UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-9334

BALDWIN TECHNOLOGY COMPANY, INC.

(Exact name of registrant as specified in its charter)

Delaware		13-3258160
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2 Trap Falls Road, Suite 402, Shelton, Connecticut 06484

203-402-1000

N/A

     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 þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer o		Smaller reporting company o		Non-accelerated filer þ
				(do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at April 30, 2011
Class A Common Stock ($0.01 par value)			14,564,331
Class B Common Stock ($0.01 par value)			1,092,555

 

 

BALDWIN TECHNOLOGY COMPANY, INC.

INDEX

		Page
Part I Financial Information
Item 1 Financial Statements
Consolidated Balance Sheets at March 31, 2011 (unaudited) and June 30, 2010			1-2
Consolidated Statements of Operations for the three and nine months ended March 31, 2011 (unaudited) and 2010 (unaudited)			3
Consolidated Statements of Changes in Shareholders’ Equity for the nine months ended March 31, 2011 (unaudited)			4
Consolidated Statements of Cash Flows for the nine months ended March 31, 2011 (unaudited) and 2010 (unaudited)			5-6
Notes to Consolidated Financial Statements (unaudited)			7-20
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations			20
Item 3 Quantitative and Qualitative Disclosures About Market Risk			30
Item 4 Controls and Procedures			30
Part II Other Information
Item 1A Risk Factors			32
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds			33
Item 6 Exhibits			33
Signatures			34
EX-10.01
EX-31.01
EX-31.02
EX-32.01
EX-32.02

BALDWIN TECHNOLOGY COMPANY, INC.

CONSOLIDATED BALANCE SHEETS
(in thousands)

ASSETS

		March 31,				June 30,
		2011				2010
		(unaudited)
CURRENT ASSETS:
Cash and cash equivalents		$	13,938			$	15,710
Accounts receivable trade, net of allowance for doubtful accounts of $1,272 ($1,154 at June 30, 2010)			27,076				22,042
Notes receivable, trade			2,893				2,328
Inventories, net			23,491				20,237
Deferred taxes, net			1,778				1,778
Prepaid expenses and other			4,890				4,365
Assets of discontinued operations			1,021				981
Total current assets			75,087				67,441
MARKETABLE SECURITIES:
(Cost $867 at March 31, 2011 and $787 at June 30, 2010)			546				500
PROPERTY, PLANT AND EQUIPMENT:
Land and buildings			1,179				1,139
Machinery and equipment			6,808				6,212
Furniture and fixtures			5,282				4,316
Capital leases			108				95
			13,377				11,762
Less: Accumulated depreciation			(8,605	)			(6,393	)
Net property, plant and equipment			4,772				5,369
INTANGIBLES, less accumulated amortization of $11,802 ($10,400 at June 30, 2010)			10,823				10,707
GOODWILL, less accumulated amortization of $1,574 ($1,425 at June 30, 2010)			19,717				18,753
DEFERRED TAXES, NET			9,816				7,712
Other assets			5,792				6,335
Assets of discontinued operations			—				2,475
TOTAL ASSETS		$	126,553			$	119,292

The accompanying notes to consolidated financial statements are an integral part of these statements.

BALDWIN TECHNOLOGY COMPANY, INC.

CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)

		March 31,				June 30,
		2011				2010
		(unaudited)
CURRENT LIABILITIES:
Loans payable		$	6,010			$	4,525
Current portion of long-term debt			16,215				389
Accounts payable, trade			15,759				13,536
Notes payable, trade			4,820				4,850
Accrued salaries, commissions, bonus and profit-sharing			4,153				3,626
Customer deposits			2,595				1,747
Accrued and withheld taxes			1,501				1,155
Income taxes payable			716				1,019
Other accounts payable and accrued liabilities			10,130				8,501
Liabilities of discontinued operations			1,214				853
Total current liabilities			63,113				40,201
LONG-TERM LIABILITIES:
Long-term debt, net of current portion			2,132				16,066
Other long-term liabilities			9,862				12,427
Total long-term liabilities			11,994				28,493
Total liabilities			75,107				68,694
Commitments and contingencies
SHAREHOLDERS’ EQUITY:
Class A Common Stock, $0.01 par, 45,000,000 shares authorized, 14,564,331 shares issued at March 31, 2011 and 14,471,363 shares issued at June 30, 2010			146				145
Class B Common Stock, $0.01 par, 4,500,000 shares authorized, 1,092,555 shares issued at March 31, 2011 and at June 30, 2010			11				11
Capital contributed in excess of par value			48,629				48,098
Accumulated earnings			(3,379	)			2,019
Accumulated other comprehensive income			6,039				325
Total shareholders’ equity			51,446				50,598
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	126,553			$	119,292

The accompanying notes to consolidated financial statements are an integral part of these statements.

BALDWIN TECHNOLOGY COMPANY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)

		For the three months ended								For the nine months ended
		March 31,								March 31,
		2011				2010				2011				2010
Net sales		$	36,443			$	36,977			$	117,705			$	107,195
Cost of goods sold			25,972				25,722				82,251				74,910
Gross profit			10,471				11,255				35,454				32,285
Operating expenses:
General and administrative			4,884				4,160				15,523				13,902
Selling			3,412				3,180				10,815				9,828
Engineering and development			3,624				3,402				10,722				9,976
Restructuring			2,114				—				2,722				—
Total operating expenses			14,034				10,742				39,782				33,706
Legal settlement income, net of expenses			—				—				—				9,266
Operating (loss) income			(3,563	)			513				(4,328	)			7,845
Other (income) expense:
Interest expense, net			656				426				1,691				2,626
Other (income) expense, net			50				66				197				267
			706				492				1,888				2,893
Income (loss) from continuing operations before income taxes			(4,269	)			21				(6,216	)			4,952
Provision (benefit) for income taxes			(1,392	)			(4	)			(2,740	)			1,745
Income (loss) from continuing operations			(2,877	)			25				(3,476	)			3,207
Discontinued operations, net of tax
Income (loss) from discontinued operations			(1,688	)			108				(1,922	)			408
Net income (loss)			(4,565	)			133				(5,398	)			3,615
Basic:
Income (loss) per share from continuing operations		$	(0.18	)		$	0.00			$	(0.22	)		$	0.21
Income (loss) per share from discontinuing operations		$	(0.11	)		$	0.01			$	(0.12	)		$	0.02
Net Income (loss) per share		$	(0.29	)		$	0.01			$	(0.34	)		$	0.23
Diluted:
Income (loss) per share from continuing operations		$	(0.18	)		$	0.00			$	(0.22	)		$	0.21
Income (loss) per share from discontinuing operations		$	(0.11	)		$	0.01			$	(0.12	)		$	0.02
Net Income (loss) per share		$	(0.29	)		$	0.01			$	(0.34	)		$	0.23
Weighted average shares outstanding:
Basic			15,640				15,526				15,604				15,455
Diluted			15,640				15,562				15,604				15,502

The accompanying notes to consolidated financial statements are an integral part of these statements.

