BALDWIN COMPANY ANNUAL REPORT FY 2021

Transcription

1 BALDWIN COMPANY ANNUAL REPORT FY 2021 Providing the world with a variety of premium, customer-focused sensors that keep pace with trending technology and withstand the test of time

2 TABLE OF CONTENTS Historical Timeline 1 Visual Summary 2 Executive Summary 3 Total Quality Management (TQM)/Sustainability 4 Research and Development (R&D) 5 Marketing 8 Production Overview 10 Human Resources (HR) Management 12 Financial Information 13 Financial Statements 15 Corporate Stock Information 17 Looking Ahead 20 Executive Staff Reflections 22 Contact Information 24

3 8 years of creating excitement and value among our customers with innovative, reliable sensors Baldwin Company successfully completes our first year in business with a positive net profit of $4.19 million! Four million in dividends paid to shareholders. Dominated overall market share. Maintained a 2.2 leverage ratio. Production began seeking ways to produce a high-quality product with a new, lower-priced alloy. Adopted a new chemical compound to wash raw materials used in making sensors, thereby successfully reducing overall electricity usage. Implemented Process Management and Total Quality Management (TQM) initiatives within the organization. Repurchased $3 million in common stock. Launched new product "Bliss" in Performance segment. Achieved AAA Bond Rating for the first time in company history! Maintained overall controlling market share. Began investing in Benchmarking, Six Sigma Training and Quality Initiative Training. Invested $5 million in recruiting and maintained 80 hours of annual training per employee. Bead achieved prime age for the second time in company history. Increased market share by 5.24% over prior year. Gained controlling market share in all segments. Posted largest net profit to-date of $99.24 million. 1

4 Earnings 2013 $4.19 million 2021 $99.24 million Since 2013, Baldwin returned $199.2 million to shareholders through dividends and share repurchases Net Sales 2021 $522 million 2019 $344.1 million 2017 $285.5 million 2015 $174.3 million 2013 $101.1 million 2

5 To Our Customers, Stockholders, Management and Employees Baldwin Company is very proud to announce that we had another excellent year of solid performance. Baldwin products lead every segment in sales, and we saw an overall increase in market share by 5.24% over prior year. We controlled an impressive 35.12% of the market share, capturing nearly 10% more market share than our closest competitors! We paid our stockholders a dividend of $16.05 per share, and we achieved our target leverage goal of 1.5. We posted record-breaking profits, and increased our productivity index by 2.1%. We achieved these remarkable goals by closely following the tactics of our broad differentiation strategy. Every department set internal goals and objectives, and solidly achieved them across the board. Our Research and Development team, lead by Amber Burton, kept our products fresh and exciting to increase our market appeal. Our Marketing team, lead by Andrea DiLenge, achieved 100% awareness in all market segments, to ensure that our customers know about our superb designs. Our Production team, lead by Joy Klushkan, ran efficient factory capacity levels to ensure that we minimized variable costs. Our Finance team, lead by Teresa Jensen, posted our highest stock price yet. As CEO of this company, I am so pleased with the progress and commitment we commonly share in an effort to maximize our company s potential and profits. We are committed to you, and with your continued loyalty and support, Baldwin Company will continue to grow and prosper. Sincerely, Andrea DiLenge Chief Executive Officer (CEO) January 31,

6 TOTAL QUALITY MANAGEMENT & SUSTAINABILITY The Baldwin Company began implementing the following Process Management and Total Quality Management (TQM) Initiatives in 2017 to improve business procedures, maximize efficiencies, minimize environmental risks, and promote a variety of green initiatives within the organization: CPI (Continuous Process Improvement) Systems Vendor/JIT (Just in Time [Inventory]) Quality Initiative Training Channel Support Systems CCE (Concurrent Engineering) UNEP Green Programs Benchmarking Quality Function Deployment Effort Six Sigma Training GEMI TQEM (Global Environmental Management Initiative Total Quality Environmental Management) Sustainability The impacts of these initiatives has improved the overall quality of our products while reducing the time and resources required to design, manufacture, warehouse and ship goods. Innovative input from customers, employees and shareholders will help continually invigorate our perspectives and engage our creativity on further TQM and sustainability implementation. Ultimately, by producing fewer toxic by-products, promoting recycling and other material use efficiencies, and lessening our impact on the environment, we are able to provide our customers, our organization, and our planet with a more sustainable company for years to come. 4

