<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1998 COMMISSION FILE NUMBER 1-9334
BALDWIN TECHNOLOGY COMPANY, INC.
(Exact name of registrant as specified in its charter)
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<TABLE>
<S> <C>
DELAWARE 13-3258160
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
ONE NORWALK WEST 06854
40 RICHARDS AVENUE, NORWALK, CONNECTICUT (Zip Code)
(Address of principal executive offices)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 203-838-7470
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
Title of Each Class Name of Each Exchange
on Which Registered
CLASS A COMMON STOCK AMERICAN STOCK EXCHANGE
PAR VALUE $.01
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
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 for 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of August 31, 1998 was $70,203,717.
Number of shares of Common Stock outstanding at August 31, 1998:
<TABLE>
<S> <C>
Class A Common Stock............... 15,289,981
Class B Common Stock............... 1,835,883
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Total............................ 17,125,864
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
Items 10, 11, 12 and 13 are incorporated by reference from the Baldwin
Technology Company, Inc. Proxy Statement for the 1998 Annual Meeting of
Stockholders to be held on November 12, 1998 into Part III of this Form 10-K. (A
definitive proxy statement will be filed with the Securities and Exchange
Commission within 120 days after the close of the fiscal year covered by this
Form 10-K.)
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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Item 1. Business.................................................... 1
Item 2. Properties.................................................. 6
Item 3. Legal Proceedings........................................... 7
Item 4. Submission of Matters to a Vote of Security Holders......... 7
Item 5. Market for the Registrant's Common Stock and Related 8
Stockholder Matters.........................................
Item 6. Selected Financial Data..................................... 9
Item 7. Management's Discussion and Analysis of Financial Condition 10
and Results of Operations...................................
Item 8. Financial Statements and Supplementary Data................. 18
Item 9. Changes in and Disagreements with Accountants on Accounting 45
and Financial Disclosure....................................
Item 10. Directors, Executive Officers and Key Employees of the 45
Registrant..................................................
Item 11. Executive Compensation...................................... 45
Item 12. Security Ownership of Certain Beneficial Owners and 45
Management..................................................
Item 13. Certain Relationships and Related Transactions.............. 45
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 45
8-K.........................................................
</TABLE>
CAUTIONARY STATEMENT -- This Form 10-K 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 this Report on Form 10-K for the year ended June 30, 1998.
<PAGE> 3
PART I
ITEM 1. BUSINESS
Baldwin Technology Company, Inc. ("Baldwin" or the "Company") is the
leading international manufacturer of material handling, accessory and control
equipment for the printing industry. The Company offers its customers a broad
range of products designed to enhance the quality of printed products and
increase the productivity and cost-efficiency of the print manufacturing
processes while addressing the environmental concerns and safety issues involved
in the printing process. Baldwin's products include cleaning systems, fountain
solution and ink control systems, web control and press protection systems,
drying systems, web and material handling systems and newspaper inserter
equipment.
The Company sells its products both to printers to upgrade the quality and
capability of existing and new presses and to printing press manufacturers who
incorporate the Company's products with their own equipment for sale to
printers. The Company has product development and manufacturing facilities, as
well as sales and service operations, in the Americas, Europe and Asia Pacific.
INDUSTRY OVERVIEW
Baldwin operates in a highly fragmented market. The Company defines its
business as that of providing material handling, accessory and control equipment
for the printing industry. The Company believes that it produces the most
complete line of material handling, accessory and control equipment for the
printing industry.
The Company's products are used by printers engaged in all printing
processes including lithography, gravure, letterpress, flexography and
print-on-demand. The largest share of its business is in offset (lithographic)
printing. Offset printing is the largest segment of the domestic printing market
and is used primarily for printing books, magazines, business forms, catalogs,
greeting cards, packaging and newspapers. The Company's products are designed to
improve the printing process in terms of both quality of the finished product as
well as its cost efficiency.
Although offset printing represents a significant segment of the U.S.
commercial printing industry, it is not as dominant in the international
printing market. The Company believes that the future growth of the
international market will be attributable in large part to the increased use of
offset printing. The Company has established operations in strategic geographic
locations to take advantage of growth opportunities in these markets. Baldwin's
worldwide operations enable it to closely monitor new product developments in
different printing markets and to introduce new products, or adapt existing
ones, to meet the printing requirements of specific local markets throughout the
world.
PRINCIPAL PRODUCTS
The Company manufactures and sells more than 200 different products to
printers and printing press manufacturers. The Company's product development is
focused on the needs of the printer. Typically, it takes a new product several
years after its introduction to make a significant contribution to the Company's
net sales. Initially, after the introduction of a new product, the Company's
marketing efforts usually focus on printers. With the exception of the Company's
Kansa product line, as a product progresses through its life cycle, the
percentage of sales to printing press manufacturers generally increases as the
product's acceptance by the industry increases and printers begin to specify
certain of the Company's products as part of their accessory or material
handling equipment package when ordering new presses. The Company's Kansa
product line is primarily marketed to newspaper
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printers. Historically, the Company's products have had a long life cycle as the
Company continually upgrades and refines its product lines to meet customer
needs and changes in printing press technology. The Company's products help
printers address increasingly demanding print quality, environmental and safety
issues while enhancing productivity. Nearly all of the Company's products also
significantly limit paper waste. The Company's sales have historically increased
about equally through both internal product development and acquisitions of
product lines and companies.
The Company's products range in unit price from under $100 to approximately
$500,000. Baldwin's principal products are:
GRAPHIC PRODUCTS AND CONTROLS GROUP
CLEANING SYSTEMS. The Company's oldest Cleaning Systems product is the
Press Washer which cleans the ink train of an offset press. Additional Cleaning
Systems products include the Automatic Blanket Cleaner, Newspaper Blanket
Cleaner, Chill Roll Cleaner and Guide Roll Cleaner, which all reduce paper
waste, volatile organic compound ("VOC") emissions and press downtime, as well
as improve productivity, print quality and safety of operation for the press
operator. In the fiscal years ended June 30, 1998, 1997 and 1996, net sales of
Cleaning Systems represented approximately 29.1%, 29.7% and 27.8% of the
Company's net sales, respectively.
FOUNTAIN SOLUTION CONTROL SYSTEMS. Fountain Solution Control Systems
control the supply, temperature, cleanliness, chemical composition and certain
other characteristics of water used in the offset printing process. Among the
most important of these products are the Company's Refrigerated Circulators and
Spray Dampening Systems. In the fiscal years ended June 30, 1998, 1997 and 1996,
net sales of Fountain Solution Control Systems represented approximately 14.5%,
14.1% and 13.3% of the Company's net sales, respectively.
WEB CONTROL AND PRESS PROTECTION SYSTEMS. The Company's Web Control
Systems improve print quality by precisely controlling the flow of paper through
a web offset press which reduces waste and increases press productivity. The
Company's Press Protection Systems, designed in response to the increasing
number of web leads used in printing today's colorful newspapers, provide an
auto-arming electronic package offering high quality press protection in the
event of a web break.
OTHER ACCESSORY AND CONTROL EQUIPMENT. The Company's Ink Control Systems
control and regulate many aspects of the ink feed system on a printing press.
These products include Ink Agitators, Ink Mixers and Ink Level Systems which
reduce wasted ink and paper and allow for the use of recyclable ink containers.
Other products include Ultra-Violet and Infra-Red Dryers and Gluing Systems. In
the fiscal years ended June 30, 1998, 1997 and 1996, net sales of Other
Accessory and Control Equipment represented approximately 14.9%, 14.0% and 12.0%
of the Company's net sales, respectively.
MATERIAL HANDLING GROUP
WEB HANDLING SYSTEMS. The Company's Web Handling Systems, produced by its
Enkel and Amal subsidiaries, unwind, rewind and splice paper and other materials
supplied to presses in webs and also control the tension and position of web
materials. This equipment eliminates unnecessary press stoppages and allows a
more efficient flow of printed work. In the fiscal years ended June 30, 1998,
1997 and 1996, net sales of Web Handling Systems represented approximately
21.3%, 13.0% and 13.8% of the Company's net sales, respectively.
MATERIAL HANDLING/STACKING SYSTEMS. Baldwin's Material Handling/Stacking
Systems automate the handling of the printed product. The efficient counting,
stacking, packing and compressing
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of printed materials helps to increase press utilization and productivity,
reduce and control waste and decrease pressroom labor requirements.
IN-LINE FINISHING SYSTEMS. The Company's In-line Finishing products allow
printers to perform automatically, at press speeds, functions which previously
required special handling in the bindery. These functions include numbering,
perforating, gluing and cutting.
NEWSPAPER INSERTER EQUIPMENT AND MAILING MACHINE SYSTEMS. The Company's
Newspaper Inserter Equipment collates and inserts sections and advertising
material into newspapers. Rising newsprint costs in the printing industry have
increased pressure on printers to reduce other costs, particularly labor costs.
When manual processes are replaced by newspaper inserters, payback periods as
low as six months have been realized by some purchasers of this equipment. The
Company's Mailing Machine Systems fold, label and prepare newspapers for
mailing.
PRE-PRESS GROUP
The Company disposed of its Pre-press business on June 30, 1997 (see Note
3 -- Notes to Consolidated Financial Statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations"). In the fiscal years
ended June 30, 1997 and 1996, net sales of Automated Imposition and Plate
Exposure Systems represented approximately 10.0% and 11.4% of the Company's net
sales, respectively.
PRINT ON-DEMAND GROUP
The Company entered the short-run, print-on-demand market in January of
1997 with the formation of a business venture in which the Company now holds an
80% interest. The venture, named Baldwin Document Finishing Systems, Inc.,
manufactures and markets finishing equipment for the digital printing market.
The Company's integrator strategy is focused on providing highly efficient
finishing systems to this rapidly growing market.
WORLDWIDE OPERATIONS
The Company believes that it is the only manufacturer of material handling,
accessory and control equipment for the printing industry which has complete
product development, manufacturing and marketing capabilities in the Americas,
Europe and Asia Pacific.
The following table sets forth the percentages of the Company's net sales
attributable to its geographic regions for the fiscal years ended June 30, 1998,
1997 and 1996:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
-----------------------
1998 1997 1996
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<S> <C> <C> <C>
Americas................................................ 44.5% 39.3% 40.7%
Europe.................................................. 28.9 35.4 34.7
Asia Pacific............................................ 26.6 25.3 24.6
----- ----- -----
Total........................................ 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
In the Americas, the Company operates in North, Central and South America
through its U.S. subsidiaries. In Europe, the Company operates through its
subsidiaries in Germany, Sweden, France, England and the Netherlands. In Asia
Pacific, the Company operates through its subsidiaries in Japan, Hong Kong,
China and Australia. All of the Company's subsidiaries are wholly owned except
its 80% owned joint venture.
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For additional information relating to the Company's operations in its
three geographic regions, see Note 5 -- Notes to Consolidated Financial
Statements.
ACQUISITION STRATEGY
An element of the Company's growth strategy is to make strategic
acquisitions of companies and product lines in related business areas. The
Company's acquisition strategy involves (i) acquiring new material handling,
accessory, control and print-on-demand products which can be sold through the
Company's own, or the acquired entity's, distribution network and which can
benefit from the Company's manufacturing and marketing expertise and financial
support; (ii) entering new end-user market segments and extending existing
markets; and (iii) acquiring companies which contribute new products to the
Company. After it makes an acquisition, the Company typically supports the
existing management of the acquired entity and participates actively with that
management in implementing operational strategies with a view to enhancing the
entity's sales, productivity and operating results.
MARKETING, SALES AND SUPPORT
MARKETING. The Company markets its products in almost all developed
countries throughout the world. Although Baldwin markets a similar line of
products in many of these countries, its product mix and distribution channels
vary from country to country. The Company has 110 employees devoted to marketing
and sales activities in its three principal markets and over 200 dealers
worldwide. The Company markets its products to printing press manufacturers and
to printers. For the fiscal year ended June 30, 1998 approximately 52% of the
Company's net sales were to printing press manufacturers and approximately 48%
of its net sales were directly to printers.
In the Americas and Europe, the Company markets its products both through
direct sales representatives and an extensive dealer network. In Asia Pacific,
the Company markets its products through direct sales representatives in Japan,
Hong Kong, China and Australia and through dealers throughout the rest of Asia.
SUPPORT. The Company is committed to after-sales service and support of
its products throughout the world. Baldwin employs approximately 114 service
technicians, who are complemented by product engineers, to provide field service
for the Company's products on a global basis.
BACKLOG. The Company's backlog was $87,381,000 as of June 30, 1998,
$72,727,000 as of June 30, 1997 and $69,351,000 as of June 30, 1996. Included in
the June 30, 1996 backlog was $5,008,000 of backlog relative to the disposed
Pre-press operations. Backlog represents product orders which Baldwin has
received from its customers under valid contracts or purchase orders.
CUSTOMERS. The Company has a diverse customer base. For the fiscal years
ended June 30, 1998, 1997 and 1996, no customer accounted for 10% or more of the
Company's net sales. The ten largest customers of Baldwin accounted for
approximately 50% of the Company's net sales for the fiscal year ended June 30,
1998. Sales of Baldwin's products are not seasonal. However, its sales have
traditionally been greater in the second six months of its fiscal year than in
the first six months of its fiscal year (see Item 7 "Management's Discussion and
Analysis of Financial Condition and Results of Operations").
RESEARCH, DEVELOPMENT AND ENGINEERING
The Company believes its research, development and engineering efforts have
been an important factor in establishing and maintaining its leadership position
in the field of material handling, accessory and control equipment for the
printing industry. The Company has won six Intertech Awards from the Graphic
Arts Technical Foundation. The Intertech Award was established in 1978 to
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recognize technologies that are predicted to have a major impact on the graphic
communications industry, but are not yet in widespread use in the marketplace.
Baldwin has devoted substantial efforts to adapt its products to almost all
models and sizes of printing presses in use worldwide.
The Company has product development facilities at each of its manufacturing
locations. This decentralized approach to research and development helps the
Company to react quickly to meet the needs of its customers. Coordination of the
Company's product development activities is accomplished within each
product/market group; Graphic Products and Controls for accessories and
controls; and Material Handling for roll and material handling equipment. The
organization by product/market groups ensures focused attention on opportunities
within their respective markets while avoiding duplicative efforts within the
Company.
Baldwin employs approximately 193 persons whose primary function is new
product development or modification of existing products. The Company's total
expenditures for research, development and engineering for the fiscal years
ended June 30, 1998, 1997 and 1996 were $18,514,000, $21,425,000 and
$21,022,000, respectively, representing approximately 8% of the Company's net
sales in each year. Included in the 1997 and 1996 amounts were $2,156,000 and
$3,151,000, respectively, attributable to the Company's former Pre-press
operations.
PATENTS
The Company owns or licenses a number of patents and patent applications
relating to a substantial number of Baldwin's products. These products
represented a substantial portion of the Company's net sales for the fiscal year
ended June 30, 1998. The Company's patents expire at different times during the
next twenty years; however, the expiration of patents in the near future is not
expected to have a material adverse effect on the Company's sales. The Company
has also relied upon and intends to continue to rely upon unpatented proprietary
technology, including the proprietary engineering required to adapt its products
to a wide range of models and sizes of printing presses. The Company believes
its rights under, and interests in, its patents and patent applications, as well
as its proprietary technology, are sufficient for its business as currently
conducted.
MANUFACTURING
The Company conducts its manufacturing operations through a number of
operating subsidiaries. In North America, the Company has subsidiaries with
manufacturing facilities located on the East Coast, in the Midwest and on the
West Coast of the United States.
In Europe, the Company has subsidiaries with manufacturing and assembly
facilities in Germany, Sweden and England. These facilities manufacture and
assemble complete lines of products that are in demand by printers worldwide and
by printing press manufacturers in Europe for shipment throughout the world. In
Asia, Baldwin has manufacturing and assembly facilities in Japan and China.
In general, raw materials required by the Company can be obtained from
various sources in the quantities desired. The Company has no long-term supply
contracts and does not consider itself dependent on any individual supplier.
The nature of most operations of the Company is such that there is little,
if any, negative effect upon the environment, and the Company has not
experienced any serious problems in complying with environmental protection laws
and regulations.
