BALDWIN TECHNOLOGY CO INC - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.

FORM 10-Q

(Mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR QUARTER ENDED SEPTEMBER 30, 2003

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 1-9334

BALDWIN TECHNOLOGY COMPANY, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 12-3258160
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

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

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

(Former name, former address and former fiscal year, if changed since last
report)

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 Act of 1934 during
the preceding 12 months (or 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 [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

BALDWIN TECHNOLOGY COMPANY, INC.

CONSOLIDATED BALANCE SHEETS

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

1

BALDWIN TECHNOLOGY COMPANY, INC.

CONSOLIDATED BALANCE SHEETS

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

2

BALDWIN TECHNOLOGY COMPANY, INC.

CONSOLIDATED STATEMENTS OF INCOME

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

3

BALDWIN TECHNOLOGY COMPANY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

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

4

BALDWIN TECHNOLOGY COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

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

5

BALDWIN TECHNOLOGY COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

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

6

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 -- ORGANIZATION AND BASIS OF PRESENTATION:

Baldwin Technology Company, Inc. and its subsidiaries ("Baldwin" or the
"Company") are engaged primarily in the development, manufacture and sale of
accessories and controls for the printing industry.

The Company has experienced operating losses and debt covenant violations
over the past three fiscal years. As more fully discussed in these notes to the
consolidated financial statements, the Company has embarked on restructuring
plans (see Note 9) and undertaken other actions aimed at improving the Company's
competitiveness, operating results and cash flow. These actions have included
the sale of certain non-core operating units (see Note 10), the consolidation of
manufacturing facilities and headcount reductions. As a result of these actions,
combined with the new credit agreement (see Note 3), management believes that
the Company's cash flows from operations, along with available bank lines of
credit and alternative sources of borrowings, if necessary, are sufficient to
finance its working capital and other capital requirements over the term of the
current financing agreement. Management further believes that additional actions
can be taken to reduce operating expenses and that assets can be sold to meet
liquidity needs, if necessary.

The accompanying unaudited consolidated financial statements include the
accounts of Baldwin and its subsidiaries and have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information and in compliance with the rules and
regulations of the Securities and Exchange Commission. Accordingly, they do not
include all of the information and footnotes required by accounting principles
generally accepted in the United States of America for complete financial
statements. These financial statements reflect all adjustments, which are in the
opinion of management, necessary to present a fair statement of the results for
the interim periods. These financial statements should be read in conjunction
with the consolidated financial statements and related notes included in the
Company's latest Annual Report on Form 10-K for the fiscal year ended June 30,
2003. Operating results for the three months ended September 30, 2003 are not
necessarily indicative of the results that may be expected for the fiscal year
ending June 30, 2004. All significant intercompany transactions have been
eliminated in consolidation.

NOTE 2 -- RECENTLY ISSUED ACCOUNTING STANDARDS:

In May 2003, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 150 ("SFAS 150"),
"Accounting for Certain Financial Instruments with Characteristics of both
Liability and Equity." SFAS 150 modifies the accounting for certain financial
instruments that, under previous guidance, issuers could account for as equity
and requires that those instruments be classified as liabilities (or assets in
certain circumstances) in statements of financial position. SFAS 150 affects the
issuer's accounting for certain types of freestanding financial instruments and
also requires disclosure about alternative ways of settling the instruments and
the capital structure of entities -- all of whose shares are mandatorily
redeemable. SFAS 150 is generally effective for all financial instruments
entered into or modified after May 31, 2003, and otherwise is effective as of
July 1, 2003 for the Company. SFAS 150 is not expected to have a material impact
on the Company's current capital structure, but may in the future should the
Company enter into transactions with certain types of freestanding financial
instruments.

7

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

RECLASSIFICATIONS:

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

NOTE 3 -- REVOLVING CREDIT FACILITY:

On August 18, 2003, the Company entered into a $20,000,000 Credit Agreement
(the "Credit Agreement") with Maple Bank GmbH ("Maple" or "Lender"), which if
not terminated by the Lender on August 15, 2004 or by the Company at any time by
payment in full, shall terminate in its entirety on August 15, 2005. The credit
facility is collateralized by substantially all of the accounts and notes
receivable of the Company and a portion of the Company's inventory up to a
maximum amount of $5,000,000. Borrowings under the credit facility are subject
to a borrowing base and bear interest at a rate equal to the three-month
Eurodollar rate (as defined in the Credit Agreement) plus (i) 10% for loans
denominated in U.S. Dollars or (ii) 11.5% for loans denominated in Euros. The
interest rate will be reduced by 0.50% or whole increments thereof for each
whole increment of Disclosed EBITDA (as defined in the Credit Agreement) that
equals or exceeds $1,250,000 for any fiscal quarter commencing with the quarter
ending December 31, 2003. In no event however, may the interest rate be less
than 10.5% per annum. The initial borrowings under the credit facility amounted
to $18,874,000, of which the Company utilized $16,243,000 to retire its
previously existing debt and associated interest with Fleet National Bank and
Wachovia Bank National Association and the remainder of the borrowings was
utilized for closing costs and working capital purposes. The closing costs are
being amortized and included in interest expense through August 18, 2004. The
Credit Agreement does not require the Company to meet any financial covenants,
except for a limitation on annual capital expenditures; however, it contains a
material adverse effect clause, which provides that Maple would not be obligated
to fund any loan, convert or continue any loan as a LIBOR loan or issue any new
letters of credit in the event of a material adverse effect. Management does not
anticipate that such an event will occur; however, there can be no assurance
that such an event will not occur.

