SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934
_______________________
For the fiscal year ended Commission File Number
December 31, 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
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
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 .
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (Section 229.405 of this
chapter) is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information
statements or any amendment to this Form 10-K. { }
<PAGE>
The aggregate market value of the voting stock held by non-affiliates
of the registrant is $36,676,300 based upon the $12.50 per share price at
which the Common Stock was last sold as reported on the Nasdaq National
Market through March 17, 1995.
The number of outstanding shares of Common Stock of Baldwin
Piano & Organ Company ("Company"), as of March 17, 1995, is
3,415,196.
DOCUMENTS INCORPORATED BY REFERENCE
Part of the information required by Item 1 of Part I and all
of the information required by Items 5-8 of Part II of this Form
10-K is incorporated by reference from the Company's Annual Report
to Shareholders for the fiscal year ended December 31, 1994 ("1994
Annual Report to Shareholders"). The information required by Items
10-13 of Part III of this Form 10-K is incorporated in whole or in
part by reference from the Company's definitive Proxy Statement to
be filed with the Securities and Exchange Commission on or about
April 7, 1995 relating to the Company's 1995 Annual Meeting of
Shareholders ("1995 Proxy Statement").
TABLE OF CONTENTS
PART I.
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of
Security Holders
Executive Officers of the Registrant
PART II.
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
<PAGE>
PART III.
Item 10. Directors and Executive Officers of the
Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial
Owners and Management
Item 13. Certain Relationships and Related
Transactions
PART IV.
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K
SIGNATURES
PART I
------
ITEM 1. BUSINESS
--------
As used herein, the term "Company" refers to Baldwin Piano &
Organ Company and its subsidiaries and the Company's predecessors
unless the context otherwise indicates.
The Company is the largest domestic manufacturer of keyboard
musical instruments and manufactures or distributes all major product
classes of pianos and electronic organs. The Company believes
that the breadth and quality of its line of keyboard musical instruments,
its large and well established dealer distribution networks, and its
manufacturing capabilities have enabled it to maintain its strong market
share in the keyboard musical instrument market.
Over the Company's 133-year history, its principal products
have been pianos and organs. The Company significantly expanded
its principal business lines through its 1988 acquisition of the
keyboard operations of The Wurlitzer Company. Over the years, the
Company has also expanded and diversified its product line in order
to utilize excess capacity and its woodworking, electronics and
technical expertise. The Company has been engaged in financing the
retail purchase of its keyboard products for over 80 years. The
Company also manufactures printed circuit boards, electronic
assemblies, and a variety of wood products.
<PAGE>
Sales of the Company's products are set forth by category in
the following table:
(dollars in thousands)
Year Ended December 31,
----------------------------
1994 1993 1992
----------------------------
Musical Products
Pianos(1).............. $ 81,185 $ 81,915 $ 83,444
Electronic Organs ..... 4,655 5,094 6,020
Electronic Contracting ..... 28,362 28,908 15,937
Other ...................... 8,145 4,740 4,676
----------------------------
Total ............ $122,347 $120,657 $110,077
============================
_______________
(1) Includes both acoustic and electronic pianos.
The information regarding segment financial data of the
Company as required by Item 101 of Regulation S-K is incorporated
herein by reference from page 18 of the Company's 1994 Annual
Report to Shareholders appearing under the note caption "Segment
Information".
MUSICAL PRODUCTS
ACOUSTIC PIANOS
The Company's premier product is the Baldwin concert
grand piano. The Company is one of only two domestic manufacturers
of pianos generally accepted for concert performances and the only
such manufacturer also producing a full line of vertical pianos.
The Company has successfully incorporated a number of enhancements
and construction techniques, originally designed for grand pianos,
into its vertical piano lines designed for home and institutional
use. The Company believes that the quality and durability of the
Baldwin concert grand pianos enhance the reputation, marketability
and profit margins of its entire product line.
The Baldwin product line offers over 60 different styles
and finishes of pianos in all classes ranging from 9-foot concert
grands to 36-inch spinets. The Company also has a reputation for
building durable, attractive and excellent sounding pianos.
Wurlitzer currently has over 50 styles and finishes in its acoustic
piano lines.
The Company also distributes two models of American made
small grand pianos to compete directly with low priced foreign
imports. In addition to the American made models, Baldwin imports
a line of grand pianos in polyester finishes. Wurlitzer imports
its grand pianos and markets these instruments under the Wurlitzer
trade name.
<PAGE>
ELECTRONIC KEYBOARDS
Baldwin distributes a broad range of electronic keyboard
instruments from small portables to large classical organs. The
Company's current series of classical organs offer significant
value at a competitive price. Since 1947, Baldwin has developed
and marketed electronic instruments which enjoy an excellent
reputation.
For the past four years, Wurlitzer has imported and
distributed a line of digitally sampled electronic pianos under the
Denon and Wurlitzer trade names. In 1994, Wurlitzer formed an
exclusive alliance with the largest manufacturer of electronic
keyboards in Europe. Wurlitzer is the sole distributor in the
United States and Canada of that manufacturer's complete line of
home digital and portable keyboards. The products are marketed
under the Wurlitzer trade name.
PRODUCT DEVELOPMENT
The Company's research staff in conjunction with outside
consulting and design services engage in ongoing efforts to refine
existing products and develop new products. The Company believes
that it maintains the only significant ongoing acoustic piano
engineering research effort among domestic manufacturers. The
research department works closely with highly trained technical
manufacturing personnel.
In the electronic keyboard market, the Company uses
outside sources for the development and production of a number of
its products and component parts. Outsourcing has enabled the
Company to reduce overall operating costs while benefiting from
other companies' expertise in advanced electronic technology and
new material development. The Company is also marketing a music
reproduction system that transforms standard acoustic pianos into
modern electronic reproducing player instruments. The system
provides the capability of playing back an original piano performance
and has the flexibility of full musical accompaniment. Commercial
musical "Libraries" are available which can be operated by remote control.
During 1994, 1993 and 1992, the Company's research and
development expenses were $524,241, $597,353 and $414,822,
respectively.
MARKETING AND DISTRIBUTION
The Company distributes its Baldwin keyboard musical
instruments in the United States through approximately 400 independent
dealers and 14 Company owned stores operating in six major metropolitan
areas. Most of the independent dealers carry Baldwin products as their
principal line.
<PAGE>
The Company distributes its Wurlitzer products through
approximately 300 independent dealers. The Company's networks of
Baldwin dealers and Wurlitzer dealers are separate and distinct,
with no significant overlap.
No single dealer accounts for more than 2% of the Company's
keyboard musical instrument sales and the ten largest dealers account
for approximately 12% of such sales.
The Company's sales leadership position is attributable,
in part, to its excellent dealer networks. The Company believes
that it has been able to attract and maintain its dealers by
offering a superior product line and numerous programs and services
designed to assist dealers, including:
An industry wide effort to demonstrate that piano lessons
can be a powerful tool in improving overall learning ability
and communicate these significant benefits to the parents of
young children throughout North America.
A complete line of pianos and electronic keyboard instruments
which enables dealers to offer a wide variety of keyboard
musical instruments without having to sell competing brands.
An inventory financing program in which the Company
finances or assists the dealer in arranging financing for the
musical instruments on the dealer's showroom floor, thus permitting
the dealer to carry a broader product line.
An installment finance program offering retail customers
a source of credit and assurance of the Company's continued
interest in product performance.
An artist endorsement program in which over 300 well-known
pianists, composers, conductors, vocalists and music
organizations endorse Baldwin grand pianos, providing dealers
with extensive national and local product publicity and a method of
product differentiation.
A dealer support program, providing training, promotional
assistance, and incentives.
A direct delivery program using Company vehicles to
achieve timely delivery and superior handling compared to common
carriers.
Local cooperative advertising, in addition to national
sales and advertising campaigns, directed towards strengthening
brand awareness and preference.
Sponsorship of educational activities, including piano
competitions, recitals and music fellowships.
<PAGE>
The Company operates 14 Company owned retail outlets in
Atlanta, Chicago, Cincinnati, Indianapolis and Louisville and
Lexington, Kentucky. These Company owned retail outlets, which
sell the Baldwin product lines, are generally located in areas
where they do not compete directly with the Company's independent
Baldwin dealers. The Company believes that the existence of this
potential competition has not adversely affected the Company's
relationship with its independent dealers.
In addition to accounting for approximately 10% of the
Company's total keyboard sales, Baldwin's retail stores provide the
Company with new retailing concepts, a better understanding of
dealer problems and a source of management talent.
A new program was introduced in 1994 to access customers
outside geographic reach of Baldwin and Wurlitzer dealerships. The
Factory Direct Sales program accounted for approximately 5% of the
Company's total keyboard sales.
The Company's products are distributed in Canada through
approximately 86 independent dealers. The Company markets both
Baldwin and Wurlitzer products through a number of distributors in
other areas of the world, accounting for approximately 2.8% of the
Company's keyboard sales.
MARKETS AND COMPETITION
The principal markets for the Company's acoustic and
electronic pianos are families with children of ages 6 to 12, young
adults and educational institutions. The principal markets for the
Company's organs are religious and educational institutions.
The domestic keyboard musical instrument market has
contracted in recent years. Industry wide annual unit sales of
acoustic pianos in the United States have declined 14% since 1992.
The Company competes with a number of domestic and foreign manufacturers
based on prices relative to tone qualities, performance characteristics
and appearance.
The Company's market share for acoustic pianos has
averaged approximately 25% since 1992, and approximates 24% in
1994. The Company believes that no single manufacturer has a
domestic market share larger than the Company's.
Based on industry statistics, foreign piano manufacturers'
combined market share for acoustic pianos has averaged
approximately 45% since 1992. By 1994, imports' share of the
market had increased to 49%. Foreign competition in the piano
market is most heavily concentrated in the market for small grand
pianos and, to a lesser extent, in the market for large vertical
pianos.
<PAGE>
Electronic digital pianos, with annual industry sales of
approximately 55,000 units, are approaching acoustic pianos in
popularity. In 1994, industry unit sales increased by 3%. These
units offer full sized touch sensitive dynamic keyboards which are
considered by some potential customers as a viable substitute for
a new or used acoustic piano. To benefit from this growing segment
of the piano market, the Company increased production of its
American-produced digital piano line and entered into a distribution
arrangement with the largest manufacturer of electronic keyboards
in Europe to sell certain of their products under the Wurlitzer
name. The Company continues to maintain its market share of
approximately 4.3% and intends to continue to aggressively
pursue a higher market share with a new generation of high-tech
products.
The Company believes several factors will favorably
influence the markets for its pianos. Demographics indicate that
the number of children between the ages of 6 and 12 will be
increasing through the year 2010. For the past five years, the
Company, individually and in conjunction with other manufacturers,
continued sponsoring advertisements and promotions designed to
increase consumer awareness of the positive effects of keyboard
instruction on the physical and mental development of children. In
addition, the Company continued its advertising efforts not only to
reach dealers, schools, other institutional buyers and music
instructors, but also to directly attract individual customers.
Unit sales in the industry and by the Company in the
conventional home organ market have decreased over the last five
years. The institutional organ market, comprised mainly of sales
to religious and civic organizations, has remained stable over the
last five years. Market statistics regarding organ sales are not
maintained. Accordingly, the Company's market share of organ sales
cannot be reliably determined.
The Company believes classical organs offer a long-range
opportunity for increasing sales and market share of electronic
keyboard instruments. In a major revamping of marketing strategy
for classical organs, the Company established a new division in
late 1991, Church Organ Systems, dedicated exclusively to selling
classical organs. The collection of instruments is one of the
broadest product lines in the classical organ market. This
division continues to build its own organization of dealers
selected for their qualifications in the highly specialized area of
church organ sales, installation and service.
Sales of the Company's keyboard products are affected by
the market for used keyboard instruments, although the Company is
unaware of any reliable data evaluating the impact of sales of used
instruments on the sale of new products. Information regarding the
Company's market share contained herein is based solely on unit
sales of new instruments. Information regarding dollar sales by
the Company includes sales of new and used instruments.
<PAGE>
The Company's retail stores and most of its independent
dealers sell used keyboard products in addition to new instruments.
The availability of used pianos and organs attracts potential
purchasers who sometimes ultimately purchase new instruments.
Owners of pianos and organs will also often trade in their existing
instruments on larger or more expensive instruments. Digital piano
products, because of their price and improved sound and touch, are
becoming good alternatives for those buyers shopping for used
pianos.
ELECTRONIC CONTRACTING
In 1984, the Company began manufacturing printed circuit board
assemblies and electro-mechanical assemblies for manufacturers
outside the music industry. These products were a natural extension
of the Company's production and research and development capabilities
developed in connection with its electronic keyboard musical instrument
business. The Company currently produces printed circuit board assemblies
and other electronic assemblies for a diverse group of original equipment
manufacturers which sell to the medical electronics, telecommunications,
computer peripheral, specialty consumer, data communications and industrial
control markets. The Company sells electronic assemblies to manufacturers
through trained electronics manufacturers' representatives with territories
covering 21 states. There are many manufacturers of contract electronic
assemblies and the Company does not have a significant share of the market
of such products. Although foreign manufacturers account for a significant
portion of the printed circuit board industry, the Company has found
numerous opportunities to compete effectively based on consistency of
quality and on-time delivery.
MANUFACTURING
The Company manufactures its acoustic pianos in what it
believes to be the most highly automated domestic facilities in the
industry. The Company's fully integrated acoustic piano manufacturing
process begins with the treatment of raw lumber, proceeds through the
fabrication and finishing of the cabinetry and assembly of the inner workings,
and culminates in the creation of a completed musical instrument. Through the
combination of automated manufacturing techniques and a skilled work force, the
Company has earned a reputation as a high quality, low cost manufacturer of
pianos, organs and cabinetry. The Company utilizes specialized,
computer-controlled production and testing equipment to manufacture
printed circuit boards and electro-mechanical assemblies for its
contract manufacturing products.
<PAGE>
RAW MATERIALS
Raw materials required for the Company's manufacturing
operations are primarily purchased in the United States. The
Company does not depend on any single source of supply for any of
its basic raw materials. The Company has not experienced, and does
not anticipate, significant difficulties in obtaining adequate
supplies of raw materials. Electronic components are purchased
from major semi-conductor manufacturers. To minimize costs and
facilitate availability of major components, the Company designs
its products to employ standard rather than custom micro-circuit
components.
FINANCING OPERATIONS
The Company has been engaged in financing the retail purchase
of its keyboard products for over 80 years. The Company has a
continuing agreement to sell all of its installment receivables to
Keyboard Acceptance Corporation ("Finance"), a wholly owned
subsidiary of the Company. Finance also purchases installment
receivables for competitive musical products from independent
retail dealers.
In December 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 $82,000,000 to such entity. 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 lives 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.
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 10% holdback. At December 31, 1994,
Finance remains contingently liable on approximately $68,269,000 of
installment receivables.
<PAGE>
SEASONALITY
The Company's business is somewhat seasonal in nature with the
fourth quarter generally showing the strongest sales. In 1994, the
fourth quarter accounted for approximately 31% of net sales. The
fourth quarter of the three previous years averaged approximately
30% of net sales.
BACKLOG
The Company principally consigns inventory to its Baldwin
keyboard dealers and, accordingly, there is no backlog of sales.
The sales backlog for Wurlitzer keyboard products and electronic,
furniture and musical product contracting businesses aggregated
approximately $20,900,000 at December 31, 1994 and $18,500,000 at
December 31, 1993. The Company anticipates that all such 1994
backlog will be filled during 1995.
WORKING CAPITAL
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 finances its working capital needs under a
revolving line of credit from General Electric Capital Corporation.
In February 1994, the Company reduced this line of credit from
$60,000,000 to $40,000,000 and extended the initial due date from
December 31, 1994 to February 15, 1999. Amounts outstanding under
the revolving line of credit are due one year after demand.
However, the lender retains absolute discretion regarding further
advances even if no event of default exists. The borrowing is
based on certain percentages of the value of inventories and trade
receivables. Finance has agreements with an independent entity to
sell substantially all of its existing installment receivable contracts
up to a maximum outstanding principal amount of $82,000,000.
ENVIRONMENTAL
The Company's operations are subject to federal, state and
local laws and regulations related to the protection of the
environment. The Company has determined that an area of soil at
its Fayetteville, Arkansas facility contains some contamination
resulting from waste disposal practices of the Company's predecessor
that were discontinued in the early 1970's. The Company has
notified the Arkansas Department of Pollution Control and Ecology
of such matter, and that agency has indicated a preference that the
Company voluntarily remediate any existing problem. The Company is
currently reviewing the potential costs of undertaking appropriate
remedial measures.
<PAGE>
The Company believes that its present operations are in
material compliance with all environmental laws and that its
existing real properties are not materially contaminated, except as
discussed above relating to its Fayetteville, Arkansas facility.
The Company does not anticipate that any environmental matters
currently known to the Company will result in any material capital
expenditures in 1995 or 1996.
