BALDWIN TECHNOLOGY CO INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 2001 COMMISSION FILE NUMBER 1-9334

BALDWIN TECHNOLOGY COMPANY, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 13-3258160
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

12 COMMERCE DRIVE 06484
SHELTON, CONNECTICUT (Zip Code)
(Address of principal executive offices)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 203-402-1000

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Name of Each Exchange
on Which Registered
CLASS A COMMON STOCK AMERICAN STOCK EXCHANGE
PAR VALUE $.01

Securities registered pursuant to Section 12(g) of the Act: None

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 of
1934 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 [ ] No [X]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's 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. [ ]

Aggregate market value of the voting stock held by non-affiliates of the
registrant as of August 31, 2001 was $15,316,000.

Number of shares of Common Stock outstanding at August 31, 2001:

Class A Common Stock............... 12,867,547
Class B Common Stock............... 1,810,883
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Total............................ 14,678,430

DOCUMENTS INCORPORATED BY REFERENCE

Items 10, 11, 12 and 13 are incorporated by reference from the Baldwin
Technology Company, Inc. Proxy Statement for the 2001 Annual Meeting of
Stockholders to be held on November 13, 2001, into Part III of this Form 10-K.
(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.)
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TABLE OF CONTENTS

CAUTIONARY STATEMENT -- This Form 10-K may contain statements which constitute
"forward-looking" information 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 Company's forward-looking statements are set forth in Exhibit
99 to this Report on Form 10-K for the year ended June 30, 2001.

PART I

ITEM 1. BUSINESS

Baldwin Technology Company, Inc. ("Baldwin" or the "Company") is the
leading global manufacturer of controls, accessories and material handling
equipment for the printing industry. The Company offers its customers a broad
range of products designed to enhance the quality of printed products and
increase the productivity and cost-efficiency of the print manufacturing process
while addressing the environmental concerns and safety issues involved in the
printing process. Baldwin's products include cleaning systems, fluid management
and ink control systems, web control and press protection systems, drying
systems, web and material handling systems and newspaper inserter equipment.

The Company sells its products both to printing press manufacturers who
incorporate the Company's products into their own printing systems for sale to
printers and to printers to upgrade the quality and capability of existing and
new printing presses. The Company has product development and manufacturing
facilities, as well as sales and service operations, in all major markets
worldwide.

On September 27, 2000, the Company sold substantially all of the assets of
its Baldwin Stobb Division ("BSD") to Systems Technology, Inc., a new company
formed by the management of BSD. The revenues and corresponding expenses
attributable to BSD are included in these consolidated financial statements only
for the period owned by the Company.

On September 26, 2001 the Company sold substantially all of the assets of
the Roll Handling Group ("RHG"). The revenues and corresponding expenses
attributable to the RHG are included in these consolidated financial statements
for all periods presented. As a result of the sale, the Company recorded an
impairment charge during the fiscal year ended June 30, 2001 of approximately
$14,831,000 as a result of the write-off of assets, primarily goodwill
associated with the RHG.

During the fourth quarter of the fiscal year ended June 30, 2001, the
Company decided to exit the Print-On-Demand ("POD") business. As a result of
this decision, the Company recorded an impairment charge of $687,000 to
write-off goodwill associated with POD.

INDUSTRY OVERVIEW

Baldwin operates in a highly fragmented market. The Company defines its
business as that of providing controls, accessories and material handling
equipment for the printing industry. The Company believes that it produces the
most complete line of controls, accessories and material handling equipment for
the printing industry.

The Company's products are used by printers engaged in all 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 printing market and is used primarily for
printing books, magazines, business forms, catalogs, greeting cards, packaging
and newspapers. The Company's products are designed to improve the printing
process in terms of both the quality of the finished product as well as its cost
efficiency.

Offset printing represents a significant segment of the U.S. commercial
printing industry, and has become dominant in the international printing market.
The Company believes that the future growth of its international markets will be
attributable in large part to the increased use of offset printing. The Company
has established operations in strategic geographic locations to take advantage
of growth opportunities in these markets. Baldwin's worldwide operations enable
it to closely monitor new

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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 manufactures and sells many different products to printers and
printing press manufacturers. The Company's product development efforts are
focused on the needs of the printer and the printing press manufacturers.
Typically, it takes a new product several years after its introduction to make a
significant contribution to the Company's net sales. With the exception of the
Company's Baldwin Kansa product line, as a product progresses through its life
cycle, the percentage of sales to printing press manufacturers generally
increases as the product's acceptance by the industry increases and printers
begin to specify certain of the Company's products as part of their accessory or
material handling equipment package selected when ordering new printing systems.
The Company's Baldwin Kansa product line is primarily marketed directly to
newspaper publishers. Historically, the Company's 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. The Company's products
help printers address increasingly demanding requirements for print quality and
environmental and safety issues, as well as enhance productivity and reduce
materials waste. The Company's sales have historically increased about equally
through both internal product development and acquisitions of product lines and
companies.

The Company's products range in unit price from under $100 to approximately
$300,000. Baldwin's principal products by business group are described below:

GRAPHIC PRODUCTS AND CONTROLS GROUP ("GPC")

CLEANING SYSTEMS. The Company's Cleaning Systems products include the
Automatic Blanket Cleaner, Newspaper Blanket Cleaner, Chill Roll Cleaner and
Guide Roll 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. The Company's Cleaning
Systems product is the Press Washer, which cleans the ink train of an offset
press. In the fiscal years ended June 30, 2001, 2000 and 1999, net sales of
Cleaning Systems represented approximately 33.5%, 35.2% and 30.2% of the
Company's net sales, respectively.

FLUID MANAGEMENT SYSTEMS. The Company's Fluid Management Systems control
the supply, temperature, cleanliness, chemical composition and certain other
characteristics of the fluid used in the lithographic printing process. Among
the most important of these products are the Company's Refrigerated Circulators
and Spray Dampening Systems. In the fiscal years ended June 30, 2001, 2000 and
1999, net sales of Fluid Management Systems represented approximately 20.1%,
18.4% and 16.5% of the Company's net sales, respectively.

WEB CONTROL AND PRESS PROTECTION SYSTEMS. The Company's Web Control
Systems improve print quality by precisely controlling the flow of paper through
a roll-fed web offset press, which reduces waste and increases press
productivity. The Company's Press Protection Systems, designed in response to
the increasing number of web leads used in printing today's colorful newspapers,
provide an auto-arming electronic package offering high quality press protection
in the event of a web break.

OTHER ACCESSORY AND CONTROL PRODUCTS. The Company's Ink Control Systems
regulate many aspects of the ink feed system on a printing press. These products
include Ink Agitators, Ink Mixers and Ink Level Systems which reduce ink and
paper waste and allow for the use of recyclable ink containers. Other products
include Ultra-Violet and Infra-Red Dryers and Gluing Systems. In the fiscal

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years ended June 30, 2001, 2000 and 1999, net sales of Other Accessory and
Control Products represented approximately 12.4%, 11.7% and 11.6% of the
Company's net sales, respectively.

MATERIAL HANDLING GROUP ("MHG")

The Material Handling Group ("MHG") has traditionally consisted of
inserters, roll handling systems and material handling and stacking equipment.
All of the above product lines have been sold with the exception of inserters.
The stacking equipment line was sold on September 27, 2000, when the Company
sold BSD. The roll handling product lines were sold on September 26, 2001. Net
sales for the RHG are included in all historical periods presented, while BSD is
included only for the three months in the current fiscal year ended June 30,
2001. However, net sales of this segment will be significantly reduced in future
periods.

ROLL HANDLING SYSTEMS. The Company's Roll Handling Systems unwind, rewind
and splice paper and other substrates supplied to presses in rolls and also
control the tension and position of web materials. This equipment eliminates
unnecessary press stoppages and allows an efficient work flow. As noted above,
this product line was sold on September 26, 2001. In the fiscal years ended June
30, 2001, 2000 and 1999, net sales of Roll Handling Systems represented
approximately 19.0%, 17.8% and 23.5% of the Company's net sales, respectively.

MATERIAL HANDLING/STACKING SYSTEMS. The Company's Material
Handling/Stacking Systems automate the handling of the printed product. The
efficient counting, stacking, packing and compressing of printed materials helps
to increase press utilization and productivity, reduce and control waste and
decrease pressroom labor requirements. As noted above, this product line was
sold on September 27, 2000.

NEWSPAPER INSERTER EQUIPMENT AND MAILING MACHINE SYSTEMS. The Company's
Newspaper Inserter Equipment collates and inserts sections and advertising
material into newspapers. The cost of materials in the printing industry
continues to pressure printers to reduce other costs, particularly labor costs.
When manual processes are replaced by newspaper inserters, payback periods as
low as six months have been realized by some purchasers of this equipment. The
Company's Mailing Machine Systems fold, label and prepare newspapers for
mailing.

PRINT ON-DEMAND GROUP ("POD")

The Company entered the short-run, print on-demand market in January of
1997 with the formation of a business named Baldwin Document Finishing Systems,
Inc. This business venture markets and distributes finishing equipment for the
digital printing market. The results of operations for the Print on-Demand Group
were not material for all periods presented. As part of the Company's
restructuring plan, the Company has decided to exit this market and will
transition out of this business. During this transition, the Company will
support its installed customer base.

WORLDWIDE OPERATIONS

The Company believes that it is the only manufacturer of controls,
accessories and material handling equipment for the printing industry, which has
complete product development, manufacturing and marketing capabilities in the
Americas, Europe and Asia.

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The following table sets forth the percentages of the Company's net sales
attributable to its geographic regions for the fiscal years ended June 30, 2001,
2000 and 1999:

In the Americas, the Company operates in North, Central and South America
through its U.S. subsidiaries and a sales office in Brazil. 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
India, Japan, China and Australia. All of the Company's 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. The sale of
the RHG will reduce operations in Sweden, China and the United States.

For additional information relating to the Company's segments and
operations in its three geographic regions, see Note 5 -- Notes to Consolidated
Financial Statements.

RESTRUCTURING CHARGE

During March 2000, the Company entered into a restructuring plan that
included the consolidation of production into certain facilities, and a
reduction in total employment, primarily in the United States. As a result, the
Company recorded restructuring charges in the amount of $2,277,000 and
$5,664,000 for the fiscal years ended June 30, 2001 and 2000, respectively.
These charges are expected to reduce the Company's worldwide cost base and
strengthen its competitive position as a leading global supplier of auxiliary
equipment to the printing and publishing industries. Prior to the restructuring,
the Company was managed in a decentralized manner through geographically
dispersed, autonomous business units. Given that many of the Company's
significant customers have been reorganizing on a global basis, management
decided to restructure the Company along functional lines on a global basis.
Rather than have administration, sales, product development and production
activities at each decentralized business unit, the restructuring plan included
the centralization of these activities. Product lines that were previously being
produced at multiple facilities are being consolidated with similar product
lines at existing facilities. The corporate headquarters was vacated and
relocated to the Shelton, Connecticut facility to take advantage of the space
created by the downsizing previously noted. Severance costs will be paid through
the end of the fiscal year ended June 30, 2002, with the majority to be paid in
the second and third quarters of fiscal 2002. Facility lease termination costs
will be paid through April 2006.

The Company expects to incur approximately $620,000 in additional
unreserved restructuring costs during the fiscal year ended June 30, 2002, which
will be expensed as incurred. The estimated total cash cost of the restructuring
program is expected to be approximately $8,052,000, with approximately
$4,530,000 expected to be spent over the next twelve months and approximately
$1,756,000 (primarily facility lease costs) expected to be spent over the
balance of the lease terms of approximately three years. The restructuring plan
is expected to save the Company approximately $4,155,000 annually following full
implementation, which is anticipated to be by June 30, 2002.

At June 30, 2001, the Company's Material Handling Group segment consists
primarily of the RHG. As part of its restructuring plan, the Company divested
its former BSD and RHG businesses. As

4

a result of these divestures, the Company is currently evaluating changing its
business segments to be congruent with its sales and marketing organization,
that is, along commercial and newspaper markets.

ACQUISITION STRATEGY

An element of the Company's growth strategy is to make strategic
acquisitions of companies and product lines in related business areas. The
Company's acquisition strategy involves: (i) acquiring entities that will
strengthen the Company's position in the accessories and controls segment and
whose products can be sold through the Company's existing distribution network;
(ii) entering 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 Company's manufacturing and marketing expertise and
financial support. Subsequent to an acquisition, the Company's strategy will be
to integrate the acquired companies processes and controls with those currently
existing in the Company's structure with a view towards 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 94 employees devoted to
marketing and sales activities in its three principal markets and approximately
47 dealers worldwide. The Company markets its products to printing press
manufacturers ("OEM's") and to printers. For the fiscal year ended June 30,
2001, approximately 49% of the Company's net sales were to printing press
manufacturers and approximately 51% were directly to printers.

In the Americas, Europe and India, the Company markets its products both
through direct sales representatives and a dealer network. In Asia, the Company
markets its products through direct sales representatives in Japan, China and
Australia and through dealers throughout the rest of Asia.

SUPPORT. The Company is committed to after-sales service and support of
its products throughout the world. Baldwin employs approximately 124 service
technicians, who are complemented by product engineers, to provide field service
for the Company's products on a global basis.

BACKLOG. The Company's backlog was $60,789,000 as of June 30, 2001,
$65,893,000 as of June 30, 2000 and $57,491,000 as of June 30, 1999. Included in
the June 30, 2000 and 1999 backlog was $5,445,000 and $2,646,000, respectively,
of backlog relating to the Company's former BSD. Included in the June 30, 2001,
2000 and 1999 backlog was $10,513,000, $11,614,000 and $13,136,000,
respectively, of backlog related to the Company's former RHG which was sold in
September 2001. Backlog represents unfilled product orders, which Baldwin has
received from its customers under valid contracts or purchase orders.