Prior to this refinancing with Maple, and 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 had an original scheduled maturity date of October 31, 2003. The
Credit Facility consisted 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"). On January 28, 2002, the Credit Facility was amended (the
"Amended Credit Facility"), to among other things, remove the Acquisition Line,
reduce the Revolver to $21,000,000 (subject to a borrowing base), and change the
maturity date to October 1, 2002. In addition, $4,000,000 of the existing
Revolver was converted into a term loan (the "Term Loan"), which matured on June
28, 2002, resulting in available borrowings under the Revolver from July 1, 2002
to October 1, 2002 of $17,000,000. The Amended Credit Facility required the
Company to satisfy certain financial covenants including minimum operating
income covenants. The Revolver had associated commitment fees, which were
calculated quarterly, at a rate of one-half of one percent per annum of the
unused portion of the Revolver. Commitment fees, for the three months ended
September 30, 2002 was $2,000. The Company incurred additional costs of
approximately $227,000 associated with entering into the Amended Credit
Facility. The Company amortized the remaining deferred financing costs through
October 1, 2002, the maturity date of the Amended Credit Facility.

The Company has experienced operating and net losses, and debt covenant
violations over the past three years. During the quarters ended March 31, 2002
and June 30, 2002, the Company did not meet its minimum operating income
covenants contained in the Amended Credit Facility, and further the Company did
not make the required $4,000,000 principal payment on the Term Loan on June 28,
2002. The Banks granted a forbearance of the collection of the indebtedness
until October 1, 2002 and on October 30, 2002, the Company and the Banks entered
into an amendment to further amend and extend the Amended Credit Facility and
waive the covenant violations and Term Loan default (the "Extended Credit
Facility"). The Extended Credit

8

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Facility, totaling $20,900,000, consisted of a $17,000,000 revolving credit line
(the "Extended Revolver") and a $3,900,000 term loan each due July 1, 2003 (the
"Extended Term Loan"). The Extended Credit Facility required the Company to
utilize the net proceeds of $3,736,000 from the sale of certain assets of its
wholly-owned subsidiary Baldwin Kansa Corporation ("BKA") (see Note 10) plus
$464,000 from the Company's cash flows to reduce outstanding borrowings under
the Extended Revolver by $4,200,000 before October 30, 2002, of which $2,700,000
permanently reduced the Extended Revolver and $1,036,000 became available for
future borrowings, subject to a borrowing base calculation. Additionally,
beginning in December 2002 and extending through June 2003, the Company was
required to permanently reduce the Extended Revolver by making monthly principal
payments of $125,000. The Company was also required to permanently reduce the
Extended Revolver by $5,000,000 on December 30, 2002 and by $5,000,000 on March
30, 2003, but only if the Company generated non-operating alternative sources of
financing. As the Company did not generate any alternative sources of financing
since entering into the Extended Credit Facility on October 30, 2002, the
Company was not required to make, and did not make, the $5,000,000 payment on
December 30, 2002 or the $5,000,000 payment on March 30, 2003. Additionally, at
September 30, 2002 and March 31, 2003, the Company was not in compliance with
its debt covenants, and received waivers for the non-compliance. At June 30,
2003, the Company had outstanding borrowings of $16,112,000 under the Extended
Revolver and Extended Term Loan and this entire outstanding balance, which was
classified as current as of June 30, 2003, was entirely repaid from the proceeds
of the refinancing with Maple on August 18, 2003.

The Company maintains relationships with both foreign and domestic banks,
which combined have extended credit facilities to the Company totaling
$24,880,000, including $20,000,000 available under the Credit Agreement. As of
September 30, 2003, the Company had $22,331,000 outstanding under these credit
facilities including $18,928,000 under the Credit Agreement. Total debt levels
as reported on the balance sheet at September 30, 2003 are $529,000 higher than
they would have been if June 30, 2003 exchange rates had been used.

NOTE 4 -- NET INCOME (LOSS) PER SHARE:

Basic net income (loss) 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 net income
(loss) 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 net income (loss) per share include 20,000 and zero additional
shares, respectively for the three months ended September 30, 2003 and 2002,
which represent potentially dilutive securities. Outstanding options to purchase
1,644,000 shares of the Company's common stock for the three months ended
September 30, 2002, are not included in the above calculation to compute diluted
net income (loss) per share as they have an anti-dilutive effect.

9

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 5 -- OTHER COMPREHENSIVE INCOME (LOSS):

Accumulated Other Comprehensive Income (Loss) ("AOCI") 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. AOCI is included in stockholders' equity in the consolidated balance
sheets and consists of cumulative translation adjustments, unrealized gains and
losses on available-for-sale securities and unrealized gains and losses on
derivative instruments. AOCI consists of the following:

NOTE 6 -- INVENTORIES:

Inventories consist of the following:

Foreign currency translation effects increased inventories by $614,000 from
June 30, 2003 to September 30, 2003.

NOTE 7 -- DERIVATIVES:

On April 27, 2001, the Company entered into an interest rate swap agreement
(the "Swap") with Fleet National Bank. The effect of this agreement was to
convert $15,000,000 of the Company's variable rate debt into fixed rate debt
with an interest rate of 4.98% with the maturity the same as the then existing
credit facility. Included in interest expense was $148,000 and $124,000,
respectively, for the three months ended September, 2003 and 2002 associated
with this Swap.

As a result of entering into the Extended Credit Facility on October 30,
2002, as defined in Note 3, which changed various provisions of the Amended
Credit Agreement, also defined in Note 3, including the maturity date, the Swap
no longer qualified as an effective cash flow hedge. Future changes in the fair
value of the Swap have and will be recorded in earnings through its maturity
date of October 30, 2003. The adjustment to the fair value of this portion of
the Swap at September 30, 2003 resulted in a gain for the three months ended
September 30, 2003 of $149,000, which was recorded in "Other income and expense"
in the accompanying consolidated statement of income.

During the three months ended September 30, 2003, the Company also had
currency futures contracts that qualified as cash flow hedges; accordingly, the
gain or loss on these cash flow hedges was recorded in

10

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

AOCI and will be recognized when the hedged items affect earnings. Except for
the Swap, hedge ineffectiveness had no material impact on earnings for the three
months ended September 30, 2003 and 2002.

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

The unrealized net loss of $11,000 at September 30, 2003 is comprised of
net losses on currency futures contracts, which expire at various times through
November 28, 2003, and are expected to be reclassified to earnings during that
period.

