10-K
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
Form 10-K
Annual Report Pursuant to
Section 13 or 15(d) of
The Securities Exchange Act of
1934
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For the
fiscal year ended June 30, 2006 |
Commission file number 1-9334 |
Baldwin
Technology Company, Inc.
(Exact name of registrant as
specified in its charter)
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Delaware
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13-3258160
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(State
or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification
No.)
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2 Trap Falls Road,
Suite 402
Shelton, Connecticut
(Address
of principal executive offices)
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06484
(Zip
Code)
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Registrants
telephone number, including area code: 203-402-1000
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class
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Name of Each Exchange
on Which Registered
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Class A
Common Stock
Par Value $.01
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American Stock
Exchange
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Securities registered pursuant to Section 12(g) of the
Act: None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
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 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 registrants 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. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and
large accelerated filer in
Rule 12b-2
of the Exchange Act
Large accelerated
filer o Accelerated
filer o Non-accelerated
filer þ
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
Aggregate market value of the registrants common stock
held by non-affiliates of the registrant, based upon the closing
price of a share of the registrants common stock on
December 31, 2005, as reported by the American Stock
Exchange on that date was $55,076,922.
Number of shares of Common Stock outstanding at June 30,
2006:
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Class A Common Stock
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13,746,013
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Class B Common Stock
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1,243,411
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Total
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14,989,424
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Documents
Incorporated by Reference
Items 10, 11, 12, 13 and 14 are incorporated by
reference into Part III of this
Form 10-K
from the Baldwin Technology Company, Inc. Proxy Statement for
the 2006 Annual Meeting of Stockholders. (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.)
TABLE OF
CONTENTS
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Page
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Item 1.
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Business
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1
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Item 1A.
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Risk Factors
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5
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Item 1B.
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Unresolved Staff Comments
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9
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Item 2.
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Properties
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9
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Item 3.
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Legal Proceedings
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9
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Item 4.
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Submission of Matters to a Vote of
Security Holders
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10
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Item 5.
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Market for the Registrants
Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
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10
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Item 6.
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Selected Financial Data
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11
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Item 7.
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Managements Discussion and
Analysis of Financial Condition and Results of Operation
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13
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Item 7A.
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Quantitative and Qualitative
Disclosures About Market Risk
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22
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Item 8.
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Financial Statements and
Supplementary Data
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24
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Item 9.
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Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure
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54
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Item 9A.
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Controls and Procedures
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54
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Item 9B.
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Other Information
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54
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Item 10.
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Directors and Executive Officers
of the Registrant
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54
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Item 11.
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Executive Compensation
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54
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Item 12.
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Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters
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54
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Item 13.
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Certain Relationships and Related
Transactions
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54
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Item 14.
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Principal Accountant Fees and
Services
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55
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Item 15.
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Exhibits, Financial Statement
Schedules
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55
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CAUTIONARY STATEMENT This Annual Report on
Form 10-K
may contain forward-looking statements 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 Companys forward-looking statements are set forth in
Item 1A Risk Factors and Exhibit 99 to
this Annual Report on
Form 10-K
for the year ended June 30, 2006.
PART I
Baldwin Technology Company, Inc. (Baldwin or the
Company) is a leading global manufacturer of
accessories and controls for the printing and publishing
industry. The Company offers its customers a broad range of
products designed to enhance the quality, productivity and
cost-efficiency of the print manufacturing process while
addressing environmental concerns and safety issues.
Baldwins products include cleaning systems, fluid
management and ink control systems, web press protection systems
and drying systems.
The Company sells its products both to printing press
manufacturers who incorporate the Companys products into
their own printing press systems for sale to printers and
publishers, as well as directly to printers and publishers to
upgrade the quality and capability of their existing and new
printing presses. The Company does not consider its business to
be seasonal, however, customer order patterns and delivery
schedules could cause revenue in select periods to fluctuate.
The Company has product development and manufacturing
facilities, and sales and service operations, in strategic
markets worldwide.
Industry
Overview
The Company defines its business as that of providing
accessories and controls for the printing and publishing
industry. The Company believes that as an independent company,
it produces one of the most complete lines of accessories and
controls products for this diverse industry.
The Companys products are used by printers engaged in all
commercial and newspaper printing processes including
lithography, flexography and digital printing. The largest share
of its business is in offset (lithographic) printing. Offset
printing is the largest segment of the domestic and
international printing market and is used primarily for general
commercial printing as well as printing books, magazines,
business forms, catalogs, greeting cards, packaging and
newspapers. The Companys products are designed to improve
the printing process in terms of quality, the environment,
safety, productivity and reduction of waste.
While offset printing represents a significant segment of the
U.S. printing industry, it is also the dominant technology
in the international printing market. The Company believes that
the future growth of its international markets will be
attributable in 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. Baldwins worldwide operations enable it to
closely monitor market and new product developments in different
printing markets and to introduce new products, or adapt
existing ones, to meet the printing equipment requirements of
specific local markets throughout the world.
Principal
Products
The Company manufactures and sells many different products to
printers and printing press manufacturers. Thus its product
development efforts are focused on the needs of printers and the
printing press manufacturers. Typically, it takes a new product
several years after its introduction to make a significant
contribution to the Companys net sales. As a product
progresses through its life cycle, the percentage of sales to
printing press manufacturers generally increases as the
products acceptance by the printing industry increases and
printers begin to specify certain of the Companys products
as part of their accessory and controls equipment package
selected when ordering new printing presses. Historically, the
Companys products have had a long life cycle as the
Company continually upgrades and refines its product lines to
meet customer needs and changes in printing press technology.
The Companys principal
1
products generally range in unit price from under $100 to
approximately $50,000. Baldwins principal products are
described below:
Cleaning Systems. The Companys Cleaning
Systems and related consumables products clean the cylinders of
an offset press and include the Press Washer, Automatic Blanket
Cleaner, Newspaper Blanket Cleaner, Chill Roll Cleaner, Digital
Plate Cleaner and Guide Roll Cleaner, all of which 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, 2006, 2005 and 2004, net sales of
Cleaning Systems represented approximately 54.2%, 55.0% and
52.6% of the Companys net sales, respectively.
Fluid Management Systems. The Companys
Fluid Management Systems control the supply, temperature,
cleanliness, chemical composition and certain other
characteristics of the fluids used in the lithographic printing
process. Among the most important of these products are the
Companys Refrigerated Circulators and Spray Dampening
Systems. In the fiscal years ended June 30, 2006, 2005 and
2004, net sales of Fluid Management Systems represented
approximately 23.4%, 23.2% and 23.2% of the Companys net
sales, respectively.
Other Accessory and Control Products. The
Companys Web Press Protection Systems (web severers and
web catchers), designed in response to the increasing number of
web leads used in printing todays colorful newspapers as
well as to the growing demand for high speed commercial web
presses, provide an auto-arming electronic package offering high
quality press protection in the event of a web break. The
Companys Ink Control Systems 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
ink and paper waste. Other products include Ultraviolet and
Infrared Dryers and Gluing Systems. In the fiscal years ended
June 30, 2006, 2005 and 2004, net sales of Other Accessory
and Control Products represented approximately 22.4%, 21.8% and
24.2% of the Companys net sales, respectively.
Worldwide
Operations
The Company believes that it is one of the few manufacturers of
accessories and controls for the printing and publishing
industry, which has complete product development, manufacturing
and marketing capabilities in the Americas, Europe and Asia. The
Company, as an international business, is subject to various
changing competitive, economic, political, legal and social
conditions. The Company currently has subsidiaries in 12
countries, and its results of operations may be adversely or
positively affected by currency fluctuations. The results of the
operations and financial positions of the Companys
subsidiaries outside of the United States are reported in the
relevant foreign currencies and then translated into
U.S. dollars at the applicable exchange rates for inclusion
in the Companys consolidated financial statements. The
exchange rates between the currencies and the U.S. dollar
may fluctuate substantially. Because the Company generates a
significant percentage of its revenues and operating expenses in
currencies other than the U.S. dollar, fluctuations in the
value of the U.S. dollar against other currencies may have
a material effect on the Companys operating income. The
Companys results and financial condition are particularly
affected by changes in the value of the U.S. dollar in
relation to the euro, Japanese yen and Swedish krona. Since the
Companys foreign subsidiaries primarily manufacture, incur
expenses and earn revenue in the local countries in which they
reside, the impact from cross currency fluctuations is somewhat
mitigated.
2
The following table sets forth the percentages of the
Companys net sales attributable to its geographic regions
for the fiscal years ended June 30, 2006, 2005 and 2004:
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Years Ended June 30,
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2006
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2005
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2004
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Americas
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17.0
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14.0
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16.0
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Europe
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51.0
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%
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47.0
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%
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45.5
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Asia
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32.0
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%
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39.0
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%
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38.5
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%
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Total
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100.0
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%
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100.0
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100.0
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In the Americas, the Company operates in North, Central and
South America through its U.S. subsidiaries and a sales
office in Brazil. In Europe, the Company operates through its
subsidiaries in Germany, Sweden, France, England, Italy and the
Netherlands. In Asia, the Company operates through its
subsidiaries in India, Japan, China and Australia. All of the
Companys subsidiaries are wholly owned except for two
subsidiaries, one in which the Company holds a 90% interest, and
another in which the Company holds an 80% interest.
Acquisition
Strategy
As part of its growth strategy, the Company intends to
investigate potential strategic acquisitions of companies and
product lines in related business areas. This strategy would
involve: (i) acquiring entities that will strengthen the
Companys position in the field of accessories and controls
and related consumables for the printing and publishing industry
and whose products can be sold through the Companys
existing distribution network; (ii) entering new end-user
market segments and extending existing markets; and
(iii) acquiring companies which contribute new products to
the Company and which can benefit from the Companys
manufacturing and marketing expertise and financial support.
Subsequent to an acquisition, the Companys intention would
be to integrate the processes and controls of the acquired
company with those of the Company with a view towards enhancing
sales, productivity and operating results.
Marketing, Sales
and Support
Marketing and Sales. While the Company markets
its products in most countries throughout the world, the product
mix and distribution channels vary from country to country. The
Company has approximately 79 employees devoted to marketing and
sales activities in its three principal worldwide markets and
more than 150 dealers, distributors and representatives
worldwide. The Company markets its products throughout the world
through these direct sales representatives, distributors and
dealer networks to printing press manufacturers
(OEMs), newspaper publishers, and commercial
printers. For the fiscal year ended June 30, 2006,
approximately 52% of the Companys net sales were to OEMs
and approximately 48% were directly to printers.
Support. The Company is committed to
after-sales service and support of its products throughout the
world. Baldwin employs approximately 79 service technicians, who
are complemented by product engineers, to provide field service
for the Companys products on a global basis.
Backlog. Backlog represents unfilled product
orders which Baldwin has received from its customers under valid
contracts or purchase orders. The Companys backlog was
$49,200,000 as of June 30, 2006, $48,114,000 as of
June 30, 2005 and $44,923,000 as of June 30, 2004.
Customers. For the fiscal year ended
June 30, 2006, one customer accounted for more than 10% of
the Companys net sales. Koenig and Bauer
Aktiengesellschaft (KBA) accounted for approximately
18% of the Companys net sales. The ten largest customers
of Baldwin (including KBA) accounted for
3
approximately 50%, 53% and 52%, respectively, of the
Companys net sales for the fiscal years ended
June 30, 2006, 2005 and 2004. Sales of Baldwins
products are not considered seasonal.
Engineering and
Development
The Company believes its engineering and development, including
research, efforts have been an important factor in establishing
and maintaining its leadership position in the field of
accessories and controls for the printing and publishing
industry. The Company has won six Intertech Awards from the
Graphic Arts Technical Foundation. The Intertech Award was
established to recognize technologies that are predicted to have
a major impact on the graphic communications industry, but is
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 functions at several of its
locations in addition to centers of competency for commercial
printing located in Germany and for newspaper printing located
in Sweden. The Company believes that this approach to
engineering and development has helped the Company to react
quickly to meet the needs of its customers and coordinate the
Companys product development activities. The engineering
and development organization focuses attention on opportunities
within the respective markets, while avoiding duplicative
efforts within the Company.
Baldwin employs approximately 109 persons whose primary function
is new product development, application engineering or
modification of existing products. The Companys total
expenditures for engineering research and development for the
fiscal years ended June 30, 2006, 2005 and 2004 were
approximately 8.5%, 9.2% and 8.6% of the Companys net
sales in each fiscal year, respectively.
Patents
The Company owns a number of patents and patent applications
relating to a substantial number of Baldwins products, and
patented products represent a significant portion of the
Companys net sales for all periods presented. The
Companys patents expire at different times during the next
twenty years; however, one group of patents, which provided the
Companys royalty income, expired in February 2005. The
expiration of patents in the near future is not expected to have
a material adverse effect on the Companys net sales;
however, royalty income and cash flows were negatively impacted
by the expiration of the afore-mentioned group of patents. 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 a manufacturing facility in Kansas. In Europe, the Company
has subsidiaries with manufacturing and assembly facilities in
Germany and Sweden. In Asia, Baldwin has manufacturing and
assembly facilities in India and Japan.
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. In addition, the
Company uses various subcontractors to provide required
services, but is not dependent on any individual subcontractor.
4
The nature of the Companys operations is such that there
is little, if any, negative effect upon the environment, and the
Company has not experienced any substantive problems in
complying with environmental protection laws and regulations.
Competition
Within the diverse market for accessories and controls for the
printing and publishing industry, the Company produces and
markets what it believes to be the most complete line of
accessories and controls. Numerous companies, including
vertically integrated printing press manufacturers, manufacture
and sell products which compete with one or more of the
Companys products. The printing press manufacturers
generally have larger staffs and greater financial resources
than the Company.
The Company competes by offering customers a broad
technologically advanced product line, coupled with a well-known
reputation for the reliability of its products and its
commitment to service and after-sale support. The Companys
ability to compete effectively in the future will depend upon
the continued reliability of its products, after-sale support,
its ability to keep its market position with new proprietary
technology and its ability to develop new products which meet
the demands of the printing and publishing industry.
Employees
At June 30, 2006, the Company employed 513 persons (plus 38
temporary and part-time employees); of which 182 are production
employees, 79 are marketing, sales and customer service
employees, 188 are research, development, engineering and
technical service employees and 64 are management and
administrative employees. In Europe, some employees are
represented by various unions under contracts with indefinite
terms: in Sweden, approximately 20 of the Companys 80
employees are represented by either Ledarna (SALF), Metall, or
Svenska Industritjanstemanna Forbundet unions; in Germany,
approximately 40 of the Companys 192 employees are
represented by the IG Metall (Metalworkers Union). The
Company considers relations with its employees and with its
unions to be good.
Set forth below and elsewhere in this Annual Report on
Form 10-K
and in other documents that the Company files with the SEC are
risks that should be considered in evaluating the Companys
Common Stock, as well as risks and uncertainties that could
cause the actual future results of the Company to differ from
those expressed or implied in the forward-looking statements
contained in this Report and in other public statements the
Company makes. Additionally, because of the following risks and
uncertainties, as well as other variables affecting the
Companys operating results, the Companys past
financial performance should not be considered an indicator of
future performance.
Company
Risk
Intellectual property and proprietary technology is important
to the continued success of the Companys
business. Failure to protect or defend this
proprietary technology may impair the Companys competitive
position. The Companys success and ability to compete
depend to a certain extent on the Companys proprietary
technology since that is one of the methods by which the Company
persuades customers to buy its products, both present and
future. The Company currently relies on copyright and trademark
laws, trade secrets, confidentiality procedures, contractual
provisions and patents to protect proprietary technology. The
Company may have to engage in litigation to protect patents and
other intellectual property rights, or to determine the validity
or scope of the proprietary rights claimed by others. This kind
of litigation can be time-consuming and expensive, regardless of
5
whether the Company wins or loses. Because it is important to
the Companys success that the Company is able to prevent
competitors from copying the Companys innovations, the
Company will usually continue to seek patent and trade secret
protection for the Companys technologies. The process of
seeking patent protection can be long and expensive and the
Company cannot be certain that any currently pending or future
applications will actually result in issued patents, or that,
even if patents are issued, they will be of sufficient strength
and scope to provide it with meaningful protection or commercial
advantage. Further, others may develop technologies that are
similar or superior to the Companys technology or design
around the Companys patents. The Company also relies on
trade secret protection for its technology, in part through
confidentiality agreements with the Companys employees,
consultants and third parties. These agreements may be breached,
and if they are, depending upon the circumstance, the Company
may not have adequate remedies. In any case, others may come to
know about the Companys trade secrets in various ways. In
addition, the laws of some countries in which the Company
manufactures or sells products may not protect the
Companys intellectual property rights to the same extent
as the laws of the United States.
Despite the Companys efforts, intellectual property
rights, particularly existing or future patents, may be
invalidated, circumvented, challenged, rendered unenforceable or
infringed or required to be licensed to others. Furthermore,
others may develop technologies that are similar or superior to
the Companys, duplicate or reverse engineer the
Companys technology or design around patents owned or
licensed by the Company. If the Company fails to protect
technology so that others may use or copy it, the Company would
be less able to differentiate its products and revenues could
decline.
The Companys operating results are subject to
fluctuations from
period-to-period,
which could cause it to miss expectations about these results
and, consequently, could adversely affect the trading price of
the Companys stock. The results of the
Companys operations for any quarter are not necessarily
indicative of results to be expected in future periods. The
Companys operating results have in the past been, and will
continue to be, subject to quarterly fluctuations as a result of
factors such as increased competition in the printing equipment
industry, the introduction and market acceptance of new
technologies and standards, changes in general economic
conditions and changes in economic conditions specific to the
Companys industry. Further, the Companys revenues
may vary significantly from quarter to quarter as a result of,
among other factors, the timing of shipments by customers,
changes in demand and mix of the Companys products and
consumables, and the timing of new product announcements and
releases by the Company or its competitors.
The Company relies on subcontractors to help manufacture its
products and if they are unable to adequately supply components
and products, the Company may be unable to deliver products to
customers on time or without defects. The Company
employs a number of unaffiliated subcontractors to manufacture
components for the Companys products. Because the Company
relies on subcontractors, however, the Company cannot be sure
that it will be able to maintain an adequate supply of
components or products. Moreover, the Company cannot be sure
that the components the Company purchases will satisfy the
Companys quality standards and be delivered on time. The
Companys business could suffer if it fails to maintain its
relationships with its subcontractors or fails to develop
sufficient alternative sources for its purchased components.
The Companys business is subject to risks from
international conditions. A significant portion
of the Companys business is conducted internationally.
Accordingly, future results could be materially adversely
affected by a variety of uncontrollable and changing factors
including, among others, regulatory, political or economic
conditions in a specific country or region, trade protection
measures and other regulatory requirements, business and
government spending patterns, and natural disasters. Because the
Company generates revenues and expenses in various currencies,
including the U.S. dollar, Euro, SEK and Yen, the
Companys financial results are subject to the effects of
fluctuations of currency
6
exchange rates. The Company cannot predict, however, when
exchange or price controls or other restrictions on the
conversion of foreign currencies could impact the Companys
business. Any or all of these factors could have an adverse
impact on the Companys business and results of operations.
The Companys growth strategy may include licenses or
acquisitions of technologies or businesses, which entail a
number of risks. As part of the Companys
strategy to grow the business, the Company may pursue licenses
of technologies from third parties or acquisitions of
complementary product lines or companies, and such transactions
entail a number of risks. The Company may expend significant
costs in investigating and pursuing such transactions, and such
transactions may not be consummated. If such transactions are
consummated, the Company may not be successful in integrating
the acquired technology or business into the existing business
to achieve the desired synergies. Integrating acquired
technologies or businesses may also require a substantial
commitment of the Companys managements time and
attention. The Company may expend significant funds to acquire
such technologies or businesses, and may incur unforeseen
liabilities in connection with any acquisition of a technology
or business. Any of the foregoing risks could result in an
adverse effect on the Companys business, results of
operations and financial conditions.
The Companys ability to maintain its competitive
position depends to a certain extent on the efforts and
abilities of its senior management and the ability to attract
highly skilled employees. The Companys
senior management possesses significant managerial, technical
and other expertise in the printing industry. Their expertise
would be difficult to quickly replace, and if the Company loses
the services of one or more of its executive officers, or if one
or more of them decided to join a competitor or otherwise
compete directly or indirectly with the Company, the
Companys business could be seriously harmed. In addition,
the Companys ability to develop, market and sell its
products and services and to maintain its competitive position
depends on its ability to attract, retain and motivate highly
skilled technical, sales and marketing and other personnel. If
the Company fails to recruit these personnel, its ability to
develop new products and provide service could suffer.
Reliance on one significant customer. In
fiscal 2006, the Company had one significant customer that
individually accounted for 18% of net sales. The Company
anticipates, but cannot assure, that this customer will continue
to be significant in fiscal 2007. The loss of, or a significant
decrease in sales to, this customer could have a material
adverse effect on the Companys financial condition and
results of operation.
Industry
Risk
If the United States and global economies slow down, the
demand for the Companys products could decrease and the
Companys revenue may be materially adversely
affected. The demand for the Companys
products is dependent upon various factors, many of which are
beyond the Companys control. For example, general economic
conditions may affect or delay expenditures for advertising and
printing, which may in turn affect the overall capital spending
by publishers and printers, particularly for capital equipment
such as printing presses. If, as a result of general economic
uncertainty or otherwise, companies reduce their capital
spending levels, such a decrease in spending could reduce demand
for the Companys products and have a material adverse
effect on the Companys business.