CUSTOMERS. For the current fiscal year ended June 30, 2001, two customers
account for more than 10% of the Company's net sales. Koenig and Bauer
Aktiengesellschaft ("KBA") and Goss Graphic Systems, Inc. ("Goss") (both
primarily for the RHG business that was sold) accounted for approximately 12%
and 11%, respectively, of the Company's net sales (see "Liquidity and Capital
Resources" in Item 7 "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for a further discussion of Goss). The ten
largest customers of Baldwin (including KBA and Goss) accounted for
approximately 49% (50% for GPC and 46% for MHG), 46% (50% for GPC and 34% for
MHG) and 46% (46% for GPC and 46% for MHG), respectively, of the Company's net
sales for the fiscal years ended June 30, 2001, 2000 and 1999. Sales of
Baldwin's products are not seasonal. However, sales have traditionally been
greater in the second six months of its fiscal year than

5

in the first six months of its fiscal year (see Item 7 "Management's Discussion
and Analysis of Financial Condition and Results of Operations"). The only recent
exception to this trend has been in the fiscal year ended June 30, 1999, which
was primarily due to lower sales to Goss and a lower level of activity in the
Japanese market during the second six months of that fiscal year. KBA and Goss
accounted for approximately 11% and 5%, respectively, of GPC net sales and 13%
and 26%, respectively, of MHG net sales for the fiscal year ended June 30, 2001.

RESEARCH, DEVELOPMENT AND ENGINEERING

The Company believes its research, development and engineering efforts have
been an important factor in establishing and maintaining its leadership position
in the field of controls, accessories and material handling equipment for the
printing industry. The Company has won six Intertech Awards from the Graphic
Arts Technical Foundation. The Intertech Award was established in 1978 to
recognize technologies that are predicted to have a major impact on the graphic
communications industry, but are not yet in widespread use in the marketplace.
Baldwin has devoted substantial efforts to adapt its products to almost all
models and sizes of printing presses in use worldwide.

The Company has product development functions at many of its locations.
While the Company believes that this approach to research and development helps
the Company to react quickly to meet the needs of its customers, coordination of
the Company's product development activities required more centralization, which
was accomplished with the restructuring. This organizational structure focuses
attention on opportunities within the respective markets, while avoiding
duplicative efforts within the Company.

Baldwin employs approximately 188 persons whose primary function is new
product development or modification of existing products. The Company's total
expenditures for research, development and engineering for the fiscal years
ended June 30, 2001, 2000 and 1999 were $17,030,000, $17,962,000 and
$19,408,000, respectively, representing approximately 9%, 9% and 8% of the
Company's net sales in each year, respectively.

PATENTS

The Company owns or licenses a number of patents and patent applications
relating to a substantial number of Baldwin's products. These products
represented a substantial portion of the Company's net sales for the fiscal year
ended June 30, 2001. The Company's patents expire at different times during the
next twenty years; however, one significant patent, which provides for the
majority of the Company's current royalty income is scheduled to expire during
February 2005. The expiration of patents in the near future is not expected to
have a material adverse effect on the Company's net sales; however, other income
is expected to be negatively impacted upon the expiration of this patent. 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 manufacturing operations through a number of
operating subsidiaries. In North America, the Company has subsidiaries with
manufacturing facilities in Emporia, Kansas, Rockford, Illinois and Shelton,
Connecticut. In Europe, the Company has subsidiaries with manufacturing and
assembly facilities in Germany and Sweden. In Asia, Baldwin has manufacturing

6

and assembly facilities in India, Japan and China. The RHG sale will reduce the
facilities in Sweden, China and the United States.

In general, raw materials required by the Company 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.

The nature of the Company's operations is such that there is little, if
any, negative effect upon the environment, and the Company has not experienced
any serious problems in complying with environmental protection laws and
regulations.

COMPETITION

Within the highly fragmented printing press accessory industry, the Company
produces and markets what it believes to be the most complete line of controls,
accessories and material handling equipment. Numerous companies, including
vertically integrated printing press manufacturers, manufacture and sell
products which compete with one or more of the Company's products. These
printing press manufacturers generally have larger staffs and greater financial
resources than the Company.

The Company competes by offering customers a broad product line, coupled
with a well-known reputation for the reliability of its products and its
commitment to service and after-sale support. The Company's ability to compete
effectively in the future will depend upon the continued reliability of its
products, after-sale support, ability to keep its market position with new
proprietary technology and its ability to develop new products which meet the
demands of the printing industry.

EMPLOYEES

The Company employs approximately 959 persons (plus approximately 43
temporary and part-time employees), of which approximately 401 are production
employees, approximately 134 are marketing, sales and customer service
employees, approximately 315 are research, development, engineering and
technical service employees and approximately 109 are management and
administrative employees. Of the Company's 165 employees in its Baldwin Graphic
Products Division in the United States, 45 are represented by the International
Association of Machinists and Aerospace Workers under a contract which expires
in November 2002. In Europe, employees are represented by various unions under
contracts with indefinite terms. In Sweden, 6, 66, and 53 of the Company's 194
employees are represented by Ledarna (SALF), Metall, and Svenska
Industritjanstemanna Forbundet, respectively. In Germany, approximately 45 of
the Company's 247 employees are represented by the IG Metall (Metalworker's
Union). The Company considers relations with its employees and with its unions
to be good.

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ITEM 2. PROPERTIES

The Company owns and leases various manufacturing and office facilities
aggregating approximately 549,000 square feet at June 30, 2001. The table below
presents the locations and ownership of these facilities:

The Company believes that its facilities are adequate to carry on its
business as currently conducted. The sale of the RHG will reduce total square
footage by approximately 56,000 in Sweden (47,000 owned), 82,000 in North
America and 6,500 in China.

ITEM 3. LEGAL PROCEEDINGS

There are no legal proceedings pending to which either the Company is a
party or to which any of its property is subject, which would have a material
adverse effect on the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders since November 14,
2000.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS

(a) PRICE RANGE OF CLASS A COMMON STOCK

The Company's Class A Common Stock is traded on the American Stock Exchange
("AMEX") under the symbol "BLD". The following chart sets forth, for the
calendar periods indicated, the range of closing prices for the Company's Class
A Common Stock on the AMEX, as reported by the AMEX.

(b) CLASS B COMMON STOCK

The Company's Class B Common Stock has no established public trading
market.

(c) APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERS

As of August 31, 2001, the approximate number of record holders (excluding
those listed under a nominee name) of the Company's Class A and Class B Common
Stock totaled 357 and 27, respectively. The Company believes, however, that
there are less than 2,000 beneficial owners of its Class A Common Stock.

(d) DIVIDENDS

Declarations of dividends depend upon the earnings and financial position
of the Company and are within the discretion of the Company's Board of
Directors. However, certain of the Company's debt agreements contain
restrictions as to the payment of cash dividends. No dividend in cash or
property can be declared or paid on shares of the Company's 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 shares of Class B Common Stock (see Note 13 -- Notes to
Consolidated Financial Statements).

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ITEM 6. SELECTED FINANCIAL DATA

The Company's income statement and balance sheet data as it relates to the
fiscal years ended June 30, 2001, 2000 and 1999 have been derived from the
Company's audited financial statements (including the Consolidated Balance Sheet
of the Company at June 30, 2001 and 2000 and the related Consolidated Statements
of Income of the Company for the years ended June 30, 2001, 2000 and 1999
appearing elsewhere herein). The following information should be read in
conjunction with the aforementioned financial statements and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations".

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL. The following is Management's discussion and analysis of certain
factors which have affected the financial position and consolidated financial
statements of Baldwin Technology Company, Inc. (the "Company"). On September 27,
2000, the Company sold substantially all the assets of its Baldwin Stobb
Division ("BSD"). As a result, the revenues and corresponding expenses
attributable to BSD are included in these consolidated financial statements only
for the period owned by the Company. The effects of this transaction on the
consolidated financial statements are discussed below where significant.

On September 26, 2001, the Company sold substantially all of the assets of
its Roll Handling Group ("RHG"). All periods presented include the revenues and
corresponding expenses attributable to the RHG. The Company recorded an
impairment charge during the fiscal year ended June 30, 2001 of approximately
$14,831,000 as a result of the write-off of assets, primarily patents and
goodwill, associated with this business. The Company recorded a similar
write-off of goodwill of approximately $687,000 associated with the Company's
Print On Demand Group ("POD") as the Company has decided to exit this business.

Excluding the impairment charges, net sales and operating income (loss) of
RHG, POD and BSD combined, were as follows for the years ended June 30:

The Company does not consider its business to be seasonal; however, except
for the fiscal year ended June 30, 1999, its sales have traditionally been
greater in the second six months of its fiscal year than in the first six months
of its fiscal year. The following schedule shows the Company's net sales for
such six-month periods over the last five fiscal years to reflect the
comparison.

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FORWARD-LOOKING STATEMENTS

Except for the historical information contained herein, the following
statements and certain other statements contained herein are based on current
expectations. 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 are set forth in Exhibit 99 to this Annual Report on Form
10-K for the fiscal year ended June 30, 2001.

RESULTS OF OPERATIONS

The following table sets forth certain of the items (expressed as a
percentage of net sales) included in the Selected Financial Data and should be
read in connection with the Consolidated Financial Statements of the Company,
including the notes thereto, presented elsewhere in this report.

FISCAL YEAR ENDED JUNE 30, 2001 VERSUS FISCAL YEAR ENDED JUNE 30, 2000

CONSOLIDATED RESULTS

NET SALES. Net sales for the fiscal year ended June 30, 2001 decreased by
$14,987,000, or 7.5%, to $183,615,000 from $198,602,000 for the fiscal year
ended June 30, 2000. Currency rate fluctuations attributable to the Company's
overseas operations decreased net sales for the current period by $14,676,000
and the previously noted divestiture of BSD further reduced net sales by
$7,074,000. Otherwise, net sales would have increased by $6,763,000. This
increase is primarily the result of increased product volumes, principally spray
dampening equipment, water products and roll handling equipment, offset by a
reduction in equipment shipments to the commercial web heatset printing market.
In local currency, sales decreased by 16.0% in the United States, and by 8.4% in
the United Kingdom. Sales increased by 97.7% in China and by 24.8% in Sweden.

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GROSS PROFIT. Gross profit for the fiscal year ended June 30, 2001 was
$53,788,000 (29.3% of net sales), compared to $63,456,000 (32.0% of net sales
for the fiscal year ended June 30, 2000), a decrease of $9,668,000 or 15.2%.
Gross profit was lower due primarily to increased warranty costs and to
continuing pricing pressures in the market. Gross profit decreased by $3,654,000
as a result of fluctuations in currency rates and decreased by $2,259,000 due to
the effect of the sale of BSD.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $40,025,000 (21.8% of net sales) for the fiscal
year ended June 30, 2001, compared to $42,193,000 (21.3% of net sales) for the
prior year, a decrease of $2,168,000. Currency rate fluctuations decreased the
current years expenses by $1,901,000 and the effect of the sale of BSD further
reduced expenses by $1,796,000. Selling expenses decreased primarily as a result
of lower trade show and advertising costs (including related travel costs),
reductions in staffing levels and decreases in sales commissions resulting from
lower sales volumes. General and administrative expenses increased primarily as
a result of increases in compensation, consulting and subcontracting costs and a
$536,000 bad debt charge related to a receivable from a major OEM customer
during the fiscal year ended June 30, 2001. The prior year period also included
a $1,100,000 bad debt charge for an OEM customer.

RESEARCH, DEVELOPMENT AND ENGINEERING EXPENSES. Research, development and
engineering expenses decreased by $932,000 over the same period of the prior
year. Fluctuations in currency rates decreased these expenses by $1,187,000;
otherwise, these expenses would have increased by $255,000. The increase in
these expenses relates to increased compensation and consulting costs, partially
offset by reduced costs in Japan, attributed to reduced personnel costs
associated with the restructuring, and the impact of the previously noted
divestiture of BSD.

RESTRUCTURING AND OTHER CHARGES. Restructuring and other charges consist
of restructuring charges of $2,277,000 and asset write-offs, primarily patents
and goodwill of $15,518,000. These asset write-offs are the result of asset
impairments of $14,831,000, associated with the RHG and $687,000 associated with
POD. The Company sold the RHG on September 26, 2001 and further, has decided to
exit the POD business.

The restructuring charge of $2,277,000 for the fiscal year ended June 30,
2001 represents additional charges incurred associated with the restructuring
plan announced in March 2000, which resulted in a $5,664,000 restructuring
charge during the fiscal year ended June 30, 2000. These additional charges,
relate primarily to severance and facility lease termination costs associated
with the Company's restructuring efforts.

INTEREST AND OTHER. Interest expense for the fiscal year ended June 30,
2001 increased by $195,000 to $2,014,000, compared to $1,819,000 for the fiscal
year ended June 30, 2000. Currency rate fluctuations decreased interest expense
by $169,000 in the current period. Otherwise, interest expense would have
increased by $364,000. This increase was due primarily to higher long-term,
fixed-rate indebtedness outstanding during the current period which was offset
slightly by lower interest rates on variable-rate debt. Interest income was
$291,000 and $330,000 for the fiscal years ended June 30, 2001 and June 30,
2000, respectively. Currency rate fluctuations increased interest income by
$53,000 in the current period. Other income and expense, net, amounted to income
of $940,000 for the fiscal year ended June 30, 2001 compared to expense of
$98,000 for the fiscal year ended June 30, 2000. These amounts include foreign
currency transaction gains (losses) of $334,000 and $(251,000) for the current
and prior periods, respectively. Other income and expense also includes a
pre-tax gain of $1,213,000 related to a favorable settlement of a patent
litigation suit, and an $831,000 pre-tax loss on the sale of BSD.

