SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
____________________
FORM 10-Q
Quarterly Report Pursuant to section 13 or 15(d) of
the Securities and Exchange Act of 1934
____________________
For the Quarter ended Commission File Number
September 30, 1994 0-14903
Baldwin Piano & Organ Company
(Exact name of registrant as specified in its charter)
Delaware 31-1091812
(State or other jurisdiction of (IRS Employer
incorporation or organization Identification No.)
422 Wards Corner Road
Loveland, Ohio 45140-8390
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (513) 576-4500
Indicate by check mark whether the registrant (1) has filed
all documents and reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---
The number of shares of the Common Stock outstanding of
Baldwin Piano & Organ Company ("Company"), as of November 1, 1994
is 3,415,196.
<PAGE>
BALDWIN PIANO & ORGAN COMPANY
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 1994 and December 31, 1993
Condensed Consolidated Statements of Earnings
for the three months and nine months ended
September 30, 1994 and 1993
Condensed Consolidated Statements of Cash Flows
for the nine months ended
September 30, 1994 and 1993
Notes to Condensed Consolidated Financial
Statements, September 30, 1994
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote
of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
<TABLE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
______________
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1994 and December 31, 1993
<CAPTION>
September 30, December 31,
ASSETS 1994 1993
------------- ------------
<S> <C> <C>
Current assets:
Cash ................................. $ 536,477 $ 1,203,199
Receivables, net ..................... 12,167,820 10,162,811
Inventories .......................... 54,499,661 45,077,365
Other current assets ................. 8,106,214 6,461,892
------------ -----------
Total current assets ........... 75,310,172 62,905,267
------------ -----------
Property, plant and equipment, net ...... 13,957,313 13,664,099
Deferred income taxes ................... 443,681 813,681
Other assets ............................ 13,457,148 12,545,368
------------ -----------
Total assets ................... $103,168,314 $89,928,415
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt .... $ 24,877,439 $11,299,100
Income taxes payable ................. 1,269,273 2,513,358
Other current liabilities ............ 11,912,921 13,151,821
------------ -----------
Total current liabilities ...... 38,059,633 26,964,279
------------ -----------
Other liabilities ....................... 13,249,099 13,072,413
------------ -----------
Total liabilities .............. 51,308,732 40,036,692
------------ -----------
Stockholders' equity:
Common stock ......................... 41,770 41,639
Additional paid-in capital ........... 12,206,232 12,068,613
Retained earnings .................... 46,023,012 43,972,787
------------ -----------
58,271,014 56,083,039
Less cost of treasury shares ......... (6,411,432) (6,191,316)
------------ -----------
Total stockholders' equity ..... 51,859,582 49,891,723
____________ ___________
Total liabilities and
stockholders' equity ........... $103,168,314 $89,928,415
============ ===========
<FN>
See accompanying Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
_______________
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ -------------------------
1994 1993 1994 1993
------------------------ -------------------------
<S> <C> <C> <C> <C>
Net sales ............... $30,570,969 $27,821,182 $84,218,528 $82,670,391
Cost of goods sold ...... 24,031,545 21,382,536 64,755,125 62,883,799
----------- ----------- ----------- -----------
Gross profit ...... 6,539,424 6,438,646 19,463,403 19,786,592
Income on the sale of
installment receivables 1,186,065 1,427,320 3,827,354 4,283,635
Interest income on
installment receivables 115,400 102,874 386,664 333,659
Other income, net ....... 738,249 777,782 2,263,438 2,787,999
----------- ----------- ----------- -----------
8,579,138 8,746,622 25,940,859 27,191,885
Operating expenses:
Selling, general
and administrative .. 6,616,045 6,375,423 20,195,611 19,037,435
Provision for
doubtful accounts ... 323,738 429,376 984,182 1,347,637
----------- ----------- ----------- ----------
Operating profit .. 1,639,355 1,941,823 4,761,066 6,806,813
Interest expense ........ 582,275 593,944 1,441,841 1,698,823
----------- ----------- ----------- -----------
Earnings before income
taxes and cumulative
effects of changes(1).. 1,057,080 1,347,879 3,319,225 5,107,990
Income taxes ............ 385,000 502,000 1,269,000 1,895,000
----------- ----------- ----------- -----------
Earnings before
cumulative effects
of changes(1) ......... 672,080 845,879 2,050,225 3,212,990
Cumulative effect of
changes(1) ............ -- -- -- (1,604,000)
----------- ----------- ----------- -----------
Net earnings ...... $ 672,080 $ 845,879 $ 2,050,225 $ 1,608,990
=========== =========== =========== ===========
<PAGE>
Earnings per share:
Before cumulative
effects of changes(1).. $.20 $.25 $.60 $.94
Cumulative effect
of changes(1) ......... -- -- -- (.47)
---- ---- ---- ----
Net earnings per share $.20 $.25 $.60 $.47
==== ==== ==== ====
Average number of common
shares outstanding 3,415,196 3,414,807 3,415,284 3,406,400
========= ========= ========= =========
<FN>
(1) Changes in accounting for postretirement and postemployment benefits.
