respectively.
Currency rate fluctuations decreased other income by $25,000 for the
period.
The Company's effective tax rate was 46% on income before the
provision for loss on the sale of Misomex (See Note 3 - Notes to
Consolidated Financial Statements) for the three month period ended
December 31, 1996, as compared to 46% on income before restructuring
charges (See Note 4 - Notes to Consolidated Financial Statements) for the
three month period ended December 31, 1995. Currency rate fluctuations
decreased the provision for income taxes by $16,000 for the current period.
The current period's effective tax rate reflects the impact of foreign
source income which is generally taxed at significantly higher rates than
domestic income. No tax benefit was recorded for the three month periods
ended December 31, 1996 or 1995 on either the provision for loss on the
disposition of Misomex or the charge for restructuring due to the Company's
tax loss carryforward positions in Europe.
Net loss for the three month period ended December 31, 1996 was
$(45,307,000) versus a net loss of $(2,337,000) for the three month period
ended December 31, 1995, or $(2.62) and $(0.13) per share, respectively.
Currency rate fluctuations increased the net loss by $18,000 for the
current period. Weighted average equivalent shares outstanding during the
three month periods ended December 31, 1996 and December 31, 1995 were
17,298,381 and 18,132,011, respectively. For the three months ended
December 31, 1996 and December 31, 1995, the net losses due to the
provision for the disposition of Misomex and the net loss due to
restructuring charges were $(46,036,000) or $(2.66) per share and
$(3,000,000) or $(0.17) per share, respectively.
Liquidity and Capital Resources at December 31, 1996
Liquidity and Working Capital
The Company's long-term debt includes $25,000,000 of 8.17% senior
notes (the "Senior Notes") due October 29, 2000 and a three-year
$20,000,000 Revolving Credit Agreement (the "Revolver") with NationsBank of
North Carolina, as Agent, which matures in December, 1998.
The Senior Notes and the Revolver require the Company to maintain
certain financial covenants and have certain restrictions regarding the
payment of dividends, limiting them throughout the terms of the Senior
Notes and the Revolver to $1,000,000 plus 50% of the Company's net income
after January 1, 1997. In addition, the Company was required to pledge
certain of its shares of its domestic subsidiaries as collateral for both
the Senior Notes and the Revolver.
- 11 -
Both the Senior Notes and the Revolver require the Company to maintain
a ratio of current assets to current liabilities (as those terms are
defined in the agreements) of not less than 1.4 to 1. At December 31,
1996, this ratio was 1.5 to 1.
The Net cash used by investing activities as reflected in the
Consolidated Statement of Cash Flows decreased by $9,371,000 from
$10,599,000 at December 31, 1995 to $1,228,000 at December 31, 1996
primarily due to the fact that the prior year amount included the purchase
of a Swedish manufacturing facility for SEK 28,840,000 ($4,335,000) and the
purchase of Acrotec AB and Subsidiaries, net of cash acquired, of
$4,798,000. The Net cash used by financing activities increased by
$3,664,000 to $(2,045,000) at December 31, 1996 from net cash provided of
$1,619,000 at December 31, 1995. The difference is primarily caused by
greater repayments under the Revolver ($750,000) and the fact that the
prior year amounts included new borrowings needed to finance the purchase
of the Swedish Manufacturing Facility ($2,766,000).
The Company's working capital decreased from $49,178,000 at December
31, 1995, to $21,933,000 at December 31, 1996, a decrease of $27,245,000 or
55.4%. The principal reasons for the decrease in working capital were the
write-down of $12,764,000 of net working capital in conjunction with the
planned disposition of the pre-press business and the reclassification of
$8,965,000 of long-term debt to current liabilities. Currency rate
fluctuations decreased working capital by $1,279,000 for the current
period. Increases in trade accounts and notes payable, income taxes
payable and other current liabilities more than offset the increases in
cash and trade receivables net of inventory decreases. The Company's
working capital decreased by $24,117,000 or 52.4% from $46,050,000 at
June 30, 1996 to $21,933,000 at December 31, 1996. The principal reasons
for the decrease in working capital were the same as noted above. Currency
rate fluctuations decreased working capital by $369,000 for the current
period. Decreases in accrued compensation were more than offset by
increases in other current liabilities and more than offset the change in
current assets where increases in receivables were offset by decreases in
inventory.