13

INCOME TAXES. The Company recorded income tax expense of $698,000 for the
fiscal year ended June 30, 2001 as compared to an income tax benefit of
$5,675,000 for the fiscal year ended June 30, 2000. Certain items have
significantly impacted the Company's effective tax rate. Specifically, in the
current year, non-deductible goodwill and increased foreign income taxed at
rates higher than the U.S. statutory rate resulted in additional tax of
$3,735,000 and $1,966,000, respectively. The prior year included a benefit of
$4,147,000, recorded as a result of a reduction of the valuation allowance
related to prior net operating losses ("NOL's") of the Company's Swedish
subsidiaries, and estimated adjustments related to the settlement of both
foreign and domestic tax issues. Currency rate fluctuations reduced the tax
expense by $420,000 in the current period.

NET (LOSS) INCOME. Net loss for the fiscal year ended June 30, 2001 was
$(18,172,000) as compared to net income of $4,836,000 for the fiscal year ended
June 30, 2000, or ($1.23) per share basic and diluted, and $.31 per share basic
and diluted, respectively. For the current period, currency rate fluctuations
and the sale of BSD decreased net income by $581,000 and $344,000, respectively.
The after-tax impact of $1,600,000 for restructuring charges reduced net income
per share by $0.11 basic and diluted in the current year. The net loss for the
current year is primarily the result of asset impairment charges of $14,831,000
associated with the sale of the RHG, and $687,000 associated with the decision
to exit the POD business.

SEGMENT RESULTS

GRAPHIC PRODUCTS AND CONTROLS GROUP

Net sales for the fiscal year ended June 30, 2001 decreased by $9,479,000,
or 6.6%, to $133,243,000 from $142,722,000 for the fiscal year ended June 30,
2000. Currency rate fluctuations attributable to the Company's overseas
operations decreased net sales for the current period by $10,115,000; otherwise,
net sales would have increased by $636,000 in the current period. This increase
is primarily the result of increased volumes of spray dampening equipment and
water products primarily in Europe offset by lower sales in the United States
markets.

Operating income amounted to $1,744,000 (1.3% of net sales) for the fiscal
year ended June 30, 2001, as compared to $8,509,000 (6.0% of net sales) for the
prior year, a decrease of $6,765,000. Currency rate fluctuations decreased the
current year's operating income by $531,000, otherwise operating income would
have decreased by $6,234,000. This decrease is primarily the result of a
decrease in sales levels of higher margin products, higher trade show costs,
higher personnel costs for engineering and research and development and a
restructuring charge of $1,933,000 in the current year, offset by a
restructuring charge of $3,077,000 in the prior year.

MATERIAL HANDLING GROUP ("MHG")

The MHG had traditionally consisted of inserters, roll handling systems and
material handling and stacking equipment. All of the above product lines have
been sold with the exception of inserters. The stacking equipment line was
divested on September 27, 2000 when the Company sold BSD. The roll handling
product lines were divested on September 26, 2001 as a result of the RHG sale.

Net sales for the fiscal year ended June 30, 2001 decreased by $7,540,000,
or 12.9%, to $51,091,000 from $58,631,000 for the fiscal year ended June 30,
2000. Currency rate fluctuations attributable to the Company's overseas
operations decreased net sales for the current period by $1,816,000; otherwise
net sales would have decreased by $5,724,000. This decrease is the result of the
divestiture of BSD offset by increased sales volumes, primarily roll handling
equipment products,

14

principally splicers. The RHG contributed net sales of approximately $34,416,000
and $34,414,000 for the fiscal years ended June 30, 2001 and 2000, respectively.

Operating loss amounted to $12,235,000 (23.9% of net sales) for the fiscal
year ended June 30, 2001, as compared to $2,164,000 (3.7% of net sales) for the
prior year, an increase of $10,071,000. This increase is primarily the result of
the asset impairment charge of $14,831,000, primarily related to patents and
goodwill, associated with the RHG, and a $536,000 bad debt charge for a major
OEM customer for the fiscal year ended June 30, 2001. This decrease was offset
by a $1,100,000 bad debt charge for an OEM customer in the prior year. Currency
rate fluctuations decreased the current year's operating profit by $91,000.
Excluding the impairment charge, the RHG accounted for operating income of
approximately $1,386,000 for the fiscal year ended June 30, 2001 and accounted
for the operating loss of approximately $918,000 for the fiscal year ended June
30, 2000.

FISCAL YEAR ENDED JUNE 30, 2000 VERSUS FISCAL YEAR ENDED JUNE 30, 1999

CONSOLIDATED RESULTS

NET SALES. Net sales for the fiscal year ended June 30, 2000 decreased by
$34,169,000, or 14.7%, to $198,602,000 from $232,771,000 for the fiscal year
ended June 30, 1999. Currency rate fluctuations attributable to the Company's
overseas operations increased net sales for the current period by $2,354,000.
Otherwise, net sales would have decreased by $36,523,000, of which $2,243,000
relates to the divestiture of the Company's former in-line finishing division.
The remaining decrease is primarily the result of reduced product volumes,
principally roll handling equipment, resulting from reduced shipments to one of
the Company's largest OEM customers, and a reduction in equipment shipments to
the commercial web heatset printing market. In local currency, sales decreased
by 27.2% in the United States, by 11.9% in Japan and by 10.3% in Germany. Sales
increased by 9.4% in Sweden.

GROSS PROFIT. Gross profit for the fiscal year ended June 30, 2000 was
$63,456,000 (32.0% of net sales), compared to $73,991,000 (31.8% of net sales)
for the fiscal year ended June 30, 1999, a decrease of $10,535,000 or 14.2%.
Gross profit was lower due primarily to decreased sales volumes, and continuing
pricing pressures in the market. Gross profit increased by $417,000 as a result
of fluctuations in currency rates and decreased by $533,000 due to the effect of
net dispositions from the prior year.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $42,193,000 (21.3% of net sales) for the fiscal
year ended June 30, 2000, compared to $42,510,000 (18.3% of net sales) for the
prior year, a decrease of $317,000. Currency rate fluctuations increased the
current years expenses by $176,000 and the effect of net dispositions from the
prior year reduced expenses by $526,000. Selling expenses increased primarily as
a result of higher trade show and advertising costs (including related travel
costs), which more than offset reductions in staffing levels and decreases in
sales commissions resulting from lower sales volumes. General and administrative
expenses decreased primarily as a result of reductions in personnel due to the
Company's restructuring efforts and reduced incentive and deferred compensation
expenses resulting from the lower profitability of the Company. These reductions
more than offset increases in consulting and subcontracting costs and a
$1,100,000 bad debt charge for the sale of the pre-petition accounts receivable
from a major OEM customer during fiscal 2000.

RESEARCH, DEVELOPMENT AND ENGINEERING EXPENSES. Research, development and
engineering expenses decreased by $1,446,000 over the same period of the prior
year. Fluctuations in currency rates increased these expenses by $14,000;
otherwise, these expenses would have decreased by

15

$1,460,000. The decrease in these expenses relates to reduced costs in Japan,
Germany and the United States attributed to reduced personnel costs associated
with the planned restructuring, and the impact of the previously noted
divestiture of the Company's former in-line finishing division in the prior
year.

INTEREST AND OTHER. Interest expense for the fiscal year ended June 30,
2000 decreased by $482,000 to $1,819,000, compared to $2,301,000 for the fiscal
year ended June 30, 1999. Currency rate fluctuations decreased interest expense
by $105,000 in the current period. The remainder of the decrease was due
primarily to reductions in the amount of long-term, fixed-rate indebtedness
outstanding during the current period which was offset slightly by rising
interest rates on variable-rate debt. Interest income was $330,000 and $453,000
for the fiscal years ended June 30, 2000 and June 30, 1999, respectively.
Currency rate fluctuations increased interest income by $13,000 in the current
period. Other income, primarily royalty income, was $3,013,000 and $3,184,000
for the fiscal years ended June 30, 2000 and June 30, 1999, respectively, and
includes foreign currency transaction losses of $251,000 and $176,000 for the
current and prior period, respectively. Royalty income was lower by $357,000 in
the current period, while currency rate fluctuations increased other income by
$232,000 for the current period.

INCOME TAXES. The Company recorded an income tax benefit of $5,675,000 for
the fiscal year ended June 30, 2000 as compared to an income tax provision of
$4,514,000 for the fiscal year ended June 30, 1999. Certain items have
significantly impacted the Company's effective tax rate. Specifically, a
$4,147,000 benefit was recorded in the current year as a result of a reduction
of the valuation allowance related to prior year net operating losses ("NOL's")
of the Company's Swedish subsidiaries, and estimated adjustments related to the
settlement of both foreign and domestic tax issues. The prior year period
included a $2,400,000 special charge related to the disposition of the former
pre-press operations for which no tax benefit was recorded. Currency rate
fluctuations reduced the tax benefit by $254,000 in the current period.

NET INCOME. Net income for the fiscal year ended June 30, 2000 was
$4,836,000 as compared to $5,625,000 for the fiscal year ended June 30, 1999, or
$.31 basic and diluted, and $.33 basic and diluted per share, respectively. For
the current period, currency rate fluctuations and net dispositions increased
net income by $323,000 and $250,000, respectively. The after-tax impact of
$3,795,000 for restructuring charges reduced net income per share by $.24 basic
and diluted in the current year, while the income tax benefits noted above
positively impacted net income by $5,351,000 or $.34 per share basic and
diluted.

SEGMENT RESULTS

GRAPHIC PRODUCTS AND CONTROLS GROUP

Net sales for the fiscal year ended June 30, 2000 decreased by $10,406,000,
or 6.8%, to $142,722,000 from $153,128,000 for the fiscal year ended June 30,
1999. Currency rate fluctuations attributable to the Company's overseas
operations increased net sales for the current period by $2,275,000; otherwise,
net sales would have decreased by $12,681,000 in the current period. This
decrease is primarily the result of reduced sales levels of web on-press
accessories and controls in the United States and Europe and an overall economic
slowdown in Asia.

Operating income amounted to $8,509,000 (6.0% of net sales) for the fiscal
year ended June 30, 2000, as compared to $14,219,000 (9.3% of net sales) for the
prior year, a decrease of $5,710,000. Currency rate fluctuations increased the
current year's operating income by $423,000, otherwise operating income would
have decreased by $6,133,000. This decrease is primarily the result of the
overall decrease in sales levels discussed above, higher trade show costs and a
restructuring charge of

16

$3,077,000 in the current year, which more than offset reductions in selling,
general and administrative expenses and a restructuring charge of $845,000 in
the prior year.

MATERIAL HANDLING GROUP

Net sales for the fiscal year ended June 30, 2000 decreased by $20,822,000,
or 26.2%, to $58,631,000 from $79,453,000 for the fiscal year ended June 30,
1999. Currency rate fluctuations attributable to the Company's overseas
operations decreased net sales for the current period by $791,000; otherwise net
sales would have decreased by $20,031,000. This decrease is the result of
reduced sales volumes, primarily roll handling equipment products, as well as a
reduction in equipment orders in the commercial web heatset printing market. The
reduction in roll handling equipment volume has resulted from reduced orders
from one of the Company's largest OEM customers. Additionally, the effect of the
disposition of the Company's former in-line finishing division during the prior
year further reduced net sales by $2,243,000.

Operating loss amounted to $2,164,000 (3.7% of net sales) for the fiscal
year ended June 30, 2000, as compared to operating income of $4,640,000 (5.8% of
net sales) for the prior year, a decrease of $6,804,000. Currency rate
fluctuations decreased the current year's operating profit by $46,000. The
remaining decrease is primarily the result of the decreased sales levels
discussed above, a restructuring charge of $2,378,000, and a $1,100,000 bad debt
charge for the sale of the pre-petition accounts receivable from a major OEM
customer in the current year. This decrease was partially offset by the
$2,400,000 provisions for loss on the pre-press operations recorded in the prior
year.

IMPACT OF INFLATION

The Company's 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.

LIQUIDITY AND CAPITAL RESOURCES

On October 31, 2000, the Company entered into a $35,000,000 Revolving
Credit Facility (the "Credit Facility") with Fleet National Bank and First Union
National Bank (collectively the "Banks"), which matures on October 31, 2003. The
Credit Facility consists of a $25,000,000 Revolving Credit Line (the "Revolver")
and a $10,000,000 credit line to be utilized for acquisitions (the "Acquisition
Line"). The Credit Facility is collateralized by a pledge of the capital stock
of the Company's subsidiaries and requires the Company to maintain certain
financial covenants. These covenants include a leverage ratio, an interest
coverage ratio and minimum net worth requirements (as those terms are defined in
the credit agreement). During the quarters ended June 30, and September 30,
2001, the Company did not meet these three covenants and on October 15, 2001
received an irrevocable commitment letter from the Banks to amend the Credit
Facility and waive the covenant violations. The commitment letter also provides
for a new borrowing structure which will enable the Company to borrow a
percentage of eligible domestic accounts receivable, domestic inventory, the
appraised value of the Company's Emporia, Kansas facility, the net book value of
domestic machinery and equipment and certain historic royalty streams, as
defined (collectively the "Borrowing Base") up to a maximum of $21,000,000. The
commitment letter also provides that $6,000,000 (less outstanding letters of
credit) may be borrowed in addition to the amounts available under the Borrowing
Base. Interest is charged at LIBOR plus 3.25% or at an alternative base rate, as
defined, plus 1%. Additionally, there is an unused commitment fee of 0.5%. The
commitment letter provides for borrowings through October 1, 2002 and requires
that a minimum tangible net worth covenant be met, beginning with the quarter
ending December 31, 2001. The commitment letter also requires minimum operating
income covenants of

17

$250,000 for the quarter ending December 31, 2001, $1,250,000 for the quarter
ending March 31, 2002 and $1,750,000 for the quarter ending June 30, 2002. Based
on management's estimates, the Company's eligible Borrowing Base through June
30, 2002, plus the additional $6,000,000 will total approximately $19,000,000.
In accordance with the terms of the commitment letter, the Company is presently
able to classify $7,400,000 of the amounts outstanding at June 30, 2001 under
the Credit Facility as long-term. The remaining $10,350,000 has been classified
as current, of which $2,000,000 has subsequently been repaid and management
believes approximately $8,100,000 will be able to be classified as long-term
once certain terms of the amended credit facility are finalized.

