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...Read further to see why things are pretty tough all around but some
manufacturers are hanging in there.
Bill Bremmer RPT
Madison, Wisconsin
Steinway Reports Second Quarter Results; Profit of $0.41 Per Share Before
Charges
WALTHAM, Mass.--(BUSINESS WIRE)--Aug. 2, 2001--Steinway Musical Instruments,
Inc. (NYSE: <A HREF="aol://4785:LVB">LVB</A>), one of the world's leading manufacturers of musical
instruments, today announced results for the second quarter ended June 30,
2001. Net sales totaled $83.7 million, an increase of 7% over the year-ago
quarter. EBITDA declined modestly, to $13.8 million from $14.1 million. Net
income for the quarter was $3.7 million before extraordinary charges,
compared to $4.5 million in the prior year.
Fiscal 2001 second quarter earnings include charges of $4.0 million, or $.44
per share, related to the early extinguishment of debt in connection with a
successful bond refinancing. Including the impact of these expenses, Steinway
reported a loss of $0.03 per share for the quarter compared to earnings of
$0.51 per share in the second quarter of 2000.
For the first half of 2001, sales totaled $185.2 million, a 12% increase over
2000. Gross margins improved to 31.7% from 31.1%. EBITDA increased 5%, to
$30.5 million from $29.1 million in the prior year. Earnings per share before
charges for the six-month period were $1.00 compared to $1.09 in 2000.
Commenting on the results, Dana D. Messina, Chief Executive Officer, stated,
"The second quarter was a challenging one for the Company. While we continued
to see steady improvements in both sales and production levels in our
overseas markets, demand for our Boston pianos continued to be weak. We also
experienced a slowdown in shipments of Steinway pianos domestically. Dealers
cancelled many of their orders in the second quarter as the ongoing economic
softness in the U.S. finally manifested itself with slower sales at the
retail level. In response, we have already started to scale back piano
production to more appropriate levels at our New York factory."
"Uncertainty about the economy impacted our band operation as well," noted
Messina. "Dealers are purchasing later than normal this year knowing that
manufacturers have excess inventory. They are delaying certain purchases
until they have greater visibility of their "back-to-school" season
requirements. In addition, we have been experiencing heavy price competition
which has had a negative impact on our results."
Looking ahead to the balance of the year, Mr. Messina said, "We continue to
have a cautious outlook for the economy in the near-term. Management is
focusing its efforts on reducing domestic inventory levels. We are adjusting
our production levels to meet current demand and have reduced our band
headcount by approximately 5%. Current trends indicate that our domestic
piano business should stabilize at 1999 levels by year-end. With the economic
slowdown clearly impacting our results in all segments, we expect our full
year earnings to be at the low end of our previously forecasted range."
Band Operations
Sales of band and orchestral instruments reached $45.1 million for the second
quarter, an increase of 33% over the prior year. With the addition of UMI,
overall unit shipments increased 39%. An increase in the production costs of
some new instrument models, coupled with the planned expenses for
reengineering our manufacturing systems, caused gross margins to slip to
27.7% from 28.7% in the second quarter of 2000.
Year-to-date, sales were up 31% over the prior period. Gross margins held
consistent at 27.4%. High inventory levels, coupled with a slowdown in demand
for woodwind instruments, forced the Company to adjust headcount levels in
certain areas and reduce production schedules for the remainder of 2001.
Piano Operations
Sales for pianos decreased by 12% over the second quarter of 2000, to $38.5
million, on a unit shortfall of 25% over prior year. This includes an
unfavorable foreign translation impact of $1.3 million. Soft demand in the
mid-priced market continued to impact the Company's results. Worldwide,
Boston unit shipments declined 38% over the prior year period. In addition,
domestic unit shipments of Steinway & Sons grand pianos decreased 24% over
the year-ago quarter as retail demand declined.