The Company may not be able to adequately respond to changes
in technology affecting the printing
industry. The Companys continuing product
development efforts have focused on refining and improving the
performance of the Companys products as they related to
printing and the Company anticipates that it will continue to
focus its efforts in this area. The printing and publishing
industry has been characterized in recent years by rapid and
significant technological changes and frequent new product
introductions. Current competitors or new market entrants could
introduce new or enhanced products with features, which render
the Companys technologies, or products incorporating the
7
Companys technologies, obsolete or less marketable. The
Companys future success will depend, in part, on the
Companys ability to:
|
|
|
|
|
use leading technologies effectively;
|
|
|
|
continue to develop the Companys technical expertise and
patented position;
|
|
|
|
enhance the Companys current products and develop new
products that meet changing customer needs;
|
|
|
|
time new product introductions in a way that minimizes the
impact of customers delaying purchases of existing products in
anticipation of new product releases;
|
|
|
|
adjust the prices of the Companys existing products to
increase customer demand;
|
|
|
|
successfully advertise and market the Companys
products; and
|
|
|
|
influence and respond to emerging industry standards and other
technological changes.
|
The Company may not be successful in effectively using new
technologies, developing new products or enhancing its existing
products and technology on a timely basis. The Companys
new technologies or enhancements may not achieve market
acceptance. The Companys pursuit of new technologies may
require substantial time and expense. The Company may need to
license new technologies to respond to technological change.
These licenses may not be available to the Company on terms that
the Company can accept. Finally, the Company may not succeed in
adapting the Companys products to new technologies as they
emerge. Any of these factors, either individually or
collectively could have an adverse impact on the Companys
business and results of operation.
Investment
Risk
If the Company fails to implement and maintain or improve
effective internal controls over financial reporting, the
Companys business, operating results and share price could
be materially adversely affected. Beginning with
the Companys annual report for the fiscal year ending
June 30, 2007 (2008 if the Company continues as a
non-accelerated filer at December 31, 2006),
Section 404 of the Sarbanes-Oxley Act of 2002 will require
a report by the Companys management of its internal
controls over financial reporting. This report must contain an
assessment by management of the effectiveness of the
Companys internal controls over financial reporting as of
the end of the Companys fiscal year and a statement as to
whether or not the Companys internal controls are
effective. The report must also contain a statement that the
Companys independent auditors have issued an attestation
report of managements assessment of such internal
controls. Compliance by the Company with Section 404 is
likely to result in significant costs, the commitment of time
and operational resources and the diversion of managements
attention. If by the time the Company is required to comply with
Section 404, the Companys annual report includes a
report that identifies one or more material weaknesses in the
Companys internal controls over financial reporting, the
Company will be unable to assert that the Companys
internal controls are effective. If the Company is unable to
assert that the Companys internal controls over financial
reporting are effective, or if the Companys independent
auditors are unable to attest that the Companys
managements report is fairly stated or they are unable to
express an opinion on the Companys managements
evaluation or on the effectiveness of the Companys
internal controls, the Companys stock price may fall.
Market perception of the Companys financial condition and
the trading price of the Companys stock may be adversely
affected and customer perception of the Companys business
may suffer.
The Companys stock price has been and could continue to
be volatile. The market price of the
Companys common stock has been subject to significant
fluctuations. The securities markets have experienced, and are
likely to experience in the future, significant price and volume
fluctuations that
8
could adversely affect the market price of the Companys
common stock without regard to the Companys operating
performance. In addition, the trading price of the
Companys common stock could be subject to significant
fluctuations in response to:
|
|
|
|
|
actual or anticipated variations in the Companys quarterly
operating results;
|
|
|
|
significant announcements by industry participants;
|
|
|
|
changes in national or regional economic conditions;
|
|
|
|
changes in securities analysts estimates for the Company,
the Companys competitors or the Companys industry,
or the Companys failure to meet analysts
expectations; and
|
|
|
|
general market conditions.
|
These factors may materially and adversely affect the
Companys stock price, regardless of the Companys
operating performance.
|
|
Item 1B.
|
Unresolved Staff
Comments
|
None
The Company owns and leases various manufacturing and office
facilities aggregating approximately 319,000 square feet at
June 30, 2006. The table below presents the locations and
ownership of these facilities: (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Square
|
|
|
Square
|
|
|
Total
|
|
|
|
Feet
|
|
|
Feet
|
|
|
Square
|
|
|
|
Owned
|
|
|
Leased
|
|
|
Feet
|
|
|
North America
|
|
|
0
|
|
|
|
84
|
|
|
|
84
|
|
Germany
|
|
|
0
|
|
|
|
102
|
|
|
|
102
|
|
Sweden
|
|
|
13
|
|
|
|
53
|
|
|
|
66
|
|
Japan
|
|
|
0
|
|
|
|
42
|
|
|
|
42
|
|
All other, foreign
|
|
|
0
|
|
|
|
25
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total square feet owned and leased
|
|
|
13
|
|
|
|
306
|
|
|
|
319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company believes that its facilities are adequate to carry
on its business as currently conducted.
|
|
Item 3.
|
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.
In addition to the aforementioned matters, the Company filed
suit in the Regional Court in Dusseldorf, Germany claiming
damages of approximately $41 million as a result of a
patent infringement. A successful outcome in this case would
have a materially favorable effect on results of operations,
financial position and cash flow.
9
Information regarding legal proceedings is included in the Notes
to Consolidated Financial Statements (see Note 16) and
is incorporated herein by reference.
|
|
Item 4.
|
Submission of
Matters to a Vote of Security Holders
|
No matters were submitted to a vote of security holders since
November 8, 2005.
PART II
|
|
Item 5.
|
Market for the
Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
|
Price Range of Class A Common Stock
The Companys Class A Common Stock is traded on the
American Stock Exchange (AMEX) under the symbol
BLD. The following chart sets forth, for the
calendar year periods indicated, the range of closing prices for
the Companys Class A Common Stock on the consolidated
market, as reported by the AMEX.
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
Low
|
|
|
2004 (calendar year)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
3.18
|
|
|
$
|
2.30
|
|
Second Quarter
|
|
$
|
4.00
|
|
|
$
|
2.88
|
|
Third Quarter
|
|
$
|
3.80
|
|
|
$
|
2.75
|
|
Fourth Quarter
|
|
$
|
3.50
|
|
|
$
|
2.88
|
|
2005 (calendar year)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
3.15
|
|
|
$
|
2.40
|
|
Second Quarter
|
|
$
|
3.19
|
|
|
$
|
2.22
|
|
Third Quarter
|
|
$
|
4.75
|
|
|
$
|
3.07
|
|
Fourth Quarter
|
|
$
|
4.41
|
|
|
$
|
3.72
|
|
2006 (calendar year)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
6.23
|
|
|
$
|
3.95
|
|
Second Quarter
|
|
$
|
6.60
|
|
|
$
|
5.20
|
|
Third Quarter (through
September 20, 2006)
|
|
$
|
5.69
|
|
|
$
|
4.70
|
|
Class B Common Stock
The Companys Class B Common Stock has no established
public trading market. However, Class B shares are
convertible,
one-for-one,
into Class A shares, upon demand.
Conversion of Class B Common Stock
During the fiscal year ended June 30, 2006, several holders
of the Companys Class B Common Stock converted a
total of 600,308 of such Class B shares into an aggregate
of 600,308 shares of the Companys Class A Common
Stock. Under the Companys restated certificate of
incorporation, each share of Class B Common Stock is
convertible at any time, at the option of the holder thereof,
into one share of Class A Common Stock. The Company
received no cash consideration for the issued Class A
Shares which
10
were issued pursuant to an exemption from registration under the
Securities Act of 1933, as amended, contained in
Section 3(a)(9) of such Act.
Approximate Number of Equity Security Holders
As of August 31, 2006, the number of record holders
(excluding those listed under a nominee name) of the
Companys Class A and Class B Common Stock
totaled 251 and 21, respectively. The Company believes,
however, that there are approximately 1,500 beneficial owners of
its Class A Common Stock.
Dividends
Declarations of dividends depend upon the earnings and financial
position of the Company and are within the discretion of the
Companys Board of Directors. However, the Companys
debt agreement prohibits the payment of dividends. No dividend
in cash or property shall be declared or paid on shares of the
Companys 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 to the Consolidated Financial
Statements).
Purchases of
Equity Securities by Issuer and Affiliated Purchasers
There has been no activity under the Companys stock
repurchase program for the fiscal year ended June 30, 2006.
|
|
Item 6.
|
Selected
Financial Data
|
(dollars
in thousands except share and per share data)
The Companys statement of operations and balance sheet
data as it relates to the fiscal years ended June 30, 2006,
2005 and 2004 have been derived from the Companys audited
financial statements (including the Consolidated Balance Sheets
of the Company at June 30, 2006 and 2005 and the related
Consolidated Statements of Operations of the Company for the
fiscal years ended June 30, 2006, 2005 and 2004 appearing
elsewhere herein). Certain transactions have affected
comparability, specifically, the Companys disposal of
assets of certain businesses. During fiscal year ended
June 30, 2004, the Company released valuation allowance for
net deferred tax assets associated with its German subsidiary.
As a result of the release, the Company recorded an income tax
benefit in fiscal year ended June 30, 2004. During fiscal
year ended June 30, 2003, the Company recorded
restructuring charges of $3,605 and other settlement and
impairment charges of $1,250. During the fiscal year ended
June 30, 2002, the goodwill associated with Baldwin Kansa
subsidiary (BKA) exceeded the assessment of its fair
value made by the Company, and the Company recorded a goodwill
impairment charge of $5,434 in the fiscal year ended
June 30, 2002. In September 2001, the Company sold
substantially all of the assets of its Roll Handling Group
(RHG) and its Print On-Demand (POD)
business. The revenues and corresponding expenses attributable
to these divested operations are included in the financial
statements only for the periods that
11
the businesses were owned by the Company. The following
information should be read in conjunction with the
aforementioned financial statements and with
Managements Discussion and Analysis of Financial
Condition and Results of Operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(in thousands, except per share data)
|
|
|
Statement of Operations
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
179,380
|
|
|
$
|
173,185
|
|
|
$
|
158,110
|
|
|
$
|
134,208
|
|
|
$
|
140,091
|
|
Cost of goods sold
|
|
|
119,072
|
|
|
|
115,948
|
|
|
|
108,074
|
|
|
|
93,788
|
|
|
|
98,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
60,308
|
|
|
|
57,237
|
|
|
|
50,036
|
|
|
|
40,420
|
|
|
|
41,277
|
|
Selling, general and
administrative expenses
|
|
|
34,526
|
|
|
|
32,289
|
|
|
|
29,711
|
|
|
|
26,953
|
|
|
|
30,627
|
|
Research, development and
engineering expenses
|
|
|
15,181
|
|
|
|
15,920
|
|
|
|
13,618
|
|
|
|
16,148
|
|
|
|
15,451
|
|
Provision for loss on the
disposition of pre-press operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(45
|
)
|
|
|
(86
|
)
|
Restructuring charges
|
|
|
|
|
|
|
(338
|
)
|
|
|
448
|
|
|
|
3,605
|
|
|
|
621
|
|
Settlement and impairment charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
10,601
|
|
|
|
9,366
|
|
|
|
6,259
|
|
|
|
(7,491
|
)
|
|
|
(5,336
|
)
|
Interest expense
|
|
|
1,074
|
|
|
|
2,412
|
|
|
|
4,985
|
|
|
|
2,411
|
|
|
|
1,792
|
|
Interest (income)
|
|
|
(125
|
)
|
|
|
(105
|
)
|
|
|
(119
|
)
|
|
|
(281
|
)
|
|
|
(288
|
)
|
Royalty (income), net
|
|
|
(200
|
)
|
|
|
(1,749
|
)
|
|
|
(3,361
|
)
|
|
|
(3,034
|
)
|
|
|
(4,252
|
)
|
Other expense (income), net
|
|
|
162
|
|
|
|
89
|
|
|
|
(559
|
)
|
|
|
2,251
|
|
|
|
1,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations before income taxes
|
|
|
9,690
|
|
|
|
8,719
|
|
|
|
5,313
|
|
|
|
(8,838
|
)
|
|
|
(3,625
|
)
|
(Benefit) provision for income
taxes
|
|
|
3,432
|
|
|
|
3,684
|
|
|
|
(1,673
|
)
|
|
|
2,578
|
|
|
|
6,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations
|
|
|
6,258
|
|
|
|
5,035
|
|
|
|
6,986
|
|
|
|
(11,416
|
)
|
|
|
(10,309
|
)
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(253
|
)
|
|
|
(241
|
)
|
Impairment charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,434
|
)
|
Gain on sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
6,258
|
|
|
$
|
5,035
|
|
|
$
|
6,986
|
|
|
$
|
(11,126
|
)
|
|
$
|
(15,984
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per share from
continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share
|
|
$
|
0.42
|
|
|
$
|
0.34
|
|
|
$
|
0.47
|
|
|
$
|
(0.76
|
)
|
|
$
|
(0.69
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per share
|
|
$
|
0.40
|
|
|
$
|
0.33
|
|
|
$
|
0.46
|
|
|
$
|
(0.76
|
)
|
|
$
|
(0.69
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per share from
discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.02
|
|
|
$
|
(0.38
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per share
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.02
|
|
|
$
|
(0.38
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
14,966
|
|
|
|
14,899
|
|
|
|
15,001
|
|
|
|
15,015
|
|
|
|
14,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
15,713
|
|
|
|
15,305
|
|
|
|
15,286
|
|
|
|
15,015
|
|
|
|
14,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(in thousands)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital
|
|
$
|
29,765
|
|
|
$
|
25,499
|
|
|
$
|
8,374
|
|
|
$
|
4,064
|
|
|
$
|
22,319
|
|
Total assets
|
|
$
|
112,763
|
|
|
$
|
109,351
|
|
|
$
|
115,271
|
|
|
$
|
96,833
|
|
|
$
|
108,488
|
|
Short-term debt
|
|
$
|
3,475
|
|
|
$
|
3,738
|
|
|
$
|
23,280
|
|
|
$
|
19,548
|
|
|
$
|
10,788
|
|
Long-term debt
|
|
$
|
7,080
|
|
|
$
|
12,223
|
|
|
$
|
1,794
|
|
|
$
|
521
|
|
|
$
|
11,873
|
|
Total debt
|
|
$
|
10,555
|
|
|
$
|
15,961
|
|
|
$
|
25,074
|
|
|
$
|
20,069
|
|
|
$
|
22,661
|
|
Shareholders equity
|
|
$
|
45,933
|
|
|
$
|
39,231
|
|
|
$
|
34,467
|
|
|
$
|
26,281
|
|
|
$
|
33,754
|
|
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operation
(dollars in thousands except share and per share data)
|
General. The following is managements
discussion and analysis of certain factors, which have affected
the consolidated financial statements of Baldwin Technology
Company, Inc. (Baldwin or the Company).
Forward-looking
Statements
Except for the historical information contained herein, the
following statements and certain other 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 are set forth in Item 1A Risk
Factors and Exhibit 99 to this Annual Report on
Form 10-K
for the fiscal year ended June 30, 2006.
Critical
Accounting Policies and Estimates
Baldwins discussion and analysis of its financial
condition and results of operations are based on the
Companys consolidated financial statements, which have
been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of
these financial statements requires Baldwin to make estimates
and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. Baldwin continually evaluates
its estimates, including those related to product returns, bad
debts, inventories, investments, asset impairments, intangible
assets, income taxes, warranty obligations, pensions and other
post-retirement benefits, contingencies and litigation. Baldwin
bases its estimates on historical experience and on various
other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or
conditions.
The following critical accounting policies affect the more
significant judgments and estimates used in the preparation of
the Companys consolidated financial statements. Baldwin
maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required
13
payments. If the financial condition of Baldwins customers
were to deteriorate, resulting in an impairment of their ability
to make payments, additional allowances could be required.
Baldwin provides for the estimated cost of product warranties at
the time revenue is recognized. While Baldwin engages in
extensive product quality programs and processes, including
actively monitoring and evaluating the quality of its component
suppliers, Baldwins warranty obligation is affected by
product failure rates, material usage and service delivery costs
incurred in correcting a product failure. Should actual product
failure rates, material usage or service delivery costs differ
from Baldwins estimates, revisions to the estimated
warranty liability would be required. Baldwin writes down its
inventory for estimated obsolescence or unmarketable inventory
equal to the difference between the cost of inventory and the
estimated market value based upon assumptions about future
demand and market conditions. If actual market conditions are
less favorable than those projected by management, additional
inventory write-downs may be required. Baldwin records a
valuation allowance to reduce its net deferred tax assets to the
amount that is more likely than not to be realized. Baldwin has
considered future taxable income and ongoing prudent and
feasible tax planning strategies in assessing the need for the
valuation allowance. In the event Baldwin were to determine that
it would be able to realize its deferred tax assets in the
future in excess of its net recorded amount, an adjustment to
the deferred tax asset valuation allowance would increase income
in the period such determination is made. Likewise, should
Baldwin determine that it would not be able to realize all or
part of its net deferred tax assets in the future, an adjustment
to the deferred tax asset valuation allowance would be recorded
through a charge to income in the period such determination is
made. Deferred tax assets and liabilities are determined using
enacted tax rates for temporary differences between book and tax
bases of assets and liabilities, as well as the effects of net
operating losses carried forward in certain tax jurisdictions in
which the Company operates that may be utilized to offset future
taxable income and similar tax credits carried forward that may
be utilized to reduce future taxes payable. The Company records
valuation allowances on deferred tax assets when appropriate to
reflect the expected future tax benefits to be realized. In
determining the appropriate valuation allowances, certain
judgments are made by management relating to recoverability of
deferred tax assets, use of tax loss and tax credit
carryforwards, levels of expected future taxable income and
available tax planning strategies. The assumptions in making
these judgments are updated periodically by management based on
current business conditions that affect the Company and overall
economic conditions. These management judgments are therefore
subject to change based on factors that include, but are not
limited to (1) changes in the profitability of the
Companys subsidiaries as well as for the Company as a
whole, (2) the ability of the Company to successfully
execute its tax planning strategies, and (3) the accuracy
of the Companys estimate of the potential effect that
changes in tax legislation, in the jurisdictions where the
Company operates, may have on the Companys future taxable
profits. Failure by the Company to achieve forecasted taxable
income or to execute its tax planning strategies may affect the
ultimate realization of certain deferred tax assets. Factors
that may affect the Companys ability to achieve sufficient
forecasted taxable income or successfully execute its tax
planning strategies include, but are not limited to, increased
competition, general economic conditions, a decline in sales or
earnings, loss of market share, delays in product availability
or changes in tax legislation. In addition, Baldwin recognizes
reserves for contingencies when it becomes probable that such a
contingency exists.
The Company tests goodwill for impairment at the reporting unit
level, at least annually, by determining the fair value of the
reporting unit based on a discounted cash flow model, and
comparing it with its book value. If, during the annual
impairment review, the book value of the reporting unit exceeds
its fair value, the implied fair value of the reporting
units goodwill is compared with the carrying amount of the
units goodwill. If the carrying amount exceeds the implied
fair value, goodwill is written down to its implied fair value.
SFAS 142 requires management to estimate the fair value of
each reporting unit, as well as the fair value of the assets and
liabilities of each reporting unit, other than goodwill. The
implied
14
fair value of goodwill is determined as the difference between
the fair value of a reporting unit, taken as a whole, and the
fair value of the assets and liabilities of such reporting unit.
Other long-lived assets are reviewed for impairment whenever
events or circumstances indicate that the carrying amount of an
asset may not be recoverable. Events which could trigger an
impairment review include, among others, a decrease in the
market value of an asset, the assets inability to generate
income from operations and positive cash flow in future periods,
a decision to change the manner in which an asset is used, a
physical change to the asset or a change in business climate.
Baldwin calculates estimated future undiscounted cash flows,
before interest and taxes, of the related operation and compares
it to the carrying value of the asset in determining whether
impairment potentially exists. If a potential impairment exists,
a calculation is performed to determine the fair value of the
long-lived asset. This calculation is based upon a valuation
model and discount rate commensurate with the risks involved.
Third party appraised values may also be used in determining
whether impairment potentially exits. Future adverse changes in
market conditions or poor operating results of a related
reporting unit may require the Company to record an impairment
charge in the future.
The impairment review process requires management to make
significant estimates and judgments regarding the future cash
flows expected to result from the use and, if applicable, the
eventual disposition of the respective assets. The key variables
that management must estimate in determining these expected
future cash flows include sales volumes, sales prices, sales
growth, production and operating costs, capital expenditures,
working capital requirements, market conditions and other
economic factors. Significant management judgment is involved in
estimating these variables, and such estimates are inherently
uncertain; however, the assumptions used are reasonable and
consistent with the Companys internal planning. Management
periodically evaluates and updates the estimates based on
conditions that influence these variables.
The assumptions and conditions for determining impairments of
property, plant and equipment, goodwill and other intangible
assets reflect managements best assumptions and estimates,
but these items involve inherent uncertainties as described
above, many of which are not under managements control. As
a result, the accounting for such items could result in
different estimates or amounts if management used different
assumptions or if different conditions occur in future
accounting periods.
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,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Net sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Cost of goods sold
|
|
|
66.4
|
|
|
|
67.0
|
|
|
|
68.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
33.6
|
|
|
|
33.0
|
|
|
|
31.6
|
|
Selling, general and
administrative expenses
|
|
|
19.2
|
|
|
|
18.6
|
|
|
|
18.9
|
|
Research, development and
engineering expenses
|
|
|
8.5
|
|
|
|
9.2
|
|
|
|
8.6
|
|
Operating income
|
|
|
5.9
|
|
|
|
5.4
|
|
|
|
4.0
|
|
Interest expense
|
|
|
(.6
|
)
|
|
|
(1.4
|
)
|
|
|
(3.2
|
)
|
Other income, net
|
|
|
.1
|
|
|
|
1.0
|
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
5.4
|
|
|
|
5.0
|
|
|
|
3.4
|
|
Provision (benefit) for income
taxes
|
|
|
1.9
|
|
|
|
2.1
|
|
|
|
(1.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
3.5
|
%
|
|
|
2.9
|
%
|
|
|
4.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
Overview
The Company is a leading global manufacturer of press
accessories and controls for the commercial and newspaper
printing 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, Connecticut, the Company has sales and service
centers and product development and manufacturing operations in
the Americas, Asia and Europe. Baldwins technology and
products include cleaning systems, 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 accessories and
controls.