The ability to achieve the covenants depends in part on the management's
successful execution of its restructuring plan as discussed in Note 5, and other
business factors outside of the control of management. There can be no guarantee
that such covenants will be met. Accordingly, if the covenants are not met,
amounts outstanding under the commitment letter would become payable on demand.
Management believes that alternative sources of financing are available to
refinance the existing facilities on a long-term basis. However, if the loans
become due on demand and alternative financing sources are not available,
management will be required to take additional actions to reduce operating
expenses or sell assets to meet liquidity needs.

On April 27, 2001, the Company entered into an interest rate swap agreement
with Fleet National Bank to fix the LIBOR portion of its interest rate at 4.98%
for a principal amount of $15,000,000 with the maturity the same as the Credit
Facility. The effect of this interest rate swap agreement did not have a
material impact on the Company's financial position or results of operations for
the fiscal year ended June 30, 2001.

The Company maintains relationships with foreign and domestic banks which
have extended credit facilities to the Company totaling $35,563,000, including
amounts available under the Revolver. As of June 30, 2001, the Company had
$21,279,000 outstanding under these lines of credit, of which $7,400,000 is
classified as long-term debt. Total debt levels as reported on the balance sheet
at June 30, 2001 are $848,000 lower than they would have been if June 30, 2000
exchange rates had been used.

The Company's working capital decreased by $10,166,000 or 31.2% from
$32,575,000 at June 30, 2000, to $22,409,000 at June 30, 2001. Foreign currency
rate fluctuations accounted for a decrease of $3,245,000, otherwise working
capital would have decreased by $6,921,000. Working capital decreased primarily
due to a portion of long-term debt being reclassified on a short-term basis.
Working capital also decreased due to decreases in inventories and accounts
receivable, and increases in income taxes payable and accrued expenses.
Offsetting these items were increases in notes receivable, and decreases in
accounts payable, customer deposits and short-term borrowings. On September 26,
2001, the Company divested its RHG. The proceeds of $6,800,000 were utilized to
reduce outstanding bank debt by $4,500,000, for estimated transaction costs of
approximately $1,600,000 and for general working capital purposes. Excluding the
impairment charge, the RHG utilized cash from operating activities of
approximately $2,181,000 for the fiscal year ended June 30, 2001.

The Company provided $1,157,000 and utilized $3,336,000 for investing
activities for the fiscal year ended June 30, 2001 and 2000, respectively. The
increase in the cash provided by investing activities is primarily the result of
the proceeds from the sale of BSD. Net capital expenditures made to meet the
normal business needs of the Company for the fiscal years ended June 30, 2001,
and June 30, 2000, including commitments for capital lease payments, were
$2,828,000 and $3,336,000, respectively. The Company has capital expenditures of
approximately $1,500,000 to $2,000,000 planned for the fiscal year ended June
30, 2002.

18

The net cash used by financing activities was $702,000 for the fiscal year
ended June 30, 2001 as compared to $6,296,000 for the fiscal year ended June 30,
2000. The difference was primarily caused by significant reductions of the
Company's long-term debt in the prior year period, and reduced purchases of
treasury stock in the current year period.

On September 10, 2001, one large OEM customer, Goss Graphic Systems, Inc.
("Goss") filed for bankruptcy protection under a prearranged Chapter 11
proceeding in the U.S. Bankruptcy Court. Goss' European and Asian subsidiaries
are not included in this proceeding, and furthermore, the Company has continued
to receive timely payments, on a post petition basis, from the foreign
subsidiaries of Goss. At June 30, 2001, the Company's balance sheet included
approximately $1,478,000 of trade receivables from Goss, of which approximately
$942,000 has been collected to date. The remaining $536,000 has been fully
reserved as of June 30, 2001. Goss had previously filed for Chapter 11
bankruptcy on July 30, 1999. The Company subsequently sold pre-petition domestic
accounts receivable from Goss of approximately $4,100,000 pursuant to a
non-recourse agreement between the Company and a third party for approximately
$3,000,000. The Company had taken a charge to earnings during the fiscal year
ended June 30, 2000 in the amount of $1,100,000 as a bad debt, which is included
in General and Administrative expenses. Prior to June 30, 2000, the entire
$3,000,000 had been received from the third party.

The Company recorded restructuring charges in the amount of $2,277,000 and
$5,664,000 for the fiscal years ended June 30, 2001 and 2000, respectively.
These charges are associated with a restructuring plan initiated in March 2000,
which is expected to reduce the Company's worldwide cost base and strengthen its
competitive position as a leading global supplier of auxiliary equipment to the
printing and publishing industry. Prior to the restructuring, the Company was
managed in a decentralized manner through geographically dispersed autonomous
business units. Given that many of the Company's significant customers have been
reorganizing on a global basis, management decided to restructure the Company
along functional lines on a global basis. Rather than have administrative,
sales, product development and production activities at each decentralized
business unit, the restructuring plan included the centralization of these
activities. Product lines that were previously being produced in the Emporia,
Kansas, Shelton, Connecticut, Malmo, Sweden, Augsburg, Germany and Lombard,
Illinois facilities, are being consolidated with the production facilities
located in Augsburg, Germany, Emporia, Kansas and Malmo, Sweden. Roll handling
products previously produced in the Rockford, Illinois facility were being
consolidated with similar products designed and manufactured in the Company's
facilities in Shanghai, China and Amal, Sweden. These Roll Handling businesses
were sold on September 26, 2001. The corporate headquarters was vacated and
relocated to the Shelton, Connecticut facility in order to take advantage of the
space created by the downsizing previously noted. The restructuring charge of
$2,277,000 recorded during the fiscal year ended June 30, 2001 includes
approximately $801,000 in employee severance and benefit costs, $1,378,000 in
facility lease termination costs, and $98,000 in incremental costs associated
with this overall restructuring. As of June 30, 2001, $4,045,000 is included in
"Other accounts payable and accrued liabilities" and $1,622,000 is included in
"Other long-term liabilities". The Company expects to incur approximately
$620,000 in additional restructuring costs during the fiscal year ended June 30,
2002, which will be expensed as incurred. The estimated total cash cost of the
restructuring program is expected to be approximately $8,052,000, with
approximately $4,530,000 expected to be spent over the next twelve months and
approximately $1,756,000 (primarily facility lease costs) expected to be spent
over the balance of the lease terms of approximately three years. The
restructuring program is expected to save the Company approximately $4,155,000
annually following full implementation, which is anticipated to occur by June
30, 2002, and is expected to restore the Company's profitability and cash flow
from operations.

19

The Company believes its cash flow from operations, available bank lines of
credit and alternative sources of borrowing are sufficient to finance its
working capital and other capital requirements for the near and long-term
future.

EURO CONVERSION

Effective January 1, 1999, the "Euro" has become the new common currency
for 11 countries of the European Community ("EC") (including Germany and France
where the Company has operations). Other member states (including the United
Kingdom and Sweden where the Company also has operations) may join in future
years. Beginning January 1, 1999, transactions in the Euro became possible, with
the national currencies continuing to circulate until January 1, 2002, when the
Euro will become the functional currency for these 11 countries. During the
transition period from January 1, 1999 to January 1, 2002, payments can be made
using either the Euro or the national currencies at fixed exchange rates.

Beginning January 1, 1999, the Company began conducting business with
customers in both the Euro and the respective national currency. Systems and
processes that are initially impacted by this dual currency requirement are
customer billing and receivables, payroll and cash management activities,
including cash collections and disbursements. To accomplish compliance, the
Company is making the necessary systems and process changes and is also working
with its financial institutions on various cash management issues. The Company's
German and French operations have begun recording all business transactions in
the Euro effective July 1, 2000 and July 1, 2001, respectively.

Management currently believes that the costs associated with implementing
and completing the Euro conversion, as well as business and market implications,
if any, associated with the Euro conversion, will not be material to its results
of operations or financial condition in any year or in the aggregate. The
competitive impact of increased cross-border price transparency, however, is
uncertain, both with respect to products sold by the Company, as well as
products and services purchased by the Company.

The Company's ongoing efforts with regard to the Euro conversion, and those
of its significant customers and suppliers, including financial institutions
may, at some time in the future, reveal as yet unidentified or not fully
understood issues that may not be addressable in a timely fashion, or that may
cause unexpected competitive or market effects, all contrary to the foregoing
statements. This issue, if not resolved favorably, could have a material adverse
effect on the Company's results of operations or financial condition in a future
period.

NEW ACCOUNTING STANDARDS

See Note 2 -- "Notes to Consolidated Financial Statements" for information
concerning new accounting standards.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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
uses derivative financial instruments in order to manage or reduce these risks,
typically currency futures contracts, the Company does not enter into derivative
or other financial instruments for trading or speculative purposes.

20

INTEREST RATE AND DEBT SENSITIVITY

As of June 30, 2001, the Company had debt totaling $22,488,000, most of
which bears interest at floating rates. The Company entered into an interest
rate swap agreement on April 27, 2001, with a notional amount of $15,000,000 and
a fixed rate of 4.98%. Interest rate swaps act as hedges of the underlying debt
instruments to effectively change the characteristics of the interest rate
without actually changing the debt instruments.

The Company performed a sensitivity analysis as of June 30, 2001, assuming
a hypothetical one percentage point increase in interest rates. Holding other
variables constant (such as foreign exchange rates, swaps and debt levels), a
one percentage point increase in interest rates would not have a material effect
on the Company's results of operations. 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 66% of its revenues from countries
outside of the United States for the fiscal year ended June 30, 2001. Results
were and continue to be affected by fluctuations in foreign currency exchange
rates. The Company's policy is to hedge the impact of currency rate fluctuations
which could have a material impact on the Company's financial results. The
Company utilizes foreign currency exchange forward contracts to hedge these
exposures. The Company also maintains certain levels of cash denominated in
various currencies which acts as a natural overall hedge. The Company adopted
the Financial Accounting Standards Board Statement No. 133 "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133") as of July 1, 2000.
Under the adoption of SFAS 133, open foreign currency exchange forward contracts
as of June 30, 2001 resulted in an increase to current liabilities of
approximately $338,000 and a decrease to other comprehensive income of
approximately $298,000, with the remaining $40,000 recognized as a currency
exchange loss in the current period.

The Company performed a sensitivity analysis as of June 30, 2001 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 Company's pre-tax income by approximately $750,000. 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 Company's actual exposures and hedges.

21

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

22

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
BALDWIN TECHNOLOGY COMPANY, INC.

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, of changes in shareholders' equity
and of cash flows present fairly, in all material respects, the financial
position of Baldwin Technology Company, Inc. and its subsidiaries at June 30,
2001 and 2000, and the results of their operations and their cash flows for each
of the three years in the period ended June 30, 2001, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
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, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Stamford, Connecticut
October 15, 2001

23

BALDWIN TECHNOLOGY COMPANY, INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

ASSETS

The accompanying notes to consolidated financial statements
are an integral part of these statements.
24

BALDWIN TECHNOLOGY COMPANY, INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

LIABILITIES AND SHAREHOLDERS' EQUITY

The accompanying notes to consolidated financial statements
are an integral part of these statements.
25

BALDWIN TECHNOLOGY COMPANY, INC.

CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The accompanying notes to consolidated financial statements
are an integral part of these statements.
26

BALDWIN TECHNOLOGY COMPANY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARES)

The accompanying notes to consolidated financial statements
are an integral part of these statements.
27

BALDWIN TECHNOLOGY COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

The accompanying notes to consolidated financial statements
are an integral part of these statements.

28

BALDWIN TECHNOLOGY COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

DISCLOSURE OF ACCOUNTING POLICY:

For purposes of the statement of cash flows, the Company considers all
highly liquid instruments (cash and short-term securities) with original
maturities of three months or less to be cash equivalents.

The accompanying notes to consolidated financial statements
are an integral part of these statements.

29

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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
controls, accessories and material handling equipment for the printing industry.

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 another
80% owned subsidiary. All significant intercompany transactions have been
eliminated in consolidation.

TRANSLATION OF FOREIGN CURRENCIES. All assets and liabilities of foreign
subsidiaries are translated into dollars at year-end (current) exchange rates
and components of revenue and expense are translated at average rates for the
year. The resulting translation adjustments are included in shareholders'
equity. Gains and losses on foreign currency exchange transactions are reflected
in the statement of income. Net transaction gains (losses) credited or charged
to income for the years ended June 30, 2001, 2000 and 1999 were $334,000,
$(251,000) and $(176,000), 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 uses derivative financial instruments 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 Company's policy is to hedge the impact of
currency rate fluctuations which could have a material impact on the Company's
financial results. The Company utilizes foreign currency exchange forward
contracts to hedge these exposures. The Company also entered into an interest
rate swap agreement to convert a portion of its variable rate debt into fixed
rate debt in order to reduce exposure to the changes in interest rates.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivate Instruments and
Hedging Activities" ("SFAS 133"). The effective date of SFAS 133 was July 1,
2000 for the Company. SFAS 133 requires that all derivative instruments be
recorded on the balance sheet at their fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other comprehensive
(loss), depending on whether a derivative is designated as part of a hedge
transaction and, if it is, the type of hedge transaction. Due to the Company's
limited use of derivative instruments, the impact of adoption at July 1, 2000
and for the year ended June 30, 2001 was immaterial and will not have a
significant effect on the Company's results of operations in future periods.