EMPLOYEES
The Company has approximately 1,600 full-time employees, of
which approximately 345 hourly workers at the Company's Greenwood,
Mississippi facility are represented by the International Chemical
Workers Union, Local Union No. 800. The other employees are not
represented by collective bargaining units. The Company considers
its employee relations to be very good.
ITEM 2. PROPERTIES
----------
The Company operates the following facilities, all of which
are owned.
Location Size Principal Products
-------- ---- ------------------
Greenwood, Mississippi 572,500 sq. ft. Piano/Organ Cases,
Clocks, Furniture
Contracting
Conway, Arkansas 169,375 sq. ft. Grand Pianos
Fayetteville, Arkansas 260,000 sq. ft. Electronic
Contracting/Keyboards
Trumann, Arkansas 297,100 sq. ft. Pianos/Piano
Components
Juarez, Mexico 111,900 sq. ft. Piano components
In November 1994, the Company entered into an agreement, for
the term of seven months with two one-year options to extend, to
lease approximately 91,000 square feet of the Fayetteville facility.
The Company's corporate offices and a retail showroom are
located in a 50,000 square foot leased facility in a suburban
office park in the greater Cincinnati, Ohio metropolitan area.
Generally, properties are utilized at normal capacity levels
on a single shift basis. During 1994, certain facilities were not
utilized at normal capacity levels as a result of lower sales
volumes of certain musical products.
The Company maintains and services its facilities to ensure
their suitability for operations.
<PAGE>
ITEM 3. 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.
The operations of the Company and its predecessors are subject
to federal, state and local laws regulating the discharge of pollutants
into the environment. Generally, the Company's environmental concerns
relate to the past operations of the Company's predecessors and the
disposal of their waste materials at facilities owned and operated by
third parties. 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 facilities
in question, the Company has been made a party to actual proceedings on
only one occasion to date. In that proceeding, the Company was one of
approximately 30 potentially responsible parties and to date the
Company's share of the actual liability has not been material nor
is it reasonably expected to become material in the future.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
The Company submitted no matters to a vote of its shareholders
during the fourth quarter of the Company's 1994 fiscal year.
=============================
EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------
Pursuant to General Instruction G(3) of Form 10-K, the
following list is included as an unnumbered Item in Part I of this
Report in lieu of being included in the Company's 1995 Proxy
Statement.
The executive officers and key employees of the Company are:
Name Age Position With The Company
---- --- -------------------------
R. S. Harrison ........ 63 Chairman of the Board
Karen L. Hendricks .... 47 Chief Executive Officer
and President
Kenen M. Edgington .... 49 Executive Vice President
Kenneth J. Clark ...... 44 Vice President/Marketing
Harry F. Forbes, Jr. .. 57 Vice President, Treasurer/
Secretary
(Retired March 31, 1995)
<PAGE>
William E. Fuller ..... 63 Vice President/Wurlitzer
George C. Huebner ..... 52 Vice President/Keyboard
Acceptance Corporation
Charles R. Juengling .. 47 Vice President/Treasurer/
Secretary
Duane A. Kuhn ......... 53 Vice President/Church Organ
Systems
Jimmie H. Smith ....... 39 Vice President/Manufacturing
John H. Tolleson ...... 57 Vice President/Special Markets
Larry E. Mustard ...... 39 Vice President/Controller
J. D. Chastain ........ 62 Divisional Vice President/
Manufacturing
J. Roy Hanson ......... 47 Divisional Vice President/
Electronic Musical Products
James K. Kindt ........ 60 Divisional Vice President/
Eastern Sales
Timothy W. Laskey ..... 47 Divisional Vice President/
Western Sales
Frank E. Seta ......... 38 Divisional Vice President/
Acoustic Pianos
All current officers of the Company hold office until the
annual meeting of shareholders and until their successors are
elected and qualified. Officers of the Company are elected by the
Board of Directors and serve at the discretion of the Board. For
purposes of the following descriptions of the backgrounds of the
Company's Executive Officers, the term "Company" refers to both the
existing Baldwin Piano & Organ Company which was formed in November
1983 and to its predecessor, the old Baldwin Piano & Organ Company
("Old BP&O") which sold all of its music related assets to the new
company in June 1984.
R. S. HARRISON, age 63, is the Company's Chairman of the
Board. Prior to December 1994, Mr. Harrison served continuously as
the Company's Chief Executive Officer from its inception in
November 1983. He also previously served as the Company's Chairman
of the Board from its formation until August 1993, when he assumed
the responsibilities as the Company's President. Prior to November
1983, Mr. Harrison served the Company's predecessor (the old
Baldwin Piano & Organ Company which sold all of its music-related
assets to the Company in June 1984) as a Director since June 1983,
as its chief executive officer and president since 1974 and in
other capacities since 1955.
<PAGE>
KAREN L. HENDRICKS, age 47, joined the Company as Chief
Executive Officer, President and Director in November 1994. Prior
to joining the Company in November 1994, Ms. Hendricks most
recently served as the Executive Vice President and General
Manager, Skin Care Division of the Dial Corp. since 1992, where she
had full responsibility for Dial's United States bar and liquid
soap business. Ms. Hendricks previously was employed for twenty-one
years by The Procter & Gamble Company in various executive
positions in product development and was promoted to General
Manager of its Vidal Sassoon Hair Care Company in 1987.
KENEN M. EDGINGTON, age 49, has been employed by the Company
since 1971. From 1977 until November 1983, he was Piano Product
Manager; from 1983 to November 1988, he was Vice President/Domestic
Wholesale Sales; in 1988, he became Vice President/Keyboard Sales;
and in 1991, he became Executive Vice President.
KENNETH J. CLARK, age 44, has been employed by the Company
since 1974, serving as a retail store manager from 1978 to 1985.
In 1985, he was appointed Divisional Vice President/Retail Sales
and in 1989 he became Vice President/Retail Sales. In 1994, he was
appointed Vice President/Marketing.
HARRY F. FORBES, JR., age 57, has been employed by the Company
since 1955. In April 1981, he became Vice President/Controller of
the Company and in February 1984 he became Vice President, Treasurer
and Assistant Secretary. Mr. Forbes also served as a Director of the
Company from June 6, 1986 to May 14, 1987. In 1989, he was also
appointed Secretary. Mr. Forbes retired March 31, 1995.
WILLIAM E. FULLER, age 63, joined the Company in 1990 as a
District Sales Manager for The Wurlitzer Company. In May 1991, he
was promoted to Divisional Vice President/Wurlitzer; and in
December 1991, he became Vice President/Wurlitzer. For more than
twenty-five years prior thereto, he was employed by The Wurlitzer
Company prior to its acquisition by the Company.
GEORGE C. HUEBNER, age 52, joined the Company in 1960 as
Assistant Credit Manager. In 1979, he was promoted to Director of
International Operations; and from 1987 to December 1989, he was
Administrative Services Manager. In January 1990, he became
National Credit Manager of the Consumer Finance Subsidiary; and in
May 1991, was promoted to Divisional Vice President/Keyboard
Acceptance Corporation. In 1993, he was promoted to Vice
President/Keyboard Acceptance Corporation.
CHARLES R. JUENGLING, age 47, joined the Company in 1984 as
Divisional Vice President/Financial. In 1989, he was appointed
Vice President and Chief Financial Officer and in March 1995, he
became Vice President, Treasurer and Secretary. Prior to 1984, he
was a Senior Manager with the firm of Peat, Marwick, Mitchell & Co.
DUANE A. KUHN, age 53, joined the Company in 1966. In 1979,
he assumed the position of Marketing Manager of Classical Organs;
in 1983, he was appointed Divisional Vice President/Eastern Sales;
in 1988, he became Senior Vice President/Wurlitzer; and in 1991, he
became Vice President/Church Organ Systems.
<PAGE>
JIMMIE H. SMITH, age 39, joined the Company in 1976 as an
Industrial Engineer at the Greenwood Plant. He was promoted to
Plant Manager at the Trumann Plant in 1983, was appointed Divisional
Vice President/Manufacturing in 1988 and in 1989 became Vice
President/Manufacturing.
JOHN H. TOLLESON, age 57, joined the Company in 1962. He
became Market Development Manager in January 1981 and Division
Sales Manager in September 1982. In December 1983, he was appointed
Divisional Vice President/Western Sales; and in June 1991, he became
Vice President/Domestic Wholesale Sales. In 1994, he was appointed
Vice President/Special Markets.
LARRY E. MUSTARD, age 39, joined the Company as Controller in
January 1994. In March 1995, he was appointed Vice President and
Controller. Prior to 1994, he was employed for five years as
Automotive Group Controller for Eagle-Picher Industries, Inc. and
previously had been employed as a Senior Manager with the firm of
KPMG Peat Marwick LLP.
J. D. CHASTAIN, age 62, joined the Company in June 1959 and
has served in various capacities at several factories. In 1969, he
was promoted to Plant Manager of the Greenwood Plant. In November
1989, he was promoted to Divisional Vice President/Manufacturing.
J. ROY HANSON, age 47, joined the Company in March 1983. He
served as marketing manager and product training/merchandising
manager before being named Divisional Vice President/Musical
Product Development in 1989. In 1994, he was appointed Divisional
Vice President/Electronic Musical Products.
JAMES K. KINDT, age 60, has been employed by the Company since
1957. He was promoted to District Sales Manager in 1970 and
Divisional Vice President/Eastern Sales in 1988.
TIMOTHY W. LASKEY, age 47, has been employed by the Company
since 1986, serving as a District Sales Manager from 1986 until
1994 when he was appointed Divisional Vice President/Western Sales.
FRANK E. SETA, age 38, joined the Company in 1979 in the
Dealer Services Division. In 1982, he was promoted to District
Sales Manager and in 1985 became a retail store manager until 1990.
In 1990, he was Director of Market Development; and in June 1991,
became Divisional Vice President/Western Sales. In 1994, he became
Divisional Vice President/Acoustic Pianos.
<PAGE>
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
-------------------------------------
AND RELATED STOCKHOLDER MATTERS
-------------------------------
The information regarding market for registrant's common
equity and related stockholder matters as required by Item 201 of
Regulation S-K is incorporated herein by reference from page 24 of
the Company's 1994 Annual Report to Shareholders appearing under
the caption "Market and Dividend Information".
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
The information regarding selected financial data of the
Company as required by Item 301 of Regulation S-K is incorporated
herein by reference from page 20 of the Company's 1994 Annual
Report to Shareholders appearing under the caption "Five-Year
Summary".
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
The information regarding management's discussion and analysis
of the Company's financial condition and results of operations as
required by Item 303 of Regulation S-K is incorporated herein by
reference from pages 21 through 23 of the Company's 1994 Annual
Report to Shareholders appearing under the caption "Management's
Discussion and Analysis of Financial Condition and Results of
Operations".
Item 8. FINANCIAL STATEMENTS
--------------------
AND SUPPLEMENTARY DATA
----------------------
The Company's financial statements are incorporated herein by
reference from pages 6 through 19 of the Company's 1994 Annual
Report to Shareholders. The supplementary quarterly financial
information regarding the Company as required by Item 302 of
Regulation S-K is incorporated herein by reference from page 19 of
the Company's 1994 Annual Report to Shareholders appearing under
the Note caption "Quarterly Financial Data".
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
---------------------------------------------
ON ACCOUNTING AND FINANCIAL DISCLOSURE
--------------------------------------
No change in the Company's auditors has taken place within the
twenty-four months prior to, or in any period subsequent to, the
Company's December 31, 1994 financial statements.
PART III
--------
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
The information regarding the Company's directors and executive
officers as required by Items 401 and 405 of Regulation S-K is
incorporated herein by reference from the Company's 1995 Proxy Statement
from the information appearing under the captions "Election of Directors"
and "Security Ownership of Certain Beneficial Owners and Management -
Beneficial Ownership of Management and Nominees." Certain information
regarding the Company's executive officers and key employees is set forth
under the caption "Executive Officers of the Registrant" appearing at the
end of Part I of this Report.
Item 11. EXECUTIVE COMPENSATION
----------------------
The information regarding compensation of the Company's
directors and executive officers as required by Item 402 of
Regulation S-K is incorporated herein by reference from the
Company's 1995 Proxy Statement from the information appearing under
the caption "Executive Compensation", except that the information
required by Items 402(k) and (l) of Regulation S-K which appears
within such caption under the sub-headings "Report of Compensation
Committee on Executive Compensation" and "Common Stock Performance"
is specifically not incorporated by reference into this Form 10-K
or into any other filing by the Company under the Securities Act of
1933 or the Securities Exchange Act of 1934.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
-----------------------------------------------
AND MANAGEMENT.
--------------
The information regarding ownership of the Company's common
stock by the Company's management and by the beneficial owners of
more than 5% of the outstanding common stock as required by Item
403 of Regulation S-K is incorporated herein by reference from the
Company's 1995 Proxy Statement from the information appearing under
the caption "Security Ownership of Certain Beneficial Owners and
Management."
<PAGE>
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
The information regarding certain relationships and related
transactions as required by Item 404 of Regulation S-K is incorporated herein
by reference from the Company's 1995 Proxy Statement from the information
appearing under the caption "Certain Transactions and Proceedings".
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
---------------------------------------
AND REPORTS ON FORM 8-K
-----------------------
1.1 The following consolidated financial statements of the
Company included in the Company's 1994 Annual Report to
Shareholders are incorporated herein by reference from
pages 6 through 19 of the annual report. Reference is
also made to Item 8.
Independent Auditors' Report.
Consolidated Statements of Earnings, years ended
December 31, 1994, 1993 and 1992.
Consolidated Statements of Shareholders' Equity,
years ended December 31, 1994, 1993 and 1992.
Consolidated Balance Sheets, as of
December 31, 1994 and 1993.
Consolidated Statements of Cash Flows, years
ended December 31, 1994, 1993 and 1992.
Notes to Consolidated Financial Statements,
years ended December 31, 1994, 1993 and 1992.
2.1 Consolidated Financial Statement Schedules of
Baldwin Piano & Organ Company and Subsidiaries:
Independent Auditors' Report on Schedule.
Schedule for the years ended
December 31, 1994, 1993 and 1992.
VIII. Valuation and Qualifying Accounts.
All other schedules are omitted, as the required
information is inapplicable or the information is
presented in the consolidated financial statements
or related notes.
<PAGE>
3.1 Certificate of Incorporation of the Company, as amended. (1)
3.2 Bylaws of the Company. (1)
MANAGEMENT CONTRACTS, COMPENSATORY PLANS AND ARRANGEMENTS
=========================================================
10.1 Baldwin Piano & Organ Company 1986 Incentive Stock Option
Plan adopted on June 30, 1986. (1)
10.2 Baldwin Piano & Organ Company Retirement Plan for Salaried
Employees, as amended. (1)
10.3 Baldwin Piano & Organ Company Retirement Trust for Salaried
Employees dated September 28, 1984. (1)
10.4 Amended and Restated Agreement of Employment and Retirement
Plan for Selected Key Employee between Baldwin Piano & Organ
Company and R. S. Harrison dated as of May 9, 1989. (4)
10.5 Form of Indemnification Agreements between the Company and
the Company's Officers and Directors dated June 30, 1986 and
accompanying schedule. (1)
10.6 Consulting Agreement between the Company and Harold S. Smith
dated as of April 14, 1993. (10)
10.7 Baldwin Piano & Organ Company Deferred Directors Fee
Plan. (11)
10.8 Baldwin Piano & Organ Company Non-Qualified Deferred
Compensation Plan. (11)
10.9 Baldwin Piano & Organ Company Non-Qualified Deferred
Compensation Rabbi Trust Agreement as amended and restated
as of October 4, 1993. (11)
10.10 Agreement of Employment between Baldwin Piano & Organ
Company and Karen L. Hendricks dated as of November 18, 1994.
10.11 Second Amended and Restated Agreement of Employment and
Retirement Plan for Selected Key Employee between Baldwin
Piano & Organ Company and R. S. Harrison dated as of
December 9, 1994.