BALDWIN TECHNOLOGY COMPANY, INC.

																		Capital				Accumu-				Accumulated
		Class A								Class B								Contributed in				lated				Other												Comprehensive Income (Loss) for the
		Common Stock								Common Stock								Excess				Earnings/				Comprehensive				Treasury Stock								Nine Months Ended March 31,
		Shares				Amount				Shares				Amount				of Par				(Deficit)				Income (Loss)				Shares				Amount				2011				2010
Balance at June 30, 2010			14,471,363			$	145				1,092,555			$	11			$	48,098			$	2,019			$	325				—			$	—
Net loss for the nine months ended March 31, 2011																							(5,398	)														$	(5,398	)		$	3,615
Translation adjustment																											5,494												5,494				7
Recognition of pension funded status, net of tax																											240												240				250
Unrealized loss on available-for-sale securities, net of tax																											(20	)											(20	)			(13	)
Amortization of stock based compensation																			568
Comprehensive income (loss)																																						$	316			$	3,859
Shares issued under stock compensation plans			122,238				1												—
Shares surrendered as payment of tax withholding			—																												(29,270	)			(37	)
Retirement of treasury stock			(29,270	)															(37	)											29,270				37
Balance at March 31, 2011			14,564,331			$	146				1,092,555			$	11			$	48,629			$	(3,379	)		$	6,039			$	0			$	0

The accompanying notes to consolidated financial statements are an integral part of these statements.

BALDWIN TECHNOLOGY COMPANY, INC.

		For the nine months ended March 31,
		2011				2010
Cash flows from operating activities:
Income (loss) from continuing operations		$	(3,476	)		$	3,207
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Depreciation and amortization			1,944				1,799
Accrued retirement pay			—				(183	)
Provision for losses on accounts receivable			401				554
Gain on legal settlement			—				(9,266	)
Deferred financing charge			118				1,183
Proceeds from legal settlement			—				9,560
Restructuring charge			2,760				—
Non-cash compensation (CEO change)			878				—
Payments against CEO non-cash compensation			(12	)			—
Non-cash compensation (CFO change)			128				—
Loss on disposal of fixed assets			86				—
Stock based compensation			568				657
Deferred income taxes			(2,654	)			(132	)
Changes in assets and liabilities:
Accounts and notes receivable			(3,631	)			1,566
Inventories			(511	)			2,827
Prepaid expenses and other			60				1,837
Other assets			1,590				1,196
Customer deposits			622				(755	)
Accrued compensation			(813	)			(553	)
Payment of restructuring charges			(1,490	)			(1,795	)
Accounts and notes payable, trade			419				(3,959	)
Income taxes payable			(756	)			1,653
Accrued and withheld taxes			(74	)			(65	)
Other accounts payable and accrued liabilities			(959	)			(1,366	)
Net cash (used) provided by operating activities			(4,802	)			7,965
Cash flows from investing activities:
Additions of property, plant and equipment			(171	)			(328	)
Additions to patents and trademarks			(277	)			(97	)
Net cash (used) by investing activities			(448	)			(425	)
Cash flows from financing activities:
Long-term and short-term debt borrowings			2,788				726
Long-term and short-term debt repayments			—				(10,183	)
Payment of debt financing costs			(220	)			(752	)
Repurchase of common stock			(37	)			(45	)
Principal payments under capital lease obligations			(100	)			(81	)
Proceeds of stock option exercises			—				12
Other long-term liabilities			232				(367	)
Net cash provided (used) by financing activities			2,663				(10,690	)
Discontinued operations:
Cash provided by operating activities			(47	)			940
Cash provided by financing activities			—				(38	)
Cash provided by investing activities			(63	)			—
Net cash (used) provided by discontinued operations			(110	)			902
Effects of exchange rate changes on cash			925				204
Net (decrease)  in cash and cash equivalents			(1,772	)			(2,044	)
Cash and cash equivalents (including discontinued operations) at beginning of period			15,710				13,806
Cash and cash equivalents (including discontinued operations) at end of period		$	13,938			$	11,762
Less cash and cash equivalents of discontinued operations at end of period			—				—
Cash and cash equivalents (excluding discontinued operations) at end of period		$	13,938			$	11,762

The accompanying notes to consolidated financial statements are an integral part of these statements.

BALDWIN TECHNOLOGY COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)

Supplemental disclosures of cash flow information:

		For the nine months
		ended March 31,
		2011				2010
Cash paid during the period for:
Interest		$	864			$	1,029
Income taxes		$	1,016			$	205
Non-cash investing and financing activities:
Warrants issued in connection with debt financing		$	529			$	—

The accompanying notes to consolidated financial statements are an integral part of these statements.

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(in thousands, except share and per share data)

Note 1 — Organization and Basis of Presentation:

     Baldwin Technology Company, Inc. and its subsidiaries (“Baldwin” or the “Company”) are engaged primarily in the development, manufacture and sale of press automation equipment and related parts and consumables for the printing and publishing industry.

     The accompanying unaudited consolidated financial statements include the accounts of Baldwin and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in compliance with the rules and regulations of the Securities and Exchange Commission (“SEC”). These financial statements reflect all adjustments of a normal recurring nature, which are in the opinion of management, necessary to present fairly the financial position and the results for the interim periods. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K/A for the fiscal year ended June 30, 2010.

     The results of operations for the interim period presented are not necessarily indicative of trends or of results to be expected for any future period including the entire fiscal year ending June 30, 2011.

     On June 30, 2010 the Company successfully completed the acquisition of Nordson UV (“UV”), a manufacturer of ultraviolet curing systems, lamps and parts. Operating results of the acquired entities are included in the results of operations from the date of acquisition.

     As described in Note 3, the Company has reclassified its food blending and packaging business to discontinued operations for all periods presented.

Note 2 — Recent Accounting Standards:

     In October 2009, the FASB issued ASC Update No. 2009-13, “Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements.” The consensus in Update No. 2009-13 supersedes certain guidance in Topic 605 (formerly EITF Issue No. 00-21, Multiple-Element Arrangements) and requires an entity to allocate arrangement consideration at the inception of an arrangement to all of its deliverables based on their relative selling prices. The consensus eliminates the use of the residual method of allocation and requires the use of the relative-selling-price method in all circumstances in which an entity recognizes revenue for an arrangement with multiple deliverables subject to ASC 605-25. The Company adopted Update No. 2009-13 as of July 1, 2010.