For the year ended June 30, 2006 net sales were
$179,380 representing approximately a 4% improvement over the
previous years sales as reported. The increases in revenue
are primarily attributable to the steady and stable growth in
worldwide printing markets which has increased demand for the
products supplied by the Company. In addition, improved
relationships with customers and acceptance of the
Companys products by end users has led to an increase in
the Companys market share for accessories and controls.
Gross margins improved to approximately 33.6% versus the prior
years margins of 33%. This increase was attributable to
the increased sales volume noted above, favorable overhead
absorption, and lower technical service and warranty costs.
Operating income increased to approximately 6% of sales for the
year ended June 30, 2006 from approximately 5.4% of sales
in the previous year primarily as a result of the increased
revenue and improved gross margins partially offset by increased
operating expenses.
In addition, the Company significantly reduced its interest
expense versus the previous years corresponding period as
a result of lower average debt levels and lower interest rates.
Lower royalty income in the year has been recognized as patents,
which provided the income stream, expired in February 2005.
Fiscal Year Ended
June 30, 2006 Versus Fiscal Year Ended June 30,
2005
Consolidated
Results
Net Sales. Net sales of $179,380 for the
fiscal year ended June 30, 2006 reflect an increase of
$6,195 or 4% versus the fiscal year ended June 30, 2005.
Currency rate fluctuations attributable to the Companys
overseas operations decreased net sales for the current period
by $8,431. Excluding the effects of currency translation, net
sales increased $14,626 or 8%.
The net sales increase primarily reflects increased revenue in
Europe and the Americas partially offset by decreased revenue in
Asia.
In Europe, sales (excluding the effects of currency translation)
increased approximately $15,144. Improving printing equipment
market conditions coupled with increased sourcing to selected
OEMs led to an increased demand from press manufacturers and end
user customers for the Companys cleaning and spray
dampening systems in the newspaper marketplace and increased
demand in the commercial market for cleaning, water and web
control systems.
In the Americas, particularly the U.S., sales increased
approximately $5,423 primarily related to an increased demand in
the commercial market for the Companys cleaning systems.
16
In Asia, particularly Japan, sales declined approximately $5,941
(excluding the effects of currency translations). Softness in
the Japanese commercial and newspaper markets coupled with
downward pricing pressure primarily accounted for the decline in
revenue.
Gross Profit. Gross profit of $60,308 for the
fiscal year ended June 30, 2006 reflects an increase of
$3,071 or 5% versus the fiscal year ended June 30, 2005.
Excluding the unfavorable foreign currency translation effect of
$3,114, gross profit increased $6,185 or 11%. Gross margins
improved to 33.6% from 33.0% primarily as a result of the higher
volumes noted above, favorable sales mix, favorable cost
absorption associated with the higher volume and lower service
and warranty costs.
Selling, General and Administrative
Expenses. Selling, general and administrative
expenses of $34,526 for the fiscal year ended June 30, 2006
reflect an increase of $2,237 or 7%. Excluding the effects of
foreign currency translation of $1,279, SG&A expenses
increased $3,516 or 11%. G&A expenses of $19,821 for the
fiscal year ended June 30, 2006 increased $1,437 or 8%
versus the fiscal year ended June 30, 2005. Excluding the
effects of currency translation of $563, G&A expenses
increased $1,999 or 11%. This increase relates primarily to
increased compensation costs, expenses associated with stock
based compensation as required per the adoption of
SFAS 123(R) approximately $500, vesting associated with
deferred compensation plans approximately $250, and higher
consulting/professional services costs related to implementation
of the Sarbanes-Oxley Act of 2002, audit, tax and other
financial services fees approximately $700.
Selling expenses of $14,705 for the fiscal year ended
June 30, 2006 increased $800 or about 6%. Excluding the
effects of currency translation of $716, selling expenses
increased $1,517. The increase in selling expenses reflects the
increased business level associated with the higher-level sales
activity coupled with an increase in commissions and trade show
costs.
Engineering and Development
Expenses. Engineering and development expenses of
$15,181 for the year ended June 30, 2006 reflect a decrease
of $739 or 5% versus the fiscal year ended June 30, 2005.
Excluding foreign currency translation effects, engineering and
development expenses remained virtually flat year over year.
Restructuring and Other Charges. The Company
had no restructuring related activities for the year ended
June 30, 2006 as compared to income of $338 for the fiscal
year ended June 30, 2005. The release in fiscal year 2005
of restructuring reserves related to facility lease costs
avoided by relocation of the Companys corporate office.
Interest and Other. Interest expense of $1,074
for the fiscal year ended June 30, 2006 decreased $1,338
versus the period ended June 30, 2005. This decrease
reflects lower average debt levels during the year ended
June 30, 2006 coupled with lower interest rates for the
period as a result of a second amendment to the credit agreement
with Maple Bank GmbH, effective July 2005. Additionally,
currency rate fluctuations decreased interest expense $73 in the
current period. Interest income remained virtually flat year
over year on a currency adjusted basis while royalty income
declined $1,549. The decline in royalty income relates to the
expiration of a group of patents in February 2005, which
provided the royalty income stream.
Other income and expense, net, amounted to expense of $162 for
the period ended June 30, 2006 and primarily reflects a net
foreign exchange loss. In 2005, the expense of $89 primarily
reflected a fixed asset write-off.
Income before income taxes. Income before
income taxes for the fiscal year ended June 30, 2006 of
$9,690 compares to income before income taxes of $8,719 in
fiscal year ended June 30, 2005. For the current fiscal
year, currency rate fluctuations decreased income before income
taxes $555. Increased
17
revenue, gross margin improvement and lower interest expense
partially offset by higher operating expenses and lower royalty
income primarily accounts for the increase.
Income Taxes. The Company recorded an income
tax provision of $3,432 for the fiscal year ended June 30,
2006. The effective tax rate of 35.4% for fiscal year ended
June 30, 2006 and 42.2% for fiscal year ended June 30,
2005 differs from the statutory rate and reflects foreign
income, taxed at rates higher than the U.S. statutory rate,
no benefit recognized for losses incurred in certain countries
as the realization of such benefits was not more likely than not
and other tax return and reserve adjustments. The Company
continues to assess the need for its deferred tax asset
valuation allowance in the jurisdictions in which it operates.
Any adjustment to the deferred tax asset valuation allowance
either positive or negative would be recorded in the income
statement of the period that the adjustment was determined to be
required. In particular, the Company is monitoring positive
earnings trends and other positive evidence in the United
States, United Kingdom and France to determine if such trends
could possibly require a reversal of valuation allowance in the
upcoming fiscal year.
Net Income. The Companys net income
amounted to $6,258 for the fiscal year ended June 30, 2006
and primarily reflects the improved income from operations
coupled with lower interest expense when compared to net income
of $5,035 for the fiscal year ended June 30, 2005. Currency
translation negatively impacted net income by approximately $505.
Fiscal Year Ended
June 30, 2005 Versus Fiscal Year Ended June 30,
2004
Consolidated
Results
Net Sales. Net sales of $173,185 for the
fiscal year ended June 30, 2005 reflect an increase of
$15,075 or 10% versus the fiscal year ended June 30, 2004.
Currency rate fluctuations increased net sales for the current
period by $7,628. Excluding the effects of currency translation,
net sales increased $7,446 or 5%.
The net sales increase primarily reflects increased demand in
Europe and Asia. In Europe, sales (excluding the effects of
currency translation) increased approximately $4,100,
particularly in Germany and the markets serviced by Sweden.
Improving global market conditions in the Americas, Europe, and
Asia led to an increased demand from press manufacturers for the
Companys cleaning and spray dampening systems in the
commercial and newspaper marketplace. While downward pricing
pressures continue, particularly in the OEM customer base,
improving market conditions coupled with OEM outsourcing and
some increase in market share led to the improved sales.
In Asia, sales increased approximately $3,800 (excluding the
effects of currency translations). In Japan, increased OEM
export production, mainly to China, increased demand for the
Companys commercial cleaning and water systems. In
addition, the Companys Australian subsidiary began
shipments of a significant newspaper cleaning system order
during the fourth quarter of 2005.
In the Americas, particularly the U.S., sales remained
relatively flat year over year due in part to the internal shift
of sales to certain European and Japanese manufactured press
equipment with products supplied by the Companys European
and Japanese subsidiaries.
Gross Profit. Gross profit of $57,237 for the
fiscal year ended June 30, 2005 reflects an increase of
$7,201 or 14% versus the fiscal year ended June 30, 2004.
Excluding the favorable foreign currency translation effect of
$2,764, gross profit increased $4,437 or 9%. Gross margins
improved to 33% from 32% primarily on the strength of the
improvement in sales volume, coupled with better control over
material and labor costs. In addition, gross margins during the
fourth quarter were favorably impacted approximately 1% due to
customer cost reimbursement for an order which was substantially
modified.
18
Selling, General and Administrative
Expenses. Selling, general and administrative
expenses of $32,289 for the fiscal year ended June 30, 2005
reflect an increase of $2,578 or 9%. Excluding the effects of
foreign currency translation of $1,192, SG&A expenses
increased $1,386 or 5%. G&A expenses of $18,384 for the
fiscal year ended June 30, 2005 increased $1,107 or 6%
versus the fiscal year ended June 30, 2004. Excluding the
effects of currency translation of $563, G&A expenses
increased $544 or 3%. This increase relates primarily to
increased compensation costs commensurate with improved business
performance coupled with higher consulting costs associated with
the implementation of compliance with the requirements of the
Sarbanes-Oxley Act of 2002.
Selling expenses of $13,905 for the fiscal year ended
June 30, 2005 increased $1,471 or 12%. Excluding the
effects of currency translation of $629, selling expenses
increased $842. The increase in selling expenses reflects the
increased business level associated with the higher-level sales
activity and reflects an increase in commissions, and higher
salaries, benefits and other employee related travel costs.
Engineering and Development
Expenses. Engineering and development expenses of
$15,920 for the year ended June 30, 2005 reflect an
increase of $2,302 or 17% versus the fiscal year ended
June 30, 2004. Excluding foreign currency translation
effects, engineering and development expenses increased $1,527
or 11%. The increase relates primarily to increased personnel
and travel related expenses, particularly in Germany, due to
planned investments in product development, and research and
development projects.
Restructuring and Other Charges. The Company
released to income restructuring reserves of $338 for the year
ended June 30, 2005 as compared to a charge of $448 for the
fiscal year ended June 30, 2004. The release of
restructuring reserves related to facility lease costs avoided
by relocation of the Companys corporate office. The $448
in fiscal year 2004 represented additional employment reductions
in the United States and the United Kingdom associated with the
August 2002 restructuring plan.
Interest and Other. Interest expense of $2,412
for the fiscal year ended June 30, 2005 decreased $2,573
versus the period ended June 30, 2004. Lower average debt
levels and lower interest rates as a result of the amended
credit agreement with Maple Bank GmbH, entered into in September
2004, coupled with lower amortization of deferred financing
costs during the period primarily account for the decrease.
Additionally, currency rate fluctuations increased interest
expense $173 in the current period. Interest income remained
virtually flat year over year on a currency adjusted basis while
royalty income declined $1,612. The decline in royalty income
relates to the expiration of a group of patents, which provided
the royalty income stream, in February 2005.
Other income and expense, net, amounted to expense of $89 for
the period ended June 30, 2005 and primarily reflects a
write-off of fixed assets. In 2004, the income of $559 primarily
reflected foreign currency transaction and fair value exchange
gains of $1,194 and $203, respectively. Partially offsetting
these gains in 2004 were financial, legal and accounting fees
amounting to $833 related to the termination of a proposed
transaction with regard to the planned sale of the Company.
Income Taxes. The Company recorded an income
tax provision of $3,684 for the fiscal year ended June 30,
2005. The effective tax rate of 42.2% for fiscal year ended
June 30, 2005 reflects strong foreign income, taxed at
rates higher than the U.S. statutory rate. Additionally, no
benefit was recognized for losses incurred in certain countries
as the realization of such benefits was not more likely than
not. For the fiscal year ended June 30, 2004, the Company
recorded a tax benefit of $1,673 primarily as a result of the
reversal of its valuation allowance for net deferred tax assets
associated with its German subsidiary.
Income from Continuing Operations. Income from
continuing operations before taxes for the fiscal year ended
June 30, 2005 of $8,719 compares to income from continuing
operations of $5,313 in fiscal year ended June 30, 2004.
For the fiscal year, currency rate fluctuations increased income
from continuing operations $645. Increased revenue, gross margin
improvement and lower interest expense
19
partially offset by higher
operating expenses and lower royalty income primarily accounted
for the increase.
Net Income. The Companys net income
amounted to $5,035 for the fiscal year ended June 30, 2005
and reflects the improved income from operations. Net income of
$6,986 for the fiscal year ended June 30, 2004 reflected
improving income from operations coupled with the income tax
benefit associated with the reversal of the German valuation
allowance.
Impact of
Inflation
The Companys 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 Companys cash flow from operating, financing and
investing activities as reflected in the Consolidated Statement
of Cash Flows are summarized in the tables below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(in thousands)
|
|
|
Cash flow from operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash from operations before
restructuring
|
|
$
|
5,810
|
|
|
$
|
14,726
|
|
|
$
|
5,792
|
|
Cash used for restructuring
payments
|
|
|
|
|
|
|
(627
|
)
|
|
|
(1,416
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities
|
|
$
|
5,810
|
|
|
$
|
14,099
|
|
|
$
|
4,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash from operating activities for the year ended
June 30, 2006 decreased $8,289 as compared to 2005. The
decrease was primarily driven by an increase in accounts
receivable. Due to the timing of shipments during the fourth
quarter, accounts receivable days sales outstanding (DSO)
increased to 62 days from 51 days in 2005. The Company
expects to return to DSOs in the mid 50s during the next
several quarters. In addition the cash flow benefit from
increased inventory turns in 2006 of 5.5 was not as great as in
2005 when inventory turns improved to 5.3 times in 2005 versus
4.6 times in 2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(in thousands)
|
|
|
Cash flow from investing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, patents,
trademarks and drawings
|
|
$
|
(1,441
|
)
|
|
$
|
(1,317
|
)
|
|
$
|
(1,022
|
)
|
Proceeds from sale of investments
|
|
|
144
|
|
|
|
|
|
|
|
|
|
Proceeds from disposition of assets
|
|
|
|
|
|
|
299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by
investing activities
|
|
$
|
(1,297
|
)
|
|
$
|
(1,018
|
)
|
|
$
|
(1,022
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2006, cash used for additions amounted to $1,441 versus
$1,018 in 2005 and $1,022 in 2004. The increase in 2006
primarily relates to higher property, plant and equipment
additions.
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(in thousands)
|
|
|
Cash flow from financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Long and short term debt borrowings
|
|
$
|
899
|
|
|
$
|
|
|
|
$
|
23,159
|
|
Long and short term debt repayments
|
|
|
(6,563
|
)
|
|
|
(9,213
|
)
|
|
|
(19,896
|
)
|
Payment of debt financing costs
|
|
|
|
|
|
|
(259
|
)
|
|
|
(2,533
|
)
|
Other
|
|
|
323
|
|
|
|
(2
|
)
|
|
|
(31
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by
financing activities
|
|
$
|
(5,341
|
)
|
|
$
|
(9,474
|
)
|
|
$
|
699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys primary source of external financing is the
Credit Agreement and its amendments (the Credit
Agreement) with Maple Bank GmbH (Maple or
Lender).
Effective July 1, 2005 the Credit Agreement with Maple was
amended (the second amendment). This amendment reduced the
interest rates for the fiscal year ended June 30, 2006.
Borrowings under the credit facility are subject to a borrowing
base and bear interest at a rate equal to the three-month
Eurodollar rate (as defined in the Credit Agreement) plus:
(i) 3.375% (5.125% for the fiscal year ended June 30,
2005) for loans denominated in U.S. dollars and
(ii) 3.775% (5.525% for the fiscal year ended June 30,
2005) for loans denominated in Euros.
The credit facility is collateralized by substantially all of
the accounts and notes receivable of the Company and a portion
of the Companys inventory up to a maximum amount of
$10,000. The Credit Agreement does not require the Company to
meet any financial covenants, except for a limitation on annual
capital expenditures, for which the Company received a waiver
for the fiscal year ended June 30, 2006; however, it
contains a material adverse effect clause, which provides that
Maple would not be obligated to fund any loan, convert or
continue any loan as a LIBOR loan or issue any new letters of
credit in the event of a material adverse effect. Management
does not anticipate that such an event will occur; however,
there can be no assurance that such an event will not occur. In
addition, the Credit Agreement granted to the Lender an option
to acquire a maximum of $5,000 of equity securities (as defined
in the Agreement) should the Company choose to issue any such
equity securities.
The initial borrowings under the credit facility during the
fiscal year ended June 30, 2004, amounted to $18,874, of
which the Company utilized $16,243 to retire its previously
existing debt, associated interest, closing costs and working
capital purposes. During the fiscal years ended June 30,
2006 and 2005, cash flow from operations enabled the Company to
reduce the amount outstanding under the Credit Agreement with
Maple by approximately $5,300 in fiscal year 2006 and $8,100 in
fiscal year 2005 included in total long and short term debt
repayments of $6,563 and 9,213 in the table above.
During the quarter ended September 30, 2005, the Company
obtained a three-year term loan with Mizuho Bank of YEN 100,000,
(approximately $899 U.S. dollars) which matures in
September 2008. This term loan is subject to quarterly principle
payments of YEN 8,333 (approximately $75 U.S. dollars) and
bears interest at the Tokyo Inter Bank Offered Rate
(TIBOR) plus 0.75%. The Company entered into an
interest rate swap agreement that converts the variable rate
payable on the loan to a fixed rate of 1.81% and which has the
same maturity date as the term loan.
The Company maintains relationships with both foreign and
domestic banks, which combined have extended credit facilities
totaling $35,744 at June 30, 2006, including amounts
available under the Maple Credit Agreement. As of June 30,
2006, the Company had $14,075 outstanding under these credit
facilities including $10,080 (including Letters of Credit) under
the Maple Credit Agreement and Term Loan.
21
The Company believes that its cash flow from operations, along
with the available bank lines of credit and alternative sources
of borrowing are sufficient to finance its working capital and
other capital requirements over the term of the current
financing with Maple.
At June 30, 2006 and 2005, the Company did not have any
relationships with unconsolidated entities or financial
partnerships, such as entities often referred to as structured
finance or special purpose entities, which would have been
established for the purpose of facilitating off-balance sheet
arrangements or other contractually narrow or limited purposes.
As such, the Company is not exposed to any financing, liquidity,
market or credit risk that could arise if the Company had
engaged in such relationships.
The following summarizes the Companys contractual
obligations at June 30, 2006 and the effect such
obligations are expected to have on its liquidity and cash flow
in future periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ending June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012 and
|
|
|
|
Total
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
Thereafter
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Contractual obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans payable
|
|
$
|
2,622
|
|
|
$
|
2,622
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Capital lease obligations
|
|
|
531
|
|
|
|
132
|
|
|
|
119
|
|
|
|
113
|
|
|
|
100
|
|
|
|
61
|
|
|
|
6
|
|
Long-term debt
|
|
|
7,933
|
|
|
|
853
|
|
|
|
417
|
|
|
|
6,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cancelable operating lease
obligations
|
|
|
25,625
|
|
|
|
6,266
|
|
|
|
3,588
|
|
|
|
2,761
|
|
|
|
1,796
|
|
|
|
1,594
|
|
|
|
9,620
|
|
Interest expense(1)
|
|
|
1,358
|
|
|
|
620
|
|
|
|
608
|
|
|
|
130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual cash
obligations...
|
|
$
|
38,069
|
|
|
$
|
10,493
|
|
|
$
|
4,732
|
|
|
$
|
9,667
|
|
|
$
|
1,896
|
|
|
$
|
1,655
|
|
|
$
|
9,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The anticipated future interest payments are based on the
Companys current indebtedness and interest rates at
June 30, 2006, with consideration given to debt reduction
as the result of expected payments. |
New Accounting
Pronouncements
As more fully described in Notes 2 and 11 to the
Consolidated Financial Statements, the Company adopted Statement
of Financial Accounting Standards (SFAS)
SFAS 123 (revised 2004), Share-Based Payment
(SFAS 123(R)), on July 1, 2005. This Statement
requires that all stock-based compensation, including grants of
employee stock options, be accounted for using the fair
value-based method. SFAS 123(R) became effective for the
Company for fiscal year beginning July 1, 2005. The Company
elected to adopt SFAS 123(R) using the modified perspective
method.
In July 2006, the Financial Accounting Standards Board
(FASB) issued Financial Interpretation
(FIN) FIN 48, Accounting for Uncertainty
in Income Taxes. FIN 48 addresses the accounting and
disclosure of uncertain tax positions. The Company will adopt
FIN 48 on July 1, 2007, and is evaluating the impact,
if any, that FIN 48 will have on the Companys
financial statements.
FASB Statement No. 158, Employers Accounting for
Defined Benefit Pension and Other Postretirement Plans, is
expected to be issued in September 2006. The Company is
evaluating the impact on its financial statements.
No other new accounting pronouncement issued or effective during
the fiscal year has had or is expected to have a material impact
on the consolidated financial statements.
22
Item 7A. Quantitative
and Qualitative Disclosures About Market Risk
The Company operates internationally and is exposed to certain
market risks arising from transactions that in the normal course
of business include fluctuations in interest rates and currency
exchange rates. While the Company occasionally uses derivative
financial instruments in order to manage or reduce these risks,
typically currency futures contracts and interest rate swap
agreements, the Company does not enter into derivative or other
financial instruments for trading or speculative purposes.
Interest Rate and
Debt Sensitivity
As of June 30, 2006, the Company had debt totaling $10,555
most of which bears interest at floating rates.
The Company performed a sensitivity analysis as of June 30,
2006, assuming a hypothetical one percentage point increase in
interest rates. Holding other variables constant (such as
foreign exchange rates and debt levels), a one-percentage point
increase in interest rates would affect the Companys
pre-tax income by approximately $100. However, actual increases
or decreases in earnings in the future could differ materially
from this analysis based on the timing and amount of both
interest rate changes and amounts borrowed by the Company.
