Baldwin Technology

Baldwin Announces Results for the Fiscal Third Quarter Ended March 31

Baldwin Technology Company, Inc. (NYSE Amex: BLD), a global leader in process automation technology for the printing industry, today reported financial results for its fiscal third quarter ended March 31, 2011.

• Orders up 19% compared to the third quarter of prior year
• Backlog increased 15% over prior quarter
• Reorganized operations and reduced global headcount by 9%
• Restated financials for Fiscal 2010 and Q1 and Q2 of Fiscal 2011 to be filed
• Ivan R. Habibe elected Vice President and CFO effective April 4, 2011
• New President of Baldwin Japan appointed effective March 16, 2011

Third Quarter Financial Results

The Company reported net sales of $36.4 million for the third quarter, a 1.4% decline compared to net sales of $37.0 million for the third quarter of the prior fiscal year. Currency effects increased sales by $1.1 million, or 3.1% from the same quarter of the prior year. Sales from the entities acquired on June 30, 2010 contributed $3.6 million. Orders for the quarter were approximately $43 million, compared to approximately $36 million in the third quarter of the prior year, an increase of 19%. Backlog as of March 31, 2011 was $39 million compared to $34 million at December 31, 2010.

Net loss from continuing operations was $2.9 million or $0.18 per diluted share, compared to net income from continuing operations of $25,000 or $0.0 per diluted share for the third quarter of Fiscal 2010.

EBITDA, a non-GAAP financial measure, after adjustment for restructuring costs recorded during the quarter was a loss of $0.9 million, compared to EBITDA of $1.0 million for the same quarter of the prior year. Cash flow from operations in the quarter was a use of $1.7 million compared to a use of $0.6 million in the third quarter of the prior year.

Please refer to the attached schedule, “Non-GAAP Statements of Operations,” for a reconciliation of GAAP results to adjusted results.


On April 5, 2011, the Company announced a strategic reorganization of the Company’s operations and a 9% reduction in global employment levels. The total cost of implementing the Q3 FY2011 restructuring plan will be approximately $2.4 million and will result in an annual savings of approximately $5 million. Coupled with actions taken earlier in the current fiscal year, the total impact of all restructurings is expected to result in savings of over $6.6 million annually.

Discontinued Operations

Additionally, on April 5, 2011, the Company announced the planned exit of its U.S. food blending and packaging business (which currently represents approximately 3% of total annual revenues). The Company has classified its non-core food blending and packaging business as discontinued operations. In connection with the exit of that business, the Company recorded an impairment of goodwill and other intangible assets in the third quarter of approximately $2.5 million. Information presented for both current and prior year periods in the financial statements has been modified to reflect the discontinued operations.


On May 10, 2011, Baldwin filed a current report on Form 8-K indicating that the Company’s financial statements for the year ended June 30, 2010, for the quarter ended September 30, 2010 and for the quarter ended December 31, 2010 should no longer be relied upon due to errors in the financial statements relating to improper cut-off of revenue in June 2010. The Company intends to file amendments to its Annual Report on Form 10-K for the year ended June 30, 2010, to its Quarterly Report on Form 10-Q for the quarter ended September 30, 2010 and to its Quarterly Report on Form 10-Q for the quarter ended December 31, 2010 as soon as practicable to reflect these adjustments. This earnings release reflects the expected impact of these adjustments to the nine months ended March 31, 2011.

The restatement of the abovementioned financial statements was necessary to reverse the recognition of certain sale transactions in the fourth quarter of fiscal 2010 at the Company’s Japanese operations and instead recognize these transactions in the first and second quarters of fiscal 2011 when the sales were actually completed. These accounting irregularities resulted in (i) an overstatement of net sales and operating income for the three months and year ended June 30, 2010 by $4.0 million and $2.0 million, respectively, (ii) an understatement of net sales and overstatement of operating loss in the three months ended September 30, 2010 by $3.4 million and $1.7 million, respectively, (iii) an understatement of net sales and overstatement of operating loss for the three months ended December 31, 2010 by $0.6 million and $0.3 million, respectively, and (iv) an understatement of net sales and overstatement of operating loss for the six months ended December 31, 2010 by $4.0 million and $2.0 million, respectively.

The Company has determined that the above-mentioned errors in its financial statements resulted from material weaknesses in the control environment for its internal control over financial reporting in its operations in Japan. The Company has taken steps to remediate the material weaknesses in place at June 30, 2010 which included management changes in Japan and the global organization. Additionally, management has implemented on a Company-wide basis enhanced and additional procedures that it expects will have an immediate effect on improving the Company’s internal control environment and its internal controls over financial reporting.

Investor Presentations

On May 3, 2011, President and CEO Mark T. Becker and Vice President and CFO Ivan R. Habibe gave a presentation on Baldwin at the 8th Annual Taglich Small Cap Investment Conference in New York City.


President and CEO Mark T. Becker said, “The restructuring we announced in early April is part of our strategic plan to better leverage our global platform and optimize our performance, with a goal of enhancing shareholder value. The facilities consolidation in Sweden and Germany will lower our cost structure and improve our ability to service Baldwin’s global customers. The headcount reduction was required to continue to right-size our employment costs for current sales levels and further growth expected in 2012. Finally, the toll-manufacturing food business acquired in 2006 as part of our purchase of the Oxy-Dry group of companies did not have the scale or structure to be competitive and would risk diverting cash from core growth businesses. By exiting this business, we will be able to focus our resources on profitable growth as part of our commitment to be an industry leader in equipment, consumables, parts and service for print media customers.”

“Our order trends continue to improve. Year to date, orders exceeded those received during the comparable nine-month period last year by 19%. Year to date sales are up 10% over prior year driven by strong equipment sales in the Americas and our UV systems offsetting slower economic recovery in printing equipment in other parts of the world. Based on the timing delays between when orders are received and when they are recorded as revenue, our strong Q2 and Q3 order book is expected to have a favorable impact on our fiscal fourth quarter and fiscal 2012 sales.”

“As indicated in our last earnings release, the debt due under the existing Bank of America credit agreement has been classified as current due to its maturity within one year. The Company did not meet its covenant targets for the third quarter; however, we are working closely with our banks to complete a current waiver in advance of filing the Company’s Quarterly Report on Form 10-Q for the third quarter. In addition, we are actively exploring refinancing options and we anticipate refinancing the Company’s credit facilities before the credit agreement matures in November 2011.” Becker concluded.

The Company’s new VP and CFO Ivan R. Habibe said, “Sales in the third quarter, excluding currency effect, decreased by $1.7 million or 4.5% compared to the same quarter of last year. Currency effects were favorable by $1.1 million, or 3.1%, compared to the same quarter of the prior year. The UV business acquisition contributed net sales of approximately $3.6 million during the quarter ended March 31, 2011. The decline in sales was primarily attributable to continued weakness in equipment sales outside of the Americas, which was partially offset by the impact of sales from the UV business we acquired on June 30, 2010. Additionally, sales in the quarter were impacted by timing delays between when orders are received and when they are recorded as sales. We have seen an increase in order activity in recent quarters which we expect will have a favorable impact in our fiscal fourth quarter sales and fiscal 2012.”

“Year to date margins were flat at 30.1% compared to prior year. Gross margin for the third quarter of 28.7%, was lower than margins of 30.4% for the same quarter last year. The reduction in margin primarily reflects unabsorbed overhead as a function of lower equipment sales in the quarter as compared to prior year. Our ongoing margin initiatives, (global sourcing, manufacturing in lower cost countries and standardization of components and controls), combined with higher margin from the UV business, helped to partially offset lower margins from equipment sales outside of the Americas. We anticipate that these initiatives, coupled with the expected increase in sales in the fourth quarter, will contribute to margin growth.”

Habibe added, “Operating expenses, excluding restructuring, for the current quarter of $11.9 million were $1.2 million higher than the $10.7 million for the same quarter last year. Excluding the effect of currency of $0.4 million and $0.8 million in operating expenses in the quarter added from the acquired UV business, operating expenses were flat at $10.7 million. As a percentage of sales, operating expenses, excluding restructuring, was 32.7% compared to 29.1% in the prior year primarily attributable to lower equipment sales not leveraging our fixed costs. We expect that operating expenses as a percentage of sales will improve in the fourth quarter as we start realizing the impact of the restructuring we announced in early April and expected sales growth based on recent order trend.”

“We anticipate total headcount in the Company to reduce from 633 at March 31, 2011 to approximately 563 by June 30, 2011, an 11% reduction, primarily as a result of the restructuring we announced in early April 2011.” Habibe continued.

“Interest expense, net of interest income, for the quarter was $656 thousand, about $230 thousand higher than last year quarter interest expense of $426 thousand. The increase in interest expense was primarily attributable to higher average debt, interest on the Promissory Note from the acquired UV business and amortization of deferred financing costs.”

“We are very disappointed with the accounting irregularities which occurred in Japan at June 30, 2010 which are now causing the Company to restate its previously published financials. The existence of these material weaknesses in our control environment are unacceptable. We believe that the combination of changes in the management structure we have made in recent months, coupled with additional controls we have implemented, has improved our control environment and significantly enhanced the overall effectiveness of the Company’s internal controls.” concluded Habibe.

Non-GAAP Financial Measures

This release contains non-GAAP financial measures. For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statements of income, balance sheets, or statements of cash flows of the Company; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. Pursuant to the requirements of Regulation G, the Company has provided reconciliations of each of the non-GAAP financial measures contained herein to the most directly comparable GAAP financial measures. These non-GAAP measures are provided because management of the Company uses these financials measures as an indicator of business performance in maintaining and evaluating the Company’s 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 Company’s ongoing operations and liquidity and when planning and forecasting future periods. These non-GAAP measures also facilitate management’s internal comparisons to the Company’s historical operating results and liquidity.

Conference Call and Webcast

The Company will host a conference call to discuss the financial results and business outlook today at 11:00 AM Eastern Time. Call in information is below:

Conference Call Access:
Domestic: (888) 972-6405
International: (210) 234-0045
Passcode: Baldwin Q3

Rebroadcast Access:
Domestic: (866) 402-3771
International: (203) 369-0558

An archived webcast of the conference call will also be available on the Company’s web site or

Leading the call will be Baldwin President and CEO Mark T. Becker and Vice President and CFO Ivan R. Habibe.

To see the financial tables, please go here:

About Baldwin

Baldwin Technology Company, Inc. is a leading global supplier of process automation equipment and related parts and consumables for the printing and publishing industries. Baldwin offers its customers a broad range of market-leading technologies, products and systems that enhance the quality of printed products and improve the economic and environmental efficiency of printing presses. Headquartered in Shelton, CT, the Company has operations strategically located in the major print markets and distributes its products via a global sales and service infrastructure. Baldwin’s technology and products include cleaning systems, fluid management and ink control systems, web press protection systems, drying and curing systems and related consumables. For more information, visit

A profile for investors is available at An online investor kit including press releases, current price quotes, stock charts and other valuable information for investors is available at To receive free e-mail notification of future releases for Baldwin, sign up at

Cautionary Statement

Certain statements contained in this News Release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding expected revenue, gross margins, operating income (loss), EBITDA, asset impairments, expectations concerning the reductions of costs, the level of customer demand and the ability of the Company to achieve its stated objectives. Such forward-looking statements involve a number of known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to: the severity and length of the current economic downturn, the impact of the economic downturn on the availability of credit for the Company's customers, the ability of the Company to maintain ongoing compliance with the terms of its amended credit agreement, market acceptance of and demand for the Company's products and resulting revenue, the ability of the Company to successfully expand into new territories, the ability of the Company to meet its stated financial and operational objectives, the Company's dependence on its partners (both manufacturing and distribution), and other risks and uncertainties detailed in the Company's periodic filings with the Securities and Exchange Commission. The words "looking forward," "looking ahead, " "believe(s)," "should," "may," "expect(s)," "anticipate(s)," "project(s)," " likely," "opportunity," and similar expressions, among others, identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. The Company undertakes no obligation to update any forward-looking statements contained in this news release.