<FN>
See accompanying Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
______________
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended
September 30, 1994 and 1993
<CAPTION>
INCREASE (DECREASE) IN CASH 1994 1993
- - --------------------------- ------------ -----------
<S> <C> <C>
Net cash used in operating activities ....... $(11,465,184) $(1,018,332)
Net cash used in investing activities ....... (1,999,642) (1,394,450)
Cash flows from financing activities:
Installment contract
receivables written ................... (37,487,257) (32,160,026)
Installment receivables liquidated ....... 3,359,649 3,513,927
Proceeds from sale of
installment receivables ............... 32,814,203 28,484,334
Borrowing under long-term debt, net ...... 14,193,875 2,113,979
Other .................................... (82,366) 168,263
------------ -----------
Net cash provided by
financing activities ................ 12,798,104 2,120,477
------------ -----------
Net decrease in cash ........................ (666,722) (292,305)
Cash at beginning of period ................. 1,203,199 1,037,372
------------ -----------
Cash at end of period ....................... $ 536,477 $ 745,067
============ ===========
SUPPLEMENTAL DISCLOSURE
- - -----------------------
OF CASH FLOW INFORMATION
------------------------
Cash paid during the period for:
Interest ................................. $ 1,295,184 $ 1,524,890
============ ===========
Income taxes ............................. $ 2,183,340 $ 4,329,427
============ ===========
<FN>
See accompanying Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
______________
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
(1) BASIS OF REPORTING FOR CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The unaudited condensed consolidated financial statements included
herein have been prepared by the Company pursuant to the rules and regula-
tions of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations, although the Company believes that
the disclosures are adequate to make the information presented not mislead-
ing. These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Annual
Report and Form 10-K for the year ended December 31, 1993.
The financial statements presented herewith reflect all adjustments
(consisting of normal and recurring accruals) which, in the opinion of
management, are necessary to fairly state the results of operations for the
three month and nine month periods ended September 30, 1994 and 1993.
Results of operations for interim periods are not necessarily indicative of
results to be expected for an entire year.
<TABLE>
(2) INVENTORIES
Inventories consist of the following:
<CAPTION>
September 30, December 31,
1994 1993
------------- ------------
<S> <C> <C>
FIFO cost:
Raw material ......................... $11,517,694 $ 9,930,923
Work-in-process ...................... 7,378,286 7,081,883
Finished goods ....................... 45,093,931 36,149,809
----------- -----------
63,989,911 53,162,615
Excess of FIFO cost
over LIFO inventory value ............ (9,490,250) (8,085,250)
----------- -----------
Net inventories ................ $54,499,661 $45,077,365
=========== ===========
</TABLE>
<PAGE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
______________
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(3) POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
The Company is contractually obligated to make health care benefits
available to a certain group of retired employees. Also, the Company
sponsors several postemployment plans for various groups of employees.
These plans' provisions include severance benefits in which the employees'
rights either vest or accumulate for each additional year of service
performed. The Company funds these postretirement and postemployment
benefits primarily on a pay-as-you-go basis.
In the fourth quarter of 1993, the Company adopted the provisions of
Statements of Financial Accounting Standards No. 106 (FAS 106), "Employers'
Accounting for Postretirement Benefits other than Pensions" and No. 112 (FAS
112), "Employers' Accounting for Postemployment Benefits." The Company
elected to recognize the combined benefit obligations of $2,673,000
retroactive to January 1, 1993 as accounting changes. On an after-tax
basis, this charge was $1,604,000 or $.47 per share. Previously reported
nine months results in 1993 have been restated to reflect the adoption of
FAS 106 and 112 as of January 1, 1993. The adoption of these standards had
no impact on consolidated cash flows. Prior to 1993, the cost of post-
retirement and postemployment benefits were recognized when incurred and
were not material.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1994
COMPARED TO THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1993
Net sales for the three months ended September 30, 1994 increased
$2,749,000 or 10% over the comparable period in 1993. The components of
this increase in sales are as follows:
Piano $ 2,536,000
Organ (401,000)
Music product contracting (312,000)
Furniture contracting 825,000
Electronic contracting (44,000)
Other 145,000
-----------
$ 2,749,000
===========
The increase in piano sales is attributable to a 13% increase in unit
volume, augmented by a 2% increase in the average unit selling price. The
decrease in organ sales is primarily related to the continued decline in
sales of home organs. The Company's sales of non-portable organs for home
use has declined steadily during the last decade, reflecting a general
decline in this market. Music product contracting sales decreased due
primarily to lower sales of piano cases to another piano manufacturer for
use outside the United States. Furniture contracting sales have grown due
to increased sales to principally two customers. Electronic contracting
sales to a single customer declined $1,235,000, partially offset by a 19%
increase in electronic contracting sales to other customers.
Net sales for the nine months ended September 30, 1994 increased
$1,548,000 or 2% from the comparable period in 1993. The components of this
increase in sales are as follows:
Piano $ 726,000
Organ (385,000)
Music product contracting 530,000
Furniture contracting 2,115,000
Electronic contracting (1,513,000)
Other 75,000
-----------
$ 1,548,000
===========
The increase in piano sales is attributable to a 5% increase in the
average unit selling price partially offset by a 3% decrease in unit volume.
The increase in the average unit selling price is primarily due to higher
sales of more expensive grand pianos and increased selling prices for
vertical pianos. The decrease in organ sales is primarily related to the
continued decline in sales of home organs. The Company's sales of non-
portable organs for home use has declined steadily during the last decade,
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
-----------------------------------------------------------
reflecting a general decline in this market. Music product contracting
sales increased due to higher sales of piano cases to another piano
manufacturer for use outside the United States. Furniture contracting
sales, which commenced in the fourth quarter of 1993, have grown due to
expanded sales to principally two customers. Electronic contracting sales
to a single customer declined $4,729,000, partially offset by an 18%
increase in electronic contracting sales to other customers.