NOTE 8 -- GOODWILL AND OTHER INTANGIBLE ASSETS:

The changes in the carrying amount of goodwill for the three months ended
September 30, 2003 are as follows:

Intangible assets subject to amortization are comprised of the following:

Amortization expense associated with these intangible assets was $164,000
and $191,000, respectively, for the three months ended September 30, 2003 and
2002. The other category is included in "Other assets" on the accompanying
consolidated balance sheets.

NOTE 9 -- RESTRUCTURING CHARGES AND RELATED RESERVES:

During March 2000, the Company initiated a restructuring plan (the "March
2000 Plan") that included the consolidation of production into certain
facilities, and reduction in total employment, primarily in the United States.
The March 2000 Plan was expanded during the fourth quarter of the fiscal year
ended June 30, 2001. The Company recorded restructuring charges in the amounts
of $23,000 and $46,000 for the three months ended September 30, 2003 and 2002,
respectively, related to the March 2000 Plan. These charges relate primarily to
additional exit costs, which were expensed as incurred. The March 2000 Plan
reduced the Company's worldwide cost base and strengthened its competitive
position as a leading global supplier of

11

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

auxiliary equipment to the printing and publishing industry. Prior to initiating
the March 2000 Plan, the Company was managed in a decentralized manner through
geographically dispersed autonomous business units. Given that many of the
Company's significant customers had reorganized on a global basis, management
realigned the Company to support its global customer base. Rather than have
separate sales, product development and production activities at each
decentralized business unit, the March 2000 Plan included centralizing control
of these activities. The following table details the components of the
restructuring charges and the remaining reserve balances as of September 30,
2003 and June 30, 2003 related to the March 2000 Plan.

Activity related to the March 2000 Plan in the three months ended September
30, 2003 was as follows:

Facility lease termination costs will be paid through April 2006. As of
September 30, 2003, $605,000 is included in "Other accounts payable and accrued
liabilities" and $708,000 is included in "Other long-term liabilities."

In August 2002, in response to weak market conditions, the Company
announced additional restructuring activities (the "August 2002 Plan"), which
reduced total worldwide employment by approximately 160. Accordingly, the
Company recorded an initial restructuring charge of $3,241,000 in August 2002
and additional restructuring charges of $144,000 during the balance of the
fiscal year ended June 30, 2003 related to the August 2002 Plan. In August 2003,
the Company expanded the August 2002 Plan and announced additional employment
reductions of 15 in the United States and 8 in the United Kingdom. In addition,
the Company closed its Dunstable, England office and is currently running its
two separate United Kingdom business operations from its Poole, England location
in an effort to reduce or eliminate certain costs as part of its global
restructuring efforts. The following table details the components of the
restructuring charges and the remaining reserve balances as of September 30,
2003 and June 30, 2003 related to the August 2002 Plan.

Activity related to the August 2002 Plan in the three months ended
September 30, 2003 was as follows:

Severance and other costs will be paid through December 2003, and lease
termination costs will be paid through October 2006, the end of the lease terms.
As of September 30, 2003, $469,000 is included in "Other accounts payable and
accrued liabilities" and $227,000 is included in "Other long-term liabilities."

12

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 10 -- SALE OF BUSINESSES:

During the first quarter of the fiscal year ended June 30, 2003, the
Company committed to a plan to dispose of substantially all of the assets of
BKA; the transaction closed on October 10, 2002. Under SFAS No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets," ("SFAS 144") BKA qualified
as a component and therefore the results of BKA's operations are required to be
reported as discontinued operations in the accompanying consolidated statements
of income. Accordingly, BKA's results for the three months ended September 30,
2002 have been aggregated and reported as a single amount in that period. BKA's
net sales were $837,000 for the three months ended September 30, 2002. The
consideration received for the transaction, after certain post-closing
adjustments, was approximately $3,736,000 and resulted in a gain on the sale of
discontinued operations of approximately $543,000 (net of $80,000 in transaction
costs), which was recognized in the second quarter of the fiscal year ending
June 30, 2003.

NOTE 11 -- 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.

The accounting policies of the operating segments are the same as those
described in the summary of significant accounting policies in the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 2003. An operating
segment's financial performance is primarily evaluated based on operating
profit.

The tables below present information about reported segments for the three
months ended September 30, 2003 and 2002 (in thousands).

Foreign currency translation effects increased net sales by $2,069,000 for
the three months ended September 30, 2003.

13

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Included in operating income (loss) for the three months ended September
30, 2003 and 2002 are restructuring charges of $379,000 and $2,612,000,
respectively, related to accessories and controls and $3,000 and $675,000,
respectively, related to corporate.

NOTE 12 -- COMMON STOCK:

Except with respect to the election or removal of Directors, and certain
other matters with respect to which Delaware law requires each class to vote as
a separate class, the holders of the Company's Class A Common Stock ("Class A")
and Class B Common Stock ("Class B") vote as a single class on all matters, with
each share of Class A having one vote per share and each share of Class B having
ten votes per share.

With respect to the election of Directors, the holders of Class A, voting
as a separate class, are entitled to elect 25% of the total number of Directors
(or the nearest higher whole number) constituting the entire Board of Directors.
The holders of 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 Company's Annual Meeting, the remaining directors are elected by the holders
of both classes of Common Stock voting together as a single class, with the
holders of Class A having one vote per share and the holders of Class B having
ten votes per share. As of September 30, 2003, the number of outstanding shares
of Class B constituted approximately 14.6% (14.6% as of June 30, 2003) 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 declared or paid on
shares of Class B.

In November 1999, the Company initiated a stock repurchase program. Under
the new program, the Company is authorized to utilize up to $5,000,000 to
repurchase shares of Class A and Class B. As of September 30, 2003, 818,300
shares of Class A and 25,000 shares of Class B had been repurchased for
$1,784,000, of which $1,721,000 was used to purchase Class A and $63,000 was
used to purchase Class B under this program. There was no activity under this
repurchase program during the three months ended September 30, 2003.

