10-K
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended June 30, 2008
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. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large
accelerated
filer o
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Accelerated
filer o
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Non-accelerated
filer þ
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Smaller
reporting
company o
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
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, 2007, as reported by the American Stock
Exchange on that date, was $68,064,000.
Number of shares of Common Stock outstanding at June 30,
2008:
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Class A Common Stock
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14,139,734
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Class B Common Stock
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1,142,555
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Total
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15,282,289
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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 2008 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
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 to this Annual Report on
Form 10-K
for the year ended June 30, 2008.
PART I
Baldwin Technology Company, Inc. (Baldwin or the
Company) is a leading global supplier of process
automation equipment for the printing and publishing industry.
The Company offers its customers a broad range of products
designed to enhance the product quality and the productivity and
cost-efficiency of the print manufacturing process, while
addressing safety issues and reducing the environmental impact
from the printing process. Baldwins products include
cleaning systems and related consumables, fluid management and
ink control systems, web press protection systems and drying
systems, and related services and consumables.
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 production facilities,
and sales and service operations, in strategic markets worldwide.
Industry
Overview
The Company defines its business as that of providing process
automation equipment for the printing and publishing industry.
The Company believes that, as an independent company, it
produces one of the most complete lines of process automation
products for the printing 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 the largest 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 its products in
emerging markets. The Company has established operations in
strategic geographic locations to take advantage of growth
opportunities in those 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 produces and sells many different products and
systems 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 the process automation 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.
Baldwins principal products are described below:
Cleaning Systems. The Companys Cleaning
Systems and related consumable products clean the rollers,
cylinders and paper of a printing press and include the Press
Washer, Automatic Blanket Cleaner, Newspaper Blanket Cleaner,
Chill Roll Cleaner, Digital Plate Cleaner Guide Roll Cleaner and
Web Paper 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
1
ended June 30, 2008, 2007 and 2006, net sales of Cleaning
Systems represented approximately 50.8%, 54.5% and 54.2% of the
Companys net sales, respectively.
Fluid Management Systems. The Companys
Fluid Management Systems measure and control the supply,
temperature, cleanliness, chemical balance and certain other
characteristics of the fluids used in the 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, 2008, 2007 and
2006, net sales of Fluid Management Systems represented
approximately 18.9%, 19.2% and 23.4% of the Companys net
sales, respectively.
Other Process Automation Products, Parts, Services and
Miscellaneous 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,
Gluing Systems and service and parts. In the fiscal years ended
June 30, 2008, 2007 and 2006, net sales of Other Process
Automation Products represented approximately 30.2%, 26.3% and
22.4% of the Companys net sales, respectively.
Worldwide
Operations
The Company believes that it is one of the few providers of
process automation products for the printing and publishing
industry that has complete product development, manufacturing
and marketing capabilities in the Americas, Europe, Asia and
Australia. The Company, as an international business, is subject
to various changing competitive, economic, political, legal and
social conditions. The Company currently has subsidiaries in
14 countries, and the 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
operate, the impact of cross currency fluctuations is somewhat
mitigated.
The following table sets forth the percentages of the
Companys net sales attributable to its geographic regions
for the fiscal years ended June 30, 2008, 2007 and 2006:
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Years Ended June 30,
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2008
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2007
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2006
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Americas
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21
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%
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20
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%
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17
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%
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Europe
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53
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%
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53
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%
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51
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%
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Asia/Australia
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26
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%
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27
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%
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32
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%
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Total
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100
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%
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100
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%
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100
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%
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In the Americas, the Company operates in North, Central and
South America through its U.S. subsidiaries and dealers
throughout Central and South America. In Europe, the Company
operates through its subsidiaries in Germany, Sweden, France,
England, Italy, Switzerland and the Netherlands. In Asia, the
Company operates through its subsidiaries in India, Japan, China
and Singapore. The Company also has operations in 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.
2
Acquisition
Strategy
As part of its growth strategy, the Company investigates
potential strategic acquisitions of companies and product lines
in related business areas. This strategy involves:
(i) acquiring entities that will strengthen the
Companys position in the field of process automation
equipment and related consumables for the printing and
publishing industry and whose products can be sold through the
Companys existing distribution network;
(ii) acquiring entities allowing entry to 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 94 employees devoted to marketing
and sales activities in its three principal worldwide markets
and more than 200 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, 2008,
approximately 48% of the Companys net sales were to OEMs
and approximately 52% were directly to printers.
Support. The Company is committed to
after-sales service and support of its products throughout the
world. Baldwin employs approximately 126 service technicians,
who are complemented by product engineers, to provide field
service for the Companys products on a global basis.
Backlog. The Companys backlog represents
unfilled product orders which Baldwin has received from its
customers under valid contracts or purchase orders. The
Companys backlog was $48,420,000 as of June 30, 2008,
$52,651,000 as of June 30, 2007 and $49,200,000 as of
June 30, 2006.
Customers. For the fiscal year ended
June 30, 2008, one customer accounted for more than 10% of
the Companys net sales and trade accounts receivable.
Koenig and Bauer Aktiengesellschaft (KBA) accounted
for approximately 15% of the Companys net sales and trade
accounts receivable. The ten largest customers of Baldwin
(including KBA) accounted for approximately 46%, 49% and 50%,
respectively, of the Companys net sales for the fiscal
years ended June 30, 2008, 2007 and 2006. 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 process
automation equipment for the printing and publishing industry.
Baldwin has devoted substantial efforts to adapt its products to
almost all models and sizes of printing presses in use worldwide.
The Companys product development takes place at its
centers of competence 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 Companys engineering and development
organization focuses attention on opportunities within the
respective markets, while avoiding duplicative efforts within
the Company.
Baldwin employs approximately 126 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, 2008, 2007 and 2006 were
approximately 7.9%, 8.4% and 8.5% of the Companys net
sales in each such fiscal year, respectively.
3
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. The expiration of patents in the near future is
not expected to have a material adverse effect on the
Companys net sales. The Company has also relied upon and
intends to continue to rely upon unpatented proprietary
technology, including the proprietary engineering required to
adapt its products to a wide range of models and sizes of
printing presses. The Company believes its rights under, and
interests in, its patents and patent applications, as well as
its proprietary technology, are sufficient for its business as
currently conducted.
Manufacturing
The Company conducts its operations, primarily subassembly and
quality control, through a number of operating subsidiaries. In
North America, the Company has facilities in Kansas and
Illinois. In Europe, the Company has facilities in Germany,
Sweden and Switzerland. In Asia, Baldwin has facilities in
India, Japan and China.
In general, materials required in the Companys business
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.
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 process automation equipment for
the printing and publishing industry, the Company produces and
markets what it believes to be the most complete line of process
automation equipment. 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, combined 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 innovative
new products which meet the demands of the printing and
publishing industry.
Employees
At June 30, 2008, the Company employed 655 persons
(plus 44 temporary and part-time employees) of which 221 are
production employees, 94 are marketing, sales and customer
service employees, 252 are research, development, engineering
and technical service employees and 88 are management and
administrative employees. In Europe, some employees are
represented by various unions under contracts with indefinite
terms: in Sweden, approximately 42 of the Companys
110 employees are represented by Ledarna (SALF), Metall, or
Svenska Industritjanstemanna Forbundet unions; in Germany,
approximately 50 of the Companys 247 employees are
represented by the IG Metall (Metalworkers Union). The
Company considers relations with its employees and with its
unions to be good.
4
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
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
Risks
Intellectual property and proprietary technology are
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 innovative
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 its innovative
proprietary technologies. 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 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
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 its
technology so that others may not 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
5
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 as a
result of its international operations. 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, Swedish krona
and Japanese yen, the Companys financial results are
subject to the effects of fluctuations of currency exchange
rates. The Company cannot predict, however, when exchange rates
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 alliances
and/or
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 alliances
and/or
licenses of technologies from third parties or acquisitions of
complementary product lines or companies, and such transactions
could 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 Companys 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 implement an alliance
and/or
acquire such technologies or businesses, and may incur
unforeseen liabilities in connection with any alliance
and/or
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 2008, the Company had one
significant customer that individually accounted for 15% of net
sales. The Company anticipates, but cannot assure, that this
customer will continue to be significant in fiscal 2009. The
loss of, or a significant decrease in sales to, this customer
would have a material adverse effect on the Companys
financial condition and results of operation.
Industry
Risks
If the United States and other significant 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.
6
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 new
features or with features incorporating the Companys
technologies, which render the Companys technologies,
obsolete or less marketable. The Companys future success
will depend, in part, on the Companys ability to:
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use leading technologies effectively;
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continue to develop the Companys technical expertise and
patented position;
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enhance the Companys current products and develop new
products that meet changing customer needs;
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time new product introductions in a way that minimizes the
impact of customers delaying purchases of existing products in
anticipation of new product releases;
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adjust the prices of the Companys existing products to
increase customer demand;
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successfully advertise and market the Companys
products; and
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influence and respond to emerging industry standards and other
technological changes.
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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
Risks
Failure to achieve and maintain effective internal
controls could adversely affect our ability to report our
financial condition and results of operations accurately or on a
timely basis. As a result, current and potential stockholders
could lose confidence in our financial reporting, which could
harm our business and the trading price of our
stock. As required by Section 404 of the
Sarbanes-Oxley Act of 2002, management is required to
periodically evaluate the design and effectiveness of disclosure
controls and procedures and assess the effectiveness of internal
controls over financial reporting. Management has identified and
reported a material weakness as of June 30, 2008. As a
result of the material weakness, the Company has concluded that
internal controls over financial reporting were not effective as
of June 30, 2008. Any failure to implement or difficulties
experienced in implementing improved controls or any failure to
maintain existing effective controls could have an adverse
effect on the Companys business, operating results and
stock price. For a more detailed discussion of the
Companys disclosure controls and procedures and internal
control over financial reporting, see Item 9A of this
Annual Report on
Form 10-K.
In addition, if the Company were deemed to be an
accelerated filer under the Exchange Act for
purposes of its fiscal year ending on June 30, 2009, then
the annual report for that fiscal year would be required to
include, in addition to managements report on internal
control over financial reporting, an opinion on the
Companys internal control over financial reporting by the
Companys independent auditors. If the Companys
independent auditors are unable to assert that the
Companys internal controls over financial reporting are
effective, 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 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 could adversely affect the market price of the
7
Companys stock without regard to the Companys
operating performance. In addition, the trading price of the
Companys 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 420,000 square feet at
June 30, 2008. 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
|
|
|
|
127
|
|
|
|
127
|
|
Germany
|
|
|
0
|
|
|
|
144
|
|
|
|
144
|
|
Sweden
|
|
|
13
|
|
|
|
53
|
|
|
|
66
|
|
Japan
|
|
|
0
|
|
|
|
33
|
|
|
|
33
|
|
All other, foreign
|
|
|
0
|
|
|
|
56
|
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total square feet owned and leased
|
|
|
13
|
|
|
|
413
|
|
|
|
426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 33 million euro (approximately
$50 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.
Additionally, information regarding legal proceedings is
included in the Notes to Consolidated Financial Statements (see
Note 19) and is incorporated herein by reference.
8
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
No matters were submitted to a vote of security holders since
January 24, 2008.
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
|
|
|
2006 (calendar year)
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
6.23
|
|
|
$
|
3.95
|
|
Second Quarter
|
|
$
|
6.60
|
|
|
$
|
5.20
|
|
Third Quarter
|
|
$
|
5.69
|
|
|
$
|
4.70
|
|
Fourth Quarter
|
|
$
|
6.19
|
|
|
$
|
4.80
|
|
|
|
|
|
|
|
|
|
|
2007 (calendar year)
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
5.25
|
|
|
$
|
4.55
|
|
Second Quarter
|
|
$
|
6.11
|
|
|
$
|
4.60
|
|
Third Quarter
|
|
$
|
6.57
|
|
|
$
|
4.72
|
|
Fourth Quarter
|
|
$
|
5.63
|
|
|
$
|
4.10
|
|
|
|
|
|
|
|
|
|
|
2008 (calendar year)
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
4.70
|
|
|
$
|
2.18
|
|
Second Quarter
|
|
$
|
3.19
|
|
|
$
|
2.24
|
|
Third Quarter (through September 17, 2008)
|
|
$
|
3.21
|
|
|
$
|
2.19
|
|
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, 2008, several holders
of the Companys Class B Common Stock converted a
total of 50,000 of such shares into 50,000 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
Class A Shares which were issued pursuant to an exemption
from registration contained in Section 3(a)(9) of the
Securities Act of 1933, as amended.
Approximate
Number of Equity Security Holders
As of August 29, 2008, the number of record holders
(excluding those listed under a nominee name) of the
Companys Class A and Class B Common Stock
totaled 259 and 18, respectively. The Company believes, however,
that there are approximately 1,800 beneficial owners of its
Class A Common Stock.
9
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. Under the
Companys Certificate of Incorporation, no dividend in cash
or property is permitted to 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
During the quarter ended June 30, 2008, the Company
repurchased shares of its Class A Common Stock under a plan
approved by the Board of Directors in November 1999 (The 1999
Plan). The 1999 Plan authorized the Company to utilize up to
$5.0 million to repurchase shares of Class A Common
Stock. The Company had previously utilized approximately
$2.5 million under the Plan, and the maximum amount that
may be utilized under this program in the future was
approximately $2.5 million as of June 30, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
|
Maximum Dollar
|
|
|
|
|
|
|
|
|
|
Shares Purchased as
|
|
|
Value of Shares
|
|
|
|
|
|
|
|
|
|
Part of Publicly
|
|
|
that may yet be
|
|
|
|
Total Number of
|
|
|
Average
|
|
|
Announced Plans or
|
|
|
Purchased Under the
|
|
|
|
Shares Purchased
|
|
|
Price per Share
|
|
|
Programs
|
|
|
Plans or Programs
|
|
|
|
|
|
|
|
|
|
|
|
|
(In 000s)
|
|
|
April 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,874
|
|
May 2008
|
|
|
134,770
|
|
|
$
|
2.50
|
|
|
|
134,770
|
|
|
$
|
2,537
|
|
June 2008
|
|
|
6,000
|
|
|
$
|
3.08
|
|
|
|
6,000
|
|
|
$
|
2,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
140,770
|
|
|
$
|
2.53
|
|
|
|
140,770
|
|
|
$
|
2,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
Performance
Graph
The following Performance Graph compares the Companys
cumulative total stockholder return on its Class A Common
Stock for the five fiscal years ended June 30, 2008 with
the cumulative total return of the AMEX Composite Index and a
peer group composed of selected companies from the Standard
Industrial Classification (SIC) Code
3555 Special Industry Machinery, Printing Trades
Machinery and Equipment. The companies included in the peer
group are: Baldwin Technology Company, Inc., Delphax
Technologies Inc., Gunther International Ltd., Presstek, Inc.
and Scailex Corporation Ltd. The comparison assumes $100 was
invested on June 30, 2003 in the Companys
Class A Common Stock and in each of the foregoing indices
and assumes reinvestment of all dividends. Total stockholder
return is calculated using the closing price of the stock on the
last trade date of each fiscal year. The stock price performance
shown is not intended to forecast or be indicative of the
possible future performance of the Companys Class A
Common Stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended June 30,
|
|
|
|
|
2004
|
|
|
|
2005
|
|
|
|
2006
|
|
|
|
2007
|
|
|
|
2008
|
|
Baldwin Technology Company, Inc.
|
|
|
|
559.38
|
|
|
|
|
484.38
|
|
|
|
|
843.75
|
|
|
|
|
942.19
|
|
|
|
|
368.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peer Group
|
|
|
|
199.95
|
|
|
|
|
376.87
|
|
|
|
|
370.42
|
|
|
|
|
377.18
|
|
|
|
|
357.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMEX Composite
|
|
|
|
128.79
|
|
|
|
|
165.82
|
|
|
|
|
204.19
|
|
|
|
|
253.70
|
|
|
|
|
243.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
Item 6.
|
Selected
Financial Data
|
(amounts in thousands except per share data)
The Companys statement of operations and balance sheet
data as it relates to the fiscal years ended June 30, 2008,
2007 and 2006 have been derived from the Companys audited,
consolidated financial statements (including the Consolidated
Balance Sheets of the Company at June 30, 2008 and 2007 and
the related Consolidated Statements of Operations of the Company
for the fiscal years ended June 30, 2008, 2007 and 2006
appearing elsewhere herein). Certain transactions have affected
comparability. During fiscal year ended June 30, 2008, the
Company released a portion of the valuation allowance for net
deferred tax assets associated with its U.S. operations,
approximately $1,640. In addition, fiscal year ended
June 30, 2008 reflects a full year of ownership of the
Oxy-Dry group of companies and Hildebrand Systeme GmbH. During
fiscal year ended June 30, 2007, the Company acquired the
Oxy-Dry group of companies and Hildebrand Systeme GmbH. The
results of the acquired companies are included in the financial
statements from the dates of acquisition. Also, during fiscal
year 2007, the Company released a portion of the valuation
allowance for net deferred tax assets associated with its
U.S. operations, approximately $2,500. 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. 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,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands, except per share data)
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
236,330
|
|
|
$
|
201,477
|
|
|
$
|
179,380
|
|
|
$
|
173,185
|
|
|
$
|
158,110
|
|
Cost of goods sold
|
|
|
161,585
|
|
|
|
135,703
|
|
|
|
119,072
|
|
|
|
115,948
|
|
|
|
108,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
74,745
|
|
|
|
65,774
|
|
|
|
60,308
|
|
|
|
57,237
|
|
|
|
50,036
|
|
Selling, general and administrative expenses
|
|
|
44,205
|
|
|
|
37,954
|
|
|
|
34,526
|
|
|
|
32,289
|
|
|
|
29,711
|
|
Research, development and engineering expenses
|
|
|
18,640
|
|
|
|
16,913
|
|
|
|
15,181
|
|
|
|
15,920
|
|
|
|
13,618
|
|
Restructuring charges
|
|
|
960
|
|
|
|
994
|
|
|
|
|
|
|
|
(338
|
)
|
|
|
448
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
10,940
|
|
|
|
9,913
|
|
|
|
10,601
|
|
|
|
9,366
|
|
|
|
6,259
|
|
Interest expense
|
|
|
3,127
|
|
|
|
2,272
|
|
|
|
1,074
|
|
|
|
2,412
|
|
|
|
4,985
|
|
Interest (income)
|
|
|
(183
|
)
|
|
|
(210
|
)
|
|
|
(125
|
)
|
|
|
(105
|
)
|
|
|
(119
|
)
|
Royalty (income), net
|
|
|
|
|
|
|
|
|
|
|
(200
|
)
|
|
|
(1,749
|
)
|
|
|
(3,361
|
)
|
Other expense (income), net
|
|
|
(271
|
)
|
|
|
253
|
|
|
|
162
|
|
|
|
89
|
|
|
|
(559
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
8,267
|
|
|
|
7,598
|
|
|
|
9,690
|
|
|
|
8,719
|
|
|
|
5,313
|
|
Provision for income taxes
|
|
|
1,831
|
|
|
|
958
|
|
|
|
3,432
|
|
|
|
3,684
|
|
|
|
(1,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,436
|
|
|
$
|
6,640
|
|
|
$
|
6,258
|
|
|
$
|
5,035
|
|
|
$
|
6,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per share
|
|
$
|
0.42
|
|
|
$
|
0.44
|
|
|
$
|
0.42
|
|
|
$
|
0.34
|
|
|
$
|
0.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per share
|
|
$
|
0.41
|
|
|
$
|
0.42
|
|
|
$
|
0.40
|
|
|
$
|
0.33
|
|
|
$
|
0.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
15,444
|
|
|
|
15,169
|
|
|
|
14,966
|
|
|
|
14,899
|
|
|
|
15,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
15,730
|
|
|
|
15,716
|
|
|
|
15,713
|
|
|
|
15,305
|
|
|
|
15,286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2007*
|
|
|
2006*
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital
|
|
$
|
31,092
|
|
|
$
|
34,213
|
|
|
$
|
29,265
|
|
|
$
|
25,499
|
|
|
$
|
8,374
|
|
Total assets
|
|
$
|
159,658
|
|
|
$
|
157,180
|
|
|
$
|
112,763
|
|
|
$
|
109,351
|
|
|
$
|
115,271
|
|
Short-term debt
|
|
$
|
7,239
|
|
|
$
|
5,750
|
|
|
$
|
3,475
|
|
|
$
|
3,738
|
|
|
$
|
23,280
|
|
Long-term debt
|
|
$
|
17,963
|
|
|
$
|
26,929
|
|
|
$
|
7,080
|
|
|
$
|
12,223
|
|
|
$
|
1,794
|
|
Total debt
|
|
$
|
25,202
|
|
|
$
|
32,679
|
|
|
$
|
10,555
|
|
|
$
|
15,961
|
|
|
$
|
25,074
|
|
Shareholders equity
|
|
$
|
61,613
|
|
|
$
|
54,540
|
|
|
$
|
45,933
|
|
|
$
|
39,231
|
|
|
$
|
34,467
|
|
|
|
|
* |
|
See reclassifications and revisions detail in Note 2 to the
consolidated financial statements |
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operation
|
(amounts 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 to this Annual Report on
Form 10-K
for the fiscal year ended June 30, 2008.