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COMPETITION
The printing press accessory industry is highly fragmented. Although the
Company believes it produces the most complete line of material handling,
accessory and control equipment for the printing industry, numerous companies
manufacture and sell products that compete with one or more of the Company's
products. The Company also competes with printing press manufacturers who, as a
part of their businesses, produce material handling, accessory and control
equipment for the printing industry and who generally have larger staffs and
greater financial resources than the Company.
The Company competes by offering customers a broad product line, coupled
with a well-known reputation for the reliability of its products and its
commitment to service and after-sale support. Some of the Company's products
with patent protection have little or no direct competition. The Company's
ability to compete effectively in the future will depend upon the continued
reliability of its products, after-sale service, ability to keep its market
position as its patents expire and ability to develop new products which meet
the demands of the printing industry.
EMPLOYEES
The Company employs 1,091 persons, 514 of whom are production employees and
approximately 125 of whom are management and administrative employees. Fifty-two
of the Company's 147 employees in its Baldwin Graphic Products Division in the
United States are represented by the International Association of Machinists and
Aerospace Workers under a contract which expires on November 9, 1999. In Europe,
employees are represented by various unions, under contracts with indefinite
terms. In Sweden 5, 50 and 43 of the Company's 146 employees are represented by
Ledarna (SALF), Lundsorganisationen, Metall and Tjanstemannene Central
Organisation, and Svenska Industritjanstemanna Forbundet, respectively. In
Germany, approximately 37 of the Company's 252 employees are represented by the
IG Metall (Metalworker's Union). The Company considers relations with its
employees and with its unions to be good.
ITEM 2. PROPERTIES
The Company's facilities are divided among three geographic regions and
total approximately 654,000 square feet.
In North America, manufacturing and office space leased by the Company and
its subsidiaries total approximately 354,000 square feet of which space
approximately 8,400 square feet is sublet. An additional 56,550 square feet of
office and manufacturing space is owned by Kansa Corporation, a subsidiary of
the Company.
In Europe, the Company has leased facilities totaling approximately 126,000
square feet comprised of office and manufacturing facilities in Germany
(approximately 98,000 square feet), Sweden (approximately 18,000 square feet),
France (approximately 1,800 square feet), the Netherlands (approximately 600
square feet) and England (approximately 8,000 square feet of which 1,350 square
feet is sublet). In addition, the Company owns manufacturing facilities in
Sweden totaling approximately 66,000 square feet.
In Asia, the Company leases office and manufacturing facilities of
approximately 43,000 square feet in Japan and 6,000 square feet in China and
office facilities aggregating approximately 2,000 square feet in Hong Kong and
Sydney.
The Company believes that its facilities are adequate to carry on its
business as currently conducted.
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ITEM 3. LEGAL PROCEEDINGS
There are no legal proceedings pending to which the Company is a party or
to which any of its property is subject, other than routine litigation
incidental to the Company's business or which is covered by insurance and which
would not have a material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders since November 18,
1997.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
(a) PRICE RANGE OF CLASS A COMMON STOCK
The Company's Class A Common Stock is traded on the American Stock Exchange
("AMEX") under the symbol "BLD". The following chart sets forth, for the
calendar periods indicated, the range of closing prices for the Class A Common
Stock on the AMEX, as reported by the AMEX.
<TABLE>
<CAPTION>
HIGH LOW
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1996
- -----
First Quarter............................................... 5.1875 3.375
Second Quarter.............................................. 4.25 3.50
Third Quarter............................................... 3.75 2.625
Fourth Quarter.............................................. 3.25 2.3125
1997
- -----
First Quarter............................................... 3.25 2.375
Second Quarter.............................................. 3.1875 2.5625
Third Quarter............................................... 5.50 2.8125
Fourth Quarter.............................................. 5.75 4.375
1998
- -----
First Quarter............................................... 6.4375 4.9375
Second Quarter.............................................. 6.375 5.50
Third Quarter (through September 14)........................ 6.1875 4.25
</TABLE>
(b) CLASS B COMMON STOCK
The Company's Class B Common Stock has no established public trading
market.
(c) APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERS
As of August 31, 1998, the approximate number of record holders (excluding
those listed under a nominee name) of the Company's Class A and Class B Common
Stock totaled 402 and 26, respectively. The Company believes, however, that
there are in excess of 2,700 beneficial owners of its Class A Common Stock.
(d) DIVIDENDS
Declarations of dividends depend upon the earnings and financial position
of the Company and are within the discretion of the Company's Board of
Directors. No dividend in cash or property can be declared or paid on shares of
Class B Common Stock unless simultaneously therewith there is declared or paid,
as the case may be, a dividend in cash or property on shares of Class A Common
Stock of at least 105% of the dividend on shares of Class B Common Stock (see
Note 10 -- Notes to Consolidated Financial Statements). See Note 8 -- Notes to
Consolidated Financial Statements and "Liquidity and Capital Resources" within
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for restrictions on dividends.
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ITEM 6. SELECTED FINANCIAL DATA
The Company's income statement and balance sheet data as they relate to the
years ended June 30, 1998, 1997, 1996, 1995 and 1994, have been derived from the
Company's audited financial statements (including the Consolidated Balance Sheet
of the Company at June 30, 1998 and 1997 and the related Consolidated Statement
of Income of the Company for the years ended June 30, 1998, 1997 and 1996
appearing elsewhere herein). The following information should be read in
conjunction with the aforementioned financial statements and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................... $231,408 $244,146 $259,301 $222,341 $198,055
Cost of goods sold.......... 155,151 163,791 173,271 146,727 130,051
-------- -------- -------- -------- --------
Gross profit................ 76,257 80,355 86,030 75,614 68,004
-------- -------- -------- -------- --------
Selling, general and
administrative expenses... 43,357 50,435 52,799 45,847 42,068
Research, development and
engineering expenses...... 18,514 21,425 21,022 17,296 15,409
Provision for loss on the
disposition of Pre-press
operations................ 42,407
Restructuring charge........ 3,000
-------- -------- -------- -------- --------
Operating income (loss)..... 14,386 (33,912) 9,209 12,471 10,527
-------- -------- -------- -------- --------
Interest expense............ 2,792 3,516 4,032 3,436 3,694
Interest income............. 521 414 552 577 381
Minority interest........... (97) (190)
Other income, net........... 2,330 1,617 1,490 1,130 887
-------- -------- -------- -------- --------
Income (loss) before
taxes..................... 14,542 (35,207) 7,219 10,742 8,101
-------- -------- -------- -------- --------
Provision for income
taxes..................... 5,526 2,790 4,701 5,091 3,969
-------- -------- -------- -------- --------
Net income (loss)........... $ 9,016 $(37,997) $ 2,518 $ 5,651 $ 4,132
======== ======== ======== ======== ========
Basic income (loss) per
share..................... $ 0.53 $ (2.21) $ 0.14 $ 0.32 $ 0.23
======== ======== ======== ======== ========
Diluted income (loss) per
share..................... $ 0.52 $ (2.21) $ 0.14 $ 0.32 $ 0.23
======== ======== ======== ======== ========
Weighted average number of
shares:
Basic..................... 17,145 17,228 17,720 17,830 17,968
======== ======== ======== ======== ========
Diluted................... 17,480 17,228 17,817 17,967 18,059
======== ======== ======== ======== ========
</TABLE>
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<TABLE>
<CAPTION>
JUNE 30,
--------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............. $ 28,565 $ 29,696 $ 46,050 $ 53,575 $ 45,098
Total assets................ 175,028 162,123 217,340 209,770 187,216
Short-term debt............. 10,811 14,737 10,196 9,348 6,033
Long-term debt.............. 17,072 20,256 33,576 29,868 32,230
Shareholders' equity........ 63,457 58,262 97,056 98,888 88,080
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL. The Company does not consider its business to be seasonal;
however, its sales have traditionally been greater in the second six months of
its fiscal year than in the first six months of its fiscal year. The following
schedule shows the Company's net sales for such six month periods over the last
five fiscal years to reflect the comparison.
<TABLE>
<CAPTION>
FIRST SIX SECOND SIX
FISCAL YEAR MONTHS MONTHS
----------- ------------ ------------
<S> <C> <C>
1998................................................ $103,665,000 $127,743,000
1997................................................ 118,635,000 125,511,000
1996................................................ 118,651,000 140,650,000
1995................................................ 100,352,000 121,989,000
1994................................................ 91,858,000 106,197,000
</TABLE>
The term "acquisitions" as it is used throughout Management's Discussion
and Analysis of Financial Condition and Results of Operations relates to the
October 1, 1995 acquisition of the former Acrotec Group of companies and the
formation of Baldwin Document Finishing Systems, Inc. in January of 1997. For
fiscal 1998, the first six months sales include acquisition sales of $747,000.
For fiscal year 1997, the first six months sales include acquisition sales of
$7,735,000 and the second six months include acquisition sales of $141,000. For
fiscal year 1996, the first six months sales include acquisition sales of
$6,574,000 and the second six months sales include acquisition sales of
$14,373,000.
10
<PAGE> 13
RESULTS OF OPERATIONS
The following table sets forth certain of the items (expressed as a
percentage of net sales) included in the Selected Financial Data and should be
read in connection with the Consolidated Financial Statements of the Company
including the Notes thereto, presented elsewhere in this report.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------------
ACTUAL ACTUAL ACTUAL
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Net sales............................................. 100.0% 100.0% 100.0%
Cost of goods sold.................................... 67.1 67.1 66.8
----- ----- -----
Gross profit.......................................... 32.9 32.9 33.2
Selling, general and administrative expenses.......... 18.7 20.7 20.4
Research, development and engineering expenses........ 8.0 8.7 8.1
Provision for loss on the disposition of Pre-press
Operations.......................................... 17.4
Restructuring charge.................................. 1.1
----- ----- -----
Operating income (loss)............................... 6.2 (13.9) 3.6
----- ----- -----
Interest expense...................................... 1.2 1.4 1.6
Interest income....................................... .2 .2 .2
Other income, net..................................... 1.1 .7 .6
----- ----- -----
Income (loss) from operations before taxes............ 6.3 (14.4) 2.8
Provision for income taxes............................ 2.4 1.2 1.8
----- ----- -----
Net income (loss)..................................... 3.9% (15.6)% 1.0%
===== ===== =====
</TABLE>
COMPANY'S FISCAL YEAR ENDED JUNE 30, 1998 VERSUS FISCAL YEAR ENDED JUNE 30, 1997
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position and
consolidated financial statements.
The Company's disposition of its former Pre-press operations on June 30,
1997 results in significant distortions when comparing operating performance of
the current and prior year periods. The following condensed Consolidated
Statement of Income of the Company sets forth the actual 1998 and 1997 results
together with 1997 proforma results which reflect the removal of the Company's
former Pre-press operations and the provision for loss on the disposal of those
operations. THE PROFORMA 1997 AMOUNTS WILL BE USED IN THE FOLLOWING DISCUSSION
OF THE CURRENT YEAR ACTUAL RESULTS AS COMPARED TO THE PRIOR YEAR.
11
<PAGE> 14
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED JUNE 30,
(IN THOUSANDS, EXCEPT PER SHARE DATA)
------------------------------------------
LESS
ACTUAL ACTUAL PRE-PRESS PROFORMA
1998 1997 1997 1997
-------- -------- --------- --------
<S> <C> <C> <C> <C>
Net sales................................. $231,408 $244,146 $ 28,327 $215,819
-------- -------- -------- --------
Gross profit.............................. 76,257 80,355 9,260 71,095
Selling, general and administrative
expenses................................ 43,357 50,435 8,742 41,693
Other operating expenses.................. 18,514 21,425 2,156 19,269
Provision for loss on the disposition of
Pre-press operations.................... 42,407 42,407
-------- -------- -------- --------
Operating income (loss)................... 14,386 (33,912) (44,045) 10,133
Other (income) expense.................... (156) 1,295 (64) 1,359
-------- -------- -------- --------
Income (loss) before taxes................ 14,542 (35,207) (43,981) 8,774
Provision (benefit) for income taxes...... 5,526 2,790 ( 292) 3,082
-------- -------- -------- --------
Net income (loss)......................... $ 9,016 $(37,997) $(43,689) $ 5,692
======== ======== ======== ========
Basic income (loss) per share............. $ 0.53 $ (2.21) $ (2.54) $ 0.33
======== ======== ======== ========
Diluted income (loss) per share........... $ 0.52 $ (2.21) $ (2.54) $ 0.33
======== ======== ======== ========
</TABLE>
NET SALES. Net sales for the fiscal year ended June 30, 1998 increased by
$15,589,000, or 7.2%, to $231,408,000 from $215,819,000 for the fiscal year
ended June 30, 1997. Currency rate fluctuations attributable to the Company's
overseas operations decreased net sales for the current period by $12,588,000
and acquisitions added $747,000 to net sales. Product volume changes were
primarily responsible for the remainder of the change. In terms of local
currency and after excluding the impact of acquisitions and divestitures, sales
generally increased in Europe. Sales increased in Germany by 3.9% and were up
10.3% in Sweden and 12.9% in the United Kingdom. In Asia, local currency sales
increased by 9.9% in Japan. In the Americas, net sales increased by 19.1%.
GROSS PROFIT. Gross profit for the fiscal year ended June 30, 1998 was
$76,257,000 (32.9% of net sales), as compared to $71,095,000 (32.9% of net
sales) for the fiscal year ended June 30, 1997, an increase of $5,162,000, or
7.3%. Gross profit decreased by $4,084,000 on fluctuations in currency rates and
increased by $351,000 due to acquisitions with the remainder of the change due
to volume, product mix and other factors. Gross profit rates were lower in the
Americas, primarily due to higher sales of lower margin material handling
systems. Gross profit rates were also lower in Asia reflecting the difficult
economic conditions in that market. Gross margin rates were higher in Europe,
primarily the result of the Company's continuing cost reduction and cost control
efforts.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $43,357,000 (18.7% of net sales) for the fiscal
year ended June 30, 1998, as compared to $41,693,000 (19.3% of net sales) for
the prior year, an increase of $1,664,000. Currency rate fluctuations decreased
the current year's expenses by $2,000,000 and acquisitions added $615,000.
General and administrative expenses increased primarily due to increased
consulting fees associated with certain strategic initiatives undertaken in
fiscal 1998 and incentive pay expenses. These increases were partially offset by
reduced charges for severance and cost savings achieved through the
consolidation of facilities and reduced staff. Selling expense increases of
$1,875,000 were due to volume related
12
<PAGE> 15
increases in sales commissions, offset by lower trade show and advertising
expenses and reduced staffing levels.
Other operating expenses decreased by $755,000 over the same period of the
prior year. Fluctuations in currency rates decreased these expenses by
$1,080,000 and acquisitions increased these expenses by $25,000. The remaining
increase in these expenses relates to increased engineering personnel and
project costs.
INTEREST AND OTHER. Interest expense for the fiscal year ended June 30,
1998 was $2,792,000, as compared to $3,320,000 for the fiscal year ended June
30, 1997. Currency rate fluctuations decreased interest expense by $327,000. The
remainder of the decrease was due primarily to a decrease in the amount of
outstanding working capital related indebtedness used by the Company's European
operations and a reduction in long-term debt. Interest income was $521,000 and
$357,000 for the fiscal years ended June 30, 1998 and June 30, 1997,
respectively. Currency rate fluctuations decreased interest income by $108,000.
Other income was $2,330,000 and $1,414,000 for the fiscal years ended June 30,
1998 and June 30, 1997, respectively, and includes foreign currency transaction
gains (losses) of $111,000 and $(32,000) for the current and prior period,
respectively. The remaining net increase in other income is primarily due to
increased royalty income offset by currency rate fluctuations which decreased
other income by $51,000 for the current period.
INCOME TAXES. The Company's effective tax rate for the period ended June
30, 1998 was 38.0% versus the effective rate of 35.1% for the period ended June
30, 1997. Currency rate fluctuations decreased the provision for income taxes by
$254,000 during the current period. The effective rate for the prior year
included a benefit of $854,000 due to the favorable settlement of certain tax
matters in Germany.
NET INCOME. The net income for the fiscal year ended June 30, 1998 was
$9,016,000 versus net income for the fiscal year ended June 30, 1997 of
$5,692,000. For the current period, currency rate fluctuations and acquisitions
decreased net income by $415,000 and $426,000, respectively.
