Baldwin announces 7% increase in revenues
Thursday, February 11, 2010
Press release from the issuing company
Shelton, 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 second quarter ended December 31, 2009.
- Sequential increase in revenues of 7% to $38.8 million
- Sequential improvement in gross margin percentage from 28.8% to 30.1%
- EBITDA of $0.8 million
- Cash flow from operations of $10.8 million (includes $9.6 million patent settlement)
- Reduced net debt from $16 million to less than $6 million
- Leveraging Baldwin's brand equity in emerging countries [Cobra Spray Dampening]
Second quarter fiscal 2010 financial results
The Company reported net sales of $38.8 million for the second quarter, a 7% improvement over net sales of $36.2 million in the first quarter of fiscal 2010, and a decrease of $7.5 million from net sales of $46.3 million for the second quarter of the prior fiscal year. Currency effects increased sales by $2.9 million, or 6% from the same quarter of the prior year.
Net loss for the second quarter was $(0.4) million or $(0.03) per diluted share, compared to net income of $0.5 million or $0.03 per diluted share for the comparable quarter in the prior year.
Cash flow from operations in the quarter was $10.8 million compared to $2.1 million in the second quarter of the prior year, primarily as a result of the receipt of $9.6 million in settlement of the patent infringement lawsuit mentioned below.
Orders for the quarter were approximately $34.3 million, compared to $39.3 million in the second quarter of the prior year, a decrease of 13%. Backlog as of December 31, 2009 was $33.4 million compared to $37.8 million at September 30, 2009.
Please refer to the schedule following the reported GAAP results which shows a reconciliation of GAAP results to adjusted results, and the notes below explaining management's reasons for using certain non-GAAP financial measures.
Settled patent infringement case
The Company received €6.5 million ($9.6 million) during the second quarter in full settlement of a long-standing dispute with a German competitor concerning patent infringement, patent validity and the alleged amount of damages.
Improved balance sheet
Primarily as a result of the settlement discussed above, the Company's equity increased to $52.5 million at December 31, 2009 from $47.6 million at June 30, 2009. The proceeds from the settlement, net of taxes and expenses, were applied to the Company's term loan in Germany. Additional operating cash flow reduced net debt from $16.2 million on September 30 to $5.7 million on December 31.
Introduced new process automation systems and alliances at trade shows
In October, the Company showed a range of new process automation systems for the Asian marketplace at the Japanese Graphic Arts Show (JGAS) in Japan. Also in October, at IFRA Expo 09 in Austria, the Company announced its latest alliances with other leading manufacturers and continued the roll-out of its Just Ask! global marketing campaign, introduced at Print 09 in Chicago in September.
- Baldwin New Press Equipment Orders (October 26, 2009)
- Baldwin and PRISCO Extend Marketing Distribution Alliance (November 19, 2009)
- Baldwin Secures $1.2 million Order for Newspaper Press Equipment (December 8, 2009)
President and CEO Karl S. Puehringer said, "We have adjusted our cost structure to the current market demand and as such have been able to achieve a positive operating performance during the second quarter despite significantly lower volumes compared to a year ago. We are now diligently focused on leveraging Baldwin's brand equity through identified growth opportunities in emerging markets, as well as promotion of alliance partner products. I am especially pleased with the recent progress we made in India in China. During the second quarter, we received our first orders for Baldwin's newly introduced Cobra Spray Dampening System in both of those countries.
"Baldwin has also improved gross margins over the previous quarter. The sequential improvement in gross margins in a difficult marketplace resulted from the success of our supply chain initiatives. During the second quarter, we had a successful start up of our dry cloth conversion activities in China supplying local customers as well as the United States and Europe. Our centralized sourcing initiatives are also producing early results in spite of lower revenues. Due to a combination of efforts in diligent cost improvement and working capital management, we were able to produce positive operating income and cash flow during the second quarter. These efforts have also solidified our market position as a global leader in process automation technology and related consumables."
Vice President and CFO John P. Jordan said, "Cash flow from operations during the quarter was $10.8 million, primarily resulting from the proceeds of settlement of the long-standing patent dispute with a German competitor. Excluding the effect of the settlement in the face of a very challenging market, the Company's disciplined management of working capital generated operating cash flow of $1.2 million. Absolute values of accounts receivable and inventory, as well as DSO and DOI made healthy improvements from the September, 2009 levels.
"Net debt also decreased by more than $10 million from $16.2 million at September 30, 2009 to $5.7 million at December 31, 2009, as a result of the application of the settlement proceeds and internally-generated cash. Operating expenses (excluding restructuring charges in prior years) for the quarter of $11.6 million were $1.5 million (12%) lower than Q2 Fiscal 2009 OPEX, which in turn were lower than Q2 Fiscal 2008 OPEX by $2.5 million, or 16%, reflecting the benefits from the Company's restructurings and other cost reduction initiatives.
"The dedication and perseverance of the Baldwin team in these challenging times has enabled the Company to maintain compliance with its debt covenants and produce positive cash flow. When the world's economies recover from the recent economic contraction, the Company will be positioned to leverage its lower cost structure for enhanced profitability and cash flow." Jordan concluded.
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.
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.