The Company maintains relationships with foreign and domestic banks
which have extended credit facilities to the Company totaling $37,361,000,
including amounts available under the Revolver. As of December 31, 1996,
the Company had outstanding $13,248,000 under these lines of credit, of
which $113,000 is classified as long-term debt. Total debt levels as
reported on the balance sheet at December 31, 1996 are $545,000 lower than
they would have been if June 30, 1996 exchange rates had been used. The
reported amounts for "Current portion of long-term debt" and "Long-term
Debt" at December 31, 1996 exclude $290,000 and $1,945,000, respectively,
of the Misomex mortgage note payable that has been reclassified to "other
assets" in conjunction with the planned disposition of the pre-press
business.
Net capital expenditures made to meet the normal business needs of the
Company for the six months ended December 31, 1996 and December 31, 1995,
including commitments for capital lease payments, were $1,004,000 and
$1,025,000, respectively.
The Company believes its cash flow from operations and bank lines of
credit are sufficient to finance its working capital and other capital
requirements for the near and long-term future.
Impact of Inflation
The Company's results are affected by the impact of inflation on
manufacturing and operating costs. Historically, the Company has used
selling price adjustments, cost containment programs and improved operating
efficiencies to offset the otherwise negative impact of inflation on its
operations.
- 12 -
BALDWIN TECHNOLOGY COMPANY, INC.
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders was held on
November 19, 1996.
(c) A brief description of matters voted upon and the results of
the voting follows:
Proposal 1 - To elect three Class III Directors to serve for
three-year terms or until their respective successors are elected and
qualify.
SCHEDULE OF VOTES CAST FOR EACH DIRECTOR
Total Vote For Total Vote Withheld
Each Director From Each Director
Class A & B
Akira Hara 30,077,409 65,845
John T. Heald, Jr. 30,074,109 69,145
Ralph Roy Whitney, Jr. 30,065,509 77,745
Proposal 2 - To approve the Company's 1996 Stock Option Plan.
Total votes Broker
Total Votes For Against Abstentions Non-Votes
23,102,861 2,844,625 72,682 4,123,085
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.26 Third Amendment to Amended and Restated Revolving Credit
Agreement dated as of February 14, 1997 by and among Baldwin Technology
Company, Inc. and its subsidiaries, Baldwin Americas Corporation and Baldwin
Technology Limited, and NationsBank NA as agent and Lender, and Bank of
Boston Connecticut (filed herewith).
10.27 Amendment to Note Agreement dated as of February 14, 1997
by and among Baldwin Technology Company, Inc. and its subsidiaries,
Baldwin Americas Corporation and Baldwin Technology Limited, and John
Hancock Mutual Life Insurance Company, John Hancock Variable Life Insurance
Company and John Hancock Life Insurance Company of America (filed herewith).
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K. There were no reports on Form 8-K filed for
the three months ended December 31, 1996.
- 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
Treasurer and
Chief Financial Officer
Dated: February 14, 1997
- 14 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
BALDWIN TECHNOLOGY COMPANY, INC.
BY s\ William J. Lauricella
Treasurer and
Chief Financial Officer
Dated: February 14, 1997
- 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>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 7,404
<SECURITIES> 1,976
<RECEIVABLES> 59,042
<ALLOWANCES> 2,059
<INVENTORY> 28,335
<CURRENT-ASSETS> 101,558
<PP&E> 25,610
<DEPRECIATION> 17,601
<TOTAL-ASSETS> 158,832
<CURRENT-LIABILITIES> 79,625
<BONDS> 0
0
0
<COMMON> 184
<OTHER-SE> 53,138
<TOTAL-LIABILITY-AND-EQUITY> 158,832
<SALES> 118,635
<TOTAL-REVENUES> 118,635
<CGS> 80,818
<TOTAL-COSTS> 80,818
<OTHER-EXPENSES> 79,665
<LOSS-PROVISION> (41,848)
<INTEREST-EXPENSE> 1,808
<INCOME-PRETAX> (43,656)
<INCOME-TAX> 1,095
<INCOME-CONTINUING> (44,751)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (44,751)
<EPS-PRIMARY> (2.58)
<EPS-DILUTED> (2.58)
</TABLE>
THIRD AMENDMENT TO
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
THIS THIRD AMENDMENT TO AMENDED AND RESTATED REVOLVING
CREDIT AGREEMENT (this "Amendment Agreement") is made and entered into as of
this 14th day of February, 1997, by and among BALDWIN AMERICAS CORPORATION, a
Delaware corporation ("BAM"), BALDWIN TECHNOLOGY LIMITED, a Bermuda corporation
("BTL"), BALDWIN TECHNOLOGY COMPANY, INC., a Delaware corporation ("Baldwin"),
NATIONSBANK, N.A., a national banking association (formerly known as Nations
Bank of North Carolina, National Association), as Agent (the "Agent") for the
lenders (the "Lenders") party to the Credit Agreement (defined below), NATIONS
BANK, N.A., as Lender ("NationsBank"), and BANK OF BOSTON CONNECTICUT, as
Lender ("Bank of Boston").