COMPANY'S FISCAL YEAR ENDED JUNE 30, 1997 VERSUS FISCAL YEAR ENDED JUNE 30, 1996
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position and
consolidated financial statements. THE FOLLOWING DISCUSSION IS BASED UPON
FINANCIAL RESULTS WHICH INCLUDED PRE-PRESS OPERATIONS FOR BOTH PERIODS
PRESENTED.
NET SALES. Net sales for the fiscal year ended June 30, 1997 decreased by
$15,155,000, or 5.8%, to $244,146,000 from $259,301,000 for the fiscal year
ended June 30, 1996. Currency rate fluctuations attributable to the Company's
overseas operations decreased net sales for the current period by $12,247,000
and acquisitions added $7,876,000 to net sales. Product volume changes were
primarily responsible for the remainder of the change. In terms of local
currency and after excluding the impact of acquisitions, sales generally
decreased in Europe. Sales decreased in Germany by 12.7% and were down 14.2% in
Sweden. In Asia, local currency sales increased by 13.7% in Japan. In the
Americas, net sales decreased by 8.4%.
GROSS PROFIT. Gross profit for the fiscal year ended June 30, 1997 was
$80,355,000 (32.9% of net sales), as compared to $86,030,000 (33.2% of net
sales) for the fiscal year ended June 30, 1996, a decrease of $5,675,000 or
6.6%. Gross profit decreased by $3,755,000 on fluctuations in currency rates and
increased by $2,627,000 due to acquisitions with the remainder of the change due
to volume, 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 and weaker margins in Germany and in the divested
Pre-press group.
13
<PAGE> 16
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $50,435,000 (20.7% of net sales) for the fiscal
year ended June 30, 1997, as compared to $52,799,000 (20.4% of net sales) for
the prior year, a decrease of $2,364,000. Currency rate fluctuations decreased
the current year's expenses by $660,000 and acquisitions added $1,687,000.
General and administrative expenses increased marginally primarily due to
severance expenses related to the former Chairman of the Company, increased
pension expenses for the divested Pre-press group and increased consulting fees
associated with certain strategic initiatives undertaken in fiscal 1997. These
increases were almost offset by reduced charges for goodwill amortization and
cost savings achieved through the consolidation of facilities and reduced staff.
Selling expense decreases of $2,465,000 were due to volume related decreases in
sales commissions, lower trade show and advertising expenses and reduced
staffing levels.
Other operating expenses, before the provision for loss on the disposition
of Misomex and restructuring charges (see Notes 3 and 4 -- Notes to Consolidated
Financial Statements) increased by $403,000 over the same period of the prior
year. Fluctuations in currency rates decreased these expenses by $1,162,000 and
acquisitions increased these expenses by $770,000. The remainder of the increase
in these expenses relates to increased engineering personnel and project costs.
INTEREST AND OTHER. Interest expense for the fiscal year ended June 30,
1997 was $3,516,000, as compared to $4,032,000 for the fiscal year ended June
30, 1996. Currency rate fluctuations decreased interest expense by $471,000
while acquisitions added $351,000 to the current period. The remainder of the
decrease was due primarily to a decrease in the amount of outstanding working
capital related indebtedness used by the Company's European operations and a
reduction in long-term debt. Interest income was $414,000 and $552,000 for the
fiscal years ended June 30, 1997 and June 30, 1996, respectively. Currency rate
fluctuations decreased interest income by $101,000 and acquisitions added
$21,000 to interest income for the current period. Other income was $1,617,000
and $1,490,000 for the fiscal years ended June 30, 1997 and June 30, 1996,
respectively, and includes foreign currency transaction (losses) gains of
$(182,000) and $594,000 for the current and prior period, respectively. The
remaining net increase in other income is primarily due to increased royalty
income offset by currency rate fluctuations which decreased other income by
$20,000 for the current period.
INCOME TAXES. The Company's effective tax rate on income before the
provision for loss on the disposition of Misomex was 38.8% for the year ended
June 30, 1997 as compared to 46% on income before restructuring charges (see
Note 9 -- Notes to Consolidated Statements) for the fiscal year ended June 30,
1996. Currency rate fluctuations decreased the provision for income taxes by
$79,000 during the current period. The effective rate reflects the impact of
foreign source income which is taxed at substantially higher rates than domestic
income. No tax benefit was recorded on either the $42,407,000 provision for loss
on the disposition of Misomex for the current year or the $3,000,000 charge for
restructuring in the prior year due to the Company's tax loss carryforward
positions in Europe. The decrease from the prior year's effective rate is
primarily caused by the favorable settlement of certain prior year tax matters
in Germany in the amount of $854,000 (see Note 9 -- Notes to Consolidated
Financial Statements).
NET (LOSS) INCOME. The net (loss) for the fiscal year ended June 30, 1997
was $(37,997,000) versus net income for the fiscal year ended June 30, 1996 of
$2,518,000. For the current period, currency rate fluctuations and acquisitions
increased the net loss by $124,000 and $56,000, respectively.
14
<PAGE> 17
The following condensed income statement data sets forth the consolidated
results of the divested Pre-press business for the fiscal years ended June 30,
1997 and 1996.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
JUNE 30,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
PROFORMA LOSS STATEMENT FOR PRE-PRESS OPERATIONS:
Net sales............................................... $28,327,000 $33,232,000
Costs and expenses...................................... 29,965,000 33,278,000
----------- -----------
Operating loss.......................................... (1,638,000) (46,000)
Other (income) expense, net............................. (64,000) 349,000
----------- -----------
Loss before taxes....................................... $(1,574,000) $ (395,000)
=========== ===========
</TABLE>
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.
LIQUIDITY AND CAPITAL RESOURCES
The Company's long-term debt includes $18,750,000 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 on December 31, 1999.
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 the 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 June 30, 1998, this ratio was 1.5
to 1.
The Company's working capital decreased from $29,696,000 at June 30, 1997,
to $28,565,000 at June 30, 1998, a decrease of $1,131,000 or 3.8%. Foreign
currency rate fluctuations accounted for a decrease of $3,056,000. Excluding
foreign currency translation impacts, working capital increased by $1,925,000.
This increase was primarily attributable to increases in cash and equivalents of
$8,573,000 and increases in inventory of $9,101,000 and trade receivables of
$5,060,000, which are associated with the Company's increased sales volumes.
Offsetting these items were an increase in customer deposits of $7,741,000
associated with the Company's increased order backlog, increased income taxes
payable of $5,109,000 and decreased prepaid expenses and other current assets of
$5,773,000 resulting primarily from the collection of the receivable associated
with the sale of the former Pre-press operations.
For the year ended June 30, 1998, the Company generated $3,526,000 from
investing activities. For the year ended June 30, 1997, the Company utilized
$2,675,000 as a result of its investing
15
<PAGE> 18
activities. This positive differential of $6,201,000 resulted from the
collection of the receivable associated with the sale of the former Pre-press
operations. The net cash used by financing activities was $6,656,000 for the
year ended June 30, 1998 as compared to $5,941,000 for the year ended June 30,
1997. The difference was primarily caused by debt reductions on the Company's
long-term debt and decreased purchases of treasury stock.
The Company maintains relationships with foreign and domestic banks which
have extended credit facilities to the Company totaling $31,685,000, including
amounts available under the Revolver. As of June 30, 1998, the Company had
outstanding $7,801,000 under these lines of credit, of which $3,320,000 is
classified as long-term debt. Total debt levels as reported on the balance sheet
at June 30, 1998 are $740,000 lower then they would have been if June 30, 1997
exchange rates had been used.
Net capital expenditures made to meet the normal business needs of the
Company for the fiscal years ended June 30, 1998 and June 30, 1997, including
commitments for capital lease payments, were $2,399,000 and $2,137,000,
respectively.
The Company believes its cash flow from operations and available bank lines
of credit are sufficient to finance its working capital and other capital
requirements for the near and long-term future.
YEAR 2000 COMPLIANCE
The Company is aware of the issues associated with the limitations of
programming code in existing computer systems whereby the computer systems may
not properly recognize date sensitive information as the year 2000 approaches.
The inability to properly recognize dates and related potential date sensitive
problems are referred to as the Year-2000 situation.
The Year-2000 situation has a potential impact on the Company's internal
information systems infrastructure, Company products which either contain or
utilize digital devices and the internal information systems of suppliers to the
Company.
The Company has undertaken a study, utilizing external consultants, to
evaluate the Company's internal information systems infrastructure as it relates
to the Year-2000 situation and believes it has identified Year-2000
non-compliant processes. The Company has undertaken projects to update and
replace all non-compliant internal information systems and processes to ensure
that the Year-2000 situation will not have a detrimental impact on the internal
operations of the Company. The cost to update and replace non-compliant systems
is approximately $2,000,000 consisting of hardware and software and will be
incurred through Fiscal 1999. The cost of Year-2000 compliance is not projected
to have a significant negative impact on the Company's financial results in
subsequent fiscal years.
A review has been undertaken, or is in process, for those products of the
Company that utilize microprocessors in the operation of the product which could
be adversely affected by the Year-2000 date change. At the present time, no
Company products have been identified where Year-2000 non-compliance would have
a detrimental impact on the operation of the products.
The Company is surveying its suppliers and service providers to determine
potential exposure from external, non-compliant sources. No exposures have been
identified, to date, from external sources.
The Company has or is addressing its Year-2000 exposures. However, should
an unforeseeable Year-2000 situation arise that poses a severe threat to the
Company, the Company expects to be able to revert to PC and manual backup
internal processes until the situation can be resolved. The Company
16
<PAGE> 19
maintains service and engineering personnel which would be able to remediate any
unforeseen Year-2000 non-compliance situations related to a product of the
Company which would require immediate resolution. The Company does not utilize
single source service providers or vendors and as such, may change to other
providers and vendors in the case of non-compliance.
17
<PAGE> 20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants........................... 19
Consolidated Balance Sheet at June 30, 1998 and June 30,
1997...................................................... 20
Consolidated Statement of Income for the years ended June
30, 1998, June 30, 1997 and June 30, 1996................. 22
Consolidated Statement of Changes in Shareholders' Equity
for the years ended June 30, 1998, June 30, 1997 and June
30, 1996.................................................. 23
Consolidated Statement of Cash Flows for the years ended
June 30, 1998, June 30, 1997 and June 30, 1996............ 24
Notes to Consolidated Financial Statements.................. 26
</TABLE>
18
<PAGE> 21
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
BALDWIN TECHNOLOGY COMPANY, INC.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of changes in shareholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Baldwin Technology Company, Inc. and its subsidiaries at June 30, 1998 and 1997,
and the results of their operations and their cash flows for each of the three
years in the period ended June 30, 1998, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Stamford, Connecticut
August 7, 1998
19
<PAGE> 22
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1998 1997
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash................................................... $ 15,054 $ 9,421
Short-term securities.................................. 6,972 4,032
Accounts receivable trade, net of allowance for
doubtful accounts of $1,713 ($2,106 at June 30,
1997)............................................... 39,839 38,177
Notes receivable, trade................................ 13,323 15,051
Inventories............................................ 35,166 27,833
Prepaid expenses and other............................. 8,086 13,512
-------- --------
Total current assets.......................... 118,440 108,026
-------- --------
MARKETABLE SECURITIES :
(Cost $586 at June 30, 1998 and $712 at June 30,
1997)............................................... 738 942
-------- --------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land and buildings..................................... 3,123 3,136
Machinery and equipment................................ 7,210 6,732
Furniture and fixtures................................. 5,539 5,638
Leasehold improvements................................. 1,028 976
Capital leases......................................... 5,339 5,397
-------- --------
22,239 21,879
Less: Accumulated depreciation and amortization.......... 15,241 14,334
-------- --------
Net property, plant and equipment........................ 6,998 7,545
-------- --------
PATENTS, TRADEMARKS AND ENGINEERING DRAWINGS, at cost,
less accumulated amortization of $5,410 ($4,664 at June
30, 1997).............................................. 4,935 5,279
GOODWILL, less accumulated amortization of $8,033 ($7,368
at June 30, 1997)...................................... 29,394 31,452
OTHER ASSETS............................................. 14,523 8,879
-------- --------
TOTAL ASSETS.................................. $175,028 $162,123
======== ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
20
<PAGE> 23
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1998 1997
-------- --------
<S> <C> <C>
CURRENT LIABILITIES:
Loans payable.......................................... $ 4,481 $ 8,312
Current portion of long-term debt...................... 6,330 6,425
Accounts payable, trade................................ 15,962 15,634
Notes payable, trade................................... 9,707 11,273
Accrued salaries, commissions, bonus and
profit-sharing...................................... 9,351 7,794
Customer deposits...................................... 14,180 6,439
Accrued and withheld taxes............................. 2,282 1,941
Income taxes payable................................... 10,478 5,369
Other accounts payable and accrued liabilities......... 17,104 15,143
-------- --------
Total current liabilities..................... 89,875 78,330
-------- --------
LONG-TERM LIABILITIES:
Long-term debt......................................... 17,072 20,256
Other long-term liabilities............................ 4,624 5,275
-------- --------
Total long-term liabilities................... 21,696 25,531
-------- --------
Total liabilities............................. 111,571 103,861
-------- --------
SHAREHOLDERS' EQUITY:
Class A Common Stock, $.01 par, 45,000,000 shares
authorized, 16,431,683 shares issued (16,391,683 at
June 30, 1997)...................................... 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............. 57,359 57,185
Retained earnings...................................... 15,168 6,152
Cumulative translation adjustment...................... (3,423) 538
Unrealized gain on investments net of $73 of deferred
taxes
($117 at June 30, 1997)............................. 79 113
Less: Treasury stock, at cost:
Class A -- 1,102,802 shares (1,102,802 at June 30,
1997)
Class B -- 164,117 shares (164,117 at June 30,
1997)............................................ (5,910) (5,910)
-------- --------
Total shareholders' equity.................... 63,457 58,262
-------- --------
COMMITMENTS..............................................