NOTE 13 -- STOCK OPTIONS:

On January 1, 2003, the Company adopted the disclosure provisions of
Financial Accounting Standards Board ("FASB") Statement No. 148, "Accounting for
Stock-Based Compensation -- transition and disclosure" ("SFAS 148"), which
amended FASB Statement No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123") to provide alternative methods of transition for an entity that
voluntarily changes to the fair value based method of accounting for stock-based
employee compensation, effective as of the beginning of

14

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the fiscal year. Baldwin continues to apply the provisions of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees,"
("APB 25") in accounting for stock-based compensation. In accordance with APB
No. 25, compensation costs for stock options is recognized in income based on
the excess, if any, of the quoted market price over the exercise price of the
stock on the date of grant. The exercise price for all stock option grants
equals the fair market value on the date of grant, therefore no compensation
expense is recorded.

The pro forma net income (loss) and income (loss) per share information
have been determined for employee stock plans under the fair value method using
the Black-Scholes option-pricing model at the date of grant. The following table
illustrates the effect on net income (loss) and income (loss) per share if the
Company had applied the fair value recognition provisions of SFAS 123 for the
three months ended September 30, 2003 and 2002 (in thousands):

NOTE 14 -- RELATED PARTIES:

On October 25, 2002, John T. Heald, Jr. resigned as President, Chief
Executive Officer and a Director of the Company. Mr. Heald was employed by the
Company from March 21, 2001 to November 21, 2002. In accordance with Mr. Heald's
employment agreement, the Company sold 375,000 shares of Class B to Mr. Heald in
October 2001 at $1.80 per share in exchange for a recourse demand promissory
note in the amount of $675,000. The promissory note bears interest, payable
annually, at a rate of 5% per annum. Of the 375,000 shares issued, 189,117
shares were treasury shares and the balance of 185,883 shares were newly issued
shares. The promissory note is collateralized by the shares, pursuant to a loan
and pledge agreement between Mr. Heald and the Company dated October 17, 2001.
If at any time, Mr. Heald sells any of these shares, he is to pay the Company
$1.80 times the number of shares sold within five days of receipt of the funds
from such sale. In November 2002, the Company amended the loan and pledge
agreement, and the promissory note, to evidence a reduction of the outstanding
principal due from Mr. Heald on the loan by $225,000 in exchange for a reduction
in deferred compensation payments to be made by the Company to Mr. Heald. The
Company agreed not to demand payment of the promissory note for a period of two
years following Mr. Heald's termination. The reduction represented the then
present value of Mr. Heald's deferred compensation benefit that had accrued to
Mr. Heald. The balance of the loan, including interest, was $506,000 and
$501,000 at September 30, 2003 and June 30, 2003, respectively.

In accordance with the terms of the employment agreement between the
Company and Gerald A. Nathe, Chairman, President and Chief Executive Officer of
the Company, the Company loaned Mr. Nathe $1,817,000 to enable Mr. Nathe to
purchase 315,144 shares of Class B from a non-employee shareholder in November
1993 in exchange for a recourse demand promissory note for said amount. The note
bore interest, payable on the anniversary dates of the loan, at LIBOR rates plus
1.25%, reset on the first day of each

15

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

succeeding January, April, July and October. The note, was collateralized by the
shares pursuant to a loan and pledge agreement between Mr. Nathe and the Company
dated November 30, 1993, as amended and restated on November 25, 1997. Upon
termination of Mr. Nathe's employment, the Company has agreed not to demand
payment for a period of six months following termination, or twelve months
following termination if Mr. Nathe's employment terminates by reason of death.
Notwithstanding the foregoing, if at any time Mr. Nathe sells any of these
shares, he is to pay the Company $5.77 times the number of shares sold within
five days of receipt of the funds from such sale.

In February, 2002, the Company amended Mr. Nathe's employment agreement and
the loan and pledge agreement, and, following repayment by Mr. Nathe of a
portion of the principal on the loan, Mr. Nathe issued a substitute recourse
demand promissory note for $1,500,000, the outstanding principal balance on the
date thereof, with interest payable annually at an annual rate of 5%. In August,
2002, the Company amended Mr. Nathe's employment agreement, the loan and pledge
agreement, and the promissory note, to evidence reduction of the outstanding
principal and interest due from Mr. Nathe on the loan by $750,000 in exchange
for an equal reduction in deferred compensation payments to be made by the
Company to Mr. Nathe. The reduction represented the then present value of a
portion of Mr. Nathe's deferred compensation benefit that had accrued to Mr.
Nathe. Mr. Nathe was responsible for his personal taxes on this exchange. The
balance of the loan, including interest, was $845,000 and $836,000 at September
30, 2003 and June 30, 2003, respectively.

NOTE 15 -- CUSTOMERS:

During the three months ended September 30, 2003, two customers each
accounted for more than 10% of the Company's net sales. Koenig and Bauer
Aktiengesellschaft ("KBA") accounted for approximately 16% and 12% of the
Company's net sales for the three months ended September 30, 2003 and 2002,
respectively and Mitsubishi accounted for approximately 10% and 11%,
respectively for the three months ended September 30, 2003 and 2002.

NOTE 16 -- WARRANTY COSTS:

The Company's standard contractual warranty provisions are to repair or
replace, at the Company's option, 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 separate from the percent of
revenue discussed above.

NOTE 17 -- LEGAL PROCEEDINGS AND SETTLEMENTS:

On November 14, 2002, the Dusseldorf Higher Regional Court ("DHRC")
announced its judgment in favor of Baldwin in a patent infringement dispute
against its competitor, technotrans AG ("Technotrans"). Subsequent to November
14, 2002, Technotrans has filed an appeal of the DHRC ruling with the German
Supreme Court in Karlsruhe. Technotrans has also filed to invalidate the
Company's patent with the German

16

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Patent Court in Munich. No amounts have been recorded in the consolidated
financial statements with regard to the potential contingent gain from the DHRC
judgment.