     The new guidance changes the criteria required to (1) separate deliverables into separate units of accounting when deliverables are sold in a bundled arrangement and (2) to allocate the arrangement’s consideration to each unit in the arrangement (such as, equipment, installation or commissioning services). Entities are now required to determine an estimated selling price for each separate deliverable following a hierarchy of evidence — first Vendor-specific objective evidence (“VSOE”), next Third Party Evidence (“TPE”) and, if VSOE and TPE do not exist, best estimate of selling price (“BESP”).

     The Company’s material revenue streams are the result of a wide range of activities, from the delivery of stand-alone equipment, parts, services, consumables and, in some instances, design, installation and commissioning of equipment. The Company enters into revenue arrangements that may consist of multiple deliverables of its product and service offerings due to the needs of its customers. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collectability of the sale price is reasonably assured. In addition to these general revenue recognition criteria, the following specific revenue recognition policies are followed:

     Products and Equipment — For product and equipment sales (one deliverable only), revenue recognition generally occurs when products or equipment have been shipped, risk of loss has transferred to the customer, objective evidence exists that customer acceptance provisions have been met, no significant obligations remain and an allowance for discounts, returns and customer incentives can be reliably estimated. Recorded revenues are reduced by these allowances. The Company bases its estimates of these allowances on historical experience taking into consideration the type of products sold, the type of customer, and the specific type of transaction in each arrangement.

     Services — Revenue for services is generally recognized at completion of the contractually required services.

     Multiple-Element Arrangements — Arrangements with customers may include multiple deliverables, including any combination of products, equipment and services. For the Company’s multiple-element arrangements, deliverables are separated into more than one unit of accounting when (i) the delivered element(s) have value to the customer on a stand-alone basis, and (ii) delivery of the undelivered element(s) is probable and substantially in the control of the Company. Based on the new accounting guidance adopted July 1, 2010, revenue is then allocated to each unit of accounting based on the estimated selling price determined using a hierarchy of evidence based first on VSOE if it exists, based next on TPE if VSOE does not exist, and finally, if both VSOE and TPE do not exist, based on BESP.

•

VSOE — The price of a deliverable when the Company regularly sells it on a stand-alone basis.

     Typically, the Company is unable to determine VSOE for the installation and commissioning services portion, as well as, the equipment portion of a multiple-element arrangement. Since the Company does not sell its installation and commissioning services on a stand-alone basis, the Company is not able to determine VSOE for these portions of a multiple-element arrangement. In addition, in certain instances, similar equipment included in a multiple-element arrangement is sold separately in stand-alone arrangements as customers may perform installations themselves. The Company has determined that the applicability of this stand-alone pricing is almost always not appropriate to serve as the VSOE for equipment in multiple-element arrangements since this pricing considers the geographies in which the products or services are sold, major product and service groups, customer classification (OEM versus End User) and other marketing variables.

•

TPE — Third party (competitor, subcontractors, etc) sales prices for the same or largely interchangeable products or services to similar customers in stand-alone sales. TPE can only be used if VSOE is not available.

     Generally, the Company’s strategy for many of its products differs from that of its peers and its offerings contain a level of customization and differentiation such that the comparable pricing

of products with similar functionality sold by other companies cannot be obtained. Furthermore, the Company is unable to reliably determine what similar competitor products’ selling prices are on a stand-alone basis. Therefore, the Company is typically not able to determine TPE for the equipment portion of a multiple-element arrangement. However, there are others (subcontractors) in the industry with sufficient knowledge about the installation and commissioning process that the Company uses on occasion to perform these services. Overall, installation and commissioning services may vary, due in part, to the size and complexity of the installation and commissioning; however, these subcontractor rates may provide a basis for TPE after considering the type of services to be performed (i.e. mechanical, electrical) and negotiated subcontractor rates.

•

BESP — When the Company is unable to establish VSOE or TPE, the Company uses BESP. The objective of BESP is to determine the price at which the Company would transact a sale if the product or service were sold on a stand-alone basis.

     The Company determines BESP for a deliverable in a multiple element arrangement by first collecting all reasonably available data points including sales, cost and margin analysis of the product, and other inputs based on the Company’s normal pricing practices. Second, the Company makes any reasonably required adjustments to the data based on market conditions and Company-specific factors (customer, cost structure, etc.). Third, the Company stratifies the data points, when appropriate, based on customer, magnitude of the transaction and sales volume. In addition, the Company has negotiated supply agreements, primarily with large OEM customers, for pricing some of its products and installation and commissioning services. The Company has experience selling the products and installation and commissioning services at the published price list and considers this to be BESP when contracting with customers under supply agreements. The determination of BESP is a formal process within the Company that includes review and approval by the Company’s management.

     Contractually stated prices in multiple-element arrangements are not presumed to represent VSOE, TPE or BESP for an individual deliverable. An entity must develop its estimate of selling prices using the hierarchy of evidence in the new guidance.

     After determination of the estimated selling price of each deliverable in a multiple-element arrangement, the arrangement consideration is then allocated using the relative selling price method. Under the relative selling price method, the estimated selling price for each deliverable is compared to the sum of the estimated selling prices for all deliverables. The percentage that is calculated for each deliverable is then multiplied by the total contractual value of the multiple-element arrangement to determine the revenue allocated to each deliverable.

     The revenue allocated to each deliverable will then be recorded in accordance with existing revenue recognition guidance for stand alone product/equipment sales and unbundled services.

     Based on the Company’s current sales strategies, the newly adopted accounting guidance for revenue recognition has not and is not expected to have a significant effect on the timing and pattern of revenue recognition for sales in periods after the initial adoption when applied to multiple-element arrangements.

Note 3 — Discontinued Operations:

     During the quarter ended March 31, 2011 the Company decided to discontinue its non-core food blending and packaging business. As a result of this decision and having met the criteria to be reported as a discontinued operation, the assets, liabilities, results of operations and cash flows of the food blending and packaging business are classified as discontinued operations for all periods presented.

     Additionally, as a result of its decision to discontinue the food blending and packaging business, the Company performed an assessment as to the recoverability of goodwill, intangibles and fixed assets associated with the discontinued operation. Based on these assessments, the Company recorded a pre-tax impairment charge of $2,449 related to goodwill, intangibles and fixed assets associated with the discontinued operation.