Gross profit as a percent of sales declined for the three months and
nine months ended September 30, 1994 compared with the same periods in 1993.
This decrease is largely due to reduced gross profit on contracting sales.
The Company values a substantial portion of its inventory on the last-
in, first-out (LIFO) method. The gross profit for the three months and nine
months ended September 30, 1994 is $505,000 and $1,405,000, less than the
amounts that would have been presented had the first-in, first-out (FIFO)
method been used.
Income on the sale of installment receivables decreased $242,000 and
$457,000 for the three months and nine months ended September 30, 1994,
respectively, from the comparable periods in 1993. This decrease is
primarily the result of higher interest costs as a result of an interest
rate modification agreement on $20,000,000. See "Liquidity and Capital
Resources."
Other income decreased $524,000 for the nine months ended September 30,
1994, from the comparable period in the prior year. The decline is
primarily due to a non-reoccurring favorable insurance settlement during the
second quarter of 1993, partially offset by expenses related to a proposed
acquisition of Baldwin. The net of these two items added $300,000 to
Baldwin's other income during the second quarter of 1993.
Selling, general and administrative expenses increased $241,000 and
$1,159,000 for the three months and nine months ended September 30, 1994,
respectively, over the comparable periods in 1993. The increase is
primarily related to additional sales programs, including a new "factory
direct" sales concept started during the first quarter of 1994.
The provision for doubtful accounts declined $106,000 and $364,000 for
the three months and nine months ended September 30, 1994, respectively,
from the comparable periods in 1993. This decline is due to continued
reductions in losses experienced.
Interest expense decreased $11,000 and $257,000 for the three months
and nine months ended September 30, 1994, respectively, from the comparable
periods in 1993. This decrease is due to reduced average borrowing which is
primarily a result of net earnings since September 30, 1993.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
-----------------------------------------------------------
In the fourth quarter of 1993, the Company adopted the provisions of
Statements of Financial Accounting Standards No. 106 (FAS 106), "Employers'
Accounting for Postretirement Benefits Other Than Pensions" and No. 112 (FAS
112), "Employers' Accounting for Postemployment Benefits." The Company
elected to recognize the combined benefit obligations of $2,673,000
retroactive to January 1, 1993 as accounting changes. On an after-tax
basis, this charge amounted to $1,604,000 or $.47 per share. Previously
reported nine months results in 1993 have been restated to reflect the
adoption of FAS 106 and 112 as of January 1, 1993. The adoption of these
standards had no impact on consolidated cash flows. Prior to 1993, the cost
of postretirement and postemployment benefits were recognized when incurred
and were not material.
Effective January 1, 1993, the Company implemented the provisions of
Statement of Financial Accounting Standards No. 109 (FAS 109), "Accounting
for Income Taxes." The adoption of FAS 109 had no effect on the financial
condition or results of operations of the Company. In the opinion of
management, no valuation allowance related to deferred tax assets was
required at December 31, 1993. Based on the Company's historical and
current pre-tax earnings, management believes it is more likely than not
that the Company will realize the benefit of recorded deferred tax assets.
There can be no assurance, however, that the Company will generate any
earnings or any specific level of continuing earnings.
INFLATION, OPERATIONS AND INTEREST RATES
The impact of inflation on manufacturing and operating costs can affect
the Company's results. However, the Company has generally been able to
offset the effects of inflation by price increases and operating efficien-
cies.
The operations of the Company and its predecessors are subject to
federal, state and local laws regulating the discharge of materials into the
environment. Although on several occasions the Company has been the subject
of inquiries from government agencies and/or persons who may be held
responsible for environmental liabilities relating to the sites in question,
the Company has been made a party to actual proceedings on only one occasion
to date. The Company's actual liability in such matter was not significant.
The Company does not anticipate that any environmental matters currently
known to the Company will result in additional proceedings against the
Company or in any material liability.
The Company and its subsidiaries' operating results are sensitive to
changes in interest rates primarily because of fixed interest rates on
installment receivables and floating interest rates on a substantial portion
of indebtedness. Additionally, the buyer of the installment receivables is
entitled to earn interest on the outstanding principal balance of the
contracts based upon a floating interest rate provision.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
-----------------------------------------------------------
The Company can partially offset the effect of interest rate changes by
adjusting display fees on its consigned inventory and interest rates on its
new installment receivable contracts. The Company had an interest rate
modification agreement which ensured, through October 1994, that with
respect to $25,000,000, the Company would have received interest income to
the extent the one-month commercial paper rate reported on the Federal
Reserve statistical release H15(519), converted to a money market yield,
exceeded 12%.
In 1993, the annual rate of interest under the revolving line of credit
(Revolver) was the prime lending rate plus 1/2%. Effective February 15,
1994, the annual rate of interest is 150 basis points plus the greater of
the LIBOR on three month deposits or the rate on 60 day high grade
commercial paper.
LIQUIDITY AND CAPITAL RESOURCES
The Company and its wholly-owned finance subsidiary (Finance) require
significant working capital to support their operations. Working capital
requirements fluctuate throughout the year.
The Company ships musical instruments and clocks to its Baldwin dealer
network on a consignment basis. Management believes the consignment program
creates a competitive advantage for its dealers. Dealers are able to
display a larger and more comprehensive product line than they may otherwise
be able to without the Company's financial support. Also the consignment
program is advantageous to the Company for income tax purposes, and
management believes the consignment method minimizes losses from dealers.
