e10vk
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, 2011
Commission file number 1-9334
Baldwin Technology Company, Inc.
(Exact name of registrant as specified in its charter)
|
|
|
Delaware
|
|
13-3258160 |
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification No.) |
|
|
|
2000 NW Corporate Blvd., Suite 101 |
|
|
Boca Raton, Florida
|
|
33431 |
(Address of principal executive offices)
|
|
(Zip Code) |
Registrants telephone number, including area code: (561) 367-2950
Securities registered pursuant to Section 12(b) of the Exchange Act:
|
|
|
Title of Each Class
|
|
Name of Each Exchange on which Registered |
|
|
|
Class A Common Stock
|
|
NYSE Amex |
Par Value $.01
|
|
o |
Securities registered pursuant to Section 12(g) of the Exchange 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 Exchange 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 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate website, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§ 232.405) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K (§229.405) 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.
|
|
|
|
|
|
|
Large accelerated filer o
|
|
Accelerated filer o
|
|
Non-accelerated filer o
|
|
Smaller reporting company þ |
|
|
|
|
(Do not check if a smaller reporting company) |
|
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act). Yes o No þ
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, 2010, as reported by the New York Stock Exchange on that date, was $18,892,212.
Number of shares of Common Stock outstanding at June 30, 2011:
|
|
|
|
|
|
|
Class A Common Stock |
|
|
14,574,997 |
|
|
Class B Common Stock |
|
|
1,092,555 |
|
|
Total |
|
|
15,667,552 |
|
|
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 2011 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 fiscal year ended June
30, 2011.
2
PART I
Item 1. Business
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, drying
and curing systems, and related services and parts.
The Company sells its products both to printing press manufacturers (OEMs) who incorporate
the Companys products into their own printing press systems for sale to printers and publishers
and 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 in 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, effect on 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 products in 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 ended June 30, 2011,
3
2010 and 2009, net sales of Cleaning Systems represented approximately 48.7%, 56.9% and 52.2%
of the Companys net sales, respectively.
UV/IR Systems. The companys Ultra Violet (UV) curing and Infra-Red (IR) drying systems and
related consumables are used to accelerate the drying (curing) of inks and coatings on all sorts of
industrial printing presses, along with some industrial applications. The technology speeds up the
actual printing and post-printing processes, reduces waste, improves quality, along with enhancing
the appearance and durability of the finished products. In addition, the UV systems eliminate the
need for volatile organic compounds (VOCs) in some inks and coatings, which reduces the
environmental impact of printing. In fiscal years ended June 30, 2011, 2010 and 2009, net sales of
UV/IR Systems represented approximately 12.9%, 2.9% and 3.6% 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, 2011, 2010
and 2009, net sales of Fluid Management Systems represented approximately 16.0%, 16.5% and 20.0% 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 systems 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 addition, the
Company provides a variety of anti-offset spray powders to the graphic arts industry. In the fiscal
years ended June 30, 2011, 2010 and 2009, net sales of Other Products represented approximately
22.4%, 23.6% and 24.1% 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 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 10 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 incur significant 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, Swedish krona and the British pound. 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, 2011, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended June 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
Americas |
|
|
21 |
% |
|
|
18 |
% |
|
|
19 |
% |
Europe |
|
|
50 |
% |
|
|
52 |
% |
|
|
50 |
% |
Asia/Australia |
|
|
29 |
% |
|
|
30 |
% |
|
|
31 |
% |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
4
In North, Central and South America, the Company operates through its U.S. subsidiaries and
throughout Central and South America through dealers. In Europe, the Company operates through its
subsidiaries in Germany, Sweden, France, England and the Netherlands. In Asia, the Company operates
through its subsidiaries in Japan, China and India. The Company also operates in Australia through
its Australian subsidiary. All of the Companys subsidiaries are wholly owned except for two
subsidiaries, one in which the Company holds a 90% interest, and another in which the Company holds
an 80% interest.
Acquisition Strategy
As part of its growth strategy, the Company 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. 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 the objective of
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 85 employees devoted to marketing and sales activities in its three principal markets
and more than a number of 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, 2011, approximately 38% of the Companys net sales
were to OEMs and approximately 62% were directly to printers.
Support. The Company is committed to after-sales service and support of its products
throughout the world. Baldwin employs approximately 92 service technicians, who are supported 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 $36,579 as
of June 30, 2011, $33,917 as of June 30, 2010 and $38,693 as of June 30, 2009.
Customers. For the fiscal year ended June 30, 2011, one customer accounted for more than 10%
of the Companys net sales and trade accounts receivable. Koenig and Bauer Aktiengesellschaft
(KBA) accounted for approximately 14% and 15% of the Companys net sales and trade accounts
receivable, respectively. The ten largest customers of Baldwin (including KBA) accounted for
approximately, 40%, 39% and 48%, respectively, of the Companys net sales for the fiscal years
ended June 30, 2011, 2010 and 2009. 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 various centers of competence for its product
offerings. The Company believes that this approach to engineering and development has helped the
Company to target the needs of its customers quicker and more precisely and coordinate the
Companys product development activities. The Companys engineering and development organization
works globally to coordinate its activities and focuses attention on opportunities within the
respective markets, while avoiding duplicative efforts within the Company.
5
Baldwin employs approximately 85 persons whose primary function is new product development,
application engineering or modification of existing products. The Companys total expenditures for
engineering and development for the fiscal years ended June 30, 2011, 2010 and 2009 were
approximately 9.0%, 9.7% and 8.9% of the Companys net sales in each such fiscal year,
respectively.
Patents
The Company owns a number of patents and has 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 assembly and quality control, through a number
of operating subsidiaries. In North America, the Company has facilities in Kansas, Illinois and
Pennsylvania. In Europe, the Company has facilities in Germany, Sweden and the U.K. 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, its 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 changing demands of the printing and publishing industry.
Employees
At July 1, 2011, adjusting for terminations on June 30, 2011, the Company employed 512 persons
(plus 50 temporary and part-time employees) of which 180 are production employees, 85 are
marketing, sales and customer service employees, 177 are development, engineering and technical
service employees and 70 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 73 employees are represented by the Ledarna (SALF), Metall, or Svenska
Industritjanstemanna Forbundet unions; in Germany, approximately 80 of the Companys 173 employees
are represented by the IG Metall (Metalworkers Union). The Company considers relations with its
employees and with its unions to be good.
6
Item 1A. Risk Factors
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 the impact of continuing economic difficulties, increased
competition in the printing equipment industry, the introduction and market acceptance of new and
alternative printing and information distribution 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 for the Companys products
and consumables, and the timing of new product announcements and releases by the Company or its
competitors. Finally, the operating results of the Company are dependent upon managements ability
to control manufacturing costs as well as operating expenses in view of the Companys business
environment.
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 utilizes a number of unaffiliated
subcontractors to manufacture components for the Companys products. Because the Company relies on
subcontractors, however, the Company cannot be sure that it
7
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 and 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, British pound, 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 its 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
condition.
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 significant customers. In fiscal 2011, the Company had one significant
customer that individually accounted for 14% of net sales. The Company anticipates, but cannot
assure, that this customer will continue to be significant in fiscal 2012. 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. In addition, the Companys ten largest
customers accounted for approximately 40% of the Companys net sales for the fiscal year ended June
30, 2011.
Banking and financing relationships. The Companys continued effective operating
presence in the marketplace is dependent upon its financing arrangements with its banks. The
Company cannot predict if those relationships will always be supportive.
Industry Risks
If the United States and other significant global economies are impacted by a recession,
the demand for the Companys products could remain lower 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.
8
Financial markets throughout the world have experienced disruption, including volatility in
securities prices, diminished liquidity and credit availability, failure and potential failures of
major financial institutions and unprecedented government support of financial institutions. These
developments along with any extended economic downturn have and will adversely impact the Companys
business and financial condition in a number of ways, including impacts beyond those typically
associated with other recent downturns in the U.S. and foreign economies. Reduced capital spending
by OEMs and end users has already adversely affected and may continue to adversely affect the
Companys product sales, which could necessitate further testing for impairment of goodwill, other
intangible assets, and long-lived assets and may require an additional valuation allowance with
respect to the Companys deferred tax assets. In addition, cost reduction actions may be necessary
which would lead to additional restructuring charges. As credit in financial markets tightens, the
general economic downturn has adversely affected the ability of the Companys customers and
suppliers to obtain financing for significant purchases. The tightening could result in a decrease
in or cancellation of orders for the Companys products and services, could negatively impact the
Companys ability to collect its accounts receivable on a timely basis, could result in additional
reserves for uncollectible accounts receivable, and in the event of continued contraction in the
Companys sales, could lead to an additional write-down of inventory.
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 relate 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 could render the Companys technologies obsolete or less marketable. The
Companys future success will depend, in part, on the Companys ability to:
|
|
|
use leading technologies effectively; |
|
|
|
|
continue to develop the Companys technical expertise and patented position; |
|
|
|
|
enhance the Companys current products and develop new products that meet
changing customer needs; |
|
|
|
|
time new product introductions in a way that minimizes the impact of customers
delaying purchases of existing products in anticipation of new product releases; |
|
|
|
|
adjust the prices of the Companys existing products to increase customer demand; |
|
|
|
|
successfully advertise and market the Companys products; |
|
|
|
|
influence and respond to emerging industry standards and other technological
changes; and |
|
|
|
|
adjust products and services to accommodate substitution of non-traditional
digital technologies for traditional print on paper. |
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 the
Companys ability to report its financial condition and results of operations accurately or on a
timely basis. As a result, current and potential stockholders could lose confidence in the
Companys financial reporting, which could harm its business and the trading price of its
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.
9
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 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.
Risks associated with indebtedness
The Company has indebtedness. As of June 30, 2011, the Companys total indebtedness
was $24,213. Borrowings under the Companys Credit Agreement with Bank of America, N.A., certain
other Lenders (the Credit Agreement) are secured by the assets of the Company. Under the terms of
the Credit Agreement, the Company is required to satisfy certain financial covenants. At June 30,
2011, the Company was in compliance with the financial covenants contained in its Credit Agreement.
The Company expects to continue to be in compliance with the covenants in the Credit
Agreement, as amended, but a significant decline in the Companys financial performance could have
a material adverse effect on the Company, including the Companys ability to retain its existing
financing or obtain additional financing; or any such financing may not be available on terms
favorable to the Company. The Companys ability to make expected repayments of borrowings under its
Credit Agreement and to meet its other debt or contractual obligations (including compliance with
applicable financial covenants) will depend upon the Companys future performance and its cash
flows from operations, both of which are subject to prevailing economic conditions and financial,
business, and other known and unknown risks and uncertainties, certain of which are beyond the
Companys control.
The
Companys Credit Agreement matures July 2, 2012, and the Company may be unable to
renew or replace this financing. The Company is in discussions regarding replacement of its
Credit Agreement and anticipates finalizing a replacement Credit
Agreement prior to July 2, 2012 although there are no
assurances that such agreement will be completed by the loan maturity date.
Item 1B. Unresolved Staff Comments
None
10
Item 2. Properties
The Company owns an idle facility in Sweden and leases various manufacturing and office
facilities aggregating approximately 424,000 square feet at June 30, 2011. The table below presents
the locations and ownership of these facilities: (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Square |
|
|
Square |
|
|
Total |
|
|
|
Feet |
|
|
Feet |
|
|
Square |
|
|
|
Owned |
|
|
Leased |
|
|
Feet |
|
United States |
|
|
|
|
|
|
97 |
|
|
|
97 |
|
Germany |
|
|
|
|
|
|
144 |
|
|
|
144 |
|
Sweden |
|
|
23 |
|
|
|
53 |
|
|
|
76 |
|
Japan |
|
|
|
|
|
|
30 |
|
|
|
30 |
|
U.K |
|
|
|
|
|
|
39 |
|
|
|
39 |
|
All other, foreign |
|
|
|
|
|
|
38 |
|
|
|
38 |
|
|
|
|
|
|
|
|
|
|
|
Total square feet owned and leased |
|
|
23 |
|
|
|
401 |
|
|
|
424 |
|
|
|
|
|
|
|
|
|
|
|
The Company believes that its facilities are adequate to carry on its business as currently
conducted.
Item 3. Legal Proceedings
Baldwin is involved from time to time in various legal proceedings, 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.
Additionally, information regarding legal proceedings is included in the Notes to Consolidated
Financial Statements (see Note 20) and is incorporated herein by reference.
Item 4. Removed and Reserved
11
PART II
Item 5. Market for 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 was traded on the American Stock Exchange (AMEX) until
October 1, 2008, when the AMEX was acquired by the NYSE Euronext. Since October 1, 2008, the
Companys Class A Common Stock has been traded on the New York Stock Exchange (NYSE 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 during the period prior to October 1, 2008, and as reported by the NYSE Amex
since October 1, 2008.
|
|
|
|
|
|
|
|
|
|
|
High |
|
|
Low |
|
2009 (calendar year) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
1.80 |
|
|
$ |
0.73 |
|
Second Quarter |
|
$ |
1.31 |
|
|
$ |
0.87 |
|
Third Quarter |
|
$ |
1.63 |
|
|
$ |
0.96 |
|
Fourth Quarter |
|
$ |
2.00 |
|
|
$ |
1.15 |
|
|
|
|
|
|
|
|
|
|
2010 (calendar year) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
1.38 |
|
|
$ |
1.02 |
|
Second Quarter |
|
$ |
1.57 |
|
|
$ |
1.17 |
|
Third Quarter |
|
$ |
1.38 |
|
|
$ |
1.14 |
|
Fourth Quarter |
|
$ |
1.36 |
|
|
$ |
1.05 |
|
|
|
|
|
|
|
|
|
|
2011 (calendar year) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
1.66 |
|
|
$ |
1.28 |
|
Second Quarter |
|
$ |
1.78 |
|
|
$ |
1.12 |
|
Third Quarter (through September 15, 2011) |
|
$ |
1.36 |
|
|
$ |
0.87 |
|
Class B Common Stock
The Companys Class B Common Stock has no established public trading market. However, shares
of Class B Common Stock are convertible, one-for-one, into shares of Class A Common Stock, upon
demand. During the fiscal year ended June 30, 2011, no holders of the Companys Class B Common
Stock converted shares into shares of the Companys Class A Common Stock.
Approximate Number of Equity Security Holders
As of September 8, 2011, the number of record holders of the Companys Class A Common Stock
and Class B Common Stock totaled 205 and 29, respectively. The Company believes, however, that
there are approximately 1,300 beneficial owners of its Class A Common Stock.
Dividends
Declarations of dividends depend upon the earnings and financial position of the Company
and are within the discretion of the Companys Board of Directors. However, the Companys Credit
Agreement prohibits the payment of dividends. Under the Companys Certificate of Incorporation, no
dividend in cash or property also 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
the shares of Class B Common Stock (see Note 11 to the
Consolidated Financial Statements).
12
Purchases of Equity Securities by Issuer and Affiliated Purchasers
There was no activity under the Companys stock repurchase program during the quarter ended
June 30, 2011.
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, 2011 with the cumulative total
return of the NYSE Amex Composite Index, and a peer group composed of publicly traded companies
(customers and competitors) in the printing equipment business. The companies included in the peer
group are: Baldwin Technology Company, Inc., Heidelberger Druckmaschinen, Koenig & Bauer AG, Komori
Corporation, Presstek, Inc. and technotrans AG (the currencies of all foreign listed companies were
converted to USD for the time periods indicated). The comparison assumes $100 was invested on June
30, 2006 in the Companys Class A Common Stock and in each of the foregoing indices and assumes
reinvestment of all dividends. Total stockholder return was 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.
Comparison of Five Year Cumulative Total Return (*) Among Baldwin Technology
Company Inc., the NYSE Amex Composite Index and a Peer Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Baldwin Technology |
|
|
|
|
|
|
|
For the year ended June 30, |
|
Company, Inc. |
|
|
Peer Group |
|
|
NYSE Amex Composite |
|
2007 |
|
|
111.67 |
|
|
|
109.33 |
|
|
|
125.36 |
|
2008 |
|
|
43.70 |
|
|
|
62.78 |
|
|
|
124.63 |
|
2009 |
|
|
18.52 |
|
|
|
27.76 |
|
|
|
92.01 |
|
2010 |
|
|
21.85 |
|
|
|
33.00 |
|
|
|
108.97 |
|
2011 |
|
|
22.04 |
|
|
|
28.25 |
|
|
|
146.13 |
|
|
|
|
* |
|
$100 invested on June 30, 2006 in stock or index including
reinvestment of dividends. (Fiscal year ending June 30.) |
Unregistered Sales of Equity Securities
On July 8, 2010, the Company entered into an advisory agreement (the Advisory Agreement)
with OBX Partners LLC (OBX), a Florida limited liability company, under which OBX acted as a
financial advisor and strategic consultant to the Ad Hoc Advisory Committee of the Board of
Directors of the Company. As part of the consideration for the services to be rendered pursuant to
the Advisory Agreement, the Company granted to OBX an option (the OBX Option) to purchase 300,000
shares of the Companys Class A Common Stock (the Shares) at an exercise price per share of
$1.26, exercisable on or after October 1, 2011. The OBX Option will terminate on September 30,
2020. Neither the OBX Option nor the Shares to be issued upon exercise of the OBX Option have been
registered under the Securities Act of 1933 in reliance upon the exemption from registration
afforded by Section 4(2) of the Securities Act of 1933, as amended.
On September 28, 2010 the Company entered into Amendment #8 to the Credit Agreement
(Amendment #8) with BofA as agent and with the other lenders. Under the terms of Amendment #8,
the Company issued to each of the Companys three lenders Warrants with a term of ten years to
purchase an aggregate of 352,671 shares of the Companys Class A Common Stock for a purchase price
of $0.01 per share (the 2010 Warrants). The 2010 Warrants contain a cashless exercise provision
which permits the holders to exercise at any time at which the then fair market value of the Class
A Common Stock exceeds the $0.01 per share warrant exercise price. The 2010 Warrants also contain a
put provision that enables the holders after September 28, 2012 to request a cash settlement equal
to the then fair market value of the 2010 Warrants in an amount not to exceed $1.50 per share.
Neither the 2010 Warrants nor the shares of Class A Common Stock issuable upon exercise of the 2010
Warrants have been registered under the Securities Act in reliance upon the exemption from
registration afforded by Section 4(2) of the Securities Act.
13
On May 16, 2011 the Company entered into Waiver and Amendment No. 10 to the Credit Agreement
(Amendment No. 10) with BofA as agent and the other lenders. Under the terms of Amendment No. 10,
the Company issued to each of the Companys three lenders Warrants with a term of ten years to
purchase an aggregate of 372,374 shares of the Companys Class A Common Stock for a purchase price
of $0.01 per share (the 2011 Warrants). The 2011 Warrants contain a cashless exercise provision
which permits the holders to exercise at any time at which the then fair market value of the Class
A Common Stock exceeds the $0.01 per share warrant exercise price. The 2011 Warrants also contain a
put provision that enables the holders thereof after May 16, 2 013 to request a cash settlement
equal to the then fair market value of the 2011 Warrants in an amount not to exceed $1.50 per
share. Neither the 2011 Warrants nor the shares of Class A Common Stock issuable upon the exercise
of the 2011 Warrants have been registered under the Securities Act in reliance upon the exemption
from registration afforded by Section 4(2) of the Securities Act.
|
|
|
Item 6. |
|
Selected Financial Data |
Not completed due to Registrants status as a smaller reporting company.
|
|
|
Item 7. |
|
Managements Discussion and Analysis of Financial Condition and Results of Operations |
(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 include, but are not limited to
the following: (i) the ability to comply with requirements of credit agreements; the availability
of funding under such agreements; the ability to maintain adequate liquidity in declining and
challenging economic conditions impacting the Company as well as customers, (ii) general economic
conditions in the U.S. and other foreign locations, (iii) the ability to obtain, maintain and
defend challenges against valid patent protection of certain technology, primarily as it relates to
the Companys cleaning systems, (iv) material changes in foreign currency exchange rates versus the
U.S. Dollar, (v) changes in the mix of products and services comprising revenues, (vi) a decline in
the rate of growth of the installed base of printing press units and the timing of new press
orders, (vii) the ultimate realization of certain trade receivables and the status of ongoing
business levels with the Companys large OEM customers, and (viii) competitive market influences.
Additional factors are set forth in Item 1A Risk Factors in this Annual Report on Form 10-K for
the fiscal year ended June 30, 2011, which should be read in conjunction herewith.
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 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
14
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 varying terms and conditions
depending on the nature of the product sold and the geographic location of the customer. The
Companys revenues also include installation and service contracts. The Company may also enter
into multi-element revenue arrangements that may consist of multiple deliverables of its product
and service offerings. The Company recognizes revenue when persuasive evidence of an arrangement
exists, delivery has occurred, the sales price is fixed or determinable, and collectability of the
sale price is reasonably assured. In addition to these general revenue recognition criteria, the
following specific revenue recognition policies are followed:
Products and Equipment For product and equipment sales (one deliverable only), revenue
recognition generally occurs when products or equipment have been shipped, risk of loss has
transferred to the customer, objective evidence exists that customer acceptance provisions have
been met, no significant obligations remain and an allowance for discounts, returns and customer
incentives can be reliably estimated. Recorded revenues are reduced by these allowances. The
Company bases its estimates of these allowances on historical experience taking into consideration
the type of products sold, the type of customer, and the specific type of transaction in each
arrangement.
Services Revenue for services is generally recognized at completion of the contractually
required services.
Multiple-Element Arrangements In July 2010 the Company adopted ASC Update No. 2009-13,
Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. The consensus in
Update No. 2009-13 supersedes certain guidance in Topic 605 (formerly EITF Issue No. 00-21,
Multiple-Element Arrangements) and requires the Company to allocate arrangement consideration at
the inception of an arrangement to all of its deliverables based on their relative selling prices.
The consensus eliminated the use of the residual method of allocation and requires the use of the
relative-selling-price method in all circumstances in which the Company recognizes revenue for an
arrangement with multiple deliverables subject to ASC 605-25.
The new guidance changed the criteria required to (1) separate deliverables into separate
units of accounting when deliverables are sold in a bundled arrangement and (2) to allocate the
arrangements consideration to each unit in the arrangement (such as, equipment, installation or
commissioning services). The Company now determines an estimated selling price for each separate
deliverable following a hierarchy of evidence Vendor-specific objective evidence (VSOE), Third
Party Evidence (TPE) and, if VSOE and TPE do not exist, best estimate of selling price (BESP).
Arrangements with customers may include multiple deliverables, including any combination of
products, equipment and services. For the Companys multiple-element arrangements, deliverables are
separated into more than one unit of accounting when (i) the delivered element(s) have value to the
customer on a stand-alone basis, and (ii) delivery of the undelivered element(s) is probable and
substantially in the control of the Company. Based on the new accounting guidance adopted July 1,
2010, revenue is then allocated to each unit of accounting based on the estimated selling price
determined using a hierarchy of evidence based first on VSOE if it exists, based next on TPE if
VSOE does not exist, and finally, if both VSOE and TPE do not exist, based on BESP.
|
|
|
VSOE The price of a deliverable when the Company regularly sells it on a stand
-alone basis. |
Typically, the Company is unable to determine VSOE for the installation and
commissioning services portion, as well as, the equipment portion of a multiple-element
arrangement. Since the Company does not sell its installation and commissioning services on
a stand-alone basis, the Company is not able to determine VSOE for these portions of a
multiple-element arrangement. In addition, in certain instances, similar equipment included
in a multiple-element arrangement is sold separately in stand-alone
15
arrangements as customers may perform installations themselves. The Company has determined
that the applicability of this stand-alone pricing is not appropriate to serve as the VSOE
for equipment in multiple-element arrangements since this pricing considers the geographies
in which the products or services are sold, major product and service groups, customer
classification (OEM versus End User) and other market variables.
|
|
|
TPE Third party (competitor, subcontractors, etc.) sales prices for the same or
largely interchangeable products or services to similar customers in stand-alone sales.
TPE can only be used if VSOE is not available. |
Generally, the Companys strategy for many of its products differs from that of its
peers and its offerings contain a level of customization and differentiation such that the
comparable pricing of products with similar functionality sold by other companies cannot be
obtained. Furthermore, the Company is unable to reliably determine what similar competitor
products selling prices are on a stand-alone basis. Therefore, the Company is typically not
able to determine TPE for the equipment portion of a multiple-element arrangement. However,
there are others (subcontractors) in the industry with sufficient knowledge about the
installation and commissioning process that the Company uses on occasion to perform these
services. Overall, installation and commissioning services may vary, due in part, to the
size and complexity of the installation and commissioning, however, these subcontractor
rates may provide a basis for TPE after considering the type of services to be performed
(i.e. mechanical, electrical) and negotiated subcontractor rates.
|
|
|
BESP When the Company is unable to establish VSOE or TPE, the Company uses BESP.
The objective of BESP is to determine the price at which the Company would transact a
sale if the product or service were sold on a stand-alone basis. |
The Company determines BESP for a deliverable in a multiple element arrangement by
first collecting all reasonably available data points including sales, cost and margin
analysis of the product, and other inputs based on the Companys normal pricing practices.
Second, the Company makes any reasonably required adjustments to the data based on market
conditions and Company-specific factors (customer, cost structure, etc.). Third, the Company
stratifies the data points, when appropriate, based on customer, magnitude of the
transaction and sales volume. In addition, the Company has negotiated supply agreements,
primarily with large OEM customers, for pricing some of its products and installation and
commissioning services. The Company has experience selling the products and installation and
commissioning services at the published price list and considers this to be BESP when
contracting with customers under the supply agreements.
The determination of BESP is a formal process within the Company that includes review and
approval by the Companys management.
After determination of the estimated selling price of each deliverable in a multiple-element
arrangement, the arrangement consideration is then allocated using the relative selling price
method. Under the relative selling price method, the estimated selling price for each deliverable
is compared to the sum of the estimated selling prices for all deliverables. The percentage that
is calculated for each deliverable is then multiplied by the total contractual value of the
multiple-element arrangement to determine the revenue allocated to each deliverable.
The revenue allocated to each deliverable is then recorded in accordance with existing revenue
recognition guidance for stand-alone product/equipment sales and unbundled services.
Prior to the adoption of the amended guidance for contracts which contain multiple element
arrangements the Company separated the arrangement into its stand-alone elements for revenue
recognition purposes: (i) when the delivered item had value to the customer on a stand-alone basis,
(ii) there was objective and reliable evidence of the fair value of the undelivered item and (iii)
the arrangement did not include a general right of return. If all these criteria were met revenue
was recognized on each element as a separate unit of accounting. If these criteria were not met,
the arrangement was accounted for as one unit of accounting which would result in revenue being
deferred until the last undelivered contractual element was fulfilled.
16
Based on the Companys current sales strategies, the newly adopted accounting guidance for
revenue recognition did not have a significant effect on the timing and pattern of revenue
recognition for sales in periods after the initial adoption when applied to multiple-element
arrangements.
Additional Revenue Recognition Policies
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.
Products are generally ordered on purchase orders, 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 sometimes uses distributors to assist in the sales function. In these cases, the
Company does not recognize revenue until title for the equipment or product and risk of loss have
passed to the ultimate customer, who then becomes obligated to pay with no right of return. In
addition, the Company reviews all alliance agreements to determine whether revenue should be
recognized on a gross or net basis and recognizes revenue as appropriate in the circumstances.
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 provides reserves for estimated obsolescence in inventory 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 reserves may be required.
Due to the continued deteriorating macro-economic environment, a decision to transfer equipment
manufacturing from the U.S. to Germany, a general restructuring of the U.S. operations and the
inability of the U.S. operation to reach target goals for inventory utilization, the Company
recorded a $4,250 additional reserve for obsolescence during the third quarter of fiscal year 2009
for its U.S. inventories.
Baldwin records a valuation allowance to reduce its net deferred tax assets to the
amount that is more likely than not to be realized. Baldwin has considered future taxable income
and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation
allowance. In the event Baldwin were to determine that it would be able to realize its deferred tax
assets in the future in excess of 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
17
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. In fiscal year 2011 the tax rate was
negatively impacted by recognition of valuation allowances. The Company recorded valuation
allowances of approximately $11,458 on certain domestic and foreign deferred tax assets and $1,826
on a domestic capital loss carryforward including capital loss and foreign tax credit carryforwards
of $1,798 and $1,469, respectively.
The Company tests goodwill for impairment at the reporting unit level at least
annually in May of each fiscal year. The Company has identified six reporting units in accordance
with ASC 350-20-35 as the lowest level of an entity that is a business, that can be distinguished
from other activities, operations, and assets of the entity and for which discrete financial
information is available and regularly reviewed by management.
The fair value of each reporting unit is determined utilizing an equal weighting of a
combination of income and market approaches of the reporting unit and comparing the fair value with
its recorded book value. The income approach applies a discounted cash flow methodology to the
Companys future period projections, and a market approach compares the Companys multiples of
revenues and earnings with those of comparable companies. The Company considers the combination of
valuation techniques, which utilizes internal analysis and external valuations and utilizes both
income and market approaches to determine fair value, provides a better estimate of the fair value
of the reporting unit as opposed to reliance on one valuation technique. Significant estimates and
assumptions are inherent in the valuations that reflect a consideration of other marketplace
participants, the amount and timing of future cash flows (including expected growth rates and
profitability) and the discount rate applied to cash flows. Unanticipated market or macroeconomic
events or circumstances may occur that could affect the accuracy or validity of the estimates and
assumptions used in the determination of fair value. A significant reduction in the estimated fair
values could result in impairment charges that could materially affect financial statements in any
given year.
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 would be 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. ASC 350 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.
At June 30, 2011 the annual impairment test for goodwill indicated that all reporting unit
fair values exceeded their respective recorded values. However, the estimated fair value of the
German reporting unit which exceeded its carrying value by approximately 12% has been
disproportionally impacted by the economic downturn. The current valuation has the reporting unit
returning to sales and earnings more consistent with the Companys long-term business plans.
Failure to achieve the plans or further or continued deterioration of macro economic conditions
could
result in a valuation that could trigger an impairment of goodwill. The amount of goodwill at
the German reporting unit is approximately $13 million.
18
During fiscal year ended June 30, 2009 as a result of the deteriorating macro-economic
environment, the continued market volatility and the Companys decreased market capitalization, the
Company assessed the recoverability of its goodwill carrying value as required. A two-step process
was used to test goodwill impairment. The first step was to determine if there was an indication of
impairment by comparing the estimated fair value of each reporting unit to its carrying value
including goodwill. Goodwill is considered impaired if the carrying value of a reporting unit
exceeds its estimated fair value. Upon indication of impairment, a second step would be performed
to determine the amount of the impairment by comparing the implied fair value of the reporting
units goodwill with its carrying value.
As a result of the assessment, and the impact of the deteriorating economic and market
conditions that led to a reduced demand for the Companys products supplied by its Japan reporting
unit, the Company recorded a non-cash goodwill impairment charge of $5,658 related to its Japan
reporting unit during the third quarter of fiscal year 2009.
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.
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.
Pension obligations and the related benefits costs are determined based upon actuarial
assumptions regarding mortality, discount rates, long-term return on assets, salary increases, and
other factors. Changes in these assumptions can result in changes to the recognized pension expense
and recorded liabilities.
For Stock-Based Compensation, the Company uses the Black-Scholes option pricing model
to determine the fair value of stock options issued as compensation to employees and non-employee
directors. The model determines a fair value based on a number of key variables including the grant
date price of the Companys common stock and the related exercise or strike price, estimated
dividend yield, estimated term of the option prior to exercise, risk free rate of interest over the
estimated term and a measure of the volatility of the Companys common stock over the estimated
term. Certain of these variables encompass a degree of subjectivity whose variability could result
in significantly different values for the grant date fair value of stock option awards. In
addition, the Company recognizes share-based compensation cost based upon the number of awards that
are expected to vest. This method implicitly includes an estimate for forfeitures based on employee
turnover, reductions in force and other factors
specific to the award recipient population. The Company has a policy to review its estimate of
award forfeitures on an annual basis or when specific facts and circumstances warrant additional
review.
19
Results of Operations
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 Boca Raton, Florida,
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, blending and packaging services, and related services and parts.
The Company manages its business as one reportable business segment built around its core
competency in process automation equipment.
Overview for Fiscal Year ended June 30, 2011
|
|
|
Revenues increased 16%, versus the prior year comparable period. |
|
|
|
|
Backlog of $36,579 at June 30, 2011 increased 8% versus June 30, 2010. |
|
|
|
|
Order intake was up 23% versus the prior year comparable period. |
|
|
|
|
The Company recorded additional restructuring charges of $2,966 and anticipates
associated savings of approximately $6,000 on an annual basis. |
|
|
|
|
The Company completed the integration of Nordson UV, a manufacturer of ultraviolet
curing systems, lamps and parts it acquired as of June 30, 2010. Operating results of
the acquired entities are included in the results of operations from the date of
acquisition . |
|
|
|
|
The Company has classified its non-core food blending and packaging business as a
discontinued operation. The food blending business was sold on June 3, 2011. |
See the discussion below related to consolidated results of operations and liquidity and
capital resources from continuing operations.
Fiscal Year Ended June 30, 2011 versus Fiscal Year Ended June 30, 2010
Consolidated Results
Net Sales. Net sales for the fiscal year ended June 30, 2011 increased $22,300, or 16%, to
$160,899 from $138,599 for the year ended June 30, 2010. Foreign currency translation had a
favorable impact of $4,537. The acquired graphic arts UV curing business contributed net sales of
approximately $17,052 during the fiscal year ended June 30, 2011.
In Europe, net sales increased approximately $8,206, including $572 of favorable foreign
currency translation. The increase was primarily attributable to the additional revenue from the
acquired UV curing business. Partially offsetting this increase was reduced demand for the
Companys products as a result of the global economic contraction, lack of available financing
sources for equipment purchases by our customers, and OEM press manufacturers experiencing reduced
shipment volume primarily in the first nine months in the fiscal year ended June 30, 2011.
Net Sales in the Americas increased $9,454 and reflects additional sales of products acquired
in the UV business acquisition coupled with improved cleaning and spray dampening equipment sales.
In Asia/Australia, net sales increased approximately $4,640, including $3,965 of favorable
foreign currency translation. The increase reflects higher shipments of cleaning and spray
dampening equipment to the markets in
China, partially offset by lower newspaper equipment shipments in Japan.
20
Gross Profit. Gross profit for the fiscal year ended June 30, 2011 increased to $47,043
(29.2% of sales) versus $41,371 (29.8% of sales) for the fiscal year ended June 30, 2010. Net,
favorable foreign currency translation increased gross profit by $1,428 for the 2011 fiscal year.
Margins for the 2011 fiscal year were negatively impacted primarily by a non-cash inventory
write-down of $1.0 million in the fiscal fourth quarter. Excluding the impact of the non-cash
write-down of inventory, gross margin was 30.0%. Ongoing margin initiatives, (global sourcing,
manufacturing in lower cost countries and standardization of components and controls), combined
with higher margins from the UV curing business, helped offset the negative impact from lower
equipment sales outside of the Americas in the first nine month period of fiscal year 2011.
Selling, General and Administrative Expenses. Selling, general and administrative
expenses (SG&A) of $35,967 for the fiscal year ended June 30, 2011 increased $4,284, or 14%,
versus the fiscal year ended June 30, 2010. Foreign currency translation had an unfavorable impact
of $1,176 in fiscal year 2011.
G&A expenses for the fiscal year ended June 30, 2011 increased $2,641, or 14%, including
unfavorable foreign currency translation of $655 in fiscal year 2011. The increase primarily
reflects additional G&A expenses of $1,619 associated with the acquired graphic arts UV curing
business. In addition, the Company incurred approximately $1,006 of costs associated with
termination agreements with the Companys former CEO and CFO, and other professional/consulting
fees of $1,190 primarily related to an internal controls investigation at its subsidiary in Japan.
Partially offsetting these increases were lower fees of $911 incurred in fiscal year 2010 related
to an investigation into internal control matters, lower acquisition and bank amendment fees of
$580, lower bad debt expense of $210 and lower costs associated with savings from announced
restructurings.
Selling expenses for the fiscal year ended June 30, 2011 increased $1,643, or 13%, and include
unfavorable currency translation of $521 in fiscal year 2011. The increase primarily reflects
additional selling expenses of $1,912 associated with the acquired Nordson UV curing business,
partially offset by lower use of outside subcontractors, lower expenses associated with trade shows
and savings from restructuring actions.
Engineering and Development Expenses. Engineering and development expenses for the fiscal year
ended June 30, 2011 increased $1,032, or 8%, including $378 of unfavorable currency translation in
fiscal year 2011. The increase primarily reflects additional expenses of $681 associated with the
acquired Nordson UV curing business.
Restructuring. The Company recorded $2,966 of restructuring costs during the fiscal year ended June
30, 2011 versus $540 in the comparable prior year. The current year restructuring plan was designed
to achieve operational efficiencies in Germany, Japan, Sweden and the UK and consists of employee
terminations, consolidation of facilities and fixed asset write downs. The FY 2010 plan was
designed to achieve operational efficiencies in Germany and consisted entirely of employee
terminations.
Legal Settlement. During the fiscal year ended June 30, 2010, the Company recorded a net gain
on the settlement of a patent infringement lawsuit of $9,266. Please refer to Note 20 in Notes to
Consolidated Financial Statements for further discussion of this settlement.
Interest, Net and Other. Interest expense, net, of $2,133 for the fiscal year ended June 30,
2011 decreased $925 versus the fiscal year ended June 30, 2010. Fiscal year 2010 interest expense
included costs incurred during the first quarter of fiscal year 2010 related to an amendment to the
Companys Credit Agreement. Certain costs associated with the amendment, together with legacy
deferred financing costs aggregating approximately $1,183, were charged to expense during the
quarter ended September 30, 2009. After giving effect to these expenses, interest expense increased
$258. The increase was attributable to higher debt and interest rates.
Other income and expense, net, was an expense of $112 versus an expense of $406 for the
periods ended June 30, 2011 and 2010, respectively, and primarily reflects net foreign exchange
transaction gains and losses.
Gain on Bargain Purchase. During the fourth quarter of fiscal year ended June 30, 2010, the
Company completed the previously announced acquisition of the Nordson UV curing business and
recorded a net gain of
$2,960 on the bargain purchase, representing the excess of net assets acquired over the
consideration paid. Please refer to Note 15 to the Consolidated Financial Statements for further
discussion.
21
Income (Loss) Before Income Taxes from continuing operations. Loss from continuing operations
before income taxes for the fiscal year ended June 30, 2011 was $8,634 compared to income from
continuing operations before income taxes of $4,443 for the fiscal year ended June 30, 2010. The
loss for the fiscal year ended June 30, 2011 includes the restructuring charges of $2,966 mentioned
above. The income for fiscal year ended June 30, 2010 included the previously mentioned gain on
legal settlement of $9,266 and the gain on bargain purchase of $2,960.
Income Taxes.
The Company recorded an income tax expense of $3,508 for the fiscal year ended June 30, 2011
versus an expense of $937 for the fiscal year ended June 30, 2010. The effective tax rates of
-40.6% and 21.1% for the fiscal years ended June 30, 2011 and 2010, respectively differ from the
statutory rate of 34%.
In fiscal year 2011 the tax rate was negatively impacted by recognition of valuation
allowances. The Company recorded valuation allowances of approximately $11,458 on certain domestic
and foreign deferred tax assets and including capital loss and foreign tax credit carryforwards of
$1,798 and $1,469, respectively. In fiscal year 2010 the tax rate benefited by release of foreign
contingency reserves, the gain on the Nordson UV bargain purchase and the foreign rate differential
offset by negative impacts of adjustments to valuation allowance related to a foreign tax credit
and net operating loss utilization. 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 (Loss) from continuing operations. The Companys net loss from continuing
operations was $14,605 for the fiscal year ended June 30, 2011 compared to net income of $3,877 for
the fiscal year ended June 30, 2010.
Discontinued Operations
During the quarter ended March 31, 2011 the Company announced its decision to discontinue its
non-core food blending and packaging business. As a result of this decision, and having met the
criteria to be reported as a discontinued operation, the assets, liabilities, results of operation
and cash flows of the food blending and packaging business are classified as discontinued
operations for all periods presented.
Additionally, as a result of its decision to discontinue the food blending and packaging
business, the Company performed an assessment as to the recoverability of goodwill, intangibles and
fixed assets associated with the discontinued operation. Based on these assessments, the Company
recorded a pre-tax impairment charge of $2,449 related to goodwill, intangibles and fixed assets
associated with the discontinued operation. The food blending business was sold on June 3, 2011.
22
Revenues and net income (loss) of the food blending and packaging business included in
discontinued operations for the fiscal years ended June 30 are as follows:
|
|
|
|
|
|
|
|
|
|
|
For the year ended |
|
|
|
June 30, 2011 |
|
|
June 30, 2010 |
|
|
|
(in thousands) |
|
Revenues |
|
$ |
6,161 |
|
|
$ |
9,182 |
|
|
|
|
|
|
|
|
|
|
Pre-tax (loss) income from operations of blending
and packaging business, excluding impairment |
|
|
(670 |
) |
|
|
579 |
|
|
|
|
|
|
|
|
|
|
Pre-tax loss for impairment of blending and packaging
assets: |
|
|
|
|
|
|
|
|
Goodwill |
|
|
(1,349 |
) |
|
|
|
|
Intangibles, net |
|
|
(356 |
) |
|
|
|
|
Fixed assets |
|
|
(668 |
) |
|
|
|
|
Other write offs/accruals |
|
|
(76 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,449 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax (loss) income from discontinued operations |
|
|
(3,119 |
) |
|
|
579 |
|
Tax (benefit) provision |
|
|
(657 |
) |
|
|
208 |
|
|
|
|
|
|
|
|
(Loss) income from discontinued operations |
|
$ |
(2,462 |
) |
|
$ |
371 |
|
|
|
|
|
|
|
|
Non-GAAP Financial Measures. Consolidated EBITDA and Adjusted EBITDA are non-GAAP financial
measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission.
These non-GAAP measures are provided because management of the Company uses these financial
measures as an indicator of business performance in maintaining and evaluating the Companys
on-going financial results and trends. The Company believes that both management and investors
benefit from referring to these non-GAAP measures in assessing the performance of the Companys
ongoing operations and liquidity and when planning and forecasting future periods. These non-GAAP
measures also facilitate managements internal comparisons to the Companys historical operating
results and liquidity. The following is a reconciliation of the net income (loss) as reported to
Consolidated EBITDA and Adjusted EBITDA from continuing operations.
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
Year Ended |
|
EBITDA and Adjusted EBITDA Calculation |
|
June 30, 2011 |
|
|
June 30, 2010 |
|
|
|
(in thousands) |
|
Net (loss) income from continuing operations |
|
$ |
(12,142 |
) |
|
$ |
3,506 |
|
Add back: |
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
3,508 |
|
|
|
937 |
|
Interest, net |
|
|
2,133 |
|
|
|
3,058 |
|
Depreciation and amortization |
|
|
2,828 |
|
|
|
2,416 |
|
|
|
|
|
|
|
|
EBITDA |
|
$ |
(3,673 |
) |
|
$ |
9,917 |
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
Restructuring charges |
|
|
2,966 |
|
|
|
540 |
|
Former CEO and CFO termination charges |
|
|
1,006 |
|
|
|
|
|
Inventory step up |
|
|
243 |
|
|
|
|
|
Legal settlement gain |
|
|
|
|
|
|
(9,266 |
) |
Gain on bargain purchase |
|
|
|
|
|
|
(2,960 |
) |
Other non-routine items |
|
|
1,190 |
(a) |
|
|
1,494 |
(b) |
|
|
|
|
|
|
|
Adjusted EBITDA |
|
$ |
1,732 |
|
|
$ |
(275 |
) |
|
|
|
|
|
|
|
|
|
|
(a) |
|
Adjustment primarily represents costs incurred in connection with the Japanese subsidiary
investigation, certain consulting fees and other non-routine charges |
|
(b) |
|
Adjustment represents non-routine charges for special investigation costs of $911,
acquisition closing costs of $332 and bank amendment fees of $251 |
23
Overview for Fiscal Year ended June 30, 2010
The market for printing equipment faced and continued to face significant economic challenges
in fiscal year 2010. Several of the Companys largest customers (major OEM press manufacturers)
reported weakness in orders and sales, particularly for commercial presses. These events translated
into a lower level of business activity for the Company and were reflected in lower order intake
and reduced shipment levels of the Companys equipment. As a result of the slowing global economy,
the Company implemented cost reduction and restructuring programs designed to mitigate the impact
of the continuing weak market for printing equipment.
|
|
|
Revenues declined 17.3%, versus the prior year comparable period. |
|
|
|
|
Backlog of $33,917 at June 30, 2010 decreased 12% versus June 30, 2009. |
|
|
|
|
Order intake was down 18% versus the prior year comparable period. |
|
|
|
|
Cash flow provided by operations during the year ended June 30, 2010 of $11,507
reflected cash generated from operations supplemented by cash received from settlement of a
long standing patent infringement lawsuit. |
|
|
|
|
The Company recorded additional restructuring charges of $540. |
|
|
|
|
As of June 30, 2010 the Company successfully completed the previously announced
acquisition of Nordson UV, a manufacturer of ultraviolet curing systems, lamps and parts. |
See discussion below related to consolidated results of operations and liquidity and capital
resources from continuing operations. Amounts in the following discussion have been adjusted from
prior year to reflect the discontinued food blending and packaging business.
Fiscal Year Ended June 30, 2010 versus Fiscal Year Ended June 30, 2009
Consolidated Results
Net Sales. Net sales for the fiscal year ended June 30, 2010 decreased $29,073, or 17.3%, to
$138,599 from $167,672 for the year ended June 30, 2009. Currency rate fluctuations effecting the
Companys overseas operations increased net sales for the current period by $4,490. The revenue
decrease primarily reflects weakness in demand for the Companys equipment offerings.
In Europe, net sales decreased approximately $12,852, including $1,313 of favorable effects
from exchange rate fluctuations. The decrease was attributable to reduced demand for the Companys
products as a result of the global economic contraction and lack of available financing sources for
equipment purchases by customers. OEM press manufacturers in Germany experienced reduced orders and
sales, and printers and publishers have deferred purchases of the Companys equipment until final
demand and liquidity return to the market.
In Asia/Australia, particularly Japan, net sales decreased approximately $9,702, including
$3,177 of favorable effects from exchange rate fluctuations. The decrease reflects the impact of
the slowing Asian economies in the commercial and newspaper markets in Japan for the Companys
cleaning equipment.
Net Sales in the Americas decreased $6,519, primarily reflecting lower demand in the U.S.
commercial market for cleaning systems.
Gross Profit. Gross profit for the fiscal year ended June 30, 2010 decreased to $41,371 (29.1%
of sales) versus $47,184 (28.1% of sales) for the fiscal year ended June 30, 2009. Fiscal year 2009
gross profit was negatively impacted by an inventory write-off in the U.S. of $4,250 or 2.5%
associated with a deteriorating macro-economic environment, a decision to transfer equipment
manufacturing from the U.S. to Germany, a general restructuring of the U.S. operations and the
inability of the U.S. operations to reach target goals for inventory utilization. Currency rate
fluctuations increased gross profit by $1,585 in the 2010 fiscal year. Gross profit as a percentage
of net sales decreased after giving effect to the inventory write-off, (to 28.1% from 30.6%)
primarily as a result of continued pricing pressures from OEMs and end users and unfavorable
overhead absorption related to the reduced volumes.
24
Partially offsetting these impacts were lower costs associated with announced restructuring
and cost saving initiatives resulting in lower direct and indirect labor and associated fringe
benefits, lower subcontractor and lower technical service costs.
Selling, General and Administrative Expenses. Selling, general and administrative expenses
(SG&A) of $31,683 for the fiscal year ended June 30, 2010 decreased $3,383, or 10%, versus the
fiscal year ended June 30, 2009. Currency rate fluctuations effecting the Companys overseas
operations increased SG&A expenses for fiscal year 2010 by $898.
G&A expenses for the fiscal year ended June 30, 2010 decreased $1,644, or 8%, including
unfavorable exchange effects of $427 compared to the fiscal year ended June 30, 2009. This decrease
primarily reflects cost reduction actions leading to reductions in compensation, benefit costs,
outside service costs, insurance, travel, annual meeting and investor relations costs, together
with reduced cash discounts and lower bad debt expense. These reductions were partially offset by
approximately $900 of costs related to a special investigation into violation of the Companys
internal control procedures, expenses associated with the Nordson UV acquisition of $330 and bank
amendment fees of $250.
Selling expenses for the fiscal year ended June 30, 2010 decreased $1,739, or 12%, including
unfavorable exchange effects of $471 compared to the fiscal year ended June 30, 2009. The decrease
in selling expenses reflected reduced salary, benefit and other associated employee costs
commensurate with reductions in headcount, cost reduction actions and the lower level of sales
activity.
Engineering and Development Expenses. Engineering and development expenses for the fiscal year
ended June 30, 2010 decreased $1,522, or 10%, and included $412 of unfavorable exchange effects
versus the fiscal year ended June 30, 2009 and reflected reduced salary, benefit and other
associated employee costs commensurate with reductions in headcount. Engineering and development
expenses were approximately 8% of sales for each of the fiscal years ended June 30, 2010 and June
30, 2009.
Restructuring. The Company recorded $540 of restructuring costs during the fourth quarter of
fiscal year ended June 30, 2010 versus $4,747 in the comparable prior year period. The current year
restructuring plan was designed to achieve operational efficiencies in Germany and consists of
employee terminations. The fiscal year 2009 plan consisted primarily of reductions in employment
levels and the consolidation of production facilities in Germany in response to continued weak
market conditions.
Impairment of Goodwill. The Companys annual impairment testing of goodwill for the fiscal
year ended June 30, 2010 indicated no impairment. In fiscal year 2009, as a result of the
deteriorating macro-economic environment, the continued market volatility and the Companys
decreased market capitalization, the Companys goodwill impairment assessment indicated an
impairment of goodwill and the Company recorded a non-cash goodwill impairment charge of $5,658
related to its Japanese reporting unit during the third quarter of fiscal year 2009.
Legal Settlement. During the fiscal year ended June 30, 2010, the Company recorded a net gain
on the settlement of a patent infringement lawsuit of $9,266. Please refer to Note 20 in Notes to
Consolidated Financial Statements for further discussion of this settlement.
Interest, Net and Other. Interest expense, net, of $3,058 for the fiscal year ended June 30,
2010 increased $790 versus the fiscal year ended June 30, 2009. Interest expense included costs
incurred during the first quarter of fiscal year 2010 related to an amendment to the Companys
Credit Agreement. Certain costs associated with the amendment, together with legacy deferred
financing costs aggregating approximately $1,183, were charged to expense during the quarter ended
September 30, 2009. The increase was partially offset by $423 resulting from lower average debt and
lower interest rates in fiscal year 2010 versus the year ended June 30, 2009. Currency rate
fluctuations had no impact in the fiscal year ended June 30, 2010.
Other income and expense, net, was an expense of $406 versus income of $867 for the periods
ended June 30, 2010 and 2009, respectively, and primarily reflected net foreign exchange gains and
losses.
25
Gain on Bargain Purchase. During the fourth quarter of the fiscal year ended June 30, 2010,
the Company
completed the previously announced acquisition of the Nordson UV curing business and recorded
a net gain of $2,960 on the bargain purchase, representing the excess of net assets acquired over
the consideration paid. Please refer to Note 15 to the Consolidated Financial Statements for
further discussion.
Income (Loss) Before Income Taxes for Continuing Operations. Income before income taxes for
the fiscal year ended June 30, 2010 was $4,443 compared to a loss before income taxes of $14,677
for the fiscal year ended June 30, 2009. The income before income taxes includes the previously
mentioned gain on the legal settlement of $9,266 and the gain on the bargain purchase of $2,960.
The loss before income taxes for the fiscal year ended June 30, 2009 included the previously
mentioned goodwill impairment charge of $5,658, restructuring charges of $4,747 and additional
inventory reserve totaling $4,250.
Income Taxes. The Company recorded an income tax expense of $1,937 for the fiscal year ended
June 30, 2010 versus a benefit of $2,328 for the fiscal year ended June 30, 2009. The effective tax
rates of 22.8% and 14.6% for the fiscal years ended June 30, 2010 and 2009, respectively, differ
from the statutory rate. In fiscal year 2010 the tax rate benefited by the release of foreign
contingency reserves, the gain on bargain purchase and a foreign rate differential offset by
negative impacts of adjustments to the valuation allowance related to a foreign tax credit and net
operating loss utilization. In fiscal year 2009 the tax rate was negatively impacted by: (a) no
benefit recognized for losses incurred in certain countries as the realization of such benefits was
not more likely than not, and (b) foreign and domestic permanent items including the
non-deductibility of the fiscal year 2009 goodwill impairment charge. 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 (Loss) from Continuing Operations. The Companys net income was $3,506 for the
fiscal year ended June 30, 2010 compared to a net loss of $(12,349) for the fiscal year ended June
30, 2009.
Non-GAAP Financial Measures. Consolidated EBITDA is a non-GAAP financial measure within the
meaning of Regulation G promulgated by the Securities and Exchange Commission. This non-GAAP
measure is provided because management of the Company uses this financial measure as an indicator
of business performance in maintaining and evaluating the Companys on-going financial results and
trends. The Company believes that both management and investors benefit from referring to this
non-GAAP measure in assessing the performance of the Companys ongoing operations and liquidity and
when planning and forecasting future periods. This non-GAAP measure also facilitates managements
internal comparisons to the Companys historical operating results and liquidity. The following is
a reconciliation of the net income (loss) as reported to Consolidated EBITDA.
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
|
(in thousands) |
|
Net income (loss) as reported from continuing
operations |
|
$ |
3,506 |
|
|
$ |
(12,349 |
) |
Provision for income taxes |
|
|
937 |
|
|
|
(2,328 |
) |
Interest, net |
|
|
3,058 |
|
|
|
2,268 |
|
Depreciation and amortization |
|
|
2,416 |
|
|
|
2,508 |
|
|
|
|
|
|
|
|
EBITDA |
|
$ |
9,917 |
|
|
$ |
(9,901 |
) |
|
|
|
|
|
|
|
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.
26
Liquidity and Capital Resources
The Companys cash flow from operating, investing and financing activities from continuing
operations as reflected in the Consolidated Statement of Cash Flows are summarized in the tables
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended June 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
|
|
(in thousands) |
|
Cash flow from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used) provided by operating activities |
|
$ |
(1,584 |
) |
|
$ |
10,564 |
|
|
$ |
1,646 |
|
|
|
|
|
|
|
|
|
|
|
Net cash from operating activities for the year ended June 30, 2011 decreased $12,148 compared
to fiscal year 2010. The decrease in cash from operating activities was primarily attributable to:
(i) receipt of proceeds from a legal settlement of $9,266 in the fiscal year ended June 30, 2010
and (ii) an increase in working capital requirements due to higher sales in the fiscal year ended
June 30, 2011 compared to the fiscal year ended June 30, 2010.
Net cash from operating activities for the year ended June 30, 2010 increased $8,918 compared
to fiscal year ended June 30, 2009. The increase in cash provided was primarily attributable to:
(i) receipt of proceeds from a legal settlement of $9,266, (ii) a decrease in working capital
requirements due to lower sales in the fiscal year ended June 30, 2010 compared to fiscal year
ended June 30, 2009 and (iii) lower restructuring payments. Partially offsetting these increases in
cash was lower operating income, after adjusting for one-time items, in the fiscal year ended June
30, 2010 compared to the fiscal year ended June 30, 2009 primarily as the result of lower sales..
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended June 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
|
|
(in thousands) |
|
Cash flow from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Property and intangibles |
|
$ |
(902 |
) |
|
$ |
(592 |
) |
|
$ |
(1,842 |
) |
Cash received in acquisition |
|
|
|
|
|
|
728 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) investing activities |
|
$ |
(902 |
) |
|
$ |
136 |
|
|
$ |
(1,842 |
) |
|
|
|
|
|
|
|
|
|
|
In fiscal years 2011, 2010 and 2009, the Company utilized $902, $592 and $1,842, respectively
for investing activities primarily for additions to property, plant and equipment and intangibles
(primarily patents). In addition, in the fiscal year ended June 30, 2010 the Company received $728
of cash associated with the Nordson UV curing business acquisition.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended June 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
|
|
(in thousands) |
|
Cash flow from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Long and short-term debt borrowings |
|
$ |
2788 |
|
|
$ |
693 |
|
|
$ |
16,764 |
|
Long and short-term debt repayments |
|
|
(389 |
) |
|
|
(10,207 |
) |
|
|
(12,365 |
) |
Payment of debt financing costs |
|
|
(442 |
) |
|
|
(816 |
) |
|
|
|
|
Repurchase of common stock |
|
|
|
|
|
|
|
|
|
|
(157 |
) |
Advances received in acquisition |
|
|
|
|
|
|
650 |
|
|
|
|
|
Other |
|
|
(1,032 |
) |
|
|
(533 |
) |
|
|
(628 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
$ |
925 |
|
|
$ |
(10,213 |
) |
|
$ |
3,614 |
|
|
|
|
|
|
|
|
|
|
|
The Companys primary source of external financing is its Credit Agreement, as amended (the
Credit Agreement), with Bank of America
(BofA) which has a term that ends on July 2, 2012.
Borrowings under the Credit Agreement are secured in the U.S. by a pledge of substantially all of
the Companys domestic assets (approximately $17,000) and in Europe by a pledge of the Companys
European assets and the stock of the Companys European subsidiaries and certain Asian
subsidiaries.
Under the terms of waiver and amendment agreements entered into in September 2010 and May 2011
to the Credit Agreement the Company issued to the Lenders two tranches of Warrants. The first
tranche (the 2010 Warrants) has a term of 10 years to purchase 352,671 shares of the Companys
Class A Common Stock for $0.01 per share and contains a put provision that enables the holders
after September 28, 2012 to request a cash settlement of the then fair market value of the 2010
Warrants in an amount not to exceed $1.50 per share. The second tranche (the 2011 Warrants) also
has a term of ten years to purchase 372,374 shares of the Companys Class A Common
27
Stock for
$0.01 per share. The 2011 Warrants also contain a put provision that enables the
holders after May 16, 2013 to request a cash settlement of the then fair market value of the 2011
Warrants in an amount not to exceed $1.50 per share.
On October 13, 2011, the Company entered into Amendment No. 11 to the Credit Agreement
(Amendment No. 11) with certain lenders and BofA as agent. Among other things, Amendment No. 11
(i) extended the maturity date of the revolving Credit Agreement from November 21, 2011 to July 2,
2012, (ii) adjusted the interest payment provisions pursuant to which euro and U.S. dollar
borrowings bear interest at LIBOR plus 7.50%, and (iii) increased the incremental interest rate for
the deferred interest to be paid at maturity. As part of the consideration for Amendment No. 11,
the Company will (a) pay the Lenders a potential fee of $1,100 as follows: $200 upon signing of
Amendment No. 11, and scheduled weekly installments ranging from $200 to $50 beginning February
10, 2012 through April 20, 2012 unless the Credit Agreement is fully refinanced prior to the
payment due dates, in which case any remaining payments will be waived, (b) grant to the Lenders
ten year Warrants to purchase an aggregate of 434,200 shares of Class A Common Stock of the Company
at an exercise price of $0.01 per share, with a put provision exercisable after two (2) years that
enables the holder to request a cash settlement equal to the then fair market value of the Warrants
in an amount not to exceed $1.50 per share for each share issuable upon the exercise of the
Warrants (the October 2011 Warrants); and (c) if the Credit Agreement is not refinanced prior to
certain scheduled dates, the Company may grant to the Lenders additional ten year Warrants in four
monthly installments beginning March 1, 2012 and on the first day of each month through June 1,
2012, to purchase an aggregate of 1,592,067 shares of Class A Common Stock of the Company (equal to
an amount not to exceed 20 percent of the issued and outstanding shares of Class A Common Stock of
the Company on September 27, 2010) each at an exercise price of $0.01 per share, and each with a
put provision exercisable after two (2) years that enables the holder to request a cash settlement
equal to the then fair market value of the Warrants in an amount not to exceed $1.50 per share for
each share issuable upon the exercise of the Warrants.
The Credit Agreement, as amended by Amendment No 11, continues to require that the Company
satisfy certain minimum EBITDA, Minimum Currency Adjusted Net Sales, Capital Expenditures, and
Minimum Liquidity tests. The Company anticipates that it will be in compliance with these
covenants for the remainder of the term of the Credit Agreement. However
the Companys ability to meet its debt obligations (including
compliance with applicable financial covenants) is dependent upon the
Company's future performance and its cash flows from operations, both
of which are subject to prevailing economic conditions and financial,
business, and other known and unknown risks and uncertainties,
certain of which are beyond the Companys control.
28
Cash provided by financing activities of $925 for the period ended June 30, 2011 primarily
reflected additional borrowings against the Companys domestic and foreign credit facilities.
Cash used by financing activities of $10,213 for the period ended June 30, 2010 primarily
reflected the partial use of net cash proceeds from the legal settlement of a long standing patent
infringement lawsuit of approximately $7,700 to repay the term loan under the Credit Agreement in
accordance with the provisions of the July 31, 2009 amendment to the Credit Agreement. In addition,
cash used for financing activities reflected the scheduled term loan payments of approximately
$2,507 and payment of debt financing costs of $818. These payments were partially offset by
borrowings under the revolving loan under the Credit Agreement of $693 and advances associated with
the financing of the Nordson UV acquisition.
During fiscal year 2009, cash from financing activities of $3,614 primarily reflected
borrowings in excess of repayments of $4,399. In addition, the Company utilized $602 to meet
long-term obligations under its capital lease and assumed liabilities obligations and $183 of cash
to purchase shares of its Class A Common Stock under its share repurchase program. At June 30,
2009, approximately $2.4 million remained available for use under the share repurchase program.
Repurchases were restricted by the terms of the Credit Agreement amendment on July 31, 2009; and no
repurchases were made during fiscal year 2010 or fiscal year 2011.
During each of the fiscal years ended June 30, 2011, 2010 and 2009, the Company announced
restructuring initiatives in response to the challenges facing the market for printing equipment.
The restructuring initiatives were designed to reduce the Companys worldwide cost base,
consolidate facilities, exit a non core business, and strengthen its competitive position. The
Company made cash payments against these plans of $2,045 in fiscal year 2011, $1,899 in fiscal year
2010 and $3,051 in fiscal year 2009 and anticipates a total of approximately $2,000 in addition to
be paid through fiscal year 2012. The Company anticipates annual savings from the fiscal year 2011
restructuring plans of approximately $6,000.
The Company maintains relationships with foreign and domestic banks, which combined, have
extended short and long term credit facilities to the Company totaling $28,688. As of June 30,
2011, the Company had $23,208 outstanding (including Letters of Credit of $1,127 under these
facilities. The amount available under these facilities at June 30, 2011 was $2,280.
The Company believes that its cash flow from operations, along with its available bank lines
of credit is sufficient to finance its operations and other capital requirements over the remaining
term of the Credit Agreement which expires July 2, 2012. However, the Company believes that, if
needed, other available sources of liquidity could be limited. The Company is in discussions
regarding replacement of its Credit Agreement and anticipates finalizing a replacement Credit
Agreement prior to July 2, 2012 although there are no assurances that such agreement will be completed by the loan
maturity date.
At June 30, 2011 and 2010, 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, 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.
29
Contractual Obligations
The Companys contractual obligations as of June 30, 2011 are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ending June 30, |
|
|
|
Total at |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 and |
|
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
|
2015 |
|
|
2016 |
|
|
thereafter |
|
|
|
(in thousands) |
|
Loans payable |
|
$ |
4,965 |
|
|
$ |
4,965 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Capital lease obligations |
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
19,248 |
|
|
|
696 |
|
|
|
16,616 |
|
|
|
809 |
|
|
|
878 |
|
|
|
249 |
|
|
|
|
|
Non-cancelable operating lease obligations |
|
|
17,284 |
|
|
|
5,039 |
|
|
|
3,249 |
|
|
|
2,484 |
|
|
|
1,860 |
|
|
|
2,068 |
|
|
|
2,584 |
|
Purchase commitments (materials) |
|
|
12,649 |
|
|
|
12,649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental compensation (1) |
|
|
10,582 |
|
|
|
1,364 |
|
|
|
1,011 |
|
|
|
908 |
|
|
|
1,014 |
|
|
|
1,266 |
|
|
|
5,019 |
|
Restructuring payments |
|
|
2,000 |
|
|
|
2,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
819 |
|
|
|
549 |
|
|
|
124 |
|
|
|
89 |
|
|
|
50 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual cash obligations |
|
$ |
67,550 |
|
|
$ |
27,265 |
|
|
$ |
21,000 |
|
|
$ |
4,290 |
|
|
$ |
3,802 |
|
|
$ |
3,590 |
|
|
$ |
7,603 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
the amount includes estimated benefit payments as well as estimated contributions for fiscal
year 2012 (See Note 12). |
|
(2) |
|
At June 30, 2011, the Company had unrecognized tax benefits of $1,693. A reasonable estimate
of the timing related to the $1,693 is not possible. |
Recent Accounting Pronouncements
In October 2009, the FASB issued ASC Update No. 2009-13, Revenue Recognition (Topic 605):
Multiple-Deliverable Revenue Arrangements. The consensus in Update No. 2009-13 supersedes certain
guidance in Topic 605 (formerly EITF Issue No. 00-21, Multiple-Element Arrangements) and requires
an entity to allocate arrangement consideration at the inception of an arrangement to all of its
deliverables based on their relative selling prices. The consensus eliminates the use of the
residual method of allocation and requires the use of the relative-selling-price method in all
circumstances in which an entity recognizes revenue for an arrangement with multiple deliverables
subject to ASC 605-25. The Company adopted Update No. 2009-13 as of July 1, 2010. The adoption did
not have a material effect on the Companys results of operations and financial position.
Accounting Standards Codification Topic 220, Comprehensive Income, was amended in June 2011
to require entities to present the total of comprehensive income, the components of net income, and
the components of other comprehensive income either in a single continuous statement of
comprehensive income or in two separate but consecutive statements. The amendment does not change
the items that must be reported in other comprehensive income or when an item of other
comprehensive income must be reclassified to net income under current GAAP. This guidance is
effective for the Company beginning July 1, 2012. The adoption of this guidance is not expected to
have a material effect on our consolidated financial statements.
In September 2011, the Financial Accounting Standards Board (FASB) issued revised
authoritative guidance for annual and interim goodwill impairment tests performed for fiscal years
beginning after December 15, 2011. The guidance allows an entity the option to make a qualitative
evaluation about the likelihood of goodwill impairment for a reporting unit. If, after assessing
the totality of events or circumstances, an entity determines it is not more likely than not that
the fair value of a reporting unit is less than its carrying amount, then performing the
quantitative two-step impairment test is unnecessary. Early adoption is permitted for annual and
interim goodwill impairment tests if an entitys financial statements for the most recent interim
period have not yet been issued. The Company does not expect that adoption of this guidance will
have a material impact on the Companys consolidated financial position, results of operations and
cash flows.
30
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, 2011, the Company had debt totaling $24,213 most of which bears interest at
floating rates.
The Company performed a sensitivity analysis as of June 30, 2011, 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 $242. 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 79% of its revenues from countries outside of the Americas
for the fiscal year ended June 30, 2011. 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 hedge against adverse variations in individual currencies.
The Company performed a sensitivity analysis as of June 30, 2011 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 $1,202. 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.
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
31
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. (a
Delaware corporation) and subsidiaries as of June 30, 2011 and 2010, and the related consolidated
statements of operations, changes in shareholders equity, and cash flows for each of the three
years in the period ended June 30, 2011. Our audits of the consolidated financial statements
included the financial statement schedule listed in the index appearing under Item 15(a)(2). 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 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 consolidated 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, 2011 and 2010, and the results of their operations and their cash flows for each of the
three years in the period ended June 30, 2011 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.
/s/ GRANT THORNTON LLP
New York, New York
October 13, 2011
32
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
Assets
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2011 |
|
|
2010 |
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
15,814 |
|
|
$ |
15,710 |
|
Accounts receivable trade, net of allowance for doubtful accounts of $1,398
($1,154 at June 30, 2010) |
|
|
28,068 |
|
|
|
22,042 |
|
Notes receivable, trade |
|
|
2,511 |
|
|
|
2,328 |
|
Inventories |
|
|
20,629 |
|
|
|
20,237 |
|
Deferred taxes |
|
|
834 |
|
|
|
1,860 |
|
Prepaid expenses and other |
|
|
6,361 |
|
|
|
4,365 |
|
Assets of discontinued operations |
|
|
|
|
|
|
981 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
74,217 |
|
|
|
67,523 |
|
|
|
|
|
|
|
|
MARKETABLE SECURITIES: |
|
|
|
|
|
|
|
|
(Cost $907 at June 30, 2011 and $787 at June 30, 2010) |
|
|
565 |
|
|
|
500 |
|
|
|
|
|
|
|
|
PROPERTY, PLANT AND EQUIPMENT: |
|
|
|
|
|
|
|
|
Land and buildings |
|
|
1,176 |
|
|
|
1,139 |
|
Machinery and equipment |
|
|
6,223 |
|
|
|
6,212 |
|
Furniture and fixtures |
|
|
4,872 |
|
|
|
4,316 |
|
Capital leases |
|
|
118 |
|
|
|
95 |
|
|
|
|
|
|
|
|
|
|
|
12,389 |
|
|
|
11,762 |
|
Less: Accumulated depreciation |
|
|
(8,081 |
) |
|
|
(6,393 |
) |
|
|
|
|
|
|
|
Net property, plant and equipment |
|
|
4,308 |
|
|
|
5,369 |
|
|
|
|
|
|
|
|
INTANGIBLES, less accumulated amortization of $12,222 ($10,400 at June 30, 2010) |
|
|
10,729 |
|
|
|
10,707 |
|
GOODWILL, less accumulated amortization of $1,606 ($1,425 at June 30, 2010) |
|
|
19,925 |
|
|
|
18,753 |
|
DEFERRED TAXES |
|
|
4,087 |
|
|
|
9,193 |
|
OTHER ASSETS |
|
|
5,291 |
|
|
|
6,335 |
|
ASSETS OF DISCONTINUED OPERATIONS |
|
|
|
|
|
|
2,475 |
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
119,122 |
|
|
$ |
120,855 |
|
|
|
|
|
|
|
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
33
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
Liabilities and Shareholders Equity
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2011 |
|
|
2010 |
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
Loans payable |
|
$ |
4,965 |
|
|
$ |
4,525 |
|
Current portion of long-term debt |
|
|
696 |
|
|
|
389 |
|
Accounts payable, trade |
|
|
16,937 |
|
|
|
13,536 |
|
Notes payable, trade |
|
|
3,879 |
|
|
|
4,850 |
|
Accrued salaries, commissions, bonus and profit-sharing |
|
|
5,216 |
|
|
|
3,626 |
|
Customer deposits |
|
|
2,911 |
|
|
|
1,747 |
|
Accrued and withheld taxes |
|
|
1,295 |
|
|
|
1,155 |
|
Income taxes payable |
|
|
109 |
|
|
|
1,019 |
|
Deferred taxes |
|
|
93 |
|
|
|
|
|
Other accounts payable and accrued liabilities |
|
|
11,519 |
|
|
|
8,501 |
|
Liabilities of discontinued operations |
|
|
|
|
|
|
853 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
47,620 |
|
|
|
40,201 |
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES: |
|
|
|
|
|
|
|
|
Long-term debt, net of current portion |
|
|
18,552 |
|
|
|
16,066 |
|
Deferred taxes |
|
|
718 |
|
|
|
1,563 |
|
Other long-term liabilities |
|
|
9,881 |
|
|
|
12,427 |
|
|
|
|
|
|
|
|
Total long-term liabilities |
|
|
29,151 |
|
|
|
30,056 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
76,771 |
|
|
|
70,257 |
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY: |
|
|
|
|
|
|
|
|
Class A Common Stock, $.01 par, 45,000,000 shares
authorized, 14,574,997 shares issued at June 30, 2011
and 14,471,363 shares issued at June 30, 2010 |
|
|
146 |
|
|
|
145 |
|
Class B Common Stock, $.01 par, 4,500,000 shares
authorized, 1,092,555 shares issued at June 30, 2011
and June 30, 2010 |
|
|
11 |
|
|
|
11 |
|
Capital contributed in excess of par value |
|
|
48,748 |
|
|
|
48,098 |
|
Accumulated (deficit) earnings |
|
|
(12,585 |
) |
|
|
2,019 |
|
Accumulated other comprehensive income |
|
|
6,031 |
|
|
|
325 |
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
42,351 |
|
|
|
50,598 |
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |
|
$ |
119,122 |
|
|
$ |
120,855 |
|
|
|
|
|
|
|
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
34
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended June 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
Net sales |
|
$ |
160,899 |
|
|
$ |
138,599 |
|
|
$ |
167,672 |
|
Cost of goods sold |
|
|
113,856 |
|
|
|
97,228 |
|
|
|
116,238 |
|
Inventory reserve |
|
|
|
|
|
|
|
|
|
|
4,250 |
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
47,043 |
|
|
|
41,371 |
|
|
|
47,184 |
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
21,493 |
|
|
|
18,852 |
|
|
|
20,496 |
|
Selling |
|
|
14,474 |
|
|
|
12,831 |
|
|
|
14,570 |
|
Engineering and development |
|
|
14,499 |
|
|
|
13,467 |
|
|
|
14,989 |
|
Restructuring charges |
|
|
2,966 |
|
|
|
540 |
|
|
|
4,747 |
|
Impairment of goodwill |
|
|
|
|
|
|
|
|
|
|
5,658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,432 |
|
|
|
45,690 |
|
|
|
60,460 |
|
Legal settlement income, net of expenses |
|
|
|
|
|
|
9,266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income |
|
|
(6,389 |
) |
|
|
4,947 |
|
|
|
(13,276 |
) |
|
|
|
|
|
|
|
|
|
|
Other (income) expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
2,133 |
|
|
|
3,058 |
|
|
|
2,268 |
|
Gain on bargain purchase |
|
|
|
|
|
|
(2,960 |
) |
|
|
|
|
Other expense (income), net |
|
|
112 |
|
|
|
406 |
|
|
|
(867 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
2,245 |
|
|
|
504 |
|
|
|
1,401 |
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before income taxes |
|
|
(8,634 |
) |
|
|
4,443 |
|
|
|
(14,677 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision (benefit) for income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
|
3,001 |
|
|
|
686 |
|
|
|
(2,156 |
) |
Foreign |
|
|
507 |
|
|
|
251 |
|
|
|
(172 |
) |
|
|
|
|
|
|
|
|
|
|
Total income tax provision (benefit) |
|
|
3,508 |
|
|
|
937 |
|
|
|
(2,328 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
$ |
(12,142 |
) |
|
$ |
3,506 |
|
|
$ |
(12,349 |
) |
|
|
|
|
|
|
|
|
|
|
(Loss) income from discontinued operations, net of tax |
|
$ |
(2,462 |
) |
|
$ |
371 |
|
|
$ |
538 |
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(14,604 |
) |
|
$ |
3,877 |
|
|
$ |
(11,811 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic: |
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income per share from continuing operations |
|
$ |
(0.78 |
) |
|
$ |
0.23 |
|
|
$ |
(0.81 |
) |
|
|
|
|
|
|
|
|
|
|
(Loss) income per share from discontinued operations |
|
$ |
(0.16 |
) |
|
$ |
0.02 |
|
|
$ |
0.04 |
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per share |
|
$ |
(0.94 |
) |
|
$ |
0.25 |
|
|
$ |
(0.77 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income per share from continuing operations |
|
$ |
(0.78 |
) |
|
$ |
0.23 |
|
|
$ |
(0.81 |
) |
|
|
|
|
|
|
|
|
|
|
(Loss) income per share from discontinued operations |
|
$ |
(0.16 |
) |
|
$ |
0.02 |
|
|
$ |
0.04 |
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per share |
|
$ |
(0.94 |
) |
|
$ |
0.25 |
|
|
$ |
(0.77 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
15,619 |
|
|
|
15,477 |
|
|
|
15,329 |
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
15,619 |
|
|
|
15,524 |
|
|
|
15,329 |
|
|
|
|
|
|
|
|
|
|
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
35
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(in thousands, except shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A |
|
|
Class B |
|
|
Capital Contributed |
|
|
Accumulated |
|
|
Accumulated Other |
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
Common Stock |
|
|
in Excess of |
|
|
Earnings/ |
|
|
Comprehensive |
|
|
Treasury Stock |
|
|
Comprehensive |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Par Value |
|
|
(Deficit) |
|
|
Income (Loss) |
|
|
Shares |
|
|
Amount |
|
|
Income (Loss) |
|
Balance at June 30,
2008 |
|
|
14,139,734 |
|
|
$ |
142 |
|
|
|
1,142,555 |
|
|
$ |
11 |
|
|
$ |
46,398 |
|
|
$ |
9,953 |
|
|
$ |
5,778 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30,
2009: net loss for
the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,811 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(11,811 |
) |
Translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,186 |
) |
|
|
|
|
|
|
|
|
|
|
(3,186 |
) |
Unrealized loss on
available-for-sale
securities, net of
tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(94 |
) |
|
|
|
|
|
|
|
|
|
|
(94 |
) |
Recognition of
pension funded
status, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(467 |
) |
|
|
|
|
|
|
|
|
|
|
(467 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(15,558 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of stock
based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,092 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(85,365 |
) |
|
|
(157 |
) |
|
|
|
|
Retirement of
treasury stock |
|
|
(98,276 |
) |
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
(182 |
) |
|
|
|
|
|
|
|
|
|
|
98,276 |
|
|
|
183 |
|
|
|
|
|
Shares issued under
stock option plan |
|
|
191,786 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,911 |
) |
|
|
(26 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30,
2009 |
|
|
14,233,244 |
|
|
$ |
143 |
|
|
|
1,142,555 |
|
|
$ |
11 |
|
|
$ |
47,308 |
|
|
$ |
(1,858 |
) |
|
$ |
2,031 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30,
2010: Net income for
the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,877 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,877 |
|
Translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,525 |
) |
|
|
|
|
|
|
|
|
|
|
(1,525 |
) |
Unrealized loss on
available- for-sale
securities, net of
tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(70 |
) |
|
|
|
|
|
|
|
|
|
|
(70 |
) |
Recognition of
pension funded
status, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(111 |
) |
|
|
|
|
|
|
|
|
|
|
(111 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of stock
based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
829 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares converted
Class B to Class A |
|
|
50,000 |
|
|
|
|
|
|
|
(50,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares surrendered as
payment of tax
withholding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(34,390 |
) |
|
|
(51 |
) |
|
|
|
|
Retirement of
treasury stock |
|
|
(34,390 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(51 |
) |
|
|
|
|
|
|
|
|
|
|
34,390 |
|
|
|
51 |
|
|
|
|
|
Shares issued under
stock option plan |
|
|
222,509 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30,
2010 |
|
|
14,471,363 |
|
|
$ |
145 |
|
|
|
1,092,555 |
|
|
$ |
11 |
|
|
$ |
48,098 |
|
|
$ |
2,019 |
|
|
$ |
325 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30,
2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(14,604 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(14,604 |
) |
Translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,032 |
|
|
|
|
|
|
|
|
|
|
|
6,032 |
|
Unrealized loss on
available- for-sale
securities, net of
tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32 |
) |
|
|
|
|
|
|
|
|
|
|
(32 |
) |
Recognition of
pension funded
status, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(294 |
) |
|
|
|
|
|
|
|
|
|
|
(294 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive (loss)
income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(8,898 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of stock
based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
679 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares surrendered as
payment of tax
withholding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(29,270 |
) |
|
|
(37 |
) |
|
|
|
|
Retirement of
treasury stock |
|
|
(29,270 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37 |
) |
|
|
|
|
|
|
|
|
|
|
29,270 |
|
|
|
37 |
|
|
|
|
|
Shares issued under
stock option plan |
|
|
132,904 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30,
2011 |
|
|
14,574,997 |
|
|
$ |
146 |
|
|
|
1,092,555 |
|
|
$ |
11 |
|
|
$ |
48,748 |
|
|
$ |
(12,585 |
) |
|
$ |
6,031 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
36
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(14,604 |
) |
|
$ |
3,877 |
|
|
$ |
(11,811 |
) |
Adjustments
to reconcile net income (loss) to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss (income) from discontinued operations |
|
|
2,462 |
|
|
|
(371 |
) |
|
|
(538 |
) |
Depreciation and amortization |
|
|
2,828 |
|
|
|
2,416 |
|
|
|
2,508 |
|
Deferred income taxes |
|
|
3,368 |
|
|
|
(401 |
) |
|
|
(1,543 |
) |
Provision for losses on accounts receivable |
|
|
651 |
|
|
|
640 |
|
|
|
391 |
|
Inventory obsolescence |
|
|
780 |
|
|
|
|
|
|
|
4,722 |
|
Deferred financing charge |
|
|
118 |
|
|
|
1,183 |
|
|
|
|
|
Stock based compensation expense |
|
|
679 |
|
|
|
829 |
|
|
|
1,092 |
|
Gain on legal settlement |
|
|
|
|
|
|
(9,266 |
) |
|
|
|
|
Gain on bargain purchase |
|
|
|
|
|
|
(2,960 |
) |
|
|
|
|
Restructuring charges |
|
|
2,966 |
|
|
|
540 |
|
|
|
4,747 |
|
Payment of restructuring charges |
|
|
(2,045 |
) |
|
|
(1,899 |
) |
|
|
(3,051 |
) |
Severance charge (former CEO/CFO) |
|
|
1,006 |
|
|
|
|
|
|
|
|
|
Severance charge payments |
|
|
(332 |
) |
|
|
|
|
|
|
|
|
Impairment charge |
|
|
|
|
|
|
|
|
|
|
5,658 |
|
Loss on disposal of fixed assets |
|
|
449 |
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts and notes receivable |
|
|
(3,686 |
) |
|
|
6,163 |
|
|
|
17,329 |
|
Inventories |
|
|
1,470 |
|
|
|
3,609 |
|
|
|
4,040 |
|
Prepaid expenses and other |
|
|
(1,404 |
) |
|
|
2,088 |
|
|
|
(229 |
) |
Proceeds from legal settlement |
|
|
|
|
|
|
9,560 |
|
|
|
|
|
Other assets |
|
|
2,701 |
|
|
|
882 |
|
|
|
(366 |
) |
Customer deposits |
|
|
895 |
|
|
|
(828 |
) |
|
|
1,069 |
|
Accrued compensation |
|
|
263 |
|
|
|
(466 |
) |
|
|
(4,396 |
) |
Accounts and notes payable, trade |
|
|
8 |
|
|
|
(4,365 |
) |
|
|
(10,929 |
) |
Income taxes payable |
|
|
(1,111 |
) |
|
|
802 |
|
|
|
(1,432 |
) |
Accrued and withheld taxes |
|
|
(166 |
) |
|
|
(214 |
) |
|
|
(827 |
) |
Other accounts payable and accrued liabilities |
|
|
1,120 |
|
|
|
(1,255 |
) |
|
|
(4,623 |
) |
|
|
|
|
|
|
|
|
|
|
Payments of liabilities assumed |
|
|
|
|
|
|
|
|
|
|
(165 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by continuing operating activities |
|
|
(1,584 |
) |
|
|
10,564 |
|
|
|
1,646 |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash received on acquisition of Nordson UV |
|
|
|
|
|
|
728 |
|
|
|
|
|
Additions of property, plant and equipment |
|
|
(582 |
) |
|
|
(445 |
) |
|
|
(893 |
) |
Additions of patents and trademarks |
|
|
(320 |
) |
|
|
(147 |
) |
|
|
(949 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided (used in) by investing activities |
|
|
(902 |
) |
|
|
136 |
|
|
|
(1,842 |
) |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Long-term and short-term debt borrowings |
|
|
2,788 |
|
|
|
693 |
|
|
|
16,764 |
|
Long-term and short-term debt repayments |
|
|
(389 |
) |
|
|
(10,207 |
) |
|
|
(12,365 |
) |
Principal payments under capital lease obligations |
|
|
(107 |
) |
|
|
(81 |
) |
|
|
(149 |
) |
Payment of debt financing costs |
|
|
(442 |
) |
|
|
(816 |
) |
|
|
|
|
Share repurchase |
|
|
(37 |
) |
|
|
(39 |
) |
|
|
(183 |
) |
Cash received on acquisition of Nordson UV |
|
|
|
|
|
|
650 |
|
|
|
|
|
Other long-term liabilities |
|
|
(888 |
) |
|
|
(413 |
) |
|
|
(453 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
925 |
|
|
|
(10,213 |
) |
|
|
3,614 |
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by operating activities |
|
|
152 |
|
|
|
943 |
|
|
|
985 |
|
Cash provided by (used in) investing activities |
|
|
187 |
|
|
|
(171 |
) |
|
|
(155 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) discontinued operations |
|
|
339 |
|
|
|
772 |
|
|
|
830 |
|
|
|
|
|
|
|
|
|
|
|
Effects of exchange rate changes on cash |
|
|
1,326 |
|
|
|
645 |
|
|
|
225 |
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
104 |
|
|
|
1,904 |
|
|
|
4,473 |
|
Cash and cash equivalents (including discontinued operations at beginning of year) |
|
|
15,710 |
|
|
|
13,806 |
|
|
|
9,333 |
|
Cash and cash equivalents (including discontinued operations at end of year) |
|
|
15,814 |
|
|
|
15,710 |
|
|
|
13,806 |
|
Less cash and cash equivalents of discontinued operations at end of year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents (excluding discontinued operations) at end of year |
|
$ |
15,814 |
|
|
$ |
15,710 |
|
|
$ |
13,806 |
|
|
|
|
|
|
|
|
|
|
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
37
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
1,114 |
|
|
$ |
1,212 |
|
|
$ |
1,780 |
|
Income taxes |
|
$ |
1,161 |
|
|
$ |
233 |
|
|
$ |
831 |
|
Non cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued in connection with debt financing |
|
$ |
863 |
|
|
$ |
|
|
|
$ |
|
|
Acquisition of Nordson UV for long-term debt |
|
$ |
|
|
|
$ |
1,871 |
|
|
$ |
|
|
The accompanying notes to Consolidated Financial Statements are an integral part of these statements.
38
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands except for share and per share data)
Note 1 Organization of Business:
Baldwin Technology Company, Inc. and its subsidiaries (Baldwin or the Company) are engaged
primarily in the development, manufacture and sale of process automation equipment and related
consumables for the printing and publishing industry. Headquartered in Boca Raton, Florida, 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 an 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 allowance is estimated
based on a combination of write-off history, aging analysis and specific account evaluation. When a
receivable balance is known to be uncollectable, it is written off against the allowance for
doubtful accounts. 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 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, 2011, 2010 and 2009 were $167,
$412 and ($1,025), 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. The Company did not enter into any cash flow hedges for any of the fiscal
years ended June
39
30, 2011, 2010 and 2009, and the effect of fair value hedge activities is not material to the
Consolidated Financial Statements for the periods ended June 30, 2011, 2010 or 2009.
Concentration of Credit Risk. Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of trade accounts and notes receivable and cash
and cash equivalents. The Company controls this risk through credit approvals, customer limits and
monitoring procedures. For the fiscal years ended June 30, 2011, 2010 and 2009, one customer
accounted for more than 10% of the Companys net sales and trade accounts receivable. Koenig and
Bauer Aktiengesellschaft (KBA) accounted for approximately 14%, 14% and 13%, of the Companys net
sales for the fiscal years ended June 30, 2011, 2010 and 2009, respectively, and 15% and 14% of
trade accounts receivable at June 30, 2011 and 2010, respectively. The Companys ten largest
customers accounted for approximately 40%, 39% and 48% of the Companys net sales for each of the
fiscal years ended June 30, 2011, 2010 and 2009, respectively. Foreign cash balances at June 30,
2011 and 2010 were $13,677 and $13,288, 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 based on
quoted market prices, 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 using
the first-in, first-out (FIFO) method. 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. Property,
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 $1,462, $1,412 and $1,346 for the fiscal years ended June 30, 2011, 2010 and
2009, 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
Accounting Standards Codification (ASC) ASC 360, Property, Plant and Equipment, the Company
concluded that no impairment of its long-lived assets existed at June 30, 2011 or at June 30, 2010.
Stock Based Compensation. Stock-based compensation represents the cost related to stock-based
awards granted to employees and directors. 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 will 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 are recorded in Additional Paid-in Capital (if the tax deduction exceeds the deferred tax
asset) or in the Consolidated Statement of Operations (if the deferred tax asset exceeds the tax
deduction and no additional paid-in capital exists from previous awards).
Goodwill and Other Intangible Assets. Goodwill is tested for impairment at the reporting unit
level at least annually, (May 31) by determining the fair value utilizing a combination of income
and market approaches of the reporting unit and comparing the fair value with its recorded book
value. The income approach applies a discounted cash flow methodology to the Companys future
period projections and a market approach compares the Companys multiples of revenues and earnings
with those of comparable companies. 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. ASC 350, Intangibles Goodwill
40
and Other, 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.
A two-step process was used to test goodwill impairment. The first step was to determine if
there is an indication of impairment by comparing the estimated fair value of each reporting unit
to its carrying value including goodwill. Goodwill is considered impaired if the carrying value of
a reporting unit exceeds the estimated fair value. Upon indication of impairment, a second step is
performed to determine the amount of the impairment by comparing the implied fair value of the
reporting units goodwill with its carrying value. As a result of the assessment, the Company
recorded a non-cash goodwill impairment charge of $5,658, primarily related to its Japanese
reporting unit during the third quarter of fiscal year 2009. The Company concluded based on its
annual impairment tests that there were no goodwill impairments during either fiscal year 2011 or
fiscal year 2010.
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 $1,366, $1,253 and $1,427 for the fiscal years
ended June 30, 2011, 2010 and 2009, 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, scheduled reversal of temporary differences 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 and cash equivalents, 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 carrying amount of the short term instruments
approximate fair market value due to their short term nature. The carrying amount of marketable
securities approximates market value based on quoted market prices. The carrying amount of long
term borrowings and capital lease obligations approximates fair value as their interest rate is
current market rate.
Fair Value Measurements. Effective July 1, 2008, the Company adopted ASC 820, Fair Value
Measurements and Disclosures which established a framework for fair value and expanded disclosures
about financial instruments.
ASC 820 requires the use of valuation techniques that maximize the use of observable inputs
and minimize the use of unobservable inputs. Observable inputs consist of market data obtained from
independent sources while unobservable inputs reflect the Companys own market assumptions. These
inputs create the following fair value hierarchy:
|
|
|
Level 1 Quoted prices in active markets for identical assets or liabilities |
|
|
|
|
Level 2 Valuations based on quoted prices in markets that are not active,
quoted prices for similar assets or liabilities or all other inputs that are observable |
|
|
|
|
Level 3 Unobservable inputs for which there is little or no market data which
require the Company to develop its own assumptions |
If the inputs used to measure the fair value of a financial instrument fall within different
levels of the hierarchy, the financial instrument is categorized based upon the lowest level input
that is significant to the fair value measurement.
41
Whenever possible, the Company uses quoted market prices to determine fair value. In the
absence of quoted market prices, the Company uses independent sources and data to determine fair
value.
At June 30, 2011, the Companys financial assets and financial liabilities that are measured
at fair value on a recurring basis, consistent with the fair value hierarchy provisions, and valued
as Level 1 are comprised of marketable securities of $565. At June 30, 2011, the Company did not
have any assets or liabilities at fair value on a recurring basis using significant unobservable
inputs (Level 3) in the Consolidated Financial Statements.
In addition to items that are measured at fair value on a recurring basis, there are also
assets and liabilities that are measured at fair value on a non-recurring basis. Assets and
liabilities that are measured at fair value on a non-recurring basis include certain long-lived
assets (see Note 16, Goodwill and Other Intangible Assets). The Company determined that the fair
value measurements included in each of these assets and liabilities rely primarily on its
assumptions as unobservable inputs that are not publicly available. As such, the Company has
determined that each of these fair value measurements reside within Level 3 of the fair value
hierarchy.
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 for each product. Hence, the Company accrues estimated warranty costs at the time of
sale and includes that cost 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 and in addition to the percentage of revenue discussed above. The Company accrued estimated
future warranty and customer support obligations of $2,123 and $1,999 at June 30, 2011 and 2010,
respectively, which are included in Other accounts payable and accrued liabilities (see Note 19).
Revenue Recognition. The Companys products are sold with varying terms and conditions depending on
the nature of the product sold and the geographic location of the customer. The Companys revenues
also include installation and service contracts. The Company may also enter into multi-element
revenue arrangements that may consist of multiple deliverables of its product and service
offerings. The Company recognizes revenue when persuasive evidence of an arrangement exists,
delivery has occurred, the sales price is fixed or determinable, and collectability of the sale
price is reasonably assured. In addition to these general revenue recognition criteria, the
following specific revenue recognition policies are followed:
Products and Equipment For product and equipment sales (one deliverable only), revenue
recognition generally occurs when products or equipment have been shipped, risk of loss has
transferred to the customer, objective evidence exists that customer acceptance provisions, if
applicable, have been met, no significant obligations remain and, where applicable, an allowance
for discounts, returns and customer incentives can be reliably estimated. Recorded revenues are
reduced by these allowances. The Company bases its estimates of these allowances on historical
experience taking into consideration the type of products sold, the type of customer, and the
specific type of transaction in each arrangement.
Services Revenue for services is generally recognized at completion of the contractually
required services.
Multiple-Element Arrangements In July 2010 the Company adopted ASC Update No. 2009-13,
Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. The consensus in
Update No. 2009-13 supersedes certain guidance in Topic 605 (formerly EITF Issue No. 00-21,
Multiple-Element Arrangements) and requires the Company to allocate arrangement consideration at
the inception of an arrangement to all of its deliverables based on their relative selling prices.
The consensus eliminated the use of the residual method of allocation and requires the use of the
relative-selling-price method in all circumstances in which the Company recognizes revenue for an
arrangement with multiple deliverables subject to ASC 605-25.
The new guidance changed the criteria required to (1) separate deliverables into separate
units of accounting when deliverables are sold in a bundled arrangement and (2) to allocate the
arrangements consideration to each unit in the arrangement (such as, equipment, installation or
commissioning services). The Company now determines an estimated selling price for each separate
deliverable following a hierarchy of evidence Vendor-specific objective
42
evidence (VSOE), Third Party Evidence (TPE) and, if VSOE and TPE do not exist, best estimate of
selling price (BESP).
Arrangements with customers may include multiple deliverables, including any combination of
products, equipment and services. For the Companys multiple-element arrangements, deliverables are
separated into more than one unit of accounting when (i) the delivered element(s) have value to the
customer on a stand-alone basis, and (ii) delivery of the undelivered element(s) is probable and
substantially in the control of the Company. Based on the new accounting guidance adopted July 1,
2010, revenue is then allocated to each unit of accounting based on the estimated selling price
determined using a hierarchy of evidence based first on VSOE if it exists, based next on TPE if
VSOE does not exist, and finally, if both VSOE and TPE do not exist, based on BESP.
|
|
|
VSOE The price of a deliverable when the Company regularly sells it on a stand
-alone basis. |
Typically, the Company is unable to determine VSOE for the installation and
commissioning services portion, as well as, the equipment portion of a multiple-element
arrangement. Since the Company does not sell its installation and commissioning services on
a stand-alone basis, the Company is not able to determine VSOE for these portions of a
multiple-element arrangement. In addition, in certain instances, similar equipment included
in a multiple-element arrangement is sold separately in stand-alone arrangements as
customers may perform installations themselves. The Company has determined that the
applicability of this stand-alone pricing is not appropriate to serve as the VSOE for
equipment in multiple-element arrangements since this pricing considers the geographies in
which the products or services are sold, major product and service groups, customer
classification (OEM versus End User) and other market variables.
|
|
|
TPE Third party (competitor, subcontractors, etc) sales prices for the same or
largely interchangeable products or services to similar customers in stand-alone sales.
TPE can only be used if VSOE is not available. |
Generally, the Companys strategy for many of its products differs from that of its
peers and its offerings contain a level of customization and differentiation such that the
comparable pricing of products with similar functionality sold by other companies cannot be
obtained. Furthermore, the Company is unable to reliably determine what similar competitor
products selling prices are on a stand-alone basis. Therefore, the Company is typically not
able to determine TPE for the equipment portion of a multiple-element arrangement. However,
there are others (subcontractors) in the industry with sufficient knowledge about the
installation and commissioning process that the Company uses on occasion to perform these
services. Overall, installation and commissioning services may vary, due in part, to the
size and complexity of the installation and commissioning, however, these subcontractor
rates may provide a basis for TPE after considering the type of services to be performed
(i.e. mechanical, electrical) and negotiated subcontractor rates.
|
|
|
BESP When the Company is unable to establish VSOE or TPE, the Company uses BESP.
The objective of BESP is to determine the price at which the Company would transact a
sale if the product or service were sold on a stand-alone basis. |
The Company determines BESP for a deliverable in a multiple element arrangement by
first collecting all reasonably available data points including sales, cost and margin
analysis of the product, and other inputs based on the Companys normal pricing practices.
Second, the Company makes any reasonably required adjustments to the data based on market
conditions and Company-specific factors (customer, cost structure, etc.). Third, the Company
stratifies the data points, when appropriate, based on customer, magnitude of the
transaction and sales volume. In addition, the Company has negotiated supply agreements,
primarily with large OEM customers, for pricing some of its products and installation and
commissioning services. The Company has experience selling the products and installation and
commissioning services at the published price list and considers this to be BESP when
contracting with customers under the supply agreements.
43
After determination of the estimated selling price of each deliverable in a multiple-element
arrangement, the arrangement consideration is then allocated using the relative selling price
method. Under the relative selling price method, the estimated selling price for each deliverable
is compared to the sum of the estimated selling prices for all deliverables. The percentage that
is calculated for each deliverable is then multiplied by the total contractual value of the
multiple-element arrangement to determine the revenue allocated to each deliverable.
The revenue allocated to each deliverable is then recorded in accordance with existing revenue
recognition guidance for stand alone product/equipment sales and unbundled services.
Prior to the adoption of the amended guidance for contracts which contain multiple element
arrangements the Company separated the arrangement into its stand-alone elements for revenue
recognition purposes: (i) when the delivered item had value to the customer on a stand alone basis,
(ii) there was objective and reliable evidence of the fair value of the undelivered item and (iii)
the arrangement did not include a general right of return. If all these criteria were met revenue
was recognized on each element as a separate unit of accounting. If these criteria were not met,
the arrangement was accounted for as one unit of accounting which would result in revenue being
deferred until the last undelivered contractual element was fulfilled.
Based on the Companys current sales strategies, the newly adopted accounting guidance for
revenue recognition did not have a significant effect on the timing and pattern of revenue
recognition for sales in periods after the initial adoption when applied to multiple-element
arrangements.
Additional Revenue Recognition Policies
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.
Products are generally ordered on purchase orders, 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 sometimes uses distributors to assist in the sales function. In these cases, the
Company does not recognize revenue until title for the equipment or product and risk of loss have
passed to the ultimate customer, who then becomes obligated to pay with no right of return. In
addition, the Company reviews all alliance agreements to determine whether revenue should be
recognized on a gross or net basis and recognizes revenue as appropriate in the circumstances.
Shipping and Handling, and Advertising Costs. 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 $47, $141 and $147 for the fiscal years
ended June 30, 2011, 2010 and 2009, 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 on a straight line basis over the term of the related financing
transaction, which is not materially different than amortizing under an interest method, and are
included in interest expense.
44
Engineering and Development. Engineering and development (including research) 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 valuations, and goodwill and intangible valuations. Actual results could
differ from those estimates.
Recent Accounting Pronouncements.
In October 2009, the FASB issued ASC Update No. 2009-13, Revenue Recognition (Topic 605):
Multiple-Deliverable Revenue Arrangements. The consensus in Update No. 2009-13 supersedes certain
guidance in Topic 605 (formerly EITF Issue No. 00-21, Multiple-Element Arrangements) and requires
an entity to allocate arrangement consideration at the inception of an arrangement to all of its
deliverables based on their relative selling prices. The consensus eliminates the use of the
residual method of allocation and requires the use of the relative-selling-price method in all
circumstances in which an entity recognizes revenue for an arrangement with multiple deliverables
subject to ASC 605-25. The Company adopted Update No. 2009-13 as of July 1, 2010. The adoption did
not have a material effect on the Companys results of operations and financial position.
Accounting Standards Codification Topic 220, Comprehensive Income, was amended in June 2011
to require entities to present the total of comprehensive income, the components of net income, and
the components of other comprehensive income either in a single continuous statement of
comprehensive income or in two separate but consecutive statements. The amendment does not change
the items that must be reported in other comprehensive income or when an item of other
comprehensive income must be reclassified to net income under current GAAP. This guidance is
effective for the Company beginning July 1, 2012. The adoption of this guidance is not expected to
have a material effect on our consolidated financial statements.
In September 2011, the Financial Accounting Standards Board (FASB) issued revised
authoritative guidance for annual and interim goodwill impairment tests performed for fiscal years
beginning after December 15, 2011. The guidance allows an entity the option to make a qualitative
evaluation about the likelihood of goodwill impairment for a reporting unit. If, after assessing
the totality of events or circumstances, an entity determines it is not more likely than not that
the fair value of a reporting unit is less than its carrying amount, then performing the
quantitative two-step impairment test is unnecessary. Early adoption is permitted for annual and
interim goodwill impairment tests if an entitys financial statements for the most recent interim
period have not yet been issued. The Company does not expect that adoption of this guidance will
have a material impact on the Companys consolidated financial position, results of operations and
cash flows.
Note 3 Discontinued Operations:
During the quarter ended March 31, 2011 the Company decided to discontinue its non-core food
blending and packaging business. As a result of this decision and having met the criteria to be
reported as a discontinued operation, the assets, liabilities, results of operations and cash flows
of the food blending and packaging business are classified as discontinued operations for all
periods presented.
45
Additionally, as a result of its decision to discontinue the food blending and packaging
business, the Company performed an assessment as to the recoverability of goodwill, intangibles and
fixed assets associated with the discontinued operation. Based on these assessments, the Company
recorded a pre-tax impairment charge of $2,449 related to goodwill, intangibles and fixed assets
associated with the discontinued operation. The food blending and packaging business was sold on
June 3, 2011 and the Company received cash proceeds of $250.
Revenues and net income (loss) of the food blending and packaging business included in
discontinued operations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended |
|
|
|
June 30, 2011 |
|
|
June 30, 2010 |
|
|
June 30, 2009 |
|
|
|
|
|
|
(in thousands) |
|
|
|
|
Revenues |
|
$ |
6,161 |
|
|
$ |
9,182 |
|
|
$ |
8,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax loss from operations of blending and
packaging business, excluding impairment |
|
|
(670 |
) |
|
|
579 |
|
|
|
853 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax income (loss) for impairment of blending
and packaging assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
(1,349 |
) |
|
|
|
|
|
|
|
|
Intangibles, net |
|
|
(356 |
) |
|
|
|
|
|
|
|
|
Fixed assets |
|
|
(668 |
) |
|
|
|
|
|
|
|
|
Other write offs/accruals |
|
|
(76 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,449 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax (loss) income from discontinued operations |
|
|
(3,119 |
) |
|
|
579 |
|
|
|
853 |
|
|
|
|
|
|
|
|
|
|
|
Tax (benefit) provision |
|
|
(657 |
) |
|
|
208 |
|
|
|
297 |
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from discontinued operations |
|
$ |
(2,462 |
) |
|
$ |
371 |
|
|
$ |
538 |
|
|
|
|
|
|
|
|
|
|
|
Assets and liabilities of the discontinued operations were as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30, 2011 |
|
|
June 30, 2010 |
|
|
|
(in thousands) |
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
$ |
|
|
|
$ |
261 |
|
Inventory, net |
|
|
|
|
|
|
602 |
|
Pre-paid expenses |
|
|
|
|
|
|
88 |
|
Other |
|
|
|
|
|
|
30 |
|
|
|
|
|
|
|
|
Current assets of discontinued operations |
|
|
|
|
|
|
981 |
|
|
|
|
|
|
|
|
Long term assets of discontinued operations |
|
|
|
|
|
|
2,475 |
|
|
|
|
|
|
|
|
Assets of discontinued operations |
|
$ |
|
|
|
$ |
3,456 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
|
|
|
$ |
550 |
|
Customer deposits |
|
|
|
|
|
|
8 |
|
Other |
|
|
|
|
|
|
80 |
|
Deferred taxes |
|
|
|
|
|
|
215 |
|
|
|
|
|
|
|
|
Liabilities of discontinued operations |
|
$ |
|
|
|
$ |
853 |
|
|
|
|
|
|
|
|
Note 4 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 capacities as owners. OCI consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30, |
|
|
|
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
|
|
(in thousands) |
|
|
|
|
|
Cumulative translation adjustment |
|
$ |
7,516 |
|
|
$ |
1,484 |
|
|
$ |
3,009 |
|
Unrealized (loss) gain on
investments, net of tax benefit of
$144 (benefit of $121 at June 30,
2010) |
|
|
(198 |
) |
|
|
(166 |
) |
|
|
(96 |
) |
Pension funded status, net of tax
benefit of $930 (benefit of $768 at
June 30, 2010) |
|
|
(1,287 |
) |
|
|
(993 |
) |
|
|
(882 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
6,031 |
|
|
$ |
325 |
|
|
$ |
2,031 |
|
|
|
|
|
|
|
|
|
|
|
46
Note 5 Earnings per Share:
The following represents a reconciliation from basic earnings per share to diluted earnings
per share. Options to purchase 3,189, 1,460, and 1,386 shares of common stock were outstanding at
June 30, 2011, June 30, 2010 and June 30, 2009, 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, |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
|
|
(in thousands, except per share data) |
|
Determination of shares: |
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding |
|
|
15,619 |
|
|
|
15,477 |
|
|
|
15,329 |
|
Assumed conversion of dilutive stock options and awards |
|
|
|
|
|
|
47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted average common shares outstanding |
|
|
15,619 |
|
|
|
15,524 |
|
|
|
15,329 |
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share from continuing operations |
|
$ |
(0.78 |
) |
|
$ |
0.23 |
|
|
$ |
(0.81 |
) |
Basic earnings per common share from discontinued operations |
|
$ |
(0.16 |
) |
|
$ |
0.02 |
|
|
$ |
0.04 |
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per share |
|
$ |
(0.94 |
) |
|
$ |
0.25 |
|
|
$ |
(0.77 |
) |
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share from continuing operations |
|
$ |
(0.78 |
) |
|
$ |
0.23 |
|
|
$ |
(0.81 |
) |
Diluted earnings per common share from discontinued operations |
|
$ |
(0.16 |
) |
|
$ |
0.02 |
|
|
$ |
0.04 |
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per share |
|
$ |
(0.94 |
) |
|
$ |
0.25 |
|
|
$ |
(0.77 |
) |
|
|
|
|
|
|
|
|
|
|
Note 6 Business Segment Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
(in thousands) |
|
|
|
|
Geographic information: |
|
|
|
|
|
|
|
|
|
|
|
|
Sales* by major country: |
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
34,123 |
|
|
$ |
24,674 |
|
|
$ |
31,195 |
|
Japan |
|
|
37,483 |
|
|
|
36,094 |
|
|
|
46,523 |
|
Germany |
|
|
37,596 |
|
|
|
38,590 |
|
|
|
46,180 |
|
Sweden |
|
|
16,642 |
|
|
|
18,735 |
|
|
|
23,370 |
|
United Kingdom |
|
|
18,594 |
|
|
|
7,736 |
|
|
|
8,270 |
|
All other foreign |
|
|
16,461 |
|
|
|
12,770 |
|
|
|
12,134 |
|
|
|
|
|
|
|
|
|
|
|
Total sales |
|
$ |
160,899 |
|
|
$ |
138,599 |
|
|
$ |
167,672 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
sales are attributed to a geographic area based on the location of the
subsidiary recording the external sale. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years June 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
(in thousands) |
|
|
|
|
Long-lived assets by major country: |
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
563 |
|
|
$ |
705 |
|
|
$ |
660 |
|
Japan |
|
|
1,132 |
|
|
|
1,486 |
|
|
|
1,536 |
|
Germany |
|
|
1,638 |
|
|
|
1,683 |
|
|
|
2,384 |
|
Sweden |
|
|
1,405 |
|
|
|
1,392 |
|
|
|
1,565 |
|
All other foreign |
|
|
1,016 |
|
|
|
1,458 |
|
|
|
430 |
|
|
|
|
|
|
|
|
|
|
|
Total long-lived assets |
|
$ |
5,754 |
|
|
$ |
6,724 |
|
|
$ |
6,575 |
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets primarily include the net book value of property, plant and equipment and
other tangible assets.
47
Note 7 Inventories:
Inventories, net of reserve, consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended June 30, 2011 |
|
|
|
Domestic |
|
|
Foreign |
|
|
Total |
|
|
|
|
|
|
(in thousands) |
|
|
|
|
Raw materials |
|
$ |
2,156 |
|
|
$ |
9,954 |
|
|
$ |
12,110 |
|
In process |
|
|
|
|
|
|
4,761 |
|
|
|
4,761 |
|
Finished goods |
|
|
683 |
|
|
|
3,075 |
|
|
|
3,758 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,839 |
|
|
$ |
17,790 |
|
|
$ |
20,629 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended June 30, 2010 |
|
|
|
Domestic |
|
|
Foreign |
|
|
Total |
|
|
|
|
|
|
(in thousands) |
|
|
|
|
Raw materials |
|
$ |
2,306 |
|
|
$ |
9,067 |
|
|
$ |
11,373 |
|
In process |
|
|
4 |
|
|
|
4,524 |
|
|
|
4,528 |
|
Finished goods |
|
|
981 |
|
|
|
3,355 |
|
|
|
4,336 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,291 |
|
|
$ |
16,946 |
|
|
$ |
20,237 |
|
|
|
|
|
|
|
|
|
|
|
Note 8 Loans Payable:
|
|
|
|
|
|
|
|
|
|
|
Rate |
|
|
Amount |
|
|
|
(in thousands) |
|
Loans Payable at June 30, 2011: Foreign subsidiary |
|
1.33% (average) |
|
$ |
4,965 |
|
|
|
|
|
|
|
|
|
Loans Payable at June 30, 2010: Foreign subsidiary |
|
1.35% (average) |
|
$ |
4,525 |
|
|
|
|
|
|
|
|
|
The maximum amount of bank loans payable outstanding during the year ended June 30, 2011 was
$6,164 ($4,627 in 2010). 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 loans are
uncollateralized.
Note 9 Long-Term Debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|
|
June 30, 2011 |
|
|
June 30, 2010 |
|
|
|
Current |
|
|
Long-Term |
|
|
Current |
|
|
Long-Term |
|
Revolving Credit
Agreement due July 2,
2012, interest rate
one-month LIBOR rate
0.19% plus 5.50% (a) |
|
$ |
|
|
|
$ |
13,700 |
|
|
$ |
|
|
|
$ |
12,100 |
|
Revolving Credit
Agreement due July 2,
2012, interest rate
one-month LIBOR rate
1.19% plus 5.50% (a) |
|
|
|
|
|
|
2,175 |
|
|
|
|
|
|
|
1,834 |
|
Term loan payable by
foreign subsidiary due
April 28, 2016, with
annual payments,
interest rate 2.83% (b) |
|
|
248 |
|
|
|
993 |
|
|
|
|
|
|
|
|
|
Subordinated promissory
note due June 30, 2015,
interest one year LIBOR
rate 1.2% plus 4.50%
(c) |
|
|
448 |
|
|
|
1,684 |
|
|
|
389 |
|
|
|
2,132 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
696 |
|
|
$ |
18,552 |
|
|
$ |
389 |
|
|
$ |
16,066 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
The Companys primary source of external financing is its revolving Credit Agreement, as
amended with certain lenders (the Lenders) and Bank of America (BofA) as Agent (the Credit
Agreement), which has a term that ends on July 2, 2012. The borrowings under the Credit
Agreement are secured in the U.S. by a pledge of substantially all of the Companys domestic
assets (approximately $17,000) and in Europe by a pledge of the Companys European assets and
the stock of the Companys European subsidiaries and certain of the Companys Asian
subsidiaries. The Company is in discussions regarding replacement of its Credit Agreement and
anticipates finalizing a replacement Credit Agreement although there are no assurances that such
agreement will be completed by the loan maturity date. |
48
The Credit Agreement, as amended, requires the Company to satisfy certain minimum EBITDA,
Minimum Currency Adjusted Net Sales, Capital Expenditures, and Minimum Liquidity covenants. The
Company was in compliance with all covenants under the Credit Agreement at June 30, 2011.
Under the terms of waiver and amendment agreements entered into in September 2010 and May 2011
to the Credit Agreement the Company issued to the Lenders two tranches of Warrants. The first
tranche (the 2010 Warrants) have a term of 10 years to purchase 352,671 shares of the Companys
Class A Common Stock for $0.01 per share and contains a put provision that enables the holders
after September 28, 2012 to request a cash settlement of the then fair market value of the 2010
Warrants in an amount not to exceed $1.50 per share. The 2010 Warrants were valued based on the
Companys stock price at September 28, 2010 and are presented as a liability ($420 at June 30,
2011) under other long-term liabilities. The value of the 2010 Warrants are marked to market at the
end of each reporting period and the change in value is recorded in interest expense. During the
fiscal year ended June 30, 2011, the value of the September Warrants decreased by $21.
The second tranche (the 2011 Warrants) also have a term of ten years to purchase 372,374
shares of the Companys Class A Common Stock for $0.01 per share. The 2011 Warrants also contain a
put provision that enables the holders after May 16, 2013 to request a cash settlement of the then
fair market value of the 2011 Warrants in an amount not to exceed $1.50 per share. The 2011
Warrants are presented as a liability ($443 at June 30, 2011) under other long-term liabilities.
The value of the 2011 Warrants are marked to market at the end of each reporting period and the
2011 changes in value is recorded in interest expense. During the fiscal year ended June 30, 2011,
the value of the 2011 Warrants decreased by $112.
On October 13, 2011, the Company entered into Amendment No. 11 to the Credit Agreement
(Amendment No. 11) with certain lenders and BofA as agent. Among other things, Amendment No. 11
(i) extended the maturity date of the revolving Credit Agreement from November 21, 2011 to July 2,
2012, (ii) adjusted the interest payment provisions pursuant to which euro and U.S. dollar
borrowings bear interest at LIBOR plus 7.50%, and (iii) increased the incremental interest rate for
the deferred interest to be paid at maturity. As part of the consideration for Amendment No. 11,
the Company will (a) pay the Lenders a potential fee of $1,100 as follows: $200 upon signing of
Amendment No. 11, and scheduled weekly installments ranging from $200 to $50 beginning February
10, 2012 through April 20, 2012 unless the Credit Agreement is fully refinanced prior to the
payment due dates, in which case any remaining payments will be waived, (b) grant to the Lenders
ten year Warrants to purchase an aggregate of 434,200 shares of Class A Common Stock of the Company
at an exercise price of $0.01 per share, with a put provision exercisable after two (2) years that
enables the holder to request a cash settlement equal to the then fair market value of the Warrants
in an amount not to exceed $1.50 per share for each share issuable upon the exercise of the
Warrants (the October 2011 Warrants); and (c) if the Credit Agreement is not refinanced prior to
certain scheduled dates, the Company may grant to the Lenders additional ten year Warrants in four
monthly installments beginning March 1, 2012 and on the first day of each month through June 1,
2012, to purchase an aggregate of 1,592,067 shares of Class A Common Stock of the Company (equal to
an amount not to exceed 20 percent of the issued and outstanding shares of Class A Common Stock of
the Company on September 27, 2010) each at an exercise price of $0.01 per share, and each with a
put provision exercisable after two (2) years that enables the holder to request a cash settlement
equal to the then fair market value of the Warrants in an amount not to exceed $1.50 per share for
each share issuable upon the exercise of the Warrants.
The Credit Agreement, as amended by Amendment No 11, continues to require that the Company
satisfy certain minimum EBITDA, Minimum Currency Adjusted Net Sales, Capital Expenditures, and
Minimum Liquidity tests. The Company anticipates that it will be in compliance with these
covenants for the remainder of the term of the Credit Agreement. However
the Companys ability to meet its debt obligations (including
compliance with applicable financial covenants) is dependent upon the
Company's future performance and its cash flows from operations, both
of which are subject to prevailing economic conditions and financial,
business, and other known and unknown risks and uncertainties,
certain of which are beyond the Companys control.
49
|
(b) |
|
$1,241 five year term loan with principal and interest payments due and payable in five
annual installments. |
|
|
(c) |
|
$2,521 five year subordinated promissory note with principal and interest payments due and
payable in five annual installments. The balance at June 30, 2011 was $2,132 (See Note 15). |
The Company maintains relationships with both foreign and domestic banks, which combined have
extended short- and long-term credit facilities to the Company totaling $28,688. As of June 30,
2011, the Company had $23,208 outstanding (including Letters of Credit of $1,127). The amount
available under these credit facilities at June 30, 2011 was $2,280.
Maturities of long-term debt in each fiscal year ending after June 30, 2011 are as follows:
|
|
|
|
|
Fiscal Year Ending June 30, |
|
(in thousands) |
|
2012 |
|
$ |
16,571 |
|
2013 |
|
|
741 |
|
2014 |
|
|
809 |
|
2015 |
|
|
878 |
|
2016 |
|
|
249 |
|
2017 and thereafter |
|
|
|
|
|
|
|
|
|
|
$ |
19,248 |
|
|
|
|
|
50
Note 10 Taxes on Income:
Income (loss) before income taxes and the (benefit) provision for income taxes are comprised
of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
Income (loss) before income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
$ |
1,232 |
|
|
$ |
(3,944 |
) |
|
$ |
(6,402 |
) |
Foreign |
|
|
(9,866 |
) |
|
|
8,387 |
|
|
|
(8,275 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(8,634 |
) |
|
$ |
4,443 |
|
|
$ |
(14,677 |
) |
|
|
|
|
|
|
|
|
|
|
(Benefit) provision for income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
Currently payable: |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
$ |
(1,714 |
) |
|
$ |
437 |
|
|
$ |
(544 |
) |
Foreign |
|
|
(821 |
) |
|
|
129 |
|
|
|
(240 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(2,535 |
) |
|
$ |
566 |
|
|
$ |
(784 |
) |
|
|
|
|
|
|
|
|
|
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
$ |
4,715 |
|
|
$ |
249 |
|
|
$ |
(1,612 |
) |
Foreign |
|
|
1,328 |
|
|
|
122 |
|
|
|
68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,043 |
|
|
|
371 |
|
|
|
(1,544 |
) |
|
|
|
|
|
|
|
|
|
|
Total income tax provision (benefit) |
|
$ |
3,508 |
|
|
$ |
937 |
|
|
$ |
(2,328 |
) |
|
|
|
|
|
|
|
|
|
|
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, 2011 and 2010 are as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30, 2011 |
|
|
June 30, 2010 |
|
Deferred tax assets (liabilities): |
|
|
|
|
|
|
|
|
Foreign tax credit carryforwards |
|
$ |
3,853 |
|
|
$ |
3,853 |
|
Foreign net operating loss carryforwards |
|
|
14,735 |
|
|
|
9,358 |
|
Domestic net operating loss carryforwards |
|
|
2,152 |
|
|
|
2,432 |
|
Capital loss carryforwards |
|
|
1,990 |
|
|
|
164 |
|
Inventories |
|
|
1,534 |
|
|
|
1,426 |
|
Pension/deferred compensation |
|
|
2,602 |
|
|
|
2,962 |
|
Identifiable intangibles |
|
|
(1,911 |
) |
|
|
(2,721 |
) |
Other deferred tax assets, individually less than 5% |
|
|
3,347 |
|
|
|
2,263 |
|
Other deferred tax liabilities, individually less than 5% |
|
|
(514 |
) |
|
|
(15 |
) |
|
|
|
|
|
|
|
Net deferred tax asset |
|
|
27,788 |
|
|
|
19,722 |
|
Valuation allowance |
|
|
(23,678 |
) |
|
|
(10,232 |
) |
|
|
|
|
|
|
|
Total net deferred tax assets |
|
$ |
4,110 |
|
|
$ |
9,490 |
|
|
|
|
|
|
|
|
At June 30, 2011, net operating loss carryforwards of $53,705 may be available to reduce
future foreign taxable income. The majority of the Companys foreign net operating loss (NOL)
carry-forwards have an indefinite carry-forward period. In addition, as of June 30, 2011, the
Company has indefinite foreign capital loss carry-forwards available in the amount of $712. At June
30, 2011, the Company had U.S. NOL carryforwards of $6,075 of which $998 will expire in 2020 and
$5,077 will expire in 2030. In addition, as of June, 2011 the Company has U.S. capital loss
carry-forwards of $5,287 which will expire in 5 years. Foreign tax credits of $3,853 will expire
in 2013 through 2019.
In assessing the realizability of the deferred tax assets, the Company considers whether it is
more likely than not that some portion or the entire deferred tax asset will be realized.
Ultimately, the realization of the deferred tax asset is dependent upon the generation of
sufficient taxable income in those periods in which temporary differences become deductible and/or
net operating loss, capital loss and tax credit carryforwards can be utilized. The Company
considered the level of historical taxable income, scheduled reversal of temporary differences, tax
planning strategies and future taxable income in determining whether a valuation allowance is
warranted. Assumptions are consistent with estimates and plans used to manage the underlying
business. In evaluating historical results, the Company considered three years of recent losses as
well as the impact of non-routine events in assessing core pretax earnings. Based on these
considerations, the Company concluded that an additional valuation allowance was warranted for the
year ended June 30, 2011. Accordingly, the Companys fiscal 2011 income tax expense from continuing
operations include $11,458 of additional valuation allowance recorded against certain domestic and
51
foreign deferred tax assets including capital loss and foreign tax credit carryforwards of
$1,798 and $1,469, respectively. The remaining $1,988 increase in the valuation allowance is
primarily due to balance sheet cumulative translations adjustments related to foreign deferred tax
assets.
The Company has not had to provide for income taxes on $13,382 of cumulative undistributed
earnings of subsidiaries outside the United States at June 30, 2011 because of the Companys
intention to indefinitely reinvest those earnings. The amount of unrecognized deferred tax
liabilities for temporary differences related to investments in undistributed earnings is not
practicable to determine at this time.
On June 30, 2011, the Companys unrecognized tax benefits totaled $1,693, including $1,404
which, if recognized, would reduce the annual effective income tax rate.
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 years
ending June 30, 2011 and 2010, the Company accrued $9 and $18, respectively, in potential interest
and penalties associated with uncertain tax positions. 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. At June 30, 2011, the Company had $276 of accrued interest and penalties.
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, |
|
|
|
2011 |
|
|
2010 |
|
|
|
(in thousands) |
|
Balance as of July 1 |
|
$ |
4,102 |
|
|
$ |
4,999 |
|
Additions based on tax positions related to the current year |
|
|
124 |
|
|
|
90 |
|
Additions for tax positions related to prior years |
|
|
17 |
|
|
|
(113 |
) |
Decrease from lapse of statute of limitation |
|
|
(2,550 |
) |
|
|
(874 |
) |
|
|
|
|
|
|
|
Balance as of June 30 |
|
$ |
1,693 |
|
|
$ |
4,102 |
|
|
|
|
|
|
|
|
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, U.K. and Japan. The earliest year for which the Company or its affiliates
are subject to examination by tax authorities is the tax year 2005. It is reasonably possible that
in the next 12 months, because of changes in facts and circumstances, the unrecognized tax benefits
for tax positions taken related to previously filed tax returns may decrease. The range of
possible decrease related to the potential settled adjustments and expiration of the statute of
limitation is zero to $0.5 million.
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, |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
(in thousands) |
|
|
|
|
Computed expected tax provision |
|
$ |
(2,936 |
) |
|
$ |
1,511 |
|
|
$ |
(4,990 |
) |
Permanent differences |
|
|
261 |
|
|
|
357 |
|
|
|
445 |
|
Foreign income taxed at rates other than the U.S. statutory rate |
|
|
(1,377 |
) |
|
|
(1,106 |
) |
|
|
(136 |
) |
Capital loss |
|
|
(1,798 |
) |
|
|
|
|
|
|
|
|
Change in deferred tax asset valuation allowance |
|
|
11,458 |
|
|
|
2,305 |
|
|
|
761 |
|
Change in tax reserves |
|
|
(2,211 |
) |
|
|
(838 |
) |
|
|
179 |
|
Gain on bargain purchase |
|
|
|
|
|
|
(1,006 |
) |
|
|
|
|
Goodwill impairment |
|
|
|
|
|
|
|
|
|
|
1,951 |
|
Other reconciling items |
|
|
111 |
|
|
|
(286 |
) |
|
|
(538 |
) |
|
|
|
|
|
|
|
|
|
|
Total income tax provision |
|
$ |
3,508 |
|
|
$ |
937 |
|
|
$ |
(2,328 |
) |
|
|
|
|
|
|
|
|
|
|
52
Note 11 Common Stock:
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 total number of outstanding shares of both classes of Common
Stock as of the record date of the meeting of stockholders. 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 meeting of stockholders, the remaining directors are elected by
the holders of both classes of Common Stock voting together as a single class, with the holders of
Class A having one vote per share and the holders of Class B having ten votes per share. As of June
30, 2011, the number of outstanding shares of Class B constituted approximately 7% of the total
number of outstanding shares of both classes of Common Stock.
Class A has no conversion rights; however, shares of Class B are convertible into shares of
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. The Companys current Credit
Agreement prohibits the payment of dividends.
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, 2011, 1,192,760 shares of Class A had been repurchased for $2,638. During the fiscal years
ended June 30, 2011 and 2010 no shares of Class A were repurchased. Repurchases are restricted
under the terms of the Credit Agreement.
Note 12 Stock Based Compensation:
Stock based incentive awards are provided under the terms of the Companys plans:
The 1996 Stock Option Plan, as amended and restated (the 1996 Plan) allowed 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. 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 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 (the 1998 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 Common Stock. Under the 1998 Plan, each year, each
Eligible Director received a grant of options to purchase 3,000 shares of Class A Common Stock. 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 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 was amended in
August 2008 to increase by 1,000,000 shares the number of shares of Class A Common Stock that may
be subject to awards outstanding under the 2005 Plan from 1,200,000 to 2,200,000. This amendment
was approved by the stockholders on November 11, 2008. The 2005 Plan provides for the granting of a
variety of awards to the Companys employees, non-employee directors, and others who provide
services to the Company, including stock-based incentives and cash-based incentives. The maximum
aggregate number of shares that may be issued to participants or their beneficiaries pursuant to
all awards granted under the 2005 Plan is now 2,200,000. During fiscal year 2011, an aggregate of
53
759,288 shares were granted as restricted shares/share units, long term incentive performance
awards and stock options under the 2005 Plan. Awards for a total of 246,055 shares were canceled
during fiscal year 2011, and those shares became available for future awards. 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 shares/share units have restrictions that generally lapse in three equal
annual installments commencing on the first anniversary of the date of grant.
At June 30, 2011, the aggregate number of shares available for future grants under the 2005
Plan was 326,713.
In addition, during fiscal year 2011, the Company granted an aggregate of 650,000 non-plan
options to purchase shares of the Companys Class A Common Stock to the Companys CEO, CFO and a
strategic consultation firm.
Compensation expense recorded for all of the Companys share-based compensation plans for the
fiscal years, 2011, 2010 and 2009 was $679, $829 and $1,092, respectively. The tax benefit related
to this compensation expense for the fiscal years 2011, 2010 and 2009 was $221, $274 and $373,
respectively.
Stock Options
The following table summarizes activity under the plans during 2011, 2010 and 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The 1996 Plan |
|
|
The 1998 Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
Option Price |
|
|
Average Price |
|
|
|
|
|
|
|
|
|
|
Option Price |
|
|
Average Price |
|
|
|
Class A |
|
|
Class B |
|
|
Range |
|
|
A |
|
|
B |
|
|
Class A |
|
|
Class B |
|
|
Range |
|
|
A |
|
|
B |
|
Outstanding at June
30, 2008 |
|
|
837,835 |
|
|
|
0 |
|
|
$ |
0.58-$5.50 |
|
|
$ |
3.10 |
|
|
$ |
0.00 |
|
|
|
30,000 |
|
|
|
0 |
|
|
$ |
1.13-$5.50 |
|
|
$ |
2.48 |
|
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled |
|
|
(80,999 |
) |
|
|
0 |
|
|
$ |
3.25-$5.50 |
|
|
$ |
5.12 |
|
|
|
|
|
|
|
(9,000 |
) |
|
|
0 |
|
|
$ |
5.49 |
|
|
$ |
5.49 |
|
|
|
|
|
Exercised |
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June
30, 2009 |
|
|
756,836 |
|
|
|
0 |
|
|
$ |
0.58-$4.95 |
|
|
$ |
2.88 |
|
|
$ |
0.00 |
|
|
|
21,000 |
|
|
|
0 |
|
|
$ |
1.13-$2.25 |
|
|
$ |
1.56 |
|
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled |
|
|
(98,334 |
) |
|
|
0 |
|
|
$ |
0.82-$4.90 |
|
|
$ |
2.69 |
|
|
|
|
|
|
|
(6,000 |
) |
|
|
0 |
|
|
$ |
2.25 |
|
|
$ |
2.25 |
|
|
|
|
|
Exercised |
|
|
(14,333 |
) |
|
|
0 |
|
|
$ |
0.58-$0.82 |
|
|
$ |
0.74 |
|
|
|
|
|
|
|
(3,000 |
) |
|
|
0 |
|
|
$ |
1.13 |
|
|
|
1.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June
30, 2010 |
|
|
644,169 |
|
|
|
0 |
|
|
$ |
0.58-$4.95 |
|
|
$ |
2.96 |
|
|
$ |
0.00 |
|
|
|
12,000 |
|
|
|
0 |
|
|
$ |
1.13-$1.50 |
|
|
$ |
1.32 |
|
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled |
|
|
(8,333 |
) |
|
|
0 |
|
|
$ |
4.90-$4.95 |
|
|
$ |
4.93 |
|
|
|
|
|
|
|
(6,000 |
) |
|
|
0 |
|
|
$ |
1.50 |
|
|
$ |
1.50 |
|
|
|
|
|
Exercised |
|
|
(5,000 |
) |
|
|
0 |
|
|
$ |
058 |
|
|
$ |
0.58 |
|
|
|
|
|
|
|
(3,000 |
) |
|
|
0 |
|
|
$ |
1.13 |
|
|
|
1.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June
30, 2011 |
|
|
630,836 |
|
|
|
0 |
|
|
$ |
0.58-$4.95 |
|
|
$ |
2.95 |
|
|
$ |
0.00 |
|
|
|
3,000 |
|
|
|
0 |
|
|
$ |
1.13 |
|
|
$ |
1.13 |
|
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June
30, 2011 |
|
|
630,836 |
|
|
|
0 |
|
|
$ |
058.-$4.95 |
|
|
$ |
2.95 |
|
|
$ |
0.00 |
|
|
|
3,000 |
|
|
|
0 |
|
|
$ |
1.13 |
|
|
$ |
1.13 |
|
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Plan |
|
|
The 2005 Plan |
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
Option Price |
|
|
Weighted |
|
|
|
Class A |
|
|
Option Price Range |
|
|
Price |
|
|
Class A |
|
|
Range |
|
|
Average Price |
|
Outstanding at June 30, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
134,000 |
|
|
$ |
5.49 |
|
|
$ |
5.49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
118,500 |
|
|
$ |
2.22 |
|
|
$ |
2.22 |
|
Canceled |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(41,000 |
) |
|
$ |
2.22-$5.49 |
|
|
$ |
3.82 |
|
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
0 |
|
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
211,500 |
|
|
$ |
2.22-$5.49 |
|
|
$ |
3.98 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
130,000 |
|
|
$ |
1.22-$1.82 |
|
|
$ |
1.79 |
|
Canceled |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,667 |
) |
|
$ |
2.22-$5.49 |
|
|
$ |
3.76 |
|
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
335,833 |
|
|
$ |
1.22-$5.99 |
|
|
$ |
3.14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
650,000 |
|
|
$ |
1.20-$1.61 |
|
|
$ |
1.32 |
|
|
|
702,144 |
|
|
$ |
1.13-$1.61 |
|
|
$ |
1.27 |
|
Canceled |
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
(68,666 |
) |
|
$ |
1.82-$5.49 |
|
|
$ |
2.33 |
|
Exercised |
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2011 |
|
|
650,000 |
|
|
$ |
1.20-$1.61 |
|
|
$ |
1.32 |
|
|
|
969,311 |
|
|
$ |
1.13-$5.49 |
|
|
$ |
1.84 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2011 |
|
|
650,000 |
|
|
$ |
1.20-$1.61 |
|
|
$ |
1.32 |
|
|
|
301,173 |
|
|
$ |
1.20-$5.49 |
|
|
$ |
2.31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value of options exercised during the fiscal year ended June 30, 2011,
2010 and 2009 was $6, $15, and $0, respectively.
54
The following table summarizes information regarding stock options outstanding and exercisable
at June 30, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding |
|
|
Options Exercisable |
|
|
|
|
|
|
|
Weighted |
|
|
Weighted |
|
|
Number |
|
|
Weighted |
|
Range of |
|
Number of |
|
|
Average |
|
|
Average |
|
|
of |
|
|
Average |
|
Exercise |
|
Outstanding |
|
|
Remaining |
|
|
Outstanding |
|
|
Exercisable |
|
|
Exercise |
|
Prices |
|
Options |
|
|
Contractual Life |
|
|
Price |
|
|
Options |
|
|
Price |
|
$0.58 - $1.12 |
|
|
1,131,311 |
|
|
8.4 years |
|
$ |
1.18 |
|
|
|
312,167 |
|
|
$ |
1.13 |
|
$1.52 - $3.25 |
|
|
670,834 |
|
|
6.8 years |
|
$ |
1.81 |
|
|
|
203,834 |
|
|
$ |
2.10 |
|
$3.41 - $4.90 |
|
|
343,335 |
|
|
3.8 years |
|
$ |
3.99 |
|
|
|
343,335 |
|
|
$ |
3.99 |
|
$4.95 - $5.49 |
|
|
107,667 |
|
|
6.1 years |
|
$ |
5.46 |
|
|
|
75,673 |
|
|
$ |
5.45 |
|
The aggregate intrinsic value of outstanding and exercisable options at June 30, 2011 was $38
and $22, respectively.
Total unrecognized compensation costs related to non-vested stock option awards at June 30,
2011 is $513 and is expected to be recognized over the weighted average period of approximately 3.2
years.
The Company estimates the fair value of stock options at the date of grant using a
Black-Scholes valuation model. 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, |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Option term (1) |
|
|
5 |
|
|
|
5 |
|
|
|
5 |
|
Volatility (2) |
|
|
53.77 |
|
|
|
50.51 |
|
|
|
49.85 |
|
Risk free rate |
|
|
1.77 |
|
|
|
2.31 |
|
|
|
3.18 |
|
Dividend yield |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average fair value |
|
$ |
0.63 |
|
|
$ |
0.84 |
|
|
$ |
1.04 |
|
|
|
|
(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, 2011, 2010 and 2009, the Company issued restricted
shares/share units under the 2005 Plan. Awards granted as restricted shares/share units have
restrictions that generally lapse in three equal annual installments commencing on the first
anniversary of the date grant of each such award. Compensation expense of $139, $655, and $884 was
recognized during the periods ended June 30, 2011, 2010 and 2009, respectively. The aggregate
unrecognized compensation costs related to the non-vested restricted awards outstanding at June 30,
2011 was $108 and is expected to be recognized over a weighted-average period of approximately 1.4
years.
55
The following table summarizes outstanding and non-vested shares under the 2005 Plan for 2011,
2010 and 2009.
|
|
|
|
|
|
|
|
|
|
|
The 2005 Plan |
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Average Grant Date |
|
|
|
Class A Units |
|
|
Fair Value |
|
Outstanding at June 30, 2008 |
|
|
420,019 |
|
|
$ |
4.80 |
|
|
|
|
|
|
|
|
Granted |
|
|
139,667 |
|
|
$ |
2.01 |
|
Canceled |
|
|
(7,500 |
) |
|
$ |
5.19 |
|
Vested |
|
|
(198,454 |
) |
|
$ |
4.73 |
|
|
|
|
|
|
|
|
Outstanding at June 30, 2009 |
|
|
353,732 |
|
|
$ |
3.73 |
|
|
|
|
|
|
|
|
Granted |
|
|
177,000 |
|
|
$ |
1.65 |
|
Canceled |
|
|
(15,500 |
) |
|
$ |
3.55 |
|
Vested |
|
|
(187,774 |
) |
|
$ |
4.05 |
|
|
|
|
|
|
|
|
Outstanding at June 30, 2010 |
|
|
327,458 |
|
|
$ |
2.43 |
|
|
|
|
|
|
|
|
Granted |
|
|
57,144 |
|
|
$ |
1.26 |
|
Canceled |
|
|
(98,056 |
) |
|
$ |
2.74 |
|
Vested |
|
|
(136,404 |
) |
|
$ |
2.74 |
|
|
|
|
|
|
|
|
Outstanding at June 30, 2011 |
|
|
150,142 |
|
|
$ |
1.50 |
|
|
|
|
|
|
|
|
Long Term Incentive Performance Share Awards
The Company did not issue any long term incentive performance share awards during the fiscal
year ended June 30, 2011. During the fiscal year ended June 30, 2010, the Company issued long term
incentive performance share awards (PSAs) under the 2005 Plan. PSAs are stock awards where the
number of shares ultimately received by the employee depends on the Companys performance against
specified targets and typically vest during a three-year period. The fair value of each PSA is
determined on the grant date, based on the Companys stock price. Over the performance period, the
number of shares of stock that will be issued and the associated compensation expense is adjusted
upward or downward based upon the probability of achievement of performance targets. The ultimate
number of shares issued and the related compensation cost recognized as expense will be based on a
comparison of the final performance metrics to the specified targets. The fair value of PSAs
granted during the fiscal year ended June 30, 2010 was $183. Total fair value of PSAs vested and
compensation expense incurred during each of the three years ended June 30, 2011, 2010 and 2009 was
$0, based on the current assessment of the probability of achievement.
Long-term incentive performance share awards:
|
|
|
|
|
|
|
|
|
|
|
The 2005 Plan |
|
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
|
Grant Date Fair |
|
|
|
Class A Units |
|
|
Value |
|
Outstanding at June 30, 2009 |
|
|
43,333 |
|
|
$ |
2.15 |
|
|
|
|
|
|
|
|
Granted |
|
|
101,440 |
|
|
$ |
1.80 |
|
Canceled |
|
|
(4,000 |
) |
|
$ |
2.15 |
|
Vested |
|
|
|
|
|
$ |
0.00 |
|
|
|
|
|
|
|
|
Outstanding at June 30, 2010 |
|
|
140,773 |
|
|
$ |
1.90 |
|
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
$ |
0.00 |
|
Canceled |
|
|
(79,333 |
) |
|
$ |
1.93 |
|
Vested |
|
|
|
|
|
$ |
0.00 |
|
|
|
|
|
|
|
|
Outstanding at June 30, 2011 |
|
|
61,440 |
|
|
$ |
1.85 |
|
|
|
|
|
|
|
|
Note 13 Supplemental Compensation:
In the U.S., the Company maintains the Baldwin Technology Profit Sharing and Savings Plan. The
Company typically matched up to 5% of eligible compensation and the participants interests in the
Companys contributions vested immediately. For the fiscal years 2011, 2010 and 2009, the Company
suspended its matching contributions to the plan. Participant contributions are made on a bi-weekly
basis, while the Companys matching contributions have been made on a quarterly basis. Employer
contributions charged to income were $0, $0 and $154, respectively, for
56
the fiscal years ended June 2011, 2010 and 2009. The assets of the plan are invested primarily
in mutual funds, money market funds, and Class A Common Stock of the Company. The Class A Common
Stock constituted approximately 1% of the total assets of the plan at June 30, 2011.
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, |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Germany |
|
$ |
237 |
|
|
$ |
213 |
|
|
$ |
218 |
|
Sweden |
|
|
83 |
|
|
|
119 |
|
|
|
115 |
|
U.K. |
|
|
143 |
|
|
|
60 |
|
|
|
68 |
|
|
|
|
|
|
|
|
|
|
|
Total expense |
|
$ |
463 |
|
|
$ |
392 |
|
|
$ |
401 |
|
|
|
|
|
|
|
|
|
|
|
In Germany, there is one pension plan covering one former employee, and the Companys Japanese
subsidiary maintains a retirement plan covering all of its 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. The fair values of 100% of plan assets are represented by
insurance contracts which are measured as a Level 2 type valuation as of June 30, 2011 and 2010,
and the expected return on plan assets is determined based on the expected long term rate of return
on plan assets. The Company also has non-qualified Supplemental Executive Retirement Plans (SERPs).
The SERPs provide benefits to eligible executives, based on average earnings, years of service and
age at retirement or separation from employment. The Company has established a Trust to provide a
potential source of funds to pay benefits under the SERPs. The amount held in trust in Other Assets
at June 30, 2011 and 2010 was $1,457 and $1,253, respectively, which represents the market value of
the trust assets measured as a Level 1 type valuation as of June 30, 2011 and 2010, respectively.
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, |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Service Cost benefits earned during the year |
|
$ |
396 |
|
|
$ |
401 |
|
|
$ |
401 |
|
Interest on projected benefit obligation |
|
|
304 |
|
|
|
329 |
|
|
|
336 |
|
Annual return on plan assets |
|
|
(31 |
) |
|
|
(20 |
) |
|
|
(20 |
) |
Amortization of net actuarial loss |
|
|
77 |
|
|
|
48 |
|
|
|
45 |
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension expense |
|
$ |
746 |
|
|
$ |
758 |
|
|
$ |
762 |
|
|
|
|
|
|
|
|
|
|
|
57
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30, |
|
|
|
2011 |
|
|
2010 |
|
|
|
(in thousands) |
|
Change in benefit obligation: |
|
|
|
|
|
|
|
|
Projected benefit obligation beginning of year |
|
$ |
10,239 |
|
|
$ |
9,645 |
|
Service cost benefits earned during the year |
|
|
396 |
|
|
|
401 |
|
Interest on projected benefit obligation |
|
|
304 |
|
|
|
329 |
|
Actuarial loss |
|
|
583 |
|
|
|
204 |
|
Benefits paid |
|
|
(1,472 |
) |
|
|
(771 |
) |
Foreign currency rate changes |
|
|
513 |
|
|
|
431 |
|
Curtailment/settlement |
|
|
(916 |
) |
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation end of year |
|
$ |
9,647 |
|
|
$ |
10,239 |
|
|
|
|
|
|
|
|
Change in plan assets: |
|
|
|
|
|
|
|
|
Fair value of plan assets beginning of year |
|
$ |
2,037 |
|
|
$ |
1,796 |
|
Actual return on plan assets |
|
|
24 |
|
|
|
10 |
|
Contributions to the plan |
|
|
1,019 |
|
|
|
768 |
|
Benefits paid |
|
|
(1,055 |
) |
|
|
(691 |
) |
Curtailment/settlement |
|
|
(592 |
) |
|
|
|
|
Foreign currency rate changes |
|
|
201 |
|
|
|
154 |
|
|
|
|
|
|
|
|
Fair value of plan assets end of year |
|
|
1,634 |
|
|
|
2,037 |
|
|
|
|
|
|
|
|
Funded status at year end |
|
$ |
(8,013 |
) |
|
$ |
(8,202 |
) |
|
|
|
|
|
|
|
Components of above amounts: |
|
|
|
|
|
|
|
|
Accrued expenses |
|
$ |
(785 |
) |
|
$ |
(605 |
) |
Accrued benefit liability (noncurrent) |
|
|
(7,228 |
) |
|
|
(7,597 |
) |
|
|
|
|
|
|
|
Total |
|
$ |
(8,013 |
) |
|
$ |
(8,202 |
) |
|
|
|
|
|
|
|
Amounts included in AOCI: |
|
|
|
|
|
|
|
|
Actuarial losses |
|
$ |
1,287 |
|
|
$ |
993 |
|
|
|
|
|
|
|
|
Amount expected to be recognized during next
fiscal year actuarial gain |
|
|
120 |
|
|
|
71 |
|
|
|
|
|
|
|
|
Accumulated benefit obligation |
|
$ |
9,647 |
|
|
$ |
9,706 |
|
|
|
|
|
|
|
|
Weighted average actuarial assumptions: |
|
|
|
|
|
|
|
|
Discount rate |
|
|
1.75%-5.10 |
% |
|
|
1.75%-5.10 |
% |
Rate of increase in compensation levels |
|
|
0.00%-3.00 |
% |
|
|
0.00%-3.00 |
% |
Expected rate of return on plan assets |
|
|
1.50%-4.00 |
% |
|
|
1.50%-4.00 |
% |
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) |
|
2012 |
|
$ |
1,057 |
|
2013 |
|
$ |
1,011 |
|
2014 |
|
$ |
908 |
|
2015 |
|
$ |
1,014 |
|
2016 |
|
$ |
1,266 |
|
Aggregate for 2017 through 2021 |
|
$ |
5,019 |
|
The amount expected to be contributed by the Company to its defined benefit pension plans
during fiscal year 2012 is approximately $307.
Note 14 Restructuring:
Quarter 3 FY 2009 Plans:
In January and March 2009, the Company committed to the principal features of plans to
restructure some of its existing operations. These plans included the consolidation of production
facilities in Germany, as well as employee reductions in Germany, Sweden, Italy and the U.S. The
actions were taken in response to sustained weak market
58
conditions. Actions under the plans commenced during the third quarter of Fiscal 2009; and
were substantially completed by June 30, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
Payments against |
|
|
Balance at |
|
|
|
Initial Reserve |
|
|
June 30, 2010 |
|
|
Reserve |
|
|
June 30, 2011 |
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Restructuring costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee termination costs |
|
$ |
3,836 |
|
|
$ |
266 |
|
|
$ |
(266 |
) |
|
$ |
|
|
Other |
|
|
230 |
|
|
|
129 |
|
|
|
(129 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total restructuring costs |
|
$ |
4,066 |
|
|
$ |
395 |
|
|
$ |
(395 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 4 FY 2010 Plan:
In June 2010 the Company committed to the principal features of a plan to additionally
restructure its operation in Germany. Actions under the plan commenced and were completed by June
30, 2010. All costs associated with the plan are cash payments related to employee reductions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
Payments against |
|
|
Balance at |
|
|
|
Initial Reserve |
|
|
June 30, 2010 |
|
|
Reserve |
|
|
June 30, 2011 |
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Restructuring costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee termination costs |
|
$ |
540 |
|
|
$ |
502 |
|
|
$ |
(502 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total restructuring costs |
|
$ |
540 |
|
|
$ |
502 |
|
|
$ |
(502 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 1 FY 2011 Plan:
In September 2010 the Company committed to the principle features of a plan to restructure its
operations in the UK and Japan. Actions under the plan to consolidate facilities in the UK and to
reduce employment levels in Japan commenced in September. Costs associated with the plan are
primarily cash payments related to employee reductions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments against |
|
|
Balance at |
|
|
|
Initial Reserve |
|
|
Reserve |
|
|
June 30, 2011 |
|
|
|
|
|
|
(in thousands) |
|
|
|
|
Restructuring costs: |
|
|
|
|
|
|
|
|
|
|
|
|
Employee termination costs |
|
$ |
145 |
|
|
$ |
(145 |
) |
|
$ |
|
|
Other |
|
|
47 |
|
|
|
(32 |
) |
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
Total restructuring costs |
|
$ |
192 |
|
|
$ |
(177 |
) |
|
$ |
15 |
|
|
|
|
|
|
|
|
|
|
|
Quarter 2 FY 2011 Plan:
In December 2010 the Company committed to the principle features of a plan to restructure its
operations in Germany and further restructure its operations in Japan. Actions under the plan to
reduce employment levels commenced in December. Costs associated with the plan are primarily cash
payments related to employee reductions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments against |
|
|
Balance at |
|
|
|
Initial Reserve |
|
|
Reserve |
|
|
June 30, 2011 |
|
|
|
|
|
|
(in thousands) |
|
|
|
|
Restructuring costs: |
|
|
|
|
|
|
|
|
|
|
|
|
Employee termination costs |
|
$ |
417 |
|
|
$ |
(397 |
) |
|
$ |
20 |
|
|
|
|
|
|
|
|
|
|
|
Total restructuring costs |
|
$ |
417 |
|
|
$ |
(397 |
) |
|
$ |
20 |
|
|
|
|
|
|
|
|
|
|
|
59
Quarter 3 FY 2011 Plan:
In March 2011 the Company committed to the principle features of a plan to additionally
further restructure its operations in Japan, Germany, the U.K. and Sweden. Actions under the plan
primarily relate to reduction in employment levels, consolidation of facilities and fixed asset
write-downs. Costs associated with the plan are primarily cash payments related to employee
reductions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Uses |
|
|
|
|
|
|
|
|
|
|
Reserve Adjustments |
|
|
Against Reserve |
|
|
Balance at |
|
|
|
Initial Reserve |
|
|
(in thousands) |
|
|
June 30, 2011 |
|
Restructuring costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee termination costs |
|
$ |
1,583 |
|
|
$ |
198 |
|
|
$ |
(552 |
) |
|
$ |
1,229 |
|
Other |
|
|
531 |
|
|
|
46 |
|
|
|
159 |
|
|
|
736 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total restructuring costs |
|
$ |
2,114 |
|
|
$ |
244 |
|
|
$ |
(393 |
) |
|
$ |
1,965 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 15 Business Acquisition:
On June 30, 2010, the Company concluded its acquisition from Nordson Corporation of 100% of
the outstanding shares of Nordson UV. The acquired business provides UV (ultraviolet) curing
systems to the graphic arts markets, as well as a line of parts and consumables (ultraviolet
lamps). The acquisition introduces the Company to delivery of UV curing systems as well as
expanding opportunities in UV applications and the digital (ink jet) market sector.
In conjunction with the acquisition, the Company executed a five-year purchase note payable to
Nordson Corporation, the seller. The original amount of the note payable was $2,150. Due to a
subsequent net working capital adjustment, the note has been revised to $2,521 of which $1,871
represents the purchase price and $650 represents costs of the transaction funded by the seller to
be repaid to the seller over the period of the note.
The following summarizes the allocation of purchase price, based on a management valuation
study, to the fair value of assets acquired and liabilities assumed at the date of acquisition.
|
|
|
|
|
Assets acquired: |
|
|
|
|
Accounts Receivable |
|
$ |
1,875 |
|
Inventory |
|
|
2,740 |
|
Property, plant and equipment |
|
|
1,174 |
|
Existing product technology and other intangibles |
|
|
1,560 |
|
Other assets |
|
|
611 |
|
|
|
|
|
Total assets acquired |
|
$ |
7,960 |
|
|
|
|
|
Liabilities assumed: |
|
|
|
|
Accounts payable and other accrued liabilities |
|
$ |
1,978 |
|
Deferred tax liability |
|
|
1,151 |
|
|
|
|
|
Net assets acquired |
|
|
4,831 |
|
Gain on bargain purchase |
|
|
2,960 |
|
|
|
|
|
Purchase price |
|
$ |
1,871 |
|
|
|
|
|
Note 16 Goodwill and Other Intangible Assets:
The changes in the carrying amount of goodwill for each of the fiscal years ended June 30,
2011 and 2010 are as follows:
Activity in the fiscal year ended June 30, 2011 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Carrying |
|
|
Accumulated |
|
|
Net |
|
|
|
Amount |
|
|
Amortization |
|
|
Book Value |
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Balance as of July 1, 2010 |
|
$ |
20,178 |
|
|
$ |
1,425 |
|
|
$ |
18,753 |
|
Effects of currency translation |
|
|
1,353 |
|
|
|
181 |
|
|
|
1,172 |
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2011 |
|
$ |
21,531 |
|
|
$ |
1,606 |
|
|
$ |
19,925 |
|
|
|
|
|
|
|
|
|
|
|
60
Activity in the fiscal year ended June 30, 2010 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Carrying |
|
|
Accumulated |
|
|
Net |
|
|
|
Amount |
|
|
Amortization |
|
|
Book Value |
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Balance as of July 1, 2009 |
|
$ |
20,821 |
|
|
$ |
1,462 |
|
|
$ |
19,359 |
|
Effects of currency translation |
|
|
(643 |
) |
|
|
(37 |
) |
|
|
(606 |
) |
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2010 |
|
$ |
20,178 |
|
|
$ |
1,425 |
|
|
$ |
18,753 |
|
|
|
|
|
|
|
|
|
|
|
Intangible assets subject to amortization were comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2011 |
|
|
As of June 30, 2010 |
|
|
|
Amortization Period |
|
|
Gross |
|
|
Accumulated |
|
|
Gross |
|
|
Accumulated |
|
Intangible Assets: |
|
(Years) |
|
|
Carrying Amount |
|
|
Amortization |
|
|
Carrying Amount |
|
|
Amortization |
|
|
|
|
|
|
|
(in thousands) |
|
|
(in thousands) |
|
Patents and Trademarks |
|
|
12-20 |
|
|
$ |
11,930 |
|
|
$ |
8,010 |
|
|
$ |
11,372 |
|
|
$ |
7,155 |
|
Customer relationships |
|
|
2-13 |
|
|
|
597 |
|
|
|
137 |
|
|
|
538 |
|
|
|
58 |
|
Trademarks |
|
|
30 |
|
|
|
1,547 |
|
|
|
241 |
|
|
|
1,368 |
|
|
|
163 |
|
Existing product technology |
|
|
15 |
|
|
|
6,442 |
|
|
|
1,574 |
|
|
|
5,605 |
|
|
|
1,135 |
|
Non-compete/solicitation agreements |
|
|
5 |
|
|
|
66 |
|
|
|
55 |
|
|
|
59 |
|
|
|
41 |
|
Other |
|
|
5-30 |
|
|
|
2,369 |
|
|
|
2,205 |
|
|
|
2,165 |
|
|
|
1,848 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
22,951 |
|
|
$ |
12,222 |
|
|
$ |
21,107 |
|
|
$ |
10,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average life of intangible assets at June 30, 2011 was 12 years. Amortization
expense was $1,366 for the fiscal year ended June 30, 2011, $1,205 for the fiscal year ended June
30, 2010 and $1,379 for the fiscal year ended June 30, 2009. The net carrying amount of intangible
assets increased $22 for the year ended June 30, 2011 primarily due to amortization of $1,366 which
was offset by the effects of currency translation of $1,065 and the costs of retaining and
obtaining future economic benefits of patents of $320.
Estimated amortization expense for each of the following five fiscal years is as follows:
|
|
|
|
|
Fiscal Years Ending June 30, |
|
Amount |
|
|
|
(in thousands) |
|
2012 |
|
$ |
1,444 |
|
2013 |
|
$ |
1,350 |
|
2014 |
|
$ |
1,259 |
|
2015 |
|
$ |
1,178 |
|
2016 |
|
$ |
1,130 |
|
Note 17 Commitments and Contingencies:
Future minimum annual lease payments under capital leases were as follows at June 30, 2011:
|
|
|
|
|
Fiscal Years Ending June 30, |
|
Amount |
|
|
|
(in thousands) |
|
2012 |
|
$ |
3 |
|
2013 |
|
|
|
|
2014 |
|
|
|
|
2015 |
|
|
|
|
2016 |
|
|
|
|
|
|
|
|
Present value of minimum lease payments (net of $2 with interest) |
|
$ |
3 |
|
|
|
|
|
At June 30, 2011, $0 ($3 at June 30, 2010) was included in Other long-term liabilities
representing the long-term portion of the present value of minimum lease payments, and $3 ($99 at
June 30, 2010) was included in Other accounts payable and accrued liabilities representing the
current portion of the present value of minimum lease payments. At June 30, 2011, the gross asset
totaled $118, with accumulated depreciation of $115.
61
Rental expense under operating leases amounted to approximately $7,089, $6,814 and $6,354 for
the years ended June 30, 2011, 2010 and 2009, respectively. Aggregate future annual rentals under
noncancellable operating leases for periods of more than one year at June 30, 2011 are as follows:
|
|
|
|
|
Fiscal Years Ending June 30, |
|
Amount |
|
|
|
(in thousands) |
|
2012 |
|
$ |
5,039 |
|
2013 |
|
$ |
3,249 |
|
2014 |
|
$ |
2,484 |
|
2015 |
|
$ |
1,860 |
|
2016 |
|
$ |
2,068 |
|
2017 and thereafter |
|
$ |
2,584 |
|
Note 18 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 years ended June 30, 2011, 2010 and 2009,
the Company paid $246, $139 and $95, respectively to Mr. Fortenbaugh for legal services rendered.
Akira Hara, a former Director of the Company, is currently a strategic advisor to the Company
and through September 19, 2011 was Chairman of Baldwin Japan Limited, a wholly-owned subsidiary of
the Company. Mr. Hara, as strategic advisor, received compensation of approximately $49 for the
fiscal year ended June 30, 2011. In addition, Mr. Hara receives 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
$183 (See Note 13).
Note 19 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. 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 and in addition to the percentage of revenue
discussed above.
|
|
|
|
|
|
|
Warranty Amount |
|
|
|
(in thousands) |
|
Warranty reserve at June 30, 2009 |
|
$ |
2,626 |
|
Additional warranty expense accruals |
|
|
2,271 |
|
Additional warranty reserve related to Nordson acquisition |
|
|
240 |
|
Payments against reserve |
|
|
(3,085 |
) |
Effects of currency rate fluctuations |
|
|
(53 |
) |
|
|
|
|
Warranty reserve at June 30, 2010 |
|
$ |
1,999 |
|
Warranty expense accruals |
|
|
2,445 |
|
Payments against reserve |
|
|
(2,649 |
) |
Effects of currency rate fluctuations |
|
|
328 |
|
|
|
|
|
Warranty reserve at June 30, 2011 |
|
$ |
2,123 |
|
|
|
|
|
Note 20 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
62
on its results of operations, financial position or cash flows; however, there can be no
assurances that an adverse determination would not have a material adverse effect on the Company.
On September 24, 2009, the Company and technotrans AG (Technotrans) agreed to an
out-of-court settlement to terminate proceedings that have been continuing for a number of years in
connection with the infringement of a Baldwin patent. Under the agreement, technotrans paid to the
Company Euro 6.5 million (approximately $9.6 million) and the Company agreed to dismiss its claim
for damages.
Note 21: Subsequent Event:
On October 13, 2011, the Company entered into Amendment No. 11 to the Credit Agreement (Amendment
No. 11) with BofA (See Note 9).
Note 22 Additional Balance Sheet Detail
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2011 |
|
|
As of June 30, 2010 |
|
Other Accounts Payable and Accrued Liabilities |
|
(in thousands) |
|
Warranty (see Note 19 - Warranty Costs) |
|
$ |
2,123 |
|
|
$ |
1,999 |
|
Commissions |
|
|
351 |
|
|
|
329 |
|
Restructuring reserve (see Note 14 - Restructuring) |
|
|
2,000 |
|
|
|
897 |
|
Professional fees |
|
|
584 |
|
|
|
518 |
|
Health insurance |
|
|
818 |
|
|
|
721 |
|
VAT tax payable |
|
|
574 |
|
|
|
531 |
|
Severance accrual |
|
|
674 |
|
|
|
|
|
U.K. dilapidations |
|
|
403 |
|
|
|
|
|
Other |
|
|
3,992 |
|
|
|
3,506 |
|
|
|
|
|
|
|
|
|
|
$ |
11,519 |
|
|
$ |
8,501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2011 |
|
|
As of June 30, 2010 |
|
Other Long-Term Liabilities |
|
(in thousands) |
|
Non-current income tax liabilities (see Note 10) |
|
$ |
1,404 |
|
|
$ |
3,726 |
|
Supplemental compensation (see Note 13) |
|
|
7,228 |
|
|
|
7,597 |
|
Phantom equity |
|
|
|
|
|
|
252 |
|
Warrants |
|
|
863 |
|
|
|
|
|
Other |
|
|
386 |
|
|
|
852 |
|
|
|
|
|
|
|
|
|
|
$ |
9,881 |
|
|
$ |
12,427 |
|
|
|
|
|
|
|
|
63
Note 23 Quarterly Financial Data (unaudited):
Summarized unaudited quarterly financial data for the fiscal years ended June 30, 2011 and
2010 are as follows (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter |
|
Fiscal Year Ended June 30, 2011 |
|
First |
|
|
Second |
|
|
Third |
|
|
Fourth |
|
Net sales |
|
$ |
39,998 |
|
|
$ |
41,264 |
|
|
$ |
36,443 |
|
|
$ |
43,194 |
|
Cost of goods sold |
|
|
27,649 |
|
|
|
28,630 |
|
|
|
25,972 |
|
|
|
31,605 |
|
Gross profit (1) |
|
|
12,349 |
|
|
|
12,634 |
|
|
|
10,471 |
|
|
|
11,589 |
|
Operating expenses (2) |
|
|
12,898 |
|
|
|
12,242 |
|
|
|
11,920 |
|
|
|
13,406 |
|
Restructuring (3) |
|
|
191 |
|
|
|
417 |
|
|
|
2,114 |
|
|
|
244 |
|
Interest expense, net |
|
|
540 |
|
|
|
495 |
|
|
|
656 |
|
|
|
442 |
|
Other (income) expense, net |
|
|
171 |
|
|
|
(24 |
) |
|
|
50 |
|
|
|
(85 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before income
taxes |
|
|
(1,451 |
) |
|
|
(496 |
) |
|
|
(4,269 |
) |
|
|
(2,418 |
) |
Provision (benefit) for income taxes (4) |
|
|
(489 |
) |
|
|
(859 |
) |
|
|
(1,392 |
) |
|
|
6,248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
$ |
(962 |
) |
|
$ |
363 |
|
|
$ |
(2,877 |
) |
|
$ |
(8,666 |
) |
Discontinued operations, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from discontinued operations |
|
|
(111 |
) |
|
|
(123 |
) |
|
|
(1,688 |
) |
|
|
(541 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(1,073 |
) |
|
$ |
240 |
|
|
$ |
(4,565 |
) |
|
$ |
(9,207 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income per share from continuing operations |
|
$ |
(0.06 |
) |
|
$ |
0.02 |
|
|
$ |
(0.18 |
) |
|
$ |
(0.55 |
) |
(Loss) income per share from discontinued operations |
|
$ |
(0.01 |
) |
|
$ |
0.00 |
|
|
$ |
(0.11 |
) |
|
$ |
(0.04 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income per share |
|
$ |
(0.07 |
) |
|
$ |
0.02 |
|
|
$ |
(0.29 |
) |
|
$ |
(0.59 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income per share from continuing operations |
|
$ |
(0.06 |
) |
|
$ |
0.02 |
|
|
$ |
(0.18 |
) |
|
$ |
(0.55 |
) |
(Loss) income per share from discontinued operations |
|
$ |
(0.01 |
) |
|
$ |
0.00 |
|
|
$ |
(0.11 |
) |
|
$ |
(0.04 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income per share |
|
$ |
(0.07 |
) |
|
$ |
0.02 |
|
|
$ |
(0.29 |
) |
|
$ |
(0.59 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
15,568 |
|
|
|
15,604 |
|
|
|
15,640 |
|
|
|
15,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
15,568 |
|
|
|
15,981 |
|
|
|
15,640 |
|
|
|
15,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
First quarter includes a charge of $243 related to inventory step up. |
|
(2) |
|
First quarter includes CEO termination costs of $878. Third quarter
includes CFO termination costs of $128 and investigation costs of
$130. Fourth quarter includes $350 of internal control investigation
costs. |
|
(3) |
|
See Note 13 regarding details of restructuring expenses. |
|
(4) |
|
Fourth quarter reflects recording of additional valuation allowance. |
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter |
|
Fiscal Year Ended June 30, 2010 |
|
First |
|
|
Second |
|
|
Third |
|
|
Fourth |
|
Net sales |
|
$ |
33,504 |
|
|
$ |
36,714 |
|
|
$ |
36,977 |
|
|
$ |
31,404 |
|
Cost of goods sold |
|
|
23,677 |
|
|
|
25,511 |
|
|
|
25,722 |
|
|
|
22,318 |
|
Gross profit |
|
|
9,827 |
|
|
|
11,203 |
|
|
|
11,255 |
|
|
|
9,086 |
|
Operating expenses (2) |
|
|
11,723 |
|
|
|
11,242 |
|
|
|
10,742 |
|
|
|
11,443 |
|
Restructuring (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
540 |
|
Legal settlement gain |
|
|
9,266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on bargain price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,960 |
|
Interest expense, net |
|
|
1,715 |
|
|
|
485 |
|
|
|
426 |
|
|
|
432 |
|
Other (income) expense, net |
|
|
176 |
|
|
|
25 |
|
|
|
66 |
|
|
|
139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income
taxes |
|
|
5,479 |
|
|
|
(549 |
) |
|
|
21 |
|
|
|
(508 |
) |
Provision (benefit) for income taxes |
|
|
1,778 |
|
|
|
(29 |
) |
|
|
(4 |
) |
|
|
(808 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
$ |
3,701 |
|
|
$ |
(520 |
) |
|
$ |
25 |
|
|
$ |
300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from discontinued operations |
|
|
197 |
|
|
|
104 |
|
|
|
108 |
|
|
|
(38 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
3,898 |
|
|
$ |
(416 |
) |
|
$ |
133 |
|
|
$ |
262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income per share from continuing operations |
|
$ |
0.24 |
|
|
$ |
(0.03 |
) |
|
$ |
0.00 |
|
|
$ |
0.02 |
|
(Loss) income per share from discontinued operations |
|
$ |
0.01 |
|
|
$ |
0.00 |
|
|
$ |
0.01 |
|
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income per share |
|
$ |
0.25 |
|
|
$ |
(0.03 |
) |
|
$ |
0.01 |
|
|
$ |
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income per share from continuing operations |
|
$ |
0.24 |
|
|
$ |
(0.03 |
) |
|
$ |
0.00 |
|
|
$ |
0.02 |
|
(Loss) income per share from discontinued operations |
|
$ |
0.01 |
|
|
$ |
0.00 |
|
|
$ |
0.01 |
|
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income per share |
|
$ |
0.25 |
|
|
$ |
(0.03 |
) |
|
$ |
0.01 |
|
|
$ |
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
15,380 |
|
|
|
15,461 |
|
|
|
15,526 |
|
|
|
15,477 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
15,427 |
|
|
|
15,461 |
|
|
|
15,562 |
|
|
|
15,524 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
See Note 14 regarding details of restructuring expense |
|
(2) |
|
First quarter includes $911 of costs related to a special
investigation into violation of the Companys internal control
procedures. Fourth quarter includes costs of $330 associated with the
Nordson acquisition and $250 for bank amendment fees. |
|
|
|
Item 9. |
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures |
None.
|
|
|
Item 9A. |
|
Controls and Procedures |
(a) Evaluation of disclosure controls and procedures
The Company maintains disclosure controls and procedures that are designed to ensure that
information required to be disclosed in the Companys reports under the Exchange Act of 1934, as
amended (the Exchange Act) is recorded, processed, summarized and reported within the time
periods specified in the SECs rules and forms, and that such information is accumulated and
communicated to management, including the Companys Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required disclosure. The Companys
management, with participation of the Companys Chief Executive Officer and Chief Financial
Officer, conducted an evaluation of the effectiveness of the Companys disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period
covered by this Annual Report on Form 10-K.
65
Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures were effective as of June 30, 2011.
(b) Managements report on internal controls over financial reporting
The management of the Company is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act. The Companys internal control over financial reporting is designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting
principles. The Companys internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the Company are being made only in accordance with authorizations of management and
directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the Companys assets that could have
a material effect on financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Therefore, even those systems determined to be effective can provide only
reasonable assurance with respect to financial statement preparation and presentation. Also,
projections of any evaluation and 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 of the Company may deteriorate.