=======================================
10.12 Office Space Lease Agreement between Wards Corner Associates
Limited Partnership and the Company dated as of June 16, 1986. (1)
10.13 Lease Agreement between LeFlore County, Mississippi and the
Company dated as of December 1, 1984. (1)
10.14 Lease Agreement between the City of Fayetteville, Arkansas
and the Company dated as of December 1, 1984. (1)
<PAGE>
10.15 Guaranty dated February 23, 1988 in favor of General
Electric Capital Corporation made by TWCA Corp
(now known as `The Wurlitzer Company'). (2)
10.16 Security Agreement dated February 23, 1988 in favor of
General Electric Capital Corporation made by TWCA Corp. (2)
10.17 Stock Pledge Agreement dated February 23, 1988 by and
between Baldwin Piano & Organ Company and General Electric
Capital Corporation relating to the Company's shares of TWCA
Corp. (2)
10.18 Amended and Restated Revolving Credit and Security Agreement
between the Company and General Electric Capital Corporation
dated October 25, 1990. (6)
10.19 Pledge Agreement by the Company in favor of General Electric
Capital Corporation dated October 25, 1990. (6)
10.20 Security Agreement by BPO Finance Corporation in favor of
General Electric Capital Corporation dated October 25,
1990. (6)
10.21 Guaranty by BPO Finance Corporation in favor of General
Electric Capital Corporation dated October 25, 1990. (6)
10.22 Purchase and Administration Agreement among the Company, BPO
Finance Corporation, Retailer Funding Corporation and
General Electric Capital Corporation, as a consenting party,
dated as of October 1, 1990. (6)
10.23 Guaranty Agreement among the Company, BPO Finance
Corporation, Retailer Funding Corporation and General
Electric Capital Corporation dated as of October 1, 1990.(6)
10.24 Indemnification Agreement among BPO Finance Corporation,
General Electric Capital Corporation and Kidder Peabody &
Co. Incorporated as of October 1, 1990. (6)
10.25 Retail Accounts Receivable Purchase Agreement among the
Company, BPO Finance Corporation and The Wurlitzer Company
dated as of October 1, 1990. (6)
10.26 Amendment dated as of February 15, 1994 to the October 25,
1990 Amended and Restated Revolving Credit Agreement between the
Company and General Electric Capital Corporation. (12)
10.27 Amendment dated as of February 15, 1994 to the October 1,
1990 Purchase and Administration Agreement among the Company,
Keyboard Acceptance Corporation (formerly known as BPO Finance
Corporation), Retailer Funding Corporation and General Electric
Capital Corporation as a consenting party. (12)
10.28 Amendment dated as of February 15, 1994 to the October 1,
1990 Guaranty Agreement among the Company, Keyboard Acceptance
Corporation, Retailer Funding Corporation and General Electric
Capital Corporation. (12)
<PAGE>
10.29 Amended and Restated General Loan and Security Agreement
dated as of February 24, 1994 between the Company and The Fifth
Third Bank. (12)
10.30 Irrevocable Standby Letter of Credit issued August 13, 1993
by The Fifth Third Bank on behalf of the Company in favor of Harold
S. Smith. (12)
10.31 Letter of Credit Reimbursement Agreement dated as of August
13, 1993 between the Company and The Fifth Third Bank. (12)
10.32 Amendment to Office Space Lease Agreement between Baldwin
Piano & Organ Company and Nooney Management Company dated as of
June 11, 1991. (8)
10.33 Agreement dated as of September 30, 1992 to be effective
January 1, 1993 through March 31, 1996 between Baldwin Piano &
Organ Company and International Chemical Workers Union and Local
Union No. 800. (9)
10.34 Lease Agreement between Baldwin Piano & Organ Company and
XL/Datacomp, Inc. dated as of October 14, 1992. (9)
10.35 Memorandum Agreement between Nippon Columbia Co., LTD. and
The Wurlitzer Company dated as of November 15, 1992. (9)
10.36 Development Agreement between the Company and ENSONIQ Corp.
dated as of April 15, 1993. (12)
10.37 Distribution Agreement between The Wurlitzer Company and
GeneralMusic S.p.A. dated as of March 9, 1994. (12)
10.38 Second Amendment dated as of December 1, 1994 to Purchase
and Administration Agreement dated as of October 1, 1990 as amended
by a First Amendment dated as of February 15, 1994 among Retailer
Funding Corporation, Keyboard Acceptance Corporation (formerly BPO
Finance Corporation) and General Electric Capital Corporation as a
consenting party.
10.39 Indemnification agreement dated as of December 1, 1994 among
General Electric Capital Corporation, Lehman Commercial Paper, Inc.
and Keyboard Acceptance Corporation (formerly BPO Finance Corporation).
10.40 Amendment #4 dated as of September 30, 1994 to that certain
Revolving Credit and Security Agreement, dated as of June 15, 1984
and Restated as of October 15, 1990 between Baldwin Piano & Organ
Company and General Electric Capital Corporation.
11.1 Statement regarding computation of per share earnings.
13.1 Information incorporated by reference from the Company's
1994 Annual Report to Shareholders for the year ended December 31,
1994: "Independent Auditors' Report", "Financial Statements"
(including Notes thereto), "Five Year Summary", "Management's
Discussion and Analysis of Financial Condition", and "Market and
Dividend Information".
<PAGE>
21.1 Subsidiaries of the Company.
23.1 Consent of Independent Accountants.
27.1 Financial Data Schedule.
99.1 Baldwin Stock Repurchase Plan. (3)
99.2 Amendment No. 1 to Baldwin Stock Repurchase Plan. (5)
99.3 Amendment No. 2 to Baldwin Stock Repurchase Plan. (7)
99.4 Press Release dated March 1, 1995.
(1) Incorporated by reference from the Company's Form S-1 Registration
Statement as declared effective by the Commission on October 8, 1986.
(2) Incorporated by reference from the Company's Form 8-K dated
February 23, 1988 as filed with the Commission on March 9, 1988.
(3) Incorporated by reference from the Company's Form 10-Q for
the period ended September 30, 1987.
(4) Incorporated by reference from the Company's Form 10-Q for
the period ended June 30, 1989.
(5) Incorporated by reference from the Company's Form 10-K for
the period ended December 31, 1989.
(6) Incorporated by reference from the Company's Form 8-K dated
October 25, 1990 as filed with the Commission on November 9, 1990.
(7) Incorporated by reference from the Company's Form 10-Q for
the period ended September 30, 1990.
(8) Incorporated by reference from the Company's Form 10-K for
the period ended December 31, 1991.
(9) Incorporated by reference from the Company's Form 10-K for
the period ended December 31, 1992.
(10) Incorporated by reference from the Company's Form S-3
Registration Statement as declared effective by the Commission on
May 19, 1993.
(11) Incorporated by reference from the Company's Form 10-Q for
the period ended September 30, 1993.
(12) Incorporated by reference from the Company's Form 10-K for
the period ended December 31, 1993.
Index to Exhibits - pages 28 - 33
<PAGE>
REPORTS ON FORM 8-K
-------------------
During the fourth quarter of 1994, the Company filed no
reports on Form 8-K.
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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
By: KAREN L. HENDRICKS
-----------------------------------
Karen L. Hendricks, Chief Executive
Officer and President.
Date: March 24, 1995
---------------------------------
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Date: March 24, 1995 KAREN L. HENDRICKS
--------------- ------------------------------------
Karen L. Hendricks, Chief Executive
Officer (Principal Executive Officer),
President and Director
Date: March 24, 1995 R. S. HARRISON
-------------- ------------------------------------
R. S. Harrison, Chairman of the
Board and Director
Date: March 24, 1995 GEORGE E. CASTRUCCI
-------------- ------------------------------------
George E. Castrucci, Director
Date: March 24, 1995 JOSEPH H. HEAD, JR.
-------------- ------------------------------------
Joseph H. Head, Jr., Director
Date: March 24, 1995 ROGER L. HOWE
-------------- ------------------------------------
Roger L. Howe, Director
Date: March 24, 1995 CHARLES R. JUENGLING
-------------- ------------------------------------
Charles R. Juengling, Vice President/
Treasurer/Secretary (Chief Accounting
Officer)
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SCHEDULE
----------------------------------------
The Board of Directors
Baldwin Piano & Organ Company:
Under date of February 28, 1995, we reported on the
consolidated balance sheets of Baldwin Piano & Organ Company
and subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of earnings, shareholders'
equity and cash flows for each of the years in the three-year
period ended December 31, 1994, as contained in the 1994
annual report to shareholders. These consolidated financial
statements and our report thereon are incorporated by
reference in the annual report on Form 10-K for the year
1994. In connection with our audits of the aforementioned
consolidated financial statements, we also have audited the
related consolidated financial statement schedule as listed
in the index under Part IV, item 14 (2.1) of this Form 10-K.
This financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express
an opinion on this financial statement schedule based on our
audits.
In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Cincinnati, Ohio
February 28, 1995
<PAGE>
<TABLE>
Schedule VIII
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
_______________
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1994, 1993 and 1992
<CAPTION>
Additions
---------
Charged Charged
Balance at to cost to other Balance at
beginning and accounts Deductions end of
Description of period expenses describe describe period
----------------------------------------------------------------------------------
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
<S> <C> <C> <C> <C> <C>
Year ended
December 31, 1994 $4,110,040 $1,183,876 $ - $ 994,349(1) $4,299,567
=============================================================
Year ended
December 31, 1993 $3,377,353 $1,432,234 $ - $ 699,547(1) $4,110,040
=============================================================
Year ended
December 31, 1992 $3,741,244 $1,593,189 $ - $1,957,080(1) $3,377,353
=============================================================
RESERVE FOR INSTALLMENT RECEIVABLES
-----------------------------------
SOLD WITH RECOURSE:
------------------
Year ended
December 31, 1994 $2,706,000 $ 120,000 $ - $ 530,000(2) $2,296,000
=============================================================
Year ended
December 31, 1993 $2,734,000 $ 270,000 $ - $ 298,000(2) $2,706,000
=============================================================
Year ended
December 31, 1992 $2,490,000 $ 460,000 $ - $ 216,000(2) $2,734,000
=============================================================
_____________________
<FN1>
(1) Represents accounts charged off, less recoveries.
<FN2>
(2) Represents reserve related to accounts repurchased.
</TABLE>
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
------ -------
3.1 Certificate of Incorporation of the Company, *
as amended. (1)
3.2 Bylaws of the Company. (1) *
10.1 Baldwin Piano & Organ Company 1986 Incentive *
Stock Option Plan adopted on June 30, 1986. (1)
10.2 Baldwin Piano & Organ Company Retirement Plan *
for Salaried Employees, as amended. (1)
10.3 Baldwin Piano & Organ Company Retirement Trust *
for Salaried Employees dated September 28,
1984. (1)
10.4 Amended and Restated Agreement of Employment *
and Retirement Plan for Selected Key Employee
between Baldwin Piano & Organ Company and
R. S. Harrison dated as of May 9, 1989. (4)
10.5 Form of Indemnification Agreements between *
the Company and the Company's Officers and
Directors dated June 30, 1986 and accompany-
ing schedule. (1)
10.6 Consulting Agreement between the Company *
and Harold S. Smith dated as of April 14,
1993. (10)
10.7 Baldwin Piano & Organ Company Deferred *
Directors Fee Plan. (11)
10.8 Baldwin Piano & Organ Company Non-Qualified *
Deferred Compensation Plan. (11)
10.9 Baldwin Piano & Organ Company Non-Qualified *
Deferred Compensation Rabbi Trust Agreement
as amended and restated as of October 4,
1993. (11)
10.10 Agreement of Employment between Baldwin Piano
& Organ Company and Karen L. Hendricks dated
as of November 18, 1994.
10.11 Second Amended and Restated Agreement of
Employment and Retirement Plan for Selected
Key Employee between Baldwin Piano & Organ
Company and R. S. Harrison dated as of
December 9, 1994.
<PAGE>
10.12 Office Space Lease Agreement between Wards *
Corner Associates Limited Partnership and the
Company dated as of June 16, 1986. (1)
10.13 Lease Agreement between LeFlore County, *
Mississippi and the Company dated as of
December 1, 1984. (1)
10.14 Lease Agreement between the City of *
Fayetteville, Arkansas and the Company
dated as of December 1, 1984. (1)
10.15 Guaranty dated February 23, 1988 in favor *
of General Electric Capital Corporation
made by TWCA Corp (now known as `The
Wurlitzer Company'). (2)
10.16 Security Agreement dated February 23, 1988 *
in favor of General Electric Capital Corpo-
ration made by TWCA Corp. (2)
10.17 Stock Pledge Agreement dated February 23, 1988 *
by and between Baldwin Piano & Organ Company
and General Electric Capital Corporation
relating to the Company's shares of TWCA
Corp. (2)
10.18 Amended and Restated Revolving Credit and *
Security Agreement between the Company and
General Electric Capital Corporation dated
October 25, 1990. (6)
10.19 Pledge Agreement by the Company in favor of *
General Electric Capital Corporation dated
October 25, 1990. (6)
10.20 Security Agreement by BPO Finance Corporation *
in favor of General Electric Capital Corpora-
tion dated October 25, 1990. (6)
10.21 Guaranty by BPO Finance Corporation in favor *
of General Electric Capital Corporation dated
October 25, 1990. (6)
10.22 Purchase and Administration Agreement among *
the Company, BPO Finance Corporation,
Retailer Funding Corporation and General
Electric Capital Corporation, as a consenting
party, dated as of October 1, 1990. (6)
10.23 Guaranty Agreement among the Company, *
BPO Finance Corporation, Retailer Funding
Corporation and General Electric Capital
Corporation dated as of October 1, 1990. (6)
<PAGE>
10.24 Indemnification Agreement among BPO Finance *
Corporation, General Electric Capital Corpo-
ration and Kidder Peabody & Co. Incorporated
as of October 1, 1990. (6)
10.25 Retail Accounts Receivable Purchase Agreement *
among the Company, BPO Finance Corporation
and The Wurlitzer Company dated as of October
1, 1990. (6)
10.26 Amendment dated as of February 15, 1994 to *
the October 25, 1990 Amended and Restated
Revolving Credit Agreement between the
Company and General Electric Capital
Corporation. (12)
10.27 Amendment dated as of February 15, 1994 to *
the October 1, 1990 Purchase and Adminis-
tration Agreement among the Company, Keyboard
Acceptance Corporation (formerly known as
BPO Finance Corporation), Retailer Funding
Corporation and General Electric Capital
Corporation as a consenting party. (12)
10.28 Amendment dated as of February 15, 1994 to *
the October 1, 1990 Guaranty Agreement among
the Company, Keyboard Acceptance Corporation,
Retailer Funding Corporation and General
Electric Capital Corporation. (12)
10.29 Amended and Restated General Loan and Security *
Agreement dated as of February 24, 1994 between
the Company and The Fifth Third Bank. (12)
10.30 Irrevocable Standby Letter of Credit issued *
August 13, 1993 by The Fifth Third Bank on
behalf of the Company in favor of Harold
S. Smith. (12)
10.31 Letter of Credit Reimbursement Agreement *
dated as of August 13, 1993 between the
Company and The Fifth Third Bank. (12)
10.32 Amendment to Office Space Lease Agreement *
between Baldwin Piano & Organ Company and
Nooney Management Company dated as of
June 11, 1991. (8)
10.33 Agreement dated as of September 30, 1992 *
to be effective January 1, 1993 through
March 31, 1996 between Baldwin Piano &
Organ Company and International Chemical
Workers Union and Local Union No. 800. (9)
10.34 Lease Agreement between Baldwin Piano & *
Organ Company and XL/Datacomp, Inc. dated
as of October 14, 1992. (9)
<PAGE>
10.35 Memorandum Agreement between Nippon Columbia *
Co., LTD. and The Wurlitzer Company dated as
of November 15, 1992. (9)
10.36 Development Agreement between the Company *
and ENSONIQ Corp. dated as of April 15, 1993.
(12)
10.37 Distribution Agreement between The Wurlitzer *
Company and GeneralMusic S.p.A. dated as of
March 9, 1994. (12)
10.38 Second Amendment dated as of December 1, 1994
to Purchase and Administration Agreement dated
as of October 1, 1990 as amended by a First
Amendment dated as of February 15, 1994 among
Retailer Funding Corporation, Keyboard Accept-
ance Corporation (formerly BPO Finance Corpo-
ration) and General Electric Capital Corporation
as a consenting party.
10.39 Indemnification Agreement dated as of December 1,
1994 among General Electric Capital Corporation,
Lehman Commercial Paper, Inc. and Keyboard
Acceptance Corporation (formerly BPO Finance
Corporation).
10.40 Amendment #4 dated as of September 30, 1994 to
that certain Revolving Credit and Security
Agreement, dated as of June 15, 1984 and
Restated as of October 15, 1990 between
Baldwin Piano & Organ Company and General
Electric Capital Corporation.
11.1 Statement regarding computation of per share
earnings.
13.1 Information incorporated by reference from the
Company's 1994 Annual Report to Shareholders
for the year ended December 31, 1994: "Inde-
pendent Auditors' Report", "Financial State-
ments" (including Notes thereto), "Five Year
Summary", "Management's Discussion and Analysis
of Financial Condition", and "Market and
Dividend Information".
21.1 Subsidiaries of the Company.
23.1 Consent of Independent Accountants.
27.1 Financial Data Schedule.
99.1 Baldwin Stock Repurchase Plan. (3) *
99.2 Amendment No. 1 to Baldwin Stock Repurchase *
Plan. (5)
<PAGE>
99.3 Amendment No. 2 to Baldwin Stock Repurchase *
Plan. (7)
99.4 Press Release dated March 1, 1995.
* Incorporated by reference as indicated in the applicable
footnote.
(1) Incorporated by reference from the Company's Form S-1
Registration Statement as declared effective by the Commission on
October 8, 1986.
(2) Incorporated by reference from the Company's Form 8-K dated
February 23, 1988 as filed with the Commission on March 9, 1988.
(3) Incorporated by reference from the Company's Form 10-Q for
the period ended September 30, 1987.