In August, 2001, R.R. Donnelley & Sons (RRD), a customer of the Company and
a licensor to Baldwin Stobb, formerly a division of the Company, filed a
complaint against the Company and Systems Technology Inc. (STI), the entity that
acquired substantially all the assets of Baldwin Stobb in September 2000,
alleging among other things, breach of a license agreement. In March 2002, RRD
amended its complaint alleging additional causes of action. In early March 2003,
RRD withdrew some of its claims and moved to again amend its complaint to
include additional allegations and request specific performance; in late March
2003, RRD moved to file a corrected second amended complaint, alleging new
causes of action and increased damages. The parties reached a settlement in June
2003, under which the Company agreed to provide product, in lieu of cash,
("Credits") to RRD for its share of the settlement, over the course of the next
two years, limited to $250,000 per quarter. The Company recognized a charge to
earnings, which is included in the loss from continuing operations, during the
fourth quarter of the fiscal quarter and year ended June 30, 2003, in the amount
of $1,250,000 representing the fair market value of said product. During the
three months ended September 30, 2003, RRD utilized Credits of $32,000 resulting
in a remaining balance of $1,218,000 at September 30, 2003.

NOTE 18 -- SUBSEQUENT EVENTS:

On November 11, 2003, the Compensation and Stock Option Committee of the
Company granted non-qualified options to purchase 335,000 shares of Class A to
certain executives and key employees under the Company's 1996 Stock Option Plan
(the "1996 Plan") at an exercise price of $1.93 per share, the fair market value
on the date of grant.

On November 12, 2003, under the 1996 Plan, six non-employee Directors were
automatically granted options to purchase 5,000 shares each of Class A at an
exercise price of $1.91 per share, the fair market value on the date of grant.

17

BALDWIN TECHNOLOGY COMPANY, INC.

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following is management's discussion and analysis of certain factors,
which have affected the consolidated financial statements of Baldwin Technology
Company, Inc. ("Baldwin" or the "Company").

During the first quarter of the fiscal year ending June 30, 2003, the
Company committed to a plan to dispose of certain assets of its wholly-owned
subsidiary, Baldwin Kansa Corporation ("BKA"); the transaction closed on October
10, 2002. The consideration received for the transaction, after certain
post-closing adjustments, was approximately $3,736,000, which resulted in the
recognition of a gain on the sale of discontinued operations of approximately
$543,000 in the second quarter of the fiscal year ending June 30, 2003. During
the fourth quarter of the fiscal year ended June 30, 2002, the Company recorded
an impairment charge of $5,434,000 related to the goodwill associated with this
business as the recorded value of this goodwill exceeded the assessment of its
fair value made by the Company. For a further discussion, see Note 10 to the
consolidated financial statements. The effects of this transaction on the
consolidated financial statements are discussed below where significant.

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 include, but are not limited to the following: (i) the
ability to obtain, maintain and defend challenges against valid patent
protection on certain technology, primarily as it relates to the Company's
cleaning systems, (ii) material changes in foreign currency exchange rates
versus the U.S. Dollar, (iii) changes in the mix of products and services
comprising revenues, (iv) a decline in the rate of growth of the installed base
of printing press units and the timing of new press orders, (v) general economic
conditions, either domestically or in foreign locations, (vi) the ultimate
realization of certain trade receivables and the status of ongoing business
levels with the Company's large OEM customers, (vii) competitive market
influences and (viii) the ability to successfully implement the Company's
restructuring initiatives. Additional factors are set forth in Exhibit 99 to the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2003
which should be read in conjunction herewith.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

For further information regarding the Company's critical accounting
policies, please refer to the Management's Discussion and Analysis section of
the Company's Annual Report on Form 10-K for the fiscal year ended June 30,
2003.

THREE MONTHS ENDED SEPTEMBER 30, 2003 VS. THREE MONTHS ENDED SEPTEMBER 30,
2002

Consolidated Results

Net sales for the three months ended September 30, 2003 increased by
$1,707,000, or 5.2%, to $34,511,000 from $32,804,000 for the three months ended
September 30, 2002. Currency rate fluctuations attributable to the Company's
overseas operations increased net sales by $2,069,000 in the current period,
otherwise, net sales would have decreased by $362,000. This decrease was
primarily due to timing of shipments.

Gross profit for the three months ended September 30, 2003 was $10,769,000
(31.2% of net sales) as compared to $9,188,000 (28.1% of net sales) for the
three months ended September 30, 2002, an increase of $1,581,000 or 17.2%.
Currency rate fluctuations increased gross profit by $751,000 in the current
period. Excluding the effects of currency rate fluctuation, gross profit would
have increased by $830,000. Gross profit

18

as a percentage of net sales increased primarily due to a favorable mix of
products, improved capacity utilization and reduced service costs, resulting
primarily from the Company's restructuring efforts. In addition, gross profit in
the prior year period was unfavorably impacted by higher warranty costs
associated with two customer installations in Japan.

Selling, general and administrative expenses amounted to $6,314,000 (18.3%
of net sales) for the three months ended September 30, 2003 as compared to
$7,487,000 (22.8% of net sales) for the same period in the prior fiscal year, a
decrease of $1,173,000 or 15.7%. Currency rate fluctuations increased these
expenses by $354,000 in the current period. Otherwise, selling, general and
administrative expenses would have decreased by $1,527,000. Selling expenses
decreased by $443,000, which primarily relates to decreased compensation and
travel costs associated with reduced employment levels, and to decreased trade
show and advertising costs in the current year period. General and
administrative expenses decreased by $1,084,000 primarily due to reduced
compensation, travel and other employee related costs primarily as a result of
the Company's restructuring efforts and to decreased subcontracting costs in the
current year period.

Engineering and development expenses decreased by $848,000 over the same
period in the prior fiscal year. Currency rate fluctuations increased these
expenses by $239,000 in the current period. Excluding the effects of currency
rate fluctuations, engineering and development expenses would have decreased by
$1,087,000 in the current period. This decrease relates primarily to decreased
employee compensation and related costs primarily as a result of the Company's
restructuring efforts and to decreased research and development project and
subcontracting costs. As a percentage of net sales, engineering and development
expenses decreased 3.1% to 9.4% for the three months ended September 30, 2003
compared to 12.5% for the same period in the prior fiscal year.