W I T N E S S E T H:
WHEREAS, BAM, BTL, Baldwin, the Lenders and the Agent have entered into
thatcertain Amended and Restated Revolving Credit Agreement dated as of December
31, 1995 (asamended, the "Credit Agreement"), pursuant to which the Lenders
have agreed to make certaino BAM and BTL as Borrowers; and
WHEREAS, the parties hereto desire further to amend the Credit Agreement
in themanner herein set forth effective as of the date hereof;
NOW, THEREFORE, the parties hereby agree as follows:
1. Definitions. The term "Credit Agreement" or "Agreement" (as the case
may be)as used herein and in the Loan Documents shall mean the Credit Agreement
as hereby amended and modified, and as further amended, modified or supplemen
ted from time to time as permitted thereby. Unless the context otherwise
requires, all terms used herein without definition shall have the definitions
provided therefor in the Credit Agreement.
2. Amendments. Subject to the conditions hereof, the Credit Agreement
is hereby amended, effective as of the date hereof, as follows:
(a) The definition of "Applicable Margin" is hereby deleted in its
entirety and
the following is inserted in replacement thereof:
"Applicable Margin" means (a) initially, 1.50% and (b)
commencing on February 15, 1997, the margin set forth below opposite
the applicable Consolidated Indebtedness for Money Borrowed/Cash Flow
Ratio with respect to the LIBOR Loans:
<PAGE>
Consolidated Indebtedness for Applicable
Money Borrowed/Cash Flow Ratio Margin
Less than 2.00 to 1.00 1.00%
Less than or equal to 1.25%
2.50 to 1.00 and greater
than or equal to 2.00
to 1.00
Less than or equal to 1.50%
3.00 to 1.00 and greater
than 2.50 to 1.00
Less than or equal to 1.75%
3.50 to 1.00 and greater
than 3.00 to 1.00
Greater than 3.50 to 1.00 2.50%
provided, however, that the Applicable Margin shall be adjusted on each Rate
Change Date from and after February 15, 1997, based upon the Consolidated
Indebtedness for Money Borrowed/Cash Flow Ratio for the period comprised of the
four consecutive Fiscal Quarters ended on the immediately preceding Calculation
Date, to be the margin set out above opposite the applicable Consolidated
Indebtedness for Money Borrowed/Cash Flow Ratio. Such change in the
Applicable Margin shall be applicable to all LIBOR Loans extended, renewed,
continued or converted on or after such Rate Change Date. If Consolidated
Cash Flow shall be equal to or less than zero for any period of calculation
of Consolidated Indebtedness for Money Borrowed/Cash Flow
Ratio, the Applicable Margin shall be the highest percentage set forth above for
such period.
(b) The definition of "Consolidated Funded Debt" is hereby deleted in its
entirety and the following is inserted in replacement thereof:
"Consolidated Funded Debt" means, for any period, the sum of (i) the aggregate
total Funded Debt of Baldwin and its Subsidiaries on a consolidated basis on
the last day of such period plus (ii) the current maturities of all Indebtedness
under the Joint and Several Senior Notes issued pursuant to the Senior Note
Agreement due during such period, all in accordance with GAAP;
(c) The definition of "Senior Note Agreement" is hereby amended by adding after
the words "(as defined therein)" in the last line thereof the words, "as from
time to time amended, modified or supplemented."
(d) The definition of "Senior Note Documents" is hereby amended by adding after
the words "(as defined in the Senior Note Agreement)" in the last line thereof
the words, "all as from time to time amended, modified or supplemented".