(4) Incorporated by reference from the Company's Form 10-Q for
the period ended June 30, 1989.
(5) Incorporated by reference from the Company's Form 10-K for
the period ended December 31, 1989.
(6) Incorporated by reference from the Company's Form 8-K dated
October 25, 1990 as filed with the Commission on November 9, 1990.
(7) Incorporated by reference from the Company's Form 10-Q for
the period ended September 30, 1990.
(8) Incorporated by reference from the Company's Form 10-K for
the period ended December 31, 1991.
(9) Incorporated by reference from the Company's Form 10-K for
the period ended December 31, 1992.
(10) Incorporated by reference from the Company's Form S-3
Registration Statement as declared effective by the Commission
on May 19, 1993.
(11) Incorporated by reference from the Company's Form 10-Q for
the period ended September 30, 1993.
(12) Incorporated by reference from the Company's Form 10-K for
the period ended December 31, 1993.
Exhibit 10.10
AGREEMENT OF EMPLOYMENT
THIS AGREEMENT OF EMPLOYMENT made and entered into as of
November 18, 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 Karen Hendricks, a
key prospective employee of the Company (the "Employee").
W I T N E S S E T H :
WHEREAS, the Company and the Employee mutually desire
that Employee join the Company as its Chief Executive Officer and
President and that Employee become a Director of the Company; and
WHEREAS, the Company and Employee wish to enter into this
Agreement to set forth their mutual understanding as to the terms
and conditions of Employee's employment by the Company.
It is therefore agreed between the parties as follows:
1. Employment. The Company agrees to employ the Employee as
the Company's Chief Executive Officer and President, and the
Employee, in consideration of such employment, hereby accepts such
employment. During the term of her employment, the Employee shall
use her best efforts to do all things necessary and incident to her
position and the dispatch of her responsibilities. Unless
otherwise approved in advance by the Company's Board of Directors,
Employee shall devote her full business time and energy exclusively
to the business and affairs of the Company and in no event shall
Employee engage in any outside activities which would be reasonably
expected to affect the Company adversely.
2. Board of Directors. The Company agrees that at the first
meeting of the Company's Board of Directors following the
commencement of Employee's employment with the Company, the Company
will cause Employee to be nominated to fill the vacant position
that now exists on the Company's Board of Directors and to serve in
that position until such term expires at the Company's 1995 Annual
Meeting of Stockholders. The Company hereby represents and
warrants to Employee that the Board of Directors has agreed that it
will so elect Employee to the Board at such meeting. The Company
further agrees that it will cause Employee to be nominated for re-
election to the Board during each year of her employment hereunder,
such election being subject only to the approval of the Company's
stockholders.
3. Term. Employee shall commence employment with the
Company pursuant to this Agreement on November 21, 1994 (the
"Commencement Date") and shall continue thereafter through December
31, 1997 (the "Expiration Date"), unless sooner terminated as
provided in Section 7 hereof.
<PAGE>
4. Compensation and Benefits. Except as otherwise provided
upon a termination of Employee's employment prior to the Expiration
Date, the Company shall compensate Employee and provide the
benefits as set forth in this Section 4. In addition, the Company
shall reimburse Employee or pay directly for reasonable business
expenses incurred by her during her employment term.
4.1. Base Salary. The Company shall pay Employee a
minimum $300,000 annual base salary in each of 1995, 1996 and 1997.
Such salary will be payable in equal monthly installments on the
25th day of each month. Commencing January 1, 1996, Employee will
be eligible for salary review by the Executive Compensation
Committee (the "Committee") of the Company's Board of Directors and
her annual base salary may be increased from time to time as such
Committee deems appropriate. For the period beginning on the
Commencement Date through December 31, 1994, the Company will pay
Employee a pro rata salary based upon a $300,000 per annum base
salary.
4.2 Annual Incentive. Commencing January 1, 1995,
Employee shall participate in the Baldwin Piano & Organ Company
1994 Management Incentive Plan, the Company's annual incentive
compensation program as same may be amended from time to time (the
"MIP"). As a participant in the MIP, subject to the attainment of
performance goals as established by the Committee from time to
time, Employee will be eligible for annual incentive compensation.
For the year January 1, 1995 through December 31, 1995, the Company
hereby agrees that the annual incentive compensation to be paid to
Employee will equal at least $100,000. Any incentive amounts under
the MIP earned by the Employee in excess of $100,000 for calendar
year 1995 will also be paid to Employee. All such amounts shall be
paid by the Company by March 31, 1996.
4.3. Long Term Incentive. Immediately upon the
Commencement Date, Employee will be enrolled as a participant in
the Baldwin Piano & Organ Company 1994 Long Term Incentive Plan, as
same may be amended from time to time (the "Restricted Stock Plan")
for the three year cycle encompassing calendar years 1994, 1995 and
1996. Awards of restricted stock under the Restricted Stock Plan
are based upon the Company's performance as set forth in that Plan
and any restricted stock earned thereunder is payable at the
conclusion of the three year period.
<PAGE>
4.4. Stock Options. Immediately upon the Commencement
Date, the Company shall grant to Employee a non-qualified stock
option to acquire 100,000 shares of the Company's common stock.
The per share exercise price of such option shall equal the last
sale price of the Company's common stock on the Nasdaq National
Market on the Commencement Date or, if no trades are made on such
date, the next business day following the Commencement Date on
which trades of the Company's common stock are reported. Employee's
right to acquire the shares subject to this option shall vest as to
20% of such shares immediately upon the Commencement Date and shall
vest as to an additional 20% of such shares on each anniversary of
the Commencement Date. Such options shall expire on the earlier of
ten years from the date of grant or three months following the
termination of Employee's employment for any reason other than
permanent disability or death, in which cases the provisions of
Sections 7.3 or 7.4 shall apply. Beginning in calendar year 1996,
Employee will also be eligible to receive stock option grants under
the Baldwin Piano & Organ Company 1994 Incentive Stock Option Plan,
as same may be amended from time to time, such grants to be in the
discretion of the Committee.
4.5. Retirement Plan/401(k) Savings Plan. Employee
shall be enrolled in the Baldwin Piano & Organ Company Retirement
Plan for Salaried Employees, as amended and restated effective June
16, 1984, in accordance with the provisions of this Plan. Subject
to ERISA and other applicable laws, as to the Employee the Company
will seek to fund this plan with an annualized contribution equal
to 3% of Employee's base salary as determined pursuant to Section
4.1. Commencing January 1, 1996, the Company will also make an
additional matching contribution on Employee's behalf at a rate of
$.50 per each $1.00 of salary deferral by Employee into the
Company's 401(k) plan up to a maximum Company contribution equal to
3% of Employee's base salary as determined pursuant to Section 4.1.
4.6. Vacation. Employee is entitled to, and expected to
utilize, four weeks of paid vacation in each calendar year.
4.7. Group Benefits. Subject to the following sentence,
Employee shall participate immediately in the Baldwin Piano & Organ
Company Group Benefits Program, as outlined in the booklet, "Your
Group Benefits Plan and the Long Term Disability Highlights Summary
Report". Due to the fact that the Company's health benefits plan
currently requires a ninety day waiting period prior to becoming
eligible for participation therein, the Company will reimburse
Employee for the actual cost of her health care benefits under
COBRA from her employer immediately prior to the Commencement Date.
<PAGE>
4.8. Additional Insurance. In addition to the various
insurance coverages available to Employee as described in Section
4.7, the Company shall purchase at its own expense for Employee's
benefit additional disability insurance coverage and life insurance
as set forth in this Section 4.8. The Company shall purchase
disability coverage covering Employee through the Expiration Date
such that, in the event of her disability, Employee will receive
$10,000 per month in addition to all disability benefits provided
to Employee through disability coverage she elects to purchase
pursuant to Section 4.7. For each calendar year during the term of
Employee's employment hereunder, the Company will purchase a
$500,000 term life insurance policy on the life of Employee with
the proceeds payable to such beneficiaries as Employee may
designate.
5. Relocation.
5.1. Closing Fees. The Company will reimburse Employee
for all fees and expenses customarily incurred by a seller of
residential real estate, including legal fees, real estate
brokerage fees and closing costs, incurred by her relating to the
sale of Employee's home in Phoenix, Arizona. The Company will also
reimburse Employee for all fees and expenses customarily incurred
by a buyer of residential real estate, including legal fees and
closing costs but excluding real estate brokerage costs and any
mortgage loan points paid to reduce the interest rate of such loan,
incurred by her relating to the purchase of a new home in the
Cincinnati, Ohio area.
5.2. Househunting and Temporary Living Expenses. The
Company will reimburse Employee for actual expenses incurred by
Employee or by Employee's spouse during a reasonable number of
trips to Cincinnati prior to the Commencement Date relating to her
purchase of a new home in the Cincinnati area. After the
Commencement Date and prior to Employee's occupancy of her new home
in Cincinnati, the Company will either reimburse Employee for her
temporary living expenses in Cincinnati and/or pay such expenses
directly on her behalf. Upon the purchase of a new home in
Cincinnati and the relocation of Employee's family to such
Cincinnati residence, the Company will reimburse Employee for the
carrying costs of Employee's Phoenix residence up to $8,000 per
month for a period not to exceed six months and Employee will use
her reasonable best efforts to bring such carrying costs below
$8,000 per month. The Company will also reimburse Employee for her
transportation expenses incurred relating to any trips to Phoenix
to conclude her personal affairs in that city.
5.3. Assistance in New Home Purchase. If requested by
Employee, the Company will arrange bridge financing to facilitate
Employee's purchase of a new residence in Cincinnati and Company
will pay all interest expense of such bridge loan for up to six
months. The Company will further pay Employee up to $100,000 to
compensate Employee for any actual loss realized by her on the sale
of her Phoenix residence.
<PAGE>
5.4. Moving Expenses. The Company will pay for the pack
and move of Employee's household from Phoenix to Cincinnati.
Employee may use the moving company involved in her previous
relocation from Cincinnati to Phoenix.
5.5. Reimbursements. Notwithstanding any other
provision of Section 5, the Company and Employee agree that
whenever feasible the Company will pay directly the expenses
described in Sections 5.1, 5.2, 5.3 and 5.4 rather than reimburse
Employee. To the extent Employee is subject to federal, state
and/or local taxes on any such amounts, whether paid directly by
the Company or reimbursed to Employee, the Company shall pay to
Employee an additional gross up amount for the purpose of covering
such taxes.
6. Non-Renewal of Agreement. Neither the Company nor the
Employee shall have any obligation to the other to negotiate a new
period of employment subsequent to the Expiration Date. The
Company agrees that if, during the term of this Agreement, the
Company's Board of Directors identifies any performance
deficiencies that the Board believes would likely cause the Company
to not continue Employee's employment subsequent to the Expiration
Date, the Company will notify Employee in writing of such
deficiencies and Employee shall have the opportunity to discuss
such matters with the Board and to take corrective measures if
deemed appropriate by the Board and Employee. No later than
September 30, 1997, the Company and Employee shall each notify the
other of its and her respective desire to negotiate a new period of
employment beyond the Expiration Date.
6.1. Employee's Non-Renewal. If Employee's employment
is not extended due to her desire not to continue, Employee shall
receive all compensation earned by her through the Expiration Date,
including any short term and long term incentive compensation
earned by her but not yet paid during the term of her employment,
and the Company shall have no further obligation to her. Such
amounts shall be paid by the Company on or before March 31, 1998.
In addition, any and all options granted to Employee pursuant to
Section 4.4 which have not yet vested shall immediately vest.
6.2. Company's Non-Renewal. If Employee's employment is
not extended due to the Company's determination not to offer
continued employment, the Company shall pay Employee, in addition
to the amounts specified in Section 6.1., severance equal to her
1997 annual base salary plus 50% of such base salary. Such
severance payment shall be paid by the Company in a lump sum on or
before March 31, 1998. In the event of non-renewal by the Company,
the Company shall also pay its share of continuing Employee's
health insurance for her and her family until such time as Employee
may obtain health insurance from her new employer, but in no event
to extend past December 31, 1998. In addition, any and all options
granted to Employee pursuant to Section 4.4 which have not yet
vested shall immediately vest.
<PAGE>
7. Termination of Agreement Prior to Expiration Date.
7.1. Without Cause. The Company may terminate
Employee's employment prior to the Expiration Date at any time,
whether or not for cause (as "cause" is defined in Section 7.2.
below). In the event the Company terminates Employee without
cause, the Company will pay Employee a lump sum amount equal to the
greater of (a) $450,000 or (b) the difference between $1,000,000
(three years base salary at the annualized rate of $300,000 plus
$100,000 guaranteed 1995 incentive) and any base salary and 1995
incentive payment paid to the date of termination. Such severance
payment shall be paid by the Company within 90 days following the
date of Employee's termination. The Company shall also pay its
share of continuing Employee's health insurance for her and her
family until such time as Employee may obtain health insurance from
her new employer, but in no event to extend more than one year from
the date of termination.
7.2. For Cause. The Company may terminate Employee's
employment at any time for cause (as defined below) effective
immediately upon written notice to Employee. In such event,
Employee shall receive her salary through the effective date of
termination and all incentive payments earned by but not yet paid
to Employee prior to such date. For purposes of this Agreement,
"cause" shall mean a violation by Employee of the Baldwin Piano &
Organ Company Corporate Policy on Ethics and Business, and/or any
acts by Employee against the Company amounting to fraud,
intentional misrepresentation and/or embezzlement.
7.3. Disability. 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"), the Employee shall have been continuously unable or
shall have otherwise failed to perform her duties hereunder for one
hundred twenty (120) consecutive working days, or if, during any
calendar year of the term hereof because of disability, she shall
have been unable or shall have otherwise failed to perform her
duties hereunder for a total period of one hundred eighty (180)
working days regardless of whether or not such days are
consecutive. 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 her 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. In
the event of the termination of Employee's employment due to
disability, the Company will pay Employee her monthly salary
through the end of month in which such termination upon disability
occurs and all incentive payments earned by but not yet paid to
Employee prior to her termination upon disability. All options
granted to Employee in accordance with Section 4.4 and which have
vested may continue to be exercised within the applicable period
provided by the Internal Revenue Code of 1986, as amended.
<PAGE>
7.4. Death. This Agreement shall be terminated on the
death of the Employee effective as of the date of her death.
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
she dies and shall be entitled to all incentive payments earned by
but not yet paid to Employee prior to her death. All options
granted to Employee in accordance with Section 4.4 and which have
vested shall be exercisable for a period not in excess of one year
after Employee's death (but not exceeding ten years from the grant
date) by the person or persons to whom the same is transferred by
will or by the applicable laws of descent and distribution.
8. Change in Control; Accelerated Vesting Schedules. In the
event that Employee's employment by the Company is terminated
without cause prior to the Expiration Date and within eighteen
months of a change in control of the Company, in addition to the
amounts due to Employee pursuant to Section 7.1., all stock options
granted to Employee shall immediately vest in full. Moreover,
Employee shall be entitled to receive immediately upon such
termination the cash value of any long term incentives payable to
her under any long term incentive compensation plans, including but
not limited to the Restricted Stock Plan, in which Employee is then
participating calculated as of the date of her termination
regardless of any provisions in such plans requiring continued
employment with the Company. For purposes of this Agreement,
"change in control" means any of the following events:
(a) A change in control of the direction and
administration of the Company's business of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended (the "1934 Act"), as in effect on the date hereof
and any successor provision of the regulations under the 1934 Act,
whether or not the Company is then subject to such reporting
requirements; or
(b) Any "person" (as such term is used in Section 13(d)
and Section 14(d)(2) of the 1934 Act but excluding any employee benefit
plan of the Company) is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the 1934 Act), directly or indirectly, of
securities of the Company representing more than one half of the
combined voting power of the Company's outstanding securities then
entitled to vote for the election of directors; or
(c) The Company shall sell all or substantially all of
the assets of the Company; or
(d) The Company shall participate in a merger,
reorganization, consolidation or similar business combination that
constitutes a change in control as defined in the Baldwin Piano &
Organ Company 1994 Incentive Stock Option Plan and/or results in
the occurrence of any event described in clause (a), (b) or (c)
above.
<PAGE>
9. Sale/Registration of Shares Subject to Stock Options. In
the event that Employee's employment is not renewed by the Company
pursuant to Section 6 or is terminated pursuant to Section 7.1., if
Employee informs the Company that she desires to exercise any or
all of the stock options granted to her on the Commencement Date
pursuant to Section 4.4. which have vested (including such options
which have vested pursuant to Section 8) immediately prior to such
non-renewal or termination, then the Company in its sole discretion
shall either (a) register the underlying shares of the Company's
common stock for sale to the public pursuant to a registration
statement filed by the Company with the Securities and Exchange
Commission within 180 days of the termination of Employee's
employment, or (b) purchase from Employee the stock options which
Employee desires to exercise. If the Company elects to purchase
the stock options, the purchase price to be paid by the Company for
each such option being purchased shall be the difference between
the last sale price of the Company's common stock on the Nasdaq
National Market on the earlier of the date of termination or
January 2, 1998 and the exercise price of the option. In addition,
at any time during the term of this Agreement at the direction of
the Company's Board of Directors, the Company may, but is not
required to, register some or all of the shares of common stock
subject to the options granted to Employee hereunder with the
Securities and Exchange Commission without any action by Employee.