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............... $175,028 $162,123
======== ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
21
<PAGE> 24
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Net sales...................................... $231,408 $244,146 $259,301
Cost of goods sold............................. 155,151 163,791 173,271
-------- -------- --------
Gross profit................................... 76,257 80,355 86,030
-------- -------- --------
Operating expenses:
General and administrative................... 24,634 27,627 27,428
Selling...................................... 18,723 22,808 25,371
Engineering.................................. 13,136 14,604 13,896
Research and development..................... 5,378 6,821 7,126
Provision for loss on the disposition of
Pre-press operations...................... 42,407
Restructuring charge......................... 3,000
-------- -------- --------
61,871 114,267 76,821
-------- -------- --------
Operating income (loss)........................ 14,386 (33,912) 9,209
-------- -------- --------
Other (income) expense:
Interest expense............................. 2,792 3,516 4,032
Interest (income)............................ (521) (414) (552)
Minority interest............................ (97) (190)
Other (income), net.......................... (2,330) (1,617) (1,490)
-------- -------- --------
(156) 1,295 1,990
-------- -------- --------
Income (loss) from operations before taxes..... 14,542 (35,207) 7,219
-------- -------- --------
Provision (benefit) for income taxes:
Domestic:
Federal................................... 4,641 (707) 288
State..................................... 345 344 772
Foreign................................... 540 3,153 3,641
-------- -------- --------
Total income taxes.................. 5,526 2,790 4,701
-------- -------- --------
Net income (loss).............................. $ 9,016 $(37,997) $ 2,518
======== ======== ========
Basic income (loss) per share.................. $ 0.53 $ (2.21) $ 0.14
======== ======== ========
Diluted income (loss) per share................ $ 0.52 $ (2.21) $ 0.14
======== ======== ========
Weighted average shares outstanding:
Basic........................................ 17,145 17,228 17,720
======== ======== ========
Diluted...................................... 17,480 17,228 17,817
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
22
<PAGE> 25
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
CLASS A CLASS B CAPITAL
COMMON STOCK COMMON STOCK IN EXCESS CUMULATIVE UNREALIZED
------------------- ------------------ OF PAR RETAINED TRANSLATION GAIN ON
SHARES AMOUNT SHARES AMOUNT VALUE EARNINGS ADJUSTMENTS INVESTMENTS
---------- ------ --------- ------ --------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1995 16,011,586 $160 2,000,000 $20 $54,881 $41,631 $ 4,174
Year ended June 30,
1996:
Net income for the
year 2,518
Unrealized gain on
available-for-sale
securities, net of
tax $118
Translation adjustment (4,125)
Comprehensive income
Stock issued in
conjunction with the
acquisition of
Acrotec 350,000 4 2,184
Stock options
exercised 30,097 120
Purchase of treasury
stock
---------- ---- --------- --- ------- -------- ------- ----
Balance at June 30, 1996 16,391,683 164 2,000,000 20 57,185 44,149 49 118
Year ended June 30,
1997:
Net loss for the year (37,997)
Unrealized loss on
available for sale
securities, net of
tax (5)
Translation adjustment 489
Comprehensive income
Purchase of treasury
stock
Stock received in the
settlement of an
indemnification
claim made under the
Acrotec Stock
Purchase Agreement
---------- ---- --------- --- ------- -------- ------- ----
Balance at June 30, 1997 16,391,683 164 2,000,000 20 57,185 6,152 538 113
Year ended June 30,
1998:
Net income for the
year 9,016
Unrealized loss on
available for sale
securities, net of
tax (34)
Translation adjustment (3,961)
Comprehensive income
Stock options
exercised 40,000 174
---------- ---- --------- --- ------- -------- ------- ----
Balance at June 30, 1998 16,431,683 $164 2,000,000 $20 $57,359 $15,168 $(3,423) $ 79
========== ==== ========= === ======= ======== ======= ====
<CAPTION>
TREASURY
STOCK
-------------------- COMPREHENSIVE
SHARES AMOUNT INCOME
---------- ------- -------------
<S> <C> <C> <C>
Balance at June 30, 1995 (338,373) $(1,978)
Year ended June 30,
1996:
Net income for the
year $ 2,518
Unrealized gain on
available-for-sale
securities, net of
tax 118
Translation adjustment (4,125)
--------
Comprehensive income $ (1,489)
========
Stock issued in
conjunction with the
acquisition of
Acrotec
Stock options
exercised
Purchase of treasury
stock (643,900) (2,651)
---------- -------
Balance at June 30, 1996 (982,273) (4,629)
Year ended June 30,
1997:
Net loss for the year $(37,997)
Unrealized loss on
available for sale
securities, net of
tax (5)
Translation adjustment 489
--------
Comprehensive income $(37,513)
========
Purchase of treasury
stock (156,400) (481)
Stock received in the
settlement of an
indemnification
claim made under the
Acrotec Stock
Purchase Agreement (128,246) (800)
---------- -------
Balance at June 30, 1997 (1,266,919) (5,910)
Year ended June 30,
1998:
Net income for the
year $ 9,016
Unrealized loss on
available for sale
securities, net of
tax (34)
Translation adjustment (3,961)
--------
Comprehensive income $ 5,021
========
Stock options
exercised
---------- -------
Balance at June 30, 1998 (1,266,919) $(5,910)
========== =======
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
23
<PAGE> 26
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Income (loss) from operations........................ $ 9,016 $(37,997) $ 2,518
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization..................... 3,985 4,321 4,801
Accrued retirement pay............................ 569 228 (289)
Provision for losses on accounts receivable....... 303 429 95
Provision for loss on the disposition of Pre-press
operations..................................... 42,407
Restructuring charge.............................. 3,000
Changes in assets and liabilities net of effects
from
the acquisitions and disposition:
Accounts and notes receivable.................. (5,060) (164) 904
Inventories.................................... (9,101) 3,678 643
Prepaid expenses and other..................... (921) 61 568
Other assets................................... (5,964) (2,106) (408)
Customer deposits.............................. 8,408 631 (103)
Accrued compensation........................... 1,883 (826) 476
Accounts and notes payable, trade.............. 1,509 2,533 2,803
Income taxes payable........................... 5,539 2 1,824
Accrued and withheld taxes..................... 427 38 545
Other accounts payable and accrued
liabilities................................. 2,735 (143) (2,520)
Interest payable............................... (86) (31) 18
-------- -------- --------
Net cash provided by operating activities.............. 13,242 13,061 14,875
-------- -------- --------
Cash flows from investing activities:
Proceeds from the disposition of Pre-press
operations........................................ 5,925
Acquisitions of subsidiaries, net of cash acquired... (538) (5,137)
Additions of property, net........................... (1,967) (1,395) (5,924)
Additions of patents, trademarks and drawings, net... (432) (742) (617)
-------- -------- --------
Net cash provided (used) by investing activities....... 3,526 (2,675) (11,678)
-------- -------- --------
Cash flows from financing activities:
Long-term borrowings................................. 9,806 3,776 11,101
Short-term borrowings................................ 3,619 8,802 8,665
Long-term debt repayment............................. (12,896) (9,052) (9,970)
Short-term debt repayment............................ (6,899) (8,381) (10,062)
Stock options exercised.............................. 174 120
Principal payments under capital lease obligations... (282) (273) (427)
Other long-term liabilities.......................... (178) (332) (1,687)
Treasury stock purchased............................. (481) (2,651)
-------- -------- --------
Net cash used by financing activities.................. (6,656) (5,941) (4,911)
-------- -------- --------
Effect of exchange rate changes........................ (1,539) (786) (1,681)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents... 8,573 3,659 (3,395)
Cash and cash equivalents at beginning of year......... 13,453 9,794 13,189
-------- -------- --------
Cash and cash equivalents at end of year............... $ 22,026 $ 13,453 $ 9,794
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
24
<PAGE> 27
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
-----------------------------
1998 1997 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash paid during the period for:
Interest........................................... $2,878 $3,547 $4,014
Income taxes....................................... $5,917 $3,078 $5,869
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
FISCAL YEAR ENDED JUNE 30, 1998.
The Company entered into capital lease agreements of $78,000 for the year
ended June 30, 1998.
FISCAL YEAR ENDED JUNE 30, 1997. 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.
The Company entered into capital lease agreements of $62,000 for the year
ended June 30, 1997.
FISCAL YEAR ENDED JUNE 30, 1996. The Company acquired the capital stock of
Acrotec AB and its 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.)
"Other assets" includes $267,000 of previously capitalized patent costs
unrealized as royalties at June 30, 1996.
The Company entered into capital lease agreements of $81,000 for the year
ended June 30, 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.
25
<PAGE> 28
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION OF BUSINESS:
Baldwin Technology Company, Inc. and its subsidiaries ("Baldwin" or the
"Company") are engaged primarily in the development, manufacture and sale of
material handling, accessory and control equipment for the printing and
print-on-demand industries.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The following are the significant accounting policies followed by the
Company:
CONSOLIDATION. The consolidated financial statements include the accounts
of Baldwin, its wholly owned subsidiaries and its 80% (64% at June 30, 1997)
owned subsidiary (Baldwin Document Finishing Systems, Inc.). All significant
intercompany transactions have been eliminated in consolidation.
TRANSLATION OF FOREIGN CURRENCIES. All assets and liabilities of foreign
subsidiaries are translated into dollars at year-end (current) exchange rates
and components of revenue and expense are translated at average rates for the
year. The resulting translation adjustments are included in shareholders'
equity. Gains and losses on foreign currency exchange transactions are reflected
in the statement of income. Net transaction gains (losses) credited or charged
to income for the years ended June 30, 1998, 1997 and 1996 were $111,000,
$(182,000) and $594,000, respectively.
CONCENTRATION OF CREDIT RISK. Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of
trade accounts receivable. The Company controls this risk through credit
approvals, customer limits and monitoring procedures. The Company can, however,
limit the amount of support provided to its customer in the event of
non-performance.
INVENTORIES. Inventories are stated at the lower of cost or market. Cost
is determined on the last-in, first-out (LIFO) method for domestic inventories
and the first-in, first-out (FIFO) method for foreign inventories. If the FIFO
method had been used for all inventories, the total stated amount for
inventories would have been $754,000 and $772,000 greater as of June 30, 1998
and 1997, respectively.
PLANT AND EQUIPMENT. The Company depreciates its assets over their
estimated useful lives. Plant and equipment additions are depreciated using
primarily the straight-line method. Repair and maintenance expenditures are
expensed as incurred.
PATENT, TRADEMARKS AND ENGINEERING DRAWINGS. The cost of acquired patents,
trademarks and engineering drawings are being amortized on a straight-line basis
over the estimated useful lives of the related assets.
GOODWILL. Goodwill represents the excess of purchase price over the fair
market value of net assets acquired and is being amortized over 40 years on a
straight-line basis. Goodwill is measured for possible impairment, as of each
balance sheet date, based upon undiscounted future cash flows from the related
operations. Should such undiscounted future cash flows be less than the carrying
value, a charge to operations for the shortfall would be provided. Goodwill
decreased $1,509,000 in fiscal 1998 (decreased $6,188,000 in fiscal 1997) due to
the impact of foreign exchange fluctuations.
INCOME TAXES. Deferred taxes are determined under the asset and liability
approach. Deferred tax assets and liabilities are recognized on differences
between the book and tax bases of assets and liabilities using presently enacted
tax rates.
26
<PAGE> 29
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS. The Company's financial
instruments consist of cash, short-term securities, accounts receivable, notes
receivable, marketable securities, capital lease obligations, accounts payable,
notes payable and other short and long term borrowings. The current carrying
amount of these instruments approximates fair market value.
DEFERRED LOAN ORIGINATION COSTS. At June 30, 1998, these costs were
$1,641,000 less $1,397,000 of accumulated amortization ($1,716,000 less
$1,324,000 of accumulated amortization at June 30, 1997) and were included in
"Other assets".
NET INCOME (LOSS) PER SHARE. In 1998, the Company adopted Financial
Accounting Standards Board Statement No. 128, "Earnings Per Share" (FAS 128).
FAS 128 applies to entities with publicly held common stock or potential common
stock and is effective for financial statements issued for periods ending after
December 15, 1997. Under FAS 128, the presentation of primary earnings per share
is replaced with a presentation of basic earnings per share. FAS 128 requires
dual presentation of basic and diluted earnings per share for entities with
complex capital structures. Basic earnings per share includes no dilution and is
computed by dividing net income (loss) available to common stockholders by the
weighted average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution of securities that could
share in the earnings of an entity, similar to fully diluted earnings per share.
The weighted average shares outstanding used to compute diluted income (loss)
per share includes 334,449, 0 (none) and 97,000 shares, for the years ended June
30, 1998, 1997 and 1996, respectively, which represent potentially dilutive
securities. These include primarily outstanding options to purchase the
Company's common stock. The Company has presented basic and diluted income
(loss) per share for all periods.
COMPREHENSIVE INCOME. The Company has adopted Statement of Financial
Accounting Standard No. 130 (FAS 130), "Comprehensive Income", for the period
ended June 30,1998 and has restated prior comparative years to reflect
comprehensive income in accordance with FAS 130. As shown in the Statement of
Changes in Shareholders' Equity, comprehensive income is a measure of net income
and all other changes in equity of the Company that result from recognized
transactions and other events of the period other than transactions with
shareholders.
USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
NEWLY ISSUED ACCOUNTING STANDARDS. In June 1997, the Financial Accounting
Standards Board issued Statement No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (FAS 131). FAS 131 applies to all public
companies and is effective for fiscal years beginning after December 15, 1997.
FAS 131 requires that business segment financial information be reported in the
financial statements utilizing the management approach. The management approach
is defined as the manner in which management organizes the segments within the
enterprise for making operating decisions and assessing performance. The Company
is currently evaluating the disclosure requirements of FAS 131 and intends to
adopt FAS 131 for its fiscal year beginning July 1, 1998.
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" (FAS 133).
FAS 133 is effective for all fiscal
27
<PAGE> 30
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
quarters of all fiscal years beginning after June 15, 1999 (July 1, 1999 for the
Company). FAS 133 requires that all derivative instruments be recorded on the
balance sheet at their fair value. Changes in the fair value of derivatives are
recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge transaction
and, if it is, the type of hedge transaction. Management of the Company
anticipates that, due to its limited use of derivative instruments, the adoption
of FAS 133 will not have a significant effect on the Company's results of
operations or its financial position.
NOTE 3 -- PROVISION FOR LOSS ON THE DISPOSITION OF PRE-PRESS OPERATIONS:
On June 9, 1997, the Company signed a Stock Purchase Agreement with Kaber
Imaging, Inc. under which terms it agreed to sell all of the outstanding shares
of its Pre-press operations. The transaction was completed on June 30, 1997 and
resulted in a charge to earnings of $42,407,000 which included accruals
amounting to $993,000 for expenses related to the disposition. At June 30, 1997
the Company recorded a receivable for the proceeds of the sale in the amount of
$6,000,000 in "prepaid expenses and other". The Company collected this
receivable during fiscal year 1998.
The following pro-forma condensed Consolidated Statement of Income of the
Company reflects the removal of the results of the Company's Pre-press
operations for the years ended June 30, 1997 and 1996.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Net sales........................................... $215,819,000 $226,069,000
Gross profit........................................ 71,095,000 73,193,000
Operating expenses.................................. 60,962,000 60,938,000
Provision for loss on disposal of Pre-press
operations........................................ 42,407,000
Restructuring charge................................ 3,000,000
------------ ------------
Operating (loss) income............................. (32,274,000) 9,255,000
Other expenses...................................... 1,359,000 1,641,000
------------ ------------
Pre-tax (loss) income............................... $(33,633,000) $ 7,614,000
============ ============
</TABLE>
NOTE 4 -- RESTRUCTURING CHARGE AND RESERVES:
During fiscal 1992, a restructuring reserve was established relating to an
excess facility sublease subsidy. In addition, a restructuring reserve was
charged to income during the quarter ended December 31, 1995 in the amount of
$3,000,000 in order to accrue the costs associated with a planned workforce
reduction at 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. The balances of these two reserves at June 30, 1997 were
$160,000 and $1,144,000, respectively. As of June 30, 1998 these reserves have
been fully utilized.
NOTE 5 -- BUSINESS SEGMENT INFORMATION:
The Company operates primarily in the printing industry. The Company,
through its subsidiaries, operates in three geographic regions: the Americas,
Europe and Asia Pacific.
28
<PAGE> 31
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A summary of the results by geographic region is as follows (in thousands):
<TABLE>
<CAPTION>
ADJUSTMENTS
THE ASIA AND
AMERICAS EUROPE PACIFIC ELIMINATIONS CONSOLIDATED
-------- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1998
Sales to unaffiliated
customers.............. $102,979 $ 67,015 $61,625 $ (211) $231,408
Transfers between
geographic areas....... 6,013 6,017 472 (12,502) 0
-------- -------- ------- -------- --------
Total revenue....... $108,992 $ 73,032 $62,097 $(12,713) $231,408
======== ======== ======= ======== ========
Operating profit.......... $10,061 $ 2,243 $ 7,886 $ 1,691 $ 21,881
======== ======== ======= ========
General corporate
expenses............... (5,068)
Interest expense, net..... (2,271)
--------
Income from operations
before taxes........... $ 14,542
========
Identifiable assets....... $76,276 $ 45,366 $42,510 $ 0 $164,152
======== ======== ======= ========
Corporate assets.......... 10,876
--------
Total assets........ $175,028
========
Total liabilities... $47,748 $ 40,204 $23,619 $ 0 $111,571
======== ======== ======= ======== ========
</TABLE>
29
<PAGE> 32
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
ADJUSTMENTS
THE ASIA AND
AMERICAS EUROPE PACIFIC ELIMINATIONS CONSOLIDATED
-------- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1997
Sales to unaffiliated
customers.............. $95,833 $ 86,340 $61,782 $ 191 $244,146
Transfers between
geographic areas....... 4,875 6,389 188 (11,452) 0
-------- -------- ------- -------- --------
Total revenue....... $100,708 $ 92,729 $61,970 $(11,261) $244,146
======== ======== ======= ======== ========
Operating profit (loss)... $ 276 $(35,382) $ 7,583 $ (170) $(27,693)
======== ======== ======= ========
General corporate
expenses............... (4,412)
Interest expense, net..... (3,102)
--------
(Loss) from operations
before taxes........... $(35,207)
========
Identifiable assets....... $69,872 $ 43,083 $44,292 $ 0 $157,247
======== ======== ======= ========
Corporate assets.......... 4,876
--------
Total assets........ $162,123
========
Total liabilities... $33,599 $ 43,051 $27,211 $ 0 $103,861
======== ======== ======= ======== ========
YEAR ENDED JUNE 30, 1996
Sales to unaffiliated
customers.............. $105,521 $ 89,725 $63,861 $ 194 $259,301
Transfers between
geographic areas....... 4,131 11,456 1,958 (17,545) 0
-------- -------- ------- -------- --------
Total revenue....... $109,652 $101,181 $65,819 $(17,351) $259,301
======== ======== ======= ======== ========
Operating profit.......... $ 9,722 $ (3,852) $ 7,783 $ (206) $ 13,447
======== ======== ======= ========
General corporate
expenses............... (2,748)
Interest expense, net..... (3,480)
--------
Income from operations
before taxes........... $ 7,219
========
Identifiable assets....... $71,401 $ 97,738 $43,438 $ 0 $212,577
======== ======== ======= ========
Corporate assets.......... 4,763
--------
Total assets........ $217,340
========
Total liabilities... $34,213 $ 59,473 $26,598 $ 0 $120,284
======== ======== ======= ======== ========
</TABLE>
No customer accounted for 10% or more of the Company's net sales in the
fiscal years ended June 30, 1998, 1997 and 1996.