7 RESEARCH AND DEVELOPMENT (R&D) Traditional Products in the traditional segment are geared towards customers who prefer proven products at a modest price. Baldwin s traditional product, Baker, maintained a positioning of 10.6 and a size of 9.4 throughout the year. Additionally, Baker was able to achieve a product age of 1.8 years, which falls within 0.2 years of its prime age. Baker 2021 Positioning Low Low segment sensors offer the lowest priced and most reliable products on the market. Baldwin Company's most popular product, Bead, was strategically positioned at 5.0 and sized at 15.0 in 2018 to allow it to hit a prime age of 7 years in Allowing Bead to drift for 2021 allowed the product to maintain its tenured age while still remaining within customers fine-cut positioning circle. Bead 2021 Positioning 5

8 High Consumers seeking cutting-edge size and performance technology in their sensors tend to prefer the high segment products. Through avid research and development, Baldwin Company's high segment sensor, Bid, was able to provide ideal positioning of 16.1 and ideal size of 3.9 at a young product age of 1.5 years by December 31, Bid 2021 Positioning Performance Products in the performance segment are tailored to customers requiring highly reliable, innovative technology in their sensors. Baldwin maintains two performance products, Bold and Bliss. Both products are revised annually to maintain the highest level of performance available in the marketplace. During 2021 Bold maintained positioning of 17.2 and size of 10.6, while Bliss was positioned at 17.4 and sized at 10.4; both products upheld an MTBF of 27000, thereby maximizing each product s performance length. Bold 2021 Positioning Bliss 2021 Positioning 6

9 Size The size segment offers advanced technology products with increasingly efficient size characteristics. Buddy, Baldwin's size sensor, was positioned at 9.6 and sized at 2.6, meeting ideal customer preferences within the segment for the year. Additionally, Buddy achieved prime age of 1.5 years during Buddy 2021 Positioning Future Development Plans The following table outlines the planned positioning and sizing for each product during the 2022 fiscal year. No changes in MTBF are anticipated being made at this time. Product Name Primary Segment Performance Size Baker Traditional Bead Low Bid High Bold Performance Buddy Size Bliss Performance

10 MARKETING For fiscal year ending 2021, Marketing focused our strategy solely on increasing current market share. We concentrated our efforts on identifying competitive weaknesses through competitive intelligence reporting, forecasting accurately to meet excess demand, achieving high customer survey scores to increase product appeal, and maintaining 100 percent awareness and accessibility through our sales and promo budgets. Overall, Baldwin Company increased market share by 5.24% over prior year, and ranked as one of our best years of performance thus far. Competitive Intelligence Factors Year-in and year-out, Baldwin Company products lead most segments and have traditionally captured a strong majority of competitors lost or missed sales opportunities. In 2021, Baldwin Marketing Department identified that the Low-End segment had a significant opportunity to increase market share within this particular segment. Andrews Company was underperforming by roughly 5%, and Ferris Company was picking up the majority of those lost sales. Bead, our Low-End product, was scheduled to hit the ideal age, was competitively priced, had a modest reliability, and the overall appeal for Bead in the coming year was high. This was the year to produce double our normal capacity, in hopes of capturing Andrews Company s lost sales. We are pleased to report that this strategy paid off, and Bead saw a 9.8% increase in demand over prior year; 7.0% of that increase was picked up from competitors missed sales. Accurate Forecasting Marketing continued to forecast a best case scenario for Production and a worst case forecast for Finance. Employing this forecasting technique has successfully allowed Baldwin to capitalize on picking up lost sales from our competitors, while financing for the possibility of carrying bloated inventories. Marketing has routinely met at least 95% of demand annually with this forecasting technique. Pricing & Customer Survey Scores Baldwin continued to maintain its premium pricing structure in the High-End, Performance, and Size segments. However, Marketing has noticed that customer survey scores are showing a somewhat decreasing trend. To address this, Marketing reduced product prices by $ in each segment. Although our customer survey scores continue to trend slightly downward, our customer survey scores still maintain a satisfactory, respectable range. 8