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.
Revenue Recognition. The Companys
products are sold with terms and conditions that vary depending
on the nature of the product sold and the cultural and business
environments in which the Company operates.
The Company recognizes revenue based on the type of product sold
and the obligations under the contract. Revenue is recognized on
contracts for design, manufacture and delivery of equipment
without installation
13
(equipment sales) and parts, service and consumables at the time
of shipment or rendering of services. The Company considers
revenue realized on equipment sales when it has persuasive
evidence of an arrangement, delivery has occurred, the sales
price is fixed or determinable and collectibility is reasonably
assured. In contracts that include additional services,
including installation,
start-up
and/or
commissioning (system sales), the Company recognizes revenue on
each element of the contract as appropriate. Installation
services are provided to the customer on an as-needed basis and
may be contracted for separately or included in the same
contract as the equipment sale. Revenue is recognized for
installation services at the completion of the contractually
required services.
Contracts for system sales may include multiple-element revenue
arrangements. When the Company enters into multiple-element
revenue arrangements, which may include installation services as
a contractual element, along with the purchase price of the
product as a contractual element, the arrangement is separated
into its stand-alone elements for revenue recognition purposes.
When the delivered item has value to the customer on a stand
alone basis, there is objective and reliable evidence of the
fair value of the undelivered item and the arrangement does not
include a general right of return, revenue is recognized on each
element as separate units of accounting. If these criteria are
not met, the arrangement is accounted for as one unit of
accounting which would result in revenue being deferred until
the last undelivered contractual element is fulfilled.
Standard payment terms may 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. In those cases when the Company renders
invoices prior to performance of the service, the Company
records deferred revenue until completion of the services,
whereupon revenue is fully recognized.
Freight terms are generally FOB shipping dock with risk of loss
passing to the purchaser at the time of shipment. 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, unless the product fails to meet published
product specifications and the Company fails to perform its
obligations under product warranty terms.
The terms of sale are generally on a purchase order basis, which
may contain formal product acceptance clauses. Occasionally,
clauses may be included in a contract or purchase order that
require acceptance related to certain specifications as outlined
in the contract or purchase order. In these instances, the
nature of the acceptance is evaluated to ensure that the Company
has met the applicable criteria concurrent with the shipment of
equipment to the customer.
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 have passed to the
ultimate customer, who then becomes obligated to pay with no
right of return.
Baldwin maintains allowances for doubtful accounts for
estimated losses resulting from the inability of its customers
to make required 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
14
would be able to realize its deferred tax assets in the future
in excess of the 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
statutory 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
overall economic conditions and current business conditions that
affect the Company. 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
and changes in tax legislation.
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 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
and 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 exists. 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.
15
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,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Net sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Cost of goods sold
|
|
|
68.4
|
|
|
|
67.4
|
|
|
|
66.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
31.6
|
|
|
|
32.6
|
|
|
|
33.6
|
|
Selling, general and administrative expenses
|
|
|
18.7
|
|
|
|
18.8
|
|
|
|
19.2
|
|
Engineering and development expenses
|
|
|
7.9
|
|
|
|
8.4
|
|
|
|
8.5
|
|
Restructuring charges
|
|
|
.4
|
|
|
|
.5
|
|
|
|
|
|
Operating income
|
|
|
4.6
|
|
|
|
4.9
|
|
|
|
5.9
|
|
Interest expense
|
|
|
(1.3
|
)
|
|
|
(1.1
|
)
|
|
|
(.6
|
)
|
Other income, net
|
|
|
.2
|
|
|
|
|
|
|
|
.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
3.5
|
|
|
|
3.8
|
|
|
|
5.4
|
|
Provision for income taxes
|
|
|
.8
|
|
|
|
.5
|
|
|
|
1.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
2.7
|
%
|
|
|
3.3
|
%
|
|
|
3.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Overview
Baldwin is a leading global supplier of process automation
equipment for the commercial and newspaper printing industries.
The Company 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, Australia and Europe. Baldwins technology
and products include cleaning systems and related consumables,
fluid management and ink control systems, web press protection
systems and drying systems.
The Company manages its business as one reportable business
segment built around its core competency in process automation
equipment.
For the year ended June 30, 2008, net sales as reported
were $236,330 representing approximately a 17% increase over the
previous years net sales as reported. The increase in net
sales, as more fully described in the sections below, was
favorably impacted during the period by the acquisitions in
fiscal year 2007, currency exchange rates and net sales
increases in Asia and the Americas. Partially offsetting these
increases in net sales was decreased demand in the commercial
and newspaper markets served by the Companys European
subsidiaries.
Gross margins as reported were 31.6% versus the prior
years gross margins of 32.6%. This decrease was
attributable to unfavorable overhead absorption, unfavorable
sales mix and higher material and technical service costs.
Operating income as reported remained at approximately 5% of net
sales for the years ended June 30, 2008 and June 30,
2007.
16
Additionally, the results for the year ended June 30, 2008
reflect higher interest expense associated with higher debt
levels and a reversal of a portion of the valuation allowance
for net deferred tax assets associated with the Companys
U.S. operations.
Fiscal
Year Ended June 30, 2008 Versus Fiscal Year Ended
June 30, 2007
Consolidated
Results
Net Sales. Net sales for the fiscal year ended
June 30, 2008, increased $34,853, or 17% to $236,330 from
$201,477 for the year ended June 30, 2007. Revenue from the
acquired companies during the non-comparable ownership period of
fiscal year ended June 30, 2007 (Oxy-Dry was acquired in
November 2006 and Hildebrand in April 2007) and fiscal year
ended June 30, 2008 favorably impacted net sales by
$16,095. Currency rate fluctuations effecting the Companys
overseas operations increased net sales for the current period
by $16,149. Excluding the effects of the acquired business for
the non-comparable period and currency translation, net sales
for fiscal year 2008 increased $2,609 or 1% when compared with
fiscal year 2007.
The net sales increase, excluding the effects of the
non-comparable period of the acquired businesses and currency
translations, primarily reflects increased revenue in Asia and
the Americas partially offset by decreased revenue in Europe.
In Asia, particularly Japan, net sales increased approximately
$1,876 (excluding the effects of currency translations). The
increase reflects higher revenue from increased market share for
spray dampening equipment, a systematic approach to expand the
cleaning consumables business and a focused effort on the sales
of service and parts. These increases were partially offset by
lower cleaning equipment demand by OEMs and reduced market share
for the Companys water systems.
In the Americas, particularly the U.S., net sales (excluding the
effects of the acquired businesses) increased approximately
$3,593. The increase is primarily related to an increased
presence in the fluid temperature control market and sales of
other U.S. based products. Growth from installation,
service and parts also contributed to the increased revenue.
Installation revenue increased on large newspaper equipment
projects delivered in late fiscal year 2007 while the service
and parts revenue increase benefited from a concentrated
marketing effort to Baldwins large customer installed base
of equipment at commercial and newspaper customers. Partially
offsetting these increases was lower demand for cleaning and
spray dampening equipment.
In Europe, net sales (excluding the effects of the acquired
businesses and currency translations) decreased approximately
$2,860. The decrease primarily reflects reduced order and sales
activity in the commercial markets by OEM press manufacturers in
Germany for cleaning, water and web control systems. Lower
demand for the Companys spray dampening equipment in the
newspaper market related to fewer newspaper projects in fiscal
year 2008 versus fiscal year 2007. Sales mix change to
lower-priced spray dampening equipment in fiscal year 2008.
Partially offsetting these declines were increased dryer and
cleaning consumables sales due to the large installed base of
equipment utilizing these products.
Gross Profit. Gross profit for the fiscal year
ended June 30, 2008 increased to $74,745 (31.6% of sales)
versus $65,774 (32.6% of sales) for the fiscal year ended
June 30, 2007. Excluding the favorable foreign currency
translation effect of $5,798 and the effect of the acquired
businesses for the non-comparable period in fiscal year 2007 of
$3,930, gross profit remained relatively flat. As a percentage
of sales, gross profit declined primarily as a result of an
unfavorable sales mix and unfavorable cost absorption associated
with the lower volume of certain product lines, coupled with
higher material and technical service costs.
Selling, General and Administrative
Expenses. Selling, general and administrative
expenses (SG&A) of $44,205 for the fiscal year
ended June 30, 2008 increased $6,251, or 16% versus the
fiscal year ended June 20, 2007. SG&A expenses of the
acquired businesses during the non-comparable ownership period
of fiscal year ended June 30, 2007 and fiscal year ended
June 30, 2008 negatively impacted expenses by $2,042. In
addition, currency rate fluctuations effecting the
Companys overseas operations increased SG&A expenses
for fiscal year 2008 by $2,517. Excluding the effects of the
acquired business for the non-comparable period and currency
translation, SG&A expenses for fiscal year 2008 increased
$1,692 or 4% when compared with the corresponding year ago
period.
17
G&A expenses, excluding the effects of the non-comparable
period of the acquired businesses of $1,123 and currency
translations of $1,170 for the fiscal year ended June 30,
2008, increased $666 or 3% compared to the fiscal year ended
June 30, 2007. This increase relates primarily to increased
expenses associated with stock based compensation, approximately
$250, and incentive compensation costs, approximately $800.
Partially offsetting these increases were lower
consulting/professional costs related to audit services and
other financial services fees, and severance and employee
procurement cost of approximately $500.
Selling expenses excluding the effects of the non comparable
period of the acquired businesses of $919 and currency
translations, of $1,347 for the fiscal year ended June 30,
2008 increased $1,026 or 7% versus the fiscal year ended
June 30, 2007. The increase in selling expenses reflects
the level of sales activity coupled with increased trade show
costs.
Engineering and Development
Expenses. Engineering and development expenses
excluding the effects of the non-comparable period of the
acquired businesses of $716 and currency translations, of $1,590
for the fiscal year ended June 30, 2008 decreased $579 or
3% versus the fiscal year ended June 30, 2007. Engineering
and development expenses remained at approximately 8% of sales
for the fiscal years ended June 30, 2008 and June 30,
2007.
Restructuring. The Company recorded $960,000
of restructuring costs during the fiscal year ended
June 30, 2008 versus $994,000 in the comparable prior year
period. The current year restructuring plan was designed to
achieve operational efficiencies in Germany and consists
entirely of employee terminations. The fiscal year 2007 plan was
designed to achieve operational efficiencies in sales,
marketing, administration and operational activities primarily
in Germany, the U.S. and the U.K. and included employee
termination costs of $810,000, facility relocation and lease
termination costs of $72,000 and other associated costs of
$112,000.
Interest and Other. Interest expense of $3,127
for the fiscal year ended June 30, 2008 increased $855
versus the fiscal year ended June 30, 2007. This increase
reflects higher average debt levels during the fiscal year ended
June 30, 2008 of approximately $3,500 versus the fiscal
year ended June 30, 2007. In addition, the interest expense
for the twelve months ended June 30, 2008 includes higher
(approximately $273) of additional amortization of capitalized
finance costs. Currency rate fluctuations increased interest
expense $202 in the current period.
Interest income remained relatively flat year over year, while
other income and expense, net, amounted to income of $271 versus
expense of $253 for the periods ended June 30, 2008 and
2007, respectively, and reflects net foreign exchange gains and
losses.
Income before income taxes. Income before
income taxes for the fiscal year ended June 30, 2008 was
$8,267 compared to income before income taxes of $7,598 for the
fiscal year ended June 30, 2007. For the current fiscal
year, currency rate fluctuations increased income before income
taxes by $1,693.
Income Taxes. The Company recorded an income
tax provision of $1,831 for the fiscal year ended June 30,
2008. During the year ended June 30, 2008, the Company
reversed approximately $1,642 ($1,225 in third quarter and $415
in fourth quarter) of its valuation allowance for net deferred
tax assets associated with its U.S. operations. This
reversal of a portion of the U.S. operations deferred tax
valuation allowance is based upon i) prudent and feasible
tax planning strategies, ii) the U.S. operations
historical and projected operating performance, and
iii) managements expectation that the operations will
generate sufficient taxable income in future periods to realize
a portion of the tax benefits associated with its deferred tax
assets. The Company recorded an income tax provision of $958 for
the fiscal year ended June 30, 2007. During the fourth
quarter of fiscal year 2007, the Company reversed a portion of
its valuation allowance for net deferred tax assets associated
with its U.S. operations (approximately $2,500) which
resulted in the recording of a net tax benefit of $1,437 for the
quarter ended June 30, 2007. The reversal of a portion of
the U.S. operations deferred tax valuation allowance was
based upon the U.S. operations historical operating
performances and managements expectation that the
operations will generate sufficient taxable income in future
periods to realize a portion of the tax benefits associated with
its net operating loss carryforwards. Partially offsetting the
benefits of the valuation allowance releases in the fiscal years
ended June 30, 2008 and 2007 were (a) foreign income
taxed at rates higher than the U.S. statutory rate,
(b) no benefit recognized for losses incurred in certain
countries as the realization of such benefits was not more
likely than not and (c) foreign and domestic permanent
items. Therefore, the effective tax rates (excluding the
reversal of a portion
18
of the valuation allowance) of 42.0% for the fiscal year ended
June 30, 2008 and 45.5% for the fiscal year ended
June 30, 2007 differ from the statutory rate. 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
would be recorded in the income statement of the period that the
adjustment is determined to be required.
Net Income. The Companys net income
amounted to $6,436 for the fiscal year ended June 30, 2008
and primarily reflects the higher income from operations,
partially offset by higher interest expense coupled with a
favorable tax rate when compared to net income of $6,640 for the
fiscal year ended June 30, 2007. Currency translation
favorably impacted net income by approximately $1,838.
Fiscal
Year Ended June 30, 2007 Versus Fiscal Year Ended
June 30, 2006
Overview
On November 21, 2006, the Company completed its acquisition
of the Oxy-Dry group of companies (Oxy-Dry).
Aggregate consideration paid, in cash, at closing consisted of a
purchase price of approximately $18,000 working capital and
other contract related adjustments $1,077, subject to post
closing adjustments and $1,394 in fees and expenses.
Oxy-Dry,
with annual sales of approximately $38,000 produces accessories
and controls for the printing industry. In addition, on
April 11, 2007, the Company announced that it had acquired
Hildebrand Systeme GmbH, a leader in the field of high
performance web cleaning systems, for approximately
$2.4 million in cash.
The results of the acquired companies are included in the
financial statements as reported from the dates of their
respective acquisitions and are addressed specifically in the
discussion below.
In conjunction with the acquisitions, the Company also
negotiated a new credit facility consisting of a term loan of
$15,000 and a $35,000 revolving line of credit. Proceeds of the
new facility were used to finance the acquisitions and repay the
Companys existing credit facility.
For the year ended June 30, 2007, net sales as reported
were $201,477 representing approximately a 12% increase over the
previous years net sales as reported. Net sales during the
period were favorably impacted by the acquisitions and currency
exchange rates as more fully described in the sections below and
were negatively impacted by decreased demand in the commercial
and newspaper markets served by the Companys European and
Asian subsidiaries.
Gross margins as reported declined to 32.6% versus the prior
years margins of 33.6%. This decrease was attributable to
the lower volume of sales, unfavorable overhead absorption, and
unfavorable sales mix in the legacy businesses coupled with
lower margins of the acquired businesses.
Operating income as reported of 5% of net sales for the year
ended June 30, 2007 was lower than the 5% of sales in the
previous year primarily as a result of the lower revenue from
the legacy businesses, reduced gross profit, and higher
operating expenses (including $4,615 from acquired businesses
and restructuring expenses of $994).
Additionally the results for the year ended June 30, 2007
reflect higher interest expense associated with higher debt
levels and a reversal of a portion of the valuation allowance
for net deferred tax assets associated with the Companys
U.S. operations.
Consolidated
Results
Net Sales. Net sales for the fiscal year ended
June 30, 2007, excluding the acquisitions of Oxy-Dry and
Hildebrand, of $181,472 were virtually flat versus net sales of
$179,380 for the fiscal year ended June 30, 2006. Currency
rate fluctuations effecting the Companys overseas
operations increased net sales for the current period by $5,685.
Excluding the effects of currency translations, net sales
decreased $3,593 or 2%. Sales of the acquired businesses of
$20,005 for the fiscal year ended June 30, 2007 brought
reported net sales to $201,477.
The net sales decrease, excluding the effects of the acquired
businesses and currency translations, primarily reflects
decreased revenue in Europe and Asia, partially offset by
increased revenue in the Americas.
19
In Europe, net sales (excluding the effects of the acquired
businesses and currency translations) decreased approximately
$2,460. The decline was attributable to lower demand in fiscal
year 2007 for the Companys commercial cleaning and spray
dampening systems in the newspaper marketplace.