30
<PAGE> 33
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 -- INVENTORIES:
Inventories consist of the following:
<TABLE>
<CAPTION>
JUNE 30, 1998
---------------------------------------
DOMESTIC FOREIGN TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
Raw materials............................... $ 7,404,000 $ 6,754,000 $14,158,000
In process.................................. 5,374,000 6,358,000 11,732,000
Finished goods.............................. 6,429,000 2,847,000 9,276,000
----------- ----------- -----------
$19,207,000 $15,959,000 $35,166,000
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------------------------
DOMESTIC FOREIGN TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
Raw materials............................... $ 5,748,000 $ 5,635,000 $11,383,000
In process.................................. 3,739,000 5,094,000 8,833,000
Finished goods.............................. 4,302,000 3,315,000 7,617,000
----------- ----------- -----------
$13,789,000 $14,044,000 $27,833,000
=========== =========== ===========
</TABLE>
Foreign inventories decreased $1,513,000 (decreased $1,483,000 in 1997) due
to translation rates in effect at June 30, 1998 when compared to rates at June
30, 1997.
NOTE 7 -- LOANS PAYABLE:
<TABLE>
<CAPTION>
RATE AMOUNT
--------------- ----------
<S> <C> <C>
SHORT-TERM INDEBTEDNESS AT JUNE 30, 1998:
Foreign subsidiaries.................................. 3.09% (average) $4,481,000
==========
SHORT-TERM INDEBTEDNESS AT JUNE 30, 1997:
Foreign subsidiaries.................................. 4.64% (average) $8,312,000
==========
</TABLE>
The maximum amount of loans payable to banks outstanding during the year
ended June 30, 1998 was $8,297,000 ($13,470,000 in 1997). Average rates are
weighted by month and reflect the monthly amount of short-term borrowing in use
and the respective rates of interest thereon. Loans payable decreased by
$551,000 (decreased by $951,000 in 1997), due to translation rates in effect at
June 30, 1998 when compared to rates at June 30, 1997.
31
<PAGE> 34
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 -- LONG-TERM DEBT:
<TABLE>
<CAPTION>
JUNE 30, 1998 JUNE 30, 1997
------------------------ ------------------------
CURRENT LONG-TERM CURRENT LONG-TERM
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Notes payable in equal annual
installments from October,
1997 through October, 2000,
interest rate 8.17%........... $6,250,000 $12,500,000 $6,250,000 $18,750,000
Note payable December, 1999
interest rate (1.25% over
LIBOR) 4.82%.................. 3,320,000
Note payable by foreign
subsidiary through 2002,
interest rate 5.65%........... 1,130,000 1,160,000
Industrial revenue bond payable
in annual installments through
October, 1998, interest rate
9%............................ 28,000 114,000 36,000
Notes payable by foreign
subsidiary through 2003,
interest rates 4.44% and
9.9%.......................... 34,000 83,000 34,000 223,000
Notes payable by foreign
subsidiary through March,
2000, interest rates 6.25% and
6.5%.......................... 28,000 57,000
Note payable by foreign
subsidiary through August,
2000, interest rate 8.5%...... 18,000 11,000 27,000 30,000
---------- ----------- ---------- -----------
$6,330,000 $17,072,000 $6,425,000 $20,256,000
========== =========== ========== ===========
</TABLE>
Notes payable, denominated in currencies other than the U.S. dollar,
decreased by $189,000 (decreased by $254,000 in 1997), due to translation rates
in effect at June 30, 1998 when compared to rates at June 30, 1997. The foreign
note due through 2002, with an interest rate of 5.65%, and the industrial
revenue bond are collateralized by buildings and specific equipment as outlined
in the indenture relating thereto. Approximately $174,000 of the loans included
above are collateralized by assets of foreign subsidiaries of the Company. The
notes payable from October, 1997 through October, 2000 (the "Senior Notes") and
note payable December, 1999 (the "Revolver", a $20,000,000 credit facility) are
collateralized by a pledge of the capital stock of the Company's domestic
subsidiaries. The Senior Notes and the Revolver require the Company to maintain
certain financial covenants and have certain restrictions regarding the payments
of dividends, limiting them to $1,000,000 plus 50% of the Company's net income
after January 1, 1997. In addition, both the Senior Notes and the Revolver
require the Company to maintain a ratio of current assets to current liabilities
(as these terms are defined in the agreements) of not less than 1.4 to 1. At
June 30, 1998, this ratio was 1.5 to 1.
32
<PAGE> 35
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Maturities of long-term debt in each fiscal year ending after June 30, 1998
are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDING JUNE 30,
- ---------------------------
<S> <C>
1999........................................................ $ 6,330,000
2000........................................................ 7,452,000
2001........................................................ 9,603,000
2002........................................................ 17,000
2003........................................................ 0
2004 and thereafter......................................... 0
-----------
$23,402,000
===========
</TABLE>
At June 30, 1998, the Company had available lines of credit of $31,685,000
upon which $7,801,000 had been drawn and of which $3,320,000 is included in
long-term debt. Only the Revolver has associated commitment fees. The commitment
fees, which are calculated quarterly, are equal to between one-quarter and
one-half of one percent per annum of the unused portion of the Revolver.
Commitment fees for the years ended June 30, 1998, 1997 and 1996 were $71,000,
$61,000 and $71,000, respectively.
NOTE 9 -- TAXES ON INCOME:
Income (loss) from operations before taxes and the provision (benefit) for
income taxes are comprised of:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
------------------------------------------
1998 1997 1996
----------- ------------ -----------
<S> <C> <C> <C>
Income (loss) from operations before
taxes:
Domestic............................. $11,378,000 $ 346,000 $12,613,000
Foreign.............................. 3,164,000 (35,553,000) (5,394,000)
----------- ------------ -----------
$14,542,000 $(35,207,000) $ 7,219,000
=========== ============ ===========
Provision (benefit) for income taxes:
Currently payable:
Domestic.......................... $ 6,486,000 $ (363,000) $ 1,060,000
Foreign........................... 4,571,000 3,522,000 4,035,000
----------- ------------ -----------
11,057,000 3,159,000 5,095,000
----------- ------------ -----------
(Prepaid) deferred:
Domestic............................. (1,500,000)
Foreign.............................. (4,031,000) (369,000) (394,000)
----------- ------------ -----------
(5,531,000) (369,000) (394,000)
----------- ------------ -----------
Total income tax expense.... $ 5,526,000 $ 2,790,000 $ 4,701,000
=========== ============ ===========
</TABLE>
33
<PAGE> 36
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Deferred income taxes are provided on temporary differences between the
financial reporting basis and tax basis of the Company's assets and liabilities.
The principal temporary differences which give rise to deferred tax assets and
liabilities at June 30, 1998 and 1997 are as follows:
DEFERRED TAX:
<TABLE>
<CAPTION>
JUNE 30,
------------------------------------------------------------------------------------
1998 1997
---------------------------------------- ----------------------------------------
ASSETS LIABILITIES TOTAL ASSETS LIABILITIES TOTAL
----------- ----------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Foreign tax credit
carryforwards............... $ 1,916,000
Foreign net operating loss
carryforwards............... 18,667,000 $18,127,000
Capital loss carryforwards.... 3,021,000 4,391,000
Inventories................... 1,847,000 1,519,000
Pension....................... 1,563,000 1,735,000
Other, individually less than
5% of "Net Deferred Tax
Asset"...................... 2,583,000 $935,000 1,771,000 $1,099,000
----------- -------- ----------- ----------
Net Deferred Tax Asset and
Liability................... $29,597,000 $935,000 $ 28,662,000 $27,543,000 $1,099,000 $ 26,444,000
=========== ======== =========== ==========
Valuation Allowance........... (19,868,000) (22,774,000)
------------ ------------
Total Net Deferred
Tax Assets......... $ 8,794,000 $ 3,670,000
============ ============
</TABLE>
At June 30, 1998, net operating loss carryforwards of $55,847,000 are
available to reduce future foreign taxable income. The Company also has capital
loss carryforwards in the amount of $9,101,000 ($7,274,000 of which is domestic
and expires in fiscal year 2002 and the remainder in England having an
indefinite carryforward period) available at June 30, 1998. The Company also has
$993,000 in domestic net operating loss carryforwards subject to separate return
limitation year rules ("SRLY").
The Company has not had to provide for income taxes on $8,259,000 of
cumulative undistributed earnings of subsidiaries outside the United States
because of the Company's intention to reinvest those earnings. In the event that
earnings were remitted, the tax effect on the results of operations after
considering available tax credits would not be significant. The Company
decreased the valuation allowance related to its deferred tax assets due to the
increased profitability in Europe and the resulting likelihood that the
carryforwards will be utilized in future years.
The total income tax expense allocated to operations exceeded the computed
"expected" (benefit) tax (determined by applying the United States Federal
statutory income tax rate of 34% to
34
<PAGE> 37
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(loss) income from operations before taxes) by $582,000, $14,760,000 and
$2,247,000 for the years ended June 30, 1998, 1997 and 1996, respectively. The
reasons for the difference are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
-----------------------------------------
1998 1997 1996
----------- ------------ ----------
<S> <C> <C> <C>
Computed "expected" tax (benefit)........ $ 4,944,000 $(11,970,000) $2,454,000
State income taxes, net of federal income
tax benefit............................ 228,000 227,000 510,000
Foreign income taxed at higher (lower)
than the U.S. statutory rate........... 5,047,000 309,000 1,745,000
Change in deferred tax asset valuation... (5,500,000)
SRLY NOL................................. 338,000
Pre-press divestiture.................... 14,418,000
Goodwill write-off not deductible for
taxes.................................. 255,000 213,000 233,000
Foreign Sales Corporation................ (335,000) (368,000) (264,000)
Other reconciling items, individually
less than
5% of the "expected" tax............... 549,000 (39,000) 23,000
----------- ------------ ----------
Total income tax expense...... $ 5,526,000 $ 2,790,000 $4,701,000
=========== ============ ==========
</TABLE>
NOTE 10 -- COMMON STOCK:
The holders of the Company's Class A Common Stock, voting as a separate
class, are entitled to elect 25% of the members of the Board of Directors.
Holders of Class B Common Stock, voting as a separate class, are entitled to
elect the remaining Directors, so long as the number of outstanding shares of
Class B Common Stock is equal to at least 12.5% of the number of outstanding
shares of both classes of Common Stock as of the record date of the Company's
Annual Meeting. If the number of outstanding shares of Class B Common Stock is
less than 12.5% of the total number of outstanding shares of both classes of
Common Stock as of the record date of the Annual Meeting, the holders of Class A
Common Stock, voting as a separate class, continue to elect a number of
Directors equal to 25% of the total number of Directors constituting the entire
Board of Directors and the remaining directors are elected by the holders of
both classes of Common Stock, with the holders of Class A Common Stock having
one vote per share and the holders of Class B Common Stock having ten votes per
share. As of June 30, 1998, the number of outstanding shares of Class B Common
Stock constituted 10.7% (10.7% in 1997) of the total number of outstanding
shares of both classes of Common Stock.
The Class A Common Stock has no conversion rights; however, Class B Common
Stock is convertible into Class A Common Stock on a one-for-one basis. In
addition, no dividend in cash or property may be declared or paid on shares of
Class B Common Stock without a dividend being declared or paid on shares of
Class A Common Stock of at least 105% of that on the Class B Common Stock.
In March of 1996, the Company's stock repurchase program was increased to
$10,000,000 of Class A Common Stock and 500,000 shares of Class B Common Stock.
As of June 30, 1998, 1,819,556 shares of Class A Common Stock (1,819,556 at
1997) and 164,117 shares of Class B Common Stock (164,117 at 1997) had been
repurchased for $8,756,000, of which $7,635,000 represents Class A
35
<PAGE> 38
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Common Stock, ($8,756,000 at 1997 of which $7,635,000 represents Class A Common
Stock) under this program.
NOTE 11 -- STOCK OPTIONS:
The 1986 Stock Option Plan, as amended and restated (the "1986 Plan"),
allowed for the granting, at fair market value on the date of grant, of
incentive stock options, non-qualified stock options, and tandem stock
appreciation rights (SARS) for up to a total of 2,220,000 and 590,000 shares of
Class A and Class B Common Stock, respectively. Options to purchase shares of
the Company's Class B Common Stock were granted at a price per share of no less
than 125% of the fair market value of a share of Class A Common Stock on the
date of grant. All options become exercisable in three equal annual installments
commencing on the second anniversary of the date of grant. Unexercised options
terminate no later than ten years from the date of grant and canceled shares
become available for future grants. On October 14, 1996 the 1986 Plan
terminated.
The 1990 Directors' Stock Option Plan (the "1990 Plan") provides for the
granting, at fair market value on the date of grant, of up to 100,000 shares of
the Company's Class A and Class B Common Stock as non-qualified stock options to
members of the Company's Board of Directors who are not employees ("Eligible
Directors") of the Company or any of its subsidiaries. Grants are made on the
third business day subsequent to each Annual Meeting of Stockholders, including
the 1990 meeting, to each Eligible Director for 1,000 shares of Class A and
Class B Common Stock in proportion to the number of shares of each such class
then outstanding. Options to purchase shares of the Company's Class B Common
Stock are granted at a price per share of no less than 125% of the fair market
value of a share of Class A Common Stock on the date of grant. Restrictions
under the 1990 Plan are similar to those under the 1986 Plan except with regard
to the exercise date, which is twelve months after the date of grant, and
termination of options, which is generally nine months after termination of
service as a director.
The 1996 Stock Option Plan (the "1996 Plan") allows for the granting, at
fair market value on the date of grant, of incentive stock options,
non-qualified stock options, and tandem stock appreciation rights. Grants from
the 1996 Plan are limited to a maximum outstanding total of 875,000 and 125,000
shares of Class A and Class B Common Stock, respectively, at all times. Options
to purchase shares of the Company's Class B Common Stock are granted at a price
per share of no less than 125% of the fair market value of a share of Class A
Common Stock on the date of grant. Restrictions under the 1996 Plan are similar
to those under the 1986 Plan with regard to the exercise and termination of
options. Canceled shares become available for future grants.
36
<PAGE> 39
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
THE 1986 PLAN
--------------------------------------------------
WEIGHTED
AVERAGE
PRICE
OPTION -------------
CLASS A CLASS B PRICE RANGE A B
--------- ------- ------------- ----- -----
<S> <C> <C> <C> <C> <C>
Outstanding at June 30, 1995...................... 953,333 275,000 $3.88-$9.84 $4.84 $7.72
--------- ------- ------------- ----- -----
Granted........................................... 391,000 195,000 $5.38-$6.72 $5.40 $6.72
Canceled.......................................... (7,000) $5.63 $5.63
Exercised......................................... (28,333) $4.00-$5.50 $4.31
--------- ------- ------------- ----- -----
Outstanding at June 30, 1996...................... 1,309,000 470,000 $3.88-$9.84 $5.01 $7.30
--------- ------- ------------- ----- -----
Granted........................................... 352,500 120,000 $3.00-$3.75 $3.00 $3.75
Canceled.......................................... (236,001) (61,667) $3.00-$8.13 $5.11 $6.55
Exercised.........................................
--------- ------- ------------- ----- -----
Outstanding at June 30, 1997...................... 1,425,499 528,333 $3.00-$9.84 $4.50 $6.58
--------- ------- ------------- ----- -----
Granted...........................................