Currency Exchange
Rate Sensitivity
The Company derived approximately 83% of its revenues from
countries outside of the United States for the fiscal year ended
June 30, 2006. Results were and continue to be affected by
fluctuations in foreign currency exchange rates. The
Companys policy is to hedge the impact of currency rate
fluctuations, which could have a material impact on the
Companys financial results. The Company utilizes foreign
currency exchange forward contracts to hedge certain of these
exposures. The Company also maintains certain levels of cash
denominated in various currencies, which acts as a natural
overall hedge.
The Company performed a sensitivity analysis as of June 30,
2006 assuming a hypothetical 10% adverse change in foreign
currency exchange rates. Holding all other variables constant,
the analysis indicated that such a market movement would affect
the Companys pre-tax income by approximately $800.
However, actual gains and losses in the future could differ
materially from this analysis based on the timing and amount of
both foreign currency exchange rate movements and the
Companys actual exposures and hedges.
23
Item 8. Financial
Statements and Supplementary Data
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
Page
|
|
|
|
|
|
|
|
Report of Independent Registered
Public Accounting Firm
|
|
|
25
|
|
|
|
|
|
|
Consolidated Balance Sheets at
June 30, 2006 and June 30, 2005
|
|
|
26
|
|
|
|
|
|
|
Consolidated Statements of
Operations for the years ended June 30, 2006, June 30,
2005 and June 30, 2004
|
|
|
28
|
|
|
|
|
|
|
Consolidated Statements of Changes
in Shareholders Equity for the years ended June 30,
2006, June 30, 2005 and June 30, 2004
|
|
|
29
|
|
|
|
|
|
|
Consolidated Statements of Cash
Flows for the years ended June 30, 2006, June 30, 2005
and June 30, 2004
|
|
|
30
|
|
|
|
|
|
|
Notes to Consolidated Financial
Statements
|
|
|
31
|
|
24
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board
of Directors and Shareholders of
BALDWIN TECHNOLOGY COMPANY, INC.
In our opinion, the consolidated Financial Statements listed in
the accompanying index present fairly, in all material respects,
the financial position of Baldwin Technology Company, Inc. and
its subsidiaries at June 30, 2006 and 2005, and the results
of their operations and their cash flows for each of the three
years in the period ended June 30, 2006 in conformity with
accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of
the Companys 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 the
standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
As discussed in Note 2 to the financial statements, the
Company changed the manner in which it accounts for stock-based
compensation as of July 1, 2005.
PricewaterhouseCoopers LLP
Stamford, Connecticut
September 28, 2006
25
BALDWIN
TECHNOLOGY COMPANY, INC.
CONSOLIDATED
BALANCE SHEETS
(in
thousands)
Assets
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
14,986
|
|
|
$
|
15,443
|
|
Accounts receivable trade, net of
allowance for doubtful accounts of $1,452 ($1,962 at
June 30, 2005)
|
|
|
32,602
|
|
|
|
27,160
|
|
Notes receivable, trade
|
|
|
7,260
|
|
|
|
8,090
|
|
Inventories
|
|
|
22,657
|
|
|
|
22,755
|
|
Deferred taxes, net
|
|
|
475
|
|
|
|
416
|
|
Prepaid expenses and other
|
|
|
4,799
|
|
|
|
3,132
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
82,779
|
|
|
|
76,996
|
|
|
|
|
|
|
|
|
|
|
MARKETABLE SECURITIES:
|
|
|
|
|
|
|
|
|
(Cost $573 at June 30, 2006
and $610 at June 30, 2005)
|
|
|
760
|
|
|
|
678
|
|
|
|
|
|
|
|
|
|
|
PROPERTY, PLANT AND EQUIPMENT, at
cost:
|
|
|
|
|
|
|
|
|
Land and buildings
|
|
|
1,024
|
|
|
|
936
|
|
Machinery and equipment
|
|
|
2,674
|
|
|
|
2,082
|
|
Furniture and fixtures
|
|
|
4,023
|
|
|
|
3,796
|
|
Capital leases
|
|
|
287
|
|
|
|
391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,008
|
|
|
|
7,205
|
|
Less: Accumulated depreciation
|
|
|
(4,391
|
)
|
|
|
(3,790
|
)
|
|
|
|
|
|
|
|
|
|
Net property, plant and equipment
|
|
|
3,617
|
|
|
|
3,415
|
|
|
|
|
|
|
|
|
|
|
PATENTS, TRADEMARKS AND
ENGINEERING DRAWINGS, at cost, less accumulated amortization of
$4,996 ($4,559 at June 30, 2005)
|
|
|
2,690
|
|
|
|
2,561
|
|
GOODWILL, less accumulated
amortization of $3,419 ($3,456 at June 30, 2005)
|
|
|
11,059
|
|
|
|
10,922
|
|
DEFERRED TAXES, NET
|
|
|
8,109
|
|
|
|
10,623
|
|
OTHER ASSETS
|
|
|
3,749
|
|
|
|
4,156
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
112,763
|
|
|
$
|
109,351
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes to
consolidated financial statements
are an integral part of these
statements.
26
BALDWIN
TECHNOLOGY COMPANY, INC.
CONSOLIDATED
BALANCE SHEETS
(in
thousands, except share and per share data)
Liabilities
and Shareholders Equity
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Loans payable
|
|
$
|
2,622
|
|
|
$
|
2,705
|
|
Current portion of long-term debt
|
|
|
853
|
|
|
|
1,033
|
|
Accounts payable, trade
|
|
|
16,809
|
|
|
|
14,789
|
|
Notes payable, trade
|
|
|
7,987
|
|
|
|
9,278
|
|
Accrued salaries, commissions,
bonus and profit-sharing
|
|
|
7,998
|
|
|
|
7,641
|
|
Customer deposits
|
|
|
4,113
|
|
|
|
3,320
|
|
Accrued and withheld taxes
|
|
|
2,036
|
|
|
|
2,041
|
|
Income taxes payable
|
|
|
1,015
|
|
|
|
1,204
|
|
Other accounts payable and accrued
liabilities
|
|
|
9,581
|
|
|
|
9,486
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
53,014
|
|
|
|
51,497
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES:
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
7,080
|
|
|
|
12,223
|
|
Other long-term liabilities
|
|
|
6,736
|
|
|
|
6,400
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
13,816
|
|
|
|
18,623
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
66,830
|
|
|
|
70,120
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY:
|
|
|
|
|
|
|
|
|
Class A Common Stock, $.01
par, 45,000,000 shares authorized, 17,376,215 shares
issued at June 30, 2006 and 16,575,349 shares issued
at June 30, 2005
|
|
|
174
|
|
|
|
166
|
|
Class B Common Stock, $.01
par, 4,500,000 shares authorized, 1,537,681 shares
issued at June 30, 2006 and 2,137,883 shares issued at
June 30, 2005
|
|
|
15
|
|
|
|
21
|
|
Capital contributed in excess of
par value
|
|
|
57,943
|
|
|
|
57,065
|
|
Accumulated deficit
|
|
|
(1,374
|
)
|
|
|
(7,632
|
)
|
Accumulated other comprehensive
income
|
|
|
2,626
|
|
|
|
2,332
|
|
Less: Treasury stock, at cost:
|
|
|
|
|
|
|
|
|
Class A
3,630,202 shares (3,630,202 shares at June 30,
2005) Class B 294,270 shares
(172,464 shares at June 30, 2005)
|
|
|
(13,451
|
)
|
|
|
(12,721
|
)
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
45,933
|
|
|
|
39,231
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY
|
|
$
|
112,763
|
|
|
$
|
109,351
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes to
consolidated financial statements
are an integral part of these
statements.
27
BALDWIN
TECHNOLOGY COMPANY, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands,
except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Net sales
|
|
$
|
179,380
|
|
|
$
|
173,185
|
|
|
$
|
158,110
|
|
Cost of goods sold
|
|
|
119,072
|
|
|
|
115,948
|
|
|
|
108,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
60,308
|
|
|
|
57,237
|
|
|
|
50,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
19,821
|
|
|
|
18,384
|
|
|
|
17,277
|
|
Selling
|
|
|
14,705
|
|
|
|
13,905
|
|
|
|
12,434
|
|
Engineering and development
|
|
|
15,181
|
|
|
|
15,920
|
|
|
|
13,618
|
|
Restructuring charges
|
|
|
|
|
|
|
(338
|
)
|
|
|
448
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,707
|
|
|
|
47,871
|
|
|
|
43,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
10,601
|
|
|
|
9,366
|
|
|
|
6,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income) expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
1,074
|
|
|
|
2,412
|
|
|
|
4,985
|
|
Interest (income)
|
|
|
(125
|
)
|
|
|
(105
|
)
|
|
|
(119
|
)
|
Royalty (income), net
|
|
|
(200
|
)
|
|
|
(1,749
|
)
|
|
|
(3,361
|
)
|
Other expense (income), net
|
|
|
162
|
|
|
|
89
|
|
|
|
(559
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
911
|
|
|
|
647
|
|
|
|
946
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
9,690
|
|
|
|
8,719
|
|
|
|
5,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Benefit) provision for income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
(274
|
)
|
|
|
(55
|
)
|
|
|
(485
|
)
|
Foreign
|
|
|
3,706
|
|
|
|
3,739
|
|
|
|
(1,188
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax provision (benefit)
|
|
|
3,432
|
|
|
|
3,684
|
|
|
|
(1,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,258
|
|
|
$
|
5,035
|
|
|
$
|
6,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share basic
|
|
$
|
0.42
|
|
|
$
|
0.34
|
|
|
$
|
0.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share diluted
|
|
$
|
0.40
|
|
|
$
|
0.33
|
|
|
$
|
0.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
14,966
|
|
|
|
14,899
|
|
|
|
15,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
15,713
|
|
|
|
15,305
|
|
|
|
15,286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes to
consolidated financial statements
are an integral part of these
statements.
28
BALDWIN
TECHNOLOGY COMPANY, INC.
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(in thousands
except for share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note Receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
From Key
|
|
|
|
|
|
|
Class A
|
|
|
Class B
|
|
|
Capital in
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
Executive For
|
|
|
|
|
|
|
Common Stock
|
|
|
Common Stock
|
|
|
Excess of
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Treasury Stock
|
|
|
Common Stock
|
|
|
Comprehensive
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Par Value
|
|
|
Deficit
|
|
|
Income
|
|
|
Shares
|
|
|
Amount
|
|
|
Issuance
|
|
|
Income
|
|
|
Balance at June 30, 2003
|
|
|
16,458,849
|
|
|
$
|
165
|
|
|
|
2,185,883
|
|
|
$
|
21
|
|
|
$
|
56,986
|
|
|
$
|
(19,653
|
)
|
|
$
|
1,411
|
|
|
|
(3,630,202
|
)
|
|
$
|
(12,199
|
)
|
|
$
|
(450
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30, 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,986
|
|
Translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,253
|
|
Unrealized gain on available-for
sale securities, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88
|
|
Unrealized loss on forward contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
Shares issued under stock option
plan
|
|
|
22,499
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares converted Class B to
Class A
|
|
|
48,000
|
|
|
|
|
|
|
|
(48,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional minimum pension liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(100
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(100
|
)
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reduction in note receivable
through exchanged shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(172,464
|
)
|
|
|
(522
|
)
|
|
|
450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2004
|
|
|
16,529,348
|
|
|
$
|
166
|
|
|
|
2,137,883
|
|
|
$
|
21
|
|
|
$
|
57,017
|
|
|
$
|
(12,667
|
)
|
|
$
|
2,651
|
|
|
|
(3,802,666
|
)
|
|
$
|
(12,721
|
)
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,035
|
|
Translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(318
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(318
|
)
|
Unrealized gain on available-for
sale securities, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
Unrealized loss on forward contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30
|
)
|
Shares issued under stock option
plan
|
|
|
46,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reduction of minimum pension
liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2005
|
|
|
16,575,349
|
|
|
$
|
166
|
|
|
|
2,137,883
|
|
|
$
|
21
|
|
|
$
|
57,065
|
|
|
$
|
(7,632
|
)
|
|
$
|
2,332
|
|
|
|
(3,802,666
|
)
|
|
$
|
(12,721
|
)
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,258
|
|
Translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
181
|
|
Unrealized gain on available-for
sale securities, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69
|
|
Amortization stock-based
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares converted Class B to
Class A
|
|
|
600,308
|
|
|
|
6
|
|
|
|
(600,308
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on forward contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74
|
|
Shares issued under stock option
plan
|
|
|
200,558
|
|
|
|
2
|
|
|
|
106
|
|
|
|
|
|
|
|
412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reduction in note receivable
through exchanged shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(121,806
|
)
|
|
|
(730
|
)
|
|
|
|
|
|
|
|
|
Increase in minimum pension
liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30
|
)
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2006:
|
|
|
17,376,215
|
|
|
$
|
174
|
|
|
|
1,537,681
|
|
|
$
|
15
|
|
|
$
|
57,943
|
|
|
$
|
(1,374
|
)
|
|
$
|
2,626
|
|
|
|
(3,924,472
|
)
|
|
$
|
(13,451
|
)
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes to
consolidated financial statements
are an integral part of these
statements.
29
BALDWIN
TECHNOLOGY COMPANY, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in
thousands except for share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,258
|
|
|
$
|
5,035
|
|
|
$
|
6,986
|
|
Adjustments to reconcile net loss
to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,458
|
|
|
|
1,625
|
|
|
|
1,763
|
|
Accrued retirement pay
|
|
|
203
|
|
|
|
119
|
|
|
|
238
|
|
Deferred taxes
|
|
|
2,320
|
|
|
|
1,524
|
|
|
|
(4,678
|
)
|
Provision for losses on accounts
receivable
|
|
|
158
|
|
|
|
99
|
|
|
|
109
|
|
Write-off of fixed assets
|
|
|
55
|
|
|
|
108
|
|
|
|
|
|
Restructuring charges
|
|
|
|
|
|
|
(338
|
)
|
|
|
448
|
|
(Gain) on sale of investments
|
|
|
(92
|
)
|
|
|
|
|
|
|
|
|
Stock compensation costs
|
|
|
466
|
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities,
net of effects from dispositions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts and notes receivable
|
|
|
(4,355
|
)
|
|
|
2,010
|
|
|
|
(2,599
|
)
|
Inventories
|
|
|
686
|
|
|
|
1,990
|
|
|
|
(938
|
)
|
Prepaid expenses and other
|
|
|
(1,439
|
)
|
|
|
2,580
|
|
|
|
1,834
|
|
Other assets
|
|
|
(3
|
)
|
|
|
(331
|
)
|
|
|
233
|
|
Customer deposits
|
|
|
657
|
|
|
|
561
|
|
|
|
(590
|
)
|
Accrued compensation
|
|
|
(34
|
)
|
|
|
928
|
|
|
|
2,147
|
|
Payments of restructuring charges
|
|
|
|
|
|
|
(627
|
)
|
|
|
(1,416
|
)
|
Accounts and notes payable, trade
|
|
|
150
|
|
|
|
2,218
|
|
|
|
457
|
|
Income taxes payable
|
|
|
(180
|
)
|
|
|
(1,849
|
)
|
|
|
902
|
|
Accrued and withheld taxes
|
|
|
(5
|
)
|
|
|
(143
|
)
|
|
|
82
|
|
Other accounts payable and accrued
liabilities
|
|
|
(472
|
)
|
|
|
(1,277
|
)
|
|
|
(669
|
)
|
Interest payable
|
|
|
(21
|
)
|
|
|
(133
|
)
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities
|
|
|
5,810
|
|
|
|
14,099
|
|
|
|
4,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the disposition of
assets
|
|
|
|
|
|
|
299
|
|
|
|
|
|
Additions of property
|
|
|
(921
|
)
|
|
|
(640
|
)
|
|
|
(532
|
)
|
Additions of patents, trademarks
and drawings
|
|
|
(520
|
)
|
|
|
(677
|
)
|
|
|
(490
|
)
|
Proceeds from sale of investments
|
|
|
144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing
activities
|
|
|
(1,297
|
)
|
|
|
(1,018
|
)
|
|
|
(1,022
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term and short-term debt
borrowings
|
|
|
899
|
|
|
|
|
|
|
|
23,159
|
|
Long-term and short-term debt
repayments
|
|
|
(6,563
|
)
|
|
|
(9,213
|
)
|
|
|
(19,896
|
)
|
Principal payments under capital
lease obligations
|
|
|
(91
|
)
|
|
|
(93
|
)
|
|
|
(97
|
)
|
Payment of debt financing costs
|
|
|
|
|
|
|
(259
|
)
|
|
|
(2,533
|
)
|
Other long-term liabilities
|
|
|
|
|
|
|
45
|
|
|
|
32
|
|
Proceeds of stock option exercise
|
|
|
414
|
|
|
|
46
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used) provided by
financing activities
|
|
|
(5,341
|
)
|
|
|
(9,474
|
)
|
|
|
699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes
|
|
|
371
|
|
|
|
(172
|
)
|
|
|
1,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
and cash equivalents
|
|
|
(457
|
)
|
|
|
3,435
|
|
|
|
5,058
|
|
Cash and cash equivalents at
beginning of year
|
|
|
15,443
|
|
|
|
12,008
|
|
|
|
6,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end
of year
|
|
$
|
14,986
|
|
|
$
|
15,443
|
|
|
$
|
12,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of
cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
1,121
|
|
|
$
|
2,545
|
|
|
$
|
5,052
|
|
Income taxes
|
|
$
|
2,094
|
|
|
$
|
3,581
|
|
|
$
|
1,552
|
|
Non-cash investing and financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year 2006, capital lease
obligation $411, settlement of long-term note receivable $730
with an exchange of 121,806 shares
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes to
consolidated financial statements
are an integral part of these
statements.
30
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(in
thousands except for share and per share data)
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
accessories and controls for the printing and publishing
industry. The Company manages its business as one reportable
business segment built around its core competency in accessories
and controls.
|
|
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, one 90% owned subsidiary and another 80% owned
subsidiary. All significant intercompany transactions have been
eliminated in consolidation.
Cash and cash equivalents. The Company
considers all highly liquid instruments (cash and short-term
securities) with original maturities of three months or less to
be cash equivalents.
Accounts Receivable,
Notes Receivable/Payable. Accounts
receivable are recorded at their net realizable value after
deducting an allowance for doubtful accounts. Such deductions
reflect either specific cases or estimates based on historical
incurred losses. Notes receivable, trade reflect promissory
notes issued by customers of the Companys Japanese
subsidiary. Notes payable trade, reflect obligations of the
Companys Japanese subsidiaries to suppliers.
Translation of Foreign Currencies. All assets
and liabilities of foreign subsidiaries are translated into
dollars at the fiscal year-end (current) exchange rates and
components of revenue and expense are translated at average
rates for the fiscal year. The resulting translation adjustments
are included in shareholders equity. Gains and losses on
foreign currency exchange transactions are reflected in the
statement of operations. Net transaction gains and losses
credited or charged to Other expense (income), net
for the fiscal years ended June 30, 2006, 2005 and 2004
were ($323), $90 and ($1,194), respectively.
Hedging. The Company operates internationally
and is exposed to certain market risks arising from transactions
that in the normal course of business include fluctuations in
interest rates and currency exchange rates. While the Company
occasionally uses derivative financial instruments in order to
manage or reduce these risks, typically currency futures
contracts and interest rate swap agreements, the Company does
not enter into derivative or other financial instruments for
trading or speculative purposes. The Companys policy is to
hedge the impact of currency rate fluctuations, which could have
a material impact on the Companys financial results. The
Company utilizes foreign currency exchange forward contracts to
hedge these exposures.
Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a
hedge transaction and, if it is, the type of hedge transaction.
If a derivative is designated as a fair value hedge, the changes
in the fair value of the derivative and the underlying hedged
item attributable to the hedged risk are recognized in earnings.
If the derivative is designated as a cash flow hedge, the
effective portions of changes in fair value of the derivative
are recorded in Other Comprehensive Income (OCI) and
are recognized in the statement of operations when the
underlying hedged item affects earnings. Ineffectiveness related
to cash flow hedges is recognized in earnings and is included in
Other expense (income), net.
31
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in
thousands except for share and per share data)
Concentration of Credit Risk. Financial
instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of trade
accounts and notes receivable. The Company controls this risk
through credit approvals, customer limits and monitoring
procedures. For the fiscal years ended June 30, 2006, 2005,
and 2004, one customer accounted for more than 10% of the
Companys net sales. Koenig and Bauer Aktiengesellschaft
(KBA) accounted for approximately 18%, 17%, and 15%
respectively, of the Companys net sales. The
Companys ten largest customers accounted for approximately
50%, 53% and 52% of the Companys net sales for each of the
fiscal years ended June 30, 2006, 2005 and 2004,
respectively.
Marketable Securities. The Company classifies
all of its marketable securities as
available-for-sale
securities.
Available-for-sale
securities are carried at fair value, with the unrealized gains
and losses net of income taxes, reported as a component of other
comprehensive income (loss) included within shareholders
equity. Cost is determined using the average cost method.
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 $749 and $672 greater as
of June 30, 2006 and 2005, respectively.
Property, Plant and Equipment. The Company
depreciates its assets over their estimated useful lives. The
estimated useful lives range from 27 to 30 years for
buildings, 7 to 10 years for machinery and equipment, 3 to
7 years for furniture and fixtures, the life of the lease
for leasehold improvements and 5 to 7 years for capital
leases. Plant and equipment are carried at historical cost and
are depreciated using primarily the straight-line method. Repair
and maintenance expenditures are expensed as incurred.
Depreciation expense amounted to $970, $1,165 and $1,231 for the
fiscal years ended June 30, 2006, 2005 and 2004,
respectively.