10. Covenant Not to Compete. At all times during the term of
this Agreement, and for a period of one year thereafter if
terminated or not renewed by Employee for any reason or if
terminated by the Company pursuant to Sections 7.2. or 7.3.,
Employee agrees that she 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 directly or indirectly competes with the Company.
11. Binding Effect. This Agreement shall be binding upon the
parties hereto, the beneficiaries, heirs, executors, administrators
and successors of the Employee and the successors and assigns of
the Company.
12. Counterparts. This Agreement may be executed in two or
more counterparts, any one of which shall constitute an original
without reference to the others.
13. 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.
<PAGE>
14. Applicable Law. This Agreement shall be governed in all
respects by the law of the State of Ohio. 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.
BALDWIN PIANO & ORGAN COMPANY
Attest:
R.S. HARRISON By GEORGE E. CASTRUCCI
"EMPLOYEE"
KAREN HENDRICKS
November 18, 1994
Exhibit 10.11
SECOND AMENDED AND RESTATED AGREEMENT OF EMPLOYMENT
THIS SECOND AMENDED AND RESTATED AGREEMENT OF EMPLOYMENT made
and entered into as of December 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 ("Harrison").
WITNESSETH:
WHEREAS, the Company and Harrison 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 as of May 9, 1994; and
WHEREAS, the Company and Harrison 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. As of the date of this Agreement, Harrison
shall no longer be employed as Chief Executive Officer of the
Company, but shall be employed on an at will basis as the Company's
Chairman of the Board under the terms and conditions set forth
herein. Harrison, in consideration of such employment, hereby
accepts such at will employment upon the terms and conditions set
forth herein. During the term of his employment, Harrison shall do
all things necessary and incident to his position.
2. Termination of Agreement. The employment of Harrison
under this Agreement shall be terminated on the death of Harrison
effective as of the date of his death, or at any time at the option
of the Company or Harrison, with or without cause, upon forty-five
(45) days' prior written notice to the other party; provided,
however, that Harrison shall be entitled to those sums payable to
him pursuant to paragraph 6 and that Harrison's spouse or estate,
as the case may be, shall be entitled to retain Harrison's salary
installment for the month in which he dies, and shall be entitled
to those sums payable to Harrison pursuant to paragraph 6.
3. Outside Employment. Harrison shall not engage in outside
activities which may tend to affect the Company adversely.
<PAGE>
4. Compensation and Benefits. The Company shall pay
Harrison $275,000 as base salary for 1995, payable in the same
manner as the compensation of other officers of the Company.
Thereafter, Harrison's annual base salary shall be reviewed
annually by the Board of Directors of the Company. Harrison shall
be eligible for bonuses at Level I under the Company's 1994
Management Incentive Plan, 1994 Incentive Stock Option Plan and the
1994 Long Term Incentive Plan. Harrison also shall be eligible for
all Company benefits, including the use of an automobile, accorded
to the Company's senior officers. In addition to the compensation
and benefits provided above in this paragraph 4, Harrison 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.
5. Consulting Relationship upon Termination. In the event
that Harrison's employment hereunder terminates for any reason
(other than due to his death) before December 31, 1997, the Company
shall engage Harrison as a consultant, and Harrison shall accept
such engagement, under the terms and conditions provided in the
attached Exhibit A.
6. Deferred Compensation. Subject to all of the terms and
conditions set forth in this Agreement, upon the earlier of (i)
Harrison's attainment of age sixty-five (65), whether or not
Harrison retires or continues in the employment of the Company on
a full-time or part-time basis; or (ii) Harrison's termination of
employment by reason of disability or death, regardless of his age,
the Company shall thereafter pay to Harrison (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 Harrison'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 Harrison's
designated beneficiary (or the designated beneficiary's designed
beneficiary), if any, and, if none, then to Harrison's (or the
designated beneficiary's) estate. For purposes of paragraph 6
"disability" shall mean Harrison's inability to perform services
hereunder for a continuous period of one hundred eighty (180)
working days due to Harrison's ill health, whether physical or
mental.
As a form of additional deferred compensation, if Harrison
dies before December 31, 1997, the Company shall immediately pay to
Harrison's spouse or estate, as the case may be, a sum equal to
that amount that Harrison would have been entitled to receive for
providing consulting services as described in paragraph 5.
<PAGE>
7. Covenant Not to Compete. (a) Harrison 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
6 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 Harrison 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 Harrison and the Company shall have no further
liability to or with respect to Harrison under this Agreement.
8. Source of Payments. All payments provided in paragraphs
5 and 6 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.
Harrison 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 Harrison or any
other person.
9. Supplemental Benefits. The payments to be made under
this Agreement or with respect to Harrison shall be in addition to
any payments to which such Harrison 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.
10. Assignment. Neither Harrison 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 Harrison or his surviving
spouse, or any assignee or transferee, whether by operation of law
or otherwise.
<PAGE>
11. 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.
12. 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 or her.
13. Binding Effect. This Agreement shall be binding upon the
parties hereto, the surviving spouse, beneficiaries, heirs,
executors, administrators and successors of Harrison and Company.
14. Status of Agreement. This Second Amended and Restated
Agreement is to replace that agreement entitled Amended and
Restated Agreement of Employment dated as of May 9, 1994. Upon the
execution of this Second Amended Agreement this Agreement alone
shall evidence the rights and obligations of the parties hereto.
15. Counterparts. This Agreement may be executed in two or
more counterparts, any one of which shall constitute an original
without reference to the others.
16. 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.
17. Applicable Law. This Agreement shall be governed in all
respects by the law of the State of Ohio, shall be binding upon
Harrison's assigns, heirs, and legal representatives and shall
inure to the benefit of the Company, its successors and assigns.
The Company and Harrison 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.
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands
as of the date first above written.
BALDWIN PIANO & ORGAN COMPANY
Attest:
_______________________ By: GEORGE E. CASTRUCCI
George E. Castrucci
"Harrison"
R.S. HARRISON
EXHIBIT A
CONSULTING TERMS AND CONDITIONS
1. CONSULTING SERVICES.
(A) During the Term of the consulting period, Harrison
shall provide such advisory and consultative services relating to
the business conducted by the Company or any company or business
entity affiliated with the Company as may, from time to time, be
requested by the Board of Directors or Chief Executive Officer of
the Company. Consultant shall use his best efforts to perform his
duties and obligations hereunder.
(B) In his capacity as a consultant, Harrison shall make
himself available for telephone conferences, meetings, and such
other consulting activities as may be reasonably requested by the
Company. Harrison shall perform any consulting services hereunder
for the Company at such times and places as may be requested.
Harrison shall confer with the Company from time to time as regards
his projected work schedule. Harrison will be available to the
Company for consulting purposes on such days and at such times as
the parties may reasonably agree. The intent of the parties is
that Consultant could be required to expend a maximum of
approximately 50% of the time which an officer of the Company would
normally spend in consulting services in the first year of the
consulting relationship; approximately 35% in the second year; and
approximately 15% in the third year. This anticipated work
schedule may be altered, however, as circumstances might dictate
and upon advance notice by either party.
<PAGE>
2. TERM - TERMINATION.
(A) Subject to the termination provisions set forth
below, the term of the consulting relationship shall be for three
(3) years from the commencement date (the "Term"). The
commencement date shall be the date of Harrison's termination of
employment with the Company.
(B) In the event of a material breach by either party of
the Agreement during the Term of the consulting period, the non-
breaching party shall have the right to terminate the consulting
relationship upon fifteen (15) days written notice to the breaching
party, unless such breach is cured by the breaching party within
such fifteen (15) day period.
3. COMPENSATION AND BENEFITS.
(A) Compensation. During the Term, the Company shall
pay Harrison, as compensation for the services performed by
Harrison pursuant to this Exhibit A, an aggregate base sum of
$685,701, increased at an annual rate of 7.7% commencing December
9, 1994 and concluding on the commencement date of the consulting
relationship.
During the first year of the Term, Harrison shall be paid an
amount equal to 50% of the total sum due hereunder. During the
second year of the Term, Harrison shall be paid an amount equal to
35% of the total sum due hereunder. During the final year of the
Term, Harrison shall be paid an amount equal to 15% of the total
sum due hereunder.
Such yearly compensation shall be payable by the Company to
Harrison in twelve equal monthly installments, in arrears on or
before the last day of the month for which such installment payment
is being made.
In the event of Harrison's death during the Term of the
consulting relationship, all compensation due to Harrison under
this Exhibit A shall be accelerated and paid to Harrison's
designated beneficiary, if any, and if none, then to Harrison's
estate.
(B) Deferred Compensation. Notwithstanding the termination
of the consulting relationship, for whatever reason, Harrison, or
his designated beneficiary, shall continue to receive the Deferred
Compensation specified by paragraph 6 of the Agreement.
(C) Life Insurance. During the Term of this Agreement, the
Company shall provide Harrison with the same life insurance
coverage as provided on the last date of his employment with the
Company.
(D) Other Benefits. During the Term of the consulting
relationship, and for at least 2 years thereafter, the Company
agrees to provide to Harrison all other benefits normally provided
by the Company to its highest ranking officers, including the
following:
<PAGE>
(i) a Company owned or leased automotive vehicle
comparable to the vehicle utilized by Harrison as of the date of
termination of his employment and the Company shall pay reasonable
costs of operation, maintenance and insurance related thereto;
(ii) an office and the Company shall pay all reasonable
office overhead, including necessary equipment, furnishings (all of
which shall be owned by the Company) and a full time secretary
during the first year of the Term and a part time (three days per
week) for the second and final year of the Term. Such secretary
shall be an employee of the Company and shall receive the same
benefits as other employees of the Company and shall be available
to do work for the Company if not fully utilized by Harrison in
assisting Harrison in rendering services pursuant hereto; and
(iii) reimbursement for all travel and out-of-pocket
expenses reasonably incurred by Harrison in connection with the
performance of his obligations hereunder, upon presentation of
expense statements or receipts or such other supporting
documentation as the Company may reasonably require.
4. INDEPENDENT CONTRACTOR. During the Term of the
consulting relationship Harrison shall be treated as an independent
contractor, and not an employee, of the Company. Except as
otherwise expressly provided for herein, Harrison shall not be
covered by, or be entitled to a benefit under, any retirement or
other benefit plan of the Company with respect to his services or
compensation hereunder. Harrison shall pay any taxes imposed with
respect to his compensation under this Exhibit A. Harrison
acknowledges that as a consultant he shall have no power or
authority to bind the Company or enter into any commitment on
behalf of the Company, without the Company's express written
consent.
Exhibit 10.38
SECOND AMENDMENT
SECOND AMENDMENT (the "Second Amendment") dated
as of December 1, 1994 to Purchase and Administration
Agreement dated as of October 1, 1990, as amended by a
First Amendment dated as of February 15, 1994 (as amended,
the "Purchase and Administration Agreement") among Retailer
Funding Corporation (the "Company"), Keyboard Acceptance
Corporation (formerly BPO Finance Corporation) (the
"Seller") and Baldwin Piano & Organ Company (the "Parent")
to which General Electric Capital Corporation ("GECC") has
joined as a consenting party. Except as otherwise defined
herein, capitalized terms used herein and defined in the
Purchase and Administration Agreement shall be used herein
as so defined.
W I T N E S S E T H :
_ _ _ _ _ _ _ _ _ _
WHEREAS, the Company, the Seller and the Parent
have entered into the Purchase and Administration Agreement
and now desire to amend certain of the provisions thereof:
NOW, THEREFORE, it is agreed:
1. Section 101 of the Purchase and
Administration Agreement is hereby amended by deleting the
definition of "Commitment" set forth therein and
substituting in place therefor the following:
"Commitment" shall mean the obligation of GECC to
make Loans to the Company with respect to the Seller in a maximum
outstanding principal amount equal to $77,000,000, as such amount
may be terminated or reduced from time to time pursuant to Section
4.02 of the Liquidity Agreement.
2. The definition of "Wind-Down Date" in
Section 101 of the Purchase and Administration Agreement is
hereby amended by deleting clause (iv) thereof and
substituting in place therefor the following:
"(iv) the first Settlement Date on which the
Unpaid Balance of the Receivables exceeds $82,000,000."
3. The Seller hereby confirms its obligation
pursuant to Section 712 of the Purchase and Administration
Agreement to pay all reasonable costs and expenses incurred
by the Company or GECC in connection with the preparation,
execution and delivery of this Second Amendment, including
but not limited to the reasonable fees and expenses of
counsel to the Company and GECC and any rating agency
charges in connection with this Second Amendment.
<PAGE>
4. This Second Amendment is limited as
specified and shall not constitute a modification,
acceptance or waiver of any other provision of the Purchase
and Administration Agreement.
5. This Second Amendment shall become effective
(the "Amendment Effective Date") on the date on which the
Company, the Seller, the Parent and GECC shall have each
executed and delivered to the other a counterpart of this
Second Amendment.
6. From and after the Amendment Effective Date,
all references to the Purchase and Administration Agreement
in the Purchase and Administration Agreement, each of the
other Company Documents and each of the Seller Documents
shall be deemed to be references to the Purchase and
Administration Agreement as amended hereby.
7. This Second Amendment may be executed on
separate counterparts by the parties hereto, each of which
when so executed and delivered shall be an original, but
all of which shall constitute one and the same instrument.
8. This Second Amendment and the rights and
obligations hereunder shall be construed in accordance with
and governed by the laws of the State of New York.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto
has caused a counterpart of this Second Amendment to be
duly executed and delivered as of the date first above
written.
RETAILER FUNDING CORPORATION
By LANNHI TRAN
--------------------------------
Title: Vice President
KEYBOARD ACCEPTANCE CORPORATION
(formerly BPO Finance Corporation)
By HARRY F. FORBES, JR.
--------------------------------
Title: Vice President
BALDWIN PIANO & ORGAN COMPANY
By HARRY F. FORBES, JR.
--------------------------------
Title: Vice President
Consented and agreed to:
GENERAL ELECTRIC CAPITAL CORPORATION,
as Collateral Agent
By DANIEL PORTER
---------------------------------
Title: Vice President
Exhibit 10.39
INDEMNIFICATION AGREEMENT
-------------------------
INDEMNIFICATION AGREEMENT ("Agreement") dated as of
December 1, 1994, among General Electric Capital Corporation, a
corporation organized under the laws of the State of New York (the
"Administrator"), Lehman Commercial Paper, Inc., a corporation
organized under the laws of the State of Delaware ("Lehman") and
Keyboard Acceptance Corporation (formerly BPO Finance Corporation),
a corporation organized under the laws of the State of Delaware
(the "Seller").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, Retailer Funding Corporation (the "Company") has
entered into a Liquidity Agreement dated as of October 1, 1990, as
amended by the First Amendment dated as of February 15, 1994 (as
amended, the "Liquidity Agreement") with Administrator, pursuant to
which it is contemplated that the Company issue its commercial
paper notes (the "Commercial Paper") in the commercial paper market
and obtain loans from time to time from the Administrator the
proceeds thereof to be used to purchase certain Eligible
Receivables (as defined in the Liquidity Agreement) from the
Seller; and
WHEREAS, the Company, the Seller and Baldwin Piano &
Organ Company("Baldwin") have entered into a Purchase and
Administration Agreement dated as of October 1, 1990, as amended by
the First Amendment dated as of February 15, 1994 and the Second
Amendment dated as of December 1, 1994 (as amended, the "Purchase
Agreement"), providing, among other things, for the purchase by the
Company of the Eligible Receivables; and
WHEREAS, the Company has requested that the Administrator
provide advice and assistance to the Company and perform various
services for the Company; and
WHEREAS, the Company and the Administrator have entered
into an Administration Agreement dated as of June 28, 1988, (the
"Administration Agreement") pursuant to which the Administrator has
agreed to perform various financial, statistical, accounting and
other services for the Company; and
WHEREAS, the Company and Lehman have entered into a
Commercial Paper Dealer Agreement dated as of December 9, 1994 (the
"Commercial Paper Dealer Agreement"), pursuant to which Lehman has
agreed to act as the Company's commercial paper dealer.
NOW, THEREFORE, the parties hereto, intending to be
legally bound and in consideration of the premises and the mutual
covenants herein contained, agree as follows:
1. Representations, Warranties and
Agreements of the Seller.
------------------------
<PAGE>
The Seller represents, warrants, covenants and agrees as
follows:
(a) The Seller repeats and reaffirms to the
Administrator and Lehman the representations and warranties of the
Seller set forth in Section 301 of the Purchase Agreement and
represents and warrants that such representations and warranties
are true and correct as of the date hereof.
(b) Each issuance of Commercial Paper for the benefit of
the Seller shall be deemed a representation and warranty by the
Seller to the Administrator and Lehman, as of the date thereof,
that the representations and warranties of the Seller set forth in
Section 301 of the Purchase Agreement and in this Section 2 are
true and correct as if made on the date of delivery.