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 income statement when the underlying hedged item affects earnings.
Ineffectiveness related to cash flow hedges is recognized in earnings.

30

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

CONCENTRATION OF CREDIT RISK. Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of
trade accounts and notes receivable. The Company controls this risk through
credit approvals, customer limits and monitoring procedures. The Company can,
however, limit the amount of support provided to its customer in the event of
customer non-payment. The Company's ten largest customers accounted for
approximately 49%, 46% and 46% of the Company's net sales for each of the fiscal
years ended June 30, 2001, 2000 and 1999, 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, with the unrealized gains and losses net of income taxes,
reported as a component of shareholders' equity. Cost is determined using the
average cost method.

INVENTORIES. Inventories are stated at the lower of cost or market. Cost
is determined on the last-in, first-out (LIFO) method for domestic inventories
and the first-in, first-out (FIFO) method for foreign inventories. If the FIFO
method had been used for all inventories, the total stated amount for
inventories would have been $835,000 and 1,074,000 greater as of June 30, 2001
and 2000, respectively.

LONG-LIVED ASSETS. The Company follows Statement of Financial Accounting
Standard No. 121, "Accounting for the Impairment of Long-Lived Assets to be
Disposed Of" ("SFAS 121"). The Company continually reviews the recoverability of
the carrying value of these assets using the provisions of SFAS No. 121. As more
fully described in Note 8, during the year ended June 30, 2001, the Company
recognized impairment losses of $14,417,000 related to the long-lived assets of
the Roll Handling Group ("RHG") held for disposal at June 30, 2001 and $687,000
related to the Print-On-Demand ("POD") business that the Company decided to
exit.

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 life of the lease for leasehold improvements and 5
to 7 years for capital leases. 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 $1,659,000, $1,987,000 and $1,893,000 for the fiscal years ended June 30,
2001, 2000 and 1999, respectively.

PATENTS, TRADEMARKS AND ENGINEERING DRAWINGS. The cost of patents,
trademarks and engineering drawings are being amortized on a straight-line basis
over the estimated useful lives of the related assets, generally 15 to 20 years.
Amortization expense amounted to $669,000, $743,000 and $774,000 for the fiscal
years ended June 30, 2001, 2000 and 1999, respectively.

GOODWILL. Goodwill represents the excess of purchase price over the fair
market value of net assets acquired and is being amortized over a period of 40
years on a straight-line basis. The Company has a combination of both enterprise
level goodwill and goodwill related to assets acquired in a business
combination. The Company assesses impairment for goodwill related to assets
acquired in a business combination in conformity with Financial Accounting
Standards Board Statement No. 121 ("SFAS 121"), while enterprise level goodwill
is assessed for impairment in conformity with Accounting Principles Board
Opinion No. 17, using the undiscounted cash flow method. The Company reviews
quarterly actual and forecasted profitability on both a pre-tax and EBITDA basis
to determine whether a specific entity may be affected by impairment. Should
these reviews disclose a

31

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

potential impairment problem, the Company performs an estimated undiscounted
cash flow projection in order to verify the recoverability based on the guidance
in SFAS 121. Should such undiscounted future cash flows be less than the
carrying value, a write-down to fair market value may be required. Goodwill
decreased $2,540,000 in fiscal 2001 (increased $565,000 in fiscal 2000) due to
the impact of foreign exchange fluctuations. Amortization expense amounted to
$973,000, $1,028,000 and $995,000 for the fiscal years ended June 30, 2001, 2000
and 1999, 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, which are expected to be realized. A valuation
allowance is recorded to reduce a deferred tax asset to that portion which is
expected to more likely than not be realized. The Company continually reviews
the adequacy of the valuation allowance and recognizes these benefits only as
reassessment indicates that it is more likely than not that these benefits will
be realized.

FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS. The Company's financial
instruments consist of cash, short-term securities, accounts receivable, notes
receivable, marketable securities, capital lease obligations, accounts payable,
notes payable and other short and long term borrowings. The current carrying
amount of these instruments approximates fair market value.

DEFERRED LOAN ORIGINATION COSTS. At June 30, 2001, these costs were
$1,698,000 less $1,316,000 of accumulated amortization ($1,222,000 less
$1,193,000 of accumulated amortization at June 30, 2000) and were included in
"Other assets".

WARRANTY. The Company's standard contractual warranty provisions are to
repair or replace, at the Company's 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 within the
Company. Hence, the Company accrues estimated warranty costs 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 separately from
the percent of revenue discussed above. The Company has accrued estimated future
warranty and customer support obligations of $2,878,000 and $3,676,000 at June
30, 2001 and 2000 respectively, which are included in "Other accounts payable
and accrued liabilities".

REVENUE RECOGNITION. The Company's products are sold with terms and
conditions, which vary depending on particular cultural and business
environments in which the Company operates globally. The standard policy of the
Company is to recognize revenue in accordance with accounting principles
generally accepted in the United States of America. The Company's standard
payment terms for equipment include a deposit to be received with the order,
progress payments until equipment is shipped and a portion of the balance due
within a set number of days following shipment. Freight terms are FOB shipping
dock with risk of loss flowing to the purchaser. Installation services are
provided to the customer on an as needed basis and are contracted for
separately. If non-standard terms are negotiated, the impact of the terms of
shipment and contractual installation requirements are determined on an
individual contract basis. In the case of non-standard terms, revenue is not
recognized until, at a minimum, title and risk of loss have passed to the
customer, and the customer is obligated to pay. Should a loss 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

32

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

eligible for any refund of the purchase price, or right of return of the
contracted product, except if the product fails to meet published product
specifications and the Company fails to perform its obligations under product
warranty terms. When installation services are a contractual element, and
included in the purchase price of the product, the revenue associated with
installing the product is generally inconsequential to the total revenue stream.
The Company recognizes revenue for the total sales price and accrues the cost of
installing the product based on the Company's historical installation costs. The
terms of sale are generally on a purchase order basis and as such do not contain
formal product acceptance clauses. On certain large orders, usually in the
newspaper equipment market, a separately negotiated contract is used to
establish the terms of sale. In such cases, the Company recognizes revenue only
after all acceptance criteria, if any, have been satisfied.

Occasionally, the Company may use distributors to assist in the sales
function. In these cases, the Company does not recognize revenue until title for
the equipment and risk of loss has passed to the ultimate customer, who then
becomes obligated to pay with no right of return. Otherwise, the equipment is
reported as a part of the Company's inventory on consignment and no revenue is
reported.

RESEARCH AND DEVELOPMENT AND ENGINEERING. Research, development and
engineering costs are expensed as incurred.

NET INCOME (LOSS) PER SHARE. Basic earnings per share includes no dilution
and is computed by dividing net income (loss) available to common stockholders
by the weighted average number of common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution of securities that
could share in the earnings of an entity. The weighted average shares
outstanding used to compute diluted income (loss) per share includes 0 (zero), 0
(zero) and 347,000 shares, for each of the fiscal years ended June 30, 2001,
2000 and 1999, respectively, which represent potentially dilutive securities.
These primarily include outstanding options to purchase the Company's common
stock. Outstanding options to purchase 1,361,000 shares, 1,366,000 shares and
932,000 shares of the Company's stock, for the fiscal years ended June 30, 2001,
2000 and 1999, respectively, are not included in the above calculation to
compute diluted income (loss) per share as they have an anti-dilutive effect.

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. Actual results could differ
from those estimates.

RECENTLY ISSUED ACCOUNTING STANDARDS. In July 2001, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards No. 141, "Business Combinations," ("SFAS 141") which applies to all
business combinations initiated after June 30, 2001. The provisions of this
statement require business combinations to be accounted for using the purchase
method of accounting. Also in July 2001, the FASB issued SFAS No. 142, "Goodwill
and Other

33

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Intangible Assets", ("SFAS 142"). Under SFAS 142, goodwill from acquisitions
occurring after June 30, 2001 will not be amortized, and for goodwill existing
prior to June 30, 2001, the Company has adopted the non-amortization provisions
of the statement on July 1, 2001. Goodwill for which the nonamortization
provisions are applied will be required to be reviewed for impairment at least
on an annual basis. The initial impairment analysis is required to be completed
by the Company by December 31, 2001. Any impairment that is found to exist at
adoption will be reflected as a cumulative effect of an accounting change.
Thereafter, impairment charges will be charged to operations. SFAS 142 requires
that, upon adoption, goodwill and certain intangible assets be reviewed for
classification and useful life. For the fiscal year ended June 30, 2001,
goodwill amortization reduced operating income and net income by approximately
$973,000, of which, approximately $458,000 related to the RHG and POD
businesses. The Company expects that, aside from the nonamortization of goodwill
on a prospective basis, the effect upon adoption of SFAS 142 will be immaterial.

In August 2001, the Financial Standards Board issued Statement of Financial
Accounting Standards No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" ("SFAS 144"). SFAS 144 provides new guidance on the
recognition of impairment losses on long-lived assets to be held and used or to
be disposed of and also broadens the definition of what constitutes a
discontinued operation and how the results of a discontinued operation are to be
measured and presented. SFAS 144 is effective for the Company's fiscal year
beginning in 2002 and is not expected to materially change the methods used by
the Company to measure impairment losses on long-lived assets, but may result in
more matters being reported as discontinued operations than is permitted under
current accounting principles.

RECLASSIFICATIONS. Certain prior year items have been reclassified to
conform to the current year's presentation.

NOTE 3 -- 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 capacity as
owners. Prior to December 31, 2000, OCI has been reported on the Statement of
Financial Position, and the Statement of Changes in Shareholders' Equity, using
accounts for cumulative translation adjustment and net unrealized gains and
losses on investments. These two accounts are now being combined and shown
together as one item in both of the above statements along with the amounts
reported in OCI for the effect of the adoption of SFAS 133.

Accumulated other comprehensive income (loss) consists of the following:

34

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

At June 30, 2001, $961,000 of a cumulative translation adjustment related
to the foreign operations of the RHG held for disposal was reclassified and
reflected as part of the overall impairment charge. (See Note 8).

NOTE 4 -- PROVISION FOR LOSS ON THE DISPOSITION OF PRE-PRESS OPERATIONS:

In June 1997, the Company sold all of the outstanding shares of its former
Pre-Press Operations ("PPO") to Kaber Imaging, Inc. ("Kaber" or "Buyer"). The
Company recorded a loss on this disposition in the amount of $42,407,000 in the
fiscal year ended June 30, 1997. When the Company acquired the PPO, in July
1991, the Company assumed the existing guarantees that were being provided by
the previous owner. The guarantees consisted of two parts: 1.) a guarantee to
Forsakring Pensiongaranti ("FPG"), a Swedish pension obligation surety bond
firm, in the form of a guarantee bond covering the quasi Swedish government
retirement plan, and 2.) a direct guarantee to a group of individual employees
who were members of a separate plan. The assumption of the pension obligations
was unconditional.

The Company's initial purchase of the PPO in June 1992, included a
liability for an unfunded pension obligation of approximately $4,309,000. This
obligation was adjusted annually in accordance with Statement of Financial
Accounting Standards No. 87, "Employer's Accounting for Pensions", until the PPO
was sold in June 1997.

The purchase and sale agreement for the sale of the PPO to Kaber, in June,
1997 included provisions for the Buyer to assume all pension liabilities related
to the PPO, to use their best efforts to gain the release of the Company from
the guarantees and to reimburse the Company for any and all costs incurred by
the Company associated with the guarantees. The provisions and liabilities for
both the plan covered by the FPG surety bond and the group plan for the
individual retirees were assumed by the Buyer and resulted in no curtailment of
either plan. At the time that the PPO was sold to Kaber, management conducted
due diligence of Kaber and their financial backers and believed that they had
the financial ability to satisfy these guarantees.

Subsequent to the sale of the PPO, Kaber and their related domestic
subsidiaries filed for protection in the United States under Chapter 11 of the
bankruptcy code in February 1999 which caused similar filings in Kaber's foreign
subsidiaries including Sweden. During the period of July 1997 through February
1999, Kaber failed to gain the release of the Company from the guarantees which
remained in place. In March, 1999, the Company was contacted by FPG, the surety
bond holder, to fulfill the Company's guarantee of the pension obligation.
Neither Kaber, nor their Swedish subsidiaries, which were in liquidation,
possessed the financial capability to fulfill its obligation. Based on the
demands from FPG, and representatives of the members of the separate plan and
Kaber's bankruptcy, the Company recognized a liability for the estimated amount
of these obligations in its financial results by establishing a reserve of
$2,400,000 in the third quarter of fiscal year ended June 30, 1999. To date, the
Company has made payments to FPG in the amount of $1,567,000. The Company
further reduced the reserve by $472,000 to $361,000, during fiscal 2001, the
estimated liability at June 30, 2001 based upon recent negotiations with
remaining former employees.