(e) Section 4.2 of the Credit Agreement is hereby amended by inserting a new
paragraph at the end of such section which shall read as follows:
In addition to the foregoing conditions to Advances, the Lenders shall have
no obligation to make any Advance after September 30, 1997 until such time
as the Borrowers and Baldwin shall have complied with the requirements of
Section 7.1(a) and (c) with respect to the Fiscal Quarter ended September 30,
1997, notwithstanding the 45 day period provided in Section 7.1(a) for the
delivery of the financial information and certifications provided therein.
(f) Section 8.1(a) of the Credit Agreement is hereby amended by (i) deleting
the date "June 30, 1995" in the third line thereof and inserting in replacement
thereof the date "January 1, 1997" and (ii) deleting the dollar figure
"$80,000,000" in the third line thereof and inserting in replacement thereof
the dollar figure "$45,000,000" .
(g) Section 8.1(b) of the Credit Agreement is hereby amended by deleting the
figure "1.3" in the third line thereof and inserting in replacement thereof the
figure "1.1".
(h) Section 8.1(c) of the Credit Agreement is hereby amended by (i) deleting
the reference to "2.50 to 1.00" in the second tier of ratios therein and
inserting in replacement thereof the ratio "2.25 to 1.00" and (ii) adding the
following paragraph at the end thereof:
For the purposes of compliance with this Section 8.1(c) only (but not for
the purposes of determining the Applicable Margin at any time), in calcu-
ating the ratio of Consolidated Funded Debt to Consolidated Cash Flow for any
four-quarter period which includes the Fiscal Quarter ended December 31, 1996,
there shall be excluded therefrom the effect of the charge in the amount of
$46,036,000 relating to the Misomex operations of Baldwin incurred in the
Fiscal Quarter ended December 31, 1996.
(i) Section 8.1(d) of the Credit Agreement is hereby deleted and the following
is inserted in replacement thereof:
(d) Fixed Charge Ratio. Permit the Consolidated Fixed Charge Ratio for the
period indicated below to be less than the ratio set forth below opposite such
period below:
<PAGE>
Required Consolidated
Period Fixed Charge Ratio
The period of four 2.50 to 1.00
consecutive Fiscal
Quarters ended
December 31, 1995
The period of four 2.25 to 1.00
consecutive Fiscal
Quarters ended
March 31, 1996
The period of four 2.50 to 1.00
consecutive Fiscal
Quarters ended
June 30, 1996
Each period of four 2.25 to 1.00
consecutive Fiscal
Quarters ended
September 30, 1996 and
December 31, 1996
Each period of four 2.25 to 1.00
consecutive Fiscal
Quarters ended
March 31, 1997
and June 30, 1997
Each period of four 3.50 to 1.00
consecutive Fiscal
Quarters ended
September 30, 1997,
December 31, 1997 and
each March 31, June 30,
September 30 and December 31
thereafter
For the purposes of this Section 8.1(d) only, in calculating Consolidated Fixed
Charge Ratio for any four-quarter period which includes the Fiscal Quarter
ended December 31, 1996, there shall be excluded therefrom the effect of the
charge in an amount not in excess of $46,036,000 relating to the Misomex
operations of Baldwin incurred in the Fiscal Quarter ended December 31, 1996.
The foregoing notwithstanding, if at any time after December 31, 1996, any
current maturities of Funded Debt related to the Senior Note Documents are
prepaid, extended or altered in any respect such that they no longer qualify or
are no longer categorized, as current maturities of Funded Debt, then the re
quired minimum
Consolidated Fixed Charge Ratio shall thereafter be 3.50 to 1.00, provided
that if all current maturities with respect to the Senior Note Documents
subsequently qualify, and are categorized, as current maturities of Funded Debt,
then the required minimum Consolidated Fixed Charge Ratio shall revert to
the levels set forth in the preceding columns.
(j) Section 8.2 of the Credit Agreement is hereby deleted in its entirety and
the following is inserted in replacement:
8.2. Restricted Payments. (a) Baldwin will not make, and the Borrowers will
not permit Baldwin to make, any Restricted Payments, unless the aggregate of
all such Restricted Payments made by Baldwin after January 1, 1997 does not
exceed the sum of (x) $1,000,000; plus (y) the net cash proceeds received by
Baldwin from the issuance of shares of Eligible Capital Stock; plus (z)(i) 50%
of the Consolidated Net Income from January 1, 1997 through Baldwin's Fiscal
Quarter most recently ended for which financial statements have been (or are
required to have been) furnished to the Agent or any Lender in accordance with
Section
7.1(a) or 7.1(b), as the case may be, taken as a single accounting period or,
(ii) in the event Consolidated Net Income for such period shall be a negative
number, 100% of such amount (expressed as a negative number); provided,
further, however, that no Restricted Payment shall be permitted by Baldwin if
an Event of Default or Default exists immediately before or immediately
after such payment or would otherwise reasonably be anticipated to result
therefrom.