A strengthening of demand for Steinway & Sons pianos in overseas markets
resulted in an 11% rise in foreign unit sales during the quarter. This
increase was led by a 70% increase in Steinway grand sales in Japan. Gross
margins for the second quarter improved to 37.7% from 34.6%, as the overall
mix of pianos sold shifted toward higher margin Steinway instruments.
On a year-to-date basis, piano sales were down 5%, to $83.4 million on unit
decreases of 6% for Steinway and 41% for Boston. Gross margins rose to 37%
from 34.5% in the prior period.
Conference Call
Steinway will be discussing its second quarter results, along with its
outlook for the remainder of 2001, on a conference call today, beginning at
5:30 p.m. ET. A webcast of the call will be available to all interested
parties at www.steinwaymusical.com. Following the live webcast, an archived
version will be available on the Company's web site.
About Steinway Musical Instruments
Steinway Musical Instruments, Inc., through its Steinway, Selmer and UMI
subsidiaries, is one of the world's leading manufacturers of musical
instruments. Its notable products include Armstrong flutes, Bach trumpets,
C.G. Conn trombones, Ludwig drums, Selmer saxophones and Steinway & Sons
pianos. Additional information can be obtained by visiting our web site:
www.steinwaymusical.com
"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of
1995
This release contains "forward-looking statements" which represent the
Company's present expectations or beliefs concerning future events. The
Company cautions that such statements are necessarily based on certain
assumptions which are subject to risks and uncertainties, including, but not
limited to, changes in general economic conditions, increased competition,
exchange rate fluctuations, and the availability of production capacity which
could cause actual results to differ materially from those indicated herein.
Further information on these risk factors is included in the Company's
filings with the Securities and Exchange Commission.
STEINWAY MUSICAL INSTRUMENTS, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended Six Months Ended
06/30/2001 07/01/2000 06/30/2001 07/01/2000
Net sales $83,661 $77,824 $185,242 $165,599
Cost of sales 56,597 52,890 126,469 114,061
Gross profit 27,064 24,934 58,773 51,538
Operating expenses 16,963 14,270 35,600 28,907
Income from operations 10,101 10,664 23,173 22,631
Interest expense, net 4,529 3,602 9,066 6,967
Other (income) expense, net (229) (521) (394) (676)
Income before taxes 5,801 7,583 14,501 16,340
Provision for income taxes 2,100 3,070 5,600 6,620
Income before extraordinary
loss 3,701 4,513 8,901 9,720
Extraordinary loss on early
extinguishment of debt
(net of tax benefit
of $2,662) 3,950 3,950
Net income (loss) ($249) $4,513 $4,951 $9,720
Earnings per share: Basic
and Diluted
Before extraordinary loss $0.41 $0.51 $1.00 $1.09
Extraordinary loss (0.44) (0.44)
Net earnings ($0.03) $0.51 $0.55 $1.09
Weighted average common
shares:
Basic and Diluted 8,932 8,907 8,932 8,916
Condensed Consolidated Balance Sheets
06/30/2001 07/01/2000 12/31/2000
Cash $3,629 $4,273 $4,989
Receivables, net 111,946 75,645 93,042
Inventories 175,208 107,336 160,296
Other current assets 6,647 9,350 7,126
Total current assets 297,430 196,604 265,453
Property, plant and equipment, net 104,059 90,046 106,415
Other assets 49,333 45,614 49,948
Total assets $450,822 $332,264 $421,816
Notes payable and current portion
of long-term debt $8,670 $8,980 $9,516
Other current liabilities 38,310 35,402 47,059
Total current liabilities 46,980 44,382 56,575
Long-term debt 251,468 149,570 213,894
Other liabilities 37,098 32,303 38,140
Stockholders' equity 115,276 106,009 113,207
Total liabilities and stockholders'
equity $450,822 $332,264 $421,816
CONTACT:
Steinway Musical Instruments, Inc.
Julie A. Theriault
781-894-9770
ir@steinwaymusical.com
KEYWORD: MASSACHUSETTS
BW2494 AUG 02,2001
13:00 PACIFIC
16:00 EASTERN
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