11 Sales and Promotion Budgets Baldwin Marketing Department was also successful in achieving 100% awareness and accessibility in all product lines with the exception of Bliss. Nevertheless, even though Bliss is our newest product, it was still able to achieve 99% awareness this year. Results Driven As shown in the graph below, Baldwin has successfully captured sales in excess of potential in all segments except Traditional. Due to our ability to effectively monitor competitors weaknesses, forecast aggressively and accurately, meet and exceed customer expectations, and aggressively invest in our sales and promo budgets, Baldwin has acquired a competitive advantage, which has ultimately lead to a strong market share increase this year. Baldwin Company Market Share by Segment Potential Market Share in Units Actual Market Share in Units Total Market Share Captured in Excess of Potential Demand Traditional 21.1% 21.1% No Change Low 27.5% 34.5% 7.0% High 21.6% 25.2% 3.6% Performance 50.8% 54.4% 3.6% Size 41.8% 50.4% 8.6% Marketing Strategies for 2022 *F/Y Ending December 31, Marketing has identified that each of our competitor companies continue to be plagued with underperforming in one or more segments, which gives Baldwin Company significant market opportunities to continue to capitalize on competitors missed sales, and to further increase our market share. With the departure of Andrews, Chester, and Digby from the Size segment, Marketing highly recommends that we develop a new product to be released in this segment in the near future to further expand our current market potential. Marketing will continue to work towards increasing customer survey scores through price reductions. Our contribution margins are strong enough to withstand small price decreases utilized to increase product appeal. Marketing will continue to invest in our sales and promo budgets to maintain 100% awareness and accessibility in each segment. 9

12 PRODUCTION OVERVIEW Throughout fiscal year ending December 31, 2021, Production focused on many of the same concepts that have remained priorities over the past eight years. Our primary objective was to reduce variable costs; through continued collaboration with R&D, TQM and HR, material and labor costs were consistently reduced. The following chart shows the steady downward trend in combined costs over the last eight years: Another main focus for the Production department during FY2021 was to work closely with Marketing in order to tightly align capacity with the annual sales forecast. Baldwin s goal is to consistently remain in the percent overall plant utilization target range. 10

13 Production strategies for 2022 are to continue working closely with R & D, Marketing, and Finance to ensure that production is prepared for changes in capacity and new product offerings. Technological advances and associated benefits will be considered annually, and implemented to segments if they provide the greatest return on investment. Our diversification strategy necessitates development of new products and constant improvement to existing products. Baldwin will continue to invest heavily in plant capacity to keep our product fresh and unique. Plant expansions will be aligned with Finance s projections for growth and stability. 11

14 HUMAN RESOURCES (HR) MANAGEMENT HR decisions played a vital role in reducing labor costs, thus making Baldwin more financially successful. HR effectively hired qualified individuals and provided them with comprehensive, ongoing training. These strategies have cultivated Baldwin s employees into a more productive workforce, while simultaneously reducing labor costs. Additionally, because employees were satisfied with their jobs, we experienced declining employee turnover, thereby reducing the need to hire and train additional employees. ` Future HR objectives will include ongoing recruitment of highly skilled, productive workers. Furthermore, Baldwin will continue to provide 80 hours of annual training per employee, thus increasing productivity, employee satisfaction, and turnover reduction. When automation is considered we will thoroughly analyze the impact of proposed decisions on employee turnover and return on investment (ROI) in order to assure no negative tradeoff exists between workforce reduction and unnecessary automation. 12

15 FINANCIAL INFORMATION For fiscal year ending 2021, Finance s strategy was to increase leverage and free cash flow all while maintaining a healthy market capitalization, profit and share price. By focusing more on increasing leverage and free cash flows, it showed that a few of finance s other ratios would decrease. This didn t seem to stop the Baldwin Company from succeeded overall and still become ahead of the rest of the competition. Overall, the Baldwin Company succeeded in maintaining a healthy market capitalization even though it dropped in the last few years. This decrease was due to the large dividend payouts and stock repurchases made in an effort to reduce shareholder risk and creating more current and long term debt. Shareholder information is shown in more detail on page 18. Financial Performance Measures The finance department s performance measures consisted of emergency loans, the type of debt issued, positive cash flow, leverage and healthy stock prices and market capitalization. Emergency Loan The Baldwin Company s main finance objective was to never have an emergency loan and we have succeeded with this performance measure through fiscal year ending Throughout the years we are in business, it is our determination and standard to never have an emergency loan and continue on our path of growth. Debt Issued Current/Long Term Debt Our measure is to keep our current debt to a minimum and issue long term debt when needed. 13