Long-lived Assets. Whenever events or changes
in circumstances indicate that the carrying amount of an asset
may not be recoverable, the Company evaluates the basis of its
long-lived assets based on expectations of undiscounted cash
flows related to those assets. In accordance with Statement of
Financial Accounting Standards (SFAS) No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets, the Company believes that no impairment of its
long-lived assets existed at June 30, 2006.
Stock Based Compensation. Effective
July 1, 2005, the Company adopted the provisions of
Statement of Financial Accounting Standards (SFAS)
No. 123(R), Share-Based Payment
(SFAS 123(R)). The Company elected to adopt the modified
prospective application method provided by SFAS 123(R).
Under the modified prospective method the Company will recognize
stock-based compensation expense from July 1, 2005 to new
awards from and after the adoption date and to any unvested
employee awards as of the adoption date. The Company previously
applied Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and
related interpretations and provided the required pro forma
disclosures of SFAS No. 123, Accounting for
Stock-Based Compensation (SFAS 123). As all
previously issued stock option awards granted under the plans
had an exercise price equal to the market value of the
underlying common stock at the date of grant, no compensation
costs related to stock option grants were recognized prior to
July 1, 2005.
Stock-based compensation represents the cost related to
stock-based awards granted to employees. The Company measures
stock-based compensation cost at grant date, based on the
estimated fair value of the award, and recognizes the cost as
expense on a straight-line basis (net of estimated forfeitures)
over the
32
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in
thousands except for share and per share data)
employee requisite service period. The Company estimates the
fair value of stock options using a Black-Scholes valuation
model. The Company typically issues new shares upon share option
exercise. The Company records deferred tax assets for awards
that result in deductions on the Companys income tax
returns, based on the amount of compensation cost recognized and
the Companys statutory tax rate in the jurisdiction in
which it will receive a deduction. Differences between the
deferred tax assets recognized for financial reporting purposes
and the actual tax deduction reported on the Companys
income tax return will be recorded in Additional Paid-in Capital
(if the tax deduction exceeds the deferred tax asset) or in the
Consolidated Statement of Operations (if the deferred tax asset
exceeds the tax deduction and no additional paid-in capital
exists from previous awards).
Goodwill and Other Intangible Assets. Goodwill
is tested for impairment at the reporting unit level at least
annually, by determining the fair value utilizing discounted
cash flows of the reporting unit and comparing the fair value
with its recorded book value. A reporting unit is the lowest
level of an entity that is a business and can be distinguished
from other activities, operations, and assets of the entity. If,
during the annual impairment review, the book value of the
reporting unit exceeds the fair value, the implied fair value of
the reporting units goodwill is compared with the carrying
amount of the units goodwill. If the carrying amount
exceeds the implied fair value, goodwill is written down to its
implied fair value. SFAS No. 142 requires management
to estimate the fair value of each reporting unit, as well as
the fair value of the assets and liabilities of each reporting
unit, other than goodwill. The implied fair value of goodwill is
determined as the difference between the fair value of a
reporting unit, taken as a whole, and the fair value of the
assets and liabilities of such reporting unit. As required by
SFAS No. 142, the Company conducted an initial
impairment assessment as of the July 1, 2001 date of
adoption and determined that no impairment existed. The Company
performed its annual impairment assessment by utilizing a
discounted cash flow model and determined that no impairment
existed as of June 30, 2006.
Other intangible assets include patents, trademarks and
engineering drawings, which are amortized on a straight-line
basis over the estimated useful lives of the related assets,
generally 15 to 20 years. Amortization expense amounted to
$488, $460 and $532 for the fiscal years ended June 30,
2006, 2005 and 2004, respectively.
Income Taxes. Deferred taxes are determined
under the asset and liability approach. Deferred tax assets and
liabilities are recognized on differences between the book and
tax basis of assets and liabilities using presently enacted tax
rates. Further, deferred tax assets are recognized for the
expected benefits of available net operating loss carryforwards,
capital loss carryforwards and foreign tax credit carryforwards.
A valuation allowance is recorded to reduce a deferred tax asset
to an amount, which the Company expects to realize in the
future. The Company continually reviews the adequacy of the
valuation allowance and recognizes these benefits only as
reassessment indicates that it is more likely than not that
these benefits will be realized. In addition, the Company
continuously evaluates its tax contingencies and recognizes a
liability when it believes that it is probable that a liability
exists and is estimable.
Fair Value Disclosure of Financial
Instruments. The Companys financial
instruments consist of cash, short-term securities, accounts
receivable, notes receivable, marketable securities, capital
lease obligations, accounts payable, notes payable, other short
and long-term borrowings, and derivative financial instruments.
The current carrying amount of these instruments approximates
fair market value.
Warranty. The Companys standard
contractual warranty provisions are to repair or replace, at the
Companys option, a 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 within the
33
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in
thousands except for share and per share data)
Company. Hence, the Company accrues estimated warranty costs at
the time of sale and is included in Cost of goods
sold. In addition, should the Company become aware of a
specific potential warranty claim, a specific charge is recorded
and accounted for separately from the percent of revenue
discussed above. The Company has accrued estimated future
warranty and customer support obligations of $3,049 and $2,840
at June 30, 2006 and 2005, respectively, which are included
in Other accounts payable and accrued liabilities
(see Note 17).
Revenue Recognition. The Companys
products are sold with terms and conditions, which vary
depending on particular cultural and business environments in
which the Company operates globally. The Companys standard
payment terms for equipment include a deposit to be received
with the customer order, progress payments until equipment is
shipped and a portion of the balance due within a set number of
days following shipment. Freight terms are FOB shipping dock
with risk of loss passing to the purchaser at the time of
shipment. Installation services are provided to the customer on
an as needed basis and are contracted for separately. If
non-standard terms are negotiated, the impact of the terms of
shipment and contractual installation requirements are
determined on an individual contract basis. In the case of
non-standard terms, revenue is not recognized until, at a
minimum, title and risk of loss have passed to the customer, and
the customer is obligated to pay. If a loss should occur in
transit, the Company is not responsible for, and does not
administer insurance claims unless the terms are FOB
destination. The customer is not contractually eligible for any
refund of the purchase price, or right of return of the
contracted product, except if the product fails to meet
published product specifications and the Company fails to
perform its obligations under product warranty terms. When
installation services are a contractual element, and included in
the purchase price of the product, the revenue associated with
installing the product is generally inconsequential to the total
revenue stream. The Company recognizes revenue for the total
sales price and accrues the cost of installing the product based
on the Companys historical installation costs. The terms
of sale are generally on a purchase order basis and as such do
not contain formal product acceptance clauses. On certain large
orders, usually in the newspaper equipment market, a separately
negotiated contract is used to establish the terms of sale. In
such cases, the Company recognizes revenue only after all
acceptance criteria, if any, have been satisfied. In addition,
collection of sales price is reasonably assured prior to the
Company recognizing revenue.
The Company uses distributors to assist in the sales function.
In these cases, the Company does not recognize revenue until
title for the equipment and risk of loss has passed to the
ultimate customer, who then becomes obligated to pay with no
right of return. Otherwise, the equipment is reported as a part
of the Companys inventory on consignment and no revenue is
reported.
Research and Development and
Engineering. Research, development and
engineering costs are expensed as incurred.
Earnings (Loss) Per Share. Basic earnings per
share is computed by dividing net income by the weighted average
number of common shares outstanding during the period. Diluted
earnings per share is similar to basic earnings per share except
that it reflects the potential dilution that could occur if
dilutive securities, such as stock options, were exercised or
converted into common shares or resulted in the issuance of
common shares that then shared in the earnings of the Company.
Comprehensive Income (Loss). As shown in the
Statement of Changes in Shareholders Equity, comprehensive
income (loss) is a measure of net income (loss) and all other
changes in equity of the Company that result from recognized
transactions and other events of the period other than
transactions with shareholders.
34
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in
thousands except for share and per share data)
Use of Estimates. The preparation of financial
statements in conformity with accounting principles generally
accepted in the United States of America 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. The most significant assumptions and estimates relate to
the determination of accrued expenses including warranty,
accounts receivable and inventory valuations, useful lives of
assets and deferred tax asset valuations. Actual results could
differ from those estimates.
Royalty income. The Company owns a number of
patents and patent applications relating to Baldwins
products, some of which provide royalty income to the Company.
Patented products represent a significant portion of the
Companys net sales for all periods presented. The
Companys patents expire at different times during the next
twenty years; however, one group of patents, which provided for
the Companys royalty income, expired in February 2005. The
expiration of patents in the near future, in general, has not
and is not expected to have a material adverse effect on the
Companys net sales; however, royalty income and cash flows
are expected to be negatively impacted upon the expiration of
the aforementioned group of patents. 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.
New Accounting Pronouncements. As more fully
described in Notes 2 and 11 to the Consolidated Financial
Statements, the Company adopted SFAS 123 (revised 2004),
Share-Based Payment (SFAS 123(R)), on
July 1, 2005. This Statement requires that all stock-based
compensation, including grants of employee stock options, be
accounted for using the fair value-based method.
SFAS 123(R) became effective for the Company for fiscal
year beginning July 1, 2005. The Company elected to adopt
SFAS 123(R) using the modified perspective method.
In July 2006, the FASB issued FIN 48, Accounting for
Uncertainty in Income Taxes. FIN 48 addresses the
accounting and disclosure of uncertain tax positions. The
Company will adopt FIN 48 on July 1, 2007, and is
evaluating the impact, if any, that FIN 48 will have on the
financial statements.
FASB Statement No. 158, Employers Accounting for
Defined Benefit Pension and Other Postretirement Plans, is
expected to be issued in September 2006. The Company is
evaluating the impact on its financial statements.
No other new accounting pronouncement issued or effective during
the fiscal year has had or is expected to have a material impact
on the consolidated financial statements.
|
|
Note 3
|
Accumulated Other
Comprehensive Income (Loss):
|
Accumulated Other Comprehensive Income (Loss) (OCI)
is comprised of various items, which affect equity that result
from recognized transactions and other economic events other
than transactions
35
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in
thousands except for share and per share data)
with owners in their capacity as owners. Accumulated other
comprehensive income (loss) consists of the following:
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(in thousands)
|
|
|
Cumulative translation adjustment
|
|
$
|
2,588
|
|
|
$
|
2,407
|
|
Unrealized gain (loss) on
investments, net of tax
|
|
|
109
|
|
|
|
40
|
|
Minimum pension liability, net of
tax
|
|
|
(110
|
)
|
|
|
(80
|
)
|
Unrealized gain (loss) on forward
contracts
|
|
|
39
|
|
|
|
(35
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,626
|
|
|
$
|
2,332
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 4
|
Earnings per
Share:
|
The following represents a reconciliation from basic earnings
per share to diluted earnings per share. Options to purchase
321, 865,500 and 350,000 shares of common stock were
outstanding at June 30, 2006, June 30, 2005 and
June 30, 2004, respectively but were not included in the
computation of diluted earnings per share because the effect
would be antidilutive.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(in thousands, except per
|
|
|
|
share data)
|
|
|
Determination of
shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding
|
|
|
14,966
|
|
|
|
14,899
|
|
|
|
15,001
|
|
Assumed conversion of dilutive
stock options and awards
|
|
|
747
|
|
|
|
406
|
|
|
|
285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted average common shares
outstanding
|
|
|
15,713
|
|
|
|
15,305
|
|
|
|
15,286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per common
share
|
|
$
|
0.42
|
|
|
$
|
0.34
|
|
|
$
|
0.47
|
|
Diluted earnings (loss) per common
share
|
|
$
|
0.40
|
|
|
$
|
0.33
|
|
|
$
|
0.46
|
|
36
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in
thousands except for share and per share data)
|
|
Note 5
|
Business Segment
Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30,
|
|
Geographic
information:
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(in thousands)
|
|
|
Sales by major country:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
30,061
|
|
|
$
|
24,562
|
|
|
$
|
25,080
|
|
Japan
|
|
|
52,027
|
|
|
|
61,061
|
|
|
|
56,997
|
|
Germany
|
|
|
53,644
|
|
|
|
50,382
|
|
|
|
42,944
|
|
Sweden
|
|
|
21,270
|
|
|
|
15,708
|
|
|
|
14,030
|
|
All other foreign
|
|
|
22,378
|
|
|
|
21,472
|
|
|
|
19,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales by major country
|
|
$
|
179,380
|
|
|
$
|
173,185
|
|
|
$
|
158,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years June 30,
|
|
Long-lived assets by major
country:
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(in thousands)
|
|
|
United States
|
|
$
|
708
|
|
|
$
|
761
|
|
|
$
|
1,575
|
|
Japan
|
|
|
670
|
|
|
|
297
|
|
|
|
429
|
|
Germany
|
|
|
724
|
|
|
|
680
|
|
|
|
1,066
|
|
Sweden
|
|
|
1,964
|
|
|
|
1,769
|
|
|
|
2,061
|
|
All other foreign
|
|
|
194
|
|
|
|
189
|
|
|
|
204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-lived assets by major
country
|
|
$
|
4,260
|
|
|
$
|
3,696
|
|
|
$
|
5,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets primarily includes the net book value of
Property, plant and equipment and other tangible
assets.
Inventories, net of reserve, consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended June 30, 2006
|
|
|
|
Domestic
|
|
|
Foreign
|
|
|
Total
|
|
|
|
(in thousands)
|
|
|
Raw materials
|
|
$
|
3,734
|
|
|
$
|
7,551
|
|
|
$
|
11,285
|
|
In process
|
|
|
117
|
|
|
|
4,119
|
|
|
|
4,236
|
|
Finished goods
|
|
|
2,422
|
|
|
|
4,714
|
|
|
|
7,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,273
|
|
|
$
|
16,384
|
|
|
$
|
22,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in
thousands except for share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended June 30, 2005
|
|
|
|
Domestic
|
|
|
Foreign
|
|
|
Total
|
|
|
|
(in thousands)
|
|
|
Raw materials
|
|
$
|
3,997
|
|
|
$
|
7,456
|
|
|
$
|
11,453
|
|
In process
|
|
|
16
|
|
|
|
4,393
|
|
|
|
4,409
|
|
Finished goods
|
|
|
1,919
|
|
|
|
4,974
|
|
|
|
6,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,932
|
|
|
$
|
16,823
|
|
|
$
|
22,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign inventories increased by $588 (decreased by $253 in
2005) due to currency translation rates.
|
|
|
|
|
|
|
|
|
|
|
Rate
|
|
|
Amount
|
|
|
|
(in thousands)
|
|
|
Loans Payable at June 30,
2006:
|
|
|
|
|
|
|
|
|
Foreign subsidiaries
|
|
|
2.94% (average
|
)
|
|
$
|
2,622
|
|
|
|
|
|
|
|
|
|
|
Loans Payable at June 30,
2005:
|
|
|
|
|
|
|
|
|
Foreign subsidiaries
|
|
|
3.16% (average
|
)
|
|
$
|
2,705
|
|
|
|
|
|
|
|
|
|
|
The maximum amount of loans payable outstanding during the year
ended June 30, 2006 was $2,710 ($2,929 in 2005). Average
interest rates are weighted by month and reflect the monthly
amount of short-term borrowing in use and the respective rates
of interest thereon. The majority of the loans are
uncollateralized, however, certain of these loans are
collateralized by the current assets associated with the foreign
subsidiaries where the loans are drawn.
38
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in
thousands except for share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended
|
|
|
For the Year Ended
|
|
|
|
June 30, 2006
|
|
|
June 30, 2005
|
|
|
|
Current
|
|
|
Long-Term
|
|
|
Current
|
|
|
Long-Term
|
|
|
|
(in thousands)
|
|
|
(in thousands)
|
|
|
Revolving Credit Facility due
October 1, 2008, interest rate 5.525% plus three-month
euribor rate (2.153% at June 30)(a)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
11,504
|
|
Revolving Credit Facility due
October 1, 2008, interest rate 3.775% plus three-month
euribor rate (2.637% at June 30)(a)
|
|
|
|
|
|
|
6,560
|
|
|
|
|
|
|
|
|
|
Term loan payable by foreign
subsidiary due September 2008, interest rate 1.81%(c)
|
|
|
291
|
|
|
|
364
|
|
|
|
|
|
|
|
|
|
Term loan payable by foreign
subsidiary due December 8, 2006, interest rate 1.5%(b)
|
|
|
437
|
|
|
|
|
|
|
|
902
|
|
|
|
450
|
|
Note payable by foreign subsidiary
through 2008, interest rate 6.45%
|
|
|
125
|
|
|
|
156
|
|
|
|
115
|
|
|
|
259
|
|
Notes payable by foreign
subsidiary through February 2007, interest rates ranging from
4.58% to 4.67%
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
853
|
|
|
$
|
7,080
|
|
|
$
|
1,033
|
|
|
$
|
12,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
The Companys primary source of external financing is the
Credit Agreement and its amendments (the Credit
Agreement) with Maple Bank GmbH (Maple or
Lender). |
Effective July 1, 2005 the Credit Agreement with Maple was
amended (the second amendment). This amendment reduced the
interest rates for the fiscal year ended June 30, 2006.
Borrowings under the credit facility are subject to a borrowing
base and bear interest at a rate equal to the three-month
Eurodollar rate (as defined in the Credit Agreement) plus:
(i) 3.375% (5.125% for the fiscal year ended June 30,
2005) for loans denominated in U.S. dollars and
(ii) 3.775% (5.525% for the fiscal year ended June 30,
2005) for loans denominated in Euros.
The credit facility is collateralized by substantially all of
the accounts and notes receivable of the Company and a portion
of the Companys inventory up to a maximum amount of
$10,000. The Credit Agreement does not require the Company to
meet any financial covenants, except for a limitation on annual
capital expenditures, for which the Company received a waiver
for the fiscal year ended June 30, 2006, however, it
contains a material adverse effect clause, which provides that
Maple would not be obligated to fund any loan, convert or
continue any loan as a LIBOR loan or issue any new letters of
credit in the event of a material adverse effect. Management
does not anticipate that such an event will occur; however,
there can be no assurance that such an event will not occur. In
addition, the Credit Agreement granted to the lender an option
to acquire a maximum of $5,000 of equity securities (as defined
in the agreement) should the Company choose to issue any such
equity securities.
|
|
(b) |
Yen 300,000 term loan (approximately $2,298), which matures in
December 2006 (the Japanese Term Loan). The Japanese
Term Loan is subject to semi-annual principal payments of YEN
50,000 and bears interest at the Tokyo Inter Bank Offered Rate
(TIBOR) plus 0.75%. The Company
|
39
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in
thousands except for share and per share data)
|
|
|
received a waiver from Maple in connection with this loan, and
received the proceeds in December 2003.
|
|
|
(c) |
Yen 100,000
3-year term
loan (approximately $882). Quarterly principal payment of Yen
8,333, interest rate at Tokyo Inter Bank offered rate (TIBOR)
plus .075%. The Company entered into an interest rate swap that
converts variable rate payable on the loan to fixed rate of
1.81% and has the same maturity date at the term loan.
|
|
|
(d) |
Note is collateralized by buildings as outlined in the indenture
relating to this note.
|
The Company maintains relationships with both foreign and
domestic banks, which combined have extended credit facilities
to the Company totaling $35,744 as of June 30, 2006,
including amounts available under the Maple Revolver. As of
June 30, 2006, the Company had $14,075 outstanding under
these credit facilities including $10,080 (including Letters of
Credit) under the Maple Revolver and Term Loan.
Maturities of long-term debt in each fiscal year ending after
June 30, 2006 are as follows:
|
|
|
|
Fiscal Year Ending
June 30,
|
|
(in thousands)
|
|
2007
|
|
$
|
853
|
2008
|
|
|
417
|
2009
|
|
|
6,663
|
2010
|
|
|
|
2011
|
|
|
|
2012 and thereafter
|
|
|
|
|
|
|
|
|
|
$
|
7,933
|
|
|
|
|
|
|
Note 9
|
Taxes on
Income:
|
Income (loss) before income taxes and the (benefit) provision
for income taxes are comprised of:
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30,
|
|
|
2006
|
|
2005
|
|
2004
|
|
|
(in thousands)
|
|
Income (loss) before income taxes:
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
1,184
|
|
$
|
1,383
|
|
$
|
749
|
Foreign
|
|
|
8,506
|
|
|
7,336
|
|
|
4,564
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,690
|
|
$
|
8,719
|
|
$
|
5,313
|
|
|
|
|
|
|
|
|
|
|
40
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in
thousands except for share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(in thousands)
|
|
|
(Benefit) provision for income
taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Currently payable:
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
(274
|
)
|
|
$
|
(55
|
)
|
|
$
|
19
|
|
Foreign
|
|
|
1,200
|
|
|
|
2,434
|
|
|
|
2,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
926
|
|
|
|
2,379
|
|
|
|
2,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
2,506
|
|
|
|
1,305
|
|
|
|
(4,285
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,506
|
|
|
|
1,305
|
|
|
|
(4,285
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income (benefit) tax
provision
|
|
$
|
3,432
|
|
|
$
|
3,684
|
|
|
$
|
(1,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes are provided on temporary differences
between the financial reporting basis and tax basis of the
Companys assets and liabilities. The principal temporary
differences which give rise to deferred tax assets and
liabilities at June 30, 2006 and 2005 are as follows:
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(in thousands)
|
|
|
Deferred tax assets
(liabilities):
|
|
|
|
|
|
|
|
|
Foreign tax credit carryforwards
|
|
$
|
2,476
|
|
|
$
|
2,476
|
|
Foreign net operating loss
carryforwards
|
|
|
15,376
|
|
|
|
17,112
|
|
Domestic net operating loss
carryforwards
|
|
|
3,376
|
|
|
|
5,606
|
|
Capital loss carryforwards
|
|
|
209
|
|
|
|
308
|
|
Inventories
|
|
|
849
|
|
|
|
1,776
|
|
Pension/deferred compensation
|
|
|
2,334
|
|
|
|
2,401
|
|
Other, deferred tax assets,
individually less than 5%
|
|
|
2,258
|
|
|
|
2,087
|
|
Other deferred tax liabilities,
individually less than 5%
|
|
|
(154
|
)
|
|
|
(432
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
|
26,724
|
|
|
|
31,334
|
|
Valuation allowance
|
|
|
(18,140
|
)
|
|
|
(20,295
|
)
|
|
|
|
|
|
|
|
|
|
Total net deferred tax assets
|
|
$
|
8,584
|
|
|
$
|
11,039
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2006, net operating loss carryforwards of
$53,506 and $9,378, respectively, may be available to reduce
future foreign and domestic taxable income. The majority of the
Companys foreign net operating loss (NOL)
carry-forwards have an indefinite carry-forward period, while
the domestic NOLs begin to expire in June 2022. In addition, as
of June 30, 2005, the Company has indefinite foreign
capital loss carry-forwards available in the amount of $698.