NOTE 5 -- RESTRUCTURING CHARGES AND RELATED RESERVES:

During March 2000, the Company entered into a restructuring plan that
included the consolidation of production into certain facilities, and reduction
in total employment, primarily in the

35

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

United States. Accordingly, the Company recorded restructuring charges in the
amount of $2,277,000 and $5,664,000 for the fiscal years ended June 30, 2001 and
2000, respectively. These charges are expected to reduce the Company's worldwide
cost base and strengthen its competitive position as a leading global supplier
of auxiliary equipment to the printing and publishing industries. Prior to the
restructuring program, the Company was managed in a decentralized manner through
geographically dispersed autonomous business units. Given that many of the
Company's significant customers have been reorganizing on a global basis,
management decided to restructure the Company along functional lines on a global
basis. Rather than have administration, sales, product development and
production activities at each decentralized business unit, the restructuring
plan included the centralization of these activities. Products that were
previously being produced at multiple facilities are being consolidated with
similar product lines at existing facilities. Management believes that the
nature and scope of these restructuring activities will be sufficient to restore
the Company's profitability and cash flow from operations. The following tables
detail the components of the restructuring charges and the remaining reserve
balances as of June 30, 2001 and 2000.

Activity in the fiscal year ended June 30, 2000 is as follows:

Activity in the fiscal year ended June 30, 2001 is as follows:

---------------------

* Additional charges related to expanded restructuring efforts and additional
facility closings.

Severance costs will be paid through June 2002, the majority of which are
expected to be paid in the second and third quarters of fiscal 2002. Facility
lease termination costs will be paid through April 2006. As of June 30, 2001,
$4,045,000 is included in "Other accounts payable and accrued liabilities" and
$1,622,000 is included in "Other long-term liabilities".

A restructuring reserve was charged against earnings for the year ended
June 30, 1999 in the amount of $870,000. The reserve was established to accrue
the costs associated with planned workforce reductions at the Company's German
and Japanese operations, and certain costs associated with a

36

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

scheduled plant closing in the Americas. As of June 30, 2000, $870,000 had been
charged against this reserve.

NOTE 6 -- BUSINESS SEGMENT INFORMATION:

Operating segments are defined as material components of an enterprise
about which separate information is available that is evaluated regularly by the
chief operating decision maker, or decision-making group, in deciding how to
allocate resources and assess performance.

For the year ended June 30, 2001, the Company has two reportable operating
segments, the Graphic Products and Controls Group ("GPC"), and the Material
Handling Group ("MHG"). The GPC segment includes products such as cleaning
systems, water systems and other equipment designed to enhance the quality of
printed material and improve productivity. The MHG segment includes products
which handle the materials supplied to the press, and automates the handling of
the finished printed material. A significant portion of the MHG is comprised of
the Roll Handling Group ("RHG") product line. This product line and the
associated businesses were sold on September 26, 2001, and as a result, the
amounts reported in the MHG will be significantly reduced in future periods.
Also, on September 27, 2000, assets of the Baldwin Stobb Division ("BSD"), also
a part of MHG, were sold. The all other category is comprised of the Print
On-Demand Group ("POD"), which operates in the short-run digital printing
market. The Company has decided to exit this business in the near future. See
Note 8 for a discussion of these transactions.

The accounting policies of the operating segments are the same as those
described in Note 2. An operating segment's performance is primarily evaluated
based on operating profit. Sales by major country are determined based on the
country in which the subsidiary is legally domiciled. Long-lived assets are
principally comprised of net property, plant and equipment; patents and
trademarks; goodwill; and certain other assets.

The tables below present information about reported segments for the years
ended June 30, 2001, 2000, and 1999 (in thousands):

37

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

38

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

---------------------
(a) Operating (loss) income reported for the segments has been reduced by the
following special charges:

39

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Two customers, principally of the RHG, accounted for approximately 23% of
the Company's net sales for the fiscal year ended June 30, 2001. One of these
customers, Goss Graphic Systems, Inc. ("Goss"), which accounted for
approximately 11% of the Company's net sales for the fiscal year ended June 30,
2001, filed for bankruptcy protection under a prearranged Chapter 11 proceeding
in the United States bankruptcy court, for which the Company recognized a
$536,000 bad debt charge.

(b) Other income (expense) is comprised of the following items:

Other income of $940,000 in the fiscal year ended June 30, 2001 consists
primarily of a pre-tax gain of $1,213,000 related to a favorable settlement of a
patent litigation suit, a $345,000 pre-tax gain on a derivative financial
instrument that did not qualify as a hedge pursuant to SFAS 133, and an $831,000
pre-tax loss on the sale of BSD.

NOTE 7 -- DERIVATIVES:

The Company adopted the provisions of SFAS 133 effective July 1, 2000.
During the fiscal year ended June 30, 2001, the Company had currency futures
contracts and an interest rate swap agreement that qualified as cash flow
hedges; accordingly, the gain or loss was recorded in OCI and will be recognized
in income when the hedged item affects earnings. In April 2001, the Company
entered into an interest rate swap agreement. The effect of this agreement is to
convert $15,000,000 of the Company's variable rate debt into fixed rate debt
with an interest rate of 4.98%. Included in interest expense for the fiscal year
ended June 30, 2001 is $19,000 associated with this interest rate swap.

Hedging ineffectiveness, determined in accordance with SFAS 133 had no
material impact on earnings for the fiscal year ended June 30, 2001. At July 1,
2000, the Company had a derivative that did not qualify as a hedge pursuant to
SFAS 133. A $345,000 pre-tax gain was recorded in other income in the first
quarter of the fiscal year ended June 30, 2001 related to this derivative
instrument. The effect on earnings of the Company's other derivative financial
instruments is not material for the fiscal year ended June 30, 2001.

Unrealized net gains (losses) included in OCI are as follows:

The entire unrealized loss of $299,000 at June 30, 2001, is expected to be
reclassified against earnings during the next twelve months. The currency
futures contracts expire at various times through June 28, 2002 while the
interest rate swap agreement expires on October 30, 2002.

40

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8 -- SALE OF BUSINESSES AND IMPAIRMENT CHARGES:

During the fourth quarter of fiscal 2001, the Company committed to a plan
to dispose of the RHG. On September 26, 2001, the Company sold substantially all
of the assets of its RHG. The consideration received for the transaction,
subject to certain post-closing adjustments, amounted to approximately
$6,800,000. The Company received $1,808,000 at closing and $4,992,000 in October
2001. Accordingly, during the fourth quarter of fiscal 2001, the Company
recorded an impairment charge of approximately $14,831,000 relating primarily to
the write-off of goodwill and certain assets of the RHG, including $961,000 of
cumulative translation adjustments related to the foreign operations of the RHG,
which were reclassified and reflected as part of the impairment charge. The RHG
is included in the Material Handling Group segment and the impairment charge is
included in "restructuring and other charges" on the accompanying statement of
income.

Net assets held for disposal related to RHG are included in the following
categories as of June 30, 2001.

Cash........................................................ $ 74,000
Accounts receivable, net of allowance of $12,000............ 7,124,000
Inventory................................................... 5,992,000
Prepaid expenses and other current assets................... 690,000
Accounts payable............................................ (2,832,000)
Accrued salaries, commissions, bonus and profit-sharing..... (812,000)
Customer deposits........................................... (1,691,000)
Accrued and withheld taxes.................................. (386,000)
Income taxes payable........................................ (64,000)
Other accounts payable and accrued liabilities.............. (1,361,000)
-----------
Net assets held for disposal as of June 30, 2001............ $ 6,734,000
-----------

Not included in the above net assets are $11,192,000 of goodwill, $989,000
of patents and $1,549,000 of property, plant and equipment, which were
written-off as of June 30, 2001. These assets are considered impaired as the
carrying value of these assets will not be recovered as a result of the sale of
the RHG.

Also during the fourth quarter of fiscal 2001, the Company decided to exit
the POD business, which resulted in the write-off of $687,000 of goodwill, which
is included as part of the impairment charge. The remaining assets of POD are
not material.

On September 27, 2000, the Company sold substantially all of the assets of
its Baldwin Stobb Division ("BSD") to Systems Technology, Inc., a new company
formed by the management of BSD. The consideration received for the transaction,
subject to certain post-closing adjustments, was the sum of (i) $6,750,000;
minus (ii) all payments received (net of disbursements paid) on behalf of BSD
for the period July 1, 2000 through September 27, 2000 amounting to $2,155,000;
plus (iii) $175,000 in consideration for income tax obligations to be received
at a later date. The total consideration received by the Company included
307,000 shares of the Company's Class A Common Stock valued at the average fair
market price of the Company's Class A Common Stock for the ten days immediately
prior to closing ($1.9875 per share). The Company recorded a pre-tax loss of
$831,000 including associated disposition costs, as a result of this
transaction, which is included in other expense.

41

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Excluding the impairment charges, net sales and operating income (loss) of
RHG, POD and BSD combined, were as follows for the years ended June 30:

NOTE 9 -- INVENTORIES:

Inventories consist of the following:

Foreign inventories decreased by $3,240,000 (decreased by $164,000 in 2000)
due to translation rates in effect at June 30, 2001 when compared to rates in
effect at June 30, 2000.

NOTE 10 -- LOANS PAYABLE:

The maximum amount of loans payable outstanding during the year ended June
30, 2001 was $8,067,000 ($6,928,000 in 2000). 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. Loans payable decreased by
$574,000 (decreased by $214,000 in 2000), due to translation rates in effect at
June 30, 2001 when compared to rates in effect at June 30, 2000.

42

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11 -- LONG-TERM DEBT:

On October 31, 2000, the Company entered into a $35,000,000 Revolving
Credit Facility (the "Credit Facility") with Fleet National Bank and First Union
National Bank (collectively the "Banks"), which matures on October 31, 2003. The
Credit Facility consists of a $25,000,000 Revolving credit line (the "Revolver")
and a $10,000,000 credit line to be utilized for acquisitions, (the "Acquisition
Line"). At June 30, 2001, the Company had available lines of credit of
$35,563,000 of which $21,279,000 had been drawn. At June 30, 2001, the Company
has outstanding borrowings of $17,750,000 under the Revolver, but has no
outstanding borrowings under the Acquisition Line. Only the Revolver has
associated commitment fees, which are calculated quarterly, at a rate of
one-half of one percent per annum of the unused portion of the Revolver.
Commitment fees for the years ended June 30, 2001, 2000 and 1999 were $47,000,
$44,000 and $41,000, respectively. The Credit Facility includes certain
restrictions which limit the incurrence of debt and prohibit dividend payments,
among other things.

43

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Credit Facility is collateralized by a pledge of the capital stock of
the Company's subsidiaries and requires the Company to maintain certain
financial covenants. These covenants include a leverage ratio, an interest
coverage ratio and minimum net worth requirements (as those terms are defined in
the credit agreement). During the quarters ended June 30, and September 30,
2001, the Company did not meet these three covenants and on October 15, 2001
received an irrevocable commitment letter from the Banks to amend the Credit
Facility and waive the covenant violations. The commitment letter also provides
for a new borrowing structure which will enable the Company to borrow a
percentage of eligible domestic accounts receivable, domestic inventory, the
appraised value of the Company's Emporia, Kansas facility, the net book value of
domestic machinery and equipment and certain historic royalty streams, as
defined (collectively the "Borrowing Base") up to a maximum of $21,000,000. The
commitment letter also provides that $6,000,000 (less outstanding letters of
Credit) may be borrowed in addition to the amounts available under the Borrowing
Base. Interest is charged at LIBOR plus 3.25% or at an alternative base rate, as
defined, plus 1%. Additionally, there is an unused commitment fee of 0.5%. The
commitment letter provides for borrowings through October 1, 2002 and requires
that a minimum tangible net worth covenant be met, beginning with the quarter
ending December 31, 2001. The commitment letter also requires minimum operating
income covenants of $250,000 for the quarter ending December 31, 2001,
$1,250,000 for the quarter ending March 31, 2002 and $1,750,000 for the quarter
ending June 30, 2002. Based on management's estimates, the Company's eligible
Borrowing Base through June 30, 2002, plus the additional $6,000,000 will total
approximately $19,000,000. In accordance with the terms of the commitment
letter, the Company is presently able to classify $7,400,000 of the amounts
outstanding at June 30, 2001 under the Credit Facility as long-term. The
remaining $10,350,000 has been classified as current, of which $2,000,000 has
subsequently been repaid and management believes approximately $8,100,000 will
be able to be classified as long-term once certain terms of the amended credit
facility are finalized.

The ability to achieve the covenants depends in part on management's
successful execution of its restructuring plan as discussed in Note 5, and other
business factors outside of the control of management. There can be no guarantee
that such covenants will be met. Accordingly, if the covenants are not met,
amounts outstanding under the commitment letter would become payable on demand.
Management believes that alternative sources of financing are available to
refinance the existing facilities on a long-term basis. However, if the loans
become due on demand and alternative financing sources are not available,
management will be required to take additional actions to reduce operating
expenses or sell assets to meet liquidity needs.

On April 27, 2001, the Company entered into an interest rate swap agreement
with Fleet National Bank to fix the LIBOR portion of its interest rate at 4.98%
for a principal amount of $15,000,000 with the maturity the same as the Credit
Facility. The effect of this interest rate swap agreement did not have a
material impact on the Company's financial position or results of operations for
the fiscal year ended June 30, 2001.

Notes payable, denominated in currencies other than the U.S. dollar,
decreased by $274,000 (decreased by $307,000 in 2000), due to translation rates
in effect at June 30, 2001 when compared to translation rates in effect at June
30, 2000. The foreign note due through 2008, with an interest rate of 5.00%, is
collateralized by buildings as outlined in the indenture relating to this note.