The Company recorded restructuring charges of $382,000 for the three months
ended September 30, 2003 compared to $3,287,000 for the same period in the prior
fiscal year. The restructuring charge in the current fiscal year period of
$382,000 primarily represents additional employment reductions in the United
States and the United Kingdom announced in August 2003 associated with the
restructuring activities initiated in August 2002 (the "August 2002 Plan"). The
restructuring charge in the prior fiscal year period of $3,287,000 relates
primarily to the initial restructuring charge of $3,241,000 associated with the
August 2002 Plan and $46,000 of additional costs associated with the
restructuring plan announced in March 2000 (the "March 2000 Plan"), which were
expensed as incurred.

Interest expense for the three months ended September 30, 2003 was $937,000
as compared to $719,000 for the three months ended September 30, 2002. Currency
rate fluctuations increased interest expense by $93,000 in the current period.
Otherwise, interest expense would have increased by $125,000. This increase was
primarily due to both higher interest rates in effect for the three months ended
September 30, 2003 as a result of the new credit agreement with Maple Bank GmbH
("Maple"), which closed on August 18, 2003 and higher deferred debt financing
cost amortization during the period associated with Maple. Interest income
amounted to $26,000 and $76,000 for the three months ended September 30, 2003
and 2002, respectively. This decrease in interest income is primarily due to
decreased funds available for investment. Currency rate fluctuations increased
interest income by $21,000 in the current period.

Net royalty income for the three months ended September 30, 2003 was
$651,000 as compared to $629,000 for the three months ended September 30, 2002.

Other income (expense), net amounted to expense of $592,000 for the three
months ended September 30, 2003 compared to expense of $356,000 for the three
months ended September 30, 2002. Other income (expense), net includes net
foreign currency transaction gain of $518,000 and $2,000 for the three months
ended September 30, 2003 and 2002, respectively. The increase is primarily
attributable to currency fluctuations associated with the Maple loan. Included
in other income and expense for the three months ended September 30, 2003 and
2002 are gains of $2,000 and losses of $93,000, respectively, resulting from the
ineffective portions of derivative financial instruments which qualify as cash
flow hedge gains of $149,000 and losses of $65,000 related to an interest rate
swap which ceased to qualify as a hedge. Also included in other income and
expense in the prior fiscal year period is an additional loss of $211,000 as a
result of finalizing certain adjustments with the buyer of the Roll Handling
Group ("RHG"), which closed in September 2001.

19

The Company recorded an income tax provision of $483,000 for the three
months ended September 30, 2003 as compared to $259,000 for the three months
ended September 30, 2002. The effective tax rate of 41.6% for the three months
ended September 30, 2003 is primarily due to greater taxable income in higher
tax jurisdictions and in which tax loss carryforwards are not available. The
effective tax rate for the three months ended September 30, 2002 differs from
the statutory rate as no benefit was recognized for losses incurred in certain
countries as the realization of such benefits was not more likely than not.
Currency rate fluctuations increased the provision for income taxes by $9,000 in
the current period.

Loss from operations of discontinued operations for the three months ended
September 30, 2002 was $188,000 and related to the sale of the Baldwin Kansa
operation, which was completed in October 2002.

The Company's net income amounted to $697,000 for the three months ended
September 30, 2003, compared to a net loss of $6,493,000 for the three months
ended September 30, 2002. Currency rate fluctuations increased net income by
$140,000 in the current period. Net income per share amounted to $0.05 basic and
diluted for the three months ended September 30, 2003, as compared to net loss
per share of $0.43 basic and diluted for the three months ended September 30,
2002.

Segment Results

ACCESSORIES AND CONTROLS GROUP

Net sales for the three months ended September 30, 2003 increased by
$1,707,000, or 5.2%, to $34,511,000 from $32,804,000 for the three months ended
September 30, 2002. Currency rate fluctuations attributable to the Company's
overseas operations increased net sales for the current period by $2,069,000;
otherwise, net sales would have decreased by $362,000 in the current period.

Operating income amounted to $2,504,000 (7.3% of net sales) for the three
months ended September 30, 2003, as compared to an operating loss of $2,004,000
(6.1% of net sales) for the same period in the prior fiscal year, an increase of
$4,508,000. Currency rate fluctuations increased the current fiscal year's
operating income by $185,000. Otherwise, operating income would have increased
by $4,323,000 in the current period. This increase is primarily the result of
the effects of the Company's previous restructuring efforts, and to decreased
restructuring charges and consulting costs in the current fiscal year period.
Operating income for the three months ended September 30, 2003 and 2002,
includes restructuring charges of $379,000 and $2,612,000, respectively,
associated with both the March 2000 Plan and the August 2002 Plan.

LIQUIDITY AND CAPITAL RESOURCES AT SEPTEMBER 30, 2003

LIQUIDITY AND WORKING CAPITAL

On August 18, 2003, the Company entered into a $20,000,000 Credit Agreement
(the "Credit Agreement") with Maple Bank GmbH ("Maple" or "Lender"), which if
not terminated by the Lender on August 15, 2004 or by the Company at any time by
payment in full, shall terminate in its entirety on August 15, 2005. The credit
facility is collateralized by substantially all of the accounts and notes
receivable of the Company and a portion of the Company's inventory up to a
maximum amount of $5,000,000. Borrowings under the credit facility are subject
to a borrowing base and bear interest at a rate equal to the three-month
Eurodollar rate (as defined in the Credit Agreement) plus (i) 10% for loans
denominated in U.S. Dollars or (ii) 11.5% for loans denominated in Euros. The
interest rate will be reduced by 0.50% or whole increments thereof for each
whole increment of Disclosed EBITDA (as defined in the Credit Agreement) that
equals or exceeds $1,250,000 for any fiscal quarter commencing with the quarter
ending December 31, 2003. In no event however, may the interest rate be less
than 10.5% per annum. The initial borrowings under the credit facility amounted
to $18,874,000, of which the Company utilized $16,243,000 to retire its
previously existing debt and associated interest with Fleet National Bank and
Wachovia Bank National Association and the remainder of the borrowings was
utilized for closing costs and working capital purposes. The closing costs are
being amortized and included in interest expense through August 18, 2004. The
Credit Agreement does not require the Company to meet any financial covenants,
except for the limitation on annual capital expenditures; however, it contains a
material adverse effect clause, which provides that Maple would not be obligated
to

20

fund any loan, convert or continue any loan as a LIBOR loan or issue any new
letters of credit in the event of a material adverse effect. Management does not
anticipate that such an event will occur; however, there can be no assurance
that such an event will not occur.