41
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in
thousands except for share and per share data)
The Company establishes valuation allowances in accordance with
the provisions of SFAS No. 109, Accounting for
Income Taxes. The change in the valuation allowance for
the period ended June 30, 2006 reflects utilization of net
operating losses and other balance sheet changes for deferred
tax assets and liabilities, primarily in the U.S., which carry a
full valuation allowance.
The Company has not had to provide for income taxes on $27,857
of cumulative undistributed earnings of subsidiaries outside the
United States because of the Companys intention to
indefinitely reinvest those earnings.
The Company is subject to ongoing tax examinations and
assessments in various jurisdictions. Accordingly, the Company
provides for additional tax expense based upon the probable
outcomes of such matters. In addition, when applicable, the
Company adjusts the previously recorded tax expense to reflect
examination results.
The reconciliation of the computed expected
provision (determined by applying the United States Federal
statutory income tax rate of 34% to income before income taxes)
to the actual tax provision is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(in thousands)
|
|
|
Computed expected tax
benefit
|
|
$
|
3,295
|
|
|
$
|
2,964
|
|
|
$
|
1,807
|
|
Permanent differences
|
|
|
718
|
|
|
|
3,162
|
|
|
|
2,190
|
|
Foreign withholding tax
|
|
|
|
|
|
|
|
|
|
|
332
|
|
Foreign income taxed at rates
other than the U.S. statutory rate
|
|
|
153
|
|
|
|
467
|
|
|
|
100
|
|
Change in deferred tax asset
valuation allowance, net of changes in other reserves
|
|
|
(757
|
)
|
|
|
(2,949
|
)
|
|
|
(8,463
|
)
|
Expiration of foreign tax credits
and capital loss carryforwards
|
|
|
|
|
|
|
|
|
|
|
2,395
|
|
Other reconciling items
|
|
|
23
|
|
|
|
40
|
|
|
|
(34
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax provision
|
|
$
|
3,432
|
|
|
$
|
3,684
|
|
|
$
|
(1,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Except with respect to the election or removal of Directors, and
certain other matters with respect to which Delaware law
requires each class to vote as a separate class, the holders of
the Companys Class A Common Stock
(Class A) and Class B Common Stock
(Class B) vote as a single class on all
matters, with each share of Class A having one vote per
share and each share of Class B having ten votes per share.
With respect to the election of Directors, the holders of
Class A, voting as a separate class, are entitled to elect
25% of the total number of Directors (or the nearest higher
whole number) constituting the entire Board of Directors. The
holders of Class B, voting as a separate class, are
entitled to elect the remaining Directors, so long as the number
of outstanding shares of Class B is equal to at least 12.5%
of the number of outstanding shares of both classes of Common
Stock as of the record date of the Companys Annual
Meeting. If the number of outstanding shares of Class B is
less than 12.5% of the total number of outstanding shares of
both classes of Common Stock as of the record date of the
Companys Annual Meeting, the remaining directors are
elected by the holders of both classes of Common Stock voting
together as a single class, with the holders of Class A
having one vote per share and the holders of Class B
42
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in
thousands except for share and per share data)
having ten votes per share. As of June 30, 2006, the number
of outstanding shares of Class B constituted approximately
8.3% of the total number of outstanding shares of both classes
of Common Stock.
Class A has no conversion rights; however, Class B is
convertible into Class A on a
one-for-one
basis. In addition, no dividend in cash or property may be
declared or paid on shares of Class B without a dividend
being declared or paid on shares of Class A of at least
105% of the dividend declared or paid on shares of Class B.
In November 1999, the Company initiated a stock repurchase
program. Under the program, the Company is authorized to utilize
up to $5,000 to repurchase Class A shares. As of
June 30, 2006, 818,300 shares of Class A and
25,000 shares of Class B had been repurchased for
$1,784, of which $1,721 was used to purchase Class A and
$63 was used to purchase Class B under this program. There
was no activity under this repurchase program during the fiscal
year ended June 30, 2006.
|
|
Note 11
|
Stock Based
Compensation:
|
Stock based incentive awards are provided under the terms of the
Companys plans:
The 1986 Stock Option Plan, as amended and restated (the
1986 Plan), allowed for the granting, at fair market
value on the date of grant, of incentive stock options,
non-qualified stock options, and tandem Stock Appreciation
Rights (SARS) to key employees for up to a total of
2,220,000 and 590,000 shares of Class A and
Class B, respectively. All options became exercisable in
three equal annual installments commencing on the second
anniversary of the date of grant. Unexercised options terminate
no later than ten years from the date of grant. The 1986 Plan
was terminated on October 14, 1996; however, outstanding
options under the 1986 Plan continue to be subject to the terms
thereof.
The 1990 Directors Stock Option Plan (the 1990
Plan) provided for the granting, at fair market value on
the date of grant, of non-qualified stock options to purchase up
to a total of 100,000 shares of Class A and
Class B to members of the Companys Board of Directors
who are not employees (Eligible Directors) of the
Company. Grants were made on the third business day subsequent
to each Annual Meeting of Stockholders to each Eligible Director
for 1,000 shares of Class A and Class B in
proportion to the number of shares of each such class then
outstanding. Options granted under the 1990 Plan became
exercisable twelve months after the date of grant. Unexercised
options terminated nine months after termination of service of
an Eligible Director. The 1990 Plan was terminated on
November 12, 1998 in connection with the approval of the
1998 Non-Employee Directors Stock Option Plan (the
1998 Plan); however, outstanding options under the
1990 Plan continue to be subject to the terms thereof.
The 1996 Stock Option Plan, as amended and restated (the
1996 Plan) allows for the granting, at fair market
value on the date of grant, of incentive stock options,
non-qualified stock options, and tandem SARS to employees and
Eligible Directors for up to a total of 1,875,000 shares of
Class A. Terms of grants under the 1996 Plan were similar
to those under the 1986 Plan with regard to the exercise and
termination of options. The 1996 Plan will terminate on
November 18, 2006; however, outstanding options under the
1996 Plan will continue to be subject to the terms thereof.
The 1998 Non-Employee Directors Stock Option Plan provided
for the granting, at fair market value on the date of grant, of
options to Eligible Directors to purchase up to an aggregate of
250,000 shares of Class A. Under the 1998 Plan, each
year, each Eligible Director received a grant of options to
purchase 3,000 shares of Class A. The options vested
one-third per year on each succeeding anniversary of the date of
grant. Unexercised options terminate no later than ten years
from the date of
43
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in
thousands except for share and per share data)
grant. The 1998 Plan was terminated on November 21, 2002;
however, outstanding options under the 1998 Plan will continue
to be subject to the terms thereof.
The 2005 Equity Compensation Plan (the 2005 Plan)
was approved by the Companys Board of Directors and its
stockholders in November 2005. The 2005 Plan provides for the
granting of a variety of awards to the Companys employees,
Eligible Directors and others who provide services to the
Company, including stock-based incentives and cash-based
incentives. The maximum aggregate number of shares that may be
delivered to participants or their beneficiaries pursuant to all
awards granted under the 2005 Plan is 1,200,000. During fiscal
year 2006, an aggregate of 173,666 restrictive stock/units were
issued under the 2005 Equity Compensation Plan. Canceled shares
become available for future grants. Unless otherwise set forth
in an award agreement, awards granted as an option to purchase
shares shall vest in three equal annual installments commencing
on the second anniversary of the date of such grant.
At June 30, 2006, the aggregate number of shares available
for future grants under all the Companys share-based
compensation plans is 1,465,667. Effective with the termination
of the 1996 Stock Option Plan, approximately 309,000 shares
will no longer be available for future grants.
Stock
Options
The following table summarizes activity under the plans during
2006, 2005 and 2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The 1986 Plan
|
|
|
The 1990 Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Option Price
|
|
|
Average Price
|
|
|
|
|
|
|
|
|
Option Price
|
|
|
Average Price
|
|
|
|
Class A
|
|
|
Class B
|
|
|
Range
|
|
|
A
|
|
|
B
|
|
|
Class A
|
|
|
Class B
|
|
|
Range
|
|
|
A
|
|
|
B
|
|
|
Outstanding at June 30, 2003
|
|
|
413,000
|
|
|
|
155,000
|
|
|
$
|
3.00-$6.72
|
|
|
$
|
4.07
|
|
|
$
|
6.52
|
|
|
|
12,524
|
|
|
|
1,476
|
|
|
$
|
2.56-$6.88
|
|
|
$
|
4.59
|
|
|
$
|
5.73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted Canceled
|
|
|
(210,000
|
)
|
|
|
|
|
|
$
|
3.88-$3.94
|
|
|
$
|
3.88
|
|
|
|
|
|
|
|
(1,778
|
)
|
|
|
(222
|
)
|
|
$
|
4.88-$6.09
|
|
|
$
|
4.88
|
|
|
$
|
6.09
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2004
|
|
|
203,000
|
|
|
|
155,000
|
|
|
$
|
3.00-$6.72
|
|
|
$
|
4.28
|
|
|
$
|
6.52
|
|
|
|
10,476
|
|
|
|
1,254
|
|
|
$
|
2.56-$6.88
|
|
|
$
|
4.55
|
|
|
$
|
5.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted Canceled
|
|
|
(20,000
|
)
|
|
|
(50,000
|
)
|
|
$
|
4.88-$6.09
|
|
|
$
|
4.88
|
|
|
$
|
6.09
|
|
|
|
(2,691
|
)
|
|
|
(309
|
)
|
|
$
|
5.00-$6.25
|
|
|
$
|
5.00
|
|
|
$
|
6.25
|
|
Exercised Outstanding at
June 30, 2005
|
|
|
183,000
|
|
|
|
105,000
|
|
|
|
|
|
|
$
|
4.21
|
|
|
$
|
6.72
|
|
|
|
8,055
|
|
|
|
945
|
|
|
|
|
|
|
$
|
4.40
|
|
|
$
|
5.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted Canceled
|
|
|
(97,000
|
)
|
|
|
(105,000
|
)
|
|
$
|
3.00-$5.62
|
|
|
$
|
5.28
|
|
|
$
|
6.72
|
|
|
|
(2,694
|
)
|
|
|
(306
|
)
|
|
$
|
5.50-$6.88
|
|
|
$
|
5.50
|
|
|
$
|
6.88
|
|
Exercised
|
|
|
(46,000
|
)
|
|
|
|
|
|
$
|
3.00
|
|
|
$
|
3.00
|
|
|
|
|
|
|
|
(894
|
)
|
|
|
(106
|
)
|
|
$
|
2.56-$3.20
|
|
|
$
|
2.56
|
|
|
$
|
3.20
|
|
Outstanding at June 30, 2006
|
|
|
40,000
|
|
|
|
0
|
|
|
$
|
3.00
|
|
|
$
|
3.00
|
|
|
|
|
|
|
|
4,467
|
|
|
|
533
|
|
|
$
|
2.56-$6.41
|
|
|
$
|
4.10
|
|
|
$
|
5.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2006
|
|
|
40,000
|
|
|
|
0
|
|
|
$
|
3.00
|
|
|
$
|
3.00
|
|
|
|
|
|
|
|
4,467
|
|
|
|
533
|
|
|
$
|
2.56-$6.41
|
|
|
$
|
4.10
|
|
|
$
|
5.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The 1996 Plan
|
|
|
The 1998 Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Option Price
|
|
|
Average Price
|
|
|
|
|
|
|
|
|
Option Price
|
|
|
Average Price
|
|
|
|
Class A
|
|
|
Class B
|
|
|
Range
|
|
|
A
|
|
|
B
|
|
|
Class A
|
|
|
Class B
|
|
|
Range
|
|
|
A
|
|
|
B
|
|
|
Outstanding at June 30, 2003
|
|
|
654,000
|
|
|
|
0
|
|
|
$
|
0.58-$5.50
|
|
|
$
|
1.78
|
|
|
$
|
0.00
|
|
|
|
48,000
|
|
|
|
0
|
|
|
$
|
1.13-$5.50
|
|
|
$
|
2.56
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
360,000
|
|
|
|
|
|
|
$
|
1.90-$1.93
|
|
|
$
|
1.93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
(40,000
|
)
|
|
|
|
|
|
$
|
1.05-$1.93
|
|
|
$
|
1.59
|
|
|
|
|
|
|
|
(6,000
|
)
|
|
|
|
|
|
$
|
1.50-$5.50
|
|
|
$
|
3.75
|
|
|
|
|
|
Exercised
|
|
|
(22,499
|
)
|
|
|
|
|
|
$
|
1.05-$3.00
|
|
|
$
|
1.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2004
|
|
|
951,501
|
|
|
|
0
|
|
|
$
|
0.58-$5.50
|
|
|
$
|
1.86
|
|
|
$
|
0.00
|
|
|
|
42,000
|
|
|
|
0
|
|
|
$
|
1.13-$5.50
|
|
|
$
|
2.39
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
390,000
|
|
|
|
|
|
|
$
|
3.25-$3.41
|
|
|
$
|
3.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
(22,833
|
)
|
|
|
|
|
|
$
|
0.58-$3.41
|
|
|
$
|
2.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(43,001
|
)
|
|
|
|
|
|
$
|
0.58-$1.05
|
|
|
$
|
0.99
|
|
|
|
|
|
|
|
(3,000
|
)
|
|
|
|
|
|
|
|
|
|
$
|
1.13
|
|
|
|
|
|
Outstanding at June 30, 2005
|
|
|
1,275,667
|
|
|
|
0
|
|
|
$
|
0.58-$5.50
|
|
|
$
|
2.36
|
|
|
$
|
0.00
|
|
|
|
39,000
|
|
|
|
0
|
|
|
$
|
1.13-$5.50
|
|
|
$
|
2.48
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
105,000
|
|
|
|
|
|
|
$
|
4.49
|
|
|
$
|
4.49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
(10,500
|
)
|
|
|
|
|
|
$
|
1.05-$5.50
|
|
|
$
|
2.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in
thousands except for share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The 1996 Plan
|
|
|
The 1998 Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Option Price
|
|
|
Average Price
|
|
|
|
|
|
|
|
|
Option Price
|
|
|
Average Price
|
|
|
|
Class A
|
|
|
Class B
|
|
|
Range
|
|
|
A
|
|
|
B
|
|
|
Class A
|
|
|
Class B
|
|
|
Range
|
|
|
A
|
|
|
B
|
|
|
Exercised
|
|
|
(153,664
|
)
|
|
|
|
|
|
$
|
0.82-$5.50
|
|
|
$
|
1.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2006
|
|
|
1,216,503
|
|
|
|
|
|
|
$
|
0.58-$5.60
|
|
|
$
|
2.61
|
|
|
|
|
|
|
|
39,000
|
|
|
|
0
|
|
|
$
|
1.13-$5.50
|
|
|
$
|
2.48
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2006
|
|
|
476,655
|
|
|
|
0
|
|
|
$
|
0.58-$6.50
|
|
|
$
|
2.06
|
|
|
$
|
0.00
|
|
|
|
39,000
|
|
|
|
0
|
|
|
$
|
1.13-$5.50
|
|
|
$
|
2.48
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value of options exercised during the
period ended June 30, 2006 was $693.
The following table summarizes information regarding stock
options outstanding and exercisable at June 30, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
Number
|
|
|
Weighted
|
|
Range of
|
|
|
Number of
|
|
|
Average
|
|
|
Average
|
|
|
of
|
|
|
Average
|
|
Exercise
|
|
|
Outstanding
|
|
|
Remaining
|
|
|
Exercise
|
|
|
Exercisable
|
|
|
Exercise
|
|
Prices
|
|
|
Options
|
|
|
Contractual Life
|
|
|
Price
|
|
|
Options
|
|
|
Price
|
|
|
$
|
0.58 $3.75
|
|
|
|
1,123,503
|
|
|
|
6.5 years
|
|
|
$
|
2.27
|
|
|
|
488,655
|
|
|
$
|
1.69
|
|
$
|
3.88 $6.88
|
|
|
|
177,000
|
|
|
|
5.6 years
|
|
|
$
|
4.89
|
|
|
|
72,000
|
|
|
$
|
5.49
|
|
The aggregate intrinsic value of outstanding and exercisable
options at June 30, 2006 was $3,606 and $1,806,
respectively.
Total unrecognized compensation costs related to non-vested
stock option awards at June 30, 2006 is $680 and is
expected to be recognized over the weighted average period of
approximately 2.3 years.
Effective July 1, 2005, the Company adopted the provisions
of SFAS No. 123(R), Share Based Payment
for all share based compensation plans, which requires entities
to measure and recognize the cost of employee services received
in exchange for award of equity instruments based on grant date
fair value (see Notes to Consolidated Financial Statements
No. 1). Compensation expense is recognized on a straight
line basis over the requisite service period (generally four
years) of the grant. Prior to fiscal year 2006, the Company
applied the provisions of APB Opinion No. 25
Accounting for Stock Issued to Employees and related
interpretations and provided the required pro forma disclosures
of SFAS 123 Accounting for Stock Based
Compensation.
The Company estimates the fair value of stock options using a
Black-Scholes valuation model, consistent with the provisions of
SFAS 123(R)and Staff Accounting Bulletin 107
(SAB 107). Key inputs and assumptions used to estimate the
fair value of stock options include the grant price of the
award, the expected option term, volatility of the
Companys stock, the risk free rate and the Companys
dividend yield. Estimates for fair value are not intended to
predict actual future events or the value ultimately realized by
employees or other recipients who receive equity awards.
45
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in
thousands except for share and per share data)
The fair value of each stock option grant was estimated at the
date of grant using the Black-Scholes option pricing model. The
following table presents the weighted average assumptions used
for options granted.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
Option term(2)
|
|
|
5
|
|
|
|
5
|
|
|
|
5
|
|
Volatility(1)
|
|
|
56.14
|
|
|
|
101.62
|
|
|
|
104.33
|
|
Risk free rate
|
|
|
4.7
|
|
|
|
3.47
|
|
|
|
3.29
|
|
Dividend yield
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average fair value
|
|
$
|
2.39
|
|
|
$
|
2.61
|
|
|
$
|
1.50
|
|
|
|
|
(1) |
|
Prior to fiscal 2006, expected volatility was based on
historical volatilities over the expected terms. With the
adoption of SFAS 123(R) the Company continues to determine
expected volatility based on historical volatilities but has
incorporated adjustments associated with an unusually volatile
period from its mean-reversion analysis for fiscal years
commencing with 2006. |
|
(2) |
|
The option term is the number of years that the Company
estimates, based on history, that options will be outstanding
prior to exercise. |
Restricted
Stock
During the year ended June 30, 2006, the Company began
issuing restricted stock shares/units which are restricted for a
period of three years from the date of grant. The Company
granted 143,666 and 30,000 restricted stock shares/units
during the year ended June 30, 2006. The market values of
the common stock at the date of grant were $3.79 and
$5.25 per share, respectively. Compensation expense of $125
was recognized during the period ended June 30, 2006. The
aggregate unrecognized compensation costs related to the
non-vested restricted grants at June 30, 2006 was $577 and
is expected to be recognized over a weighted-average period of
approximately 2.5 years.
The following reflects share based compensation costs and the
net income and net income per share effects of the adoption of
SFAS 123(R) for the year ended June 30, 2006 and the
pro forma disclosure effects on net income and net income per
share if the Company had applied the fair value recognition
provisions of SFAS 123 for the years ended June 30,
2005 and 2004. For purposes of pro forma disclosure the
estimated fair value of the options is amortized to expense over
the options vesting period.
46
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in
thousands except for share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30,
|
|
|
|
2006
|
|
|
2005 pro forma
|
|
|
2004 pro forma
|
|
|
|
(in thousands)
|
|
|
Net income as reported
|
|
$
|
6,258
|
|
|
$
|
5,035
|
|
|
$
|
6,986
|
|
Add: stock-based employee
compensation expense included in net income, net of related tax
effects $0 (operating income pre-tax effect $466)
|
|
$
|
466
|
*
|
|
$
|
|
|
|
$
|
|
|
Deduct: stock-based employee
compensation expense determined as if fair value was used for
all years presented, net of related tax effects
|
|
$
|
(466
|
)*
|
|
$
|
(54
|
)
|
|
$
|
(103
|
)
|
Net income
|
|
$
|
6,258
|
|
|
$
|
4,981
|
|
|
$
|
6,883
|
|
Income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic as reported
|
|
$
|
0.42
|
|
|
$
|
0.34
|
|
|
$
|
0.47
|
|
Diluted as reported
|
|
$
|
0.40
|
|
|
$
|
0.33
|
|
|
$
|
0.46
|
|
Basic pro forma
|
|
$
|
0.42
|
|
|
$
|
0.33
|
|
|
$
|
0.46
|
|
Diluted pro forma
|
|
$
|
0.40
|
|
|
$
|
0.33
|
|
|
$
|
0.45
|
|
|
|
* |
includes expense of $191 for unvested options at July 1,
2005, restricted stock/units $125, and $50 for options granted
during fiscal year 2006.
|
Note 12
Supplemental Compensation:
In the U.S., the Company maintains the Baldwin Technology Profit
Sharing and Savings Plan. The Company matches up to 5% of
eligible compensation and the participants interest in the
Companys contribution vest immediately. Participant
contributions are made on a weekly basis, while the
Companys matching contributions are made on a quarterly
basis. Employer contributions charged to income were $169, $131
and $23 respectively for the fiscal years ended June 2006, 2005
and 2004.