Canceled.......................................... (111,499) (38,333) $3.00-$9.84 $5.20 $8.11
Exercised......................................... (40,000) $3.94-$4.00 $3.97
--------- ------- ------------- ----- -----
Outstanding at June 30, 1998...................... 1,274,000 490,000 $3.00-$9.84 $4.46 $6.47
========= ======= ============= ===== =====
Exercisable at June 30, 1998...................... 729,667 490,000 $3.88-$9.84 $4.85 $7.73
========= ======= ============= ===== =====
Available for future option grants at June 30,
1998............................................. 0 0
========= =======
<CAPTION>
THE 1990 PLAN
---------------------------------------------------------
WEIGHTED
AVERAGE
PRICE
OPTION -------------
TOTAL CLASS A CLASS B PRICE RANGE A B
------ ------- ------- ------------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding at June 30, 1995...................... 20,120 17,737 2,383 $3.75-$6.25 $4.64 $5.73
------ ------ ----- ------------- ----- -----
Granted........................................... 5,000 4,490 510 $5.50-$6.88 $5.50 $6.88
Canceled..........................................
Exercised......................................... (1,764) (1,764) $4.50-$4.75 $4.62
------ ------ ----- ------------- ----- -----
Outstanding at June 30, 1996...................... 23,356 20,463 2,893 $3.75-$6.88 $4.83 $5.92
------ ------ ----- ------------- ----- -----
Granted........................................... 5,000 4,470 530 $2.56-$3.20 $2.56 $3.20
Canceled..........................................
Exercised.........................................
------ ------ ----- ------------- ----- -----
Outstanding at June 30, 1997...................... 28,356 24,933 3,423 $2.56-$6.88 $4.42 $5.50
------ ------ ----- ------------- ----- -----
Granted........................................... 5,000 4,465 535 $5.13-$6.41 $5.12 $6.41
Canceled.......................................... (6,000) (5,328) (672) $3.75-$6.25 $4.58 $5.70
Exercised.........................................
------ ------ ----- ------------- ----- -----
Outstanding at June 30, 1998...................... 27,356 24,070 3,286 $2.56-$6.88 $4.48 $5.57
====== ====== ===== ============= ===== =====
Exercisable at June 30, 1998...................... 22,356 19,605 2,751 $2.56-$6.88 $4.34 $5.41
====== ====== ===== ============= ===== =====
Available for future option grants at June 30,
1998............................................. 70,000
======
</TABLE>
<TABLE>
<CAPTION>
THE 1996 PLAN
--------------------------------------------------
WEIGHTED
AVERAGE
PRICE
OPTION -------------
CLASS A CLASS B PRICE RANGE A B
--------- ------- ------------- ----- -----
<S> <C> <C> <C> <C> <C>
Granted........................................... 375,000 $3.00 $3.00
Canceled..........................................
Exercised.........................................
--------- ------- ------------- ----- -----
Outstanding at June 30, 1998...................... 375,000 0 $3.00 $3.00 $0.00
========= ======= ============= ===== =====
Exercisable at June 30, 1998...................... 0 0 $3.00 $3.00 $0.00
========= ======= ============= ===== =====
Available for future option grants at June 30,
1998............................................. 500,000 125,000
========= =======
</TABLE>
The following table summarizes information regarding stock options
outstanding and exercisable at June 30, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- --------------------------------------------------------- ----------------------
WEIGHTED WEIGHTED NUMBER WEIGHTED
RANGE OF NUMBER OF AVERAGE AVERAGE OF AVERAGE
EXERCISE OUTSTANDING REMAINING EXERCISE EXERCISABLE EXERCISE
PRICES OPTIONS CONTRACTUAL LIFE PRICE OPTIONS PRICE
- ------------- ----------- ---------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$2.56 - $3.75 831,760 8.6 years $3.11 126,760 $2.92
$3.88 - $5.63 886,551 5.6 years $4.85 667,753 $4.85
$5.88 - $6.88 302,045 6.0 years $6.35 301,510 $6.35
$8.13 - $9.84 146,000 2.8 years $8.85 146,000 $8.85
</TABLE>
The Company adopted Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation" (FAS 123), on July 1, 1996 electing
the disclosure only provisions of that statement. Accordingly, no charge for
compensation has been recorded for stock based employee awards. In accordance
with FAS 123, the fair value method of accounting has not been applied to
options granted prior to July 1, 1995. Due to the vesting schedule of options
granted under both the
37
<PAGE> 40
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1986 and 1990 Plans as well as the exclusion of the fair value of options
granted prior to July 1, 1995, the fair value of compensation cost calculated to
disclose pro forma financial information may not be representative of that to be
expected in future years. The fair value method of calculating the value of each
option granted subsequent to June 30, 1995 was estimated as of the option grant
date using the Black-Scholes option pricing model. Significant assumptions were
used to calculate the estimated fair value of the options by the pricing model
for the years ended June 30, 1998, 1997 and 1996. The assumptions were that the
forfeiture rates and dividend yields were 0% (none) and the expected average
lives were five years all years, the weighted average risk free rates were 6.22%
for 1998 and 6.29% for 1997 and 1996, respectively, and the average volatility
was 42.23% for 1998 and 41.31% for 1997 and 1996, respectively. If the Company
had recorded compensation cost based upon the fair values as calculated above,
the effect on net (loss) income and (loss) earnings per share would have been
the pro forma amounts indicated below:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JUNE 30,
----------------------------------------
1998 1997 1996
---------- ------------ ----------
<S> <C> <C> <C>
Net income (loss) as reported............ $9,016,000 $(37,997,000) $2,518,000
Pro forma net income (loss) net of
$139,000 of tax benefit in 1998 ($4,150
in 1997, $0 in 1996)................... $8,745,000 $(38,005,000) $2,518,000
Earnings (loss) per share as reported
(basic)................................ $ 0.53 $ (2.21) $ 0.14
Pro forma earnings (loss) per share
(basic)................................ $ 0.51 $ (2.21) $ 0.14
Earnings (loss) per share as reported
(diluted).............................. $ 0.52 $ (2.21) $ 0.14
Proforma earnings (loss) per share
(diluted).............................. $ 0.50 $ (2.21) $ 0.14
</TABLE>
38
<PAGE> 41
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12 -- SUPPLEMENTAL COMPENSATION:
Subsidiaries within the Americas maintain profit sharing, savings and
retirement plans. Amounts expensed under these plans were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
--------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Baldwin Technology Corporation ("BTC")
and Baldwin Graphic Systems, Inc.
("BGS")................................ $ 713,000 $ 773,000 $ 833,000
Kansa Corporation........................ 188,000 193,000 173,000
Baldwin Enkel Corporation................ 109,000 92,000 75,000
Misomex of North America, Inc. .......... 17,000 18,000
---------- ---------- ----------
Total expense................. $1,010,000 $1,075,000 $1,099,000
========== ========== ==========
</TABLE>
Company contributions to the BTC/BGS and Kansa plans are discretionary and
are subject to approval by their respective Boards of Directors. The Baldwin
Enkel plan requires a company contribution equal to the total participant
contribution which may not exceed 15% of the total compensation paid to the
employees of Baldwin Enkel.
Certain subsidiaries and divisions within Europe maintain pension plans.
Amounts expensed under these plans were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
----------------------------------
1998 1997 1996
-------- ---------- --------
<S> <C> <C> <C>
Baldwin Grafotec GmbH....................... $211,000 $ 394,000 $199,000
Misomex AB.................................. 355,000 83,000
Amal AB..................................... 58,000 156,000 112,000
IVT Graphics................................ 85,000 104,000 91,000
Jimek....................................... 79,000 93,000 251,000
Baldwin Europe Consolidated B.V. ........... 18,000 18,000 20,000
Misomex U.K. ............................... 107,000 133,000
-------- ---------- --------
Total expense.................... $451,000 $1,227,000 $889,000
======== ========== ========
</TABLE>
The amount of expense relating to the European pension plans is determined
based upon, among other things, the age, salary and years of service of
employees within the plans. The Company's German, English, Swedish and
Netherlands subsidiaries make annual contributions to the plans equal to the
amounts accrued for pension expense.
In Germany, at Baldwin Grafotec GmbH, there are two additional pension
plans covering 2 employees and 2 former employees. These defined benefit plans
provide for benefits, at maturity age, in lump sum payments on retirement or
death or as a disability pension in case of disability. One plan is partially
funded by insurance contracts. The unfunded recorded liability related to the
Misomex AB plan at June 30, 1997 was $0 (none) due to the divestiture of Misomex
($3,343,000 in 1996). The recorded liability at June 30, 1996 was sufficient to
cover obligations earned under the plan.
39
<PAGE> 42
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table sets forth the components of net pension costs of the
defined benefit plans:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
---------------------------------
1998 1997 1996
-------- -------- ---------
<S> <C> <C> <C>
Service Cost -- benefits earned during the
period...................................... $ 45,000 $ 6,000 $ 4,000
Interest on projected benefit obligation...... 22,000 17,000 224,000
Annual return on plan assets.................. (5,000) (5,000) (6,000)
Net amortization and deferrals................ (67,000) (74,000) (157,000)
-------- -------- ---------
Net pension cost.............................. $ (5,000) $(56,000) $ 65,000
======== ======== =========
</TABLE>
The following table sets forth the funded status of the above defined
benefit pension plans:
<TABLE>
<CAPTION>
JUNE 30,
-------------------------
1998 1997
--------- ---------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation.......................... $ 257,000 $ 206,000
========= =========
Accumulated benefit obligation..................... $ 257,000 $ 206,000
========= =========
Plan assets at fair value............................ $ 75,000 $ 74,000
Projected benefit obligation......................... 269,000 221,000
--------- ---------
Plan assets less than projected benefit obligation... (194,000) (147,000)
Unrecognized transition asset........................ 238,000 262,000
Unrecognized actuarial gain.......................... (487,000) (519,000)
--------- ---------
Accrued pension costs................................ $ 443,000 $ 404,000
========= =========
</TABLE>
<TABLE>
<S> <C> <C>
Actuarial assumptions:
Discount rate...................................... 7.5% 7.5%
Rate of increase in compensation levels............ 3% 3%
Expected rate of return on plan assets............. 7% 7%
</TABLE>
There are two retirement plans within Asia Pacific. The Company's Japanese
subsidiary maintains non-contributory retirement plans covering all employees,
excluding directors, and a separate plan for its directors. Amounts expensed
under these programs are determined based on participants' salary and length of
service. The programs are fully accrued and partially funded through insurance
contracts. Expenses relating to these programs were $498,000, $623,000 and
$606,000 for the years ended June 30, 1998, 1997 and 1996, respectively.
Officers and key employees of the Company participate in various incentive
compensation plans. Amounts expensed under such plans were $2,853,000,
$1,740,000 and $2,183,000 for the years ended June 30, 1998, 1997 and 1996,
respectively.
NOTE 13 -- COMMITMENTS AND CONTINGENCIES:
Future minimum annual lease payments under capital leases, which consist of
buildings, and machinery and equipment with accumulated depreciation amounting
to $5,144,000 at June 30, 1998
40
<PAGE> 43
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
and $4,413,000 at June 30, 1997, together with the present value of the minimum
lease payments are as follows at June 30, 1998:
<TABLE>
<CAPTION>
FISCAL YEARS ENDING JUNE 30, AMOUNT
- ---------------------------- ---------
<S> <C>
1999........................................................ $ 474,000
2000........................................................ 417,000
2001........................................................ 101,000
2002........................................................ 0
2003........................................................ 0
2004 and thereafter......................................... 0
---------
Total minimum lease payments................................ 992,000
Amount representing interest................................ (370,000)
---------
Present value of minimum lease payments..................... $ 622,000
=========
</TABLE>
At June 30, 1998, $322,000 ($578,000 at June 30, 1997) is included in other
long-term liabilities representing the long-term portion of the present value of
minimum lease payments.
Rental expense amounted to approximately $4,640,000, $5,603,000 and
$5,370,000 for the years ended June 30, 1998, 1997 and 1996, respectively.
Aggregate future annual rentals under noncancellable leases for periods of more
than one year at June 30, 1998 are as follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDING JUNE 30, AMOUNT
- ---------------------------- ----------
<S> <C>
1999........................................................ $4,310,000
2000........................................................ $3,659,000
2001........................................................ $2,848,000
2002........................................................ $2,464,000
2003........................................................ $2,180,000
2004 and thereafter......................................... $5,880,000
</TABLE>
From time to time in the ordinary course of business, the Company is
subject to legal proceedings. While it is impossible to determine the ultimate
outcome of such matters, it is management's opinion that the resolution of any
pending issues will not have a material adverse effect on the financial position
or results of operation of the Company.
NOTE 14 -- RELATED PARTIES:
On November 30, 1993, the Company entered into a loan and pledge agreement
and promissory note with Gerald A. Nathe, President and Director of the Company,
which was amended and restated on November 25, 1997. On March 11, 1994, the
Company entered into a loan and pledge agreement and promissory note with
William J. Lauricella, Chief Financial Officer and Treasurer of the Company. The
loans were made in order to enable the Company's officers to purchase shares of
the Company's Class B Common Stock from non-employee shareholders. Mr. Nathe was
loaned $1,817,321 to purchase 315,144 shares of the Company's Class B Common
Stock and Mr. Lauricella was loaned $164,063 to purchase 25,000 shares of the
Company's Class B Common Stock. All of the shares purchased have been pledged as
collateral for the demand promissory notes and each of the notes are
41
<PAGE> 44
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
interest bearing, with interest payable on the anniversary dates at LIBOR rates
plus 1.25% reset on the first day of each succeeding January, April, July and
October.
The maximum amounts of the notes outstanding, including interest, during
the year ended June 30, 1998 were $1,606,425 and $199,298 for Mr. Nathe and Mr.
Lauricella, respectively. At June 30, 1998, the balances of the notes
receivable, including interest, were $1,561,856 and $167,615 for Mr. Nathe and
Mr. Lauricella, respectively.
The maximum amount of the notes outstanding, including interest, during the
year ended June 30, 1997 were $1,604,613 and $191,169 for Mr. Nathe and Mr.
Lauricella, respectively. At June 30, 1997, the balances of the notes
receivable, including interest, were $1,561,480 and $191,169 for Mr. Nathe and
Mr. Lauricella, respectively.
The Company employs the firm of Morgan, Lewis & Bockius LLP as its legal
counsel. Samuel B. Fortenbaugh III, a Director of the Company, is a partner in
the firm. During the fiscal years ended June 30, 1998, 1997, and 1996, the
Company incurred legal fees of approximately $306,000, $200,000 and $474,000,
respectively, payable to Morgan, Lewis & Bockius LLP.
On July 1, 1990, Baldwin Technology Corporation and Baldwin Graphic
Systems, Inc., two subsidiaries of Baldwin Americas Corporation, entered into an
agreement with Harold W. Gegenheimer, Chairman Emeritus, guaranteed by the
Company, to replace various prior agreements including royalty and employment
agreements, retirement plans and bonus arrangements. The new agreement
guarantees a compensation amount of $200,000 per year to Mr. Gegenheimer.
Simultaneously, a separate agreement was entered into by the Company and Mr.
Gegenheimer whereby the Company was released from certain prior agreements, as
noted above, and agreed to pay a minimum guaranteed amount of compensation of
$200,000 per year to Mr. Gegenheimer, not to exceed $350,000 per year, based on
one and one-half percent (1.5%) of the Company's annual net after tax profits.
The amount expensed under these two agreements was $400,000 for each of the
years ended June 30, 1998, 1997 and 1996.
On February 10, 1997, Wendell M. Smith resigned as Chairman of the Company.
Pursuant to his employment agreement, the Company made compensation payments in
fiscal 1997 to Mr. Smith in the amount of $890,000. In addition, the Company has
made deferred compensation payments to Mr. Smith in the amounts of $103,000 and
$34,000 for the years ended June 30, 1998 and 1997, respectively. During fiscal
1997, certain consulting agreements between the Company and Polestar Limited
("Polestar"), a corporation controlled by Mr. Smith, were canceled and
renegotiated into a new agreement providing for payments to Polestar of $60,000
per year for consulting services. The maximum duration of the new agreement is
17 years. For the year ended June 30, 1996 the aggregate compensation expensed
under the prior agreement was $158,000.