Because the Company finances inventory on consignment to Baldwin
dealers, the Company's borrowing is higher than comparable companies not
operating on the consignment basis. Management believes the advantages of
the consignment program are greater than the risks associated with the
higher leverage.
In February 1994, the Company reduced the Revolver from $60,000,000 to
$40,000,000 and extended the due date from December 31, 1994 to February 15,
1999. The Revolver is renewable for three consecutive one-year periods
beyond February 15, 1999. Amounts outstanding under the Revolver are due
one year after demand. However, the lender retains absolute discretion
regarding further advances, even if no event of default then exists.
Under the Revolver, the lender will make available a line of credit
based upon certain percentages of the value of the Company's inventories and
trade accounts receivable. At September 30, 1994, the Company had approxi-
mately $15,123,000 of additional borrowing available under the $40,000,000
Revolver.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
-----------------------------------------------------------
The Company's debt agreements contain covenants that restrict, among
other things, the payment of dividends, the repurchase of the Company's
common stock and the Company's ability to incur new indebtedness and to
enter new businesses. Such agreements permit the payment of dividends or
repurchase of the Company's common stock equal to the lesser of (i) 50% of
the Company's cumulative net earnings since January 1, 1986 or (ii) the
amount of unused borrowing available under the Company's Revolver, reduced
by the unpaid portion of the term loan. Accordingly, at September 30, 1994,
approximately $10,123,000 is available for the payment of dividends or the
repurchase of the Company's common stock. The Company's debt agreements
contain provisions by which a default under one agreement constitutes a
default under the other agreements. The Company has been in compliance with
these covenants.
In February 1994, Finance amended its agreements with an independent
entity to sell substantially all of its installment receivable contracts up
to a maximum outstanding principal amount of $72,000,000. Certain
installment receivables are not eligible for sale and are retained by
Finance. Finance continues to service all installment receivables sold.
At the time of each installment receivable sale, Finance receives cash
equal to the unpaid principal balance of the contracts, less a holdback of
10% of the principal balance of the contracts sold.
The buyer of the installment receivables earns interest on the
outstanding principal balance of the contracts based upon a floating
interest rate provision. Over the life of the contracts, the difference
between the actual yield on the installment contracts sold, using the
interest method, and the amount retained by the buyer, is remitted to
Finance as a service fee. Finance's performance under this agreement is
guaranteed by a third party lender for which Finance pays a fee of 1% of the
outstanding balance. In February 1994, Finance entered into a five year
interest rate modification agreement on $20,000,000, whereby Finance will
receive interest income to the extent the floating rate retained by the
buyer exceeds 6% or will pay interest expense to the extent the floating
rate is less than 6%.
Proceeds from the sale of installment receivables amounted to
$32,814,000 for the nine months ended September 30, 1994 compared to
$28,484,000 for the same period of 1993. This increase is largely the
result of an increase in the volume of new installment contracts written at
traditional keyboard dealers and at Company sponsored "factory direct"
sales.
Under the sale agreements, Finance is required to repurchase accounts
that become more than 120 days past due or accounts that are deemed
uncollectable. The repurchase price is equal to the remaining unpaid
principal balance of the contract on the date repurchased, less the related
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
-----------------------------------------------------------
10% holdback. Finance remains contingently liable on approximately
$60,118,000 of installment receivables. Management believes the financial
statements contain adequate reserves for any loss that may be incurred as a
result of any repurchase.
Certain Wurlitzer dealers finance their inventory with floor plan loans
from an independent bank. Dealers can borrow money from the bank based upon
the value of the inventory purchased from Wurlitzer, with the keyboard
instruments pledged as collateral. The dealers are required to pay the bank
monthly interest payments and pay principal balance after inventory is sold
or held longer than twelve months. The bank may request Wurlitzer to
repurchase notes due from delinquent dealers. If Wurlitzer does not
repurchase such notes, the bank can terminate the floor plan agreement with
the dealers and require Wurlitzer to repurchase up to $2,200,000 of the
outstanding dealer notes. Management believes the financial statements
contain adequate provisions for any loss that may be incurred as a result of
any repurchase.
Baldwin's Stock Repurchase Plan permits the Company to purchase an
amount of the Company's common stock not to exceed the lesser of 1,033,000
shares or $12,416,000 in dollar value. From the date the plan was adopted
in November 1987 through November 1, 1994, the Company has repurchased
701,300 shares of its common stock at an aggregate purchase price of
$5,655,000 under the plan.
Capital expenditures amounted to $2,000,000 in the nine months ended
September 30, 1994 and $1,394,000 in the comparable period of 1993. At
September 30, 1994, the Company had no significant outstanding capital
commitments.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in litigation arising in its normal course of
business. The Company does not believe that any existing claim or suit will
have a material adverse effect on the business or financial condition of the
Company.
ITEM 2. CHANGES IN SECURITIES
No changes have been made to the instruments defining the right of the
holders of the Company's common stock or to the rights of such stockholders.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company is not in default nor has it defaulted on any indebtedness.
The Company is not obligated to pay any dividends or other payment to any of
its stockholders.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters have been submitted to a vote of security holders during the
third quarter of 1994.