(b) No Borrower will make, and neither Borrower nor Baldwin will permit
any Baldwin Subsidiary or any Borrower Subsidiary to make, any
Restricted Payments (other than dividends by any Baldwin Subsidiary or
distributions on any other securities of any Baldwin Subsidiary held by either
Borrower or Baldwin) if an Event of Default or Default exists immediately
before or immediately after such payment or would otherwise reasonably be
anticipated to result therefrom.
(c) In calculating compliance with paragraph (a) above, stock repurchases
made by the Borrower during the period from October 1, 1996 through February
7, 1997 in an aggregate amount not in excess of $230,000 shall not be counted
against the amount set forth in paragraph (a) above.
<PAGE>
(k) Section 11.2 of the Credit Agreement is hereby amended by deleting
11.2(d) in its entirety and inserting the following in replacement thereof:
(d) if to NationsBank or the Agent:
NationsBank, National Association
One Independence Center
101 North Tryon Street
Charlotte, North Carolina 28255-0001
Attention: Dana Weir
Telephone: 704-388-3917
Telecopy: 704-386-9923
with a copy to:
NationsBank, National Association
Corporate Banking
767 Fifth Avenue
5th Floor
New York, New York 10153-0083
Attention: Thomas J. Kane
Telephone: 212-407-5341
Telefacsimile: 212-593-1083
(l) Exhibits D-1 and D-2 to the Credit Agreement is hereby amended by adding
the following as an addressee on the first page thereof:
NationsBank, National Association
Corporate Banking
767 Fifth Avenue
5th Floor
New York, New York 10153-0083
Attention: Thomas J. Kane
(m) Exhibit J to the Credit Agreement is hereby deleted in its entirety and a
new Exhibit J is added in replacement thereof in the form attached hereto as
Exhibit A.
3. Amendment Fee. The Borrowers shall on the date hereof pay to the Agent
for the benefit of the Lenders an amendment fee in the amount of $25,000.
4. Guarantors. Each Guarantor has joined in the execution of this Amendment
Agreement for the purpose of (i) agreeing to the amendments to the Credit
Agreement and (ii) confirming its guarantee of payment of all the Obligations.
5. Representations and Warranties. Baldwin and each Borrower hereby
certifies that:
(a) The representations and warranties made by Baldwin or any Borrower in
Article VI of the Credit Agreement are true on and as of the date hereof,
with the same effect as though such representations and warranties were made on
the date hereof, except to the extent that such representations and warranties
expressly relate to an earlier date.
(b) There has been no material change in the condition, financial or other-
wise, of Baldwin, any Borrower or any of their respective Subsidiaries since
the date of the most recent financial reports of Baldwin and the Borrowers
received by each Lender under Section 7.1 of the Credit Agreement, other than
changes in the ordinary course of business and the effect of the disposition of
the Misomex operations, none of which has been a material adverse change;
(c) The business and properties of Baldwin, any Borrower or any of their
respective Subsidiaries are not, and since the date of the most recent financial
reports of Baldwin and the Borrowers received by each Lender under Section 7.1
of the Credit Agreement have not been, adversely affected in any substantial
way as the result of any fire, explosion, earthquake, accident, strike, lockout
combination of workmen, flood, embargo, riot, activities of armed forces, war
or acts of God or the public enemy, or cancellation or loss of any major
contracts; and
(d) No event has occurred and no condition exists which, upon the
consummation of the transaction contemplated hereby, will constitute a Default
or an Event of Default on the part of Baldwin or any Borrower under the Credit
Agreement or any other Loan Document either immediately or with the lapse of
time or the giving of notice, or both.
6. Entire Agreement. This Amendment Agreement sets forth the entire
understanding and agreement of the parties hereto in relation to the subject
matter hereof and supersedes any prior negotiations and agreements among
the parties relative to such subject matter.
7. Full Force and Effect of Agreement. Except as hereby specifically amended,
modified or supplemented, the Credit Agreement and all of the other Loan
Documents are hereby confirmed and ratified in all respects and shall remain in
full force and effect according to their respective terms.