42
<PAGE> 45
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 15 -- QUARTERLY FINANCIAL DATA (UNAUDITED):
Summarized quarterly financial data for fiscal 1998 and fiscal 1997 are as
follows (in thousands, except per share data):
<TABLE>
<CAPTION>
QUARTER
----------------------------------------
FISCAL 1998 FIRST SECOND THIRD FOURTH
- ----------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales............................... $48,047 $55,618 $60,199 $67,544
Costs and expenses:
Cost of goods sold.................... 32,020 36,761 41,193 45,177
Operating expenses.................... 14,185 15,199 15,420 17,067
Provision for loss on sale of
Misomex............................
Interest, net......................... 528 662 591 490
Other (income).......................... (661) (439) (562) (668)
Minority interest....................... (97)
------- ------- ------- -------
Income before taxes..................... 2,072 3,435 3,557 5,478
Provision for income taxes.............. 871 1,332 1,332 1,991
------- ------- ------- -------
Net income.............................. $ 1,201 $ 2,103 $ 2,225 $ 3,487
======= ======= ======= =======
Basic income per share.................. $ 0.07 $ 0.12 $ 0.13 $ 0.20
======= ======= ======= =======
Diluted income per share................ $ 0.07 $ 0.12 $ 0.13 $ 0.20
======= ======= ======= =======
Weighted average shares outstanding:
Basic................................. 17,125 17,135 17,157 17,165
======= ======= ======= =======
Diluted............................... 17,601 17,528 17,531 17,699
======= ======= ======= =======
</TABLE>
43
<PAGE> 46
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
FISCAL 1997 FIRST SECOND THIRD FOURTH
- ----------- ------- -------- ------- -------
<S> <C> <C> <C> <C>
Net Sales.............................. $57,541 $ 61,094 $58,318 $67,193
Costs and expenses:
Cost of goods sold................... 38,959 41,859 39,031 43,942
Operating expenses................... 17,325 17,439 17,893 19,203
Provision for loss on sale of
Misomex........................... 46,036 (3,629)
Interest, net........................ 798 802 757 745
Other (income)......................... (570) (357) (669) (21)
Minority interest...................... (73) (117)
------- -------- ------- -------
Income (loss) before taxes............. 1,029 (44,685) 1,379 7,070
Provision for income taxes............. 473 622 634 1,061
------- -------- ------- -------
Net income (loss)...................... $ 556 $(45,307) $ 745 $ 6,009
======= ======== ======= =======
Basic income (loss) per share.......... $ 0.03 $ (2.62) $ 0.04 $ 0.35
======= ======== ======= =======
Diluted income (loss) per share........ $ 0.03 $ (2.62) $ 0.04 $ 0.35
======= ======== ======= =======
Weighted average shares outstanding:
Basic................................ 17,359 17,298 17,128 17,125
======= ======== ======= =======
Diluted.............................. 17,365 17,298 17,128 17,125
======= ======== ======= =======
</TABLE>
NOTE 16 -- SUBSEQUENT EVENT:
On August 11, 1998, the Board of Directors granted non-qualified options to
purchase 200,000 shares of the Company's Class A Common Stock to certain
executives and key personnel under the Company's 1996 Plan at an exercise prices
of $5.50 per share, the fair market value on the date of grant. The options
granted are otherwise identical with regard to restrictions to options
previously granted under this plan.
On August 11, 1998, the Board of Directors voted to adopt, subject to
stockholder approval, a 1998 Non-Employee Director's Stock Option Plan (the
"1998 Plan") which would provide for the issuance of options to purchase up to
an aggregate of 250,000 shares of the Company's Class A Common Stock to
non-employee Directors of the Company. Under the 1998 Plan, each eligible
Director would receive a grant of options to purchase 3,000 shares of the
Company's Class A Common Stock, each year. The options would be granted at the
fair market value on the date of grant, and would vest one-third per year.
44
<PAGE> 47
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There has been no Form 8-K filed within 24 months prior to the date of the
most recent financial statements reporting a change of accountants and/or
reporting a disagreement on any matter of accounting principle or financial
statement disclosure.
PART III
ITEMS 10, 11, 12 AND 13.
Information required under these items is contained in the Company's 1998
Proxy Statement, which will be filed with the Securities and Exchange Commission
within 120 days after the close of the Company's fiscal year end; accordingly,
this information is therefore incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial statements required by Item 14 are listed in the index
included in Item 8 of Part II.
(a) (2) The following is a list of financial statement schedules filed as
part of this Report:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants on Financial Statement
Schedules................................................. 50
Schedule II -- Valuation and Qualifying Accounts............ 51
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
(a) (3) The following is a list of all exhibits filed as part of this
Report:
INDEX TO EXHIBITS
<TABLE>
<C> <S>
3.1 Restated Certificate of Incorporation of the Company as
filed with the Secretary of State of the State of Delaware
on November 4, 1986. Filed as Exhibit 3.1 to the Company's
registration statement (No. 33-10028) on Form S-1 and
incorporated herein by reference.
3.2 Certificate of Amendment of the Certificate of Incorporation
of the Company as filed with the Secretary of State of the
State of Delaware on November 21, 1988. Filed as Exhibit 3.2
to the Company's Registration Statement (No. 33-26121) on
Form S-1 and incorporated herein by reference.
3.3 Certificate of Amendment of the Certificate of Incorporation
of the Company as filed with the Secretary of State of the
State of Delaware on November 20, 1990. Filed as Exhibit 3.3
to the Company's Report on Form 10-K for the fiscal year
ended June 30, 1991 and incorporated herein by reference.
3.4 By-Laws of the Company. Filed as Exhibit 3.2 to the
Company's Registration Statement (No. 33-10028) on Form S-1
and incorporated herein by reference.
</TABLE>
45
<PAGE> 48
<TABLE>
<C> <S>
10.1 Baldwin Technology Company, Inc. Amended and Restated 1986
Stock Option Plan. Filed as Exhibit 10.2 to the Company's
Registration Statement (No. 33-31163) on Form S-1 and
incorporated herein by reference.
10.2 Amendment to the Baldwin Technology Company, Inc. Amended
and Restated 1986 Stock Option Plan. Filed as Exhibit 10.2
to the Company's Report on Form 10-K for the fiscal year
ended June 30, 1991 and incorporated herein by reference.
10.3 Baldwin Technology Company, Inc. 1990 Directors' Stock
Option Plan. Filed as Exhibit 10.3 to the Company's Report
on Form 10-K for the fiscal year ended June 30, 1991 and
incorporated herein by reference.
10.4 Baldwin Technology Company, Inc. 1996 Stock Option Plan.
Filed as Exhibit A to the Baldwin Technology Company, Inc.
1996 Proxy Statement and incorporated by reference to the
Company's Report on Form 10-K for the fiscal year ended June
30, 1996 and incorporated herein by reference.
10.5 Baldwin Technology Corporation Profit Sharing Plan, as
amended and restated. Filed as Exhibit 10.2 to the Company's
Registration Statement (No. 33-10028) on Form S-1 and
incorporated herein by reference.
10.6 Baldwin Technology Corporation Executive and Key Person
Bonus Plan. Filed as Exhibit 10.4 to the Company's
Registration Statement (No. 33-10028) on Form S-1 and
incorporated herein by reference.
10.7 Agreement effective as of July 1, 1990 between Baldwin
Technology Corporation, Baldwin Graphic Systems, Inc. and
Harold W. Gegenheimer, as guaranteed by Baldwin Technology
Company, Inc. Filed as Exhibit 10.6 to the Company's Report
on Form 10-K for the fiscal year ended June 30, 1991 and
incorporated herein by reference.
10.8 Agreement effective as of July 1, 1990 between Baldwin
Technology Company, Inc. and Harold W. Gegenheimer. Filed as
Exhibit 10.7 to the Company's Report on Form 10-K for the
fiscal year ended June 30, 1991 and incorporated herein by
reference.
10.9* Employment Agreement dated as of November 16, 1988 between
Baldwin-Japan Limited and Akira Hara. Filed as Exhibit 10.22
to the Company's Registration Statement (No. 33-26121) on
Form S-1 and incorporated herein by reference.
10.10 Agreement and Plan of Merger dated as of April 26, 1989
among Enkel Corporation, Bengt Kuller, Enkel Acquisition
Corporation and the Company. Filed as Exhibit I to the
Company's report on Form 8-K dated May 7, 1989 and
incorporated herein by reference.
10.11 Baldwin Technology Company, Inc. Dividend Reinvestment Plan.
Filed as Exhibit 10.49 to the Company's Report on Form 10-K
for the fiscal year ended June 30, 1991 and incorporated
herein by reference.
10.12 Consulting Agreement dated as of June 30, 1989 between
Baldwin Asia Pacific Corporation and A-PLUS LTD. Filed as
Exhibit 10.51 to the Company's Report on Form 10-K for the
fiscal year ended June 30, 1991 and incorporated herein by
reference.
10.13* Employment Agreement effective as of July 1, 1997 between
Baldwin Technology Company, Inc. and Gerald A. Nathe. Filed
as Exhibit 10.15 to the Company's Report on Form 10-Q for
the quarter ended December 31, 1997 and incorporated herein
by reference.
</TABLE>
46
<PAGE> 49
<TABLE>
<C> <S>
10.14 8.17% Senior Note Agreement dated October 29, 1993 between Baldwin Technology Company, Inc. and its
subsidiaries Baldwin Americas Corporation and Baldwin Technology Ltd. and John Hancock Mutual Life
Insurance Company, John Hancock Variable Life Insurance Company and John Hancock Life Insurance Company.
Filed as Exhibit 10.23 to the Company's Report on Form 10-K for the fiscal year ended June 30, 1994 and
incorporated herein by reference.
10.15 Amended and Restated $20,000,000 Revolving Credit Agreement dated as of December 31, 1995 between Baldwin
Technology Company, Inc. and its subsidiaries, Baldwin Americas Corporation and Baldwin Technology Ltd.,
and NationsBank of North Carolina, National Association, as Agent filed as Exhibit 10.23 to the Company's
Report on Form 10-K for the fiscal year ended June 30, 1996 and incorporated herein by reference.
10.16* Amendment to Employment Agreement between Baldwin-Japan Limited and Akira Hara effective August 15, 1995.
Filed as Exhibit 10.25 to the Company's Report on Form 10-K for the fiscal year ended June 30, 1996 and
incorporated herein by reference.
10.17 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 as
Exhibit 10.26 on the Company's Form 10-Q dated February 14, 1997 and incorporated herein by reference.
10.18 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 as Exhibit 10.27 on the Company's Form 10-Q dated February 14, 1997
and incorporated herein by reference.
10.19 Stock Purchase Agreement, (to sell all the shares of the Misomex Group of Companies), dated as of June 9,
1997, between Kaber Imaging, Inc. and the Company. Filed as Exhibit 10.26 to the Company's Report on Form
8-K dated July 3, 1997 and incorporated herein by reference.
10.20 Amendment Number One, dated June 30, 1997, to the Stock Purchase Agreement. Filed as Exhibit 10.27 to the
Company's Report on Form 8-K dated July 3, 1997 and incorporated herein by reference.
10.21 Fourth Amendment to Amended and Restated Revolving Credit Agreement dated as of September 12, 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 as
Exhibit 10.23 to the Company's report on Form 10-K for the fiscal year ended June 30, 1997 and
incorporated herein by reference.
10.22 Fifth Amendment to Amended and Restated Revolving Credit Agreement between Baldwin Americas Corporation
and Baldwin Technology Limited (as borrowers) and Nationsbank N.A. as lender. Filed as Exhibit 10.24 to
the Company's Report on Form 10-Q for the quarter ended December 31, 1997 and incorporated herein by
reference.
10.23* Employment Agreement dated March 11, 1998 and effective as of July 1, 1997 between Baldwin Technology
Company, Inc. and William J. Lauricella. Filed as Exhibit 10.25 to the Company's Report on Form 10-Q for
the quarter ended March 31, 1998 and incorporated herein by reference.
</TABLE>
47
<PAGE> 50
<TABLE>
<C> <S>
10.24 Baldwin Technology Company, Inc. Executive and Key Person
Cash Incentive Program Description (filed herewith).
21. List of Subsidiaries of Registrant (filed herewith).
23. Consent of PricewaterhouseCoopers LLP (filed herewith).
27. Financial Data Schedule (filed herewith).
28. Post-effective Amendment to the Company's previously filed
Form S 8's, Nos. 33-20611 and 33-30455. Filed as Exhibit 28
to the Company's Report on Form 10-K for the fiscal year
ended June 30, 1991 and incorporated herein by reference.
99. Company statement regarding the Private Securities
Litigation Reform Act of 1995, "Safe Harbor for
Forward-Looking Statements" (filed herewith).
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the registrant during the last quarter
of the period covered by this report.
48
<PAGE> 51
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
--------------------------------------
(REGISTRANT)
By: /s/ GERALD A. NATHE
------------------------------------
GERALD A. NATHE
(CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER)
Dated: September 28, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ GERALD A. NATHE Chairman of the Board, September 28, 1998
- --------------------------------------------------- President and Chief
GERALD A. NATHE Executive Officer
/s/ AKIRA HARA Vice President and September 28, 1998
- --------------------------------------------------- Director
AKIRA HARA
/s/ WILLIAM J. LAURICELLA Vice President, September 28, 1998
- --------------------------------------------------- Treasurer and Chief
WILLIAM J. LAURICELLA Financial Officer
/s/ RONALD F. RAHE Controller September 28, 1998
- ---------------------------------------------------
RONALD F. RAHE
/s/ JUDITH A. BOOTH Director September 28, 1998
- ---------------------------------------------------
JUDITH A. BOOTH
/s/ SAMUEL B. FORTENBAUGH III Director September 28, 1998
- ---------------------------------------------------
SAMUEL B. FORTENBAUGH III
/s/ JOHN T. HEALD, JR. Director September 28, 1998
- ---------------------------------------------------
JOHN T. HEALD, JR.
/s/ M. RICHARD ROSE Director September 28, 1998
- ---------------------------------------------------
M. RICHARD ROSE
/s/ WENDELL M. SMITH Director September 28, 1998
- ---------------------------------------------------
WENDELL M. SMITH
/s/ RALPH R. WHITNEY, JR. Director September 28, 1998
- ---------------------------------------------------
RALPH R. WHITNEY, JR.
</TABLE>
49
<PAGE> 52
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders of
BALDWIN TECHNOLOGY COMPANY, INC.
Our audits of the consolidated financial statements of Baldwin Technology
Company, Inc. referred to in our report dated August 7, 1998 appearing in this
Annual Report to Shareholders of Baldwin Technology Company, Inc. (which report
and consolidated financial statements are included in the Annual Report on Form
10-K) also included an audit of the Financial Statement Schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion, this Financial Statement Schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Stamford, Connecticut
August 7, 1998
50
<PAGE> 53
SCHEDULE II
BALDWIN TECHNOLOGY COMPANY, INC
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER AT END
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1998
Allowance for doubtful
accounts (deducted
from accounts
receivable)........... $ 2,106 $302 $ 695(1) $ 1,713
Valuation allowance for
deferred tax asset
(deducted from prepaid
and other assets)..... $22,774 $2,906(2) $19,868
Year ended June 30, 1997
Allowance for doubtful
accounts (deducted
from accounts
receivable)........... $ 2,503 $429 $ 826(1) $ 2,106
Valuation allowance for
deferred tax asset
(deducted from prepaid
and other assets)..... $16,957 $5,817(3) $22,774
Year ended June 30, 1996
Allowance for doubtful
accounts (deducted
from accounts
receivable)........... $ 2,897 $ 95 $ 489(1) $ 2,503
Valuation allowance for
deferred tax asset
(deducted from prepaid
and other assets)..... $13,313 $3,644(4) $16,957
</TABLE>
- ---------------------
(1) The decrease in the allowance for doubtful accounts for the year ended June
30, 1998 resulted from $476,000 of recoveries and currency fluctuations of
$219,000. The decrease in the allowance for doubtful accounts for the year
ended June 30, 1997 resulted from $413,000 of recoveries, $228,000 of
allowances as part of the Misomex sale and currency fluctuations of
$185,000. The decrease in the allowance for doubtful accounts for the year
ended June 30, 1996 resulted from $263,000 of recoveries and currency
fluctuations of $464,000 offset by $237,000 of reserves from acquisitions.
(2) The decrease in the amount of the valuation allowance is primarily the
result of a partial reversal of the reserve related to foreign net operating
loss carryforwards. See Note 9 -- Notes to Consolidated Financial
Statements.