ITEM 5. OTHER INFORMATION
Harry A. Shaw III, a director of the Company since August, 1993, passed
away on September 5, 1994. Accordingly, the Company's Board of Directors
currently has one vacant position.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
10.1 Amended and Restated Agreement of Employment between
Baldwin Piano & Organ Company and R.S. Harrison.
19.1 1994 Third Quarter Report to Stockholders of the
Company.
27.1 Financial Data Schedule.
_______________________________
Index to Exhibits appears on sequentially numbered page 16.
(b) Reports on Form 8-K
-------------------
The Company filed no reports on Form 8-K during the third
quarter of 1994.
<PAGE>
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 PIANO & ORGAN COMPANY
DATE: November 7, 1994 BY: R. S. HARRISON
--------------------- ------------------------------------
R. S. Harrison, President
and Chief Executive Officer
DATE: November 7, 1994 BY: CHARLES R. JUENGLING
--------------------- ------------------------------------
Charles R. Juengling, Vice President
(Chief Financial Officer and
Chief Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Exhibit
- - -------------- -------
10.1 Amended and Restated Agreement of
Employment between Baldwin Piano &
Organ Company and R.S. Harrison.
19.1 1994 Third Quarter Report to
Stockholders of the Company.
27.1 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 536,477
<SECURITIES> 0
<RECEIVABLES> 11,050,594
<ALLOWANCES> 4,117,638
<INVENTORY> 54,499,661
<CURRENT-ASSETS> 75,310,172
<PP&E> 28,213,525
<DEPRECIATION> 14,256,212
<TOTAL-ASSETS> 103,168,314
<CURRENT-LIABILITIES> 38,059,633
<BONDS> 5,000,000
<COMMON> 41,770
0
0
<OTHER-SE> 51,817,812
<TOTAL-LIABILITY-AND-EQUITY> 103,168,314
<SALES> 84,218,528
<TOTAL-REVENUES> 90,695,984
<CGS> 64,755,125
<TOTAL-COSTS> 64,755,125
<OTHER-EXPENSES> 20,195,611
<LOSS-PROVISION> 984,182
<INTEREST-EXPENSE> 1,441,841
<INCOME-PRETAX> 3,319,225
<INCOME-TAX> 1,269,000
<INCOME-CONTINUING> 2,050,225
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,050,225
<EPS-PRIMARY> .60
<EPS-DILUTED> .60
</TABLE>
BALDWIN PIANO & ORGAN COMPANY
THIRD QUARTER REPORT - 1994
<PAGE>
TO OUR STOCKHOLDERS
November 1, 1994
Net sales for the three months ended September 30, 1994, increased
10% to $30,570,000 from $27,821,000 in the corresponding three
month period in 1993. Piano sales accounted for $2,500,000 of this
sales increase. Net earnings for the three months ended September
30, 1994 decreased 21% to $672,000 from $846,000 for the three
months ended September 30, 1993. Net earnings per share for the
third quarter of 1994 decreased 20% to $.20 from $.25 for the third
quarter of 1993. The decrease in third quarter 1994 net earnings and
net earnings per share was primarily a result of reduced gross
margin in electronic contracting.
As of January 1, 1993, the Company adopted the provisions of
Statements of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" and
No. 112, "Employers' Accounting for Postemployment Benefits,"
resulting in a decrease in net earnings of $1,604,000 and a decrease
in net earnings per share of $.47 for the nine months ended
September 30, 1993.
For the nine months ended September 30, 1994, net sales increased
2% to $84,218,000 from $82,670,000 last year. Net earnings before
cumulative effects of changes in accounting principles decreased
36% to $2,050,000 for the nine months ended September 30, 1994
from $3,213,000 for the nine months ended September 30, 1993. Net
earnings per share before cumulative effects of changes in
accounting principles decreased 36% to $.60 from $.94 for the first
nine months of 1993. The decrease in net earnings and net earnings
per share, before cumulative effects of changes in accounting
principles, for the nine months ended September 30, 1994, was
primarily a result of reduced gross margin in electronic contracting
and higher operating cost in music.