(c) The Seller will not permit to become effective any
amendment, supplement, waiver or consent to or under the Purchase
Agreement or the Consent and Acknowledgment to Security Agreement
without giving the Administrator and Lehman notice of any such
written amendment, supplement, waiver or consent thereto or
thereunder prior to the effective date of the same.
(d) The Seller will comply fully with the covenants and
agreements made by it in Article III of the Purchase Agreement and
further agrees to furnish promptly to the Administrator and Lehman
copies of all notices, information and other documents given or
delivered to the Company by the Seller under the Purchase
Agreement.
2. Indemnification.
---------------
The Seller agrees to assume liability for, and to
indemnify, protect, save and keep harmless, the Administrator,
Lehman, each individual, corporation, partnership, trust
association or other entity ("Person") controlling the
Administrator or Lehman, any affiliate of any such Person or the
Administrator or Lehman and their respective directors, officers,
incorporators, shareholders, partners, trustees, employees and
agents (all of such persons, hereinafter the"Indemnitees") from and
against any and all claims, liabilities, losses (other than loss of
profit), obligations, damages, penalties, causes of action, suits,
out-of-pocket costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) or judgments of whatever
kind and nature, imposed upon, incurred by or asserted against the
Indemnitees, which arise out of or are based upon (a) the breach by
the Seller of any representation and warranty of the Seller in this
Agreement, the Purchase Agreement or the Consent and Acknowledgment
to Security Agreement or (b) the breach by the Seller of any
agreement, undertaking or covenant of the Seller contained in this
Agreement, the Purchase Agreement or the Consent and Acknowledgment
to Security Agreement.
<PAGE>
If any action, suit or proceeding arising from any of the
foregoing is brought against any of the Indemnitees, the Seller
will, if requested in writing within a reasonable time to do so, or
may, at its option, and at its own expense, resist and defend such
action, suit or proceeding or cause the same to be resisted and
defended by counsel designated by the Seller (which counsel shall
be reasonably satisfactory to such Indemnitees) and regardless of
whether the Seller is a party to the same, pay all reasonable
out-of-pocket costs and expenses of such defense (including,
without limitation, reasonable attorneys' fees and expenses).
It is agreed, however, that the obligations of the Seller
under this Section 3 shall not extend (i) to any liability of any
Indemnitee arising out of (x) any untrue statement by any
Indemnitee (whether written or oral) of a material fact in
connection with the issue and sale of the Commercial Paper, or any
omission by any Indemnitee to state a material fact necessary to
make any statement by any Indemnitee, in light of the circumstances
under which it was made, not misleading, in connection with the
issue and sale of the Commercial Paper, or (y) such Indemnitee's
gross negligence, or (ii) to Lehman's wilful misconduct or gross
negligence in the performance of its obligations under the
Commercial Paper Dealer Agreement or to any failure of Lehman to
perform its obligations under the Commercial Paper Dealer Agreement
or to any liability arising out of a breach by Lehman of its
obligations under the Commercial Paper Dealer Agreement.
In order to provide for just and equitable contribution
in circumstances in which the indemnification provided for in this
Section 3 is for any reason held unavailable, the Seller and
Indemnitees sought to be charged with any liability shall
contribute to the aggregate costs of satisfying such liability in
the proportion of their respective economic interests. The
relative economic interests of the Seller, on the one hand, and any
such Indemnitee, on the other hand, shall be deemed to be in the
same proportion as the net total proceeds of the sale of Commercial
Paper paid to such Seller for Eligible Receivables bear to the
total commissions, discounts and other consideration received in
connection therewith by any such Indemnitee with respect to such
Commercial Paper.
The obligations of the Seller under this Section 3 shall
survive any termination of this Agreement, in whole or in part.
3. Governing Law.
-------------
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
4. Entire Agreement.
----------------
This Agreement constitutes the entire agreement between
the parties hereto with respect to the matters covered hereby and
supersedes all prior agreements and understandings between the
parties.
<PAGE>
5. Amendment; Successors; Counterparts.
-----------------------------------
(a) The terms of this Agreement shall not be waived,
altered, modified, amended or supplemented in any manner whatsoever
except by written instrument signed by both the parties hereto.
(b) This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors.
(c) This Agreement may be executed in several
counterparts, each of which shall be deemed an original hereof.
6. Notices.
-------
All notices required under the terms and provisions
hereof shall be in writing, either delivered by hand, by mail
(postage prepaid), or by telecopier or prepaid telegram, and any
such notice shall be effective when received at the address
specified below:
If to the Seller:
Keyboard Acceptance Corporation
422 Wards Corner Road
Loveland, Ohio 45140
Attention: Harry F. Forbes, Jr.
---------
Telecopier No. (513) 576-4546
If to the Administrator:
General Electric Capital Corporation
Monogram Retailer Credit Services, Inc.
535 West Chicago Avenue, 16th Floor
Chicago, Illinois 60610
Attention: Chris Limoges
---------
Facsimile No.: (312) 467-6965
with copy to:
General Electric Capital Corporation
2323 N. Central Expressway, Suite 160
Richardson, Texas 75080
Attention: Harold Goehl
---------
Facsimile: (214) 907-4912
<PAGE>
If to Lehman:
Lehman Commercial Paper, Inc.
3 World Financial Center
New York, New York 10285
Attention: Commercial Paper Product
--------- Management
Facsimile No.: (212) 528-6925
or if to any of the foregoing parties, or their successors, at such
other address as such party or successor may designate from time to
time by notice duly given in accordance with the terms of this
Section 7 to the other parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above
written:
GENERAL ELECTRIC CAPITAL
CORPORATION
By DANIEL PORTER
-----------------------------
Title: Vice President
LEHMAN COMMERCIAL PAPER, INC.
By GERALD C. RYAN
-----------------------------
Title: Sr. Vice President
KEYBOARD ACCEPTANCE CORPORATION
By HARRY F. FORBES, JR.
-----------------------------
Title: Vice President
Exhibit 10.40
AMENDMENT #4 TO REVOLVING CREDIT AND SECURITY AGREEMENT
-------------------------------------------------------
AMENDMENT #4 (this "Amendment"), dated as of September
30, 1994, to that certain Revolving Credit and Security agreement,
dated as of June 15, 1984 and Restated as of October 25, 1990,
between Baldwin Piano & Organ Company and General Electric Capital
Corporation (as heretofore amended, the "Agreement," terms not
defined herein being used herein as therein defined).
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Borrower and the Lender wish to amend the terms
of the Agreement as set forth herein;
NOW THEREFORE, in consideration of the premises and
mutual covenants contained herein, the parties hereto hereby agree
as follows;
SECTION 1. Amendment. Section 6(d) of the Agreement is
hereby amended by deleting the words "Within 90 days prior to the
beginning of each Fiscal Year" and substituting therefor the words
"By no later than December 15 of each year".
SECTION 2. Conditions of Effectiveness. Section 1 of
this Amendment shall become effective when, and only when, Lender
shall have received a copy of this Amendment executed by each of
the parties hereto.
SECTION 3. Representations and Warranties. Borrower
represents and warrants to Lender as follows:
(a) All of the representations and warranties of
Borrower contained in the Agreement and in each of the other Loan
Documents are true and correct on the date hereof, except to the
extent any such representation or warranty expressly relates to an
earlier date. No Event of Default has occurred and is continuing.
(b) The execution, delivery and performance by Borrower
of this Amendment have been duly authorized by all necessary or
proper corporate action and do not require the consent or approval
of any Person which has not been obtained.
(c) This Amendment has been duly executed and delivered
by Borrower and constitutes a legal, valid and binding obligation
of Borrower, enforceable against Borrower in accordance with its
terms.
<PAGE>
SECTION 4. Reference to the Effect on the Loan
Documents.
(a) Upon the effectiveness of Section 1 hereof, on and
after the date hereof, each reference in the Agreement to "this
Agreement," "hereunder," "hereof," "herein," or words of like
import, and each reference in the other Loan Documents to the
Agreement shall mean and be a reference to the Agreement as amended
hereby.
(b) Except as specifically amended herein, the
Agreement
and all other Loan Documents shall remain in full force and effect
and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate
as a waiver of any right, power or remedy of Lender under any of
the Loan Documents, not constitute a waiver of any provision of any
of the Loan Documents.
SECTION 5. Costs and Expenses. Borrower hereby agrees
to pay on demand all costs and expenses of Lender in connection
with the preparation, execution and delivery of this Amendment,
including, without limitaion, the reasonable fees and out-of-pocket
expenses of counsel for Lender with respect thereto.
SECTION 6. Execution in Counterparts. This Amendment
may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which, when so
executed and delivered, shall be deemed to be an original and all
of which taken together shall constitute but one and the same
instrument.
SECTION 7. Governing Law. This Amendment shall be
governed by and construed in accordance with the laws of the State
of New York applicable to contracts made and performed in New York,
without regard to the principles thereof regarding conflict of law.
SECTION 8. Headings. Section headings in this Amendment
are included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose.
GENERAL ELECTRIC CAPITAL CORPORATION
By: LAWRENCE J. CANNARIATO
Title: Attorney in Fact
BALDWIN PIANO & ORGAN COMPANY
By: HARRY F. FORBES, JR.
Title: Vice President
Exhibit 11.1
STATEMENT REGARDING COMPUTATIONS OF EARNINGS PER SHARE
Year ended December 31, 1994:
----------------------------
Net earnings ...................... $ 344,708
==========
Average number of
common shares outstanding ....... 3,415,262
=========
Net earnings per share ............ $ .10
=====
Year ended December 31, 1993:
----------------------------
Earnings before cumulative
effects of changes in
accounting principles ........... $6,164,949
Cumulative effect of changes in
accounting for postretirement
and postemployment benefits ..... (1,604,000)
----------
Net earnings ...................... $4,560,949
==========
Average number of
common shares outstanding ....... 3,408,604
=========
Earnings per share:
Before cumulative effects
of changes in accounting
principles....................... $1.81
Cumulative effect of changes in
accounting for postretirement
and postemployment benefits ..... (.47)
-----
Net earnings per share .......... $1.34
=====
Year ended December 31, 1992:
----------------------------
Net earnings ...................... $5,935,700
==========
Average number of
common shares outstanding ....... 3,399,144
=========
Net earnings per share ............ $1.75
=====
Exhibit 13.1
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
OF BALDWIN PIANO & ORGAN COMPANY:
We have audited the accompanying consolidated balance sheets of Baldwin Piano
& Organ Company and subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of earnings, shareholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1994.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Baldwin
Piano & Organ Company and subsidiaries as of December 31, 1994 and 1993, and
the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1994, in conformity with
generally accepted accounting principles.
As discussed in notes 1 and 7 to the consolidated financial statements, the
Company changed its method of accounting for income taxes in 1993 to adopt
the provisions of the Financial Accounting Standards Board's Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes.
As discussed in notes 1 and 10, the Company also adopted the provisions of
the Financial Accounting Standards Board's SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions" and SFAS No. 112,
"Employers' Accounting for Postemployment Benefits" in 1993.
Cincinnati, Ohio KPMG Peat Marwick LLP
February 28, 1995
<PAGE>
<TABLE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Years ended December 31, 1994, 1993 and 1992
<CAPTION>
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
Net sales $ 122,346,862 $ 120,657,455 $ 110,076,904
Cost of goods sold 97,029,254 89,970,702 79,637,060
------------- ------------- -------------
Gross profit 25,317,608 30,686,753 30,439,844
Income on the sale of installment receivables 4,987,441 5,746,125 5,256,583
Interest income on installment receivables 564,085 443,431 308,220
Other operating income, net 3,340,843 3,530,761 3,803,228
------------- ------------- -------------
34,209,977 40,407,070 39,807,875
Operating expenses:
Selling, general and administrative 30,246,651 26,187,629 25,118,465
Provision for doubtful accounts 1,303,876 1,702,234 2,053,189
------------- ------------- -------------
Operating profit 2,659,450 12,517,207 12,636,221
Interest expense 2,100,742 2,232,258 2,610,521
------------- ------------- -------------
Earnings before income taxes and cumulative
effects of changes in accounting principles 558,708 10,284,949 10,025,700
Income taxes 214,000 4,120,000 4,090,000
------------- ------------- -------------
Earnings before cumulative effects of changes
in accounting principles 344,708 6,164,949 5,935,700
Cumulative effect of changes in accounting for
postretirement and postemployment benefits - (1,604,000) -
------------- ------------- -------------
Net earnings $ 344,708 $ 4,560,949 $ 5,935,700
============= ============= =============
Earnings per share:
Before cumulative effects of changes in
accounting principles $ .10 $ 1.81 $ 1.75
Cumulative effect of changes in accounting for
postretirement and postemployment benefits - (.47) -
------------- ------------- -------------
Net earnings per share $ .10 $ 1.34 $ 1.75
============= ============= =============
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended December 31, 1994, 1993, and 1992
<CAPTION>
Additional Cost of
Common paid-in Retained Treasury
stock capital earnings shares Total
-------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1991 $ 41,479 $ 11,900,510 $ 33,476,138 $ (6,191,316) $ 39,226,811
Net earnings - - 5,935,700 - 5,935,700
-------- ------------ ------------ ------------ -------------
Balance, December 31, 1992 41,479 11,900,510 39,411,838 (6,191,316) 45,162,511
Proceeds from exercise of stock options 160 68,103 - - 168,263
Net earnings - - 4,560,949 - 4,560,949
-------- ------------ ------------ ------------ -------------
Balance, December 31, 1993 41,639 12,068,613 43,972,787 (6,191,316) 49,891,723
Proceeds from exercise of stock options 10 9,490 - - 9,500
Purchase of 948 shares for treasury - - - (16,116) (16,116)
Redemption of stock options - (75,751) - - (75,751)
Net earnings - - 344,708 - 344,708
-------- ------------ ------------ ------------ -------------
Balance, December 31, 1994 $ 41,649 $ 12,002,352 $ 44,317,495 $ (6,207,432) $ 50,154,064
======== ============ ============ ============ =============
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1994 and 1993
<CAPTION>
ASSETS 1994 1993
------------ -------------
<S> <C> <C>
Current assets:
Cash $ 344,389 $ 1,203,199
Receivables, net 12,860,167 10,162,811
Inventories 47,036,258 45,077,365
Deferred income taxes 5,095,088 4,180,956
Other current assets 3,461,678 2,280,936
------------ -------------
Total current assets 68,797,580 62,905,267
------------ -------------
Installment receivables, less current portion 8,621,000 6,920,000
Property, plant and equipment, net 13,854,980 13,664,099
Deferred income taxes 1,193,441 813,681
Other assets 4,993,271 5,625,368
------------ -------------
Total assets $ 97,460,272 $ 89,928,415
============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 16,746,319 $ 11,299,100
Accounts payable 7,217,902 5,679,988
Income taxes payable 1,521,355 2,513,358
Accrued liabilities 6,871,317 7,471,833
------------ -------------
Total current liabilities 32,356,893 26,964,279
Long-term debt, less current portion 5,000,000 4,384,464
Other liabilities 9,949,315 8,687,949
------------ -------------
Total liabilities 47,306,208 40,036,692
Shareholders' equity:
Common stock 41,649 41,639
Additional paid-in capital 12,002,352 12,068,613
Retained earnings 44,317,495 43,972,787
------------ -------------
56,361,496 56,083,039
Less cost of treasury shares (6,207,432) (6,191,316)
------------ -------------
Total shareholders' equity 50,154,064 49,891,723
Commitments and contingent liabilities
------------ ------------
Total liabilities and shareholders' equity $ 97,460,272 $ 89,928,415
============ =============
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1994, 1993 and 1992
<CAPTION>
INCREASE (DECREASE) IN CASH 1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 344,708 $ 4,560,949 $ 5,935,700
Adjustments to reconcile net earnings to net cash
(used in) provided by operating activities:
Cumulative effect of accounting changes - 1,604,000 -
Depreciation and amortization 2,553,594 2,676,775 2,678,915
Gain on sale of land (420,045) - -
Provision for doubtful accounts 1,303,876 1,702,234 2,053,189
Deferred income taxes (1,293,892) 313,666 (1,114,347)
Change in assets and liabilities:
Trade receivables (3,190,767) (2,779,252) (1,853,142)
Inventories (1,958,893) 2,866,634 (391,705)
Other current assets (1,180,742) 222,059 (1,369,543)
Other assets 331,854 206,601 (383,252)
Accounts payable, accrued liabilities
and other liabilities 2,198,764 991,193 1,364,201
Income taxes payable (992,003) (1,261,293) 881,623
------------ ------------ ------------
Net cash (used in) provided by
operating activities (2,303,546) 11,103,566 7,801,639
------------ ------------ ------------
Cash flows from investing activities:
Additions to property, plant and equipment (2,502,572) (2,090,492) (1,372,298)
Proceeds from sale of land 478,385 - -
------------ ------------ ------------
Net cash used in investing activities (2,024,187) (2,090,492) (1,372,298)
------------ ------------ ------------
Cash flows from financing activities:
Installment receivables written (59,858,828) (48,589,373) (47,110,781)
Installment receivables liquidated 3,750,536 4,284,376 4,572,527
Proceeds from sale of installment receivables 53,596,827 43,574,151 41,512,865
Purchase of shares for treasury (16,116) - -
Redemption of stock options (75,751) - -
Net borrowing (principal payments) on long-term debt 6,062,755 (8,284,664) (5,550,702)
Proceeds from exercise of stock options 9,500 168,263 -
------------ ------------ ------------
Net cash provided by (used in) financing
activities 3,468,923 (8,847,247) (6,576,091)
------------ ------------ ------------
Net (decrease) increase in cash (858,810) 165,827 (146,750)
Cash at beginning of year 1,203,199 1,037,372 1,184,122
------------ ------------ ------------
Cash at end of year $ 344,389 $ 1,203,199 $ 1,037,372
============ ============ ============
<PAGE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 1,943,057 $ 2,042,064 $ 2,370,630
Income taxes $ 2,555,566 $ 5,092,813 $ 4,176,817
============ ============ ============
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1994, 1993 and 1992
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Baldwin Piano & Organ Company (Company) and all of its subsidiaries. All
material intercompany balances and transactions have been eliminated.