8. Counterparts. This Amendment Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment Agreement
to be duly executed by their duly authorized officers, all as of the day and
year first above written.
BALDWIN AMERICAS CORPORATION
By:________________________________
Name:______________________________
Title:______________________ _________
BALDWIN TECHNOLOGY LIMITED
By:________________________________
Name:______________________________
Title:_____________________________
BALDWIN TECHNOLOGY COMPANY, INC.
By:________________________________
Name:______________________________
Title:_____________________________
NATIONSBANK, N.A., as Agent for the Lenders
By:________________________________
Name:______________________________
Title:_______________________________
<PAGE>
NATIONSBANK, N.A., as Lender
By:________________________________
Name:______________________________
Title:_______________________________
BANK OF BOSTON CONNECTICUT, as Lender
By:________________________________
Name:______________________________
Title:_______________________________
OTHER GUARANTORS
BALDWIN EUROPE CONSOLIDATED, INC.
By:________________________________
Name:______________________________
Title:_______________________________
BALDWIN ASIA PACIFIC CORPORATION
By:________________________________
Name:______________________________
Title:_____________________________
<PAGE>
BALDWIN TECHNOLOGY CORPORATION
By:________________________________
Name:______________________________
Title:_______________________________
KANSA CORPORATION
By:________________________________
Name:______________________________
Title:_____________________________
BALDWIN GRAPHIC SYSTEMS, INC.
By:________________________________
Name:______________________________
Title:_______________________________
MISOMEX OF NORTH AMERICA, INC.
By:________________________________
Name:______________________________
Title:_____________________________
<PAGE>
ENKEL CORPORATION
By:________________________________
Name:______________________________
Title:_______________________________
<PAGE>
Exhibit A
to Third Amendment
EXHIBIT J
1. Determination of Applicable Margin
(a) Consolidated Indebtedness
for Money Borrowed
(i) Consolidated Funded Debt $_____________
(ii) Current Debt for Loans $_____________
(iii) Current Portion of
Capital Leases $_____________
(iv) Total $_____________
(b) Consolidated Cash Flow $_____________
(without exclusion of the charge
attributable to Misomex)
(c) (a) divided by (b) 3D _______ to 1.00
(d) Applicable Margin based on _______%
table in definition
2. Determination of Applicable Unused Fee Rate
(a) Consolidated Indebtedness
for Money Borrowed
(i) Consolidated Funded Debt $_________________
(ii) Current Debt for Loans $_________________
(iii) Current Portion of $_________________
Capital Leases
(iv) Total $______________
(b) Consolidated Cash Flow $_________________
(without exclusion of the charge
attributable to Misomex)
(c) (a) divided by (b) 3D _______ to 1.00
(d) Applicable Unused Fee Rate
based on table in definition _______%
BALDWIN AMERICAS CORPORATION
1801 Robert Fulton Drive
Suite 417
Reston, Virginia 22091
BALDWIN TECHNOLOGY LIMITED
Clarendon House
Hamilton, HM11 Bermuda
BALDWIN TECHNOLOGY COMPANY, INC.
65 Rowayton Avenue
Rowayton, Connecticut 06853
February __, 1997
To Each of the
Purchasers Listed on the
Purchaser Schedule:
Reference is made to the Note Agreement, dated as of October 29, 1993,
among Baldwin Americas Corporation ("BAM"), Baldwin Technology Limited ("BTL",
and together with BAM, the "Borrowers"), Baldwin Technology Company, Inc. (the
"Company") and John Hancock Mutual Life Insurance Company, John Hancock Variable
Life Insurance Company and John Hancock Life Insurance Company of America, as
amended on October 26, 1995 and October 29, 1996 (as so amended, the "Note
Agreement"). Capitalized terms shall have the
meanings set forth in the Note Agreement.
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The parties hereto agree as follows:
1. Paragraph 6A(1) of the Note Agreement is hereby amended to read as
follows:
"6A(1). Consolidated Net Worth. Permit Consolidated Net Worth,
calculated as of the last day of any fiscal quarter of the Company
after October 1, 1996, to be less than (i) $45,000,000, plus (ii) an amount
equal to 50% of the aggregate of the Consolidated Net Income (without deduction
for quarterly losses) in each fiscal quarter thereafter."