16 Free Cash Flow Free cash flow is determined by adding net cash from operations and investing activities. After fiscal year 2021, Baldwin Company achieved a substantial amount on positive cash flow. Leverage Leverage is a very important measure for the Baldwin Company because it ensures stockholders do not take full risk for financing company, and the company issues enough long-term debt to maintain a healthy ratio between liabilities and equity. Our goal is to have our leverage a healthy ratio of Baldwin Company finally achieved this success during fiscal year

17 FINANCIAL STATEMENTS 15

18 16

19 CORPORATE STOCK INFORMATION Corporate Information Headquarters: Baldwin Company 5364 Sensor Avenue Seattle, WA Listing New York Stock Exchange Stock Symbol: TBC Annual Meeting Our Annual Meeting of Shareholders will be held on Friday, August 1, 2013, at 8:00 a.m. (PST) in Seattle, Washington on the University of Washington campus. Communication with Shareholders The Baldwin Company attempts to communicate with their shareholders on a quarterly basis with letters and other means. We do hold an annual shareholders meeting every year to discuss major concerns and other matters directly related to shareholders. Market Price of Common Stock The annual stock price of common stock continued to grow through the years including 2021 and our company is determined to continue the growth for many years to come. 17

20 Market Capitalization Since the startup of Baldwin Company, market capitalization has been used as a performance measure and is determined by multiplying shares outstanding by stock price. After fiscal year 2021, Baldwin Company is determined to watch our market capitalization grow by our stock price increasing ,000, ,455, ,774, ,399, ,147, ,536, ,879, ,774, ,536,783 Dividends Payable per Share The dividend policy of Baldwin Company is to distribute to its shareholders all funds surplus to the operating needs of the organization as determined by the executive staff of Baldwin Company with a target dividend payout in respect of each financial year according to the residual payout method, but subject always to: 1. Any banking or other funding covenants by which the Baldwin Company is bound from time to time; 2. The operating requirements referred to in this clause; and 3. The necessity to utilize the funds to reinvest in capital to further expand and develop the organization. 18

21 Dividends Paid Per Share The Baldwin Company will continue to pay dividends to shareholders if it is in the best interest of the company. In future years, we anticipate being able to distribute dividends on an annually increasing basis. Shareholders As of December 31, 2021, there are 4,536,783 shareholders of The Baldwin Company s common stock. 19

22 LOOKING AHEAD Baldwin Company made many achievements during the fiscal year ending December 31, 2021 by closely following our broad differentiation strategy. Our diverse product selections lead every segment in sales, we experienced an overall increase in market share of 5.24% over prior year, and we posted record-breaking profits. Additionally, we paid our stockholders a dividend of $16.05 per share, achieved our target leverage goal of 1.5, and increased our productivity index by 2.1%. Looking ahead, Total Quality Management will welcome and encourage innovative input from customers, employees and shareholders in order to continually revitalize our sustainability perspectives. Baldwin Company will strive to continue reducing production of toxic by-products and promoting recycling and other material use efficiencies within the organization. By lessening our impact on the environment, we can better sustain our company for years to come. The Research and Development Department will continue to keep products fresh and exciting with ideal product specifications unique to each segment s consumers. Our Marketing team will work closely with R&D to introduce a new product in the Size segment in order to take advantage of the lack of competition currently in that sector. The summation of Marketing s specific, measurable future goals are to: Increase market share. Capitalize on competitor weaknesses to gain market share in segments where competitors are currently underperforming: o Traditional: All companies performing to potential. Additional market share grab currently unavailable in this segment. o Low End: Target Andrews and Chester Companies. o High End: Target Chester Company. o Performance: Target Digby and Erie Companies. o Size: Target Erie Company. Increase customer survey scores by reducing prices by $ $1.00 in all segments. Maintain current investment in sales and promo budgets to maintain 100% awareness and accessibility in all segments. Production s measurable objectives for the future are: Carefully position production capacity, so that first round capacity is never below 100%. Maintain an overall plant utilization of %. Increase sales/employee to above minimum threshold Human Resource s measurable objectives for the future are: Reduce employee turn-over to less than 5%. Increase employee productivity to over 125%. 20