In Asia, particularly Japan, sales declined approximately $2,429
(excluding the effects of currency translations). The decline
was attributable to softness in both the Japanese commercial and
newspaper markets, combined with pricing pressure.
In the Americas, particularly the U.S., net sales (excluding the
effects of the acquired businesses) increased approximately
$1,296, primarily related to an increased demand in the
commercial market for the Companys cleaning systems.
Gross Profit. Gross profit for the fiscal year
ended June 30, 2007(excluding the effects of the acquired
businesses) of $60,303 (33.2% of sales) was flat versus the
$60,308 (33.6% of sales) for the fiscal year ended June 30,
2006. Excluding the favorable foreign currency translation
effect of $2,441, gross profit decreased $2,446 or 4%. Gross
profit declined primarily as a result of lower volume and
unfavorable sales mix, coupled with the unfavorable cost
absorption associated with the lower volume. Gross profit of
$5,471 of the acquired businesses increased reported gross
profit to $65,774 (32.6% of net sales).
Selling, General and Administrative
Expenses. Selling, general and administrative
expenses, (excluding the acquired businesses) of $34,366 for the
fiscal year ended June 30, 2007 were flat versus the fiscal
year ended June 20, 2006. Excluding the effects of foreign
currency translations of $1,102, SG&A expenses decreased
$1,262 or 4%.
G&A expenses (excluding the acquired businesses) of $21,288
for the fiscal year ended June 30, 2007 increased $1,467 or
7% versus the fiscal year ended June 30, 2006. Excluding
the effects of currency translation of $556, G&A expenses
increased $911 or 5%. This increase relates primarily to
increased expenses associated with stock based compensation of
approximately $330, higher consulting/professional services
costs related to audit, tax and other financial services fees of
approximately $575 and severance and employee procurement costs
of approximately $500. These increases were partially offset by
lower incentive compensation costs. G&A of $1,761 of the
acquired businesses increased reported G&A to $23,049.
Selling expenses (excluding the acquired businesses) of $13,078
for the fiscal year ended June 30, 2007 decreased $1,627 or
11%. Excluding the effects of currency translations of $546,
selling expenses decreased $2,173 or 15%. The decrease in
selling expenses reflects the level of sales activity coupled
with decreases in commissions and trade show costs. Selling
expenses of the acquired businesses of $1,827 increased reported
selling expenses to $14,905.
Engineering and Development
Expenses. Engineering and development expenses
(excluding the acquired businesses) of $15,886 for the fiscal
year ended June 30, 2007 reflect a decrease of $706 or 5%
versus the fiscal year ended June 30, 2006. Excluding
foreign currency translation effects, engineering and
development expenses remained virtually flat year over year.
Engineering and development expenses of the acquired businesses
of $1,027 increased reported expenses to $16,913.
Restructuring. In conjunction with the
acquisition of Oxy-Dry, the Company recorded $994,000 of
restructuring costs during the physical year ended June 30,
2007 versus $0 in the prior fiscal year period. The
restructuring plan, designed to achieve efficiencies in sales,
marketing, administrative and operational activities primarily
in Germany, the U.S and the U.K., included employee termination
costs of $710,000, facility and lease termination costs of
$175,000 and other associated costs of $109,000.
Interest and Other. Interest expense of $2,272
for the fiscal year ended June 30, 2007 increased $1,198
versus the fiscal year ended June 30, 2006. This increase
reflects higher average debt levels during the fiscal year ended
June 30, 2007 of approximately $22,000 versus the fiscal
year ended June 30, 2006. In addition the interest expense
for the twelve months ended June 30, 2007 includes $282 of
amortization of capitalized finance costs. As noted above, the
increase in debt is primarily associated with the acquisitions
of Oxy-Dry and Hildebrand. Currency rate fluctuations increased
interest expense $95 in fiscal year 2007. Interest income
remained virtually flat year over
20
year on a currency adjusted basis while royalty income declined
$200. The royalty income in fiscal year 2006 was the result of
final royalty payments and true ups for the group of patents
that provided the royalty income stream.
Other income and expense, net, amounted to expense of $253 and
$162 for the fiscal year ended June 30, 2007 and 2006,
respectively and primarily reflects net foreign exchange losses.
Income before income taxes. Income before
income taxes for the fiscal year ended June 30, 2007 of
$7,598 compared to income before income taxes of $9,690 for
fiscal year ended June 30, 2006. For the fiscal year ended
June 30, 2007, currency rate fluctuations increased income
before income taxes $583. The decrease in income before income
taxes was attributable to lower gross profit and higher interest
expense and higher operating expenses, including the
restructuring charge.
Income Taxes. The Company recorded an income
tax provision of $958 for the fiscal year ended June 30,
2007. During the fourth quarter, the Company reversed a portion
of its valuation allowance for net deferred tax assets
associated with its U.S. operations (approximately $2,500)
which resulted in the recording of a net tax benefit of $1,437
for the quarter ended June 30, 2007. The reversal of a
portion of the U.S. operations deferred tax valuation
allowance was based upon the U.S. operations historical
operating performances and managements expectation that
the operations will generate sufficient taxable income in future
periods to realize a portion of the tax benefits associated with
its net operating loss carryforwards. Partially offsetting this
benefit were (a) foreign income taxed at rates higher than
the U.S. statutory rate, (b) no benefit recognized for
losses incurred in certain countries as the realization of such
benefits was not more likely than not and (c) foreign and
domestic permanent items. Therefore, the effective tax rate
(excluding the reversal of a portion of the valuation allowance
in the fourth quarter) of 45.5% for fiscal year ended
June 30, 2007 differs from the statutory rate. 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
would be recorded in the income statement of the period that the
adjustment is determined to be required.
Net Income. The Companys net income
amounted to $6,640 for the fiscal year ended June 30, 2007
and primarily reflects the lower income from operations,
combined with higher interest expense, partially offset by
favorable tax expense when compared to net income of $6,258 for
the fiscal year ended June 30, 2006. Currency translations
favorably impacted net income by approximately $587.
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,
|
|
|
|
2008
|
|
|
2007*
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Cash flow from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
7,632
|
|
|
$
|
4,246
|
|
|
$
|
5,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
See reclassifications and revisions detail in Note 2 to the
consolidated financial statements |
21
Net cash from operating activities for the year ended
June 30, 2008 increased $3,386 compared to fiscal year
2007. Higher revenue and profitability led to increased receipts
from sales in fiscal year 2008. Disciplined asset management led
to a decline in days sales outstanding (59 in fiscal year 2008;
64 in fiscal year 2007) and an increase in inventory turns.
Additionally, cash flow from operations benefited from the
timing of the payment of certain trade account and notes
payable. These increases were partially offset by higher
restructuring payments, payments against acquisition related
liabilities and lower customer deposits.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended June 30,
|
|
|
|
2008
|
|
|
2007*
|
|
|
2006*
|
|
|
|
(In thousands)
|
|
|
Cash flow from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and intangibles
|
|
$
|
(3,545
|
)
|
|
$
|
(1,406
|
)
|
|
$
|
(1,441
|
)
|
Investment in trust assets
|
|
|
|
|
|
|
(750
|
)
|
|
|
(500
|
)
|
Purchase of Oxy-Dry, net of cash acquired
|
|
|
(298
|
)
|
|
|
(18,184
|
)
|
|
|
|
|
Purchase of Hildebrand, net of cash acquired
|
|
|
(148
|
)
|
|
|
(2,356
|
)
|
|
|
|
|
Proceeds from sale of investments
|
|
|
|
|
|
|
|
|
|
|
144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) investing activities
|
|
$
|
(3,991
|
)
|
|
$
|
(22,696
|
)
|
|
$
|
(1,797
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
See reclassifications and revision detail in Note 2 to the
consolidated financial statements |
In fiscal year 2008, the Company utilized $3,991 for investing
activities primarily for additions to property, plant and
equipment and other intangibles (primarily patents). In fiscal
year 2007, the amount utilized primarily reflects the
acquisitions of Oxy-Dry and Hildebrand (net of acquired cash) of
$20,540. In addition, cash utilized for investing includes
additions to property, plant and equipment and other intangibles
(primarily patents) of $1,406 in fiscal year 2007 and $1,441 in
fiscal year 2006.
In addition, the Company made contributions to a Company
sponsored trust of $750 and $500 for fiscal years 2007 and 2006,
respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Cash flow from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Long and short term debt borrowings
|
|
$
|
13,414
|
|
|
$
|
66,957
|
|
|
$
|
899
|
|
Long and short term debt repayments
|
|
|
(23,992
|
)
|
|
|
(45,163
|
)
|
|
|
(6,563
|
)
|
Payment of debt financing costs
|
|
|
|
|
|
|
(2,306
|
)
|
|
|
|
|
Repurchase of Common Stock
|
|
|
(760
|
)
|
|
|
|
|
|
|
|
|
Other
|
|
|
(111
|
)
|
|
|
731
|
|
|
|
323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
$
|
(11,449
|
)
|
|
$
|
20,219
|
|
|
$
|
(5,341
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys primary source of external financing is its
Credit Agreement, as amended (the Credit Agreement),
with LaSalle Bank National Association (LaSalle),
which was subsequently acquired by and will be referred to
hereinafter as Bank of America (BofA).
During fiscal year 2008 the Company utilized cash in financing
activities of $11,449. Based on the strength of its operating
cash flow, the Company was able to make net debt repayments
against its external credit facilities of $10,578. In addition,
the Company utilized $760 of cash to purchase shares of its
Class A Common Stock under its share repurchase program. At
June 30, 2008, approximately $2.5 million remains
available for use under the share repurchase program.
During fiscal year 2007, the Company entered into a Credit
Agreement with Bank of America (BofA). Under the
terms of the Credit Agreement, the Company received a
$35 million bridge loan, the proceeds of which were used to
refinance the Companys previously existing obligations
with Maple Bank GmbH and fund the acquisition of Oxy-Dry and
Hildebrand and the associated closing costs. The Credit
Agreement provided for the
22
bridge loan to be converted to a permanent facility, consisting
of a $15 million term loan (the Term Loan) and
$35 million of revolving lines of credit. On
January 19, 2007, the Company initiated a draw on this
permanent financing facility using the proceeds to repay the
aforementioned bridge loan and associated interest. The term of
the permanent facility is five years, maturing on
November 21, 2011. Commencing on February 21, 2007,
the Company is required to repay the Term Loan in quarterly
installments as provided in the Credit Agreement through
November 21, 2011. Payments against the term loan in fiscal
years 2008 and 2007 were approximately $2,311 and $787,
respectively.
Interest rates under the permanent facility, depending on which
option the Company elects under the Credit Agreement, are based
on London Interbank Offering Rates (LIBOR), or in
the case of U.S. dollar loans, at the prime rate. Loans
based on LIBOR bear interest at LIBOR plus: i) 2.50% when
the total debt to EBITDA ratio is greater than 3.00:1,
ii) 2.25% when the total debt to EBITDA ratio is greater
than 2.50:1 but less than or equal to 3.00:1,
iii) 2.00% when the total debt to EBITDA ratio is greater
than 2.00:1 but less than or equal to 2.50:1, and iv) 1.75%
when the total debt to EBITDA ratio is less than or equal to
2.00:1. Loans based on the prime rate bear interest at the prime
rate plus: i) 1.00% when the total debt to EBITDA
ratio is greater than 3.00:1, ii) 0.75% when the total debt
to EBITDA ratio is greater than 2.50:1 but less than or equal to
3.00:1, iii) 0.50% when the total debt to EBITDA ratio is
greater than 2.00:1 but less than or equal to 2.50:1, and
iv) 0.25% when the total debt to EBITDA ratio is less than
or equal to 2.00:1.
The Credit Agreement requires the Company to maintain minimum
EBITDA, Fixed Charge Coverage Ratio and Total Funded Debt Ratio.
The Agreement provides that total EBITDA, as defined in the
Agreement, must not be less than i) $10,000,000 for each of
the computation periods ending on December 31, 2006 and
March 31, 2007 ii) $11,000,000 for each of the
computation periods ending on June 30, 2007 and
September 30, 2007 and iii) any computation period
ending on December 31, 2007 and thereafter: $12,000,000.
The Fixed Charge Coverage Ratio, as defined in the Credit
Agreement, must not be less than 1.25 to 1.0 commencing with the
computation period ending on December 31, 2006. Total
Funded Debt Ratio, as defined in the Credit Agreement shall not
exceed i) 3.50 to 1.0 for any computation period ending on
or after December 31, 2006 and on or before March 31,
2009 and ii) 3.00 to 1.0 for any computation period on or
after June 30, 2009. The Company was in compliance with
loan covenants at June 30, 2007 and 2008.
Borrowings under the Credit Agreement in the U.S. are
secured by substantially all of the domestic assets
(approximately $28,000) and in Europe by a pledge of the stock
of the Companys European subsidiaries.
During fiscal year 2007, the Company incurred $2.1 million
of deferred financing cost in association with the refinancing
which is being amortized over 60 months.
In addition, during the quarter ended December 31, 2007,
the Company announced a restructuring plan. The current year
restructuring plan is designed to achieve operational
efficiencies in Germany and consists entirely of employee
terminations. The Company expects to incur aggregate cash
expenditures of approximately $960, of which approximately $398
was incurred during fiscal year 2008 related to this action.
Annual estimated savings from these actions is approximately
$1.2 million.
The Company maintains relationships with both foreign and
domestic banks, which combined, have extended credit facilities
totaling $64,827 at June 30, 2008. As of June 30,
2008, the Company had $31,325 outstanding (including Letters of
Credit and Guarantees under these facilities). The amount
available under these facilities at June 30, 2008 is
$33,502.
The Company believes that its cash flow from operations, along
with its available bank lines of credit and alternative sources
of borrowing, are sufficient to finance its operations and other
capital requirements over the term of the current financing.
At June 30, 2008 and 2007, 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, where 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.
23
Contractual
Obligations
The Companys contractual obligations as of June 30,
2008 are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ending June 30,
|
|
|
|
Total at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 and
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
thereafter
|
|
|
|
(In thousands)
|
|
|
Loans payable
|
|
$
|
3,767
|
|
|
$
|
3,767
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Capital lease obligations
|
|
|
361
|
|
|
|
146
|
|
|
|
129
|
|
|
|
83
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
21,435
|
|
|
|
3,472
|
|
|
|
6,485
|
|
|
|
4,882
|
|
|
|
6,596
|
|
|
|
|
|
|
|
|
|
Non-cancelable operating lease obligations
|
|
|
27,649
|
|
|
|
6,860
|
|
|
|
5,166
|
|
|
|
3,408
|
|
|
|
2,521
|
|
|
|
2,102
|
|
|
|
7,592
|
|
Purchase commitments (materials)
|
|
|
18,130
|
|
|
|
16,527
|
|
|
|
1,603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental compensation
|
|
|
3,770
|
|
|
|
549
|
|
|
|
212
|
|
|
|
372
|
|
|
|
382
|
|
|
|
387
|
|
|
|
1,868
|
|
Restructuring and integration payments
|
|
|
881
|
|
|
|
881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
3,422
|
|
|
|
1,321
|
|
|
|
1,079
|
|
|
|
706
|
|
|
|
316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual cash obligations
|
|
$
|
79,415
|
|
|
$
|
33,523
|
|
|
$
|
14,674
|
|
|
$
|
9,451
|
|
|
$
|
9,818
|
|
|
$
|
2,489
|
|
|
$
|
9,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New
Accounting Pronouncements
The Company adopted FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes an
Interpretation of FASB Statement No. 109
(FIN 48) on July 1, 2007. FIN 48 clarifies
the accounting and reporting for uncertainties in income tax
law. This Interpretation prescribes a comprehensive model for
the financial statement recognition, measurement, presentation
and disclosure of uncertain tax positions taken or expected to
be taken in income tax returns. See Note 9 for additional
information including the effects of adoption.
In April 2008, the Financial Accounting Standards Board issued
FASB Staff Position (FSP)
FAS 142-3,
Determination of the Useful Life of Intangible
Assets, to provide guidance for determining the useful
life of recognized intangible assets and to improve consistency
between the period of expected cash flows used to measure the
fair value of a recognized intangible asset and the useful life
of the intangible asset as determined under Statement 142. The
FSP requires that an entity consider its own historical
experience in renewing or extending similar arrangements.
However, the entity must adjust that experience based on
entity-specific factors under FASB Statement 142, Goodwill
and Other Intangible Assets. FSP
FAS 142-3
is effective for fiscal years and interim periods that begin
after November 15, 2008. The Company intends to adopt FSP
FAS 142-3
effective January 1, 2009 and to apply its provisions
prospectively to recognized intangible assets acquired after
that date.
In March 2008, the FASB issued SFAS No. 161,
Disclosure about Derivative Instruments and Hedging
Activities (SFAS 161). SFAS 161 requires
additional derivative disclosures, including objectives and
strategies for using derivatives, fair value amounts of and
gains and losses on derivative instruments, and
credit-risk-related contingent features in derivative
agreements. The Company is in the process of analyzing the
impact of SFAS 161, which is effective for financial
statements issued for fiscal years and interim periods beginning
after November 15, 2008. The Company does not expect the
adoption of SFAS 161 to have a material impact on the
financial statements.
In December 2007, the FASB issued SFAS No. 141
(revised 2007), Business Combinations. SFAS No. 141(R)
establishes principles and requirements for how the acquirer in
a business combination (a) recognizes and measures in its
financial statements the identifiable assets acquired, the
liabilities assumed and any controlling interest,
(b) recognizes and measures the goodwill acquired in the
business combination or a gain from a bargain purchase, and
(c) determines what information to disclose to enable users
of the financial statements to evaluate the nature and financial
effects of the business combination. SFAS No. 141(R)
applies to business combinations for which the acquisition date
is on or after December 15, 2008. The adoption of
SFAS 141(R) will have an impact on accounting for business
combinations once adopted, but the effect is dependent upon
acquisitions at that time.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial
Statements an amendment to ARB No. 51.
SFAS No. 160 establishes accounting and reporting
standards that require (a) the ownership interest in
subsidiaries held by parties other than the parent to be clearly
identified and
24
presented in the Consolidated Balance Sheets within equity, but
separate from the parents equity, (b) the amount of
consolidated net income attributable to the parent and the
noncontrolling interest to be clearly identified and presented
on the face of the Consolidated Statement of Earnings and
(c) changes in a parents ownership interest while the
parent retains its controlling financial interest in its
subsidiary to be accounted for consistently. This statement is
effective for fiscal years beginning on or after
December 15, 2008. The Company does not expect that the
adoption of SFAS No. 160 will have a material impact
on its results of operations and financial position.