     Revenues and net income (loss) of the food blending and packaging business included in discontinued operations are as follows:

		Three Months Ended								Nine Months Ended
		March 31, 2011				March 31, 2010				March 31, 2011				March 31, 2010
		(in thousands)								(in thousands)
Revenues		$	1,571			$	2,521			$	5,000			$	7,228
Pre-tax income (loss) from operations of blending and packaging business			(217	)			184				(569	)			614
Pre-tax loss for impairment of blending and packaging assets:
Goodwill			(1,349	)			—				(1,349	)			—
Intangibles, net			(356	)			—				(356	)			—
Fixed assets			(668	)			—				(668	)			—
Other write offs/accruals			(76	)			—				(76	)			—
			(2,449	)			—				(2,449	)			—
Pre-tax income (loss) from discontinued operations			(2,666	)			184				(3,018	)			614
Tax (benefit) provision			(978	)			76				(1,096	)			206
Income (loss) from discontinued operations		$	(1,688	)		$	108			$	(1,922	)		$	408

Assets and liabilities of the discontinued operations were as follows:

		March 31, 2011				June 30, 2010
ASSETS
Accounts Receivable, net		$	499			$	261
Inventory, net			492				602
Pre-paid			—				88
Other			30				30
Current Assets of discontinued operations			1,021				981
Long Term Assets of discontinued operations			—				2,475
Assets of discontinued operations		$	1,021			$	3,456
LIABILITIES
Accounts Payable		$	880			$	550
Customer Deposits			9				8
Other			110				80
Deferred Taxes			215				215
Liabilities of discontinued operations		$	1,214			$	853

Note 4 — Long Term Debt:

		March 31, 2011								June 30, 2010
		Current				Long-Term				Current				Long-Term
		(in thousands)								(in thousands)
Revolving Credit Facility due November 21, 2011, interest rate one-month LIBOR rate 0.25% plus 4.50% (a)		$	13,700			$	—			$	—			$	12,100
Revolving Credit Facility due November 21, 2011, interest rate one-month LIBOR rate 0.87% plus 4.50% (a)			2,126				—				—				1,834
Subordinated promissory note due June 30, 2015, interest rate one year LIBOR rate 1.2% plus 4.50% (b)			389				2,132				389				2,132
		$	16,215			$	2,132			$	389			$	16,066

     The Company maintains relationships with both foreign and domestic banks, which combined have extended short and long-term credit facilities to the Company totaling $29,617. As of March 31, 2011, the Company had $22,946 outstanding under these credit facilities (including Letters of Credit). The amount available under these credit facilities at March 31, 2011 was $3,471.

Note 5 — Net income (loss) per share:

     Basic net income (loss) per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted net income (loss) per share reflects the potential dilution by securities that would share in the earnings of an entity.

     Due to the losses incurred during the three and nine months ended March 31, 2011, the denominator in the diluted earnings per share calculations does not include the effects of options or warrants as it would result in a less dilutive computation. As a result, for the three and nine months ended March 31, 2011, outstanding options and warrants to purchase 2,071,000 shares, of the Company’s common stock are not included in the calculation to compute diluted net income per share.

     The weighted average shares outstanding used to compute diluted net income (loss) per share includes potentially dilutive shares of 36,000 and 47,000, respectively, for the three and nine months ended March 31, 2010. Outstanding options to purchase, 1,010,000 shares of the Company’s common stock for the three and nine months ended March 31, 2010, are not included in the calculations for period ended March 31, 2010 to compute diluted net income per share, as their exercise prices exceeded market value.

Note 6 — Accumulated Other Comprehensive Income (Loss):

     Accumulated Other Comprehensive Income (Loss) (“AOCI”) is comprised of various items which affect equity that result from recognized transactions and other economic events other than transactions with owners in their capacity as owners. AOCI is included in stockholders’ equity in the consolidated balance sheets. AOCI consists of the following:

		March 31, 2011				June 30, 2010
		(in thousands)
Cumulative translation adjustments		$	6,978			$	1,484
Unrealized (loss) on investments, net of tax benefit of $135 (benefit of $121 at June 30, 2010)			(186	)			(166	)
Pension and other, net of tax benefit of $592 (benefit of $768 at June 30, 2010)			(753	)			(993	)
		$	6,039			$	325

Note 7 — Inventories:

     Inventories consist of the following:

		March 31, 2011				June 30, 2010
		(in thousands)
Raw materials		$	13,020			$	10,972
In process			5,585				4,528
Finished goods			4,886				4,737
		$	23,491			$	20,237

     Foreign currency translation effects increased inventories by $2,554 from June 30, 2010 to March 31, 2011.

Note 8 — Goodwill and Other Intangible Assets:

     The changes in the carrying amount of goodwill for the nine months ended March 31, 2011 were as follows:

		Gross Carrying				Accumulated				Net
		Amount				Amortization				Book Value
		(in thousands)
Balance as of June 30, 2010		$	20,178			$	1,425			$	18,753
Effects of currency translation			1,113				149				964
Balance as of March 31, 2011		$	21,291			$	1,574			$	19,717

     Intangible assets subject to amortization were comprised of the following:

						As of March 31, 2011								As of June 30, 2010
						Gross								Gross
		Amortization				Carrying				Accumulated				Carrying				Accumulated
Intangible Assets:		Period				Amount				Amortization				Amount				Amortization
						(in thousands)								(in thousands)
Patents and trademarks			12-20			$	11,836			$	7,722			$	11,372			$	7,155
Customer relationships			2-13				583				120				538				58
Trademarks			30				1,522				221				1,368				163
Existing product technology			15				6,260				1,522				5,605				1,135
Non-compete/solicitation agreements			5				99				83				59				41
Other			5-30				2,325				2,134				2,165				1,848
Total						$	22,625			$	11,802			$	21,107			$	10,400

     Amortization expense associated with these intangible assets was $344 and $1,043, respectively, for the three and nine months ended March 31, 2011 and $302 and $918, respectively, for the three and nine months ended March 31, 2010.

Note 9 — Supplemental Compensation:

     The following table sets forth the components of net periodic benefit costs for the Company’s defined benefit plans for the three and nine months ended March 31, 2011 and 2010:

		Pension Benefits								Pension Benefits
		For the three months								For the nine months
		ended March 31,								ended March 31,
		2011				2010				2011				2010
						(in thousands)
Service cost		$	100			$	100			$	300			$	300
Interest cost			79				84				237				252
Expected return on plan assets			(7	)			(4	)			(21	)			(12	)
Amortization of net actuarial gain			18				(3	)			54				(9	)
Net periodic benefit cost		$	190			$	177			$	570			$	531

     During the three and nine months ended March 31, 2011, respectively, the Company made contributions to the plans of $202 and $424. During the three and nine months ended March 31, 2010, respectively, the Company made contributions to the plans of $112 and $282.