23 Lastly, the Finance Department set forth the following performance measures to ensure benchmarking of our success and the continuous improvement needed for long-term prosperity: Ensure stockholders do not take full risk for financing company by issuing enough long-term debt to maintain a healthy ratio between liabilities and equity. Consistently increase leverage to a healthy ratio of Ensure minimum amount of current debt is issued. Ensure an emergency loan is never needed by maintaining a closing cash position between three and eight percent. Maintain an annually increasing, positive cash flow. Ensure growth in stock prices and market cap. With an ongoing commitment to our customers and staff, Baldwin Company will continue to maximize our potential and profits. We look forward to your continued loyalty and support, as we continue to grow and prosper into the future. 21

24 EXECUTIVE STAFF REFLECTIONS ANDREA DILENGE CHIEF EXECUTIVE OFFICER/ COMPETITIVE INTELLIGENCE OFFICER/CHIEF MARKETING OFFICER It was my pleasure to work with the ladies of Baldwin Company over the last 11 years. Each team member worked incredibly hard to make Baldwin Company the outstanding and prosperous company we are today. We learned that all business decisions have tradeoffs, but we learned to balance risk and reward. Most importantly though, we had a plan and we worked the plan. Our team, as a whole, was committed to achieving one primary goal: To make Baldwin Company the one to beat! I couldn t have chosen a better team to walk beside me on this journey, and I would like each of you to know that I appreciate everything you ve done. The sleepless nights, the diligent research, and the commitment to achieving our primary objective really paid off. I couldn t have done this without you. Cheers to you all. What an amazing adventure this simulation was. It was the most educational, exhilarating, and at times, frustrating simulation I have ever played. The business world is not cut and dry and I think the simulation did an excellent job of proving that. The simulation as a whole made me consider the impact of my decisions on other departments; the Total Quality Management (TQM) module in particular, was what made the impact of my decisions most apparent. The simulation also taught me that no matter what decision you made this round (year), you have a chance to offset the negative affects if you are part of group that really pays attention to all internal and competitor moves. Lucky for me, my team was amazing and worked very well together. Of course we had our disagreements, arguments and at times probably didn t like each other much but that never affected the mutual respect given to each team member throughout the game. TERESA JENSEN CHIEF FINANCIAL OFFICER/TOTAL QUALITY MANAGMENT 22

25 JOY KLUSHKAN CHIEF OPERATIONS OFFICER/ HUMAN RESOURCES Essential to the success of any accomplished business is a first-rate management team, which is made up individuals that are knowledge seekers, who have STRONG core values and work ethic. These traits are what made Baldwin the team to beat; therefore the first thing I learned is pick your partners carefully. The second thing that I learned is share, share, share; because of this desire to share what we knew, or in some cases what we didn t know, we all grew, making our team even stronger. I also learned that challenging circumstances help you grow and sticking to your strategy and never losing sight of your goal will make your team or business unbeatable. Nothing could have prepared me for how incredibly amazing and enriching this simulation was for me. The Capsim simulation successfully emulated the entire business process from beginning to end and truly helped me understand how the right staff can make a business prosper by pulling together and effectively balancing common tradeoffs that exist in business. Learning to work collaboratively with three other teammates for several weeks was quite the unique experience. I feel extremely lucky to have spent my last semester running a successful, thriving business with such an intelligent, hard-working group of women. Constructive criticism was always given and it helped us come together as a team and continuously make improvements along the way. By the end of the competition, we ran like a well-oiled machine and problem-solving seemed much more streamlined. I couldn t have asked for a better group of executives to run Baldwin Company with and appreciate what a wonderful opportunity it was to work with them. AMBER BURTON CHIEF RESEARCH & DEVELOPMENT OFFICER/WEB SITE COORDINATOR/EDITOR IN CHIEF 23

26 CONTACT INFORMATION aldwin Company 5364 Sensor Avenue Seattle, WA Tel: BALDWIN EXECUTIVE STAFF MEMBER PHONE EXTENSION ADDRESS Andrea DiLenge 1420 Teresa Jensen 1520 Joy Klushkan 1320 Amber Burton