44

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Maturities of long-term debt in each fiscal year ending after June 30, 2001
are as follows:

NOTE 12 -- TAXES ON INCOME:

(Loss) income before income taxes and the (benefit) provision for income
taxes are comprised of:

45

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Deferred income taxes are provided on temporary differences between the
financial reporting basis and tax basis of the Company's assets and liabilities.
The principal temporary differences which give rise to deferred tax assets and
liabilities at June 30, 2001 and 2000 are as follows:

At June 30, 2001, net operating loss carryforwards of $53,537,000 and
$7,368,000, respectively, are available to reduce future foreign and domestic
taxable income. The foreign net operating loss carry-forwards ("NOL's") have an
indefinite carry-forward period, while the domestic NOL's expire in 2021. In
addition, the Company also has $1,408,000 in domestic net operating loss
carryforwards subject to separate return limitation year rules ("SRLY"). In
addition, as of June 30, 2001, the Company has capital loss carry-forwards
available in the amount of $11,473,000, $10,878,000 of which is domestic and
expires at various dates through 2004 and the remainder in England, which has an
indefinite carry-forward period.

The Company establishes valuation allowances in accordance with the
provisions of Financial Accounting Standards Board Statement No. 109,
"Accounting for Income Taxes". The Company had reduced a previously recorded
valuation allowance in fiscal 2000. This reduction relates primarily to foreign
NOL carry-forwards previously expected to expire unutilized. In fiscal 2001, the
valuation allowance was increased for capital loss and foreign tax credit
carry-forwards that are more likely than not expected to expire unused, and
decreased due to exchange rate changes.

The Company has not had to provide for income taxes on $14,642,000 of
cumulative undistributed earnings of subsidiaries outside the United States
because of the Company's intention to reinvest those earnings. In the event that
earnings are remitted, the tax effect on the results of operations after
considering available tax credits and tax planning strategies are not expected
to be significant.

The total income tax (benefit) provision exceeded the computed "expected"
(benefit) provision (determined by applying the United States Federal statutory
income tax rate of 34% to (loss) income

46

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

before income taxes) by $6,639,000, $(5,390,000) and $1,067,000 for the years
ended June 30, 2001, 2000 and 1999, respectively. The reasons for the difference
are as follows:

NOTE 13 -- COMMON STOCK:

The holders of the Company's Class A Common Stock ("Class A"), voting as a
separate class, are entitled to elect 25% of the members of the Company's Board
of Directors. Holders of Class B Common Stock ("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 number of
outstanding shares of both classes of Common Stock as of the record date of the
Company's Annual Meeting. 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 Annual Meeting, the holders of Class A,
voting as a separate class, continue to elect a number of Directors equal to 25%
of the total number of Directors constituting the entire Board of Directors and
the remaining directors are elected by the holders of both classes of Common
Stock, 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, 2001, the number of
outstanding shares of Class B constituted 12.3% (12.0% in 2000) of the total
number of outstanding shares of both classes of Common Stock.

Class A has no conversion rights; however, Class B is convertible into
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 on shares of Class B.

In November 1998, the Company's stock repurchase program was increased from
$10,000,000 to $15,000,000 of Class A and 500,000 shares of Class B. In August
1999, the Company's stock repurchase program, under which the Company had spent
$13,015,000 to date to repurchase 2,821,656 shares of Class A and 164,117 shares
of Class B, was terminated.

In October 1999, the Company repurchased 400,000 shares of Class A. In
addition, in November 1999, the Company initiated a new stock repurchase
program. Under the new program, the Company is authorized to utilize up to
$5,000,000 to repurchase Class A. As of June 30, 2001, 771,800 shares of Class A
and 25,000 shares of Class B had been repurchased for $1,746,000, of which
$1,683,000 was used to purchase Class A and $63,000 was used to purchase Class B
under the new program.

47

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 14 -- STOCK OPTIONS:

The 1986 Stock Option Plan, as amended and restated (the "1986 Plan"),
allowed for the granting, at fair market value on the date of grant, of
incentive stock options, non-qualified stock options, and tandem Stock
Appreciation Rights ("SARS") for up to a total of 2,220,000 and 590,000 shares
of Class A and Class B, respectively. Options to purchase shares of Class B were
granted at a price per share of no less than 125% of the fair market value of a
share of Class A on the date of grant. All options become 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 and canceled shares become available for future grants. On October 14,
1996, the 1986 Plan terminated.

The 1990 Directors' Stock Option Plan (the "1990 Plan") provides for the
granting, at fair market value on the date of grant, of up to 100,000 shares of
Class A and Class B as non-qualified stock options to members of the Company's
Board of Directors who are not employees ("Eligible Directors") of the Company
or any of its subsidiaries. Grants are made on the third business day subsequent
to each Annual Meeting of Stockholders, including the 1990 meeting, to each
Eligible Director for 1,000 shares of Class A and Class B in proportion to the
number of shares of each such class then outstanding. Options to purchase shares
of Class B are granted at a price per share of no less than 125% of the fair
market value of a share of Class A on the date of grant. Restrictions under the
1990 Plan are similar to those under the 1986 Plan except with regard to the
exercise date, which is twelve months after the date of grant, and termination
of options, which is generally nine months after termination of service as a
director. The 1990 Plan was terminated on November 12, 1998 in connection with
the approval of the 1998 Non-Employee Directors' Stock Option Plan (the "1998
Plan"), provided however, that outstanding options under the 1990 Plan will
continue to be subject to the terms thereof.

The 1996 Stock Option Plan (the "1996 Plan") allows for the granting, at
fair market value on the date of grant, of incentive stock options,
non-qualified stock options, and tandem SARS. Grants from the 1996 Plan are
limited to a maximum outstanding total of 875,000 and 125,000 shares of Class A
and Class B, respectively, at all times. Options to purchase shares of Class B
are granted at a price per share of no less than 125% of the fair market value
of a share of Class A on the date of grant. Restrictions under the 1996 Plan are
similar to those under the 1986 Plan with regard to the exercise and termination
of options. Canceled shares become available for future grants.

The 1998 Non-Employee Directors' Stock Option Plan (the "1998 Plan")
provides for the issuance of options to purchase up to an aggregate of 250,000
shares of Class A to non-employee Directors of the Company. Under the 1998 Plan,
each year, each eligible Director receives a grant of options to purchase 3,000
shares of Class A. The options are granted at the fair market value on the date
of grant, and vest 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 and canceled shares become available for future grants.

48

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

49

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table summarizes information regarding stock options
outstanding and exercisable at June 30, 2001:

The Company adopted Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation" ("SFAS 123"), on July 1, 1996,
electing the disclosure only provisions of that statement. Accordingly, no
charge for compensation has been recorded for stock based employee awards. In
accordance with SFAS 123, the fair value method of accounting has not been
applied to options granted prior to July 1, 1995. Due to the vesting schedule of
options granted under each of the stock option plans, as well as the exclusion
of the fair value of options granted prior to July 1, 1995, the fair value of
compensation cost calculated to disclose pro forma financial information may not
be representative of that to be expected in future years. The fair value method
of calculating the value of each option granted subsequent to June 30, 1995 was
estimated as of the option grant date using the Black-Scholes option pricing
model. The following weighted average assumptions were used to calculate the
estimated fair value of the options by the pricing model for the years ended
June 30, 2001, 2000 and 1999: the forfeiture rates and dividend yields were 0%
(none) and the expected lives were five years for each of the fiscal years ended
June 30, 2001, 2000, and 1999, the weighted average risk free interest rates
were 5.70% for 2001, 6.07% for 2000 and 5.21% for 1999, and the average
volatility was 50.61% for 2001, 49.71% for 2000 and 41.44% for 1999. If the
Company had recorded compensation cost based upon the fair values as calculated
above, the proforma effects on net income and earnings per share would have been
as follows:

50

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 15 -- SUPPLEMENTAL COMPENSATION:

Subsidiaries within the Americas maintain profit sharing, savings and
retirement plans. Amounts expensed under these plans were as follows:

Company contributions to each of the above plans are discretionary and are
subject to approval by their respective Boards of Directors.

Certain subsidiaries and divisions within Europe maintain pension plans.
Amounts expensed under these plans were as follows:

The amount of expense relating to the European pension plans is determined
based upon, among other things, the age, salary and years of service of
employees within the plans. The Company's German, English and Swedish
subsidiaries make annual contributions to the plans equal to the amounts accrued
for pension expense.

In Germany, at Baldwin Grafotec GmbH, there is currently one additional
pension plan covering 1 employee and 2 former employees. This defined benefit
plan provides for benefits, at maturity age, in lump sum payments on retirement
or death or as a disability pension in case of disability, and is partially
funded by insurance contracts.

51

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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:

52

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

There are two retirement plans within Asia Pacific. The Company's Japanese
subsidiary maintains defined contribution retirement plans covering all
employees, excluding directors, and a separate plan for its directors. Amounts
contributed and expensed under these programs are determined based on
participants' salary and length of service. The plans are fully accrued and
partially funded through insurance contracts. Expenses relating to these
programs were $552,000, $852,000 and $512,000 for the fiscal years ended June
30, 2001, 2000 and 1999, respectively.

Officers and key employees of the Company participate in various incentive
compensation plans. Amounts expensed under such plans were $74,000, $0 (zero)
and $710,000 for the fiscal years ended June 30, 2001, 2000 and 1999,
respectively.

NOTE 16 -- COMMITMENTS AND CONTINGENCIES:

Future minimum annual lease payments under capital leases, which consist of
buildings, and machinery and equipment with accumulated depreciation amounting
to $590,000 at June 30, 2001 and $1,371,000 at June 30, 2000, together with the
present value of the minimum lease payments are as follows at June 30, 2001:

At June 30, 2001 $4,000, ($5,000 at June 30, 2000) is included in "Other
long-term liabilities" representing the long-term portion of the present value
of minimum lease payments.

Rental expense on operating leases amounted to approximately $4,352,000,
$4,600,000 and $4,565,000 for the years ended June 30, 2001, 2000 and 1999,
respectively. Aggregate future annual rentals under noncancellable operating
leases for periods of more than one year at June 30, 2001 are as follows:

53

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

From time to time, in the ordinary course of business, the Company is
subject to legal proceedings. While it is impossible to determine the ultimate
outcome of such matters, it is management's opinion that the resolution of any
pending issues will not have a material adverse effect on the financial position
or results of operations of the Company.

NOTE 17 -- RELATED PARTIES:

On November 30, 1993, the Company entered into a loan and pledge agreement
and promissory note with Gerald A. Nathe, President and Director of the Company,
which was amended and restated on November 25, 1997. On March 11, 1994, the
Company entered into a loan and pledge agreement and promissory note with
William J. Lauricella, a former Chief Financial Officer and Treasurer of the
Company. The loans were made in order to enable the Company's officers to
purchase shares of Class B from non-employee shareholders. Mr. Nathe was loaned
$1,817,000 to purchase 315,144 shares of the Class B and Mr. Lauricella was
loaned $164,000 to purchase 25,000 shares of Class B. All of the shares
purchased were pledged as collateral for the demand promissory notes and each of
the notes bear interest payable on the anniversary dates at LIBOR rates plus
1.25% reset on the first day of each succeeding January, April, July and
October.

On February 4, 2000, Mr. Lauricella resigned as Chief Financial Officer and
Treasurer of the Company. Pursuant to Mr. Lauricella's separation agreement, the
Company repurchased 25,000 shares of Class B for $2.50 per share, with the
resulting $63,000 used to offset the outstanding amount of the loan. In
addition, the Company owed Mr. Lauricella approximately $109,000, relating to a
deferred compensation agreement, which was used to further reduce such loan
amount. The remaining balance of $1,000 was paid by Mr. Lauricella to the
Company.

The maximum amount of the note outstanding for Mr. Nathe, including
interest, during the fiscal year ended June 30, 2001 was $1,644,000. At June 30,
2001, the balance of the note receivable for Mr. Nathe, including interest, was
$1,556,000. The Company forgave an interest payment due from Mr. Nathe during
the fiscal year ended June 30, 2001 in the amount of $128,000 on the above loan,
and included such amount as compensation expense to Mr. Nathe.

The maximum amounts of the notes outstanding, including interest, during
the fiscal year ended June 30, 2000 were $1,599,000 and $173,000 for Mr. Nathe
and Mr. Lauricella, respectively. At June 30, 2000, the balance of the note
receivable, including interest, was $1,566,000 for Mr. Nathe. The Company
forgave an interest payment due from Mr. Nathe during the fiscal year ended June
30, 2000 in the amount of $99,000 on the above loan, and included such amount as
compensation expense to Mr. Nathe.

On July 1, 1990, Baldwin Technology Corporation and Baldwin Graphic
Systems, Inc., two subsidiaries of Baldwin Americas Corporation, entered into an
agreement with Harold W. Gegenheimer, Chairman Emeritus, guaranteed by the
Company, to replace various prior agreements including royalty and employment
agreements, retirement plans and bonus arrangements. The agreement guarantees a
compensation amount of $200,000 per year to Mr. Gegenheimer. Simultaneously, a
separate agreement was entered into by the Company and Mr. Gegenheimer whereby
the Company was released from certain prior agreements and agreed to pay a
minimum guaranteed amount of compensation of $200,000 per year to Mr.
Gegenheimer, not to exceed $350,000 per year, based on one and one-half percent
(1.5%) of the Company's annual net after tax profits. The amount

54

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

expensed under these two agreements was $400,000 for each of the years ended
June 30, 2001, 2000 and 1999.

On February 10, 1997, Wendell M. Smith resigned as Chairman of the Company.
The Company has made deferred compensation payments to Mr. Smith in the amount
of $103,000 for each of the years ended June 30, 2001, 2000 and 1999,
respectively. In addition, the Company entered into a consulting agreement with
Polestar Limited ("Polestar"), a corporation controlled by Mr. Smith, which
provides for payments to Polestar of $60,000 per year for consulting services
through 2014. The agreement was amended during the fiscal year ended June 30,
2001 to increase payments to $90,000 per year.