R.S. Harrison, Chief Executive Officer and President
<PAGE>
<TABLE>
CONSOLIDATED SUMMARY OF EARNINGS (Unaudited)
(in thousands, except earnings per share)
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
September 30, September 30, September 30,
------------------ ------------------ ------------------
1994 1993 1994 1993 1994 1993
- - --------------------------------------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 30,570 $ 27,821 $ 84,218 $ 82,670 $122,206 $114,939
Cost of goods sold 24,031 21,383 64,755 62,884 91,842 84,869
- - --------------------------------------------- ------------------ ------------------ ------------------
Gross profit 6,539 6,438 19,463 19,786 30,364 30,070
Income on the sale of installment receivables 1,186 1,428 3,827 4,284 5,289 5,495
Interest income on installment receivables 116 103 387 334 496 438
Other operating income 739 778 2,264 2,788 3,007 3,657
Selling, general and administrative expenses (6,940) (6,805) (21,180) (20,385) (28,685) (27,689)
Interest expense (583) (594) (1,442) (1,699) (1,975) (2,364)
- - --------------------------------------------- ------------------ ------------------ ------------------
Earnings before income taxes and
cumulative effects of changes in
accounting principles 1,057 1,348 3,319 5,108 8,496 9,607
Income taxes 385 502 1,269 1,895 3,494 3,643
- - --------------------------------------------- ------------------ ------------------ ------------------
Earnings before cumulative effects of
changes in accounting principles 672 846 2,050 3,213 5,002 5,964
Cumulative effects of changes in accounting
for postretirement and postemployment
benefits - - - (1,604) - (1,604)
- - --------------------------------------------- ------------------ ------------------ ------------------
Net earnings $ 672 $ 846 $ 2,050 $ 1,609 $ 5,002 $ 4,360
============================================= ================== ================== ==================
Earnings per share:
Before cumulative effects of changes in
accounting principles $ .20 $ .25 $ .60 $ .94 $ 1.46 $ 1.75
Cumulative effects of changes in
accounting for postretirement and
postemployment benefits - - - (.47) - (.47)
- - --------------------------------------------- ------------------ ------------------ ------------------
Net earnings per share $ .20 $ .25 $ .60 $ .47 $ 1.46 $ 1.28
============================================= ================== ================== ==================
Average number of shares outstanding (000) 3,415 3,415 3,415 3,406 3,415 3,405
============================================= ================== ================== ==================
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED SUMMARY BALANCE SHEETS (Unaudited)
(in thousands)
<CAPTION>
September 30,
--------------------
1994 1993
- - -----------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Trade receivables, net $ 7,278 $ 5,967
Installment receivables, net 4,890 4,267
Inventories 54,500 49,237
Other current assets 8,642 8,825
- - -----------------------------------------------------------------------------
Total current assets 75,310 68,296
Installment receivables, less current portion 7,954 6,849
Property, plant and equipment, net 13,957 13,563
Other assets 5,947 6,218
- - -----------------------------------------------------------------------------
TOTAL ASSETS $103,168 $ 94,926
=============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 24,877 $ 21,421
Other current liabilities 13,182 13,681
- - -----------------------------------------------------------------------------
Total current liabilities 38,059 35,102
Long-term debt, less current portion 5,000 4,637
Other liabilities 8,249 8,247
Stockholders' equity 51,860 46,940
- - -----------------------------------------------------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $103,168 $ 94,926
=============================================================================
</TABLE>
<PAGE>
BUSINESSES
- - ----------
MANUFACTURING
Pianos and electronic keyboards
Actions, cabinets, pinblocks, bridges, cables, keys, etc. for piano
and organ industry
Printed circuit boards and electro-mechanical assemblies
for manufacturers outside music industry
Grandfather Clocks
- - -----------------------------------------------------------------------
RETAILING
Company owned outlets in Atlanta, Chicago, Cincinnati, Indianapolis,
Lexington and Louisville
Independent keyboard dealers (1,100)
- - -----------------------------------------------------------------------
FINANCING
Consumer installment financing and dealer consignment
- - -----------------------------------------------------------------------
HOME OFFICE
422 Wards Corner Road, Loveland, OH 45140, (513)576-4500
- - -----------------------------------------------------------------------
MANUFACTURING LOCATIONS
Conway, Fayetteville and Trumann, Arkansas
Greenwood, Mississippi
Juarez, Mexico
- - -----------------------------------------------------------------------
REGISTRAR AND TRANSFER AGENT
The Provident Bank, One East Fourth Street
Cincinnati, OH 45202
Baldwin Piano & Organ Company common stock is traded on
The Nasdaq National Market; Symbol: BPAO
<PHOTO>
Wurlitzer 3100 Series
<PAGE>
EXHIBIT 10.1
AMENDED AND RESTATED AGREEMENT OF EMPLOYMENT
THIS AMENDED AND RESTATED AGREEMENT made and entered into
as of May 9, 1994 by and between Baldwin Piano & Organ Company, a
Delaware corporation having its principal office at 422 Wards Corner
Road, Loveland, Ohio (the "Company") and R. S. HARRISON, a key
employee (the "Employee").
W I T N E S S E T H :
WHEREAS, the Company and the Employee executed an
agreement of Employment and Retirement for Selected Key Employee
dated as of June 15, 1984 which Agreement was amended and restated
as of May 9, 1989; and
WHEREAS, the Company and Employee wish to make certain
changes to that agreement and to restate the remaining provisions of
that agreement.
It is therefore agreed between the parties as follows:
1. Employment. The Company hereby agrees to continue to
employ the Employee as Chief Executive Officer, and the Employee, in
consideration of such employment, hereby accepts such continued
employment upon the terms and conditions set forth herein. During
the term of his employment, the Employee shall do all things
necessary and incident to his position.
2. Term. The term of such employment shall continue
after the date hereof for a period of five (5) years, ending May 8,
1999, unless sooner terminated, as provided in paragraph 3 hereof.
3. Termination of Agreement.
(a) This Agreement may be terminated, at option of
the Company or the Employee, if during the term hereof, the Employee
is under a disability, meaning because of ill health, physical or
mental disability, or for any other disability ("disability") (other
than vacations) the Employee shall have been continuously unable or
unwilling, or shall have otherwise failed to perform his duties
hereunder for one hundred twenty (120) consecutive working days, or
if, during any year of the term hereof because of disability, he
shall have been unable or unwilling, or shall have otherwise failed
to perform his duties hereunder for a total period of one hundred
eighty (180) working days regardless of whether or not such days are
consecutive. For the purposes of this Agreement, the phrase "any
year of the term hereof" is defined to mean the twelve (12) month
period commencing on January 1 of each year and terminating on
December 31 of that year. Provided, however, that regardless of the
above definition of disability a disability may be deemed to exist
regardless of the Employee's failure to perform his duties for any
specific time period, when the Employee shall be so declared by a
Court having jurisdiction of that matter, or when so declared by any
two physicians selected by the Company admitted to the practice of
medicine in the place where the Employee is then domiciled.