The assets of the plan are invested primarily in mutual funds,
money market funds, and Class A Common Stock of the
Company, which constituted approximately 6% of the total assets
of the Plan at June 30, 2006.
Certain subsidiaries and divisions within Europe maintain
pension plans. The assets of the following plans are invested
primarily in insurance contracts, government securities, and
guaranteed investment contracts. Amounts expensed under these
plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(in thousands)
|
|
|
Baldwin Germany GmbH
|
|
$
|
297
|
|
|
$
|
266
|
|
|
$
|
241
|
|
Baldwin IVT AB
|
|
|
34
|
|
|
|
36
|
|
|
|
35
|
|
Baldwin Jimek AB
|
|
|
58
|
|
|
|
64
|
|
|
|
67
|
|
Baldwin UK Ltd.
|
|
|
66
|
|
|
|
61
|
|
|
|
61
|
|
Baldwin Globaltec Ltd.
|
|
|
9
|
|
|
|
9
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expense
|
|
$
|
464
|
|
|
$
|
436
|
|
|
$
|
411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in
thousands except for share and per share data)
The amount of expense relating to the European pension plans is
determined based upon, among other things, the age, salary and
years of service of employees covered by the plans. The
Companys German, English and Swedish subsidiaries make
annual contributions to the plans equal to the amounts accrued
for pension expense.
In Germany, there is currently one pension plan covering two
former employees, and the Companys Japanese subsidiary
maintains a retirement plan covering all employees. These
defined benefit plans provide for benefits, at maturity age, in
lump sum payments on retirement or death or as a disability
pension in case of disability, and are partially funded by
insurance contracts.
The following tables set forth the components of net periodic
benefit costs, the funded status and key actuarial assumptions,
and reconciliations of projected benefit obligations and fair
values of plan assets of the defined benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(in thousands)
|
|
|
Service cost benefits
earned during the year
|
|
$
|
248
|
|
|
$
|
261
|
|
|
$
|
265
|
|
Interest on projected benefit
obligation
|
|
|
46
|
|
|
|
63
|
|
|
|
58
|
|
Annual return on plan assets
|
|
|
(4
|
)
|
|
|
(1
|
)
|
|
|
(2
|
)
|
Amortization of transition
obligation
|
|
|
14
|
|
|
|
14
|
|
|
|
12
|
|
Amortization of net actuarial
(gain)
|
|
|
(23
|
)
|
|
|
(10
|
)
|
|
|
(32
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension expense
|
|
$
|
281
|
|
|
$
|
327
|
|
|
$
|
301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(in thousands)
|
|
|
Funded status (plan assets less
than plan obligations)
|
|
$
|
(1,254
|
)
|
|
$
|
(1,380
|
)
|
|
$
|
(1,658
|
)
|
Unrecognized net loss (gain) from
past experience different from changes in assumptions
|
|
|
170
|
|
|
|
116
|
|
|
|
109
|
|
Unrecognized transition obligation
|
|
|
(4
|
)
|
|
|
9
|
|
|
|
21
|
|
Additional minimum pension
liability
|
|
|
(185
|
)
|
|
|
(123
|
)
|
|
|
(100
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued benefit cost in other long
term liabilities
|
|
$
|
(1,273
|
)
|
|
$
|
(1,378
|
)
|
|
$
|
(1,628
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average actuarial
assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
1.75% 5.00%
|
|
|
|
1.75% 7.50%
|
|
|
|
1.75% 7.50%
|
|
Rate of increase in compensation
levels
|
|
|
0.00% 0.00%
|
|
|
|
0.00% 3.00%
|
|
|
|
0.00% 3.00%
|
|
Expected rate of return on plan
assets
|
|
|
1.00% 4.50%
|
|
|
|
1.00% 7.00%
|
|
|
|
1.00% 7.00%
|
|
48
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in
thousands except for share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(in thousands)
|
|
|
Projected benefit
obligation beginning of year
|
|
$
|
2,454
|
|
|
$
|
2,447
|
|
|
$
|
2,195
|
|
Service cost benefits
earned during the year
|
|
|
248
|
|
|
|
250
|
|
|
|
270
|
|
Interest on projected benefit
obligation
|
|
|
46
|
|
|
|
62
|
|
|
|
58
|
|
Actuarial (gain) loss
|
|
|
35
|
|
|
|
2
|
|
|
|
(12
|
)
|
Benefits paid
|
|
|
(96
|
)
|
|
|
(273
|
)
|
|
|
(272
|
)
|
Foreign currency rate changes
|
|
|
(61
|
)
|
|
|
(34
|
)
|
|
|
208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit
obligation end of year
|
|
$
|
2,626
|
|
|
$
|
2,454
|
|
|
$
|
2,447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(in thousands)
|
|
|
Fair value of plan
assets beginning of year
|
|
$
|
1,074
|
|
|
$
|
789
|
|
|
$
|
718
|
|
Actual return on plan assets
|
|
|
3
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Contributions to the plan
|
|
|
420
|
|
|
|
360
|
|
|
|
275
|
|
Benefits paid
|
|
|
(96
|
)
|
|
|
(60
|
)
|
|
|
(273
|
)
|
Foreign currency rate changes
|
|
|
(29
|
)
|
|
|
(14
|
)
|
|
|
70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan
assets end of year
|
|
$
|
1,372
|
|
|
$
|
1,074
|
|
|
$
|
789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For funded plans with Accumulated Benefit Obligation
(ABO) in excess of the fair value of plan assets,
SFAS No. 87 requires that the Company record on its
consolidated balance sheets a minimum pension liability amount
such that the Companys net pension liability is at least
equal to the amount of the under-funded ABO. Net pension
liability is the excess of pension liabilities over prepaid
pension assets, on the Companys balance sheet. When
recording a minimum pension liability, SFAS No. 87
requires the Company to record a corresponding intangible asset
equal to the amount of any unrecognized prior service cost, with
the remainder, if any, charged to other comprehensive income in
shareholders equity. Therefore, the recording of this
additional minimum pension liability has no impact on the
Companys income from operations. At June 30, 2006,
the Companys Japanese subsidiary, with an ABO of
approximately $2,463, required an additional minimal liability
recognition of $185.
Undiscounted benefit amounts expected to be paid for each of the
next five successive fiscal years and for the aggregate next
five years thereafter are as follows:
|
|
|
|
|
Fiscal Years Ending
June 30,
|
|
Amount
|
|
|
|
(in thousands)
|
|
|
2007
|
|
$
|
148
|
|
2008
|
|
$
|
355
|
|
2009
|
|
$
|
560
|
|
2010
|
|
$
|
236
|
|
2011
|
|
$
|
289
|
|
Aggregate for 2012 through 2015
|
|
$
|
1,481
|
|
49
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in
thousands except for share and per share data)
The amount expected to be contributed by the Company to its
defined benefit pension plans during fiscal year 2007 is
approximately $420.
The Company also has a non-qualified Supplemental Executive
Retirement Plan (SERP). The SERP provides pension benefits to
eligible executives, based on average earnings, years of service
and age at retirement. In March 2006, the Company established a
rabbi trust and contributed $500 to partially fund the SERP. The
total cost of this plan for the years ended June 30, 2006,
2005 and 2004 was $746, $482 and $307, respectively. At
June 30, 2006 and 2005 the benefit obligation in other
long-term liabilities was $3,576 and $2,934, respectively.
Note 13
Commitments and Contingencies:
Future minimum annual lease payments under capital leases are as
follows at June 30, 2006:
|
|
|
|
|
Fiscal Years Ending
June 30,
|
|
Amount
|
|
|
|
(in thousands)
|
|
|
2007
|
|
|
132
|
|
2008
|
|
|
119
|
|
2009
|
|
|
113
|
|
2010
|
|
|
100
|
|
2011
|
|
|
61
|
|
2012
|
|
|
6
|
|
|
|
|
|
|
Present value of minimum lease
payments (net of $36 with interest)
|
|
$
|
531
|
|
|
|
|
|
|
At June 30, 2006, $401 ($78 at June 30, 2005) was
included in Other long-term liabilities representing
the long-term portion of the present value of minimum lease
payments, and $131 ($87 at June 30, 2005) was included
in Other accounts payable and accrued liabilities
representing the current portion of the present value of minimum
lease payments.
During the fiscal year ended June 30, 2003, the Company
entered into an agreement with a strategic advisor to provide
consultation services to the Company as it explored various
financing and strategic alternatives. The agreement, which
provided for a monthly fee to the advisor and a success fee or
termination fee, was terminated during fiscal 2004. For the
fiscal year ended June 30, 2004 and 2003, the Company
expensed, in Other expense (income), net,
approximately $570 and $500, respectively, associated with these
services.
During the fiscal year ended June 30, 2003, the Company
entered into an agreement with a second strategic advisor to
provide consultation services. The agreement was terminated in
June 2003, and the unpaid portion of the contingent transaction
fee was converted into a promissory note payable in the amount
of $412, which bore interest at a rate of 20% per annum.
The promissory note was paid in full during 2004. For the fiscal
year ended June 30, 2003, the Company expensed, in
Other expense (income), net, approximately $564
(including the principal amount related to the promissory note)
associated with these services.
50
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in
thousands except for share and per share data)
Rental expense on operating leases amounted to approximately
$4,602, $4,524 and $4,675 for the years ended June 30,
2006, 2005 and 2004, respectively. Aggregate future annual
rentals under noncancellable operating leases for periods of
more than one year at June 30, 2006 are as follows:
|
|
|
|
|
Fiscal Years Ending
June 30,
|
|
Amount
|
|
|
|
(in thousands)
|
|
|
2007
|
|
$
|
6,266
|
|
2008
|
|
$
|
3,588
|
|
2009
|
|
$
|
2,761
|
|
2010
|
|
$
|
1,796
|
|
2011
|
|
$
|
1,594
|
|
2012 and thereafter
|
|
$
|
9,620
|
|
From time to time, in the ordinary course of business, the
Company is subject to legal proceedings. While it is impossible
to determine the ultimate outcome of such matters, it is
managements opinion that the resolution of any pending
issues will not have a material adverse effect on the
consolidated financial position, cash flows or results of
operations of the Company.
|
|
Note 14
|
Related
Parties:
|
In accordance with the terms of the employment agreement between
the Company and Gerald A. Nathe, Chairman, then President and
Chief Executive Officer of the Company, the Company loaned
Mr. Nathe $1,817 to enable Mr. Nathe to purchase
315,144 shares of Class B from a non-employee
shareholder in November 1993 in exchange for an interest-bearing
recourse demand promissory note for said amount. The note was
collateralized by the shares pursuant to a loan and pledge
agreement between Mr. Nathe and the Company dated
November 30, 1993, as amended and restated on
November 25, 1997.
In February, 2002, the Company amended Mr. Nathes
employment agreement and the loan and pledge agreement, and,
following repayment by Mr. Nathe of a portion of the
principal on the loan, Mr. Nathe issued a substitute
recourse demand promissory note for $1,500, the outstanding
principal balance on the date thereof, with interest payable
annually at an annual rate of 5%. In August, 2002, the Company
amended Mr. Nathes employment agreement, the loan and
pledge agreement, and the promissory note, to evidence reduction
of the outstanding principal and interest due from
Mr. Nathe on the loan by $750 in exchange for an equal
reduction in deferred compensation payments to be made by the
Company to Mr. Nathe. The reduction represented the then
present value of a portion of Mr. Nathes deferred
compensation benefit that had accrued to Mr. Nathe.
Mr. Nathe was responsible for his personal taxes on this
exchange. In February 2006, Mr. Nathe repaid an additional
$50 of principal on the loan and in May 2006, Mr. Nathe
transferred to the Company 121,806 shares of Class B
common stock of the Company in full payment of the unpaid
principal amount of $700 and accrued interest on the note.
The maximum amount of the loan outstanding including interest
during the fiscal years ended June 30, 2006 and 2005 was
$809 and 876, respectively.
Samuel B. Fortenbaugh III, a Director of the Company since
1987, has rendered legal services to the Company since September
2002. During the fiscal year ended June 30, 2006, the
Company paid $86 ($54 for the year ended June 30,
2005) to Mr. Fortenbaugh for legal services rendered.
Prior to September 2002, Mr. Fortenbaugh was a partner of
the law firm of Morgan Lewis & Bockius LLP, which firm
has rendered legal services to the Company since 1980.
51
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in
thousands except for share and per share data)
|
|
Note 15
|
Goodwill and
Other Intangible Assets:
|
The changes in the carrying amount of goodwill for each of the
fiscal years ended June 30, 2006 and 2005 are as follows:
Activity in the fiscal year ended June 30, 2006 was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Accumulated
|
|
|
Net
|
|
|
|
Carrying Amount
|
|
|
Amortization
|
|
|
Book Value
|
|
|
|
(in thousands)
|
|
|
Balance as of June 30, 2005
|
|
$
|
14,378
|
|
|
$
|
3,456
|
|
|
$
|
10,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effects of currency translation
|
|
|
100
|
|
|
|
(37
|
)
|
|
|
137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2006
|
|
$
|
14,478
|
|
|
$
|
3,419
|
|
|
$
|
11,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Activity in the fiscal year ended June 30, 2005 was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Accumulated
|
|
|
Net
|
|
|
|
Carrying Amount
|
|
|
Amortization
|
|
|
Book Value
|
|
|
|
(in thousands)
|
|
|
Balance as of June 30, 2004
|
|
$
|
14,620
|
|
|
$
|
3,516
|
|
|
$
|
11,104
|
|
Effects of currency translation
|
|
|
(242
|
)
|
|
|
(60
|
)
|
|
|
(182
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2005
|
|
$
|
14,378
|
|
|
$
|
3,456
|
|
|
$
|
10,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets subject to amortization at June 30, 2006
were comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2006
|
|
|
As of June 30, 2005
|
|
Amortized Intangible
|
|
Gross
|
|
|
Accumulated
|
|
|
Gross
|
|
|
Accumulated
|
|
Assets:
|
|
Carrying Amount
|
|
|
Amortization
|
|
|
Carrying Amount
|
|
|
Amortization
|
|
|
|
(in thousands)
|
|
|
(in thousands)
|
|
|
Patents and Trademarks
|
|
$
|
7,686
|
|
|
$
|
4,996
|
|
|
$
|
7,120
|
|
|
$
|
4,559
|
|
Other (included in other assets)
|
|
|
1,397
|
|
|
|
778
|
|
|
|
937
|
|
|
|
746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
9,083
|
|
|
$
|
5,774
|
|
|
$
|
8,057
|
|
|
$
|
5,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average life for intangible assets at June 30,
2006 was 12 years and amortization expense for the fiscal
year ended June 30, 2006 was $488, $460 for fiscal year
ended June 30, 2005 and $532 for fiscal year ended
June 30, 2004.
52
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in
thousands except for share and per share data)
Estimated amortization expense for each of the five succeeding
fiscal years is as follows:
|
|
|
|
|
Fiscal Years Ending
June 30,
|
|
Amount
|
|
|
|
(In thousands)
|
|
|
2007
|
|
$
|
462
|
|
2008
|
|
$
|
419
|
|
2009
|
|
$
|
397
|
|
2010
|
|
$
|
380
|
|
2011
|
|
$
|
323
|
|
|
|
Note 16
|
Legal Proceedings
and Settlements:
|
On November 14, 2002, the Dusseldorf Higher Regional Court
(DHRC) announced its judgment in favor of Baldwin in
a patent infringement dispute against its competitor,
technotrans AG (Technotrans). Technotrans filed an
appeal of the DHRC ruling with the German Supreme Court in
Karlsruhe. Technotrans also filed to revoke the Companys
patent with the Federal Patent Court in Munich, Germany. On
July 21, 2004, the German Federal Patent Court upheld the
validity of the Companys patent. Technotrans has also
appealed that judgment to the German Supreme Court in Karlsruhe.
That court has not yet reached a decision on either of those
appeals. No amounts have been recorded in the consolidated
financial statements with regard to the potential contingent
gain from the DHRC judgment. On May 18, 2005, Baldwin
Germany GmbH of Augsburg, Germany, a subsidiary of Baldwin
Technology Company, Inc. filed suit in the Regional Court of
Dusseldorf, Germany against Technotrans, claiming damages of
32,672,592 Euro (approximately $41,000,000) as a result of the
patent infringement. The Dusseldorf Court suspended proceedings
in the damages claim until such time as a decision is reached by
the German Supreme Court in Karlsruhe on the appeal of the DHRC
decision. That appeal has been suspended until the Supreme Court
rules on the invalidity action, which decision is expected some
time in 2007.
On September 3, 2003, Gus A. Paloian, as the Chapter 7
Trustee of the Bankruptcy Estate of GGSI Liquidation, Inc.,
(formerly Goss Graphics Systems, Inc.) filed a complaint in
Federal Bankruptcy Court against Enkel Corporation, a subsidiary
of the Company which prior to the sale of substantially all of
its assets in September 2001, had operations in Illinois. The
complaint seeks to avoid and recover transfers made to or for
the benefit of, and to disallow claims, if any, filed by Enkel
Corporation, claiming the return of an aggregate amount of
$929,421.75 as Transfers made during a
Preference Period on or within ninety (90) days
before GGSI filed a voluntary petition for relief under
Chapter 11 of the Bankruptcy Code on September 10,
2001. The Company believes the claims made by the Trustee are
without merit; however, on August 21, 2006, the parties
reached a settlement in principal under which the Company will
pay $40,000 in exchange for a full release, subject to
finalizing a settlement agreement and approval of the settlement
by the Bankruptcy Court.
Note 17
Warranty Costs:
The Companys standard contractual warranty provisions are
to repair or replace, at the Companys 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 within the Company. Hence,
the Company accrues estimated warranty costs, reported in
other accounts payable and accrued
53
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in
thousands except for share and per share data)
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 separate from the
percent of revenue discussed above.
|
|
|
|
|
|
|
Warranty Amount
|
|
|
|
(in thousands)
|
|
|
Warranty reserve at June 30,
2004
|
|
$
|
2,714
|
|
Additional warranty expense
accruals
|
|
|
4,711
|
|
Payments against reserve
|
|
|
(4,514
|
)
|
Effects of currency rate
fluctuations
|
|
|
(71
|
)
|
|
|
|
|
|
Warranty reserve at June 30,
2005
|
|
$
|
2,840
|
|
Additional warranty expense
accruals
|
|
|
3,944
|
|
Payments against reserve
|
|
|
(3,897
|
)
|
Effects of currency rate
fluctuations
|
|
|
162
|
|
|
|
|
|
|
Warranty reserve at June 30,
2006
|
|
$
|
3,049
|
|
|
|
|
|
|
Note 18
Quarterly Financial Data (unaudited):
Summarized quarterly financial data for the fiscal years ended
June 30, 2006 and 2005 are as follows (in thousands, except
per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
Fiscal Year Ended June 30,
2006
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Net sales
|
|
$
|
42,645
|
|
|
$
|
43,826
|
|
|
$
|
45,447
|
|
|
$
|
47,462
|
|
Cost of goods sold
|
|
|
28,589
|
|
|
|
29,040
|
|
|
|
30,384
|
|
|
|
31,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
14,056
|
|
|
|
14,786
|
|
|
|
15,063
|
|
|
|
16,403
|
|
Operating expenses
|
|
|
11,902
|
|
|
|
12,421
|
|
|
|
12,143
|
|
|
|
13,241
|
|
Interest expense, net(1)
|
|
|
298
|
|
|
|
249
|
|
|
|
256
|
|
|
|
271
|
|
Other (income) expense, net(2)
|
|
|
(161
|
)
|
|
|
(21
|
)
|
|
|
(74
|
)
|
|
|
93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
2,017
|
|
|
|
2,137
|
|
|
|
2,738
|
|
|
|
2,798
|
|
Provision for income taxes
|
|
|
824
|
|
|
|
754
|
|
|
|
993
|
|
|
|
861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,193
|
|
|
$
|
1,383
|
|
|
$
|
1,745
|
|
|
$
|
1,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
basic
|
|
$
|
0.08
|
|
|
$
|
0.09
|
|
|
$
|
0.12
|
|
|
$
|
0.13
|
|
Net income per share
diluted
|
|
$
|
0.08
|
|
|
$
|
0.09
|
|
|
$
|
0.11
|
|
|
$
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
14,923
|
|
|
|
14,953
|
|
|
|
14,966
|
|
|
|
15,022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
15,474
|
|
|
|
15,666
|
|
|
|
15,806
|
|
|
|
15,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in
thousands except for share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
Fiscal Year Ended June 30,
2005
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Net sales
|
|
$
|
39,997
|
|
|
$
|
41,232
|
|
|
$
|
43,673
|
|
|
$
|
48,283
|
|
Cost of goods sold
|
|
|
27,906
|
|
|
|
28,525
|
|
|
|
29,232
|
|
|
|
30,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit(4)
|
|
|
12,091
|
|
|
|
12,707
|
|
|
|
14,441
|
|
|
|
17,998
|
|
Operating expenses
|
|
|
10,691
|
|
|
|
11,446
|
|
|
|
12,345
|
|
|
|
13,727
|
|
Restructuring charges(3)
|
|
|
|
|
|
|
|
|
|
|
(338
|
)
|
|
|
|
|
Interest expense, net(1)
|
|
|
929
|
|
|
|
541
|
|
|
|
436
|
|
|
|
401
|
|
Other (income) expense, net(2)
|
|
|
(767
|
)
|
|
|
(626
|
)
|
|
|
(375
|
)
|
|
|
108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
1,238
|
|
|
|
1,346
|
|
|
|
2,373
|
|
|
|
3,762
|
|
Provision for income taxes
|
|
|
519
|
|
|
|
558
|
|
|
|
864
|
|
|
|
1,743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
719
|
|
|
$
|
788
|
|
|
$
|
1,509
|
|
|
$
|
2,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
basic
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
0.10
|
|
|
$
|
0.14
|
|
Net income per share
diluted
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
0.10
|
|
|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
14,873
|
|
|
|
14,901
|
|
|
|
14,911
|
|
|
|
14,911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
15,351
|
|
|
|
15,319
|
|
|
|
15,274
|
|
|
|
15,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Interest expense reflects the amended credit facility with Maple
and lower overall debt levels.
|
|
(2)
|
Other (income) expenses reflects reduced royalty income from
patents which expired in February 2005.
|
|
(3)
|
Reversal of restructuring charges relates to previously accrued
expenses, which will not be incurred due to relocation of the
Companys corporate offices during the third quarter.
|
|
(4)
|
Fourth quarter gross margin was favorably impacted 1% due to
customer cost reimbursement for an order which was substantially
modified.
|
55
|
|
Item 9.
|
Changes in and
Disagreements with Accountants on Accounting and Financial
Disclosure
|
There have been no
Form 8-Ks
filed within 24 months prior to the date of the most recent
financial statements reporting a change of accountants
and/or
reporting a disagreement on any matter of accounting principle
or financial statement disclosure.
|
|
Item 9A.
|
Controls and
Procedures
|
The Company maintains disclosure controls and procedures (as
defined in
Rule 13a-15(e))
designed to ensure that the information required to be disclosed
in the reports that the Company files or submits under the
Securities Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Securities and
Exchange Commissions rules and forms.