REVENUE RECOGNITION
The Company ships keyboard instruments and clocks to its dealer network on
a consignment basis. Accordingly, revenue is recognized at the time the
dealer sells the instrument to a third party. Wurlitzer and the electronic
contract business transfer title and recognize revenue at the time of
shipment to their dealers and customers, respectively.
The Company charges a monthly display fee on all consigned inventory held
by dealers longer than ninety days. This display fee, on an annual basis,
ranges from 10.5% to 15.5% of the selling price of such inventory to the
dealer. Display fee income comprises the majority of the amount reported
in the Consolidated Statements of Earnings as "Other operating income, net."
INSTALLMENT RECEIVABLES
Installment receivables are recorded at the principal amount of the
contracts. Interest on the contracts is recorded as income using the
interest method.
The Company's wholly-owned finance subsidiary (Finance) has entered into
agreements with an independent entity to sell substantially all of its
installment receivable contracts up to a maximum of $82,000,000. The buyer
of the installment receivables earns interest on the outstanding principal
balance of the contracts based upon a floating interest rate provision.
Finance continues to service all installment receivables sold. Over the
lives 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 under the floating interest rate provision is remitted
to Finance as a service fee. This amount is recorded in the Consolidated
Statements of Earnings as "Income on the sale of installment receivables."
ALLOWANCE FOR DOUBTFUL ACCOUNTS
An allowance for losses on receivables is provided through a charge to
operations based on estimates of possible losses. Accounts deemed to be
uncollectable are charged and recoveries credited to the allowance for
doubtful accounts.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the last-in first-out (LIFO) method for a substantial portion of
inventories.
<PAGE>
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation, which
includes amortization on capitalized leases, is provided by the straight-
line method over the estimated useful lives of the related property. The
estimated useful lives are principally as follows:
DESCRIPTION YEARS
----------- -----
Buildings 25 - 35
Building equipment 5 - 10
Machinery and equipment 5 - 10
Leasehold improvements are amortized over the remaining life of the related
leases. The cost of maintenance, repairs, minor renewals and betterments of
property, plant and equipment is charged to expense in the year incurred.
Major expenditures for renewals and betterments are capitalized and
depreciated over their estimated useful lives.
INCOME TAXES
Effective January 1, 1993, the Company implemented the provisions of
Statement of Financial Accounting Standards No. 109 (FAS 109), "Accounting
for Income Taxes." FAS 109 requires a change from the deferred method of
accounting for income taxes under Accounting Principles Board (APB) Opinion
11 to the asset and liability method of accounting for income taxes. Under
the asset and liability method of FAS 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under FAS 109, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized in
earnings in the period that includes the enactment date.
RETIREMENT PLANS
Defined contribution and defined benefit plans cover substantially all
hourly and salaried employees located in the United States. The Company
also maintains a deferred compensation plan for certain key employees. The
Company's cost of providing these retirement plans is recognized as a
charge to income in the year the cost is incurred.
POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
Effective January 1, 1993, the Company implemented 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." These
standards require the Company to charge the expected cost of retiree
health and certain postemployment benefits to expense during the years
employees render service. In prior years, the Company recognized these
benefits on a pay-as-you-go basis.
<PAGE>
REMEASUREMENT OF FOREIGN CURRENCIES
The financial statements of foreign subsidiaries are remeasured into U.S.
dollars at the current exchange rates except inventories, sales, cost of
goods sold and expenses which are remeasured at average exchange rates
during each reporting period. Adjustments resulting from the remeasurement
of financial statements are recorded in the results of operations.
INTEREST RATE AGREEMENTS
Premiums paid for interest rate cap and swap agreements are amortized to
interest expense over the term of the caps and swaps. Unamortized premiums
are included in other assets on the balance sheet. Amounts receivable under
cap and swap agreements are accrued as a reduction of interest expense.
EARNINGS PER SHARE
Net earnings per share is computed by dividing net earnings by the weighted
average number of shares of common stock outstanding during the year
(3,415,262 shares for 1994, 3,408,604 shares for 1993 and 3,399,144 shares
for 1992). No effect has been given to options outstanding under the
Company's stock option plans as no material dilutive effect would result
from the issuance of these shares.
(2) RECEIVABLES
Receivables consist of the following:
1994 1993
------------ -------------
Trade $ 10,690,265 $ 8,631,609
Installment - owned 6,652,572 5,463,915
Holdback on accounts sold 7,847,932 6,711,903
Other 589,965 385,424
------------ -------------
25,780,734 21,192,851
Less allowance for
doubtful accounts 4,299,567 4,110,040
------------ -------------
Net receivables 21,481,167 17,082,811
Less noncurrent portion 8,621,000 6,920,000
------------ -------------
Net current receivables $ 12,860,167 $ 10,162,811
============ =============
Installment receivables owned by Finance are net of unearned interest
charges of $914,866 and $767,091 at December 31, 1994 and 1993, respectively.
See Note 5 for additional information on installment receivables and Note 6
for information regarding the use of receivables to secure borrowings.
<PAGE>
(3) INVENTORIES
Inventories consist of the following:
1994 1993
------------- --------------
FIFO cost:
Raw materials $ 11,790,577 $ 9,930,923
Work-in-process 7,464,584 7,081,883
Finished goods 38,325,314 36,149,809
57,580,475 53,162,615
------------- --------------
Excess of FIFO cost over
LIFO inventory value (10,544,217) (8,085,250)
------------- --------------
$ 47,036,258 $ 45,077,365
============= ==============
At December 31, 1994, approximately 76% of the Company's inventories were
valued on the LIFO method. Net earnings for 1994, 1993 and 1992 are
approximately $1,475,000 ($.43 per share), $754,000 ($.22 per share) and
$749,000 ($.22 per share), respectively, less than would have been reported
had the FIFO method been used.
During the past three years, certain inventories were reduced, resulting in
the liquidation of LIFO inventory layers carried at lower costs prevailing
in prior years as compared with the current cost of inventories. The effect
of these inventory liquidations was to increase net earnings for 1994, 1993
and 1992 by approximately $187,000 ($.05 per share), $694,000 ($.20 per
share) and $519,000 ($.15 per share), respectively.
See Note 6 for information regarding the use of inventories to secure
borrowings.
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
1994 1993
------------ ------------
Land $ 413,865 $ 472,205
Buildings and building
equipment 8,211,444 7,743,880
Machinery and equipment 19,154,232 17,698,131
Leasehold improvements 675,743 872,073
------------ ------------
28,455,284 26,786,289
Less accumulated
depreciation and
amortization 14,600,304 13,122,190
------------ ------------
$ 13,854,980 $ 13,664,099
============ ============
See Note 6 for information regarding the use of property, plant and
equipment to secure borrowings.
<PAGE>
(5) DISCLOSURE REGARDING FINANCE SUBSIDIARY
The Company sells certain of its musical products to customers on the
installment method. The Company has a continuing agreement to sell all of
its installment receivables to Finance. Also, Finance purchases installment
receivables for musical products from independent retail dealers.
In December 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 $82,000,000 from $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 lives 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 and reported
as "Income on the sale of installment receivables" in the Consolidated
Statements of Earnings.
In February 1994, Finance entered into a five year interest rate modification
agreement in order to reduce the potential impact of increases in interest
rates on $20,000,000. The agreement entitles Finance to receive from the
counterparty, on a monthly basis, 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%. Finance is exposed to credit
losses in the event of nonperformance by the counterparty to its interest
rate swap, but has no off-balance sheet credit risk of accounting loss.
Finance anticipates, however, that the counterparty will be able to fully
satisfy their obligations under the contract. Finance does not obtain
collateral or other security to support financial instruments subject
to credit risk but monitors the credit standing of the counterparty.
The installment contracts are written generally at fixed rates ranging
from 12% to 16% with terms extending over three to five years. The interest
retained by the buyer for 1994, 1993 and 1992 represented an average
interest rate of 5.9%, 4.3% and 4.9%, respectively.
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 10% holdback.
At December 31,1994, the balance of installment receivables on which Finance
remains contingently liable, is as follows:
Principal balance of
installment receivables sold $ 76,116,607
Less related holdback 7,847,932
-------------
$ 68,268,675
=============
<PAGE>
Installment receivables are secured by the musical products. These
receivables, other than those originated by the Company's retail stores,
are accepted with recourse to the Company's dealers if the related instrument
is repossessed. Management believes an adequate allowance has been provided
for any uncollectable receivables.
Finance has guaranteed the Company's revolving line of credit. Also, under
the covenants of the Company's debt agreements, Finance can only pay
dividends or repurchase its own stock to the extent its net worth exceeds
$4,000,000. During 1993, Finance declared and paid a dividend of $10,000,000
to the Company.
Condensed balance sheets of Finance are as follows:
ASSETS 1994 1993
------------ ------------
Installment receivables owned $ 6,652,572 $ 5,463,915
Holdback on accounts sold 7,847,932 6,711,903
Allowance for doubtful
accounts (487,699) (554,478)
------------ ------------
Installment receivables, net 14,012,805 11,621,340
Deferred income taxes 1,006,536 1,239,186
Other assets 2,823,292 1,872,629
------------ ------------
Total assets $ 17,842,633 $ 14,733,155
============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY
Other liabilities $ 4,569,732 $ 4,829,260
Due to parent 6,916,216 5,556,007
Shareholder's equity 6,356,685 4,347,888
------------ ------------
Total liabilities and
shareholder's equity $ 17,842,633 $ 14,733,155
============ ============
Condensed statements of earnings of Finance are as follows:
1994 1993 1992
------------ ------------ ------------
Income on
installment
receivables:
Sold $ 4,987,441 $ 5,746,125 $ 5,256,583
Owned 564,085 443,431 308,220
Other operating
income 351,946 543,294 574,166
------------ ------------ ------------
Total revenue 5,903,472 6,732,850 6,138,969
<PAGE>
Expenses:
General and
admin-
istrative 2,509,811 2,195,333 2,051,657
Provisions for
doubtful
accounts 120,000 270,000 460,000
Interest 63,864 44,200 39,471
------------ ------------ ------------
Earnings before
income taxes 3,209,797 4,223,317 3,587,841
Income taxes 1,201,000 1,701,000 1,435,000
------------ ------------ ------------
Net earnings $ 2,008,797 $ 2,522,317 $ 2,152,841
============ ============ ============
(6) LONG-TERM DEBT
Long-term debt consists of the following:
1994 1993
------------ ------------
Revolving line of credit $ 16,746,319 $ 10,337,588
Term loan 5,000,000 4,571,976
Industrial Development
Bonds - 774,000
------------ ------------
21,746,319 15,683,564
Less current portion 16,746,319 11,299,100
------------ ------------
Long-term debt, less
current portion $ 5,000,000 $ 4,384,464
============ ============
In February 1994, the Company reduced the revolving line of credit (Revolver)
from $60,000,000 to $40,000,000 and extended the initial 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. Accordingly, the Revolver has been classified as current portion
of long-term debt.
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 December 31, 1994, the Company had approximately
$23,254,000 of additional borrowing available under this line of credit.
The annual rate of interest under the Revolver is 150 basis points plus the
greater of the LIBOR on three month deposits or the rate on 60 day high
grade commercial paper. The rate under the Revolver was 8.0% at December 31,
1994. The annual rate of interest under the previous Revolver was the prime
lending rate plus 50 basis points, which was 6.5% at December 31, 1993.
<PAGE>
In February 1994, the Company refinanced the term loan for $5,000,000 with
an option for an additional $5,000,000 exercisable during the first two
years. The new term loan is payable in monthly principal installments of
$75,000 beginning March 1, 1996 with a final payment of $2,300,000 on
February 28, 1999. The annual rate of interest under the new term loan is
a fixed rate of 7.1%. The annual rate of interest under the old term loan
was the prime lending rate, which was 6% at December 31, 1993.
In December 1994, the Company entered into a two year interest rate
modification agreement to reduce the potential impact of increases in
interest rates on $40,000,000 of floating-rate long-term debt. The agreement
entitles the Company to receive from the counterparty, on a monthly basis,
interest income to the extent the one-month commercial paper rate exceeds
12%. The Company is exposed to credit losses in the event of nonperformance
by the counterparty to its interest rate cap, but has no off-balance sheet
credit risk of accounting loss. The Company anticipates, however, that the
counterparty will be able to fully satisfy their obligations under the
contract. The Company does not obtain collateral or other security to
support financial instruments subject to credit risk but monitors the credit
standing of the counterparty.
Substantially all of the assets of the Company and its subsidiaries are
pledged as collateral under the various debt agreements.
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 December 31, 1994, approximately
$18,254,000 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 is in compliance with these covenants.
Scheduled long-term debt repayments relating to the term loan amount to $0
in 1995, $750,000 in 1996, $900,000 in 1997, $900,000 in 1998 and $2,450,000
in 1999.
<PAGE>
(7) INCOME TAXES
Effective January 1, 1993, the Company adopted FAS 109. The adoption of FAS
109 had no effect on the financial condition or results of operations of the
Company.
The components of income tax expense (benefit) from operations are as
follows:
1994 1993 1992
------------ ----------- -----------
Current:
Federal $ 1,594,000 $ 2,386,000 $ 3,625,000
State 158,000 743,000 907,000
Foreign 204,000 261,000 303,000
------------ ----------- -----------
1,956,000 3,390,000 4,835,000
------------ ----------- -----------
Deferred:
Federal (1,548,000) 540,000 (606,000)
State (194,000) 190,000 (139,000)
------------ ------------ -----------
(1,742,000) 730,000 (745,000)
------------ ------------ -----------
$ 214,000 $ 4,120,000 $ 4,090,000
============ ============ ===========
Earnings before income taxes and cumulative effects of changes in accounting
principles aggregated $226,000, $9,660,000 and $9,615,000 for domestic
operations and $333,000, $625,000 and $411,000 for foreign operations in
1994, 1993 and 1992, respectively.
The difference between the taxes provided from operations in the
accompanying consolidated statements of earnings and the amount which
would be computed by applying the U.S. Federal income tax rate to earnings
before income taxes and cumulative effects of changes in accounting
principles is as follows:
1994 1993 1992
---------- ----------- -----------
Computed
expected tax $ 190,000 $ 3,497,000 $ 3,409,000
State income taxes
(benefits), net
of Federal tax
benefit (24,000) 602,000 507,000
Other 48,000 21,000 174,000
---------- ----------- -----------
$ 214,000 $ 4,120,000 $ 4,090,000
========== ============ ===========
<PAGE>
The significant components of deferred income tax expense (benefit)
attributable to income from operations are as follows:
1994 1993 1992
----------- ----------- -----------
Writedown of
inventories $ (515,000) $ 394,000 $ (123,000)
Allowance for
doubtful
accounts 80,000 371,000 (39,000)
Nondeductible
accruals (997,000) 131,000 (489,000)
Other (310,000) (166,000) (94,000)
------------ ---------- -----------
Deferred tax
expense
(benefit) $ (1,742,000) $ 730,000 $ (745,000)
============ ========== ===========
Components of deferred tax balances as of December 31, 1994 are as follows:
Deferred tax assets:
Accounts receivable, principally
due to allowance for
doubtful accounts $ 2,460,000
Nondeductible accruals, principally
due to accrual for financial
reporting purposes 3,804,000
Inventories, principally due to
nondeductible reserves 1,394,000
Other 288,000
-------------
Total gross deferred tax assets 7,946,000
-------------
Deferred tax liabilities:
Property, plant and equipment,
principally due to differences
in depreciation (1,030,000)
Investments in affiliated companies,
principally due to undistributed
income of affiliated companies (262,000)
State income taxes (365,000)
-------------
Total gross deferred tax liabilities (1,657,000)
-------------
Net deferred tax assets $ 6,289,000
=============
<PAGE>
In the opinion of management, no valuation allowance related to deferred
tax assets was required at December 31, 1994. 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 continued earnings.