<PAGE>
(b) This Agreement shall be terminated on the death
of the Employee effective as of the date of his death; provided,
however, that the Employee's spouse or estate, as the case may be,
shall be entitled to retain the Employee's salary installment for
the month in which he dies and shall be entitled to those sums
payable to the Employee pursuant to paragraph 7.
(c) Nothing in this Agreement shall be construed to
prevent the Company from terminating the Employee's employment
hereunder, at any time, whether or not for good cause. If the
Employee's employment is terminated at any time before age 67 for
reasons other than good cause (as defined in paragraph 6) then the
Employee shall be entitled to payment provided for in paragraph 6.
4. Outside Employment. The Employee shall not engage in
outside activities which may tend to affect the Company adversely.
5. Annual Compensation. Subject to such modification as
may be approved by the Board of Directors of the Company, the
Employee shall receive as annual compensation such salary and
benefits as shall be determined from time to time by the Board of
Directors together with all benefits payable pursuant to this
Agreement. For purposes of paragraphs 5 and 6 the term "Annual
Compensation" shall mean the Employee's base salary for the
calendar year (determined before any salary reduction elections that
may be made with respect to the Company's qualified retirement
plans) plus any other cash amounts paid by the Company to the
Employee during the calendar year.
6. Termination Compensation. In the event that the
Company terminates the employment of the Employee, whether he is
employed on a full-time basis or a part-time basis, for any reason
other than for good cause (good cause shall be defined as and be
limited to termination resulting from the Employee's acts against
the Company amounting to fraud, intentional misrepresentation and/or
embezzlement), the Company shall pay to the Employee an amount equal
to two (2) times the Employee's Annual Compensation for the calendar
year preceding the date of the Employee's termination. Said amount
shall be payable to the Employee in quarterly installment payments
over a period not to exceed eight (8) years or, at the option of the
Company, in a lump sum. In the event of the Employee's death during
the term of such payments, any compensation due to the Employee
under this paragraph shall be paid to the Employee's designated
beneficiary, if any, and if none, then to the Employee's estate.
The Company further agrees to provide to the Employee (for a five
(5) year period commencing on the date of the Employee's
termination) all other benefits normally provided by the Company to
its highest ranking officers. If the Company terminates the
employment of the Employee for any reason (regardless of cause or
the lack thereof), the Company shall provide to the Employee for the
balance of the Employee's life all medical benefits then provided by
the Company to its highest ranking officers employed on a full-time
basis.
For purposes set forth in this paragraph 6, at the option
of the Employee, any one of the following events shall constitute
termination of the Employee's employment by the Company for lack of
good cause if the Company or its shareholders:
<PAGE>
(a) Reduces the Employee's Annual Compensation for a
Calendar year by 10% or more from his Annual Compensation for the
preceding calendar year:
(b) Fails to provide to the Employee those benefits
currently being provided to the Employee, and/or all other benefits
provided by the Company to its highest ranking officers from time to
time.
(c) Fails to elect the Employee to or remove the
Employee from the Company's Board of Directors (or the Board of
Directors of any holding company that might be formed) and/or
changes the Employee title and/or officer status from that which he
currently holds which is Chief Executive Officer to a status that is
lower in the corporate structure than that currently held and/or
changes the Employee's responsibilities which are now delegated to
the Employee to perform which responsibilities are those
traditionally delegated to the Chief Executive Officer; or
(d) Requests and/or demands that the Employee change
his place of residence from that where he resides at the date of the
execution of this Agreement; or
(e) Is in breach of its obligations as set forth in
this Agreement.
7. Deferred Compensation. Subject to all of the terms
and conditions set forth in this Agreement, upon the earlier of (i)
the Employee's attainment of age sixty-five (65), whether or not the
Employee retires or continues in the employment of the Company on a
full-time or part-time basis; or (ii) the Employee's termination of
employment by reason of disability or death, regardless of his age,
the Company shall thereafter pay to the Employee (or his designated
beneficiary in the event of death) the Total Deferred Compensation.
For the purpose of this Agreement "Total Deferred Compensation"
shall mean an amount of money equal to two million, three hundred
twelve thousand fifty dollars ($2,312,050), plus accrued interest at
the rate of five percent (5%) per annum compounded annually, which
interest shall accrue commencing May 8, 1994 and continuing until
the date the first installment payment of such deferred compensation
is made. Such deferred compensation shall be payable in one hundred
and twenty (120) equal monthly installment payments. Commencing on
the first business day of the first month following the event giving
rise to the payment of the deferred compensation. In the event of
the Employee's death (or designated beneficiary's death) prior to
the completion of the deferred compensation payments, the balance of
such payments shall be made to the Employee's designated beneficiary
(or the designated beneficiary's designed beneficiary), if any, and,
if none, then to the Employee's (or the designated beneficiary's)
estate. For purposes of paragraph 7 "disability" shall have the
meaning set forth in paragraph 3 of this Agreement.
<PAGE>
8. Medical Benefits. In addition to the compensation
provided by any other provisions hereof, the Employee shall be
entitled to receive for the balance of his life medical benefits,
including full participation in all medical, dental and health care
plans of the Company as if he were a full-time employee of the
Company and its highest ranking officer.