Note 10 — Customers:

     During each of the three and nine months ended March 31, 2011, one customer accounted for more than 10% of the Company’s net sales. Koenig and Bauer Aktiengesellschaft (“KBA”) accounted for approximately 12% and 13% of the Company’s net sales, respectively. During the three months ended March 31, 2010, no one customer accounted for more than 10% of the Company’s net sales. During the nine months ended March 31, 2010, one customer accounted for more than 10% of the Company’s net sales. KBA accounted for approximately 13% of the Company’s net sales for the nine months ended March 31, 2010.

Note 11 — Warranty Costs:

     The Company’s standard contractual warranty provisions are to repair or replace, at the Company’s option, product that is proven to be defective. The Company estimates its warranty costs as a percentage of revenues on a product by product basis, based on actual historical experience. Hence, the Company accrues estimated warranty costs reported in other accounts payable and accrued liabilities, at the time of sale. In addition, should the Company become aware of a specific potential warranty claim, a specific charge is recorded and accounted for separately from the percentage of revenue discussed above.

		Warranty Amount
		2011				2010
		(in thousands)
Warranty reserve at June 30		$	1,999			$	2,626
Additional warranty expense accruals			1,693				1,928
Payments against reserve			(1,722	)			(2,319	)
Effects of currency rate fluctuations			321				60
Warranty reserve at March 31		$	2,291			$	2,295

Note 12 — Share Based Payments:

     Total share-based compensation for the three and nine months ended March 31, 2011 and 2010 are summarized in the following table:

		For the three months								For the nine months
		ended March 31,								ended March 31,
		2011				2010				2011				2010
		(in thousands)
Share based compensation
Stock options		$	46			$	52			$	475			$	154
Restricted stock			21				157				93				503
Performance shares (a)			—				—				—				—
Total share-based compensation		$	67			$	209			$	568			$	657

     During the quarter ended September 30, 2010, the Company entered into an advisory agreement (the “Advisory Agreement”) with OBX Partners LLC (“OBX”), under which OBX acted as a financial advisor and strategic consultant. As part of the consideration for the services rendered, the Company granted to OBX an option (the “OBX Option”) to purchase 300,000 shares of the Company’s Class A Common Stock (the “Shares”) at an exercise price per share of $1.26, exercisable on or after October 1, 2011. The Option would have terminated on November 16, 2010 if OBX had not substantially completed the engagement, which OBX completed during the second quarter. If not previously exercised, the OBX Option shall terminate on September 30, 2020. The fair value of the OBX Option on the date of grant was $167. The Company recomputed the fair value of the OBX Option as of December 31, 2010 (the measurement date) and recorded an adjustment to the fair value of $31, resulting in a fair value of $198 at December 31, 2010.

     In order to induce Mark Becker, President and Chief Executive Officer of the Company, to enter into an employment agreement with the Company, the Company granted, effective October 1, 2010, to Mr. Becker the following options:

          (i) An option to purchase 200,000 shares of Class A Common Stock of the Company, at an exercise price of $1.20 per share, pursuant to the Company’s 2005 Equity Compensation Plan (the “Plan Option”). The Plan Option vested and became exercisable on October 1, 2010. The Plan Option shall expire, if not sooner exercised, as of the close of business on September 30, 2020.

          (ii) An option to purchase 200,000 shares of Class A Common Stock of the Company, at an exercise price of $1.20 per share (the “Non-Plan Option”). The Non-Plan Option shall vest and become exercisable on October 1, 2011.

     The aggregate fair value of the Plan Option and the Non-Plan Option on the date of grant was $220.

     Effective November 18, 2010, the Company granted to each non-employee director of the Company (i) either a Restricted Stock Award or a Restricted Stock Unit with respect to 9,524 shares (a total of 57,144 shares for all non-employee directors) of the Company’s Class A Common Stock, the restrictions on which will lapse on November 18, 2011, having an aggregate grant date fair value of $72 and (ii) a non-qualified option (a “Non-Employee Director Option”) to purchase 9,524 shares (a total of 57,144 shares for all non-employee directors) of the Company’s Class A Common Stock, which shall vest

in three equal annual installments commencing on the second anniversary of the date of grant, having an aggregate grant date fair value of $34.

     Effective February 17, 2011 the Company granted options to Purchase 165,000 Shares of Class A common stock to certain officers of the Company, at an exercise Price of $1.52 per share and aggregate fair value of $121, which shall vest in three equal annual installments commencing on the second anniversary of the grant.

Note 13 — Restructuring:

Quarter 3 FY 2009 Plan:

     In January and March 2009, the Company committed to the principal features of plans to restructure some of its existing operations. These plans included the consolidation of production facilities in Germany, as well as employment reductions in Germany, Sweden, Italy and the U.S. The actions were taken in response to sustained weak market conditions. Actions under the plan commenced during the Company’s third quarter of Fiscal 2009; and the Company substantially completed the actions by June 30, 2009. Nearly all the costs associated with the plans are cash costs, payment of which will continue through Fiscal 2011.

						Payments				Balance at				Payments				Balance at
		Initial				against				June 30,				against				March 31,
		Reserve				Reserve				2010				Reserve				2011
		(in thousands)
Restructuring costs:
Employee termination costs		$	3,836			$	(3,570	)		$	266			$	(160	)		$	106
Other			230				(101	)			129				—				129
Total restructuring costs		$	4,066			$	(3,671	)		$	395			$	(160	)		$	235

Quarter 4 FY 2010 Plan:

     In June 2010, the Company committed to the principal features of a plan to additionally restructure its operation in Germany. Actions under the plan commenced and were completed by June 30, 2010. All costs associated with the plan are cash payments related to employee reductions.

						Payments				Balance at				Payments				Balance at
		Initial				against				June 30,				against				March 31,
		Reserve				Reserve				2010				Reserve				2011
		(in thousands)
Restructuring costs:
Employee termination costs		$	540			$	(38	)		$	502			$	(301	)		$	201
Total restructuring costs		$	540			$	(38	)		$	502			$	(301	)		$	201

Quarter 1 FY 2011 Plan:

     In September 2010 the Company committed to the principle features of a plan to restructure its operations in the UK and Japan. Actions under the plan to consolidate facilities in the UK and to reduce employment levels in Japan commenced in September and were concluded in the UK. Additional actions continued in Japan through the second quarter of Fiscal 2011. Costs associated with the current plan are primarily cash payments related to employee reductions. Payments will continue through the fiscal year.

						Payments				Balance at
		Initial				against				March 31,
		Reserve				Reserve				2011
		(in thousands)
Restructuring costs:
Employee termination costs		$	145			$	(140	)		$	5
Other			47				—				47
Total restructuring costs		$	192			$	(140	)		$	52

Quarter 2 FY 2011 Plan:

     In December 2010 the Company committed to the principle features of a plan to restructure its operations in Japan, Germany and the U.S. Actions under the plan to reduce employment levels commenced in December. Costs associated with the current plan are primarily cash payments related to employee reductions. Payments will continue through the fiscal year.