In February 2007, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 159, The Fair Value
Option for Financial Assets and Financial Liabilities Including
an Amendment of FASB Statement No 115, which permits
entities to measure some financial assets and liabilities at
fair value on an
instrument-by-instrument
basis. Entities that elect the fair value option will report
unrealized gains and losses in earnings at each subsequent
reporting date. SFAS No. 159 also establishes
additional disclosure requirements. The provisions of
SFAS No. 159 are effective for fiscal year beginning
July 1, 2008. The Company is currently evaluating the
provisions of SFAS No. 159 and the resulting impact of
adoption on its financial statements.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements. SFAS No. 157
defines fair value, establishes a framework for measuring fair
value under GAAP, and expands disclosures about fair value
measurements. The provisions of SFAS No. 157 are
effective for fiscal years beginning July 1, 2008, and
interim periods within that fiscal year. In December 2007, the
FASB issued FSP
FAS 157-b
to defer SFAS 157s effective date for all
non-financial assets and liabilities, except those items
recognized or disclosed at fair value on an annual or more
frequently recurring basis, until years beginning after
November 15, 2008. Derivatives measured at fair value under
FAS 133 were not deferred under FSP
FAS 157-b.
We are assessing the impact, if any, which the adoption of
SFAS 157 will have on our financial position, results of
operations and cash flows.
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
(amounts in thousands)
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, 2008, the Company had debt totaling $25,202,
most of which bears interest at floating rates.
The Company performed a sensitivity analysis as of June 30,
2008, 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 $252. 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 80% of its revenues from
countries outside of the United States for the fiscal year ended
June 30, 2008. 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,
2008 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 $630.
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.
25
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
26
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Baldwin Technology Company, Inc.
We have audited the accompanying consolidated balance sheets of
Baldwin Technology Company, Inc. and Subsidiaries as of
June 30, 2008 and 2007, and the related consolidated
statements of income, changes in shareholders equity, and
cash flows for each of the two years then ended. Our audits of
the basic financial statements included the financial statement
schedule II listed in the index appearing under
Item 15(a)(2). These consolidated financial statements and
financial statement schedule are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits 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. The Company is not required to
have, nor were we engaged to perform an audit of its internal
control over financial reporting. Our audit included
consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Companys internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also 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, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Baldwin Technology Company, Inc. and Subsidiaries as of
June 30, 2008 and 2007, and the results of their operations
and their cash flows for each of the two years then ended, in
conformity with accounting principles generally accepted in the
United States of America. Also, in our opinion, the related
financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, present fairly, in
all material respects, the information set forth therein.
As discussed in Note 2 to the consolidated financial
statements, the Company changed its method of accounting for
defined benefit pension and other postretirement plans,
effective as of June 30, 2007, in connection with the
adoption of Statement of Financial Accounting Standards
No. 158, Employers Accounting for Defined
Pension and Other Post Retirement Plans.
As discussed in Note 9 to the consolidated financial
statements, the Company adopted the provision of FASB
Interpretation No. 48 Accounting for Uncertainty in
Income Taxes an interpretation of FASB Statement
109 effective July 1, 2007.
Grant Thornton LLP
New York, New York
September 29, 2008
27
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Baldwin Technology Company, Inc.
In our opinion, the consolidated statements of operations,
changes in shareholders equity and cash flows for the year
ended June 30, 2006 present fairly, in all material
respects, the results of operations and cash flows of Baldwin
Technology Company, Inc. and its subsidiaries for the year 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.
/s/ PricewaterhouseCoopers,
LLP
PricewaterhouseCoopers, LLP
Stamford, CT
September 28, 2006
28
BALDWIN
TECHNOLOGY COMPANY, INC.
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents*
|
|
$
|
9,333
|
|
|
$
|
16,034
|
|
Accounts receivable trade, net of allowance for doubtful
accounts of $1,180 ($1,876 at June 30, 2007)
|
|
|
42,262
|
|
|
|
40,713
|
|
Notes receivable, trade
|
|
|
7,303
|
|
|
|
7,150
|
|
Inventories
|
|
|
31,804
|
|
|
|
30,384
|
|
Deferred taxes, net
|
|
|
1,497
|
|
|
|
1,780
|
|
Prepaid expenses and other
|
|
|
7,016
|
|
|
|
5,584
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
99,215
|
|
|
|
101,645
|
|
|
|
|
|
|
|
|
|
|
MARKETABLE SECURITIES:
|
|
|
|
|
|
|
|
|
(Cost $594 at June 30, 2008 and $564 at June 30, 2007)
|
|
|
591
|
|
|
|
781
|
|
|
|
|
|
|
|
|
|
|
PROPERTY, PLANT AND EQUIPMENT:
|
|
|
|
|
|
|
|
|
Land and buildings
|
|
|
1,408
|
|
|
|
1,116
|
|
Machinery and equipment
|
|
|
7,257
|
|
|
|
6,152
|
|
Furniture and fixtures
|
|
|
5,479
|
|
|
|
5,347
|
|
Capital leases
|
|
|
269
|
|
|
|
278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,413
|
|
|
|
12,893
|
|
Less: Accumulated depreciation
|
|
|
(8,254
|
)
|
|
|
(7,518
|
)
|
|
|
|
|
|
|
|
|
|
Net property, plant and equipment
|
|
|
6,159
|
|
|
|
5,375
|
|
|
|
|
|
|
|
|
|
|
INTANGIBLES, less accumulated amortization of $8,100 ($6,608 at
June 30, 2007)
|
|
|
11,949
|
|
|
|
11,169
|
|
GOODWILL, less accumulated amortization of $3,765 ($3,293 at
June 30, 2007)
|
|
|
27,751
|
|
|
|
24,741
|
|
DEFERRED TAXES, NET
|
|
|
6,858
|
|
|
|
6,793
|
|
OTHER ASSETS*
|
|
|
7,135
|
|
|
|
6,676
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
159,658
|
|
|
$
|
157,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
See reclassifications and revisions detail in Note 2 to the
consolidated financial statements |
The accompanying notes to consolidated financial statements are
an integral part of these statements.
29
BALDWIN
TECHNOLOGY COMPANY, INC.
CONSOLIDATED
BALANCE SHEETS (Continued)
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands, except share and per share data)
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Loans payable
|
|
$
|
3,767
|
|
|
$
|
3,249
|
|
Current portion of long-term debt
|
|
|
3,472
|
|
|
|
2,501
|
|
Accounts payable, trade
|
|
|
23,376
|
|
|
|
19,976
|
|
Notes payable, trade
|
|
|
8,661
|
|
|
|
7,009
|
|
Accrued salaries, commissions, bonus and profit-sharing
|
|
|
9,572
|
|
|
|
7,942
|
|
Customer deposits
|
|
|
1,001
|
|
|
|
5,876
|
|
Accrued and withheld taxes
|
|
|
2,104
|
|
|
|
1,793
|
|
Income taxes payable
|
|
|
1,070
|
|
|
|
1,518
|
|
Other accounts payable and accrued liabilities
|
|
|
15,100
|
|
|
|
17,559
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
68,123
|
|
|
|
67,423
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES:
|
|
|
|
|
|
|
|
|
Long-term debt, net of current portion
|
|
|
17,963
|
|
|
|
26,929
|
|
Other long-term liabilities
|
|
|
11,959
|
|
|
|
8,288
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
29,922
|
|
|
|
35,217
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
98,045
|
|
|
|
102,640
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY:
|
|
|
|
|
|
|
|
|
Class A Common Stock, $.01 par, 45,000,000 shares
authorized, 14,139,734 shares issued at June 30, 2008
and 17,875,622 shares issued at June 30, 2007
|
|
|
142
|
|
|
|
179
|
|
Class B Common Stock, $.01 par, 4,500,000 shares
authorized, 1,142,555 shares issued at June 30, 2008
and 1,486,825 shares issued at June 30, 2007
|
|
|
11
|
|
|
|
15
|
|
Capital contributed in excess of par value
|
|
|
46,398
|
|
|
|
59,499
|
|
Accumulated earnings
|
|
|
9,284
|
|
|
|
5,266
|
|
Accumulated other comprehensive income
|
|
|
5,778
|
|
|
|
3,051
|
|
Less: Treasury stock, at cost:
|
|
|
|
|
|
|
|
|
Class A zero shares (3,634,070 shares at
June 30, 2007)
|
|
|
|
|
|
|
|
|
Class B zero shares (294,270 shares at
June 30, 2007)
|
|
|
|
|
|
|
(13,470
|
)
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
61,613
|
|
|
|
54,540
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
$
|
159,658
|
|
|
$
|
157,180
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes to consolidated financial statements are
an integral part of these statements.
30
BALDWIN
TECHNOLOGY COMPANY, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands, except per share data)
|
|
|
Net sales
|
|
$
|
236,330
|
|
|
$
|
201,477
|
|
|
$
|
179,380
|
|
Cost of goods sold
|
|
|
161,585
|
|
|
|
135,703
|
|
|
|
119,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
74,745
|
|
|
|
65,774
|
|
|
|
60,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
26,008
|
|
|
|
23,049
|
|
|
|
19,821
|
|
Selling
|
|
|
18,197
|
|
|
|
14,905
|
|
|
|
14,705
|
|
Engineering and development
|
|
|
18,640
|
|
|
|
16,913
|
|
|
|
15,181
|
|
Restructuring charges
|
|
|
960
|
|
|
|
994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63,805
|
|
|
|
55,861
|
|
|
|
49,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
10,940
|
|
|
|
9,913
|
|
|
|
10,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income) expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
3,127
|
|
|
|
2,272
|
|
|
|
1,074
|
|
Interest (income)
|
|
|
(183
|
)
|
|
|
(210
|
)
|
|
|
(125
|
)
|
Royalty (income), net
|
|
|
|
|
|
|
|
|
|
|
(200
|
)
|
Other (income) expense, net
|
|
|
(271
|
)
|
|
|
253
|
|
|
|
162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,673
|
|
|
|
2,315
|
|
|
|
911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations before income taxes
|
|
|
8,267
|
|
|
|
7,598
|
|
|
|
9,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Benefit) provision for income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
(1,437
|
)
|
|
|
(2,478
|
)
|
|
|
(274
|
)
|
Foreign
|
|
|
3,268
|
|
|
|
3,436
|
|
|
|
3,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax provision
|
|
|
1,831
|
|
|
|
958
|
|
|
|
3,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,436
|
|
|
$
|
6,640
|
|
|
$
|
6,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share basic
|
|
$
|
0.42
|
|
|
$
|
0.44
|
|
|
$
|
0.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share diluted
|
|
$
|
0.41
|
|
|
$
|
0.42
|
|
|
$
|
0.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
15,444
|
|
|
|
15,169
|
|
|
|
14,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
15,730
|
|
|
|
15,716
|
|
|
|
15,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes to consolidated financial statements are
an integral part of these statements.
31
BALDWIN
TECHNOLOGY COMPANY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A
|
|
|
Class B
|
|
|
Contributed
|
|
|
Accumulated
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Common Stock
|
|
|
in Excess of
|
|
|
Earnings/
|
|
|
Comprehensive
|
|
|
Treasury Stock
|
|
|
Comprehensive
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
par Value
|
|
|
(Deficit)
|
|
|
Income
|
|
|
Shares
|
|
|
Amount
|
|
|
Income
|
|
|
|
(In thousands, except shares)
|
|
|
Balance at June 30, 2005
|
|
|
16,575,349
|
|
|
$
|
166
|
|
|
|
2,137,883
|
|
|
$
|
21
|
|
|
$
|
57,065
|
|
|
$
|
(7,632
|
)
|
|
$
|
2,332
|
|
|
|
(3,802,666
|
)
|
|
$
|
(12,721
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,640
|
|
Translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
413
|
|
|
|
|
|
|
|
|
|
|
|
413
|
|
Unrealized gain on available-for sale securities, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
Amortization stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reduction of minimum pension liability, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110
|
|
|
|
|
|
|
|
|
|
|
|
110
|
|
Recognition of pension funded status, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(76
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares converted Class B to Class A
|
|
|
51,068
|
|
|
|
|
|
|
|
(51,068
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on forward contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
(39
|
)
|
Shares issued under stock option plan
|
|
|
448,339
|
|
|
|
5
|
|
|
|
212
|
|
|
|
|
|
|
|
774
|
|
|
|
|
|
|
|
|
|
|
|
(3,868
|
)
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2007:
|
|
|
17,875,622
|
|
|
$
|
179
|
|
|
|
1,486,825
|
|
|
$
|
15
|
|
|
$
|
59,499
|
|
|
$
|
5,266
|
|
|
$
|
3,051
|
|
|
|
(3,928,340
|
)
|
|
$
|
(13,470
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adoption of FIN 48 uncertain tax positions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,418
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,436
|
|
Translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,194
|
|
|
|
|
|
|
|
|
|
|
|
3,194
|
|
Unrealized loss on available- for-sale securities, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(128
|
)
|
|
|
|
|
|
|
|
|
|
|
(128
|
)
|
Recognition of pension funded status, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(339
|
)
|
|
|
|
|
|
|
|
|
|
|
(339
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of stock based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(289,095
|
)
|
|
|
(760
|
)
|
|
|
|
|
Shares converted Class B to Class A
|
|
|
50,000
|
|
|
|
1
|
|
|
|
(50,000
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement of treasury stock
|
|
|
(3,931,400
|
)
|
|
|
(39
|
)
|
|
|
(294,270
|
)
|
|
|
(3
|
)
|
|
|
(14,233
|
)
|
|
|
|
|
|
|
|
|
|
|
4,225,670
|
|
|
|
14,275
|
|
|
|
|
|
Shares issued under stock option plan
|
|
|
145,512
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
101
|
|
|
|
|
|
|
|
|
|
|
|
(8,235
|
)
|
|
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2008:
|
|
|
14,139,734
|
|
|
$
|
142
|
|
|
|
1,142,555
|
|
|
$
|
11
|
|
|
$
|
46,398
|
|
|
$
|
9,284
|
|
|
$
|
5,778
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes to consolidated financial statements are
an integral part of these statements.
32
BALDWIN
TECHNOLOGY COMPANY, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,436
|
|
|
$
|
6,640
|
|
|
$
|
6,258
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
2,827
|
|
|
|
2,222
|
|
|
|
1,458
|
|
Deferred taxes
|
|
|
1,420
|
|
|
|
(345
|
)
|
|
|
2,320
|
|
Provision for losses on accounts receivable
|
|
|
257
|
|
|
|
309
|
|
|
|
158
|
|
Write-off of fixed assets
|
|
|
|
|
|
|
|
|
|
|
55
|
|
Restructuring charges
|
|
|
960
|
|
|
|
994
|
|
|
|
|
|
Gain on sale of investments
|
|
|
|
|
|
|
|
|
|
|
(92
|
)
|
Stock compensation costs
|
|
|
1,031
|
|
|
|
782
|
|
|
|
466
|
|
Changes in assets and liabilities, net of effects of
acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts and notes receivable
|
|
|
3,279
|
|
|
|
(565
|
)
|
|
|
(4,355
|
)
|
Inventories
|
|
|
1,534
|
|
|
|
(1,074
|
)
|
|
|
686
|
|
Prepaid expenses and other
|
|
|
(782
|
)
|
|
|
46
|
|
|
|
(1,439
|
)
|
Other assets
|
|
|
(24
|
)
|
|
|
(44
|
)
|
|
|
(3
|
)
|
Customer deposits
|
|
|
(4,890
|
)
|
|
|
(545
|
)
|
|
|
657
|
|
Accrued compensation
|
|
|
464
|
|
|
|
(380
|
)
|
|
|
(34
|
)
|
Payments of restructuring charges
|
|
|
(859
|
)
|
|
|
(533
|
)
|
|
|
|
|
Payments of integration costs
|
|
|
(1,524
|
)
|
|
|
(1,153
|
)
|
|
|
|
|
Accounts and notes payable, trade
|
|
|
1,623
|
|
|
|
277
|
|
|
|
150
|
|
Income taxes payable
|
|
|
(859
|
)
|
|
|
380
|
|
|
|
(180
|
)
|
Accrued and withheld taxes
|
|
|
311
|
|
|
|
(243
|
)
|
|
|
(5
|
)
|
Other accounts payable and accrued liabilities
|
|
|
(3,497
|
)
|
|
|
(2,642
|
)
|
|
|
(269
|
)
|
Interest payable
|
|
|
(75
|
)
|
|
|
120
|
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities*
|
|
|
7,632
|
|
|
|
4,246
|
|
|
|
5,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in trust assets*
|
|
|
|
|
|
|
(750
|
)
|
|
|
(500
|
)
|
Purchase of Oxy-Dry, net of cash acquired
|
|
|
(298
|
)
|
|
|
(18,184
|
)
|
|
|
|
|
Purchase of Hildebrand, net of cash acquired
|
|
|
(148
|
)
|
|
|
(2,356
|
)
|
|
|
|
|
Additions of property, plant and equipment
|
|
|
(1,857
|
)
|
|
|
(744
|
)
|
|
|
(921
|
)
|
Additions of intangibles
|
|
|
(1,688
|
)
|
|
|
(662
|
)
|
|
|
(520
|
)
|
Proceeds from sale of investments
|
|
|
|
|
|
|
|
|
|
|
144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) investing activities*
|
|
|
(3,991
|
)
|
|
|
(22,696
|
)
|
|
|
(1,797
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term and short-term debt borrowings
|
|
|
13,414
|
|
|
|
66,957
|
|
|
|
899
|
|
Long-term and short-term debt repayments
|
|
|
(23,992
|
)
|
|
|
(45,163
|
)
|
|
|
(6,563
|
)
|
Principal payments under capital lease obligations
|
|
|
(111
|
)
|
|
|
(153
|
)
|
|
|
(91
|
)
|
Payment of debt financing costs
|
|
|
|
|
|
|
(2,306
|
)
|
|
|
|
|
Other long-term liabilities
|
|
|
(102
|
)
|
|
|
105
|
|
|
|
|
|
Repurchase of Common Stock
|
|
|
(760
|
)
|
|
|
|
|
|
|
|
|
Proceeds from stock option exercise
|
|
|
102
|
|
|
|
779
|
|
|
|
414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(11,449
|
)
|
|
|
20,219
|
|
|
|
(5,341
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes
|
|
|
1,107
|
|
|
|
(221
|
)
|
|
|
371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(6,701
|
)
|
|
|
1,548
|
|
|
|
(957
|
)
|
Cash and cash equivalents at beginning of year*
|
|
|
16,034
|
|
|
|
14,486
|
|
|
|
15,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year*
|
|
$
|
9,333
|
|
|
$
|
16,034
|
|
|
$
|
14,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
3,247
|
|
|
$
|
2,205
|
|
|
$
|
1,121
|
|
Income taxes
|
|
$
|
1,551
|
|
|
$
|
555
|
|
|
$
|
2,094
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital lease obligation
|
|
$
|
|
|
|
$
|
|
|
|
$
|
411
|
|
Settlement of long term note receivable with exchange of shares
|
|
$
|
|
|
|
$
|
|
|
|
$
|
730
|
|
|
|
|
* |
|
See reclassifications and revisions detail in Note 2 to the
consolidated financial statements |
The accompanying notes to consolidated financial statements are
an integral part of these statements.
33
BALDWIN
TECHNOLOGY COMPANY, INC.
(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 process
automation equipment and related consumables for the printing
and publishing industry. Headquartered in Shelton, Connecticut,
the Company has sales and service centers and product
development and manufacturing operations in the Americas, Asia,
Australia and Europe. The Company manages its business as one
reportable business segment built around its core competency in
process automation and equipment.
|
|
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. The minority interest amounts are not material to
the Consolidated Financial Statements and therefore are not
disclosed.
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 subsidiary 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, 2008, 2007 and 2006
were $66, $513 and ($323), 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 forward contracts to hedge
these exposures.
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.
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, 2008, 2007
and 2006, one customer accounted for more than 10% of the
Companys net sales and trade accounts receivable. Koenig
and Bauer Aktiengesellschaft (KBA) accounted for
approximately
34
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
15%, 17% and 18%, of the Companys net sales for the fiscal
years ended June 30, 2008, 2007 and 2006, respectively and
15% and 17% of trade accounts receivable at June 30, 2008
and 2007, respectively. The Companys ten largest customers
accounted for approximately 46%, 49% and 50% of the
Companys net sales for each of the fiscal years ended
June 30, 2008, 2007 and 2006, respectively. Foreign cash
balances at June 30, 2008 and 2007 were $8,582 and $14,300,
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 $1,045 and $959 greater
as of June 30, 2008 and 2007, respectively. 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.
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 shorter of the
lease term or 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 $1,645, $1,378 and $970 for the fiscal years ended
June 30, 2008, 2007 and 2006, 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, 2008 or at
June 30, 2007.
Stock Based Compensation. Effective
July 1, 2005, the Company adopted the provisions of
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 recognized
stock-based compensation expense from July 1, 2005 on 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 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
35
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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. The Company
performed its annual impairment assessment by utilizing a
discounted cash flow model and determined that no impairment
existed as of June 30, 2008.
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 30 years. Amortization expense amounted to
$1,182, $844 and $488 for the fiscal years ended June 30,
2008, 2007 and 2006, 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.
Valuation allowances are recognized to reduce deferred tax
assets to the amount that will more likely than not be realized.
In assessing the need for a valuation allowance, management
considers all available evidence including past operating
results, estimates of future taxable income and the feasibility
of ongoing tax planning strategies. When the Company changes its
determination as to the amount of deferred tax assets that can
be realized, the valuation allowance is adjusted with a
corresponding impact to income tax expense in the period in
which such determination is made.
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 as they are indicative of the cash that would
have been received or required had settlement been made at
June 30, 2008 and at June 30, 2007.
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 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 $5,421 and $4,820 at
June 30, 2008 and 2007, respectively, which are included in
Other accounts payable and accrued liabilities (see
Note 18).
Revenue Recognition. The Companys
products are sold with terms and conditions that vary depending
on the nature of the product sold and the cultural and business
environments in which the Company operates.
36
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company recognizes revenue based on the type of product sold
and the obligations under the contract. Revenue is recognized on
contracts for design, manufacture and delivery of equipment
without installation (equipment sales) and parts, service and
consumables at the time of shipment or rendering of services.
The Company considers revenue realized on equipment sales when
it has persuasive evidence of an arrangement, delivery has
occurred, the sales price is fixed or determinable and
collectibility is reasonably assured. In contracts that include
additional services, including installation,
start-up
and/or
commissioning (system sales), the Company recognizes revenue on
each element of the contract as appropriate. Installation
services are provided to the customer on an as-needed basis and
may be contracted for separately or included in the same
contract as the equipment sale. Revenue is recognized for
installation services at the completion of the contractually
required services.
Contracts for system sales may include multiple-element revenue
arrangements. When the Company enters into multiple-element
revenue arrangements, which may include installation services as
a contractual element, along with the purchase price of the
product as a contractual element, the arrangement is separated
into its stand-alone elements for revenue recognition purposes.
When the delivered item has value to the customer on a stand
alone basis, there is objective and reliable evidence of the
fair value of the undelivered item and the arrangement does not
include a general right of return, revenue is recognized on each
element as separate units of accounting. If these criteria are
not met, the arrangement is accounted for as one unit of
accounting which would result in revenue being deferred until
the last undelivered contractual element is fulfilled.
Standard payment terms may 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. In those cases when the Company renders
invoices prior to performance of the service, the Company
records deferred revenue until completion of the services,
whereupon revenue is fully recognized.
Freight terms are generally FOB shipping dock with risk of loss
passing to the purchaser at the time of shipment. 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, unless the product fails to meet published
product specifications and the Company fails to perform its
obligations under product warranty terms.
The terms of sale are generally on a purchase order basis, which
may contain formal product acceptance clauses. Occasionally,
clauses may be included in a contract or purchase order that
require acceptance related to certain specifications as outlined
in the contract or purchase order. In these instances, the
nature of the acceptance is evaluated to ensure that the Company
has met the applicable criteria concurrent with the shipment of
equipment to the customer.
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 have passed to the
ultimate customer, who then becomes obligated to pay with no
right of return.
Shipping and Handling, Advertising. Costs
related to shipping and handling are included in cost of goods
sold in the Consolidated Statement of Operations. The Company
expenses advertising costs when incurred. Advertising expense
was $222, $275 and $221 for fiscal years ended June 30,
2008, 2007 and 2006, respectively.
Deferred Financing Costs. The Company
capitalizes costs associated with the issuance of debt,
including bank, legal, investment advisor and accounting fees
and other expenses. Deferred financing costs are amortized over
the term of the related financing transaction and are included
in interest expense.
37
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Research and Development and
Engineering. Research, development and
engineering costs are expensed as incurred.
Earnings 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.
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.
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, revenue
recognition, useful lives of assets, deferred tax asset
valuations, stock option valuation, and goodwill and
intangibles. 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. 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. 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.
The Company adopted FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes an
Interpretation of FASB Statement No. 109
(FIN 48) on July 1, 2007. FIN 48 clarifies
the accounting and reporting for uncertainties in income tax
law. This Interpretation prescribes a comprehensive model for
the financial statement recognition, measurement, presentation
and disclosure of uncertain tax positions taken or expected to
be taken in income tax returns. See Note 9 for additional
information including the effects of adoption.
In April 2008, the Financial Accounting Standards Board issued
FASB Staff Position (FSP)
FAS 142-3,
Determination of the Useful Life of Intangible
Assets, to provide guidance for determining the useful
life of recognized intangible assets and to improve consistency
between the period of expected cash flows used to measure the
fair value of a recognized intangible asset and the useful life
of the intangible asset as determined under Statement 142. The
FSP requires that an entity consider its own historical
experience in renewing or extending similar arrangements.
However, the entity must adjust that experience based on
entity-specific factors under FASB Statement 142, Goodwill
and Other Intangible Assets. FSP
FAS 142-3
is effective for fiscal years and interim periods that begin
after November 15, 2008. The Company intends to adopt FSP
FAS 142-3
effective January 1, 2009 and to apply its provisions
prospectively to recognized intangible assets acquired after
that date.
In March 2008, the FASB issued SFAS No. 161,
Disclosure about Derivative Instruments and Hedging
Activities (SFAS 161). SFAS 161 requires
additional derivative disclosures, including objectives and
strategies for using derivatives, fair value amounts of and
gains and losses on derivative instruments, and
credit-risk-related
38
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
contingent features in derivative agreements. The Company is in
the process of analyzing the impact of SFAS 161, which is
effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008. The
Company does not expect the adoption of SFAS 161 to have a
material impact on the financial statements.
In December 2007, the FASB issued SFAS No. 141
(revised 2007), Business Combinations. SFAS No. 141(R)
establishes principles and requirements for how the acquirer in
a business combination (a) recognizes and measures in its
financial statements the identifiable assets acquired, the
liabilities assumed and any controlling interest,
(b) recognizes and measures the goodwill acquired in the
business combination or a gain from a bargain purchase, and
(c) determines what information to disclose to enable users
of the financial statements to evaluate the nature and financial
effects of the business combination. SFAS No. 141(R)
applies to business combinations for which the acquisition date
is on or after December 15, 2008. The adoption of
SFAS 141(R) will have an impact on accounting for business
combinations once adopted, but the effect is dependent upon
acquisitions at that time.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial
Statements an amendment to ARB No. 51.
SFAS No. 160 establishes accounting and reporting
standards that require (a) the ownership interest in
subsidiaries held by parties other than the parent to be clearly
identified and presented in the Consolidated Balance Sheets
within equity, but separate from the parents equity,
(b) the amount of consolidated net income attributable to
the parent and the non-controlling interest to be clearly
identified and presented on the face of the Consolidated
Statement of Earnings and (c) changes in a parents
ownership interest while the parent retains its controlling
financial interest in its subsidiary to be accounted for
consistently. This statement is effective for fiscal years
beginning on or after December 15, 2008. The Company does
not expect that the adoption of SFAS No. 160 will have
a material impact on its results of operations and financial
position.
In February 2007, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 159, The Fair Value
Option for Financial Assets and Financial Liabilities Including
an Amendment of FASB Statement No 115, which permits
entities to measure some financial assets and liabilities at
fair value on an
instrument-by-instrument
basis. Entities that elect the fair value option will report
unrealized gains and losses in earnings at each subsequent
reporting date. SFAS No. 159 also establishes
additional disclosure requirements. The provisions of
SFAS No. 159 are effective for fiscal year beginning
July 1, 2008. The Company is currently evaluating the
provisions of SFAS No. 159 and the resulting impact of
adoption on its financial statements.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements. SFAS No. 157
defines fair value, establishes a framework for measuring fair
value under GAAP, and expands disclosures about fair value
measurements. The provisions of SFAS No. 157 are
effective for fiscal year beginning July 1, 2008, and
interim periods within that fiscal year. The Company is
currently evaluating the provisions of SFAS No. 157
and the resulting impact of adoption on the financial
statements. In December 2007, the FASB issued FSP
FAS 157-b
to defer SFAS 157s effective date for all
non-financial assets and liabilities, except those items
recognized or disclosed at fair value on an annual or more
frequently recurring basis, until years beginning after
November 15, 2008. Derivatives measured at fair value under
FAS 133 were not deferred under FSP
FAS 157-b.
We are assessing the impact, if any, which the adoption of
SFAS 157 will have on our financial position, results of
operations and cash flows.
Reclassifications and Revisions. Certain
amounts in the 2008, 2007 and 2006 Consolidated Financial
Statements and Notes have been reclassified to conform to the
2008 presentation. In particular, the Company has revised its
Consolidated Financial Statements as of June 30, 2007 to
revise the classification of assets held by a Company sponsored
trust. Changes to the June 30, 2007 balance sheet reflect
an immaterial reclass of $1,341 from cash and cash equivalents
to other assets. The fiscal year 2006 statement of cash
flows reflects an immaterial reduction to cash and equivalents
at end of year of $500. Corresponding immaterial
reclassifications in the fiscal years 2006 and
2007 statement of cash flows have also been made to revise
fiscal year 2007 cash provided by operating activities of $91
and fiscal years 2007 and 2006 cash used in investing activities
of $750 and $500, respectively.
39
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
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 with owners in their capacity as owners.
Accumulated other comprehensive income (loss) consists of the
following:
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Cumulative translation adjustment
|
|
$
|
6,195
|
|
|
$
|
3,001
|
|
Unrealized gain (loss) on investments, net of tax benefit of $1,
(expense of $91 at June 30, 2007)
|
|
|
(2
|
)
|
|
|
126
|
|
Pension funded status, net of tax benefit of $156 (benefit of
$55 at June 30, 2007)
|
|
|
(415
|
)
|
|
|
(76
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,778
|
|
|
$
|
3,051
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 4
|
Earnings
per Share:
|
The following represents a reconciliation from basic earnings
per share to diluted earnings per share. Options to purchase
657,334, 30,000 and 321 shares of common stock were
outstanding at June 30, 2008, June 30, 2007 and
June 30, 2006, 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,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands, except per share data)
|
|
|
Determination of shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding
|
|
|
15,444
|
|
|
|
15,169
|
|
|
|
14,966
|
|
Assumed conversion of dilutive stock options and awards
|
|
|
286
|
|
|
|
547
|
|
|
|
747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted average common shares outstanding
|
|
|
15,730
|
|
|
|
15,716
|
|
|
|
15,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
|
$
|
0.42
|
|
|
$
|
0.44
|
|
|
$
|
0.42
|
|
Diluted earnings per common share
|
|
$
|
0.41
|
|
|
$
|
0.42
|
|
|
$
|
0.40
|
|
|
|
Note 5
|
Business
Segment Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Geographic information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales* by major country:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
49,585
|
|
|
$
|
39,800
|
|
|
$
|
30,061
|
|
Japan
|
|
|
52,832
|
|
|
|
46,854
|
|
|
|
52,027
|
|
Germany
|
|
|
74,506
|
|
|
|
63,081
|
|
|
|
53,644
|
|
Sweden
|
|
|
26,286
|
|
|
|
23,300
|
|
|
|
21,270
|
|
United Kingdom
|
|
|
13,273
|
|
|
|
11,972
|
|
|
|
9,724
|
|
All other foreign
|
|
|
19,848
|
|
|
|
16,470
|
|
|
|
12,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales by major country
|
|
$
|
236,330
|
|
|
$
|
201,477
|
|
|
$
|
179,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
sales are attributed to the geographic area based on location of
the subsidiary recording the external sale. |
40
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Long-lived assets by major country:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
1,775
|
|
|
$
|
1,796
|
|
|
$
|
708
|
|
Japan
|
|
|
853
|
|
|
|
681
|
|
|
|
670
|
|
Germany
|
|
|
3,212
|
|
|
|
1,201
|
|
|
|
724
|
|
Sweden
|
|
|
2,069
|
|
|
|
1,998
|
|
|
|
1,964
|
|
All other foreign
|
|
|
417
|
|
|
|
2,227
|
|
|
|
194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-lived assets by major country
|
|
$
|
8,326
|
|
|
$
|
7,903
|
|
|
$
|
4,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2008
|
|
|
|
Domestic
|
|
|
Foreign
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Raw materials
|
|
$
|
3,460
|
|
|
$
|
11,925
|
|
|
$
|
15,385
|
|
In process
|
|
|
439
|
|
|
|
5,189
|
|
|
|
5,628
|
|
Finished goods
|
|
|
4,211
|
|
|
|
6,580
|
|
|
|
10,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,110
|
|
|
$
|
23,694
|
|
|
$
|
31,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended June 30, 2007
|
|
|
|
Domestic
|
|
|
Foreign
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Raw materials
|
|
$
|
3,416
|
|
|
$
|
10,760
|
|
|
$
|
14,176
|
|
In process
|
|
|
338
|
|
|
|
4,889
|
|
|
|
5,227
|
|
Finished goods
|
|
|
4,270
|
|
|
|
6,711
|
|
|
|
10,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,024
|
|
|
$
|
22,360
|
|
|
$
|
30,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate
|
|
|
Amount
|
|
|
|
|
|
|
(In thousands)
|
|
|
Loans Payable at June 30, 2008:
|
|
|
|
|
|
|
|
|
Foreign subsidiaries
|
|
|
1.86
|
% (average)
|
|
$
|
3,767
|
|
|
|
|
|
|
|
|
|
|
Loans Payable at June 30, 2007:
|
|
|
|
|
|
|
|
|
Foreign subsidiaries
|
|
|
2.53
|
% (average)
|
|
$
|
3,249
|
|
|
|
|
|
|
|
|
|
|
The maximum amount of bank loans payable outstanding during the
year ended June 30, 2008 was $4,576 ($3,456 in 2007).
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.
41
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2008
|
|
|
June 30, 2007
|
|
|
|
Current
|
|
|
Long-Term
|
|
|
Current
|
|
|
Long-Term
|
|
|
|
(In thousands)
|
|
|
Revolving Credit Facility due November 21, 2011, interest
rate one-month prime rate 5.0% plus 0.75%(a)
|
|
$
|
|
|
|
$
|
3,850
|
|
|
$
|
|
|
|
$
|
12,800
|
|
Revolving Credit Facility due November 21, 2011, interest
rate one-month EURIBOR rate 4.456% plus 2.25%(a)
|
|
|
|
|
|
|
2,519
|
|
|
|
|
|
|
|
1,175
|
|
Term loan payable by foreign subsidiary due November 21,
2011, with quarterly payments interest rate one-month EURIBOR
rate 4.480% plus 2.25%(a)
|
|
|
3,356
|
|
|
|
11,594
|
|
|
|
2,099
|
|
|
|
12,853
|
|
Term loan payable by foreign subsidiary due September 2008,
interest rate 1.81%(b)
|
|
|
78
|
|
|
|
|
|
|
|
271
|
|
|
|
68
|
|
Note payable by foreign subsidiary through 2008, interest rate
6.95%(c)
|
|
|
38
|
|
|
|
|
|
|
|
131
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,472
|
|
|
$
|
17,963
|
|
|
$
|
2,501
|
|
|
$
|
26,929
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
The Companys primary source of external financing is the
Companys credit agreement and its amendments (the
Credit Agreement) with LaSalle Bank National Association
(LaSalle), which was subsequently acquired by and
will be referred to hereinafter as Bank of America
(BofA). Interest rates depend on which borrowing
option the Company exercises under the Credit Agreement. The
Credit Agreement requires the Company to maintain certain
minimum net worth and leverage ratios. At June 30, 2008,
the Company was in compliance with all financial covenants.
Borrowings under the Credit Agreement in the U.S. are secured by
substantially all domestic assets (approximately $27,000) and in
Europe by a pledge of European subsidiary stock. |
|
(b) |
|
Yen 100,000 three-year term loan. Quarterly principal payment of
Yen 8,333, interest rate at Tokyo Inter Bank offered rate
(TIBOR) plus 0.75%. The Company entered into an interest rate
swap that converts variable rate payables to a fixed rate of
1.81% and has the same maturity date as the term loan. |
|
(c) |
|
Note is collateralized by a building as outlined in the
indenture relating to this note. |
In addition, the Company has a Euro-based credit facility with a
foreign lender (5,000 Euro approximately $7,872 at June 30,
2008). The interest rate for Euro-based borrowings is 7.5%; the
interest rate for U.S. dollar-based borrowings is 8.75%. At
June 30, 2008 and 2007 there were no amounts outstanding
under this arrangement.
The Company maintains relationships with both foreign and
domestic banks, which combined have extended short and long-term
credit facilities to the Company totaling $64,827. As of
June 30, 2008, the Company had $31,325 outstanding
(including Letters of Credit). The amount available under these
credit facilities at June 30, 2008 is $33,502.
42
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Maturities of long-term debt in each fiscal year ending after
June 30, 2008 are as follows:
|
|
|
|
|
Fiscal Year Ending June 30,
|
|
|
|
|
|
(In thousands)
|
|
|
2009
|
|
$
|
3,472
|
|
2010
|
|
|
6,485
|
|
2011
|
|
|
4,882
|
|
2012
|
|
|
6,596
|
|
2013
|
|
|
|
|
2014 and thereafter
|
|
|
|
|
|
|
|
|
|
|
|
$
|
21,435
|
|
|
|
|
|
|
|
|
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,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Income (loss) before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
1,122
|
|
|
$
|
(1,133
|
)
|
|
$
|
1,184
|
|
Foreign
|
|
|
7,145
|
|
|
|
8,731
|
|
|
|
8,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,267
|
|
|
$
|
7,598
|
|
|
$
|
9,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Benefit) provision for income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Currently payable:
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
187
|
|
|
$
|
22
|
|
|
$
|
(274
|
)
|
Foreign
|
|
|
1,245
|
|
|
|
901
|
|
|
|
1,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,432
|
|
|
|
923
|
|
|
|
926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
(1,624
|
)
|
|
$
|
(2,500
|
)
|
|
$
|
|
|
Foreign
|
|
|
2,023
|
|
|
|
2,535
|
|
|
|
2,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
399
|
|
|
|
35
|
|
|
|
2,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax provision
|
|
$
|
1,831
|
|
|
$
|
958
|
|
|
$
|
3,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Deferred income taxes are provided on temporary differences
between the financial reporting basis and tax basis of the
Companys assets and liabilities. The principal temporary
differences which give rise to deferred tax assets and
liabilities at June 30, 2008 and 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30, 2008
|
|
|
June 30, 2007
|
|
|
Deferred tax assets (liabilities):
|
|
|
|
|
|
|
|
|
Foreign tax credit carryforwards
|
|
$
|
6,152
|
|
|
$
|
2,886
|
|
Foreign net operating loss carryforwards
|
|
|
10,248
|
|
|
|
15,106
|
|
Domestic net operating loss carryforwards
|
|
|
300
|
|
|
|
3,789
|
|
Capital loss carryforwards
|
|
|
218
|
|
|
|
236
|
|
Inventories
|
|
|
1,140
|
|
|
|
1,103
|
|
Pension/deferred compensation
|
|
|
2,638
|
|
|
|
2,317
|
|
Restructuring and FAS 141 liabilities
|
|
|
|
|
|
|
796
|
|
Identifiable intangibles
|
|
|
(2,241
|
)
|
|
|
(2,505
|
)
|
Other deferred tax assets, individually less than 5%
|
|
|
1,873
|
|
|
|
1,717
|
|
Other deferred tax liabilities, individually less than 5%
|
|
|
(83
|
)
|
|
|
(993
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
|
20,245
|
|
|
|
24,452
|
|
Valuation allowance
|
|
|
(11,890
|
)
|
|
|
(15,879
|
)
|
|
|
|
|
|
|
|
|
|
Total net deferred tax assets
|
|
$
|
8,355
|
|
|
$
|
8,573
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2008, net operating loss carryforwards of
$52,806 and $833, 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, 2008, the Company has indefinite foreign
capital loss carry-forwards available in the amount of $779.
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, 2008 primarily reflects the
reversal of a portion of the valuation allowance for the net
deferred tax assets associated with the Companys
U.S. operations (approximately $1,640), net of the
establishment of valuation allowance associated with certain
foreign affiliates (approximately $548). The reversal of this
valuation allowance is based upon the U.S. operations
historical operating performance and expectation that the
U.S. will generate sufficient taxable income in future
periods to realize a portion of the tax benefits associated with
foreign tax credit carryforwards. The remaining change in the
valuation allowance was due to changes in deferred tax assets on
which there was valuation allowance.
The Company has not had to provide for income taxes on $28,238
of cumulative undistributed earnings of subsidiaries outside the
United States because of the Companys intention to
indefinitely reinvest those earnings.
At the beginning of the first quarter of the fiscal year ending
June 30, 2008, the Company adopted the provisions of
FIN 48. Upon adoption of FIN 48, the Company
recognized an increase of $2,418 in the liability for
unrecognized tax benefits, which was accounted for as a decrease
to the beginning balance of retained earnings. As of the date of
adoption, and after the impact of recognizing the decrease in
liability noted above, the Companys unrecognized tax
benefits totaled $4,617, including $2,719 of unrecognized tax
benefits which, if recognized, would reduce the annual effective
income tax rate. On June 30, 2008, the Companys
unrecognized tax benefits totaled $4,855, including $2,957 of
unrecognized tax benefits which, if recognized, would reduce the
annual effective income tax rate.
44
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Where applicable, the Company recognizes potential accrued
interest and penalties related to unrecognized tax benefits from
its global operations in income tax expense. During the fiscal
year ending June 30, 2008, the Company accrued $16 in
potential interest and penalties associated with uncertain tax
positions. In conjunction with the adoption of FIN 48, the
Company recognized $194 of interest and penalties. To the extent
interest and penalties are accrued in the Companys income
tax expense, such amounts, if reversed, will reduce the
effective income tax rate.
A reconciliation of the beginning and ending amount of
unrecognized tax benefits, excluding interest and penalties
associated with uncertain tax positions, is as follows:
|
|
|
|
|
|
|
Year Ended
|
|
|
|
June 30, 2008
|
|
|
|
(In thousands)
|
|
|
Balance as of June 30, 2007
|
|
$
|
4,617
|
|
Additions based on tax positions related to the current year
|
|
|
238
|
|
|
|
|
|
|
Balance as of June 30, 2008
|
|
$
|
4,855
|
|
|
|
|
|
|
The Company conducts its business globally and, as a result, the
Company or one or more of its subsidiaries files income tax
returns in the U.S. and various state and foreign
jurisdictions. The Company is subject to ongoing tax
examinations and assessments in such major jurisdictions as the
U.S., Germany, Sweden and Japan. The earliest year for which the
Company or its affiliates are subject to examination by tax
authorities is the tax year 2000. The Company does not expect
there will be any significant changes in the amount of
unrecognized tax benefits within the next twelve months.
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,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Computed expected tax provision
|
|
$
|
2,811
|
|
|
$
|
2,583
|
|
|
$
|
3,295
|
|
Permanent differences
|
|
|
10
|
|
|
|
618
|
|
|
|
718
|
|
Foreign income taxed at rates other than the U.S. statutory rate
|
|
|
(8
|
)
|
|
|
210
|
|
|
|
153
|
|
Change in deferred tax asset valuation allowance, net of changes
in other reserves
|
|
|
(1,092
|
)
|
|
|
(2,332
|
)
|
|
|
(757
|
)
|
Other reconciling items
|
|
|
110
|
|
|
|
(121
|
)
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax provision
|
|
$
|
1,831
|
|
|
$
|
958
|
|
|
$
|
3,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
45
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 having ten votes per share. As of
June 30, 2008, the number of outstanding shares of
Class B constituted approximately 7.5% 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 its most recent 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, 2008, 1,107,395 shares of Class A had
been repurchased for $2,481. During the fiscal year ended
June 30, 2008 a total of 289,095 shares of
Class A were repurchased for $760.
|
|
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.
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 terminated on
November 18, 2006; however, outstanding options under the
1996 Plan 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 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 in October
2005 and by 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
46
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 2008, an aggregate of 395,848 restrictive stock/units and
stock options were issued under the 2005 Plan. Canceled awards
during fiscal year 2008 totaled 16,000, and will 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. Awards granted as
restricted stock/units have restrictions that lapse in three
equal annual installments commencing on the first anniversary of
the date of such award.
At June 30, 2008, the aggregate number of shares available
for future grants under all the Companys share-based
compensation plans is 476,219.
Compensation expense recorded for all of the Companys
share-based compensation plans for the fiscal years, 2008, 2007
and 2006 was $1,031, $782 and $466, respectively. The tax
benefit related to this compensation expense for the fiscal
years 2008, 2007 and 2006 was $336, $135 and $91.
Stock
Options
The following table summarizes activity under the plans during
2008, 2007 and 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The 1986 Plan
|
|
|
The 1990 Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Option Price
|
|
|
Price
|
|
|
|
|
|
|
|
|
Option Price
|
|
|
Price
|
|
|
|
Class A
|
|
|
Class B
|
|
|
Range
|
|
|
A
|
|
|
B
|
|
|
Class A
|
|
|
Class B
|
|
|
Range
|
|
|
A
|
|
|
B
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(40,000
|
)
|
|
|
|
|
|
$
|
3.00
|
|
|
$
|
3.00
|
|
|
|
|
|
|
|
(1,788
|
)
|
|
|
(212
|
)
|
|
$
|
2.56-$3.20
|
|
|
$
|
2.56
|
|
|
$
|
3.20
|
|
Outstanding at June 30, 2007
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,679
|
|
|
|
321
|
|
|
$
|
5.12-$6.41
|
|
|
$
|
5.12
|
|
|
$
|
6.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
Canceled
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(893
|
)
|
|
|
(321
|
)
|
|
$
|
5.13-$6.41
|
|
|
$
|
5.13
|
|
|
$
|
6.41
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,786
|
)
|
|
|
0
|
|
|
$
|
5.13
|
|
|
$
|
5.13
|
|
|
$
|
6.41
|
|
Outstanding at June 30, 2008
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2008
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The 1996 Plan
|
|
|
The 1998 Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Option Price
|
|
|
Price
|
|
|
|
|
|
|
|
|
Option Price
|
|
|
Price
|
|
|
|
Class A
|
|
|
Class B
|
|
|
Range
|
|
|
A
|
|
|
B
|
|
|
Class A
|
|
|
Class B
|
|
|
Range
|
|
|
A
|
|
|
B
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(153,664
|
)
|
|
|
|
|
|
$
|
0.82-$5.50
|
|
|
$
|
1.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2006
|
|
|
1,216,503
|
|
|
|
0
|
|
|
$
|
0.58-$5.60
|
|
|
$
|
2.61
|
|
|
$
|
0.00
|
|
|
|
39,000
|
|
|
|
0
|
|
|
$
|
1.13-$5.50
|
|
|
$
|
2.48
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
140,000
|
|
|
|
|
|
|
$
|
4.90-$4.95
|
|
|
$
|
4.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
(79,168
|
)
|
|
|
|
|
|
$
|
1.93-$5.50
|
|
|
$
|
3.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(339,665
|
)
|
|
|
|
|
|
$
|
0.58-$3.41
|
|
|
$
|
1.87
|
|
|
|
|
|
|
|
(9,000
|
)
|
|
|
|
|
|
$
|
1.13-$2.25
|
|
|
$
|
1.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2007
|
|
|
937,670
|
|
|
|
0
|
|
|
$
|
0.58-$5.50
|
|
|
$
|
3.17
|
|
|
$
|
0.00
|
|
|
|
30,000
|
|
|
|
0
|
|
|
$
|
1.13-$5.50
|
|
|
$
|
2.48
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
(66,503
|
)
|
|
|
0
|
|
|
$
|
1.93-$5.50
|
|
|
$
|
4.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(33,332
|
)
|
|
|
0
|
|
|
$
|
1.93-$4.49
|
|
|
$
|
2.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2008
|
|
|
837,835
|
|
|
|
0
|
|
|
$
|
0.58-$5.50
|
|
|
$
|
3.10
|
|
|
$
|
0.00
|
|
|
|
30,000
|
|
|
|
0
|
|
|
$
|
1.13-$5.50
|
|
|
$
|
2.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2008
|
|
|
591,162
|
|
|
|
0
|
|
|
$
|
0.58-$5.50
|
|
|
$
|
2.61
|
|
|
$
|
0.00
|
|
|
|
30,000
|
|
|
|
0
|
|
|
$
|
1.13-$5.50
|
|
|
$
|
2.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The 2005 Plan
|
|
|
|
|
|
|
Option Price
|
|
|
Weighted
|
|
|
|
Class A
|
|
|
Range
|
|
|
Price
|
|
|
Outstanding at June 30, 2007
|
|
|
0
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
150,000
|
|
|
$
|
5.49
|
|
|
$
|
5.49
|
|
Canceled
|
|
|
(16,000
|
)
|
|
$
|
5.49
|
|
|
$
|
5.49
|
|
Exercised
|
|
|
0
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2008
|
|
|
134,000
|
|
|
$
|
5.49
|
|
|
$
|
5.49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2008
|
|
|
0
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value of options exercised during the
period ended June 30, 2008 was $74.
The following table summarizes information regarding stock
options outstanding and exercisable at June 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
Range of
|
|
|
Number of
|
|
|
Average
|
|
|
Average
|
|
|
Number of
|
|
|
Average
|
|
Exercise
|
|
|
Outstanding
|
|
|
Remaining
|
|
|
Outstanding
|
|
|
Exercisable
|
|
|
Exercisable
|
|
Prices
|
|
|
Options
|
|
|
Contractual Life
|
|
|
Price
|
|
|
Options
|
|
|
Price
|
|
|
$
|
0.58 - $1.50
|
|
|
|
153,500
|
|
|
|
3.6 years
|
|
|
$
|
0.97
|
|
|
|
153,500
|
|
|
$
|
0.97
|
|
$
|
1.90 - $3.25
|
|
|
|
221,001
|
|
|
|
5.4 years
|
|
|
$
|
2.12
|
|
|
|
221,001
|
|
|
$
|
2.12
|
|
$
|
3.41 - $4.90
|
|
|
|
418,334
|
|
|
|
6.8 years
|
|
|
$
|
3.96
|
|
|
|
181,661
|
|
|
$
|
3.58
|
|
$
|
4.95 - $6.41
|
|
|
|
209,000
|
|
|
|
6.3 years
|
|
|
$
|
5.47
|
|
|
|
65,000
|
|
|
$
|
5.50
|
|
The aggregate intrinsic value of both outstanding and
exercisable options at June 30, 2008 was $294.
48
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Total unrecognized compensation costs related to non-vested
stock option awards at June 30, 2008 is $604 and is
expected to be recognized over the weighted average period of
approximately 2.4 years.
The Company estimates the fair value of stock options at the
date of grant 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.
The following table presents the weighted average assumptions
used for options granted.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Option term(1)
|
|
|
5
|
|
|
|
5
|
|
|
|
5
|
|
Volatility(2)
|
|
|
63.57
|
|
|
|
52.66
|
|
|
|
56.14
|
|
Risk free rate
|
|
|
4.77
|
|
|
|
4.77
|
|
|
|
4.70
|
|
Dividend yield
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average fair value
|
|
$
|
3.18
|
|
|
$
|
2.49
|
|
|
$
|
2.39
|
|
|
|
|
(1) |
|
The option term is the number of years that the Company
estimates, based on history, that options will be outstanding
prior to exercise. |
|
(2) |
|
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. |
Restricted
Stock
During the years ended June 30, 2008 and 2007, the Company
issued restricted stock shares/units. Awards granted as
restricted stock/units have restrictions that lapse in three
equal annual installments commencing on the first anniversary of
the date of such award. Compensation expense of $754 and $391
was recognized during the period ended June 30, 2008
and 2007, respectively. The aggregate unrecognized compensation
costs related to the non-vested restricted grants at
June 30, 2008 was $1,446 and is expected to be recognized
over a weighted-average period of approximately 2.0 years.
The following table summarizes outstanding and non-vested shares
under the plan for 2008 and 2007.
|
|
|
|
|
|
|
|
|
|
|
The 2005 Plan
|
|
|
|
|
|
|
Weighted
|
|
|
|
Restricted Stock
|
|
|
Average Grant
|
|
|
|
Shares/Units
|
|
|
Date Fair Value
|
|
|
Outstanding and non-vested at June 30, 2006
|
|
|
173,666
|
|
|
$
|
4.04
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
206,933
|
|
|
$
|
5.16
|
|
Canceled
|
|
|
(36,666
|
)
|
|
$
|
4.44
|
|
Vested
|
|
|
(57,894
|
)
|
|
$
|
4.04
|
|
|
|
|
|
|
|
|
|
|
Outstanding and non-vested at June 30, 2007
|
|
|
286,039
|
|
|
$
|
4.80
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
245,848
|
|
|
$
|
4.75
|
|
Canceled
|
|
|
|
|
|
$
|
|
|
Vested
|
|
|
(111,868
|
)
|
|
$
|
4.70
|
|
|
|
|
|
|
|
|
|
|
Outstanding and non-vested at June 30, 2008
|
|
|
420,019
|
|
|
$
|
4.80
|
|
|
|
|
|
|
|
|
|
|
49
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
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 $254, $238
and $169, respectively for the fiscal years ended June 2008,
2007 and 2006.
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 2.5% of the total
assets of the Plan at June 30, 2008.
Certain subsidiaries within Europe maintain defined contribution
and/or
profit sharing plans. Amounts expensed under these plans based
upon the age, salary and years of service of employees covered
by the plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Baldwin Germany GmbH
|
|
$
|
221
|
|
|
$
|
271
|
|
|
$
|
297
|
|
Baldwin IVT AB
|
|
|
59
|
|
|
|
50
|
|
|
|
34
|
|
Baldwin Jimek AB
|
|
|
77
|
|
|
|
82
|
|
|
|
58
|
|
Baldwin UK Ltd.
|
|
|
79
|
|
|
|
64
|
|
|
|
66
|
|
Baldwin Globaltec Ltd.
|
|
|
10
|
|
|
|
10
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expense
|
|
$
|
446
|
|
|
$
|
477
|
|
|
$
|
464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In Germany, there is 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 Company also has a non-qualified Supplemental
Executive Retirement Plan (SERP). The SERP, which is unfunded,
provides benefits to eligible executives, based on average
earnings, years of service and age at retirement or separation
of employment. The Company uses a measurement date of
June 30 for its defined benefits plans.