NOTE 18 -- QUARTERLY FINANCIAL DATA (UNAUDITED):

Summarized quarterly financial data for the fiscal years ended June 30,
2001 and 2000 are as follows (in thousands, except per share data):

55

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

---------------------
(1) The first quarter of fiscal 2001 other income included a $345,000 gain on a
derivative financial instrument that did not qualify as a hedge pursuant to
SFAS 133 and a $650,000 pre-tax loss on the sale of BSD. See Notes 7 and
8 -- Notes to Consolidated Financial Statements and "Management's
Discussions and Analysis of Financial Condition and Results of Operations."

(2) The second quarter of fiscal 2001 other income includes a pre-tax gain of
$1,213,000 related to a favorable settlement of a patent litigation suit.
See "Management's Discussion and Analysis of Financial Conditions and
Results of Operations."

(3) The third quarter of fiscal 2001 includes a reduction to a reserve in the
amount of $472,000 related to the sale of the PPO. See "Management's
Discussion and Analysis of Financial Conditions and Results of Operations."

(4) The fourth quarter of fiscal 2001 operating expenses includes additional
executive compensation, recruitment and severance charges, and a $536,000
bad debt charge related to an OEM customer. The fourth quarter of fiscal
2001 restructuring and other charges includes asset write-offs associated
with RHG and POD of $15,518,000 and restructuring charges of $2,182,000. The
fourth quarter of fiscal 2001 other income includes a $181,000 adjustment to
the loss on the sale of BSD as additional costs associated with the sale
were incurred. See Notes 5 and 8 -- Notes to Consolidated Financial
Statements and "Management's Discussion and Analysis of Financial Conditions
and Results of Operations."

(5) The second quarter of fiscal 2000 operating expenses includes a $1,100,000
bad debt charge related to the sale of the pre-petition accounts receivable
of one of the Company's largest OEM customers. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations".

56

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(6) The third quarter of fiscal 2000 includes a $4,147,000 tax benefit related
to prior year NOL's of the Company's Swedish subsidiaries. See Note
12 -- Notes to Consolidated Financial Statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations".

(7) The fourth quarter of fiscal 2000 includes a $1,204,000 tax benefit related
to estimate adjustments resulting from the settlement of both foreign and
domestic tax issues. See Note 12 -- Notes to Consolidated Financial
Statements and "Management's Discussion and Analysis of Financial Condition
and Results of Operations".

57

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

There has been no Form 8-K filed within 24 months prior to the date of the
most recent financial statements reporting a change of accountants and/or
reporting a disagreement on any matter of accounting principle or financial
statement disclosure.

PART III

ITEMS 10, 11, 12 AND 13.

Information required under these items is contained in the Company's 2001
Proxy Statement, which will be filed with the Securities and Exchange Commission
within 120 days after the close of the Company's fiscal year end; accordingly,
this information is therefore incorporated herein by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1) Financial statements required by Item 14 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:

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 Company's
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 Company's 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 Company's 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. Filed as Exhibit 3.2 to the
Company's Registration Statement (No. 33-10028) on Form S-1
and incorporated herein by reference.

58

10.1* Baldwin Technology Company, Inc. Amended and Restated 1986
Stock Option Plan. Filed as Exhibit 10.2 to the Company's
Registration Statement (No. 33-31163) on Form S-1 and
incorporated herein by reference.
10.2* Amendment to the Baldwin Technology Company, Inc. amended
and Restated 1986 Stock Option Plan. Filed as Exhibit 10.2
to the Company's Report on Form 10-K for the fiscal year
ended June 30, 1991 and incorporated herein by reference.
10.3* Baldwin Technology Company, Inc. 1990 Directors' Stock
Option Plan. Filed as Exhibit 10.3 to the Company's Report
on Form 10-K for the fiscal year ended June 30, 1991 and
incorporated herein by reference.
10.4* Baldwin Technology Company, Inc. 1996 Stock Option Plan.
Filed as Exhibit A to the Baldwin Technology Company, Inc.
1996 Proxy Statement and incorporated by reference to the
Company's Report on Form 10-K for the fiscal year ended June
30, 1996 and incorporated herein by reference.
10.5* Baldwin Technology Corporation Profit Sharing Plan, as
amended and restated. Filed as Exhibit 10.2 to the Company's
Registration Statement (No. 33-10028) on Form S-1 and
incorporated herein by reference.
10.7 Agreement effective as of July 1, 1990 between Baldwin
Technology Corporation, Baldwin Graphic Systems, Inc. and
Harold W. Gegenheimer, as guaranteed by Baldwin Technology
Company, Inc. Filed as Exhibit 10.6 to the Company's Report
on Form 10-K for the fiscal year ended June 30, 1991 and
incorporated herein by reference.
10.8 Agreement effective as of July 1, 1990 between Baldwin
Technology Company, Inc. and Harold W. Gegenheimer. Filed as
Exhibit 10.7 to the Company's Report on Form 10-K for the
Fiscal year ended June 30, 1991 and incorporated herein by
reference.
10.9* Employment Agreement dated as of November 16, 1988 between
Baldwin-Japan Limited and Akira Hara. Filed as Exhibit 10.22
to the Company's Registration Statement (No. 33-26121) on
Form S-1 and incorporated herein by reference.
10.11 Baldwin Technology Company, Inc. Dividend Reinvestment Plan.
Filed as Exhibit 10.49 to the Company's Report on Form 10-K
for the fiscal year ended June 30, 1991 and incorporated
herein by reference.
10.13* Employment Agreement effective as of July 1, 1997 between
Baldwin Technology Company, Inc. and Gerald A. Nathe. Filed
as Exhibit 10.15 to the Company's Report on Form 10-Q for
the quarter ended December 31, 1997 and incorporated herein
by reference.
10.16* Amendment to Employment Agreement between Baldwin-Japan
Limited and Akira Hara effective August 15, 1995. Filed as
Exhibit 10.25 to the Company's Report on Form 10-K for the
fiscal year ended June 30, 1996 and incorporated herein by
reference.
10.24* Baldwin Technology Company, Inc. Executive and Key Person
Cash Incentive Program Description. Filed as Exhibit 10.24
to the Company's report on Form 10-K for the fiscal year
ended June 30, 1998 and incorporated herein by reference.
10.27* Baldwin Technology Company, Inc. 1998 Non-Employee
Directors' Stock Option Plan. Filed as Exhibit A to the
Baldwin Technology Company, Inc. 1998 Proxy Statement and
incorporated herein by reference.
10.30* Employment Agreement dated January 19, 2000 and effective as
of January 31, 2000 between Baldwin Technology Company, Inc.
and James M. Rutledge. Filed as Exhibit 10.29 to the
Company's Report on Form 10-Q for the quarter ended December
31, 1999 and incorporated herein by reference.

59

10.31* Separation Agreement dated November 17, 1999 and effective
as of January 31, 2000 between Baldwin Technology Company,
Inc. and William J. Lauricella. Filed as Exhibit 10.30 to
the Company's Report on Form 10-Q for the quarter ended
December 31, 1999 and incorporated herein by reference.
10.33* Employment Agreement dated March 1, 2000 and effective as of
November 10, 1999 between Baldwin Technology Company, Inc.
and Michael R. Samide. Filed as Exhibit 10.32 to the
Company's Report on Form 10-Q for the quarter ended March
31, 2000 and incorporated herein by reference.
10.34* Employment Agreement dated February 7, 2000 and effective as
of February 9, 2000 between Baldwin Technology Company, Inc.
and Lawrence M. Miller. Filed as Exhibit 10.33 to the
Company's Report on Form 10-Q for the quarter ended March
31, 2000 and incorporated herein by reference.
10.35* Employment Agreement dated and effective as of April 27,
2000 between Baldwin Technology Company, Inc. and Peter E.
Anselmo. Filed as Exhibit 10.34 to the Company's Report on
Form 10-Q for the quarter ended March 31, 2000 and
incorporated herein by reference.
10.38 Asset Purchase Agreement dated as of September 7, 2000 by
and among Baldwin Technology Corporation and Systems
Technology, Inc. Filed as Exhibit 10.38 to the Company's
report on Form 10-K for the fiscal year ended June 30, 2000
and incorporated herein by reference
10.39 Amendment to Purchase Agreement dated as of September 27,
2000 by and between Baldwin Technology Corporation and
Systems Technology, Inc. Filed as Exhibit 10.39 to the
Company's report on Form 10-K for the fiscal year ended June
30, 2000 and incorporated herein by reference
10.40 Credit Agreement Among Baldwin Americas Corporation, Baldwin
Europe Consolidated, Inc., and Baldwin Asia Pacific
Corporation, as Borrowers, the other credit parties
signatory thereto, the Lenders (as defined in the Credit
Agreement), Fleet National Bank, as Administrative Agent,
and First Union National Bank, as Documentation Agent, dated
as of October 31, 2000 (the "Credit Agreement"). Filed as
Exhibit 10.40 to the Company's report on Form 10-Q for the
quarter ended December 31, 2000 and incorporated herein by
reference.
10.41* Employment Agreement dated and effective as of March 19,
2001 between Baldwin Technology Company, Inc. and Gerald A.
Nathe. Filed as Exhibit 10.41 to the Company's report on
Form 10-Q for the quarter ended March 31, 001 and
incorporated herein by reference.
10.42* Employment Agreement dated June 6, 2001 and effective as of
March 21, 2001 between Baldwin Technology Company, Inc. and
John T. Heald. (filed herewith).
10.43* Amendment to Employment Agreement dated and effective as of
April 29, 2000 between Baldwin Technology Company, Inc. and
Peter E. Anselmo. (filed herewith).
10.44* Employment Agreement dated June 8, 2001 and effective as of
June 18, 2001 between Baldwin Technology Company, Inc. and
Vijay C. Tharani (filed herewith).
10.45 Asset and Share Purchase Agreement, dated as of July 20,
2001 by and among Sequa Corporation, Megtec Systems, Inc.
and the Company. Filed as Exhibit 10.45 to the Company's
report on Form 8-K dated September 26, 2001 and incorporated
herein by reference.

60

10.46 Amendment No. 1 to Asset and Share Purchase Agreement dated
September 25, 2001 and effective August 31, 2001 by and
among Sequa Corporation, Megtec Systems, Inc. and the
Company. Filed as Exhibit 10.46 to the Company's report on
Form 8-K dated September 26, 2001 and incorporated herein by
reference.
21. List of Subsidiaries of Registrant (filed herewith).
23. Consent of PricewaterhouseCoopers LLP (filed herewith).
28. Post-effective Amendment to the Company's previously filed
Form S-8's, Nos. 33-20611 and 33-30455. Filed as Exhibit 28
to the Company's Report on Form 10-K for the fiscal year
ended June 30, 1991 and incorporated herein by reference.
99. Company statement regarding the Private Securities
Litigation Reform Act of 1995, "Safe Harbor for
Forward-Looking Statements" (filed herewith).

---------------------
* Management contract or compensatory plan or arrangement.

(b) Reports on Form 8-K

No reports on Form 8-K were filed by the registrant during the last quarter
of the period covered by this report.

61

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/ GERALD A. NATHE
------------------------------------
GERALD A. NATHE
(CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER)

Dated: October 15, 2001

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.

62

REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and Shareholders of
BALDWIN TECHNOLOGY COMPANY, INC.

Our audits of the consolidated financial statements of Baldwin Technology
Company, Inc. referred to in our report dated October 15, 2001 appearing in this
Annual Report on Form 10-K to Shareholders of Baldwin Technology Company, Inc.
also included an audit of the financial statement schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.

PricewaterhouseCoopers LLP

Stamford, Connecticut
October 15, 2001

63

SCHEDULE II

BALDWIN TECHNOLOGY COMPANY, INC

VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

---------------
(1) The decrease in the allowance for doubtful accounts for the year ended June
30, 2001 resulted from $610,000 of write-offs and currency fluctuations of
$218,000. The decrease in the allowance for doubtful accounts for the year
ended June 30, 2000 resulted from $521,000 of recoveries, and a write-off of
$1,100,000 resulting from a sale of pre-petition accounts receivable from
one of the Company's largest OEM customers, which was partially offset by
currency fluctuations of $97,000. The decrease in the allowance for doubtful
accounts for the year ended June 30, 1999 resulted from $113,000 of
recoveries which was partially offset by currency fluctuations of $105,000.
(2) The amounts charged to costs and expenses and the deductions both include a
write-off of $1,100,000 resulting from a sale of pre-petition accounts
receivable from one of the Company's largest OEM customers.
(3) The decrease in the amount of the valuation allowance is primarily the
result of a reduction of the reserve related to foreign net operating loss
carryforwards. See Note 12 -- Notes to Consolidated Financial Statements.
(4) The increase in the amount of the valuation allowance is primarily the
result of increased foreign tax credits and capital loss carryforwards. See
Note 12 -- Notes to Consolidated Financial Statements.
(5) The decrease in the amount of the valuation allowance is the result of the
release of the reserve relating to foreign net operating loss carryforwards,
and a reduction in foreign tax credit carryforwards. See Note 9 -- Notes to
Consolidated Financial Statements.
(6) The decrease in the allowance for obsolete inventories resulted primarily
from the write-offs against the reserve for the sale of the Baldwin Stobb
Division.
(7) The increase in the allowance for obsolete inventories resulted primarily
from the establishment of a reserve for a new product line and the sale of
the Company's former in-line finishing division.
(8) The decrease in the allowance for obsolete inventories resulted primarily
from write-offs against the reserve for the disposal of inventory.
(9) The amounts charged to costs and expenses include a $536,000 reserve for a
major OEM customer.

64