Prior to this refinancing with Maple, and 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 had an original scheduled maturity date of October 31, 2003. The
Credit Facility consisted 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"). On January 28, 2002, the Credit Facility was amended (the
"Amended Credit Facility"), to among other things, remove the Acquisition Line,
reduce the Revolver to $21,000,000 (subject to a borrowing base), and change the
maturity date to October 1, 2002. In addition, $4,000,000 of the existing
Revolver was converted into a term loan (the "Term Loan"), which matured on June
28, 2002, resulting in available borrowings under the Revolver from July 1, 2002
to October 1, 2002 of $17,000,000. The Amended Credit Facility required the
Company to maintain certain financial covenants including minimum operating
income covenants. The Revolver had associated commitment fees, which were
calculated quarterly, at a rate of one-half of one percent per annum of the
unused portion of the Revolver. Commitment fees, for the three months ended
September 30, 2002 were $2,000. The Company incurred additional costs of
approximately $227,000 associated with entering into the Amended Credit
Facility. The Company amortized the remaining deferred financing costs through
October 1, 2002, the maturity date of the Amended Credit Facility.

The Company has experienced operating and net losses, and debt covenant
violations over the past three years. During the quarters ended March 31, 2002
and June 30, 2002, the Company did not meet its minimum operating income
covenants contained in the Amended Credit Facility, and further the Company did
not make the required $4,000,000 principal payment on the Term Loan on June 28,
2002. The Banks granted a forbearance of the collection of the indebtedness
until October 1, 2002 and on October 30, 2002, the Company and the Banks entered
into an amendment to further amend and extend the Amended Credit Facility and
waive the covenant violations and Term Loan default (the "Extended Credit
Facility"). The Extended Credit Facility, totaling $20,900,000, consisted of a
$17,000,000 revolving credit line (the "Extended Revolver") and a $3,900,000
term loan each due July 1, 2003 (the "Extended Term Loan"). The Extended Credit
Facility required the Company to utilize the net proceeds of $3,736,000 from the
sale of certain assets of its wholly-owned subsidiary Baldwin Kansa Corporation
("BKA") (see Note 10 to the consolidated financial statements) plus $464,000
from the Company's cash flows to reduce outstanding borrowings under the
Extended Revolver by $4,200,000 before October 30, 2002, of which $2,700,000
permanently reduced the Extended Revolver and $1,036,000 became available for
future borrowings, subject to a borrowing base calculation. Additionally,
beginning in December 2002 and extending through June 2003, the Company was
required to permanently reduce the Extended Revolver by making monthly principal
payments of $125,000. The Company was also required to permanently reduce the
Extended Revolver by $5,000,000 on December 30, 2002 and by $5,000,000 on March
30, 2003, but only if the Company generated non-operating alternative sources of
financing. As the Company did not generate any alternative sources of financing
since entering into the Extended Credit Facility on October 30, 2002, the
Company was not required to make, and did not make, the $5,000,000 payment on
December 30, 2002 or the $5,000,000 payment on March 30, 2003. Additionally, at
September 30, 2002 and March 31, 2003, the Company was not in compliance with
its debt covenants, and received waivers for the non-compliance. At June 30,
2003, the Company had outstanding borrowings of $16,112,000 under the Extended
Revolver and Extended Term Loan and this entire outstanding balance, which was
classified as current as of June 30, 2003, was entirely repaid from the proceeds
of the refinancing with Maple on August 18, 2003.

The Company maintains relationships with both foreign and domestic banks,
which combined have extended credit facilities to the Company totaling
$24,880,000, including $20,000,000 available under the Credit Agreement. As of
September 30, 2003, the Company had $22,361,000 outstanding under these credit
facilities including $18,928,000 under the Credit Agreement. Total debt levels
as reported on the balance sheet at September 30, 2003 are $529,000 higher than
they would have been if June 30, 2003 exchange rates had been used.

21

On April 27, 2001, the Company entered into an interest rate swap agreement
(the "Swap") with Fleet National Bank. The effect of this agreement was to
convert $15,000,000 of the Company's variable rate debt into fixed rate debt
with an interest rate of 4.98% with the maturity the same as the then existing
credit facility. Included in interest expense was $148,000 and $124,000,
respectively, for the three months ended September, 2003 and 2002 associated
with this Swap.

The Company's working capital increased by $1,373,000 or 33.8%, from
$4,064,000 at June 30, 2003, to $5,437,000 at September 30, 2003. Foreign
currency rate fluctuations accounted for an increase of $472,000; otherwise,
working capital would have increased by $901,000. Working capital increased
primarily due to increased levels of cash, trade accounts and notes receivable,
primarily in Japan, Germany and Australia and additional deferred financing
costs associated with the Maple loan. Working capital decreased primarily by the
additional debt resulting from Maple, increased accounts and notes payable,
primarily in Japan, Germany and Sweden and customer deposits, primarily in
Japan.

The Company utilized $178,000 and $259,000 for investing activities for the
three months ended September 30, 2003 and 2002, respectively, primarily for
additions to property, plant and equipment, and patents and trademarks.

Net cash used by financing activities was $207,000 for the three months
ended September 30, 2003 as compared to $822,000 for the three months ended
September 30, 2002. The difference was primarily due to higher net debt
borrowings in the current fiscal year period primarily from Maple, partially
offset by the additional closing costs associated with obtaining the Maple loan.