						Payments				Balance at
		Initial				against				March 31,
		Reserve				Reserve				2011
		(in thousands)
Restructuring costs:
Employee termination costs		$	455			$	(170	)		$	285
Other			—				—				—
Total restructuring costs		$	455			$	(170	)		$	285

Quarter 3 FY 2011 Plan:

     In March 2011 the Company committed to the principle features of a plan to further restructure its operations in Japan, Germany, the U.K. and Sweden. Actions under the plan primarily relate to reduction in employment levels, consolidation of facilities and fixed asset write-downs. Costs associated with the current plan are primarily cash payments related to employee reductions. Payments will continue through the fiscal year.

						Payments				Balance at
		Initial				against				March 31,
		Reserve				Reserve				2011
		(in thousands)
Restructuring costs:
Employee termination costs		$	1,583			$	(719	)		$	864
Other			531				—				531
Total restructuring costs		$	2,114			$	(719	)		$	1,395

Note 14 — Legal Proceedings:

     Baldwin is involved in various legal proceedings from time to time, including actions with respect to commercial, intellectual property and employment matters. The Company believes that it has meritorious defenses against the claims currently asserted against it and intends to defend them vigorously. However, the outcome of litigation is inherently uncertain, and the Company cannot be sure that it will prevail in any of the cases currently in litigation. The Company believes that the ultimate outcome of any such cases will not have a material adverse effect on its results of operations, financial position or cash flows; however, there can be no assurances that an adverse determination would not have a material adverse effect on the Company.

     On September 24, 2009, the Company and technotrans AG (“technotrans”) agreed to an out-of-court settlement to terminate all proceedings that had continued for a number of years in connection with the infringement of a Baldwin patent. Under the agreement, technotrans paid to the Company Euro 6.5 million (approximately $9.6 million) and the Company agreed to dismiss its claim for damages.

Note 15 — Income Taxes:

     The Company’s effective tax rate is impacted by several factors including but not limited to (i) having significant operations outside the United States, which are taxed at rates different than the U.S. statutory rate, (ii) no tax benefit being recognized for losses incurred in certain countries as the realization of such benefits is not more likely than not, (iii) certain foreign and domestic permanent items, and (iv) adjustments to the Company’s valuation allowances and FIN 48 reserve.

Note 16 — Fair Value Measurements:

     ASC Topic 820, Fair Value Measurements and Disclosures, requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Observable inputs consist of market data obtained from independent sources while unobservable inputs reflect the Company’s own market assumptions. These inputs create the following fair value hierarchy:

	•		Level 1 — Quoted prices in active markets for identical assets or liabilities
	•		Level 2 — Valuations based on quoted prices in markets that are not active, quoted prices for similar assets or liabilities or all other inputs that are observable
	•		Level 3 — Unobservable inputs for which there is little or no market data which require the Company to develop its own assumptions

     If the inputs used to measure the fair value of a financial instrument fall within different levels of the hierarchy, the financial instrument is categorized based upon the lowest level input that is significant to the fair value measurement.

     Whenever possible, the Company uses quoted market prices to determine fair value. In the absence of quoted market prices, the Company uses independent sources and data to determine fair value.

     At March 31, 2011, the Company’s financial assets and financial liabilities that are measured at fair value on a recurring basis, consistent with the fair value hierarchy provision and valued as Level 1 are comprised of marketable securities and warrants. At March 31, 2011, the Company did not have any assets

or liabilities at fair value on a recurring basis using significant unobservable inputs (Level 3) in the Consolidated Financial Statements.

     There has been no change in the Company’s valuation technique during the quarter ended March 31, 2011.

Note 17 — Subsequent Event:

     On May 16, 2011, the Company entered into Waiver and Amendment No. 10 to the Credit Agreement (“Amendment No. 10”) with Bank of America. Amendment No. 10 provided for a waiver by the lenders of the Company’s for failure to meet the applicable minimum EBITDA and Currency Adjusted Net Sales for certain reporting periods. Under the terms of Amendment No. 10, the Company provided the lenders warrants with a term of ten years to purchase 372,374 shares of the Company’s Class A common stock in the Company for $0.01 per share. The May Warrants also contain a put provision that enables the holder after May 16, 2013 to request a cash settlement equal to the fair market value of the Warrants in an amount not to exceed $1.50 per share. Amendment No. 10 set new covenants for Currency Adjusted Net Sales, establishes minimum EBITDA levels, adjusts interest rate provisions, approves the disposition of the assets of the food blends discontinued operations and establishes certain milestones regarding refinancing the amounts owed under the Credit Agreement.

ITEM 2:		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (IN THOUSANDS)

     The following is management’s discussion and analysis of certain factors, which have affected the consolidated financial statements of Baldwin.

Forward-looking Statements

     Except for the historical information contained herein, certain statements contained herein are based on current expectations. Similarly, the press releases issued by the Company and other public statements made by the Company from time to time may contain language that is forward-looking. These forward-looking statements may be identified by the use of forward-looking words or phrases such as “forecast,” “believe,” “expect,” “intend,” “anticipate,” “should,” “plan,” “estimate,” and “potential,” among others. Such statements are forward-looking statements that involve a number of risks and uncertainties. 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 include, but are not limited to the following: (i) the ability of the Company to comply with requirements of credit agreements; the availability of funding under said agreements; and the ability of the Company to maintain adequate liquidity in declining and challenging economic conditions impacting the Company as well as customers, (ii) general economic conditions, either in the U.S. or foreign countries, (iii) the ability of the Company to obtain, maintain and defend challenges against valid patent protection on certain technology, primarily as it relates to the Company’s cleaning systems and other products, (iv) material changes in foreign currency exchange rates versus the U.S. Dollar, (v) changes in the Company’s mix of products and services comprising revenues, (vi) a decline in the rate of growth of the installed base of printing press units and the timing of new press orders, (vii) the ultimate realization of certain trade receivables and the status of ongoing business levels with the Company’s large OEM customers, and (viii) competitive market influences. Additional factors are set forth in Item 1A “Risk Factors” in the Company’s Annual Report or Form 10-K as amended for the fiscal year ended June 30, 2010, which should be read in conjunction herewith.

Critical Accounting Policies and Estimates

     For further information regarding the Company’s critical accounting policies, please refer to the Management’s Discussion and Analysis section of the Company’s Annual Report on Form 10-K as amended for the fiscal year ended June 30, 2010. There have been no material changes during the nine months ended March 31, 2011, other than the adoption of ASC update No. 2009-13 “Revenue Recognition Topic 605: Multiple Deliverable Revenue Arrangements” discussed in Note 2.

