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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 1997 COMMISSION FILE NUMBER 1-9334
BALDWIN TECHNOLOGY COMPANY, INC.
(Exact name of registrant as specified in its charter)
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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)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 203-838-7470
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange
on Which Registered
CLASS A COMMON STOCK AMERICAN STOCK EXCHANGE
PAR VALUE $.01
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. [ ]
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of August 31, 1997 was $72,033,500.
Number of shares of Common Stock outstanding at August 31, 1997:
Class A Common Stock............... 15,288,881
Class B Common Stock............... 1,835,883
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Total............................ 17,124,764
DOCUMENTS INCORPORATED BY REFERENCE
Items 10, 11, 12 and 13 are incorporated by reference from the Baldwin
Technology Company, Inc. Proxy Statement for the 1997 Annual Meeting of
Stockholders to be held on November 18, 1997 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
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 Stockholder 8
Matters..........................................................
Item 6. Selected Financial Data.......................................... 9
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................ 10
Item 8. Financial Statements and Supplementary Data...................... 16
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure............................................. 42
Item 10. Directors, Executive Officers and Key Employees of the
Registrant....................................................... 42
Item 11. Executive Compensation........................................... 42
Item 12. Security Ownership of Certain Beneficial Owners and Management... 42
Item 13. Certain Relationships and Related Transactions................... 42
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K.............................................................. 42
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, 1997.
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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 printing presses 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, drying systems, web control and press protection 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 (lithography)
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 this
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 printers. Historically, the
Company's products have had a long life cycle as the Company continually
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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, which is especially important given the high cost of paper.
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 price from under $100 to approximately
$500,000. Baldwin's principal products are:
GRAPHIC PRODUCTS AND CONTROLS GROUP
CLEANING SYSTEMS. The Company's first Cleaning Systems product was the
Press Washer which cleaned 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, 1997, 1996 and 1995, net sales of
Cleaning Systems represented approximately 29.7%, 27.8% and 30.2% 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, 1997, 1996 and 1995,
net sales of Fountain Solution Control Systems represented approximately 14.1%,
13.3% and 13.2% 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 while also reducing waste and increasing 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, 1997, 1996 and 1995, net sales of Other
Accessory and Control Equipment represented approximately 14.0%, 12.0% and 10.3%
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, 1997,
1996 and 1995, net sales of Web Handling Systems represented approximately
13.0%, 13.8% and 14.3% 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, 1996 and 1995, net sales of Automated Imposition and Plate
Exposure Systems represented approximately 10.0%, 11.4% and 11.7% of the
Company's net sales, respectively.
PRINT ON-DEMAND GROUP
The Company entered the short-run, print-on-demand market in October of
1996 with the announcement of the formation of a business venture with Davlin
Business Systems, Inc. in which the Company purchased a 64% interest. The
venture, named Baldwin Davlin Finishing Systems, Inc. manufactures and markets
finishing equipment for the rapidly growing digital printing market. The
Company's integrator strategy includes the Davlin Set Accumulator, a unique
product that acts as an intelligent communication interface between an
electronic print engine and an in-line finishing system, as well as certain
other finishing equipment manufactured for the Company under private label.
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 facilities 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 in the fiscal years ended June 30, 1997,
1996 and 1995:
YEARS ENDED JUNE 30,
---------------------------
1997 1996 1995
----- ----- -----
Americas................................................ 39.3% 40.7% 42.2%
Europe.................................................. 35.4 34.7 29.8
Asia Pacific............................................ 25.3 24.6 28.0
----- ----- -----
Total........................................ 100.0% 100.0% 100.0%
===== ===== =====
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,
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Hong Kong, China and Australia. All of the Company's subsidiaries are wholly
owned except it's 64% owned joint venture.
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 or 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 115 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, 1997 approximately 44% of the
Company's net sales were to printing press manufacturers and approximately 56%
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 108 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 $72,727,000 as of June 30, 1997,
$69,351,000 as of June 30, 1996 and $71,866,000 as of June 30, 1995. Included in
June 30, 1996 and June 30, 1995 backlog were $5,008,000 and $6,817,000,
respectively, of backlog relative to the disposed pre-press business. 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. In the fiscal years
ended June 30, 1997, 1996 and 1995, no customer accounted for 10% or more of the
Company's net sales. The ten largest customers of Baldwin accounted for less
than 41% of the Company's net sales for the fiscal year ended June 30, 1997.
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 in "Management's Discussion
and Analysis of Financial Condition and Results of Operations").
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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
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 coordinated, decentralized approach to research and development
permits the Company to react quickly to meet the needs of its customers.
Baldwin employs approximately 204 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, 1997, 1996 and 1995 were $21,425,000, $21,022,000 and
$17,296,000, respectively, representing approximately 8% of the Company's net
sales in each year.
PATENTS
The Company owns and 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 in the fiscal year
ended June 30, 1997. The Company's patents expire at different times through
June, 2014; 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. The
Company also has sales/service facilities in Germany, Sweden, France and
England. In Asia, Baldwin has manufacturing and assembly facilities in Japan and
China and sales/service facilities in Japan, Hong Kong, China and Australia.
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 competes from time to time 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 1,047 persons, 469 of whom are production employees and
approximately 130 of whom are management and administrative employees.
Approximately 34% of the Company's 146 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 at Amal AB, 4, 37 and 24 of the Company's 64
employees are represented by Ledarna (SALF), Lundsorganisationen, Metall and
Tjanstemannene Central Organisation, and Svenska Industritjanstemanna Forbundet,
respectively. Also in Sweden, at IVT AB, 3, 8 and 15 of the Company's 31
employees are represented by Ledarna (SALF), Lundsorganisationen, Metall and
Tjanstemannene Central Organisation, and Svenska Industritjanstemanna Forbundet,
respectively. In Germany, at Baldwin Grafotec GmbH, approximately 39 of the
Company's 261 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 645,000 square feet.
In North America, manufacturing and office space leased by the Company and
its subsidiaries total approximately 315,000 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, subject to an
Industrial Revenue Bond.
In Europe, the Company has leased facilities totaling approximately 158,000
square feet comprised of office and manufacturing facilities in Germany
(approximately 130,000 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.
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In Asia, the Company leases office and manufacturing facilities of
approximately 40,000 square feet in Japan and 6,000 square feet in Beijing and
office facilities aggregating approximately 2,000 square feet in Hong Kong,
Shanghai and Sydney.
The Company believes that its facilities are adequate to carry on its
business as currently conducted.
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 19,
1996.
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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.
HIGH LOW
------ ------
1995
First Quarter................................................ 5.875 4.8125
Second Quarter............................................... 6.125 5.00
Third Quarter................................................ 6.5625 5.125
Fourth Quarter............................................... 6.3125 4.750
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 (through September 15)......................... 5.50 2.8125
(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, 1997, 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 463 and 26, respectively. The Company believes, however, that
there are in excess of 3,400 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, 1997, 1996, 1995, 1994, and 1993, have been derived from
the Company's audited financial statements (including the Consolidated Balance
Sheet of the Company at June 30, 1997 and 1996 and the related Consolidated
Statement of Income of the Company for the years ended June 30, 1997, 1996 and
1995 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".
YEARS ENDED JUNE 30,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(IN THOUSANDS)
INCOME STATEMENT DATA:
Net sales....................... $244,146 $259,301 $222,341 $198,055 $215,759
Cost of goods sold(1)........... 163,791 173,271 146,727 130,051 142,564
-------- -------- -------- -------- --------
Gross profit.................... 80,355 86,030 75,614 68,004 73,195
-------- -------- -------- -------- --------
Selling, general and
administrative expenses(2).... 50,435 52,799 45,847 42,068 42,532
Research, development and
engineering expenses.......... 21,425 21,022 17,296 15,409 16,711
Provision for loss on the
disposition of Misomex........ 42,407
Restructuring charge............ 3,000 880
-------- -------- -------- -------- --------
Operating (loss) income......... (33,912) 9,209 12,471 10,527 13,072
-------- -------- -------- -------- --------
Interest expense................ 3,516 4,032 3,436 3,694 5,850
Interest income................. 414 552 577 381 285
Minority interest in net loss... (190)
Other income, net............... 1,617 1,490 1,130 887 462
-------- -------- -------- -------- --------
(Loss) income from operations
before taxes.................. (35,207) 7,219 10,742 8,101 7,969
-------- -------- -------- -------- --------
Provision for income taxes...... 2,790 4,701 5,091 3,969 4,303
-------- -------- -------- -------- --------
(Loss) income from operations... (37,997) 2,518 5,651 4,132 3,666
-------- -------- -------- -------- --------
Extraordinary loss on
extinguishment of debt........ (1,105)
Cumulative effect of change in
accounting for income taxes... 1,229
-------- -------- -------- -------- --------
Net (loss) income............... $(37,997) $ 2,518 $ 5,651 $ 4,132 $ 3,790
========= ========= ========= ========= =========
- ---------------------
(1) Includes all technical service expense, of which $2,732,000 for the year
ended June 30, 1993 was previously classified as an item of Operating
Expense.
(2) Includes amortization expense of $2,499,000 for intangible assets for the
year ended June 30, 1993 which was previously classified as an item of Other
Income and Expense.
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YEARS ENDED JUNE 30,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
INCOME STATEMENT DATA:
(Loss) Income per share from:
Operations...................... $ (2.21) $ 0.14 $ 0.32 $ 0.23 $ 0.21
Extinguishment of debt.......... (0.06)
Cumulative effect of change in
accounting for income taxes... 0.07
-------- -------- -------- -------- --------
Net (loss) income per share..... $ (2.21) $ 0.14 $ 0.32 $ 0.23 $ 0.22
========= ========= ========= ========= =========
Cash dividends declared per
share:
Class A Common Stock............
Class B Common Stock............
Weighted average shares
outstanding................... 17,228 17,793 17,939 18,015 17,593
========= ========= ========= ========= =========
Balance Sheet Data (as of the
end of each period):
Working capital................. $ 29,696 $ 46,050 $ 53,575 $ 45,098 $ 34,414
Total assets.................... 162,123 217,340 209,770 187,216 188,479
Short-term debt................. 14,737 10,196 9,348 6,033 16,257
Long-term debt.................. 20,256 33,576 29,868 32,230 25,998
Shareholders' equity............ $ 58,262 $ 97,056 $ 98,888 $ 88,080 $ 82,864
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.
FIRST SIX SECOND SIX
FISCAL YEAR MONTHS MONTHS
- ------------------------------------------------------ ------------ ------------
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
1993.................................................. 104,376,000 111,383,000
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 a business venture with Davlin Business Systems, Inc., in which the
Company purchased a 64% interest, in January of 1997. 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
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.
YEARS ENDED JUNE 30,
---------------------------
1997 1996 1995
----- ----- -----
Net sales............................................... 100.0% 100.0% 100.0%
Cost of goods sold...................................... 67.1 66.8 66.0
----- ----- -----
Gross profit............................................ 32.9 33.2 34.0
Selling, general and administrative expenses............ 20.7 20.4 20.6
Research, development and engineering expenses.......... 8.7 8.1 7.8
Provision for loss on the disposition of Misomex........ 17.4
Restructuring charge.................................... 1.1
----- ----- -----
Operating (loss) income................................. (13.9) 3.6 5.6
----- ----- -----
Interest expense........................................ 1.4 1.6 1.6
Interest income......................................... .2 .2 .3
Other income, net....................................... .7 .6 .5
----- ----- -----
(Loss) income from operations before taxes.............. (14.4) 2.8 4.8
Provision for income taxes.............................. 1.2 1.8 2.3
----- ----- -----
Net (loss) income....................................... (15.6)% 1.0% 2.5%
===== ===== =====
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.
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.
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
11
14
$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, or a net (loss) income of $(2.21) and $0.14 per share, respectively.
For the current period, currency rate fluctuations and acquisitions increased
the net loss by $124,000 and $56,000, respectively. Weighted average equivalent
shares outstanding during the fiscal year ended June 30, 1997 were 17,228,438
and were 17,792,938 for the fiscal year ended June 30, 1996. The net loss per
share for the provision for loss on the sale of Misomex in the current period
and for restructuring charges in the prior period were $(2.46) and $(0.17),
respectively.
12
15
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.
FOR THE YEARS ENDED
JUNE 30,
--------------------------
1997 1996
----------- -----------
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)
============ ============
COMPANY'S FISCAL YEAR ENDED JUNE 30, 1996 VERSUS FISCAL YEAR ENDED JUNE 30, 1995
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position and
consolidated financial statements.
NET SALES. Net sales for the fiscal year ended June 30, 1996 increased by
$36,960,000, or 16.6%, to $259,301,000 from $222,341,000 for the fiscal year
ended June 30, 1995. Currency rate fluctuations attributable to the Company's
overseas operations decreased net sales for the current period by $2,340,000 and
acquisitions added $20,947,000 to net sales. Product volume was the primary
reason for the $18,353,000 remainder of the increase of which $11,764,000
occurred in the Americas. In terms of local currency, sales changes were mixed
within Europe. Sales decreased in Germany by 3.5%, increased in England by 14.7%
and increased in Sweden by 5.6%. Local currency sales in Asia increased 7.1% in
Japan. In the Americas, net sales increased by 12.2% for the year due to a
continued strengthening and improvement in the U.S. printing equipment market.
GROSS PROFIT. Gross profit for the fiscal year ended June 30, 1996 was
$86,030,000 (33.2% of net sales), as compared to $75,614,000 (34.0% of net
sales) for the fiscal year ended June 30, 1995, an increase of $10,416,000 or
13.8%. Gross profit decreased by $751,000 on fluctuations in currency rates and
increased by $8,025,000 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 sales of products
that contribute lower gross profits, pressure on sales prices and increased
technical service costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $52,799,000 (20.4% of net sales) for the fiscal
year ended June 30, 1996, as compared to $45,847,000 (20.6% of net sales) for
the prior year, an increase of $6,952,000. Currency rate fluctuations decreased
the current year's expenses by $263,000 and acquisitions added $5,561,000.
Increased sales expenses related to volume increases, additional personnel and
trade shows were primarily responsible for the remainder of the increase. Other
operating expenses, before restructuring charges (see Note 4 -- Notes to
Consolidated Financial Statements) increased by $3,726,000 over the same period
of the prior year. Fluctuations in currency rates decreased these expenses by
$35,000 and acquisitions increased these expenses by $2,609,000. The remainder
of the increase in these expenses relates to increased engineering personnel and
costs associated with the development of new products, particularly in the
Company's Pre-press business.
INTEREST AND OTHER. Interest expense for the fiscal year ended June 30,
1996 was $4,032,000, as compared to $3,436,000 for the fiscal year ended June
30, 1995. Interest expense increased by $357,000 due to acquisitions with the
remainder due primarily to an increase in the amount of
13
16
outstanding indebtedness related to the purchase of a manufacturing facility.
Foreign currency rate fluctuations increased interest expense by $16,000.
Interest income was $552,000 and $577,000 for the fiscal years ended June 30,
1996 and June 30, 1995, respectively. Currency rate fluctuations decreased
interest income by $74,000 and acquisitions added $142,000 to interest income
for the current period. Other income was $1,490,000 and $1,130,000 for the
fiscal years ended June 30, 1996 and June 30, 1995, respectively, and includes
foreign currency transaction gains of $594,000 and $152,000 for the current and
prior period, respectively. The remaining net decrease in other income is
primarily due to increased royalty income offset by currency rate fluctuations
which decreased other income by $200,000 and acquisitions which decreased other
income by $92,000 during the current period.
INCOME TAXES. The Company's effective tax rate on income before
restructuring charges (see Note 9 -- Notes to Consolidated Statements) was 46.0%
for the fiscal year ended June 30, 1996 as compared to 47.4% for the fiscal year
ended June 30, 1995. Currency rate fluctuations decreased the provision for
income taxes by $339,000 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 the $3,000,000 charge for
restructuring due to the Company's tax loss carryforward position in Germany.
The decrease from the prior year's effective rate is primarily caused by an
increase in income generated by domestic operations which is taxed at rates
which are generally lower than the rates applied to foreign income (see Note 9
- -- Notes to Consolidated Financial Statements).
NET INCOME. Net income for the fiscal year ended June 30, 1996 decreased
by $3,133,000 or 55.4% to $2,518,000 from $5,651,000 for the fiscal year ended
June 30, 1995. Restructuring charges decreased net income by $3,000,000 and
currency rate fluctuations decreased net income by $398,000 for the current
period. Net income per share was $0.14 and $0.32 for the fiscal years ended June
30, 1996 and 1995, respectively. Net income per share was decreased by $(0.17)
for restructuring charges and the results of the acquired Acrotec operations
decreased net income per share by $(0.02). Weighted average equivalent shares
outstanding during the fiscal years ended June 30, 1996 and June 30, 1995 were
17,792,938 and 17,939,421, respectively.
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 $25,000,000 of 8.17% senior notes
(the "Senior Notes") due October 29, 2000 and a three-year $20,000,000 Revolving
Credit Agreement (the "Revolver") with NationsBank of North Carolina, as Agent,
which matures in December, 1998.
The Senior Notes and the Revolver require the Company to maintain certain
financial covenants and have certain restrictions regarding the payment of
dividends, limiting them throughout the terms of the Senior Notes and the
Revolver to $1,000,000 plus 50% of the Company's net income after January 1,
1997. In addition, the Company was required to pledge certain of 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, 1997, this ratio was 1.63
to 1.
14
17
The net cash used by investing activities as reflected in the Consolidated
Statement of Cash Flows decreased by $7,305,000 from $12,086,000 for the year
ended June 30, 1996 to $4,781,000 for the year ended June 30, 1997, primarily
due to the fact that the prior year amount included the purchase of Acrotec AB
and its subsidiaries for $5,137,000 and the purchase of a previously leased
Swedish manufacturing facility for SEK 28,840,000 ($4,364,000). The net cash
used by financing activities was $5,941,000 for the year ended June 30, 1997 as
compared to $4,911,000 for the year ended June 30, 1996. The difference is
primarily caused by debt reductions on the Company's working capital lines of
credit and decreased purchases of treasury stock.
The Company's working capital decreased from $46,050,000 at June 30, 1996,
to $29,696,000 at June 30, 1997, a decrease of $16,354,000 or 35.5%. The
principal reasons for the decrease in working capital were the write down of
$10,981,000 of net working capital in conjunction with the disposition of the
Pre-press business offset by recording a short term other receivable of
$6,000,000 and the reclassification of $8,965,000 of long-term debt to current
liabilities of which $6,250,000 was due to scheduled repayments and the
remainder due to refinancing a long-term loan in order to obtain a more
favorable interest rate. Currency rate fluctuations decreased working capital by
$914,000 for the current period. Increases in other current liabilities were
primarily responsible for the remainder of the change in working capital.
The Company maintains relationships with foreign and domestic banks which
have extended credit facilities to the Company totaling $30,868,000, including
amounts available under the Revolver. As of June 30, 1997, the Company had
outstanding $8,516,000 under these lines of credit, of which $103,000 is
classified as long-term debt. Total debt levels as reported on the balance sheet
at June 30, 1997 are $1,205,000 lower then they would have been if June 30, 1996
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, 1997 and June 30, 1996, including
commitments for capital lease payments, were $2,137,000 and $2,177,000,
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.
15
18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants.......................................... 17
Consolidated Balance Sheet at June 30, 1997 and June 30, 1996.............. 18
Consolidated Statement of Income for the years ended June 30, 1997, June
30, 1996 and June 30, 1995............................................... 20
Consolidated Statement of Changes in Shareholders' Equity for the years
ended
June 30, 1997, June 30, 1996 and June 30, 1995........................... 21
Consolidated Statement of Cash Flows for the years ended June 30, 1997,
June 30, 1996 and June 30, 1995.......................................... 22
Notes to Consolidated Financial Statements................................. 25
16
19
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, 1997 and 1996,
and the results of their operations and their cash flows for each of the three
years in the period ended June 30, 1997, 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. An audit also includes 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.
PRICE WATERHOUSE LLP
Stamford, Connecticut
August 8, 1997
17
20
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
ASSETS
JUNE 30, JUNE 30,
1997 1996
-------- --------
CURRENT ASSETS:
Cash................................................... $ 9,421 $ 9,781
Short-term securities.................................. 4,032 13
Accounts receivable trade, net of allowance for
doubtful accounts of $2,106 ($2,503 at June 30,
1996)............................................... 38,177 53,894
Notes receivable, trade................................ 15,051 9,827
Inventories............................................ 27,833 42,049
Prepaid expenses and other............................. 13,512 8,724
-------- --------
Total current assets.......................... 108,026 124,288
-------- --------
MARKETABLE SECURITIES:
(Cost $712 at June 30, 1997 and $742 at June 30,
1996)............................................... 942 984
-------- --------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land and buildings..................................... 3,136 7,995
Machinery and equipment................................ 6,732 10,176
Furniture and fixtures................................. 5,638 5,746
Leasehold improvements................................. 976 1,280
Capital leases......................................... 5,397 7,192
-------- --------
21,879 32,389
Less: Accumulated depreciation and amortization.......... 14,334 19,075
-------- --------
Net property, plant and equipment........................ 7,545 13,314
-------- --------
PATENTS, TRADEMARKS AND ENGINEERING DRAWINGS, at cost,
less accumulated amortization of $4,664 ($3,957 at June
30, 1996).............................................. 5,279 5,414
GOODWILL, less accumulated amortization of $7,368
($12,218 at June 30, 1996)............................. 31,452 64,381
OTHER ASSETS............................................. 8,879 8,959
-------- --------
TOTAL ASSETS.................................. $162,123 $217,340
========= =========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
18
21
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARES)
LIABILITIES AND SHAREHOLDERS' EQUITY
JUNE 30, JUNE 30,
1997 1996
-------- --------
CURRENT LIABILITIES:
Loans payable.......................................... $ 8,312 $ 9,704
Current portion of long-term debt...................... 6,425 492
Accounts payable, trade................................ 15,634 17,500
Notes payable, trade................................... 11,273 10,793
Accrued salaries, commissions, bonus and
profit-sharing...................................... 7,794 9,769
Customer deposits...................................... 6,439 6,686
Accrued and withheld taxes............................. 1,941 2,780
Income taxes payable................................... 5,369 5,557
Other accounts payable and accrued liabilities......... 15,143 14,957
-------- --------
Total current liabilities..................... 78,330 78,238
-------- --------
LONG-TERM LIABILITIES:
Long-term debt......................................... 20,256 33,576
Other long-term liabilities............................ 5,275 8,470
-------- --------
Total long-term liabilities................... 25,531 42,046
-------- --------
Total liabilities............................. 103,861 120,284
-------- --------
SHAREHOLDERS' EQUITY:
Class A Common Stock, $.01 par, 45,000,000 shares
authorized, 16,391,683 shares issued................ 164 164
Class B Common Stock, $.01 par, 4,500,000 shares
authorized, 2,000,000 shares issued................. 20 20
Capital contributed in excess of par value............. 57,185 57,185
Retained earnings...................................... 6,152 44,149
Cumulative translation adjustment...................... 538 49
Unrealized gain on investments net of $117 of deferred
taxes ($124 at June 30, 1996)....................... 113 118
Less: Treasury stock, at cost:
Class A -- 1,102,802 shares (818,156 at June 30,
1996) Class B -- 164,117 shares (164,117 at June 30,
1996)............................................... (5,910) (4,629)
-------- --------
Total shareholders' equity.................... 58,262 97,056
-------- --------
COMMITMENTS..............................................
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............... $162,123 $217,340
========= =========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
19
22
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE YEARS ENDED JUNE 30,
----------------------------------------
1997 1996 1995
-------- -------- --------
Net sales.................................. $244,146 $259,301 $222,341
Cost of goods sold......................... 163,791 173,271 146,727
-------- -------- --------
Gross profit............................... 80,355 86,030 75,614
-------- -------- --------
Operating expenses:
General and administrative............... 27,627 27,428 24,614
Selling.................................. 22,808 25,371 21,233
Engineering.............................. 14,604 13,896 12,055
Research and development................. 6,821 7,126 5,241
Provision for loss on the disposition of
Misomex............................... 42,407
Restructuring charge..................... 3,000
-------- -------- --------
114,267 76,821 63,143
-------- -------- --------
Operating (loss) income.................... (33,912) 9,209 12,471
-------- -------- --------
Other (income) expense:
Interest expense......................... 3,516 4,032 3,436
Interest (income)........................ (414) (552) (577)
Minority interest........................ (190)
Other (income), net...................... (1,617) (1,490) (1,130)
-------- -------- --------
1,295 1,990 1,729
-------- -------- --------
(Loss) income from operations before
taxes.................................... (35,207) 7,219 10,742
-------- -------- --------
Provision (benefit) for income taxes:
Domestic:
Federal............................... (707) 288 1,456
State................................. 344 772 570
Foreign............................... 3,153 3,641 3,065
-------- -------- --------
Total income taxes.............. 2,790 4,701 5,091
-------- -------- --------
Net (loss) income.......................... $(37,997) $ 2,518 $ 5,651
========= ========= =========
Net (loss) income per share................ $ (2.21) $ 0.14 $ 0.32
========= ========= =========
Weighted average shares outstanding........ 17,228 17,793 17,939
========= ========= =========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
20
23
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARES)
CLASS A CLASS B CAPITAL TREASURY
COMMON STOCK COMMON STOCK IN EXCESS CUMULATIVE UNREALIZED STOCK
------------------ ----------------- OF PAR RETAINED TRANSLATION GAIN ON --------------------
SHARES AMOUNT SHARES AMOUNT VALUE EARNINGS ADJUSTMENTS INVESTMENTS SHARES AMOUNT
---------- ------ --------- ------ --------- -------- ----------- ----------- ---------- -------
Balance at June 30,
1994 16,010,706 $160 2,000,000 $ 20 $54,837 $35,980 $(1,900) (156,756) $(1,017)
Year ended June 30,
1995:
Net income for the
year 5,651
Stock options
exercised 880 4
Purchase of
treasury stock (196,617) (965)
Acquisition of
treasury stock in
exchange for
cancellation of
note receivable
from former
officer (25,000) (171)
Issuance of common
stock from
treasury to
officer under
incentive
compensation
agreement 40 40,000 175
Translation
adjustment 6,074
---------- ------ --------- ------ --------- -------- ----------- ----- ---------- -------
Balance at June 30,
1995 16,011,586 160 2,000,000 20 54,881 41,631 4,174 (338,373) (1,978)
Year ended June 30,
1996:
Net income for the
year 2,518
Stock issued in
conjunction with
the acquisition
of Acrotec 350,000 4 2,184
Stock options
exercised 30,097 120
Purchase of
treasury stock (643,900) (2,651)
Unrealized gain on
available-for-sale
securities, net
of tax $ 118
Translation
adjustment (4,125)
---------- ------ --------- ------ --------- -------- ----------- ----- ---------- -------
Balance at June 30,
1996 16,391,683 164 2,000,000 20 57,185 44,149 49 118 (982,273) (4,629)
Year ended June 30,
1997:
Net loss for the
year (37,997)
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)
Unrealized loss on
available for
sale securities,
net of tax (5)
Translation
adjustment 489
---------- ------ --------- ------ --------- -------- ----------- ----- ---------- -------
Balance at June 30,
1997 16,391,683 $164 2,000,000 $ 20 $57,185 $ 6,152 $ 538 $ 113 (1,266,919) $(5,910)
========= ======= ======== ======= ======== ======== =========== =========== ========= =======
The accompanying notes to consolidated financial statements
are an integral part of these statements.
21
24
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
FOR THE YEARS ENDED JUNE 30,
--------------------------------
1997 1996 1995
-------- -------- --------
Cash flows from operating activities:
(Loss) income from operations...................... $(37,997) $ 2,518 $ 5,651
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................... 4,321 4,801 4,504
Accrued retirement pay.......................... 228 (289) 149
Provision for losses on accounts receivable..... 429 95 190
Provision for loss on the disposition of
Misomex...................................... 42,407
Restructuring charge............................ 3,000
Changes in assets and liabilities net of effects
from the acquisitions and disposition:
Accounts and notes receivable................ (164) 904 (14,003)
Inventories.................................. 3,678 643 (4,586)
Prepaid expenses and other................... 61 568 (262)
Customer deposits............................ 631 (103) 1,029
Accrued compensation......................... (826) 476 1,471
Accounts and notes payable, trade............ 2,533 2,803 2,357
Income taxes payable......................... 2 1,824 (51)
Accrued and withheld taxes................... 38 545 394
Other accounts payable and accrued
liabilities............................... (143) (2,520) 793
Interest payable............................. (31) 18 (31)
-------- -------- --------
Net cash provided (used) by operating activities..... 15,167 15,283 (2,395)
-------- -------- --------
Cash flows from investing activities:
Acquisitions of subsidiaries, net of cash
acquired........................................ (538) (5,137)
Additions of property, net......................... (1,395) (5,924) (1,331)
Additions of patents, trademarks and drawings,
net............................................. (742) (617) (532)
Other assets....................................... (2,106) (408) 356
-------- -------- --------
Net cash used by investing activities................ (4,781) (12,086) (1,507)
-------- -------- --------
Cash flows from financing activities:
Long-term borrowings............................... 3,776 11,101 2,000
Short-term borrowings.............................. 8,802 8,665 4,390
Long-term debt repayment........................... (9,052) (9,970) (4,863)
Short-term debt repayment.......................... (8,381) (10,062) (2,296)
Stock options exercised............................ 120 4
Principal payments under capital lease
obligations..................................... (273) (427) (524)
Other long-term liabilities........................ (332) (1,687) (543)
Treasury stock purchased........................... (481) (2,651) (965)
-------- -------- --------
Net cash used by financing activities................ (5,941) (4,911) (2,797)
-------- -------- --------
Effect of exchange rate changes...................... (786) (1,681) 1,354
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents........................................ 3,659 (3,395) (5,345)
Cash and cash equivalents at beginning of year....... 9,794 13,189 18,534
-------- -------- --------
Cash and cash equivalents at end of year............. $ 13,453 $ 9,794 $ 13,189
======== ======== ========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
22
25
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
FOR THE YEARS ENDED JUNE 30,
------------------------------
1997 1996 1995
------ ------ ------
(IN THOUSANDS)
Cash paid during the period for:
Interest........................................... $3,547 $4,014 $3,467
Income taxes....................................... $3,078 $5,869 $5,076
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
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 3 -- 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.
FISCAL YEAR ENDED JUNE 30, 1995. The Company successfully defended a
patent which, under the terms of the patent purchase agreement with the patent's
inventor, entitles the Company to indemnification of a portion of the legal fees
incurred to defend the patent infringement. Accordingly, the Company
reclassified from patents to long term assets $693,000 of legal fees. These
previously capitalized patent costs will be realized as royalties become payable
to the patent's inventor. At June 30, 1995, other assets included $548,000 of
such costs.
In accordance with the terms of a note receivable from a former officer,
the Company canceled the note in exchange for the collateral which consisted of
25,000 shares of the Company's Class B Common Stock. The balance of the note
together with interest receivable was $171,000.
Under an incentive compensation agreement with an officer, the Company
issued from treasury 40,000 shares of Class A Common Stock for which the accrued
compensation of $235,000 had been expensed at June 30, 1994.
The accompanying notes to consolidated financial statements
are an integral part of these statements.
23
26
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
The Company entered into capital lease agreements of $129,000 during the
year ended June 30, 1995.
DISCLOSURE OF ACCOUNTING POLICY:
For purposes of the statement of cash flows, the Company considers all
highly liquid instruments with original maturities of three months or less to be
cash equivalents.
The accompanying notes to consolidated financial statements
are an integral part of these statements.
24
27
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 64% owned subsidiary (Baldwin
Davlin 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 (losses) gains, charged or credited
to income for the years ended June 30, 1997, 1996 and 1995 were $(182,000),
$594,000 and $152,000, respectively.
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 $772,000 and $778,000 greater as of June 30, 1997
and 1996, 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 $6,188,000 in fiscal 1997 (increased $1,111,000 in fiscal 1996) due to
the impact of foreign exchange fluctuations, primarily on the portion of
goodwill related to the European operations which is predominately denominated
in Swedish Krona.
DEFERRED LOAN ORIGINATION COSTS. At June 30, 1997, these costs were
$1,716,000 less $1,324,000 of accumulated amortization ($1,794,000 less
$1,160,000 of accumulated amortization at June 30, 1996) and were included in
"Other Assets".
NET (LOSS) INCOME PER SHARE. Net (loss) income per share is based on the
weighted average number of common and common equivalent shares outstanding
during the period. Common equivalent shares outstanding for the years ended June
30, 1997, 1996 and 1995 were 0 (none),
25
28
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
73,257 and 125,370, respectively. The Company intends to adopt Statement of
Financial Accounting Standards No. 128, "Earnings per Share" for the year ended
June 30, 1998. The effect of adoption of this standard is not anticipated to
have a material impact on the Company's financial statements.
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.
LONG-LIVED ASSETS. The Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed of" for the year ended June 30, 1997. The
effect of adoption of this standard was immaterial.
OTHER ACCOUNTING STANDARDS. The Company intends to adopt Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" and No.
131, "Disclosures about Segments of an enterprise and Related Information" for
the year ended June 30, 1999. The effect of adoption of these standards is not
anticipated to have a material impact on the Company's financial statements.
NOTE 3 -- PROVISION FOR LOSS ON THE DISPOSITION OF MISOMEX:
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 the Misomex Group. 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 $4,000,000 of
this receivable on July 1, 1997 and the remaining $2,000,000 is due on September
30, 1997.
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, 1996 and 1995.
YEARS ENDED JUNE 30,
------------------------------------------------
1997 1996 1995
------------ ------------ ------------
Net sales............................ $215,819,000 $226,069,000 $192,350,000
------------ ------------ ------------
Gross profit......................... 71,095,000 73,193,000 63,167,000
Operating expenses................... 60,962,000 60,938,000 51,598,000
Provision for loss on disposal of
Misomex............................ 42,407,000
Restructuring charge................. 3,000,000
------------ ------------ ------------
Operating (loss) income.............. (32,274,000) 9,255,000 11,569,000
Other expenses....................... 1,359,000 1,641,000 1,938,000
------------ ------------ ------------
Pre-tax (loss) income................ $(33,633,000) $ 7,614,000 $ 9,631,000
============ ============ ============
26
29
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 -- RESTRUCTURING CHARGE AND RESERVES:
A restructuring reserve was charged to income during the quarter ended
December 31, 1995 in the amount of $3,000,000. The reserve was established in
order to accrue the costs associated with a planned workforce 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
Company also has $160,000 remaining from a fiscal 1992 restructuring charge, all
of which relates to an excess facility sublease subsidy.
During fiscal 1997 all claims arising from the charges associated with the
European dealer network and distribution system were settled. As a result, the
Company charged $807,000 against the reserve. Since December 31, 1995, charges
of $1,049,000 have been made against the restructuring reserve for severance. It
is anticipated that the remaining reserve of $1,144,000 at June 30, 1997 will be
fully utilized during fiscal 1998 based upon notices of termination already
provided to employees. Restructuring reserves, except for the long-term portion
of the excess facility sublease subsidy of $57,000 which is recorded in "Other
long-term liabilities", were included in "Other accounts payable and accrued
liabilities".
Restructuring reserves consist of the following:
YEARS ENDED JUNE 30,
----------------------------
1997 1996
---------- ----------
Severance and dealer claims........................... $1,144,000 $2,552,000
Excess facility sublease subsidy...................... 160,000 263,000
---------- ----------
$1,304,000 $2,815,000
========== ==========
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. For the year ended June 30, 1995, the Company adopted a
revised allocation process that provides that corporate general and
administrative costs and assets are reflected as corporate expenses and assets
unless such costs or assets are associated with a business segment.
27
30
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A summary of the results by geographic region is as follows (in thousands):
ADJUSTMENTS
THE ASIA AND
AMERICAS EUROPE PACIFIC ELIMINATIONS CONSOLIDATED
-------- -------- ------- ------------ ------------
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
======== ======== ======= ======== ========
28
31
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ADJUSTMENTS
THE ASIA AND
AMERICAS EUROPE PACIFIC ELIMINATIONS CONSOLIDATED
-------- -------- ------- ------------ ------------
YEAR ENDED JUNE 30, 1995
Sales to unaffiliated
customers.............. $93,747 $ 66,248 $62,441 $ (95) $222,341
Transfers between
geographic areas....... 4,419 9,338 224 (13,981) 0
-------- -------- ------- -------- --------
Total revenue....... $98,166 $ 75,586 $62,665 $(14,076) $222,341
======== ======== ======= ======== ========
Operating profit.......... $ 8,337 $ 997 $ 7,187 $ (132) $ 16,389
======== ======== ======= ========
General corporate
expenses............... (2,788)
Interest expense, net..... (2,859)
--------
Income from operations
before taxes........... $ 10,742
========
Identifiable assets....... $73,217 $ 76,420 $54,874 0 $204,511
======== ======== ======= ========
Corporate assets.......... 5,259
--------
Total assets........ $209,770
========
Total liabilities... $35,884 $ 46,575 $28,423 0 $110,882
======== ======== ======= ======== ========
No customer accounted for 10% or more of the Company's net sales in the
fiscal years ended June 30, 1997, 1996 and 1995.
NOTE 6 -- INVENTORIES:
Inventories consist of the following:
JUNE 30, 1997
-----------------------------------------
DOMESTIC FOREIGN TOTAL
----------- ----------- -----------
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
=========== =========== ===========
JUNE 30, 1996
-----------------------------------------
DOMESTIC FOREIGN TOTAL
----------- ----------- -----------
Raw materials............................... $ 8,713,000 $10,730,000 $19,443,000
In process.................................. 3,183,000 11,053,000 14,236,000
Finished goods.............................. 6,097,000 2,273,000 8,370,000
----------- ----------- -----------
$17,993,000 $24,056,000 $42,049,000
============ ============ ============
Foreign inventories decreased $1,483,000 (decreased $1,021,000 in 1996) due
to translation rates in effect at June 30, 1997 when compared to rates at June
30, 1996.
29
32
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 -- LOANS PAYABLE:
RATE AMOUNT
--------------- ----------
SHORT-TERM INDEBTEDNESS AT JUNE 30, 1997:
Foreign subsidiaries.................................. 4.64% (average) $8,312,000
===========
SHORT-TERM INDEBTEDNESS AT JUNE 30, 1996:
Foreign subsidiaries.................................. 5.03% (average) $9,704,000
===========
The maximum amount of loans payable to banks outstanding during the year
ended June 30, 1997 was $13,470,000 ($12,054,000 in 1996). Average rates are
weighted by month and reflect the monthly amount of short-term borrowing in use
and the respective rates of interest therein. Loans payable decreased by
$951,000 (decreased by $776,000 in 1996), due to translation rates in effect at
June 30, 1997 when compared to rates at June 30, 1996.
NOTE 8 -- LONG-TERM DEBT:
JUNE 30, 1997 JUNE 30, 1996
------------------------- -----------------------
CURRENT LONG-TERM CURRENT LONG-TERM
---------- ----------- -------- -----------
Notes payable in equal annual
installments from October, 1997
through October, 2000, interest
rates 8.17%.................... $6,250,000 $18,750,000 $25,000,000
Note payable December, 1998
interest rate (1.25% over
LIBOR) 6.75%................... 1,750,000
Note payable by foreign
subsidiary March, 1999,
interest rate 3.8%............. 2,715,000
Note payable by foreign
subsidiary August, 2004,
interest rate 6.4%............. $301,000 2,165,000
Note payable by foreign
subsidiary through 2002,
interest rate 6.0%............. 1,160,000 1,353,000
Industrial revenue bond payable
in annual installments through
October, 1998, interest rate
9%............................. 114,000 36,000 118,000 150,000
Notes payable by foreign
subsidiary through 2003,
interest rates 4.38% and
9.9%........................... 34,000 223,000 52,000 304,000
Notes payable by foreign
subsidiary through March, 1999,
interest rates 6.25% and
6.5%........................... 57,000 99,000
Note payable by foreign
subsidiary August, 2000,
interest rate 8.25%............ 27,000 30,000 21,000 40,000
---------- ----------- -------- -----------
$6,425,000 $20,256,000 $492,000 $33,576,000
=========== ============ ========= ============
Notes payable, denominated in currencies other than the U.S. dollar,
decreased by $254,000 (decreased by $503,000 in 1996), due to translation rates
in effect at June 30, 1997 when compared to
30
33
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
rates at June 30, 1996. The foreign note due through 2002, with an interest rate
of 6.0%, and the industrial revenue bond are collateralized by buildings and
specific equipment as outlined in the indenture relating thereto. Approximately
$371,000 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, 1998 (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, 1997, this ratio was 1.63
to 1.
Maturities of long-term debt in each fiscal year succeeding June 30, 1997
are as follows:
FISCAL YEAR ENDING JUNE 30,
- --------------------------------------------------------------------
1998................................................................ $ 6,425,000
1999................................................................ 7,525,000
2000................................................................ 6,326,000
2001................................................................ 6,285,000
2002................................................................ 17,000
2003 and thereafter................................................. 103,000
-----------
$26,681,000
============
At June 30, 1997, the Company had available lines of credit of $30,868,000
upon which $8,516,000 had been drawn and of which $103,000 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, 1997, 1996 and 1995 were $61,000,
$71,000 and $67,000, respectively.
31
34
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 -- TAXES ON INCOME:
(Loss) income from operations before taxes and the (benefit) provision for
income taxes are comprised of:
FOR THE YEARS ENDED JUNE 30,
----------------------------------------------
1997 1996 1995
------------ ----------- -----------
(Loss) income from operations before
taxes:
Domestic............................. $ 346,000 $12,613,000 $ 8,897,000
Foreign.............................. (35,553,000) (5,394,000) 1,845,000
------------ ----------- -----------
$(35,207,000) $ 7,219,000 $10,742,000
============ ============ ============
(Benefit) provision for income taxes:
Currently payable:
Domestic.......................... $ (363,000) $ 1,060,000 $ 2,026,000
Foreign........................... 3,522,000 4,035,000 2,960,000
------------ ----------- -----------
3,159,000 5,095,000 4,986,000
------------ ----------- -----------
(Prepaid) deferred:
Foreign.............................. (369,000) (394,000) 105,000
------------ ----------- -----------
(369,000) (394,000) 105,000
------------ ----------- -----------
Total income tax expense.... $ 2,790,000 $ 4,701,000 $ 5,091,000
============ ============ ============
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, 1997 and 1996 are as follows:
DEFERRED TAX:
FOR THE YEARS ENDED JUNE 30,
-------------------------------------------------------------------------------------
1997 1996
---------------------------------------- ----------------------------------------
ASSETS LIABILITIES TOTAL ASSETS LIABILITIES TOTAL
----------- ----------- ------------ ----------- ----------- ------------
Foreign tax credit
carryforwards.............. $ 2,664,000
Foreign net operating loss
carryforwards.............. $18,127,000 12,853,000
Capital loss carryforwards... 4,391,000
Inventories.................. 1,519,000 1,853,000
Pension...................... 1,735,000 1,461,000
Other, individually less than
5% of "Net Deferred Tax
Asset"..................... $ 1,771,000 $ 1,099,000 $ 2,641,000 $ 1,171,000
----------- ----------- ----------- -----------
Net Deferred Tax Asset and
Liability.................. $27,543,000 $ 1,099,000 $ 26,444,000 $21,472,000 $ 1,171,000 $ 20,301,000
============ ========== ============ ==========
Valuation Allowance.......... (22,774,000) (16,957,000)
------------ ------------
Total Net Deferred
Tax Assets........ $ 3,670,000 $ 3,344,000
============ ============
32
35
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
At June 30, 1997, net operating loss carryforwards of $61,890,000 are
available to reduce future foreign taxable income ($3,762,000 of which expire in
fiscal year 1998, and the remainder of which have indefinite carryforward
periods). The Company also has capital loss carryforwards in the amou