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Steinway Reports FY 2001 Results; Fourth Quarter Exceeds Expectations
WALTHAM, Mass.--(BUSINESS WIRE)--Feb. 28, 2002--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 fourth quarter ended December
31, 2001. Net sales decreased 7%, to $84.5 million from $90.4 million.
Net income totaled $3.9 million, or $0.43 per share, compared to $4.4
million, or $0.49 per share, in the year-ago quarter.
For the full year, net sales grew to $352.6 million, an increase of 6% over
2000. EBITDA was $54.1 million as compared to $55.9 million in 2000. Strong
working capital management contributed to a doubling of cash flows from
operations, to $28.9 million from $13.3 million in the prior year. Earnings
per share before extraordinary items were $1.71 compared to $1.89 in 2000,
$0.06 above the high end of the company's previously announced earnings
guidance.
Dana Messina, Chief Executive Officer, commented, "In light of the state of
the economy, we are pleased with the company's overall performance in the
fourth quarter. Results were better than expected from our piano business as
record sales from our overseas operations lessened the impact of a 20%
shortfall in domestic piano revenue. In addition, despite an aggressive
competitive landscape, our band instrument business maintained revenues
consistent with the prior year."
Addressing the full year results, Messina said, "The economic climate made
2001 a very challenging year for our management team. We developed new
promotional programs to compete in this difficult climate. In addition,
management focused its efforts on balance sheet management and debt reduction
by scaling back production in order to maintain appropriate inventory levels.
While this action negatively affects our operating results in the short-term,
we believe this is the most prudent approach for the long-term health of the
company. We are pleased to report that during the last six months of 2001, we
trimmed inventory by $14 million, working capital by $41 million and total
debt by $49 million."
Band Operations
Net sales for the band segment were $36.7 million, remaining virtually on par
with the year-ago quarter. In response to the competitive environment, the
company expanded its promotional activity to include special pricing on
selected instruments in the fourth quarter. This contributed to a gross
margin decline to 22.7% from 26.5%. Inefficiencies caused by modifications to
the company's manufacturing systems, as well as the planned shift in
production mix, also produced an unfavorable impact on gross margins for the
quarter.
For the full year, sales of band and orchestral instruments reached $183.6
million, an increase of 23% over the prior year. Overall unit shipments
increased 23%, primarily due to the acquisition of UMI. Gross margins
decreased slightly, to 26.3% from 26.8% in the prior year.
Piano Operations
Net sales for pianos decreased 10% from the fourth quarter of 2000, to $47.8
million from $53.4 million. However, domestic demand in the mid-priced market
picked up in the fourth quarter with unit shipments of Boston and Essex brand
pianos increasing 8%. This unit increase represents a reversal of five
previous quarters of decline. As a result of purchasing cutbacks and the
growth in sales, the company achieved its goal of reducing unit inventory of
Boston grand pianos by two-thirds since midyear.
Demand for Steinway & Sons pianos in overseas markets remained strong in the
fourth quarter, with unit shipments increasing 5% over the prior year period.
However, the reduced production schedule at the company's New York factory
negatively impacted overall piano gross margins, which dropped to 33.6% from
37.8% in the fourth quarter of 2000.
For the full year, piano sales declined 8%, to $169.0 million on a unit
decrease of 15%. The higher mix of Steinway units sold for the year somewhat
offset the period costs associated with the temporary plant shutdowns,
resulting in overall piano gross margins of 35.1% compared to 35.6% in the
prior year.
Outlook
Commenting on the Company's outlook for 2002, Mr. Messina said, "Overall, we
expect 2002 revenues to remain relatively consistent with 2001. Demographic
trends in the student band instrument market remain relatively stable.
However, consolidation of dealers over the last few years has left the band
industry with several larger retailers who are more focused on reducing
inventory levels. As a result, excess inventory remains in the marketplace.
We expect sales for our band segment to be slightly down to even with 2001.
To maintain market share in the professional instrument category, the company
will maintain its reduced prices on certain instruments, adversely affecting
overall margins in 2002."
"Our 24-month band manufacturing revitalization project will be coming to an
end by the third quarter of 2002," stated Messina. "As a result, we expect to
see improvement in our band instrument gross margins by the fourth quarter.
In addition, we have recently seen signs indicating that demand in the
mid-priced segment of the U.S. piano market is increasing." Messina
concluded, "Given current market conditions and our assessment of the overall
business environment, our estimate for 2002 earnings per share is between
$1.80 and $2.10."
Conference Call
Steinway will be discussing its fourth quarter and full year results, along
with its outlook for 2002, 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 which could cause
actual results to differ materially from those indicated herein. These risk
factors include the following: changes in general economic conditions;
increased competition; exchange rate fluctuations; variations in the mix of
products sold; fluctuations in effective tax rates resulting from shifts in
sources of income; and the ability to successfully integrate and operate
acquired businesses. Further information on these risk factors is included in
the Company's filings with the Securities and Exchange Commission.
STEINWAY MUSICAL INSTRUMENTS, INC.
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