Overview

     Baldwin Technology Company, Inc. is a leading global supplier of print automation equipment and related parts and consumables for the printing and publishing industries. Baldwin offers its customers a broad range of market-leading technologies, products and systems that enhance the quality of printed products and improve the economic and environmental efficiency of printing presses. Headquartered in Shelton, CT, the Company has sales and service centers and product development and production facilities in the Americas, Asia and Europe. Baldwin’s technology and products include cleaning systems and related consumables, fluid management and ink control systems, web press protection systems and drying systems.

     The Company manages its business as one reportable business segment built around its core competency in process automation and related consumables.

     The market for printing equipment continues to face significant challenges. These challenges have translated into a lower level of business activity for the Company.

     During the quarter ended March 31, 2011 the Company classified its non-core blending and packaging business as a discontinued operation. The following highlights and ensuing discussion relate to the continuing operations.

Highlights for Three and Nine Months Ended March 31, 2011

	•		Revenues, as reported, decreased 1% and increased 9% for the three and nine months ended March 31, 2011, respectively, versus the year ago comparable periods.
	•		Backlog of $38,919 at March 31, 2011, increased 15% compared to June 30, 2010.
	•		For the three and nine month periods ended March 31, 2011, order intake was up 19% and 22%, respectively, versus the comparable year ago periods.
	•		On June 30, 2010 the Company successfully completed the acquisition of Nordson UV, (“UV”), a manufacturer of ultraviolet curing systems, lamps and parts. Operating results of the acquired entities are included in the results of operations from the date of acquisition.
	•		In September 2010, the Company concluded an amendment to its Credit Agreement with its lenders covering the period through November 21, 2011, the end of the term of the Agreement.
	•		On May 16, 2011, the Company entered into Waiver and Amendment No. 10 to its Credit Agreement with its lenders, covering the period through November 21, 2011, the end of the term of the Agreement.

See discussion below related to the Company’s consolidated results of operations, liquidity and capital resources from continuing operation.

Three Months Ended March 31, 2011 vs. Three Months Ended March 31, 2010

Consolidated Results

Net Sales

     Net sales for the three months ended March 31, 2011, decreased by $534, or 1%, to $36,443 from $36,977 for the three months ended March 31, 2010. Currency rate changes attributable to the Company’s

overseas operations increased recorded net sales by $1,142 in the current period. The UV business acquisition contributed net sales of approximately $3,585 during the quarter ended March 31, 2011.

     Net sales reflects decreased sales in Europe of $833, including $289 of favorable effects from exchange rate fluctuations. The decrease was attributable to the continued weakening of global demand for the Company’s equipment reflecting reduced order and sales activity for new printing equipment partially offset by the additional revenue from the UV business.

     In Asia, net sales decreased $2,622, including $854 of favorable effects from exchange rate fluctuations. The decrease reflects lower shipments of cleaning and spray dampening equipment to the newspaper markets, particularly in Japan.

     Net Sales in the Americas increased $2,921 primarily reflecting additional sales of products acquired in the UV business acquisition coupled with improved equipment sales.

Gross Profit

     Gross profit for the three months ended March 31, 2011 was $10,471 (28.7% of net sales) compared to $11,255 (30.4% of net sales) for the three months ended March 31, 2010, a decrease of $784.

     The decrease reflects continued pricing pressure from OEM and end users and unfavorable overhead absorption related to reduced equipment volumes. Partially offsetting these decreases were the additional sales volume and higher gross margin associated with the UV business. Currency rate fluctuations favorably increased gross profit $455 in the current period.

Selling, General, and Administrative Expenses

     Selling, general and administrative expenses (SG&A) was $8,296 (23% of net sales) for the three months ended March 31, 2011, compared to $7,340 (20% of net sales) for the same period in the prior fiscal year, an increase of $956 or 13%. Currency rate fluctuations increased these expenses by $144 in the current period. The increase primarily reflects additional G&A expenses associated with the UV business of $332. Selling expenses increased $234. Currency rate fluctuations increased these expenses by $151 in the current period. The increase primarily reflects additional selling expenses associated with the UV business of $346.

Engineering and Development Expenses

     Engineering and development expenses were $3,624 (10% of net sales) for the three months ended March 31, 2011, compared to $3,401 (9.0% of net sales) for the same period of the prior fiscal year, an increase of $223. Currency rate fluctuations of $121 increased engineering and development expenses. The increase primarily reflects additional expenses associated with the UV business of $167.

Restructuring

     The Company recorded $2,114 of restructuring costs during the three months ended March 31, 2011 versus $0 in the comparable prior year period. The restructuring plan is designed to achieve operational efficiencies in Germany, Japan and Sweden and consists of employee terminations, consolidation of facilities and fixed asset write downs.

Interest and Other

     Interest expense, net, for the three months ended March 31, 2011 was $656 compared to $426 for the three months ended March 31, 2010. The increase reflects higher debt levels and interest rates.

     Other income (expense), net, amounted to expense of $50 for the three months ended March 31, 2011 compared to expense of $66 for the three months ended March 31, 2010. Other income (expense), net, for the three months ended March 31, 2011 and 2010, respectively, primarily reflects net foreign currency transaction losses.

Income Taxes

     The Company recorded an income tax benefit of $1,392 on a loss before tax of $4,269 (effective rate of 32.6%) for the three months ended March 31, 2011, compared to a tax benefit of $4 for the three months ended March 31, 2010 on income before tax of $21. The effective tax rate for the three months ended March 31, 2011 and March 31, 2010 differs from the statutory rate and reflects a) foreign income taxed at rates different than the U.S. statutory rate, (b) no benefits being recognized for losses incurred in certain countries, as the realization of such benefits is not more likely than not, (c) the impact of foreign and domestic permanent items.

Income (loss) from continuing operations

     The Company’s loss from continuing operations amounted to $2,877 for the three months ended March 31, 2011, compared to a net income of $25 for the three months ended March 31, 2010. Loss per share from continuing operations amounted to $0.18 basic and diluted for the three months ended March 31, 2011, compared to loss per share of $0.00 basic and diluted for the three months ended March 31, 2010.

Nine Months Ended March 31, 2011 vs. Nine Months Ended March 31, 2010

Consolidated Results

Net Sales

     Net sales for the nine months ended March 31, 2011 increased $10,510, or 10%, to $117,705 from $107,195 for the nine months ended March 31, 2010. Currency rate fluctuations attributable to the Company’s overseas operations increased net sales by $989 for the current period. The UV business acquisition contributed net sales of approximately $13,242 during the nine months ended March 31, 2011.

     The net sales increase reflects higher sales in Europe of $327, including $1,786 of unfavorable effects from exchange rate fluctuations. The increase in net sales primarily reflects the additional revenue associated with the UV business acquisition partially offset by lower sales activity by OEM press manufacturers, primarily in Germany and Sweden, for new printing equipment and lower level demand from end user customers.