2. Paragraph 6B of the Note Agreement is hereby amended to read as
follows:
"6B. Restricted Payments. They will not make, and will not permit
any of their Subsidiaries to make, any Restricted Payments unless:
(i) the aggregate of all such Restricted Payments made
after January 1, 1997 does not exceed the sum of (x)
$1,250,000; plus (y) the net cash proceeds received by the
Company from the issuance of shares of Eligible Capital Stock;
plus (z)(a) 50% of the Consolidated Net Income from January
1, 1997 through the Company's fiscal quarter most recently
ended for which financial statements have been (or are required
to have been) furnished to the Holders in accordance with
paragraph 5A(I) or 5A(ii), as the case may be, taken as a single
accounting period or, (b) in the event Consolidated Net Income
for such period shall be a negative number, 100% of such
amount (expressed as a negative number); and
(ii) no Event of Default or Default exists immediately
before or immediately after such payment or would otherwise
reasonably be anticipated to result therefrom.
In calculating compliance with paragraph (i) of this paragraph
6B, stock repurchases made by the Company during the period
of October 1, 1996 through February 4, 1997, in the aggregate
amount of $230,000, shall not be counted against the amount
set forth in clause (x) above."
3. A new paragraph 6G is added to the Note Agreement to read as
follows:
"6G. Ratio of Funded Debt to Consolidated Operating EBIT. They
will not permit, as of the last day of any fiscal quarter ended on or
prior to September 30, 1988, the ratio of Consolidated Funded Debt to
Consolidated Operating EBIT for the period indicated below ended as
of such fiscal quarter to be greater than the ratio set forth opposite
such period:
Required Ratio of Consolidated
Funded Debt to Consolidated
Period Operating EBIT
Each period of four 3.25 to 1.00
consecutive fiscal
quarters ended
March 31, 1997,
June 30, 1997,
September 30, 1997,
December 31, 1997,
March 31, 1998,
June 30, 1998 and
September 30, 1998
In calculating the foregoing ratio, the charge in an amount not to
exceed $50,000,000, incurred in the fiscal quarter ended December
31, 1996, relating to Misomex, shall be excluded from the calculation
of Consolidated Operating EBIT."
4. The following defined terms are added, in appropriate alphabetical
order, to the Note Agreement in Paragraph 10B:
"Consolidated Interest Expense" means, with respect to the Company
and its Subsidiaries for any period, the gross interest expense of the
Company and its Subsidiaries determined on a consolidated basis in
accordance with GAAP applied on a consistent basis, including,
without limitation, (i) the amortization of debt discounts, (ii) the
amortization of all fees (including, without limitation, fees with
respect to interest rate protection agreements)payable in connection
with the incurrence of Debt to the extent included in interest expense
and (iii) the portion of any Capitalized Lease allocable to interest
expense. For purposes of the foregoing, gross interest expense shall
be determined after (x) giving effect to any net payments made or
received by the Company and its Subsidiaries with respect to interest
rate protection agreements entered into as a hedge against interest rate
exposure; and (y) excluding therefrom the gross interest expense of
any Person accrued prior to the date it becomes a Subsidiary."
"Consolidated Operating EBIT" shall mean with respect to the
Company and its Subsidiaries for any period, the sum of (i)
Consolidated Net Income, (ii) Consolidated Interest Expense and (iii)
(to the extent deducted in calculating Consolidated Net Income)
current and deferred taxes on income and provision for taxes on
unremitted foreign earnings which are included in gross revenues, all
on a consolidated basis in accordance with GAAP."
5. Entire Agreement. This Agreement sets forth the entire understanding
and agreement of the parties hereto in relation to the subject mater
hereof and supersedes any prior negotiations and agreements among
the parties relative to such subject matter.
6 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original,
and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such counterpart.
7. Governing Law. This Agreement shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the
law of The Commonwealth of Massachusetts (without giving
effect to principles of conflicts law).
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to
the Company and the Borrowers, whereupon this letter shall become a binding
agreement among the Prchasers, the Borrowers and the Company.
Very truly yours,
BALDWIN TECHNOLOGY COMPANY, INC.
By: ___________________________________
Title:
BALDWIN AMERICAS CORPORATION
By: ____________________________________
Title:
BALDWIN TECHNOLOGY LIMITED
By:_____________________________________
Title:
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The foregoing Agreement is
hereby accepted as of the
date first above written.
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By: ____________________________
Title:
JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY
By: _____________________________
Title:
JOHN HANCOCK LIFE INSURANCE
COMPANY OF AMERICA
By: ______________________________
Title:
