Baldwin Reports Loss on Revenue Decline
Monday, May 18, 2009
Press release from the issuing companySHELTON, Conn.-- Baldwin Technology Company, Inc. , a global leader in process automation technology for the printing industry, today reported its financial results for the company's fiscal third quarter ended March 31, 2009.
Year to date adjusted (non-GAAP) net income per share was $0.04 -- reported loss of ($0.77)
Adjusted (non-GAAP) net loss per share was ($0.10) in the quarter -- reported loss of ($0.88)
Reduced operating expenses (adjusted for one-time charges) in the quarter by $4.3 million or 27% compared to the comparable period of the prior year
Cash generated from operating activities in the quarter and fiscal year to date $2.8 million
Completed the implementation of additional restructuring initiatives including facility consolidation, capacity adjustments and closure of offices
Received positive final decision from the German Supreme Court in a patent dispute against a German competitor
Extended credit agreement waiver through July 31, 2009
Third Quarter and Year to Date FY2009 Results
The company reported third quarter FY2009 net sales of $36.1 million, compared to $59.2 million for the third quarter last year. Currency translation negatively impacted sales by $3.9 million for the quarter. Reported net loss for the quarter was ($13.4) million or ($0.88) per diluted share compared to net income of $2.0 million, or $0.13 per diluted share for the comparable period of the prior year.
Net sales for the nine months ended March 31, 2009 were $138.3 million compared to $171.1 million in the prior year period. Currency translation negatively impacted sales by $3.3 million for the nine month period. The net loss for the nine months was ($11.8) million or ($0.77) per diluted share, compared to net income of $3.3 million, or $0.21 per diluted share for the comparable period in the prior year.
The results of the quarter were negatively impacted by a goodwill impairment charge in the amount of $5.7 million, a restructuring charge of $4.1 million, an inventory write-off of $4.2 million and a write-off of accounts receivable in the amount of $0.5 million for a customer who is in Chapter 11 reorganization.
Adjusted for the non-cash charges mentioned above, the company reported a net loss of ($1.5) million or ($0.10) per basic and diluted share for the quarter compared to net income of $2.0 million or $0.13 per basic and diluted share in the prior year's third quarter. For the nine months ended March 31, 2009, adjusted net income was $0.6 million or $0.04 per basic and diluted share compared to net income of $4.0 million or $0.25 per basic and diluted share for the comparable prior year period. Please refer to the attached schedule, "Pro-forma non-GAAP Statements of Operations," for a reconciliation of GAAP results to adjusted results.
Backlog at the end of the quarter was $39.8 million, compared to a backlog of $48.2 million at the beginning of the fiscal year, and $45.3 million on December 31, 2008.
As a result of the company's cost reduction initiatives, operating expenses during the third quarter of FY2009 were reduced by $4.3 million (adjusted for one-time charges) or 27% versus the comparable quarter in the prior year. Approximately $1.1 million of the reduction was due to currency translation. During the third quarter, the company completed the consolidation of its production operations formerly located in Egelsbach, Germany, into its Friedberg facility. The company also closed its sales and service office in Italy, and made additional capacity adjustments in the U.S., Germany, Sweden, Japan and the UK.
As announced on April 22, 2009, the German Federal Supreme Court issued a favorable decision upholding the validity of a Baldwin patent that had been challenged by a competitor. Baldwin had previously prevailed in an infringement action on that patent and expects to win when the appeal to that action is heard next year. Baldwin intends to pursue its Euro 32.7 million ($46 million) claim for damages.
Credit Facility Agreement
Due to the restructuring and other adjustments recorded during the third quarter, the company was not in compliance with certain provisions of its credit agreement. The company has entered into an Amended and Restated Modification and Limited Waiver Agreement with Bank of America and the other lenders whereby the banks have agreed to a waiver of the non-compliance through July 31, 2009. The company is continuing discussions with its banks and expects to have a restructured credit agreement in place by July 31, 2009.
President and CEO, Karl S. Puehringer, commented, "We have responded quickly and aggressively to this challenging market environment by adjusting our capacities and successfully implementing several restructuring initiatives. Although we had a loss in the third quarter, we mitigated the impact of a significantly reduced market demand by adjusting our cost structures globally. In addition, we continue to focus on opportunities in emerging countries, and on leveraging our global brand and our exceptionally strong global footprint through alliances and the close business relationships we have with OEM press manufacturers."
Vice President and CFO, John P. Jordan, noted, "The reduction of accounts receivable associated with the lower sales levels was a major contributor to reduced working capital and operating cash flow. But we also continue our aggressive management of the components of working capital to generate positive cash flow from operations, resulting in an increase in our cash balance of $5.4 million from June 30, 2008. The additional provision for obsolescence in inventory resulted primarily from a change in the business model in the United States. The $5.7 million impairment charge was due to the recent macro economic conditions and diminished stock market valuation of the company. Long-term debt has been reclassified as short term on the balance sheet until an amended credit agreement is in place. We believe we have a good working relationship with our lenders, and we are discussing provisions of a permanent amendment with them. We expect to have that amendment in place by July 31."
Baldwin's financial tables are available at: http://www.hawkassociates.com/clients/press/full_news.cfm?client_id=22&news_id=1607.
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