During March 2000, the Company initiated a restructuring plan (the "March
2000 Plan") that included the consolidation of production into certain
facilities, and reduction in total employment, primarily in the United States.
The March 2000 Plan was expanded during the fourth quarter of the fiscal year
ended June 30, 2001. The Company recorded restructuring charges in the amounts
of $23,000 and $46,000 for the three months ended September 30, 2003 and 2002,
respectively, related to the March 2000 Plan. These charges relate primarily to
additional exit costs, which were expensed as incurred. The March 2000 Plan
reduced the Company's worldwide cost base and strengthened its competitive
position as a leading global supplier of auxiliary equipment to the printing and
publishing industry. Prior to initiating the March 2000 Plan, the Company was
managed in a decentralized manner through geographically dispersed autonomous
business units. Given that many of the Company's significant customers had
reorganized on a global basis, management realigned the Company to support its
global customer base. Rather than have separate sales, product development and
production activities at each decentralized business unit, the March 2000 Plan
included centralizing control of these activities. Facility lease termination
costs will be paid through April 2006. As of September 30, 2003, $605,000 is
included in "Other accounts payable and accrued liabilities" and $708,000 is
included in "Other long-term liabilities."

In response to weak market conditions, in August 2002, the Company
announced additional restructuring activities (the "August 2002 Plan"), which
reduced total worldwide employment by approximately 160. Accordingly, the
Company recorded an initial restructuring charge of $3,241,000 in August 2002
and additional restructuring charges of $144,000 during the balance of the
fiscal year ended June 30, 2003 related to the August 2002 Plan. In August 2003,
the Company expanded the August 2002 Plan and announced additional employment
reductions of 15 in the United States and 8 in the United Kingdom. In addition,
the Company closed its office in Dunstable, England and is currently running its
two separate United Kingdom business operations from its Poole, England location
in an effort to reduce or eliminate certain costs as part of its global
restructuring efforts.

The August 2002 Plan is expected to reduce operating costs by approximately
$6,900,000 annually after full implementation, which is expected to occur by the
end of December 2003. Severance and other costs will be paid through December
2003, and lease termination costs will be paid through October 2006, the end of
the lease terms. As of September 30, 2003, $469,000 is included in "Other
accounts payable and accrued liabilities" and $227,000 is included in "Other
long-term liabilities."

22

During the Company's fiscal year ended June 30, 2002, the German Tax
Authority changed its position regarding the taxability of certain intercompany
dividends. As a result, several companies, including Baldwin, were assessed
additional tax on dividends paid from 1994 through 1996. At this point in time,
the proposed assessment would result in a tax charge of approximately $2,570,000
and the elimination of previously reserved tax. However, based on precedent, the
Company believes it will prevail in this matter and there will be no material
financial impact as a result of the German Tax Authority's change in position.
It is expected that the German Tax Authority will assess the Company during the
second or third quarter of the fiscal year ended June 30, 2004. Under German tax
law, an assessment is payable at the time it is assessed, however, a Company is
permitted to request a deferral of the payment from the German Tax Authority
through various alternatives. Management believes a deferral will be granted,
however no assurances can be given that such deferral will be granted.

The Company believes that its cash flows from operations, along with the
available bank lines of credit and alternative sources of borrowings, if
necessary are sufficient to finance its working capital and other capital
requirements through the term of the credit agreement with Maple.

At September 30, 2003 and June 30, 2003, the Company did not have any
relationships with unconsolidated entities or financial partnerships, such as
entities often referred to as structured finance entities, special purpose
entities or variable interest entities, which would have been established for
the purpose of facilitating off-balance sheet arrangements or other
contractually narrow or limited purposes. As such, the Company is not exposed to
any financing, liquidity, market or credit risk that could arise if the Company
had engaged in such relationships.

The following summarizes the Company's contractual obligations at September
30, 2003 and the effect such obligations are expected to have on its liquidity
and cash flow in future periods (in thousands):

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

* Includes only the remaining nine months of the fiscal year ending June 30,
2004.

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.

RECENTLY ISSUED ACCOUNTING STANDARDS

See Note 2 to the consolidated financial statements for information
concerning recently issued accounting standards.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

A discussion of market risk exposures is included in Part II Item 7A,
"Quantitative and Qualitative Disclosures About Market Risk" of the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 2003. There have
been no material changes during the three months ended September 30, 2003.

23

ITEM 4: CONTROLS AND PROCEDURES

The Chief Executive Officer and Chief Financial Officer of the Company (its
principal executive officer and principal financial officer, respectively) have
concluded, based on their evaluation as of a date within 90 days prior to the
date of the filing of this Report on Form 10-Q, that the Company's controls and
procedures are effective to ensure that information required to be disclosed by
the Company in the reports filed by it under the Securities and Exchange Act of
1934, as amended, are recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and forms, and include controls and
procedures designed to ensure that information required to be disclosed by the
Company in such reports is accumulated and communicated to the Company's
management, including the Chief Executive Officer and Chief Financial Officer of
the Company, as appropriate, to allow timely decisions regarding required
disclosure.

There were no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of such evaluation.

PART II: OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

10.64 Amendment to Employment Agreement dated and effective
November 11, 2003 between Baldwin Technology Company, Inc.
and Vijay C. Tharani (filed herewith).
31.01 Certification of the Principal Executive Officer pursuant to
Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
31.02 Certification of the Principal Financial Officer pursuant to
Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
32.01 Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, 18 U.S.C. Section 1350 (filed herewith).
32.02 Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, 18 U.S.C. Section 1350 (filed herewith).

(b) Reports on Form 8-K

The Company filed a Current Report on Form 8-K dated July 1, 2003
relating to items 5 and 7.

The Company filed a Current Report on Form 8-K dated August 1, 2003
relating to items 5 and 7.

The Company filed a Current Report on Form 8-K dated August 18, 2003
relating to items 5 and 7.

The Company filed a Current Report on Form 8-K dated September 26,
2003 relating to items 7 and 9.

24

SIGNATURES

Pursuant to the requirements 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.

By /s/ VIJAY C. THARANI
------------------------------------
Vice President, Chief Financial
Officer and Treasurer

Dated: November 14, 2003

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