     In Asia, net sales increased approximately $3,760, including $2,775 of favorable effects from exchange rate fluctuations. The increase in net sales reflects the impact of UV shipments and other increases of products sold in China and India, and delivery of several large newspaper equipment projects in Japan.

     Net sales in the Americas increased $6,423, primarily reflecting additional sales from the UV business acquisition.

Gross Profit

     Gross profit for the nine months ended March 31, 2011 was $35,454 (30.1% of net sales) compared to $32,285 (30.1% of net sales) for the nine months ended March 31, 2010, an increase of $3,169

     Currency rate fluctuations had virtually no impact on gross profit in the current period. The increase in gross profit primarily relates to the additional sales volume and higher gross margins associated with the UV business. Partially offsetting these increases were continued pricing pressure from OEM and end users and unfavorable overhead absorption related to reduced volumes.

Selling, General and Administrative Expenses

     Selling, general and administrative expenses (SG&A) amounted to $26,338 (22.4% of net sales) for the nine months ended March 31, 2011 compared to $23,730 (22.1% of net sales) for the same period in the prior fiscal year, an increase of $2,608 or 11%. Currency rate fluctuations increased SG&A $353 during the nine month period. G&A expenses increased $1,393. The increase primarily reflects additional G&A expenses associated with the UV business of $1,076 and costs associated with the termination agreement with the Company’s former CEO and CFO and other professional fees. Partially offsetting these increases were lower professional fees of $900 incurred in fiscal year 2010 related to an investigation into internal control matters. Selling expenses increased $862. The increase primarily reflects additional selling expenses associated with the UV business of $1,072.

Engineering and Development Expenses

     Engineering and development expenses amounted to $10,722 (9% of net sales) for the nine months ended March 31, 2011, compared to $9,976 (9.3% of net sales) for the same period in the prior fiscal year, an increase of $746 or 7%. Currency rate fluctuations had virtually no impact on expenses in the current period. The increase primarily reflects additional expenses associated with the UV business of $498.

Restructuring

     The Company recorded $2,722 of restructuring costs during the nine months ended March 31, 2011 versus $0 in the comparable prior year period. The restructuring plan is designed to achieve operational efficiencies in Germany, Japan and Sweden and consists of employee terminations, consolidation of facilities and fixed asset write downs.

Legal Settlement

     During the nine months ended March 31, 2010, the Company recorded a net gain on the settlement of a patent infringement lawsuit of $9,266.

Interest and Other

     Interest expense, net, for the nine months ended March 31, 2011 was $1,691 compared to $2,626 for the nine months ended March 31, 2010. During the quarter ended September 30, 2010, the Company concluded an amendment to its credit agreement with its Lenders. Legacy deferred financing costs totaling approximately $118 were charged to interest expense during the quarter ended September 30, 2010. During the quarter ended September 30, 2009, the Company concluded an amendment to its credit agreement with its Lenders. Certain costs associated with the amendment, together with legacy deferred financing costs totaling approximately $1,183, were charged to expense during the quarter ended September 30, 2009. After giving effect to these expenses and the decrease from currency of $50, interest expense increased $130.

     Other (income) expense, net was an expense of $197 for the nine months ended March 31, 2011 compared to expense of $267 for the nine months ended March 31, 2010 and is primarily comprised of net foreign currency transaction losses.

Income Taxes

     The Company recorded an income tax benefit of $2,740, for the nine months ended March 31, 2011, compared to a provision of $1,745, for the nine months ended March 31, 2010. The effective tax rate for fiscal 2011 of 44.1% differs from the U.S. statutory rate and reflects a) foreign income taxed at rates different than the U.S. statutory rate, (b) no benefits being recognized for losses incurred in certain countries, as the realization of such benefits is not more likely than not, (c) the impact of foreign and domestic permanent items, and (d) reversal of previously recorded reserves associated with unrecognized tax benefits (FIN 48 “Liabilities”) upon finalization of a German tax audit for years 2000-2004, of $777 and a reversal of a valuation allowance in the U.K.

     The effective tax rate for fiscal 2010, differs from the statutory rate and reflect (a) foreign income taxed at rates different than the U.S. statutory rate, (b) no benefits recognized for losses incurred in certain countries, as the realization of such benefits is not more likely than not, and (c) the impact of foreign and domestic permanent items.

     The Company continues to assess the need for its deferred tax asset valuation allowance in the jurisdictions in which it operates. Any adjustments to the deferred tax asset valuation allowance, either positive or negative, would be recorded in the statement of operations for the period that the adjustment was determined to be required.

Net Income (Loss) from continuing operations

     The Company’s net loss was $3,476 for the nine months ended March 31, 2011, compared to income of $3,207 for the nine months ended March 31, 2010. Net loss per share amounted to $0.22 basic and diluted for the nine months ended March 31, 2011, compared to net income per share of $0.21 basic and diluted for the nine months ended March 31, 2010.

Discontinued Operations three and nine months ended March 31, 2011 and 2010:

     During the quarter ended March 31, 2011 the Company announced its decision to discontinue its non-core food blending and packaging business. As a result of this decision and having met the criteria to be reported as a discontinued operation, the assets, liabilities, results of operation and cash flows of the food blending and packaging business are classified as discontinued operations for all periods presented.

     Additionally, as a result of its decision to discontinue the food blending and packaging business, the Company performed an assessment as to the recoverability of goodwill, intangibles and fixed assets associated with the discontinued operation. Based on these assessments, the Company recorded a pre-tax impairment charge of $2,449 related to goodwill, intangibles and fixed assets associated with the discontinued operation.

     Revenues net income (loss) of the food blending and packaging business included in discontinued operations are as follows:

		Three Months Ended								Nine Months Ended
		March 31, 2010				March 31, 2011				March 31, 2011				March 31, 2010
		(in thousands)								(in thousands)
Revenues		$	1,571			$	2,521			$	5,000			$	7,228
Pre-tax income (loss) from operations of blending and packaging business			(217	)			184				(569	)			614
Pre-tax loss for impairment of blending and packaging assets:
Goodwill			(1,349	)			—				(1,349	)			—
Intangibles, net			(356	)			—				(356	)			—
Fixed assets			(668	)			—				(668	)			—
Other write offs/accruals			(76	)			—				(76	)			—
			(2,449	)			—				(2,449	)			—
Pre-tax income (loss) from discontinued operations			(2,666	)			184				(3,018	)			614
Tax (benefit) provision			(978	)			76				(1,096	)			206
Income (loss) from discontinued operations		$	(1,688	)		$	108			$	(1,922	)		$	408