The Companys management, with the participation of the
Companys Chief Executive Officer and Chief Financial
Officer, evaluated the effectiveness of these disclosure
controls and procedures as of the end of our fiscal year
June 30, 2006, the period covered by this report. Based on
that evaluation, the Companys Chief Executive Officer and
Chief Financial Officer have concluded that the Companys
disclosure controls and procedures are effective. No changes
were made to the Companys internal control over financial
reporting during the year ended June 30, 2006, that have
materially effected, or are reasonably likely to materially
effect, the Companys internal controls over financial
reporting.
Section 404 of the Sarbanes-Oxley Act of 2002 (the
Act) will require the Company to include an internal
control report from management in its annual report for the
fiscal year ending June 30, 2007 (2008 if the Company
continues as a non-accelerated filer at December 31,
2006) and in subsequent annual reports thereafter. The
internal control report must include the following: (1) a
statement of managements responsibility for establishing
and maintaining adequate internal control over financial
reporting, (2) a statement identifying the framework used
by management to conduct the required evaluation of the
effectiveness of the Companys internal control over
financial reporting, (3) managements assessment of
the effectiveness of the Companys internal control over
financial reporting as of June 30, 2007 (2008 if the
Company continues as a non-accelerated filer at
December 31, 2006), including a statement as to whether or
not internal control over financial reporting is effective, and
(4) a statement that the Companys independent
registered public accounting firm has issued an attestation
report on managements assessment of internal control over
financial reporting.
Management acknowledges its responsibility for establishing and
maintaining internal controls over financial reporting and seeks
to continually improve those controls. In addition, in order to
achieve compliance with Section 404 of the Act within the
required timeframe, the Company has initiated a process to
document and evaluate and test its internal controls over
financial reporting.
|
|
Item 9B.
|
Other
Information
|
None.
PART III
Items 10, 11,
12, 13
Information required under these items is contained in the
Companys 2006 Proxy Statement, which will be filed with
the Securities and Exchange Commission within 120 days
after the close of the Companys fiscal year end;
accordingly, this information is therefore incorporated herein
by reference.
56
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
Information concerning fees billed by PricewaterhouseCoopers
LLP, Baldwins independent registered public accounting
firm, during the fiscal years ended June 30, 2006 and 2005
is incorporated herein by reference to Baldwins Proxy
Statement.
PART IV
|
|
Item 15.
|
Exhibits,
Financial Statement Schedules
|
(a)(1) Financial statements required by Item 15 are listed
in the index included in Item 8 of Part II.
(a)(2) The following is a list of financial statement schedules
filed as part of this Report:
|
|
|
|
|
Page
|
|
Report of Independent Registered
Public Accounting Firm on Financial Statement Schedule
|
|
61
|
Schedule II
Valuation and Qualifying Accounts
|
|
62
|
All other schedules are omitted because they are not applicable
or the required information is shown in the financial statements
or notes thereto.
(a)(3) The following is a list of all exhibits filed as part of
this Report:
INDEX TO
EXHIBITS
|
|
|
|
|
|
3
|
.1
|
|
Restated Certificate of
Incorporation of the Company as filed with the Secretary of
State of the State of Delaware on November 4, 1986. Filed
as Exhibit 3.1 to the Companys registration statement
(No. 33-10028)
on
Form S-1
and incorporated herein by reference.
|
|
3
|
.2
|
|
Certificate of Amendment of the
Certificate of Incorporation of the Company as filed with the
Secretary of State of the State of Delaware on November 21,
1988. Filed as Exhibit 3.2 to the Companys
Registration Statement
(No. 33-26121)
on
Form S-1
and incorporated herein by reference.
|
|
3
|
.3
|
|
Certificate of Amendment of the
Certificate of Incorporation of the Company as filed with the
Secretary of State of the State of Delaware on November 20,
1990. Filed as Exhibit 3.3 to the Companys Report on
Form 10-K
for the fiscal year ended June 30, 1991 and incorporated
herein by reference.
|
|
3
|
.4
|
|
By-Laws of the Company. Filed as
Exhibit 3.2 to the Companys Registration Statement
(No. 33-10028)
on
Form S-1
and incorporated herein by reference.
|
|
10
|
.1*
|
|
Baldwin Technology Company, Inc.
Amended and Restated 1986 Stock Option Plan. Filed as
Exhibit 10.2 to the Companys Registration Statement
(No. 33-31163)
on
Form S-1
and incorporated herein by reference.
|
|
10
|
.2*
|
|
Amendment to the Baldwin
Technology Company, Inc. amended and Restated 1986 Stock Option
Plan. Filed as Exhibit 10.2 to the Companys Report on
Form 10-K
for the fiscal year ended June 30, 1991 and incorporated
herein by reference.
|
|
10
|
.3*
|
|
Baldwin Technology Company, Inc.
1990 Directors Stock Option Plan. Filed as
Exhibit 10.3 to the Companys Report on
Form 10-K
for the fiscal year ended June 30, 1991 and incorporated
herein by reference.
|
|
10
|
.4*
|
|
Baldwin Technology Company, Inc.
1996 Stock Option Plan. Filed as Exhibit A to the Baldwin
Technology Company, Inc. 1996 Proxy Statement and incorporated
by reference to the Companys Report on
Form 10-K
for the fiscal year ended June 30, 1996 and incorporated
herein by reference.
|
57
|
|
|
|
|
|
10
|
.5*
|
|
Baldwin Technology Company, Inc.
2005 Equity Compensation Plan. Filed as Exhibit A to the
Baldwin Technology Company, Inc. 2005 Proxy Statement and
incorporated herein by reference.
|
|
10
|
.7
|
|
Agreement effective as of
July 1, 1990 between Baldwin Technology Corporation,
Baldwin Graphic Systems, Inc. and Harold W. Gegenheimer, as
guaranteed by Baldwin Technology Company, Inc. Filed as
Exhibit 10.6 to the Companys Report on
Form 10-K
for the fiscal year ended June 30, 1991 and incorporated
herein by reference.
|
|
10
|
.8
|
|
Amendment to Agreement between
Harold W. Gegenheimer, Baldwin Technology Corporation, Baldwin
Graphic Systems, Inc, and Baldwin Technology Company, Inc.
effective as of November 22, 2004. Filed as
Exhibit 10.8 to the Companys Report on
Form 10-K
for the fiscal year ended June 30, 2005 and incorporated
herein by reference.
|
|
10
|
.9*
|
|
Baldwin Technology Company Inc.
2007 Management Incentive Compensation Plan. Filed as
Exhibit 10.1 to the Companys Periodic Report on
Form 8-K
dated August 17, 2006 and incorporated herein by reference.
|
|
10
|
.11
|
|
Baldwin Technology Company, Inc.
Dividend Reinvestment Plan. Filed as Exhibit 10.49 to the
Companys Report on
Form 10-K
for the fiscal year ended June 30, 1991 and incorporated
herein by reference.
|
|
10
|
.27*
|
|
Baldwin Technology Company, Inc.
1998 Non-Employee Directors Stock Option Plan. Filed as
Exhibit A to the Baldwin Technology Company, Inc. 1998
Proxy Statement and incorporated herein by reference.
|
|
10
|
.41*
|
|
Employment Agreement dated and
effective as of March 19, 2001 between Baldwin Technology
Company, Inc. and Gerald A. Nathe. Filed as Exhibit 10.41
to the Companys report on
Form 10-Q
for the quarter ended March 31, 2001 and incorporated
herein by reference.
|
|
10
|
.44*
|
|
Employment Agreement dated
June 8, 2001 and effective as of June 18, 2001 between
Baldwin Technology Company, Inc. and Vijay C. Tharani. Filed as
Exhibit 10.44 to the Companys Report on
Form 10-K
for the fiscal year ended June 30, 2001 and incorporated
herein by reference.
|
|
10
|
.49*
|
|
Employment Agreement dated
September 19, 2001 and effective as of November 1,
2001 between Baldwin Technology Company, Inc. and Karl S.
Puehringer. Filed as Exhibit 10.49 to the Companys
Report on
Form 10-Q
for the quarter ended December 31, 2001 and incorporated
herein by reference.
|
|
10
|
.50*
|
|
Amendment to Employment Agreement
dated February 26, 2002 and effective November 14,
2001 between Baldwin Technology Company, Inc. and Gerald A.
Nathe. Filed as Exhibit 10.50 to the Companys Report
on
Form 10-Q
for the quarter ended March 31, 2002 and incorporated
herein by reference.
|
|
10
|
.53*
|
|
Baldwin Technology Profit Sharing
and Savings Plan as amended. Filed as Exhibit 10.53 to the
Companys Report on
Form 10-K
for the year ended June 30, 2003.
|
|
10
|
.54*
|
|
Baldwin Technology Management
Incentive Compensation Plan. Filed as Exhibit 10.54 to the
Companys Report on
Form 10-K
for the year ended June 30, 2002.
|
|
10
|
.59*
|
|
Amendment to Employment Agreement
dated and effective May 12, 2003 between Baldwin Technology
Company, Inc. and Karl S. Puehringer. Filed as
Exhibit 10.60 to the Companys Report on
Form 10-Q
for the quarter ended March 30, 2003.
|
|
10
|
.61*
|
|
Amendment to Employment Agreement
dated and effective August 13, 2002 between Baldwin
Technology Company, Inc. and Gerald A. Nathe. Filed as
Exhibit 10.61 to the Companys Report on
Form 10-K
for the year ended June 30, 2004.
|
58
|
|
|
|
|
|
10
|
.62*
|
|
Amendment to Employment Agreement
dated July 11, 2003 and effective July 1, 2003 between
Baldwin Technology Company, Inc. and Gerald A. Nathe. Filed as
Exhibit 10.62 to the Companys Report on
Form 10-K
for the year ended June 30, 2004.
|
|
10
|
.63
|
|
Credit Agreement among Baldwin
Europe Consolidated, B.V., as Borrower, and Baldwin Technology
Company, Inc., as Parent, Guarantor and Borrower Representative,
and Baldwin Americas Corporation, Baldwin Europe Consolidated
Inc., Baldwin Asia Pacific Corporation, Baldwin Graphic Systems,
Inc., Baldwin Germany GmbH, Baldwin U.K. Holding Limited,
Baldwin (U.K) Ltd., Acrotec UK Ltd., Baldwin Globaltec Ltd.,
Baldwin Sweden Holding AB, Baldwin IVT AB, Baldwin Jimek AB,
Japan-Baldwin Ltd., as Guarantors, and Maple Bank GmbH, as
Lender, dated as of July 25, 2003. Filed as
Exhibit 10.64 to the Companys Current Report on
Form 8-K
dated August 18, 2003.
|
|
10
|
.64*
|
|
Amendment to Employment Agreement
dated and effective November 11, 2003 between Baldwin
Technology Company, Inc. and Vijay C. Tharani. Filed as
Exhibit 10.64 to the Companys Report on
Form 10-Q
for the quarter ended September 30, 2003.
|
|
10
|
.66
|
|
Strategic Advisory Services
Agreement dated October 19, 2003 and effective
January 1, 2004 between Baldwin Technology Company, Inc.
and Akira Hara. Filed as Exhibit 10.66 to the
Companys Report on
Form 10-Q
for the quarter ended December 31, 2003.
|
|
10
|
.67*
|
|
Amendment to the Employment
Agreement dated and effective February 10, 2004 between
Karl Puehringer and the Company. Filed as Exhibit 10.67 to
the Companys Report on
Form 10-Q
for the quarter ended March 31, 2004.
|
|
10
|
.68*
|
|
Employment Agreement dated and
effective September 1, 2004 between Baldwin Technology
Company, Inc. and Shaun J. Kilfoyle filed as Exhibit 10.68
to the Companys Report on
Form 10-K
for the year ended June 30, 2004.
|
|
10
|
.69
|
|
First Amendment to Credit
Agreement among Baldwin Europe Consolidated B.V., as Borrower,
Baldwin Technology Company, Inc., as Parent, Guarantor and
Borrower Representative, Baldwin Americas Corporation, Baldwin
Europe Consolidated Inc., Baldwin Asia Pacific Corporation,
Baldwin Graphic Systems, Inc., Baldwin Germany GmbH, Baldwin
U.K. Holding Limited, Baldwin (U.K.) Ltd., Acrotec UK Ltd.,
Baldwin Globaltec Ltd., Baldwin Sweden Holding AB, Baldwin IVT
AB, Baldwin Jimek AB, Japan-Baldwin Ltd., as Guarantors, and
Maple Bank GmbH, as Lender, dated as of September 9, 2004.
Filed as Exhibit 10.69 to the Companys Current Report
on
Form 8-K
dated September 20, 2004.
|
|
10
|
.70*
|
|
Employment Agreement between
Baldwin Technology Company, Inc. and Karl S. Puehringer, dated
as of August 17, 2005, filed as Exhibit 10.1 to the
Companys Current Report on
Form 8-K
dated August 17, 2005.
|
|
10
|
.71*
|
|
Amendment to Employment Agreement
between Baldwin Technology Company, Inc. and Gerald A. Nathe,
dated August 17, 2005, filed as Exhibit 10.1 to the
Companys Current Report on
Form 8-K
dated August 17, 2005.
|
|
10
|
.72
|
|
Second Amendment and Waiver to
Credit Agreement among Baldwin Europe Consolidated B.V., as
Borrower, Baldwin Technology Company, Inc., as Parent, Guarantor
and Borrower Representative, Baldwin Americas Corporation,
Baldwin Europe Consolidated Inc., Baldwin Asia Pacific
Corporation, Baldwin Graphic Systems, Inc., Baldwin Germany
GmbH, Baldwin U.K. Holding Limited, Baldwin (U.K.) Ltd., Acrotec
UK Ltd., Baldwin Globaltec Ltd., Baldwin Sweden Holding AB,
Baldwin IVT AB, Baldwin Jimek AB, Japan-Baldwin Ltd., as
Guarantors, and Maple Bank GmbH, as Lender, dated as of
July 1, 2005, filed as Exhibit 10.72 to the
Companys Current Report on
Form 8-K
dated September 9, 2005.
|
59
|
|
|
|
|
|
10
|
.73*
|
|
Amendment to Employment Agreement
between Baldwin Technology Company, Inc. and Gerald A. Nathe,
dated November 14, 2005. Filed as Exhibit 10.73 to the
Companys Report on
Form 10-Q
for the Quarter ended September 30, 2005 and incorporated
herein by reference.
|
|
10
|
.74*
|
|
Amendment to Employment Agreement
between the Company and Karl Puehringer dated November 14,
2005. Filed as Exhibit 10.74 to the Companys Report
on
Form 10-Q
for the Quarter ended September 30, 2005 and incorporated
herein by reference.
|
|
10
|
.75*
|
|
Retirement Allowance Plan for
Representative Directors and Directors of Baldwin-Japan Ltd.
Filed as Exhibit 10.75 to the Companys Report on
Form 10-Q
for the Quarter ended December 31, 2005 and incorporated
herein by reference.
|
|
21
|
.
|
|
List of Subsidiaries of Registrant
(filed herewith).
|
|
23
|
.
|
|
Consent of PricewaterhouseCoopers
LLP (filed herewith).
|
|
28
|
.
|
|
Post-effective Amendment to the
Companys previously filed
Form S-8s,
Nos.
33-20611 and
33-30455.
Filed as Exhibit 28 to the Companys Report on
Form 10-K
for the fiscal year ended June 30, 1991 and incorporated
herein by reference.
|
|
31
|
.01
|
|
Certification of the Principal
Executive Officer pursuant to Exchange Act
Rule 13a-14(a)/15d-14(a),
as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 (filed herewith).
|
|
31
|
.02
|
|
Certification of the Principal
Financial Officer pursuant to Exchange Act
Rule 13a-14(a)/15d-14(a),
as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 (filed herewith).
|
|
32
|
.01
|
|
Certification pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002,
18 U.S.C. Section 1350 (filed herewith).
|
|
32
|
.02
|
|
Certification pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002,
18 U.S.C. Section 1350 (filed herewith).
|
|
99
|
.
|
|
Company statement regarding the
Private Securities Litigation Reform Act of 1995, Safe
Harbor for Forward-Looking Statements (filed herewith).
|
|
|
|
* |
|
Management contract or compensatory plan or arrangement. |
60
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BALDWIN TECHNOLOGY COMPANY, INC.
(Registrant)
Gerald
A. Nathe
(Chairman
of the Board)
Dated: September 28, 2006
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
/s/ GERALD
A. NATHE
Gerald
A. Nathe
|
|
Chairman of the Board and Chief
Executive Officer
|
|
September 28, 2006
|
|
|
|
|
|
/s/ KARL
S.
PUEHRINGER
Karl
S. Puehringer
|
|
President and Chief Operating
Officer
|
|
September 28, 2006
|
|
|
|
|
|
/s/ VIJAY
C. THARANI
Vijay
C. Tharani
|
|
Vice President, Chief Financial
Officer and Treasurer
|
|
September 28, 2006
|
|
|
|
|
|
/s/ LEON
RICHARDS
Leon
Richards
|
|
Controller and Chief Accounting
Officer
|
|
September 28, 2006
|
|
|
|
|
|
/s/ MARK
T. BECKER
Mark
T. Becker
|
|
Director
|
|
September 28, 2006
|
|
|
|
|
|
/s/ ROLF
BERGSTROM
Rolf
Bergstrom
|
|
Director
|
|
September 28, 2006
|
|
|
|
|
|
/s/ SAMUEL
B. FORTENBAUGH
III
Samuel
B. Fortenbaugh III
|
|
Director
|
|
September 28, 2006
|
|
|
|
|
|
/s/ AKIRA
HARA
Akira
Hara
|
|
Director
|
|
September 28, 2006
|
|
|
|
|
|
/s/ JUDITH
A.
MULHOLLAND
Judith
A. Mulholland
|
|
Director
|
|
September 28, 2006
|
|
|
|
|
|
/s/ RONALD
B. SALVAGIO
Ronald
B. Salvagio
|
|
Director
|
|
September 28, 2006
|
61
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
/s/ FREDERICK
WESTLAKE
Frederick
Westlake
|
|
Director
|
|
September 28, 2006
|
|
|
|
|
|
/s/ RALPH
R. WHITNEY,
JR.
Ralph
R. Whitney, Jr.
|
|
Director
|
|
September 28, 2006
|
62
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON
FINANCIAL
STATEMENT SCHEDULE
To the Board
of Directors and Shareholders of
BALDWIN TECHNOLOGY COMPANY, INC.
Our audits of the consolidated financial statements of Baldwin
Technology Company, Inc. referred to in our report dated
September 28, 2006 appearing in the 2006 Annual Report to
Shareholders of Baldwin Technology Company, Inc. (which report
and consolidated financial statements are included in this
Annual Report on
Form 10-K)
also included an audit of the financial statement schedules
listed in Item 15(a)(2) of this
Form 10-K.
In our opinion, this financial statement schedule presents
fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated
financial statements.
PricewaterhouseCoopers LLP
Stamford, Connecticut
September 28, 2006
63
SCHEDULE II
BALDWIN
TECHNOLOGY COMPANY, INC
VALUATION
AND QUALIFYING ACCOUNTS
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
Charged to
|
|
|
|
|
|
Balance
|
|
|
|
Beginning
|
|
|
Costs and
|
|
|
|
|
|
at End
|
|
|
|
of Period
|
|
|
Expenses
|
|
|
Deduction
|
|
|
of Period
|
|
|
Year ended June 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
(deducted from accounts receivable)
|
|
$
|
1,962
|
|
|
$
|
158
|
|
|
$
|
668
|
(2)
|
|
$
|
1,452
|
|
Allowance for obsolete inventories
(deducted from inventories)
|
|
$
|
3,878
|
|
|
$
|
563
|
|
|
$
|
523
|
|
|
$
|
3,918
|
|
Year ended June 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
(deducted from accounts receivable)
|
|
$
|
2,155
|
|
|
$
|
99
|
|
|
$
|
292
|
|
|
$
|
1,962
|
|
Allowance for obsolete inventories
(deducted from inventories)
|
|
$
|
3,450
|
|
|
$
|
506
|
|
|
$
|
78
|
|
|
$
|
3,878
|
|
Year ended June 30, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
(deducted from accounts receivable)
|
|
$
|
2,286
|
|
|
$
|
109
|
|
|
$
|
240
|
|
|
$
|
2,155
|
|
Allowance for obsolete inventories
(deducted from inventories)
|
|
$
|
4,069
|
|
|
$
|
631
|
|
|
$
|
1,250
|
(1)
|
|
$
|
3,450
|
|
|
|
|
(1)
|
|
The reduction in allowance for
obsolete inventory for the fiscal year ended June 30, 2004
reflects a disposition of previously reserved inventory related
to Baldwin Enkel of $1,235.
|
(2)
|
|
The reduction in allowance for
doubtful accounts primarily reflects previously identified and
specifically reserved accounts receivable in Sweden.
|
64