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,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Service Cost benefits earned during the year
|
|
$
|
424
|
|
|
$
|
978
|
|
|
$
|
994
|
|
Interest on projected benefit obligation
|
|
|
259
|
|
|
|
54
|
|
|
|
120
|
|
Annual return on plan assets
|
|
|
(2
|
)
|
|
|
(16
|
)
|
|
|
(4
|
)
|
Amortization of transition obligation
|
|
|
|
|
|
|
(3
|
)
|
|
|
14
|
|
Amortization of net actuarial (gain)
|
|
|
(10
|
)
|
|
|
(3
|
)
|
|
|
(23
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension expense
|
|
$
|
671
|
|
|
$
|
1,010
|
|
|
$
|
1,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
Projected benefit obligation beginning of year
|
|
$
|
7,634
|
|
|
$
|
7,454
|
|
Service cost benefits earned during the year
|
|
|
437
|
|
|
|
968
|
|
Interest on projected benefit obligation
|
|
|
300
|
|
|
|
55
|
|
Actuarial (gain) loss
|
|
|
443
|
|
|
|
(209
|
)
|
Benefits paid
|
|
|
(859
|
)
|
|
|
(546
|
)
|
Foreign currency rate changes
|
|
|
645
|
|
|
|
(88
|
)
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation end of year
|
|
$
|
8,600
|
|
|
$
|
7,634
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
Fair value of plan assets beginning of year
|
|
$
|
1,514
|
|
|
$
|
1,372
|
|
Actual return on plan assets
|
|
|
19
|
|
|
|
11
|
|
Contributions to the plan
|
|
|
793
|
|
|
|
799
|
|
Benefits paid
|
|
|
(863
|
)
|
|
|
(546
|
)
|
Foreign currency rate changes
|
|
|
246
|
|
|
|
(122
|
)
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets end of year
|
|
|
1,709
|
|
|
|
1,514
|
|
|
|
|
|
|
|
|
|
|
Funded status at year end
|
|
$
|
(6,891
|
)
|
|
$
|
(6,120
|
)
|
|
|
|
|
|
|
|
|
|
Components of above amounts:
|
|
|
|
|
|
|
|
|
Accrued expenses
|
|
$
|
(181
|
)
|
|
$
|
(112
|
)
|
Accrued benefit liability (noncurrent)
|
|
|
(6,710
|
)
|
|
|
(6,008
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(6,891
|
)
|
|
$
|
(6,120
|
)
|
|
|
|
|
|
|
|
|
|
Amounts included in AOCL:
|
|
|
|
|
|
|
|
|
Actuarial losses
|
|
$
|
(415
|
)
|
|
$
|
(76
|
)
|
|
|
|
|
|
|
|
|
|
Amount expected to be recognized during next fiscal year
actuarial gain
|
|
$
|
6
|
|
|
$
|
8
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation
|
|
$
|
8,040
|
|
|
$
|
7,226
|
|
|
|
|
|
|
|
|
|
|
Weighted average actuarial assumptions:
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
1.75%-6.00%
|
|
|
|
1.75%-5.25%
|
|
Rate of increase in compensation levels
|
|
|
0.00%-3.00%
|
|
|
|
0.00%-3.00%
|
|
Expected rate of return on plan assets
|
|
|
1.00%-4.10%
|
|
|
|
1.00%-4.10%
|
|
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)
|
|
|
2009
|
|
$
|
679
|
|
2010
|
|
$
|
528
|
|
2011
|
|
$
|
826
|
|
2012
|
|
$
|
605
|
|
2013
|
|
$
|
763
|
|
Aggregate for 2014 through 2017
|
|
$
|
3,704
|
|
51
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The amount expected to be contributed by the Company to its
defined benefit pension plans during fiscal year 2009 is
approximately $337.
FY2008
Plan
On December 1, 2007, the Company committed to the principal
features of a plan to restructure and achieve operational
efficiencies in Germany. Actions under the plan commenced in
December 2007 and were substantially complete at June 30,
2008. Payments are expected to continue through the first
quarter of fiscal year ending June 30, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments
|
|
|
|
|
|
|
Initial
|
|
|
Against
|
|
|
Balance at
|
|
|
|
Reserve
|
|
|
Reserve
|
|
|
June 30, 2008
|
|
|
|
(In thousands)
|
|
|
Restructuring costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee termination costs
|
|
$
|
960
|
|
|
$
|
(398
|
)
|
|
$
|
562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total restructuring costs
|
|
$
|
960
|
|
|
$
|
(398
|
)
|
|
$
|
562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FY2007
Plan
Activity related to the December 20, 2006 restructuring
plan designed to achieve operational efficiencies and eliminate
redundant costs and achieve greater efficiency in sales,
marketing and operational activities is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments
|
|
|
|
|
|
Payments
|
|
|
|
|
|
|
|
|
|
Against Reserve
|
|
|
|
|
|
Against Reserve
|
|
|
|
|
|
|
|
|
|
for the Fiscal
|
|
|
|
|
|
for the Fiscal
|
|
|
|
|
|
|
Initial
|
|
|
Year Ended
|
|
|
Balance at
|
|
|
Year Ended
|
|
|
Balance at
|
|
|
|
Reserve
|
|
|
June 30, 2007
|
|
|
June 30, 2007
|
|
|
June 30, 2008
|
|
|
June 30, 2008
|
|
|
|
(In thousands)
|
|
|
Restructuring costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee termination costs
|
|
$
|
810
|
|
|
$
|
(504
|
)
|
|
$
|
306
|
|
|
$
|
(306
|
)
|
|
$
|
0
|
|
Contract termination costs
|
|
|
72
|
|
|
|
|
|
|
|
72
|
|
|
|
(72
|
)
|
|
|
0
|
|
Other associated costs
|
|
|
112
|
|
|
|
(29
|
)
|
|
|
83
|
|
|
|
(83
|
)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total restructuring costs
|
|
|
994
|
|
|
$
|
(533
|
)
|
|
$
|
461
|
|
|
$
|
(461
|
)
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actions under the plan were substantially completed at
June 30, 2007 with payments completed by June 30, 2008.
On November 21, 2006, the Company completed the acquisition
of Oxy-Dry Corporation, a producer of accessories and controls
for the printing industry. The acquisition strengthens the
Companys presence in its core market of accessories and
controls by affording it the ability to provide a broader range
of product offerings to its customers. Aggregate consideration
paid, in cash, at closing, to the holders of all outstanding
shares of MTC Trading Company, which owned all of the
outstanding shares of capital stock of Oxy-Dry, consisted of a
purchase price of approximately $18,000 working capital and
other contract related adjustments of $1,077, subject to post
closing adjustments and $1,692 in fees and expenses.
52
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The table below represents the allocation of the unadjusted
total consideration to the Oxy-Dry tangible and identifiable
intangible assets and liabilities based on the Companys
assessment of their respective fair values as of the date of
acquisition. The Company and sellers have not agreed on the
finalization of the purchase price and, in accordance with the
stock purchase agreement, intend to arbitrate the finalization
of the purchase price. The resolution of the arbitration could
ultimately increase or decrease the cash paid by the Company to
the shareholders of MTC Trading Company, the owner of all of the
capital stock of Oxy-Dry and the Oxy-Dry goodwill recorded on
the books of the Company as a result of the acquisition.
|
|
|
|
|
|
|
(In thousands)
|
|
|
Cash
|
|
$
|
2,287
|
|
Accounts receivable
|
|
|
7,136
|
|
Inventory
|
|
|
5,905
|
|
Other assets
|
|
|
914
|
|
Property, plant and equipment
|
|
|
2,149
|
|
Identifiable intangible assets
|
|
|
6,745
|
|
Accounts payable
|
|
|
(1,723
|
)
|
Deposits
|
|
|
(2,156
|
)
|
Accrued expenses(a)
|
|
|
(9,327
|
)
|
Liabilities assumed
|
|
|
(3,000
|
)
|
Deferred taxes
|
|
|
(486
|
)
|
Other liabilities
|
|
|
(1,151
|
)
|
|
|
|
|
|
Total fair value of net assets acquired
|
|
|
7,293
|
|
|
|
|
|
|
Goodwill(b)
|
|
$
|
13,476
|
|
|
|
|
(a) |
|
Reflects adjustment to original purchase price allocation ($860)
primarily due to warranty related issues. |
|
(b) |
|
Reflects adjustment to original purchase price allocation
primarily for additional accrued expenses (primarily warranty
$860) and additional capitalized transaction costs ($298). |
Identifiable intangibles include product technology, $4,499
(15 year life), trade name $1,645 (30 year life),
customer relationships $528 (13 year life), and non-compete
agreements $73 (5 year life). Additionally, there is no
amount of tax deductible goodwill.
On December 20, 2006, the Company committed to the
principal features of a plan to restructure and integrate the
operations of MTC Corporation and its wholly-owned subsidiary
Oxy-Dry Corporation. The objective was to achieve operational
efficiencies and eliminate redundant costs resulting from the
acquisition as well as to achieve greater efficiency in sales,
marketing, administrative and operational activities, primarily
in Germany, the United States and the United Kingdom. In
particular, the U.S. and U.K. plan involves consolidation
of former Oxy-Dry leased locations into existing Company
locations, and elimination of redundant manufacturing and
support personnel. In Germany, the plan consists of
consolidation and elimination of support functions while
maintaining the former Oxy-Dry manufacturing location. The
actions under the plan commenced during December 2006 and were
substantially complete by the end of fiscal year 2007. The
liabilities recognized in connection with the acquisition
include $2,300 of employee termination and associated costs and
$700 of facilities and other
one-time
costs included in other accounts payable and accrued
liabilities. The results of the acquisition of Oxy-Dry have been
included in the consolidated financial statements since the date
of acquisition.
On April 10, 2007, the Company completed the acquisition of
Hildebrand Systeme GmbH (Hildebrand), a leader in
the field of high performance web cleaning systems. Aggregate
consideration paid, at closing consisted of a purchase price of
approximately $2,290 and $214 in fees and expenses. Identifiable
intangibles include product
53
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
technology $939 (15 year life), customer relationships $105
(12 year life) and non-compete agreements $20 (5 year
life). Fair value of net assets acquired was $1,082 and goodwill
totaled $1,422. The results of the acquisition of Hildebrand
have been included in the consolidated financial statements
since the date of acquisition.
The following unaudited pro forma consolidated financial
information reflects the results of operations, including
Oxy-Dry, for the twelve months ended June 30, 2007 and 2006
as if the acquisition had occurred at the beginning of each
period, after giving effect to certain purchase accounting
adjustments, including assumed amortization of acquired
intangibles and higher interest expense due to higher debt
level. Hildebrand is excluded from the pro forma presentation as
it is not material. These pro forma results are not necessarily
indicative of what the Companys operating results would
have been had the acquisition actually taken place at the
beginning of each period.
|
|
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(Unaudited)
|
|
|
|
(In thousands, except per share data)
|
|
|
Revenue
|
|
$
|
215,337
|
|
|
$
|
218,487
|
|
Net income
|
|
$
|
4,543
|
|
|
$
|
4,454
|
|
Income per share basic
|
|
$
|
0.30
|
|
|
$
|
0.30
|
|
Income per share diluted
|
|
$
|
0.29
|
|
|
$
|
0.28
|
|
|
|
Note 15
|
Goodwill
and Other Intangible Assets:
|
The changes in the carrying amount of goodwill for each of the
fiscal years ended June 30, 2008 and 2007 are as follows:
Activity in the fiscal year ended June 30, 2008 was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Net
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Book Value
|
|
|
|
(In thousands)
|
|
|
Balance as of July 1, 2007
|
|
$
|
28,034
|
|
|
$
|
3,293
|
|
|
$
|
24,741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of Oxy-Dry
|
|
|
1,202
|
|
|
|
|
|
|
|
1,202
|
|
Purchase of Hildebrand
|
|
|
148
|
|
|
|
|
|
|
|
148
|
|
Effects of currency translation
|
|
|
2,132
|
|
|
|
472
|
|
|
|
1,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2008
|
|
$
|
31,516
|
|
|
$
|
3,765
|
|
|
$
|
27,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Activity in the fiscal year ended June 30, 2007 was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Net
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Book Value
|
|
|
|
(In thousands)
|
|
|
Balance as of June 30, 2006
|
|
$
|
14,478
|
|
|
$
|
3,419
|
|
|
$
|
11,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of Oxy-Dry
|
|
|
12,263
|
|
|
|
|
|
|
|
12,263
|
|
Effects of currency translation
|
|
|
1,274
|
|
|
|
|
|
|
|
1,274
|
|
Effects of currency translation
|
|
|
19
|
|
|
|
(126
|
)
|
|
|
145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2007
|
|
$
|
28,034
|
|
|
$
|
3,293
|
|
|
$
|
24,741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Intangible assets subject to amortization were comprised of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2008
|
|
|
As of June 30, 2007
|
|
|
|
Amortization
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
Period
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
Accumulated
|
|
Intangible Assets:
|
|
(Years)
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
Amortization
|
|
|
|
|
|
|
(In thousands)
|
|
|
(In thousands)
|
|
|
Patents and Trademarks
|
|
|
15-20
|
|
|
$
|
10,215
|
|
|
$
|
5,868
|
|
|
$
|
8,390
|
|
|
$
|
5,412
|
|
Customer relationships
|
|
|
2-13
|
|
|
|
633
|
|
|
|
88
|
|
|
|
633
|
|
|
|
25
|
|
Trademarks
|
|
|
30
|
|
|
|
1,645
|
|
|
|
90
|
|
|
|
1,645
|
|
|
|
35
|
|
Existing product technology
|
|
|
15
|
|
|
|
5,438
|
|
|
|
548
|
|
|
|
5,438
|
|
|
|
186
|
|
Non-compete/solicitation agreements
|
|
|
5
|
|
|
|
93
|
|
|
|
26
|
|
|
|
93
|
|
|
|
7
|
|
Other
|
|
|
5-30
|
|
|
|
2,025
|
|
|
|
1,480
|
|
|
|
1,578
|
|
|
|
943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
20,049
|
|
|
$
|
8,100
|
|
|
$
|
17,777
|
|
|
$
|
6,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average life for intangible assets at June 30,
2008 was 14 years. Amortization expense was $1,182 for the
fiscal year ended June 30, 2008, $844 for the fiscal year
ended June 30, 2007 and $488 for the fiscal year ended
June 30, 2006.
Estimated amortization expense for each of the five succeeding
fiscal years is as follows:
|
|
|
|
|
Fiscal Years Ending June 30,
|
|
Amount
|
|
|
|
(In thousands)
|
|
|
2009
|
|
$
|
1,335
|
|
2010
|
|
$
|
1,175
|
|
2011
|
|
$
|
1,054
|
|
2012
|
|
$
|
973
|
|
2013
|
|
$
|
952
|
|
|
|
Note 16
|
Commitments
and Contingencies:
|
Future minimum annual lease payments under capital leases are as
follows at June 30, 2008:
|
|
|
|
|
Fiscal Years Ending June 30,
|
|
Amount
|
|
|
|
(In thousands)
|
|
|
2009
|
|
|
146
|
|
2010
|
|
|
129
|
|
2011
|
|
|
83
|
|
2012
|
|
|
3
|
|
2013
|
|
|
|
|
|
|
|
|
|
Present value of minimum lease payments (net of $19 with
interest)
|
|
$
|
361
|
|
|
|
|
|
|
At June 30, 2008, $215 ($104 at June 30,
2007) was included in Other long-term
liabilities representing the long-term portion of the
present value of minimum lease payments, and $146 ($53 at
June 30, 2007) was included in Other accounts
payable and accrued liabilities representing the current
portion of the present value of minimum lease payments. At
June 30, 2008, the gross asset totaled $508, with
accumulated depreciation of $147.
55
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Rental expense on operating leases amounted to approximately
$6,696, $5,659 and $4,602 for the years ended June 30,
2008, 2007 and 2006, respectively. Aggregate future annual
rentals under noncancellable operating leases for periods of
more than one year at June 30, 2008 are as follows:
|
|
|
|
|
Fiscal Years Ending June 30,
|
|
Amount
|
|
|
|
(In thousands)
|
|
|
2009
|
|
$
|
6,860
|
|
2010
|
|
$
|
5,166
|
|
2011
|
|
$
|
3,408
|
|
2012
|
|
$
|
2,521
|
|
2013
|
|
$
|
2,102
|
|
2014 and thereafter
|
|
$
|
7,592
|
|
Quebecor World (Quebecor), a customer of the Company, filed for
protection under the bankruptcy laws of Canada and the
U.S. in January 2008. The Company has accounts receivable
from Quebecor of approximately $500,000. At this time, the
Company cannot estimate whether there will be any loss on its
receivables from Quebecor. As a result, no provision for loss on
the receivables has been recorded at June 30, 2008. The
Company will continue to monitor and assess the need for a loss
provision.
|
|
Note 17
|
Related
Parties:
|
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, 2008, the Company
paid $171 ($211 and $86 for the fiscal years ended June 30,
2007 and 2006, respectively) to Mr. Fortenbaugh for legal
services rendered.
Akira Hara, a Director of the Company since 1989, is currently a
strategic advisor to the Company and Chairman of Baldwin Japan
Limited, a wholly-owned subsidiary of the Company.
Mr. Hara, as strategic advisor, receives compensation of
approximately $60 per year. In addition, Mr. Hara is also
eligible to receive benefits under a non-qualified supplemental
executive retirement plan, which expires in 2015 or upon his
death whichever occurs later. The estimated annual benefit
payable to him under this supplemental plan is approximately
$136.
|
|
Note 18
|
Warranty
Costs:
|
The Companys standard contractual warranty provisions are
to repair or replace, 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 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, 2006
|
|
$
|
3,049
|
|
Additional warranty expense accruals
|
|
|
3,535
|
|
Payments against reserve
|
|
|
(4,231
|
)
|
Acquired Oxy-Dry accrual
|
|
|
2,382
|
|
Effects of currency rate fluctuations
|
|
|
85
|
|
|
|
|
|
|
Warranty reserve at June 30, 2007
|
|
$
|
4,820
|
|
|
|
|
|
|
Additional warranty expense accruals
|
|
|
4,343
|
|
Payments against reserve
|
|
|
(6,220
|
)
|
Acquired Oxy-Dry accrual
|
|
|
1,689
|
|
Effects of currency rate fluctuations
|
|
|
789
|
|
|
|
|
|
|
Warranty reserve at June 30, 2008
|
|
$
|
5,421
|
|
|
|
|
|
|
56
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 19
|
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.
Baldwin brought a patent infringement case against Siebert in
2002 before the U.S. District Court for the Northern
District of Illinois, alleging infringement of several of
Baldwins U.S. Patents. During 2006, the District
Court granted summary judgment of non-infringement to Siebert on
Baldwins RE35,976 Patent. During 2007, the District Court
granted summary judgment of non-infringement to Siebert on
Baldwins U.S. Patent 5,974,976. Baldwin appealed both
rulings to the Federal Circuit. On January 15, 2008, the
United States Court of Appeals for the Federal Circuit rendered
its decision in the matter of Baldwin Graphic Systems,
Inc. v. Siebert, Inc. The Federal Circuit affirmed the
lower courts decision of summary judgment on the RE35,976
Patent, reversed the summary judgment decision on Patent
5,974,976, and remanded back to the lower court for further
proceedings. Siebert again moved for summary judgment, which the
District Court granted on August 27, 2008, invalidating
Patent 5,974, 976 as obvious and indefinite. Baldwin has
appealed that decision to the United States Court of Appeals for
the Federal Circuit.