(3) The increase in the amount of the valuation allowance is primarily the
result of increased foreign net operating loss carryforwards. See Note
9 -- Notes to Consolidated Financial Statements.
(4) The reduction in the amount of the valuation allowance is the result of
improved earnings in the Company's domestic operations. See Note 9 -- Notes
to Consolidated Financial Statements.
51
<PAGE> 54
EXHIBIT INDEX
-------------
Exhibit
No. Description
------- -----------
10.24 Baldwin Technology Company, Inc. Executive and Key Person
Cash Incentive Program Description (filed herewith).
21. List of Subsidiaries of Registrant (filed herewith).
23. Consent of PricewaterhouseCoopers LLP (filed herewith).
27. Financial Data Schedule (filed herewith).
99. Company statement regarding the Private Securities
Litigation Reform Act of 1995, "Safe Harbor for
Forward-Looking Statements" (filed herewith).
<PAGE> 1
EXHIBIT 10.24
to Registrant's Report on Form 10-K
for the year-ended June 30, 1998
BALDWIN TECHNOLOGY COMPANY, INC.
EXECUTIVE AND KEY PERSON
CASH INCENTIVE PROGRAM DESCRIPTION
EFFECTIVE DATE: JULY 1, 1997
OBJECTIVES:
The Baldwin Executive and Key Person Cash Incentive Program (the "Program") is
designed to reward executives and key persons with cash incentives based on
consistently improving financial performance.
The underlying financial measure is ECONOMIC PROFIT ("EP"). The Program is based
on a "sharing" of E P between Program participants and BTI shareholders. The
Program results in separate incentive "pools" being calculated at the BTI
(worldwide consolidated), Product Group and business unit (subsidiary or
division) levels.
The Program is designed without any "cap" on the amount of incentive which can
be calculated for any one fiscal year. In order to ensure that Baldwin's
financial performance improves on a consistent basis, however, some portion of
the Calculated Incentive for a fiscal year may be "banked" as set forth in the
PAYOUT AND INCENTIVE BANK section below. Amounts credited to the Incentive Bank
are at risk if future performance is negative. Furthermore, in circumstances
where financial performance is negative, it is possible for the Incentive Bank
to contain a negative balance. This negative balance must be overcome in the
future before any incentive payouts can be made.
DEFINITIONS:
Pre-incentive EP. To be calculated in accordance with the attached. BTI reserves
the right, in its sole discretion, to adjust any component of the calculation of
Pre-incentive EP at a later date. Any adjustment must be made prior to the start
of the fiscal year for which the change is effective.
Target Incentive Percent (individual). Incentive opportunity stated as a percent
of an individual's salary. Target Incentive Percentages are to be established
and approved as follows (subject to further approval by the BTI BOD/Compensation
Committee where so required):
-1-
<PAGE> 2
Participant Level Approval Required
----------------- -----------------
Business unit level below President/MD Business unit President/MD
Business unit President/MD Product Group President
Product Group Level below President Product Group President
Product Group Presidents BTI President
BTI level below President BTI President
BTI Chairman, CEO and President BTI BOD/Compensation Committee
Target Incentive Amount (individual). Equal to the actual salary paid to an
individual during a fiscal year multiplied by the individual's Target Incentive
Percent.
Target Incentive Pool. Represents the sum of the Target Incentive Amounts for
all individuals participating in the Program at either the BTI, Product Group,
or business unit level.
Absolute Sharing Amount. Calculated by multiplying the absolute amount of Pre-
incentive EP for a fiscal year by the Absolute Sharing Percentage. THE ABSOLUTE
SHARING AMOUNT CAN NEVER BE LESS THAN ZERO.
Delta Sharing Amount. Calculated by multiplying the difference between the
current and prior fiscal years' Pre-incentive EP by the Delta Sharing
Percentage. THIS AMOUNT CAN BE BOTH POSITIVE AND NEGATIVE.
Absolute Sharing Percentage. Will be established by BTI for minimum periods of
two years and published on each July 1. The percentage may be different for
different geographic areas of the world based on local incentive compensation
practices.
Delta Sharing Percentage. Will be established by BTI for minimum periods of two
years and published on each July 1. The percentage may be different for
different geographic areas of the world based on local incentive compensation
practices.
Calculated Incentive Pool. Represents the sum of the Absolute Sharing Amount and
the Delta Sharing Amount on either a BTI, Product Group or business unit level.
Calculated Incentive (individual). Represents an individual participant's share
of the Calculated Incentive Pool as follows:
Target Incentive Amount
----------------------- X Calculated Incentive Pool
Target Incentive Pool
-2-
<PAGE> 3
INCENTIVE POOL LEVELS:
Program participants shall be included in incentive pools at various levels as
follows:
<TABLE>
<CAPTION>
Participants employed as/at Incentive pool level
--------------------------- --------------------
<S> <C>
BTI 100% based on BTI performance
Sector financial 100% based on BTI performance
Product Group Presidents 25% based on BTI performance
75% based on Product Group
performance
Business unit Presidents 25% based on Product Group
performance
75% based on business unit
performance
All other business unit participants 100% based on business unit
performance
</TABLE>
The above levels are subject to change in the future at the sole discretion of
the CEO of BTI. Any such changes must be made prior to the start of the fiscal
year for which the change is effective.
INCENTIVE POOL CALCULATIONS
Baldwin executives and key employees will participate in one or more Incentive
Pools as described in the immediately preceding section of this Description.
At the end of each fiscal year, Pre-incentive EP calculations will be performed
for each business unit, each Product Group and BTI on a consolidated basis.
These Pre- incentive EP amounts will be used to determine the Calculated
Incentive Pools. After the Calculated Incentive Pools have been determined, the
Calculated Incentive for each individual participant will be calculated and
payouts will be determined as set forth under the following section.
PAYOUTS AND INCENTIVE BANK:
As noted in the Objectives section of this Program description, the basic
concept behind a Incentive Bank is to ensure that, since there is no cap on the
amount of incentive that can be calculated for an individual for any one fiscal
year, participants are not unduly impacted, either positively or negatively, by
inconsistent performance.
Under the Program's Incentive Bank provisions, the Calculated Incentive for an
individual participant during any fiscal year will be paid in cash to the extent
the Calculated Incentive for the year does not exceed the individual's Target
Incentive Amount (but only if there is not a negative balance in the
individual's Incentive Bank carrying forward from the prior year - SEE BELOW).
-3-
<PAGE> 4
To the extent the Calculated Incentive for the year is in excess of the
individual's Target Incentive Amount, the excess will be added to the Incentive
Bank carryforward balance. To the extent the Calculated Incentive for the year
is a negative amount, it shall be subtracted, on a dollar-for-dollar basis, from
any Incentive Bank carryforward balance and, if in excess of any Incentive Bank
carryforward balance, can result in a negative Incentive Bank balance.
Each year, in addition to making cash payments of amounts not exceeding the
Target Incentive Amount, a further payment of 40% of any balance in the
Incentive Bank (after taking into account any current year additions or
reductions) will be made. Amounts in the Incentive Bank are not vested (but see
section on Administrative Matters below), do not accrue interest or any other
type of return and are subject to reduction for negative financial performance
in future years.
In the event an individual has a negative Incentive Bank balance carrying
forward from a prior year, any current year Calculated Incentive must first be
applied to reduce the negative Incentive Bank balance on a dollar-for-dollar
basis. If the negative Incentive Bank balance is greater than the Calculated
Incentive, no cash incentive payment will be made for that year and the
remaining negative balance will carry forward to the succeeding fiscal year. In
the event the Calculated Incentive is in excess of the negative Incentive Bank
balance, then a cash payment will be made in an amount not to exceed the
individual's Target Incentive Amount. If the Calculated Incentive is in excess
of the sum of the amount required to offset the negative Incentive Bank balance
and the Target Incentive Amount, such excess will be credited to the
individual's Incentive Bank and thereafter treated in accordance with the
immediately preceding paragraph.
CORPORATE-WIDE HURDLE RATE
In addition to the provisions set forth above regarding payouts and the
Incentive Bank, there is a further hurdle applicable to payments to all Program
participants. This additional hurdle is as follows: In any year in which
Baldwin's consolidated EP after deducting the after-tax sum of all Calculated
Incentive Pools (the "After-Incentive EP"), is a negative number, each
Calculated Incentive Pool shall be ratably reduced, on a dollar-for-dollar
basis, until Baldwin's consolidated EP is a positive amount. In the event BTI's
consolidated After-Incentive EP is negative, each Calculated Incentive Pool
within the Company shall be reduced to zero. Consequently, no incentive payouts
will be made from any Calculated Incentive Pool for that fiscal year, but
payouts will be made from any Incentive Bank in accordance with the provisions
set forth in the preceding section.
-4-
<PAGE> 5
ADMINISTRATIVE MATTERS:
1. All Incentive Bank balances will be zero at the inception of the
Program
2. All calculations associated with this program for any individual
business unit are to be prepared by the business unit, in accordance
with the standard format provided by BTI, with appropriate review and
approval by the Product Group President. All calculations for the
Product Groups and BTI will be performed by BTI.
3. Since our Product Group corporate costs are not "housed" in any legal
entity, any incentive costs/liability for a business unit President or
Product Group President shall be accounted for, and funded by, the
business unit on whose payroll the individual resides.
4. For accounting purposes, estimates of incentive levels should be made
on a quarterly basis (initially based on the AOP). Our policy will be
to accrue for the entire Calculated Incentive Pool, even if some
portion may be banked.
5. Unless stipulated otherwise in a written employment agreement, if an
employee participant in the Program leaves the Company prior to the end
of a fiscal year, other than for retirement at the normal retirement
age or death or permanent disability, no incentive will be paid for the
fiscal year during which the employee leaves. In the event of
termination due to normal retirement, death or disability the incentive
for the year of separation shall be prorated based on the time period
actually worked during that fiscal year.
6. All payouts under the Program are to be made no later than 90 days
after the end of a fiscal year. There are to be NO interim or mid-year
payments under the Program.
7. Amounts credited to an individual Incentive Bank are forfeited if (a)
an employee participant voluntarily terminates employment with the
Company or (b) the employee is terminated for cause. In the event of
termination by the Company without cause, or separation due to death,
permanent disability or normal retirement, the full balance in an
Employee's Incentive Bank will be paid out within 30 days of separation
from employment.
-5-
<PAGE> 1
EXHIBIT 21
to Registrant's Report on Form 10-K
for the year-ended June 30, 1998
SUBSIDIARIES OF THE REGISTRANT Jurisdiction
------------
Baldwin Americas Corporation Delaware
Baldwin Europe Consolidated Inc. Delaware
Baldwin Asia Pacific Corporation Delaware
Baldwin Technology Limited Bermuda
Baldwin Document Finishing Systems, Inc. Delaware
SUBSIDIARIES OF BALDWIN AMERICAS CORPORATION
Baldwin Technology Corporation Connecticut
Baldwin Enkel Corporation Delaware
Baldwin Graphic Systems, Inc. Delaware
SUBSIDIARIES OF BALDWIN TECHNOLOGY CORPORATION
Kansa Corporation Kansas
SUBSIDIARIES OF BALDWIN ENKEL CORPORATION
Enkel International Sales Corporation Illinois
Enkel Foreign Sales Corporation US Virgin Island
SUBSIDIARIES OF BALDWIN EUROPE CONSOLIDATED INC.
Baldwin Europe Consolidated BV Netherlands
SUBSIDIARIES OF BALDWIN EUROPE CONSOLIDATED BV
Baldwin Graphic Equipment BV Netherlands
Baldwin German Capital Holding GmbH Germany
Baldwin U.K. Holding Limited United Kingdom
BS Holding AB Sweden
Graphics Financing Ireland Limited Ireland
Baldwin France Sarl France
SUBSIDIARIES OF BALDWIN GERMAN CAPITAL HOLDING GMBH
Baldwin Grafotec GmbH Germany
Baldwin Auslandsbeteiligungs Holding GmbH Germany
Baldwin International Products GmbH Germany
SUBSIDIARIES OF BALDWIN U.K. HOLDING LIMITED
Baldwin (UK) Ltd. United Kingdom
Acrotec UK Ltd. United Kingdom
<PAGE> 2
SUBSIDIARIES OF BS HOLDING AB
Amal AB Sweden
IVT Graphics AB Sweden
Jimek AB Sweden
SUBSIDIARIES OF BALDWIN GRAFOTEC GMBH
Baldwin Gegenheimer Ltd. United Kingdom
SUBSIDIARIES OF BALDWIN AUSLANDSBETEILIGUNGS HOLDING GMBH
Baldwin Hungaria Ltd. Hungary
SUBSIDIARIES OF BALDWIN ASIA PACIFIC CORPORATION
Baldwin Asia Pacific Ltd. Hong Kong
Baldwin Japan Ltd. Japan
Baldwin Printing Control Equipment (Beijing) Company, Ltd. China
BAP VC Limited British Virgin
Islands
SUBSIDIARIES OF BALDWIN ASIA PACIFIC LTD
Baldwin Graphic Equipment Pty. Ltd. Australia
Baldwin Printing Controls Ltd. Hong Kong
<PAGE> 1
EXHIBIT 23
to Registrant's Report on Form 10-K
for the year-ended June 30, 1998
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-8 (No. 33-20611, No.
33-30455, No. 33-58104, No. 33-58106 and No. 333-44631) and the Registration
Statements on Form S-3 (No. 33- 33104, No. 33-42265 and No. 33-41586) of our
report dated August 7, 1998 which appears in the 1998 Annual Report to
Shareholders of Baldwin Technology Company, Inc. on Form 10-K for the year ended
June 30, 1998. We also consent to the incorporation by reference of our report
on the Financial Statement Schedule, which appears in such Annual Report on Form
10-K.
PricewaterhouseCoopers LLP
Stamford, Connecticut
August 7, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET CONSOLIDATED STATEMENT OF INCOME AND CONSOLIDATED
STATEMENT OF CASH FLOWS. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED JUNE 30, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 15,054
<SECURITIES> 6,972
<RECEIVABLES> 54,875
<ALLOWANCES> (1,713)
<INVENTORY> 35,166
<CURRENT-ASSETS> 118,440
<PP&E> 22,239
<DEPRECIATION> 15,241
<TOTAL-ASSETS> 175,028
<CURRENT-LIABILITIES> 89,875
<BONDS> 0
0
0
<COMMON> 184
<OTHER-SE> 63,273
<TOTAL-LIABILITY-AND-EQUITY> 175,028
<SALES> 231,408
<TOTAL-REVENUES> 231,408
<CGS> 155,151
<TOTAL-COSTS> 155,151
<OTHER-EXPENSES> 64,810
<LOSS-PROVISION> 303
<INTEREST-EXPENSE> 2,792
<INCOME-PRETAX> 14,542
<INCOME-TAX> 5,526
<INCOME-CONTINUING> 9,016
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,016
<EPS-PRIMARY> .53
<EPS-DILUTED> .52
</TABLE>
<PAGE> 1
EXHIBIT 99
to Registrant's Report on Form 10-K
for the year-ended June 30, 1998
RISK FACTORS OR CAUTIONARY STATEMENTS PURSUANT TO "SAFE HARBOR" PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Except for historical information, the report on Form 10-K for fiscal year ended
June 30, 1998, to which this exhibit is appended, the Company's quarterly
reports to the Securities and Exchange Commission on Form 10-Q and periodic
press releases, as well as other public documents and statements, may contain
"forward-looking statements" within the meaning of the federal securities laws.
Forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ materially from those expressed or implied by the
statements, including, among others:
- - The ability to obtain, maintain, and defend challenges against, valid
patent protection on certain technology, primarily as it relates to the
Company's Cleaning Systems.
- - Significant price reductions or improvements in competing imaging
technologies.
- - A decline in the rate of growth of the installed base of printing press
units and the timing of new press orders.
- - Material changes in foreign currency exchange rates versus the U.S.
Dollar.
- - Some dependence on a small number of large customers.
- - Competitive product offerings and pricing actions.
- - The availability and pricing of key raw materials.
- - The ability to generate productivity improvements in the Company's
product designing and manufacturing processes.
- - Dependence on key members of management.
- - Changes in the mix of products and services comprising revenues.
- - The Company's or its vendors' ability to resolve Year 2000 compliance
issues.
Readers are cautioned not to place undue reliance on forward-looking statements.
The Company undertakes no obligation to publish revised forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrences of unanticipated events.
