Baldwin announces sales up 6% for Q1 over previous year
Friday, November 12, 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 first quarter ended September 30, 2010.
New President and CEO appointed October 1, 2010
Q1 Sales up 6% over prior year
Q1 Orders up 18% over prior year
UV curing business contributes $5.6m to revenues
First Quarter Fiscal 2011 Financial Results
The Company reported net sales of $38.5 million for the first quarter, compared to net sales of $36.2 million for the first quarter of the prior year. Currency effects decreased net sales by $0.5 million, and sales from the entities acquired on June 30th contributed $5.6 million.
Net loss for the first quarter was $1.1 million or ($0.07) per diluted share, compared to net income of $3.9 million or $0.25 per diluted share for the comparable quarter in the prior year. Current year results included the following non-routine items:
$0.9 million expenses related to termination of former president and CEO
$0.2 million restructuring expenses
$0.2 million expenses related to the inventory step-up from the Nordson acquisition
$0.1 million expenses associated with the credit agreement amendment
Excluding the net-of-tax impact of these items, the Company would have reported a net loss of $0.2 million for the quarter ended September 30, 2010.
Results for the prior year first quarter also included several non-routine items:
$9.3 million net gain associated with settlement of patent infringement lawsuit
$1.2 million expenses associated with credit agreement amendment
$0.9 million expenses related to internal control investigation
Excluding the net-of-tax impact of these items, the Company would have reported a net loss of $1.4 million for the quarter ended September 30, 2009.
EBITDA as reported was a loss of $2.1 million for the first quarter, compared to EBITDA of $8.1 million for the prior year first quarter. Adjusted EBITDA, which the Company defines as earnings (loss) before interest, taxes, depreciation, amortization, restructuring and other non-routine items, as shown in the attached schedule, was a loss of $0.8 million for the quarter, compared to a loss of $0.2 million for the same quarter of FY2010.
Cash used in operations in the quarter was $4.2 million compared to $1.2 million in the first quarter of the prior year. The increased cash use was attributable primarily to timing of shipments and timing of collections of accounts receivable and accounts payable.
Orders for the quarter were approximately $40.4 million, compared to $34.3 million in first quarter of the prior year and $32.7 million in the previous quarter, an increase of 18% over the same quarter last year and a 24% sequential increase over the prior quarter. Backlog as of September 30, 2010 was $31.8 million, compared to $29.9 million at June 30, 2010 and $37.8 million at September 30, 2009.
Please refer to the attached schedule, "Non-GAAP Statements of Operations," for a reconciliation of GAAP results to adjusted results.
Credit Facility Amendment
Effective September 28 and September 29, 2010, the Company entered into amendments to its primary credit agreement which established the new covenant targets for the remainder of the term of the agreement. The Company is in full compliance with the credit agreement covenants, as amended.
Introduced New Products at Trade Shows
In September, the Company introduced the UV-curing product line acquired in June, and its alliance products for ink system management and stitching at the Graph Expo 2010 trade show in Chicago and the IFRA Expo 2010 exhibition in Hamburg, Germany. The trade shows were very well-attended from around the world, and there was considerable interest, particularly in commercial web presses, retrofit conversions and UV systems. Investment interest is focused on cost reduction and productivity improvement in customers' production facilities, and our Company's process automation products are designed to improve printers' profitability.
Mark T. Becker, appointed as Baldwin President and CEO on October 1 after serving on the Company's Board of Directors since 2001, said: "During my first weeks as CEO, I have met with key customers at the Graph Expo and IFRA trade shows to review market conditions and product needs, travelled to assess our major global operations in Europe, Japan and the U.S., and challenged our management team for a more aggressive approach to developing our markets, improving products and services and leveraging our global footprint to better manage costs. I will be reporting on the Company's strategic direction and value creation opportunities in the upcoming months.
Regarding our current market conditions, after weathering two challenging years of demand contraction, the second half of Fiscal 2010 saw a stabilization of orders and backlog. However, due to the long project lead times from order intake until revenue recognition, especially in commercial web and newspaper sales, this stabilization is not yet reflected in Baldwin revenues. Our increased order intake this quarter is a positive sign of coming revenue increases and the potential for sustainable growth in our equipment business, and our consumables and parts businesses have remained resilient during the economic contraction.
We were encouraged with the general attendance and mood at the industry trade shows in October, sensing that printers are planning for new equipment capital projects in calendar 2011 where Baldwin process automation components will be key. Where new growth was not being planned, more capital is expected to be available for performance upgrades of existing installed capacity which provides opportunities for Baldwin retrofit products.
Lastly, the introduction of our new UV products acquired in June has provided us access to a faster growing digital print market as well as helping us to grow our range of high performance products available across an entire printing line. Baldwin continues to develop its unique position of being able to support our customers globally with our broad product portfolio and our international sales, production and service organizations.
Vice President and CFO John P. Jordan added, "The first fiscal quarter is traditionally the lowest revenue quarter in our fiscal year, and the lower volume, as well as some one-time additional warranty costs impacted our margin. However, we are confident that our ongoing margin initiatives (global sourcing, manufacturing in lower cost countries and standardization of components and controls) will continue to sustain current margins and contribute to margin growth. These efforts, together with our emphasis on working capital control, should help generate earnings and cash flow during the remainder of the fiscal year. The timing of receivables collections, customer deposits and payments of accounts payable that gave rise to the negative cash flow during first quarter should moderate during the remainder of the fiscal year and give rise to improved cash flow.
We have established covenant targets with our bank group for the remainder of the term of the credit agreement, and we expect to be able to achieve those targets. Our internal cash-generating capability is expected to provide adequate liquidity to carry out our operating plan."
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