9. Retirement. Nothing in this Agreement shall prohibit
the Board of Directors of the Company from separately agreeing with
the Employee that the Employee may remain in the employ of the
Company beyond the term of this Agreement, provided, however, the
Employee shall receive the benefits as set forth in paragraph 7 of
this Agreement in addition to any other salary, benefits or
compensation paid to him as a result of his continued employment.
10. Consulting Services. Nothing in this Agreement shall
require the Employee to render to the Company consulting, advisory
or other services of any nature whatsoever after the termination of
his employment with the Company.
11. Covenant Not to Compete. (a) The Employee agrees
that, during a period commencing with the termination of his
employment with the Company and terminating on the date the last
payment of deferred compensation is required to be made pursuant to
paragraph 7 of this Agreement, he will not directly or indirectly
enter into or in any manner take part in any business or endeavor
either as an employee, agent, independent contractor, owner or
otherwise, which in the opinion of the majority of the Board of
Directors of the Company, is in competition with the Company.
(b) If the Employee enters into any business
described in paragraph (a) above, which a majority of the Board of
Directors of the Company declares to be in competition with the
Company as provided in such paragraph, and continues therein for a
period of fifteen (15) days after the Company shall have notified
him in writing to his home address by registered mail that the
majority of the Board of Directors of the Company has decided that
such business in competition with the Company, then no further
payments shall be due or payable by the Company under this Agreement
to or with respect to the Employee and the Company shall have no
further liability to or with respect to the Employee under this
Agreement.
12. Source of Payments. All payments provided in
paragraphs 6 and 7 shall be paid in cash from the general funds of
the Company, and no special or separate fund shall be established
and no other segregation of assets shall be made to assure payment.
The Employee shall have no right, title or interest whatsoever in or
to any investments which the Company may make to aid the Company in
meeting its obligations hereunder. Nothing contained in this
Agreement, and no action taken pursuant to its provisions, shall
create or be construed to create a trust of any kind, or a fiduciary
relationship, between the Company and the Employee or any other
person.
<PAGE>
13. Supplemental Benefits. The payments to be made under
this Agreement or with respect to the Employee shall be in addition
to any payments to which such Employee or his beneficiaries may be
entitled under present or future retirement, pension or profit
sharing plans or executive incentive bonus plans which the Company
has adopted or may adopt generally for the benefit of its employees.
14. Assignment. Neither the Employee nor his surviving
spouse shall have any right to commute, sell, assign, transfer or
otherwise convey or dispose of the right to receive any payments
under this Agreement, which payments and the right thereto are
expressly declared to be non-assignable and non-transferable, and,
in the event of any attempted assignment or transfer, the Company
shall have no further liability either to the Employee or his
surviving spouse, or any assignee or transferee, whether by
operation of law or otherwise.
15. Merger or Consolidation. The Company agrees that in
the event it shall merge or consolidate with any other corporation,
the continuing corporation resulting from such merger or
consolidation shall be obligated to perform the duties and
obligations of the Company set forth in this Agreement, and the
Company further agrees that in the event that it should voluntarily
dissolve and liquidate the assets and business of the Company, it
will undertake to have the terms and provisions of this Agreement
fulfilled prior to the distribution or disposal of the Company's
assets.
16. Extension of Agreement. The Company by action of its
Board of Directors may hereafter from time to time agree with an
additional employee or employees whose services are considered to be
vital to the success of the Company's business that this Agreement
shall be extended to such additional employee or employees on such
terms and conditions as shall be specified in the extension
agreement. The Employment by the Company of any person in a
position which would otherwise be regarded as a key employee
position shall not entitle that person to have the benefits of the
Agreement extended to him.
17. Binding Effect. This Agreement shall be binding upon
the parties hereto, the surviving spouse, beneficiaries, heirs,
executors, administrators and successors of the Employee and
Company.
18. Status of Agreement. This Amended Agreement is to
replace that agreement entitled Amended and Reinstated Agreement of
Employment and Retirement Plan for Selected Key Employee dated as of
May 9, 1989. Upon the execution of this Amended Agreement this
Agreement alone shall evidence the rights and obligations of the
parties hereto.
19. Counterparts. This Agreement may be executed in two
or more counterparts, any one of which shall constitute an original
without reference to the others.
<PAGE>
20. Severability of Clauses. Each of the paragraphs of
this Agreement shall stand independently and severably, and the
invalidity of any one paragraph or portion thereof shall not affect
the validity of any other provision. In the event any provision
shall be construed to be invalid, no other provision of this
Agreement shall be affected thereby. Furthermore, it is agreed that
any period of restriction or covenant hereinabove stated shall not
include any period of violation or period of time required for
litigation or arbitration to enforce such restrictions or covenants.
21. Applicable Law. This Agreement shall be governed in
all respects by the law of the State of Ohio, shall be binding upon
the Employee's assigns, heirs, and legal representatives and shall
inure to the benefit of the Company, its successors and assigns.
The Company and Employee hereby consent to service of process,
personal jurisdiction, and venue in the courts of general
jurisdiction of Cincinnati, Ohio, or Hamilton County, Ohio and any
federal court, with concurrent jurisdiction, with respect to any
action or preceding brought to enforce any liability under this
Agreement.
IN WITNESS WHEREOF, the parties have hereunto set their
hands as of the date first above written.
Attest: BALDWIN PIANO & ORGAN COMPANY
/s/ Harry F. Forbes, Jr. By /s/ George E. Castrucci
Chairman
"EMPLOYEE"
/s/ R.S. Harrison
R.S. Harrison
<PAGE>