Management conducted an evaluation of the effectiveness of internal control over financial
reporting as of June 30, 2011 based on the framework in Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Managements
assessment included an evaluation of the design of the Companys internal control over financial
reporting and testing the effectiveness of the Companys internal control over financial reporting.
Based on our evaluation, we concluded that our internal control over financial reporting was
effective as of June 30, 2011.
(c) Changes in internal control over financial reporting
A material weakness is a control deficiency, or combination of control deficiencies, that
result in more than a remote likelihood that a material misstatement of the annual or interim
financial statements will not be prevented or detected. As more fully described in the Form 10 K/A
for the year ended June 30, 2010 filed May 23, 2011, the Company reported a material weakness in
the control environment at its Japanese operations. As a result, established revenue recognition,
purchase and expense policies and related internal controls at the Companys Japanese subsidiary
were overridden and intentionally circumvented by local management. Specifically, existing policies
and controls were violated as revenue was recorded prior to shipments of goods or completion of
installation services and related costs were recorded prior to receipt of materials and components
As a result of the material weakness the Company concluded that disclosure control and procedures
and internal control over financial reporting were not effective as of June 30, 2010.
As previously disclosed in the Form 10-K/A for the year ended June 30, 2010, in August 2010,
the former President of the Companys Japanese operations left the Company and in March 2011, the
Company hired a new President for its Japanese subsidiary.
In addition, during the fourth quarter of the fiscal year ended June 30, 2011 management took
various actions to strengthen disclosure and control procedures and internal control over financial
reporting at its Japanese and other subsidiaries. The following remediation activities were
performed:
|
|
|
Appropriate disciplinary actions were taken against employees in Japan involved in the
violations. |
|
|
|
A quarterly process was implemented for management of the individual subsidiaries to
review and validate the appropriateness of revenue recognition with corporate management. |
|
|
|
Additional training was conducted on the revenue recognition and purchase processes at
all subsidiaries to |
66
|
|
|
ensure that expectations are fully communicated and understood
throughout the Company. |
|
|
|
Conducted updated training with respect to Baldwins Code of Conduct and Business Ethics
policy and required annual written confirmation from each employee of their understanding
and adherence to this policy. |
|
|
|
Improved the communication surrounding, and encouraged the use of the Companys
whistleblower program to ensure that any issues, such as those that led to the material
weaknesses, are reported in a more timely manner. |
Also, during the fiscal year ended June 30, 2011, the Company made significant senior level
and other management changes and other organizational changes. In October 2010, the Company hired a
new Chief Executive Officer. In December 2010, under the leadership of the new CEO, the Company
made significant organizational changes including transforming the Company from a country-based
group of silo organizations, with local managements and local focus, to a globally integrated
organization with multiple leaders having global responsibility managing the Companys business
units with improved reporting and personal accountabilities. Additionally, in April 2011, the
Company hired a new Chief Financial Officer. The Company believes that these senior management and
organizational changes have contributed significantly to remediation of the issues identified at
its Japanese subsidiary.
Except as noted above, there was no change in the Companys internal control over financial
reporting that occurred in the fourth quarter ended June 30, 2011, that materially affected, or is
reasonably likely to materially affect, the Companys internal control over financial reporting.
|
|
|
Item 9B. |
|
Other Information |
On May 16, 2011 the Company entered into Waiver and Amendment No. 10 to the Credit Agreement
(Amendment No. 10) with BofA as agent and the other lenders. Under the terms of Amendment No. 10,
the Company issued to each of the Companys three lenders Warrants with a term of ten years to
purchase an aggregate of 372,374 shares of the Companys Class A Common Stock for a purchase price
of $0.01 per share (the 2011 Warrants). The 2011 Warrants also contain a put provision that
enables the holders thereof after May 16, 2 013 to request a cash settlement equal to the fair
market value of the Warrants in an amount not to exceed $1.50 per share. Neither the 2011 Warrants
nor the shares of Class A Common Stock issuable upon the exercise of the 2011 Warrants have been
registered under the Securities Act in reliance upon the exemption from registration afforded by
Section 4(2) of the Securities Act.
On October 13, 2011, the Company entered into Amendment No. 11 to the Credit Agreement
(Amendment No. 11) with certain lenders and BofA as agent. Among other things, Amendment No. 11
(i) extended the maturity date of the revolving Credit Agreement from November 21, 2011 to July 2,
2012, (ii) adjusted the interest payment provisions pursuant to which euro and U.S. dollar
borrowings bear interest at LIBOR plus 7.50%, and (iii) increased the incremental interest rate for
the deferred interest to be paid at maturity. As part of the consideration for Amendment No. 11,
the Company will (a) pay the Lenders a potential fee of $1,100 as follows: $200 upon signing of
Amendment No. 11, and scheduled weekly installments ranging from $200 to $50 beginning February
10, 2012 through April 20, 2012 unless the Credit Agreement is fully refinanced prior to the
payment due dates, in which case any remaining payments will be waived, (b) grant to the Lenders
ten year Warrants to purchase an aggregate of 434,200 shares of Class A Common Stock of the Company
at an exercise price of $0.01 per share, with a put provision exercisable after two (2) years that
enables the holder to request a cash settlement equal to the then fair market value of the Warrants
in an amount not to exceed $1.50 per share for each share issuable upon the exercise of the
Warrants (the October 2011 Warrants); and (c) if the Credit Agreement is not refinanced prior to
certain scheduled dates, the Company may grant to the Lenders additional ten year Warrants in four
monthly installments beginning March 1, 2012 and on the first day of each month through June 1,
2012, to purchase an aggregate of 1,592,067 shares of Class A Common Stock of the Company (equal to
an amount not to exceed 20 percent of the issued and outstanding shares of Class A Common Stock of
the Company on September 27, 2010) each at an exercise price of $0.01 per share, and each with a
put provision exercisable after two (2) years that enables the holder to request a cash settlement
equal to the then fair market value of the Warrants in an amount not to exceed $1.50 per share for
each share issuable upon the exercise of the Warrants.
The Credit Agreement, as amended by Amendment No 11, continues to require that the Company
satisfy certain minimum EBITDA, Minimum Currency Adjusted Net Sales, Capital Expenditures, and
Minimum Liquidity tests. The Company anticipates that it will be in compliance with these
covenants for the remainder of the term of the Credit Agreement.
PART III
Items 10, 11, 12, 13, 14
Information required under these items is contained in the Companys 2011 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.
67
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:
|
|
|
|
|
|
|
Page |
|
Schedule II Valuation and Qualifying Accounts |
|
|
73 |
|
All other schedules are omitted because they are not applicable or the required information is
shown in the financial statements or notes thereto.
(a)(3) The following is a list of all exhibits filed as part of this Report:
INDEX TO EXHIBITS
|
|
|
3.1
|
|
Restated Certificate of Incorporation of the Company as filed with the Secretary of State of the
State of Delaware on November 4, 1986. Filed as Exhibit 3.1 to the Companys registration
statement (No. 33-10028) on Form S-1 and incorporated herein by reference. |
|
3.2
|
|
Certificate of Amendment of the Certificate of Incorporation of the Company as filed with the
Secretary of State of the State of Delaware on November 21, 1988. Filed as Exhibit 3.2 to the
Companys Registration Statement (No. 33-26121) on Form S-1 and incorporated herein by reference. |
|
3.3
|
|
Certificate of Amendment of the Certificate of Incorporation of the Company as filed with the
Secretary of State of the State of Delaware on November 20, 1990. Filed as Exhibit 3.3 to the
Companys Report on Form 10-K for the fiscal year ended June 30, 1991 and incorporated herein by
reference. |
|
3.4
|
|
By-Laws of the Company 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. |
|
4.1
|
|
Form of Warrant to purchase shares of the Companys Class A Common Stock, dated as of September
28, 2010, issued to the Companys Lenders pursuant to Amendment No. 8 to the Companys Credit
Agreement (filed herewith). |
|
4.2
|
|
Form of Warrant to purchase shares of the Companys Class A Common Stock, dated as of May 23,
2011, issued to the Companys Lenders pursuant to Amendment No. 10 to the Companys Credit
Agreement (filed herewith). |
|
10.1*
|
|
Baldwin Technology Company, Inc. 1996 Stock Option Plan, as amended August 2002. Filed as Exhibit
A to the Baldwin Technology Company, Inc. 2002 Proxy Statement dated October 28, 2002 and
incorporated herein by reference. |
|
10.2*
|
|
Baldwin Technology Company, Inc. 1998 Non-Employee Directors Stock Option Plan. Filed as Exhibit
A to the Baldwin Technology Company, Inc. 1998 Proxy Statement dated October 15, 1998 and
incorporated herein by reference. |
|
10.3*
|
|
Baldwin Technology Company, Inc. 2005 Equity Compensation Plan as amended August 2008. Filed as
Exhibit A to the Companys 2008 Proxy Statement dated October 10, 2008 and incorporated herein by
reference. |
|
10.4*
|
|
Form of Restricted Stock Award Agreement between the Company and individuals granted Restricted
Stock Awards under the Companys 2005 Equity Compensation Plan, as amended. Filed as Exhibit 10.1
to the Companys Report on Form 8-K dated November 20, 2006 and incorporated herein by reference. |
|
10.5*
|
|
Form of Restricted Stock Unit Award Agreement between the Company and individuals granted
Restricted Stock Unit Awards under the Companys 2005 Equity Compensation Plan, as amended. Filed
as Exhibit 10.2 to the Companys Report on Form 8-K dated November 20, 2006 and incorporated
herein by reference. |
|
10.6*
|
|
Form of Grant Certificate issued by the Company to individuals granted stock options under the
Companys 2005 Equity Compensation Plan, as amended. Filed as Exhibit 10.8 to the Companys Report
on Form 10-K dated September 28, 2007 and incorporated herein by reference. |
68
|
|
|
10.7*
|
|
Form of Performance Share Award Agreement between the Company and individuals granted Performance
Share Awards under the Companys 2005 Equity Compensation Plan, as amended. Filed as Exhibit 10.7
to the Companys Report on Form 10-K dated September 28, 2009 and incorporated herein by
reference. |
|
10.8*
|
|
Baldwin Technology Company, Inc. 2009 Management Incentive Compensation Plan. Filed as Exhibit
10.11 to the Companys Report on Form 10-K dated September 29, 2008 and incorporated herein by
reference. |
|
10.9*
|
|
Baldwin Technology Company, Inc. 2010 Management Incentive Compensation Plan. Filed as Exhibit
10.11 to the Companys Report on Form 10-K dated September 28, 2009 and incorporated herein by
reference. |
|
10.10*
|
|
Baldwin Technology Company, Inc. 2011 Management Incentive Compensation Plan. Filed as an Exhibit
to the Companys Report on Form 10-K dated September 28, 2010 and incorporated herein by
reference. |
|
10.11
|
|
Baldwin Technology Company, Inc. Dividend Reinvestment Plan. Filed as Exhibit 10.49 to the
Companys Report on Form 10-K for the fiscal year ended June 30, 1991 and incorporated herein by
reference. |
|
10.12*
|
|
Employment Agreement dated December 19, 2008, amending and restating an earlier agreement dated
February 22, 2007, between Baldwin Technology Company, Inc. and John P. Jordan. Filed as Exhibit
10.26 to the Companys Report on Form 10-Q dated February 17, 2009 and incorporated herein by
reference. |
|
10.13*
|
|
Amendment dated January 29, 2009 to Employment Agreement between Baldwin Technology Company, Inc.
and John P. Jordan. Filed as Exhibit 10.30 to the Companys Report on Form 10-Q dated February 17,
2009 and incorporated herein by reference. |
|
10.14*
|
|
Baldwin Technology Profit Sharing and Savings Plan, as amended. Filed as Exhibit 10.53 to the
Companys Report on Form 10-K dated October 13, 2003 and incorporated herein by reference. |
|
10.15*
|
|
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 dated February 13, 2004 and incorporated herein by reference. |
|
10.16*
|
|
Amendment to Strategic Advisory Services Agreement dated as of September 25, 2008 between Baldwin
Technology Company, Inc. and Akira Hara. Filed as Exhibit 10.25 to the Companys Report on Form
10-K dated September 28, 2009 and incorporated herein by reference. |
|
10.17*
|
|
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 dated February 10, 2006 and incorporated
herein by reference. |
|
10.18
|
|
Credit Agreement dated as of November 21, 2006 by and among Baldwin Technology Company, Inc.,
Mainsee 431. VV GmbH (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
Report on Form 8-K dated November 28, 2006 and incorporated herein by reference. |
|
10.19
|
|
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 Report on Form 10-K dated as of September 28, 2007 and incorporated herein
by reference. |
|
10.20
|
|
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 dated February 14, 2008 and incorporated herein by reference. |
|
10.21
|
|
Modification and Limited Waiver Agreement dated as of March 31, 2009 among Baldwin Technology
Company, Inc., Baldwin Germany Holding GmbH, Baldwin Germany GmbH, Baldwin Oxy-Dry GmbH, the other
Credit Parties party thereto, Bank of America, N.A., as a Lender and as Administrative Agent, and
the other Lenders party thereto. Filed as Exhibit 10.33 to the Companys Report on Form 8-K dated
April 6, 2009 and incorporated herein by reference. |
|
10.22
|
|
Amended and Restated Modification and Limited Waiver Agreement dated as of May 15, 2009 among
Baldwin Technology Company, Inc., Baldwin Germany Holding GmbH, Baldwin Germany GmbH, Baldwin
Oxy-Dry GmbH, the other Credit Parties thereto, Bank of America, N.A., as a Lender and as
Administrative Agent, and the other Lenders party thereto. Filed as Exhibit 10.34 to the Companys
Report on Form 10-Q dated May 15, 2009 and incorporated herein by reference. |
|
10.23
|
|
Waiver and Amendment No. 5 to Credit Agreement dated as of July 31, 2009 among Baldwin Technology
Company, Inc., Baldwin Germany Holding GmbH, Baldwin Germany GmbH, Baldwin Oxy-Dry GmbH, the |
69
|
|
|
|
|
other
Credit Parties party thereto, Bank of America, N.A., as a Lender and as Administrative Agent and
the other Lenders party thereto. Filed as Exhibit 10.33 to the Companys Report on Form 10-K dated
September 29, 2009 and incorporated herein by reference. |
|
10.24*
|
|
Employment Agreement effective July 1, 2009 between Baldwin Germany GmbH and Dr. Steffen Weisser.
Filed as Exhibit 10.34 to the Companys Report on Form 10-K dated September 29, 2009 and
incorporated herein by reference. |
|
10.25*
|
|
Employment Agreement effective July 1, 2009 between Baldwin Jimek AB and Peter Hultberg. Filed as
Exhibit 10.35 to the Companys Report on Form 10-K dated September 29, 2009 and incorporated
herein by reference. |
|
10.26
|
|
Waiver and Amendment No. 6 to Credit Agreement dated as of May 12, 2010 among Baldwin Technology
Company, Inc., Baldwin Germany Holding GmbH, Baldwin Germany GmbH, Baldwin Oxy-Dry GmbH, the other
Credit Parties party thereto, Bank of America, N.A., as a Lender and as Administrative Agent, and
the other Lenders party thereto. Filed as Exhibit 10.1 to the Companys Report on Form 10-Q dated
May 17, 2010 and incorporated herein by reference. |
|
10.27
|
|
Waiver and Amendment No. 7 to Credit Agreement dated as of June 9, 2010 among Baldwin Technology
Company, Inc., Baldwin Germany Holding GmbH, Baldwin Germany GmbH, Baldwin Oxy-Dry GmbH, the other
Credit Parties party thereto, Bank of America, N.A., as a Lender and as Administrative Agent, and
the other Lenders party thereto. Filed as Exhibit 10.1 to the Companys Report on Form 8-K dated
June 14, 2010 and incorporated herein by reference. |
|
10.28
|
|
Stock Purchase Agreement by and between Nordson Corporation and Baldwin Technology Company, Inc.
and Baldwin Americas Corporation and Baldwin Europe Consolidated BV dated June 9, 2010. Filed as
an Exhibit to the Companys Report on Form 10-K dated September 28, 2010 and incorporated herein
by reference. |
|
10.29*
|
|
Amended and Restated Employment Agreement dated June 19, 2010 between Baldwin Technology Company,
Inc. and Karl S. Puehringer. Filed as Exhibit 10.1 to the Companys Report on Form 8-K dated June
24, 2010 and incorporated herein by reference. |
|
10.30*
|
|
Contract for Chairman of the Board between Baldwin Technology Company, Inc. and Gerald A. Nathe
dated June 15, 2010. Filed as Exhibit 10.1 to Companys Report on Form 8-K dated July 7, 2010 and
incorporated herein by reference. |
|
10.31
|
|
Advisory Agreement dated July 8, 2010 between Baldwin Technology Company, Inc. and OBX Partners
LLC. Filed as Exhibit 10.1 to the Companys Report on Form 8-K dated July 14, 2010 and
incorporated herein by reference. |
|
10.32
|
|
Amendment No. 8 to Credit Agreement dated as of September 28, 2010 among Baldwin Technology
Company, Inc., Baldwin Germany Holding GmbH, Baldwin Germany GmbH, Baldwin Oxy-Dry GmbH, the other
Credit Parties party thereto, Bank of America, N.A., as a Lender and as Administrative Agent, and
the other Lenders party thereto. Filed as Exhibit 10.35 to the Companys Report on Form 10-K dated September 28, 2010 and incorporated herein by reference. |
|
10.33*
|
|
Termination Agreement between Baldwin Technology Company, Inc. and Karl S. Puehringer dated
September 30, 2010. Filed as Exhibit 10.1 to the Companys Report on Form 8-K dated October 5,
2010 and incorporated herein by reference. |
|
10.34*
|
|
Employment Agreement between Baldwin Technology Company, Inc. and Mark T. Becker dated January 5,
2011. Filed as Exhibit 10.1 to the Companys Report on Form 8-K dated January 10, 2011 and
incorporated herein by reference. |
|
10.35*
|
|
Plan Option Grant Certificate to Mark T. Becker. Filed as Exhibit 10.2 to the Companys Report on
Form 8-K dated January 10, 2011 and incorporated herein by reference. |
|
10.36*
|
|
Non-Plan Option Grant Certificate to Mark T. Becker. Filed as Exhibit 10.3 to the Companys
Report on Form 8-K dated January 10, 2011 and incorporated herein by reference. |
|
10.37*
|
|
Amendment to Employment Agreement between Baldwin Technology Company, Inc. and John P. Jordan
dated January 3, 2011. Filed as Exhibit 10.4 to the Companys Report on Form 8-K dated January
10, 2011 and incorporated herein by reference. |
|
10.38*
|
|
Amendment to Employment Agreement between Baldwin Jimek AB and Peter Hultberg dated January 3,
2011. Filed as Exhibit 10.5 to the Companys Report on Form 8-K dated January 10, 2011 and
incorporated herein by reference. |
|
10.39*
|
|
Amendment to Employment Agreement between Baldwin Germany GmbH and Steffen Weisser dated January
3, 2011. Filed as Exhibit 10.6 to the Companys Report on Form 8-K dated January 10, 2011 and
incorporated herein by reference. |
70
|
|
|
10.40*
|
|
Employment Agreement between Baldwin Jimek AB and Birger Hansson dated January 12, 2006. Filed as
Exhibit 10.7 to the Companys Report on Form 8-K dated January 10, 2011 and incorporated herein by
reference. |
|
10.41*
|
|
Amendment to Employment Agreement between Baldwin Jimek AB and Birger Hansson dated January 3,
2011. Filed as Exhibit 10.8 to the Companys Report on Form 8-K dated January 10, 2011 and
incorporated herein by reference. |
|
10.42*
|
|
Separation Agreement between Baldwin Technology Company, Inc. and John P. Jordan dated February
16, 2011. Filed as Exhibit 10.1 to the Companys Report on Form 8-K dated February 22, 2011 and
incorporated herein by reference. |
|
10.43*
|
|
Employment Agreement between Baldwin Technology Company, Inc. and Ivan R. Habibe effective April
4, 2011. Filed as Exhibit 10.01 to the Companys Report on Form 8-K dated March 24, 2011 and
incorporated herein by reference. |
|
10.44
|
|
Amendment No. 9 to Credit Agreement dated as of September 29, 2010 among Baldwin Technology
Company, Inc., Baldwin Germany Holding GmbH, Baldwin Germany GmbH, Baldwin Oxy-Dry GmbH, the other
Credit Parties party thereto, Bank of America, N.A., as Lender and as Administrative Agent, and
the other Lenders party thereto. Filed as Exhibit 10.3 to the Companys Quarterly Report on Form
10-Q dated November 15, 2010 and incorporated herein by reference. |
|
10.45
|
|
Waiver and Amendment No. 10 to Credit Agreement, dated as of May 16, 2011, among Baldwin
Technology Company, Inc. and certain of its subsidiaries, Bank of America, N.A. and certain other
Lenders. Filed as Exhibit 10.1 to the Companys Quarter Report on Form 10-Q dated May 23, 2011
and incorporated herein by reference. |
|
10.46*
|
|
Amendment No. 1 to Contract for Chairman of the Board signed on November 16, 2010 (filed herewith). |
|
18.
|
|
Preferability Letter dated September 28, 2009 from Grant Thornton LLP, the Companys registered
independent accounting firm, filed as Exhibit 18 to the Companys Report on Form 10-K dated
September 29, 2009 and incorporated herein by reference. |
|
21.
|
|
List of Subsidiaries of Registrant (filed herewith). |
|
23.
|
|
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
(furnished herewith). |
|
32.02
|
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
(furnished herewith). |
|
|
|
* |
|
Management contract or compensatory plan or arrangement. |
71
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
|
|
|
|
|
BALDWIN TECHNOLOGY COMPANY, INC.
(Registrant)
|
|
|
By: |
/s/ MARK T. BECKER
|
|
|
|
Mark. T. Becker |
|
|
|
President and Chief Executive Officer
(Principal Executive Officer) |
|
|
Dated: October 13, 2011
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
|
|
October 13, 2011 |
|
/s/ MARK T. BECKER
Mark T. Becker
|
|
President, Chief Executive Officer and a Director
(Principal Executive Officer)
|
|
October 13,
2011 |
|
/s/ IVAN R. HABIBE
Ivan R. Habibe
|
|
Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)
|
|
October 13,
2011 |
|
/s/ LEON RICHARDS
Leon Richards
|
|
Controller
(Principal Accounting Officer)
|
|
October 13, 2011 |
|
/s/ PAUL J. GRISWOLD
Paul J. Griswold
|
|
Director
|
|
October 13, 2011 |
|
/s/ ROLF BERGSTROM
Rolf Bergstrom
|
|
Director
|
|
October 13, 2011 |
|
/s/ SAMUEL B. FORTENBAUGH III
Samuel B. Fortenbaugh III
|
|
Director
|
|
October 13, 2011 |
|
/s/ RONALD B. SALVAGIO
Ronald B. Salvagio
|
|
Director
|
|
October 13, 2011 |
|
/s/ CLAES WARNANDER
Claes Warnander
|
|
Director
|
|
October 13, 2011 |
72
SCHEDULE II
BALDWIN TECHNOLOGY COMPANY, INC
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
Charged to |
|
|
|
|
|
|
|
|
|
|
Balance |
|
|
|
Beginning |
|
|
Costs and |
|
|
|
|
|
|
|
|
|
|
at End of Fiscal |
|
|
|
of Fiscal Year |
|
|
Expenses |
|
|
Deduction |
|
|
Acquired Balances |
|
|
Year |
|
Fiscal year
ended June 30, 2011
Allowance for
doubtful accounts
(deducted from
accounts
receivable) |
|
$ |
1,154 |
|
|
$ |
651 |
|
|
$ |
407 |
|
|
$ |
|
|
|
$ |
1,398 |
|
Fiscal year ended
June 30, 2010
Allowance for
doubtful accounts
(deducted from
accounts
receivable) |
|
$ |
1,698 |
|
|
$ |
634 |
|
|
$ |
1,354 |
|
|
$ |
176 |
|
|
$ |
1,154 |
|
Fiscal year ended
June 30, 2009
Allowance for
doubtful accounts
(deducted from
accounts
receivable) |
|
$ |
1,180 |
|
|
$ |
857 |
|
|
$ |
339 |
|
|
$ |
|
|
|
$ |
1,698 |
|
73