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 $50,000,000) 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 2009.
|
|
Note 20
|
Additional
Balance Sheet Detail
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30,
|
|
|
As of June 30,
|
|
Other Accounts Payable and Accrued Liabilities
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Warranty (see Note 18 Warranty Costs)
|
|
$
|
5,421
|
|
|
$
|
4,820
|
|
Commissions
|
|
|
1,197
|
|
|
|
1,107
|
|
Restructuring reserve (see Note 13
Restructuring)
|
|
|
562
|
|
|
|
461
|
|
Integration reserve (see Note 14 Acquisitions)
|
|
|
319
|
|
|
|
1,847
|
|
Installation reserve
|
|
|
832
|
|
|
|
1,183
|
|
Deferred revenue
|
|
|
206
|
|
|
|
1,338
|
|
Other
|
|
|
6,563
|
|
|
|
6,803
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,100
|
|
|
$
|
17,559
|
|
|
|
|
|
|
|
|
|
|
57
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
As of June 30,
|
|
|
As of June 30,
|
|
Other Long-Term Liabilities
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Non-current income tax liabilities
|
|
$
|
2,951
|
|
|
$
|
4,979
|
|
Supplemental Compensation (see Note 12)
|
|
|
6,710
|
|
|
|
6,008
|
|
Phantom Equity
|
|
|
1,290
|
|
|
|
1,217
|
|
Other
|
|
|
1,008
|
|
|
|
1,063
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
11,959
|
|
|
$
|
8,288
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 21
|
Quarterly
Financial Data (unaudited):
|
Summarized unaudited quarterly financial data for the fiscal
years ended June 30, 2008 and 2007 are as follows (in
thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
Fiscal Year Ended June 30, 2008
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Net sales
|
|
$
|
53,929
|
|
|
$
|
57,931
|
|
|
$
|
59,200
|
|
|
$
|
65,270
|
|
Cost of goods sold
|
|
|
36,683
|
|
|
|
39,963
|
|
|
|
40,709
|
|
|
|
44,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
17,246
|
|
|
|
17,968
|
|
|
|
18,491
|
|
|
|
21,040
|
|
Operating expenses
|
|
|
14,094
|
|
|
|
15,536
|
|
|
|
15,910
|
|
|
|
17,305
|
|
Restructuring(1)
|
|
|
|
|
|
|
960
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
702
|
|
|
|
725
|
|
|
|
821
|
|
|
|
696
|
|
Other (income) expense, net
|
|
|
72
|
|
|
|
(27
|
)
|
|
|
(17
|
)
|
|
|
(299
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
2,378
|
|
|
|
774
|
|
|
|
1,777
|
|
|
|
3,338
|
|
Provision (benefit) for income taxes(2)
|
|
|
1,339
|
|
|
|
510
|
|
|
|
(219
|
)
|
|
|
201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,039
|
|
|
$
|
264
|
|
|
$
|
1,996
|
|
|
$
|
3,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share basic
|
|
$
|
0.07
|
|
|
$
|
0.02
|
|
|
$
|
0.13
|
|
|
$
|
0.20
|
|
Net income per share diluted*
|
|
$
|
0.07
|
|
|
$
|
0.02
|
|
|
$
|
0.13
|
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
15,435
|
|
|
|
15,486
|
|
|
|
15,496
|
|
|
|
15,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
15,872
|
|
|
|
15,866
|
|
|
|
15,671
|
|
|
|
15,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
net income per share in each quarter is computed using the
weight-average number of shares outstanding during the quarter
while net income per share for the full fiscal year is computed
using the weighted average number of shares outstanding during
the fiscal year. Thus, the sum of the four quarters net
come per share does not equal the full fiscal year. |
|
(1) |
|
See Note 13 regarding details of restructuring expense |
|
(2) |
|
Third and Fourth quarters reflect reversal of a portion of the
U.S. Valuation Allowance ($1,225 in Q3 and $415 in Q4). See
Note 9. |
58
BALDWIN
TECHNOLOGY COMPANY, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
Fiscal Year Ended June 30, 2007(1)
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Net sales
|
|
$
|
43,207
|
|
|
$
|
48,168
|
|
|
$
|
53,211
|
|
|
$
|
56,891
|
|
Cost of goods sold
|
|
|
28,945
|
|
|
|
32,550
|
|
|
|
35,774
|
|
|
|
38,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
14,262
|
|
|
|
15,618
|
|
|
|
17,437
|
|
|
|
18,457
|
|
Operating expenses
|
|
|
12,147
|
|
|
|
12,913
|
|
|
|
14,275
|
|
|
|
15,532
|
|
Restructuring(2)
|
|
|
|
|
|
|
994
|
|
|
|
|
|
|
|
|
|
Interest expense, net(3)
|
|
|
193
|
|
|
|
502
|
|
|
|
705
|
|
|
|
662
|
|
Other (income) expense, net
|
|
|
(226
|
)
|
|
|
175
|
|
|
|
220
|
|
|
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
2,148
|
|
|
|
1,034
|
|
|
|
2,237
|
|
|
|
2,179
|
|
Provision (benefit) for income taxes(4)
|
|
|
822
|
|
|
|
632
|
|
|
|
941
|
|
|
|
(1,437
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,326
|
|
|
$
|
402
|
|
|
$
|
1,296
|
|
|
$
|
3,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share basic
|
|
$
|
0.09
|
|
|
$
|
0.03
|
|
|
$
|
0.09
|
|
|
$
|
0.24
|
|
Net income per share diluted
|
|
$
|
0.08
|
|
|
$
|
0.03
|
|
|
$
|
0.08
|
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
15,003
|
|
|
|
15,097
|
|
|
|
15,203
|
|
|
|
15,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
15,726
|
|
|
|
15,695
|
|
|
|
15,697
|
|
|
|
15,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Results of operations include the results of Oxy-Dry from
November 21, 2006 and Hildebrand from April 11, 2007. |
|
(2) |
|
See Note No. 13 regarding details of restructuring expense. |
|
(3) |
|
Interest expense results from higher debt levels associated with
the new credit agreement. See Note No. 10. |
|
(4) |
|
Fourth quarter reflects partial reversal of U.S. valuation
allowance $2,500. See Note No. 9. |
59
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
Information regarding the Companys change in accountants
during fiscal year 2007 is incorporated herein by reference to
Item 4.01 of
Form 8-K
filed on November 20, 2006 and
Form 8-K
filed on November 28, 2006. There were no disagreements
related to the change in accountants.
|
|
Item 9A.
|
Controls
and Procedures
|
|
|
(a)
|
Evaluation
of disclosure controls and procedures
|
With the participation of the Chief Executive Officer and Chief
Financial Officer, the Companys management evaluated the
effectiveness of Baldwins disclosure controls and
procedures (as defined in
Rules 13a-15(e)
and
15d-15(e)
under the Securities Exchange Act of 1934, as amended (the
Exchange Act)), as of June 30, 2008. As a
result, management has concluded that Baldwins disclosure
controls and procedures were not as effective as of
June 30, 2008 as they should have been, and there was a
material weakness in internal control over financial reporting.
As more fully described below, the Company is in the process of
addressing this deficiency.
|
|
(b)
|
Managements
report on internal controls over financial reporting.
|
Baldwins management is responsible for establishing and
maintaining effective internal control over financial reporting
(as defined in
Rule 13a-15(f)
under the Exchange Act). The Companys internal control
system was designed to provide reasonable assurance of the
reliability of Baldwins financial reporting and
preparation of financial statements for external reporting
purposes in accordance with accounting principles generally
accepted in the United States of America. Because of its
inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the
policies or procedures may deteriorate. Under the supervision
and with the participation of management, including the
Companys Chief Executive Officer and Chief Financial
Officer, the Company assessed the effectiveness of its internal
control over financial reporting as of June 30, 2008
utilizing the criteria established in Internal
Control Integrated Framework set forth by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO).
Based on this assessment, Baldwins management has
identified as a material weakness in internal control as of
June 30, 2008 that it has insufficient staffing of
accounting personnel commensurate with the Companys global
financial reporting requirements and the complexity of the
Companys operations and transactions. A material weakness
is a deficiency, or combination of deficiencies, in internal
control over financial reporting, such that there is a
reasonable possibility that a material misstatement of the
Companys annual or interim financial statements will not
be prevented or detected on a timely basis. As a result of the
inadequate level of staffing, the following non-routine
transactions had not been recorded properly, and adjustments in
the financial statements were made where required:
i) contributions to a Company sponsored trust, initially
reported as cash and cash equivalents, were reclassified as
other assets,
ii) EITF 99-19,
Reporting Revenue Gross as a Principal versus Net as an
Agent, had not been followed in recording revenue on one
contract, which resulted in an overstatement of sales by $1,030
and overstatement of cost of sales by $1,000, iii) the
Company reversed $397 of revenue and $286 of cost of sales on
one bill and hold transaction, as all of the revenue recognition
criteria were deemed not to have been met, and iv) an
opening balance error made in the computation of the amount of
valuation allowance release was corrected and the Companys
methodology for determining inventory obsolescence in the
U.S. and Japan were deemed to be inadequate. Management
does not believe that this material weakness has an impact on
the Companys internal controls over financial reporting as
it relates to the recording of more routine day-to-day
transactions.
|
|
(c)
|
Changes
in internal controls-Remediation Plan
|
As noted in Managements Report on Internal Control Over
Financial Reporting, management has concluded that the Company
had insufficient accounting personnel commensurate with the
Companys global financial reporting requirements and the
complexity of the Companys operations and transactions.
Management is in the process of performing a comprehensive
review of its accounting resources, and based on the results of
that review may hire additional experienced, skilled finance
professionals. The Company has hired an experienced, skilled
60
Controller in its Japan subsidiary and in its
U.S. subsidiary as well as an experienced and skilled
Global Tax Director in the United States. In addition, the
Company will increase the level of review and discussion on
complex and judgmental accounting matters.
This annual report does not include an attestation report of
Baldwins registered public accounting firm regarding
internal control over financial reporting. Managements
report was not subject to attestation by Baldwins
registered public accounting firm pursuant to temporary rules of
the Securities and Exchange Commission that permits Baldwin to
provide only managements report in this annual report.
|
|
Item 9B.
|
Other
Information
|
None.
PART III
Items 10,
11, 12, 13
Information required under these items is contained in the
Companys 2008 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.
|
|
Item 14.
|
Principal
Accounting Fees and Services
|
Information concerning fees billed by Grant Thornton LLP,
Baldwins independent registered public accounting firm
during the fiscal years ended June 30, 2008 and 2007 is
incorporated herein by reference to Baldwins Proxy
Statement.
PART IV
|
|
Item 15.
|
Exhibits
and 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:
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.
|
61
|
|
|
|
|
|
3
|
.4
|
|
By-Laws of the Company as amended on November 13, 2007.
Filed as Exhibit 3.1 to the Companys Report on
Form 8-K
dated November 19, 2007 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.
|
|
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
|
.6*
|
|
Form of Restricted Stock Award Agreement. Filed as
Exhibit 10.1 to the Companys Current Report on
Form 8-K
dated November 20, 2006 and incorporated herein by
reference.
|
|
10
|
.7*
|
|
Form of Restricted Stock Unit Award Agreement. Filed as
Exhibit 10.2 to the Companys Current Report on
Form 8-K
dated November 20, 2006 and incorporated herein by
reference.
|
|
10
|
.8*
|
|
Form of Grant Certificate for stock options granted to
individuals under the Companys 2005 Equity Compensation
Plan.
|
|
10
|
.9*
|
|
Baldwin Technology Company Inc. 2007 Management Incentive
Compensation Plan. Filed as Exhibit 10.1 to the
Companys Current Report on
Form 8-K
dated August 17, 2006 and incorporated herein by reference.
|
|
10
|
.10*
|
|
Baldwin Technology Company, Inc. 2008 Management Incentive
Compensation Plan. Filed as Exhibit 10.10 to the
Companys Annual Report on
Form 10-K
dated September 28, 2007.
|
|
10
|
.11*
|
|
Baldwin Technology Company, Inc. 2009 Management Incentive
Compensation Plan (filed herewith).
|
|
10
|
.12
|
|
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
|
.13*
|
|
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
|
.14*
|
|
Employment Agreement dated June 19, 2007 and effective as
of June 30, 2007 between Baldwin Technology Company, Inc.
and Gerald A. Nathe. Filed as Exhibit 10.2 to the
Companys report on
Form 8-K
dated July 6, 2007 and incorporated herein by reference.
|
|
10
|
.15*
|
|
Employment Agreement dated June 19, 2007 and effective as
of June 30, 2007 between Baldwin Technology Company, Inc.
and Karl S. Puehringer. Filed as Exhibit 10.1 to the
Companys Report on
Form 8-K
dated July 6, 2007 and incorporated herein by reference.
|
|
10
|
.16*
|
|
Employment Agreement dated February 22, 2007 and effective
as of March 8, 2007 between
Baldwin Technology Company, Inc. and John P. Jordan.
Filed as Exhibit 10.01 to the Companys Report on
Form 8-K
dated March 12, 2007 and incorporated herein by reference.
|
|
10
|
.17*
|
|
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
|
.18*
|
|
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
|
.19*
|
|
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.
|
62
|
|
|
|
|
|
10
|
.20*
|
|
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.
|
|
10
|
.21
|
|
Credit Agreement dated as of November 21, 2006 by and among
Baldwin Technology Company, Inc., Mainsee 431. VV GmbH (to be
renamed Baldwin Germany Holding GmbH), Baldwin Germany GmbH and
Oxy-Dry Maschinen GmbH as Borrowers, the various lenders party
thereto as Lenders and LaSalle Bank National Association as
Administrative Agent and Arranger. Filed as Exhibit 10.1 to
the Companys Current Report on
Form 8-K
dated November 28, 2006.
|
|
10
|
.22
|
|
Letter Agreement regarding Payoff of Loans and Related
Obligations dated as of November 21, 2006 from Maple Bank
GmbH to the Company, Baldwin Europe Consolidated B.V. and
LaSalle Bank National Association as Administrative Agent. Filed
as Exhibit 10.3 to the Companys Current Report on
Form 8-K
dated November 28, 2006.
|
|
10
|
.23
|
|
Amended and Restated Stock Purchase Agreement by and among
Baldwin Technology Company, Inc. and the Stockholders of MTC
Trading Company dated November 17, 2006. Filed as
Exhibit 10.2 to the Companys Current Report on
Form 8-K
dated November 28, 2006.
|
|
10
|
.24
|
|
Line of Credit Contract in the amount of EUR 5,000,000.00 (five
Million Euro) between
Baden-Württembergische
Bank (as Lender) and Baldwin Germany Holding GmbH, Baldwin
Germany GmbH and Oxy-Dry Maschinen GmbH as joint Borrowers,
dated April 18, 2007. Translation filed as
Exhibit 10.23 to the Companys Annual Report on
Form 10-K
dated as of September 28, 2007.
|
|
10
|
.25
|
|
Waiver, Consent and Amendment No. 3 to Credit Agreement by
and among Baldwin Technology Company, Inc., Baldwin Germany
Holding GmbH, Baldwin Germany GmbH and Oxy-Dry Maschinen GmbH as
Borrowers, various lenders party thereto as Lenders, and LaSalle
Bank National Association as Administrative Agent and Lender,
dated and effective as of January 3, 2008. Filed as
Exhibit 10.24 to the Companys Report on
Form 10-Q
for the Quarter ended December 31, 2007.
|
|
21
|
.
|
|
List of Subsidiaries of Registrant (filed herewith).
|
|
23
|
.1
|
|
Consent of PricewaterhouseCoopers LLP (filed herewith).
|
|
23
|
.2
|
|
Consent of Grant Thornton LLP (filed herewith).
|
|
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).
|
|
|
|
* |
|
Management contract or compensatory plan or arrangement. |
63
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 29, 2008
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
|
|
September 29, 2008
|
|
|
|
|
|
/s/ KARL
S. PUEHRINGER
Karl
S. Puehringer
|
|
President, Chief Executive Officer and a Director
|
|
September 29, 2008
|
|
|
|
|
|
/s/ JOHN
P. JORDAN
John
P. Jordan
|
|
Vice President, Chief Financial Officer and Treasurer
|
|
September 29, 2008
|
|
|
|
|
|
/s/ LEON
RICHARDS
Leon
Richards
|
|
Controller and Chief Accounting Officer
|
|
September 29, 2008
|
|
|
|
|
|
/s/ MARK
T. BECKER
Mark
T. Becker
|
|
Director
|
|
September 29, 2008
|
|
|
|
|
|
/s/ ROLF
BERGSTROM
Rolf
Bergstrom
|
|
Director
|
|
September 29, 2008
|
|
|
|
|
|
/s/ SAMUEL
B. FORTENBAUGH III
Samuel
B. Fortenbaugh III
|
|
Director
|
|
September 29, 2008
|
|
|
|
|
|
/s/ AKIRA
HARA
Akira
Hara
|
|
Director
|
|
September 29, 2008
|
|
|
|
|
|
/s/ JUDITH
A. MULHOLLAND
Judith
A. Mulholland
|
|
Director
|
|
September 29, 2008
|
|
|
|
|
|
/s/ RONALD
B. SALVAGIO
Ronald
B. Salvagio
|
|
Director
|
|
September 29, 2008
|
|
|
|
|
|
/s/ CLAES
WARNANDER
Claes
Warnander
|
|
Director
|
|
September 29, 2008
|
|
|
|
|
|
/s/ RALPH
R. WHITNEY, JR.
Ralph
R. Whitney, Jr.
|
|
Director
|
|
September 29, 2008
|
64
Report of
Independent Registered Public Accounting Firm
on Financial Statement Schedule
To the Board of Directors and Shareholders of
Baldwin Technology Company, Inc.
Our audit of the consolidated statement of operations,
shareholders equity and cash flows 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 schedule
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.
/s/ PricewaterhouseCoopers
LLP
PricewaterhouseCoopers LLP
Stamford, Connecticut
September 28, 2006
65
BALDWIN
TECHNOLOGY COMPANY, INC
VALUATION
AND QUALIFYING ACCOUNTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
Charged to
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
Beginning of
|
|
|
Costs and
|
|
|
|
|
|
Acquired
|
|
|
End of
|
|
|
|
Fiscal Year
|
|
|
Expenses
|
|
|
Deduction
|
|
|
Balances
|
|
|
Fiscal Year
|
|
|
|
(In thousands)
|
|
|
Fiscal year ended June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts (deducted from accounts
receivable)
|
|
$
|
1,876
|
|
|
$
|
257
|
|
|
$
|
953
|
(1)
|
|
$
|
|
|
|
$
|
1,180
|
|
Fiscal year ended June 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts (deducted from accounts
receivable)
|
|
$
|
1,452
|
|
|
$
|
309
|
|
|
$
|
355
|
|
|
$
|
470
|
|
|
$
|
1,876
|
|
Fiscal year ended June 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts (deducted from accounts
receivable)
|
|
$
|
1,962
|
|
|
$
|
158
|
|
|
$
|
668
|
(2)
|
|
$
|
|
|
|
$
|
1,452
|
|
|
|
|
(1) |
|
The reduction in allowance for doubtful accounts primarily
reflects a write-off of previously identified and specifically
reserved accounts receivable for a U.S. subsidiary. |
|
(2) |
|
The reduction in allowance for doubtful accounts primarily
reflects a write-off of previously identified and specifically
reserved accounts receivable in Sweden. |
66