(8) ACCRUED AND OTHER LIABILITIES
Accrued and other liabilities consist of the following:
1994 1993
------------ -----------
Accrued liabilities:
Reserve for installment
receivables sold
with recourse $ 2,296,000 $ 2,706,000
Compensation 1,210,888 1,780,800
Other 3,364,429 2,985,033
------------ -----------
$ 6,871,317 $ 7,471,833
============ ===========
Other liabilities:
Postretirement and
postemployment $ 4,021,688 $ 2,588,459
Deferred compensation 2,413,807 2,282,248
Other 3,513,820 3,817,242
------------ -----------
$ 9,949,315 $ 8,687,949
============ ===========
(9) RETIREMENT PLANS
The Company maintains retirement plans under Section 401(k) of the Internal
Revenue Code. Under these plans, the Company makes an annual contribution
equal to 3% of compensation paid to all covered employees. To the extent
employees contribute up to 6% of their compensation, the Company will match
a portion of each dollar contributed. The Company also maintains a deferred
compensation plan for certain key employees and a defined benefit plan for
certain hourly employees. The cost of providing these retirement benefits
is as follows:
1994 1993 1992
----------- ----------- -----------
Defined
contribution
401(k) $ 801,000 $ 732,000 $ 772,000
Deferred
compensation 255,000 232,000 211,000
Defined benefit 226,000 206,000 161,000
----------- ----------- -----------
$ 1,282,000 $ 1,170,000 $ 1,144,000
=========== =========== ===========
<PAGE>
(10) 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 FAS 106
and 112. 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 first quarter 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. In 1992, prior to the
adoption of FAS 106 and 112, the cost of postretirement and postemployment
benefits were recognized when incurred and were not material.
(11) SHAREHOLDERS' EQUITY
At December 31, 1994 and 1993 the Company had 14,000,000 shares of $.01 par
value common stock authorized and 4,164,944 and 4,163,944 shares issued,
respectively. As of those dates the Company held 749,748 and 748,800 shares
in treasury, respectively.
The Company maintains two incentive stock option plans (Plans). Under these
Plans, options for 450,000 shares of common stock may be granted to key
managerial personnel of the Company. The option price shall not be less
than the fair market value of the common stock at the date of grant.
A summary of the activity of these Plans follows:
Average
Shares subject per share
to option option price
-------------- -------------
Balance, December 31, 1992 123,500 $ 11.45
Options exercised (16,000) 10.52
Options expired (4,000) 16.93
-------------- -------------
Balance, December 31, 1993 103,500 11.38
Options granted 40,000 16.00
Options exercised (1,000) 9.50
Options expired (2,500) 12.53
-------------- -------------
Balance, December 31, 1994 140,000 $ 12.69
============== =============
Exercisable at December 31, 1994 103,000 $ 11.51
============== =============
The Company has also granted a key employee a non-qualified stock option to
acquire 100,000 shares of common stock at an exercise price of $12.50 per
share, the market price on the date of the grant. These shares vest 20%
during 1994 and 20% on each anniversary thereafter and expire ten years
after grant.
<PAGE>
Annually the Company also grants to each non-employee director, non-qualified
stock options for 2,000 shares at an exercise price equal to the market price
on the date of the grant. Under this arrangement, at December 31, 1994,
there were options for 36,000 shares outstanding and exercisable, at an
average option price per share of $12.67.
(12) OTHER INCOME (EXPENSE)
In March 1993, the contents of one of the Company's finished goods
warehouses were damaged by exposure to smoke from a fire adjacent to the
warehouse. The Company received insurance proceeds equal to the wholesale
value of the inventory destroyed. Accordingly, a gain of approximately
$1,412,000 on the insurance settlement is included in the 1993 Consolidated
Statements of Earnings as "Other operating income, net."
On January 27, 1993, the Company entered into an agreement in principle
whereby Peridot Associates, Inc. (Peridot) would acquire all outstanding
shares of the Company's common stock at a per share price of $18.25, subject
to certain contingencies. The agreement expired on May 16, 1993. Under the
agreement, the Company was obligated to reimburse Peridot $800,000 for
certain expenses incurred by Peridot. Additionally, the Company incurred
other expenses of approximately $305,000 related to the proposed acquisition.
These combined expenses are included in the 1993 Consolidated Statements of
Earnings as "Other operating income, net."
(13) COMMITMENTS AND CONTINGENT LIABILITIES
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.
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 material. 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.
At December 31, 1994, the Company was obligated under non-cancellable
operating leases for real and personal property, expiring on various dates
to 1999, which are subject to certain renewal and purchase options. Minimum
rental payments for each of the five years ending December 31, 1999, are
approximately $931,000, $817,000, $334,000, $182,000 and $54,000,
respectively. Minimum rental payments due after 1999 are not significant.
Rent expense under operating leases amounted to $1,002,000 for 1994,
$1,163,000 for 1993 and $1,158,000 for 1992.
<PAGE>
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 musical
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. The Company believes the financial statements
contain adequate provisions for any loss that may be incurred as a result of
this commitment.
(14) SEGMENT INFORMATION
A summary of operations by major segment follows:
1994 1993 1992
------------- ------------- -------------
Revenue:
Musical
products
and other $ 96,974,257 $ 94,737,086 $ 97,369,293
Electronic
contracting 28,361,502 28,907,836 15,936,673
Financing
services 5,903,472 6,732,850 6,138,969
------------- ------------- -------------
$ 131,239,231 $ 130,377,772 $ 119,444,935
============= ============= =============
Operating profit (loss):
Musical
products
and other $ (2,060,714) $ 4,682,132 $ 7,399,982
Electronic
contracting 2,103,503 4,281,692 2,214,185
Financing
services 2,616,661 3,553,383 3,022,054
------------- ------------- -------------
$ 2,659,450 $ 12,517,207 $ 12,636,221
============= ============= =============
<PAGE>
Identifiable assets:
Musical
products
and other $ 66,498,267 $ 63,735,935 $ 66,149,255
Electronic
contracting 13,119,372 11,459,325 8,956,185
Financing
services 17,842,633 14,733,155 16,559,828
------------- ------------- -------------
$ 97,460,272 $ 89,928,415 $ 91,665,268
============= ============= =============
Depreciation:
Musical
products
and other $ 1,980,160 $ 2,056,043 $ 2,055,004
Electronic
contracting 273,191 261,409 253,497
------------- ------------- -------------
$ 2,253,351 $ 2,317,452 $ 2,308,501
============= ============= =============
Capital additions:
Musical
products
and other $ 1,654,438 $ 1,637,813 $ 1,137,199
Electronic
contracting 848,134 452,679 235,099
------------- ------------- -------------
$ 2,502,572 $ 2,090,492 $ 1,372,298
============= ============= =============
The electronic contracting segment assembles printed circuit boards and
electro-mechanical devices for original equipment manufacturers outside
the music industry.
<PAGE>
The 1994 operating profit of the musical products and other segment was
lower due to the write-down of certain inventory. The 1994 operating profit
of the electronic contracting segment was lower due to lower margins on a
changing mix of sales. The 1994 operating profit on the financing services
segment was lower due to higher interest cost. In addition, the 1994
operating profit of all three segments was lower due to the allocation of
expense associated with the transition of senior management.
The Company uses the LIFO method of valuing musical products inventory and
the FIFO method for electronic contracting inventory.
(15) QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
Quarterly financial data for the years ended December 31, 1994 and 1993 are
as follows (in thousands, except per share amounts):
<CAPTION>
1994 First Second Third Fourth Year
---- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Net sales $ 25,572 $ 28,076 $ 30,570 $ 38,129 $ 122,347
--------- --------- --------- --------- ----------
Gross profit 6,235 6,689 6,539 5,855 25,318
--------- --------- --------- --------- ----------
Net earnings (loss) 705 673 672 (1,705) 345
--------- --------- --------- --------- ----------
Net earnings (loss) per share .21 .20 .20 (.50) .10
1993
----
Net sales $ 28,073 $ 26,776 $ 27,821 $ 37,987 $ 120,657
--------- --------- --------- --------- ----------
Gross profit 6,833 6,515 6,438 10,901 30,687
--------- --------- --------- --------- ----------
Earnings before cumulative effects
of changes in accounting principles 1,217 1,150 846 2,952 6,165
Cumulative effect of changes in
accounting for postretirement and
postemployment benefits (1,604) - - - (1,604)
--------- --------- --------- --------- ----------
Net earnings (loss) $ (387) $ 1,150 $ 846 $ 2,952 $ 4,561
========= ========= ========= ========= ==========
Earnings per share:
Before cumulative effects of changes
in accounting principles $ .36 $ .34 $ .25 $ .86 $ 1.81
Cumulative effect of changes in
accounting for postretirement
and postemployment benefits (.47) - - - (.47)
--------- --------- --------- --------- ----------
Net earnings (loss) per share $ (.11) $ .34 $ .25 $ .86 $ 1.34
========= ========= ========= ========= ==========
</TABLE>
<PAGE>
Fourth quarter adjustments in 1994, primarily from inventory write-downs
related to decisions to upgrade technology on certain musical instruments
and expenses associated with the transition of senior management, decreased
net earnings per share by $.88.
Fourth quarter adjustments in 1993, primarily related to inventories,
increased net earnings per share by $ .25.
During the fourth quarter of 1993, the Company implemented Statements of
Financial Accounting Standards No. 106 and No. 112, retroactive to January 1,
1993. These accounting changes reduced previously reported first quarter
results in 1993 by the cumulative after-tax charge of $1,604 ($.47 per
share). The impact of implementing these standards on previously reported
second and third quarter results for 1993 was not material.
<PAGE>
<TABLE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
FIVE-YEAR SUMMARY
(In thousands, except per share amounts)
<CAPTION>
1994 1993 1992 1991 1990
--------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Earnings Statement Data:
Net sales $ 122,347 $ 120,658 $ 110,077 $ 103,230 $ 116,252
Cost of goods sold 97,029 89,971 79,637 74,038 84,057
--------- --------- ---------- ---------- ----------
Gross profit 25,318 30,687 30,440 29,192 32,195
Income on the sale of
installment receivables 4,987 5,746 5,257 4,023 715
Interest income on
installment receivables 564 443 308 350 2,633
Other operating income, net 3,341 3,531 3,803 3,769 3,830
--------- --------- ---------- ---------- ----------
34,210 40,407 39,808 37,334 39,373
Operating expenses:
Selling, general
and administrative 30,246 26,188 25,119 23,970 25,192
Provision for doubtful account 1,304 1,702 2,053 2,132 1,732
--------- --------- ---------- ---------- ----------
Operating Profit 2,660 12,517 12,636 11,232 12,449
Interest expense 2,101 2,232 2,610 3,933 6,178
--------- --------- ---------- ---------- ----------
Earnings before taxes and
cumulative effects of
changes in accounting
principles 559 10,285 10,026 7,299 6,271
Income taxes 214 4,120 4,090 2,884 2,513
--------- --------- ---------- ---------- ----------
Earnings before cumulative
effects of changes in 345 6,165 5,936 4,415 3,758
accounting principles
Cumulative effect of changes in
accounting for
postretirement
and postemployment
benefits - (1,604) - - -
--------- --------- ---------- ---------- ----------
Net earnings $ 345 $ 4,561 $ 5,936 $ 4,415 $ 3,758
========= ========= ========== ========== ==========
<PAGE>
Earnings per share:
Before cumulative effects
of changes
in accounting
principles $ .10 $ 1.81 $ 1.75 $ 1.30 $ 1.06
Cumulative effect of changes in
accounting for
postretirement
and postemployment
benefits - (0.47) - - -
--------- --------- ---------- ---------- ----------
Net earnings per share $ .10 $ 1.34 $ 1.75 $ 1.30 $ 1.06
========= ========= ========== ========== ==========
BALANCE SHEET DATA (AT DECEMBER 31):
Working capital $ 36,441 $ 35,941 $ 29,998 $ 26,783 $ 26,244
--------- --------- ---------- ---------- ----------
Total assets 97,460 89,928 91,665 86,860 90,800
--------- --------- ---------- ---------- ----------
Current portion of long-term
debt 16,746 11,299 18,622 24,550 26,880
--------- --------- ---------- ---------- ----------
Long-term debt, less current
portion 5,000 4,384 5,346 7,167 13,488
--------- --------- ---------- ---------- ----------
Shareholders' equity 50,154 49,892 45,163 39,227 34,812
--------- --------- ---------- ---------- ----------
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
1994 COMPARED TO 1993
Net earnings were $.3 million compared to $4.6 million for 1993. Net earnings
for 1994 were adversely impacted by the inventory write-downs relating to
decisions to upgrade technology on certain musical instruments and expenses
associated with the transition of senior management as well as lower
operating margins on a changing mix of sales in both music products and
electronic contracting businesses. Previous year net earnings were favorably
affected by these items: a successful piano promotion, a large one-time order
in the electronic contracting business and a LIFO inventory adjustment.
Net sales aggregated $122.3 million which were comparable to $120.7 million
in sales for 1993. Net sales from the piano and organ business were lower
than the previous year due to lower unit volume in 1994, reflective of a
successful piano promotion in 1993 as well as a continuing decline in home
organ unit sales. The Company's sales of non-portable home organs declined
steadily during the last decade, reflecting a general decline in this market.
Electronic contracting sales were comparable with 1993 as a result of a
large one-time order in 1993 of $4.7 million partially offset by a 23%
increase in sales to the top fifteen electronic contracting customers.
Furniture contracting sales, which commenced in the fourth quarter of 1993,
grew to approximately $2.5 million in 1994 due primarily to sales to two
customers.
Gross profit for 1994 declined from 1993 as a result of lower margins on a
changing mix of sales in both the music products and electronic contracting
businesses as well as the write-down of certain inventories.
The Company values a substantial portion of its inventory on the last-in,
first-out (LIFO) method. The 1994 gross profit is $2.5 million less than the
amount that would have been presented had the first-in, first-out (FIFO)
method been used.
Income on the sale of installment receivables generated by the Company's
financing operation for 1994 decreased $.8 million from 1993. This decrease
is primarily the result of higher interest costs under both the floating
interest rate provision of the sale agreement and a $20 million interest
rate modification agreement. See 'Liquidity and Capital Resources.'
Other operating income decreased due primarily to a non-recurring favorable
insurance settlement during 1993 partially offset by expenses related to a
proposed acquisition of Baldwin in that same year.
Selling, general and administrative expenses increased $4.1 million from 1993
chiefly as a result of a new sales program aimed at accessing customers in
locations not serviced by existing Baldwin or Wurlitzer dealers as well as
expenses associated with the transition of senior management.
The provision for doubtful accounts has declined due to continued reductions
in losses experienced.
<PAGE>
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 $2.7 million
retroactive to January 1, 1993 as accounting changes. On an after-tax basis,
this charge amounted to $1.6 million or $.47 per share.
1993 COMPARED TO 1992
Net earnings for 1993 were $4.6 million compared to $5.9 million for 1992.
The decrease in net earnings was primarily the result of the cumulative
effect of accounting changes in 1993.
Net sales for 1993 amounted to $120.7 million compared to $110.1 million for
1992. Net sales for 1993 from the piano and organ business were lower than
the previous year due to a decrease in unit volume offset partially by price
increases. Electronic contracting sales increased sharply in 1993 resulting
from a large one-time order of $4.7 million as well as increased volume with
the Company's existing customer base.
The Company values a substantial portion of its inventory on the last-in,
first-out (LIFO) method. The 1993 gross profit is $1.3 million less than the
amount that would have been presented had the first-in, first-out (FIFO)
method been used.
Income on the sale of installment receivables for 1993 increased $.5 million
over 1992. This increase is primarily the result of lower interest costs
under the floating interest rate provision of the sale agreement, as well
as an increase in the portfolio sold. See 'Liquidity and Capital Resources.'
Selling, general and administrative expenses increased $1.1 million from 1992
primarily due to a piano promotion program in 1993 and higher sales
commissions, related to increased electronic contracting sales.
Interest expense for 1993 decreased $.4 million, primarily due to reduced
average borrowing. The Company used 1993 net earnings and decreased
inventories to reduce average borrowing.
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.
<PAGE>
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 efficiencies.
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 material.
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's 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
earns interest on the outstanding principal balance of the contracts based
upon a floating interest rate provision.
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. In December 1994, the Company entered
into a two year interest rate modification agreement to reduce the potential
impact of increases in interest rates on $40.0 million of floating-rate long-
term debt. The agreement entitles the Company to receive from the
counterparty, on a monthly basis, interest income to the extent the one-
month commercial paper rate exceeds 12%. The Company is exposed to credit
losses in the event of nonperformance by the counterparty to its interest
rate cap, but has no off-balance sheet credit risk of accounting loss. The
Company anticipates, however, that the counterparty will be able to fully
satisfy their obligations under the contract. The Company does not obtain
collateral or other security to support financial instruments subject to
credit risk but monitors the credit standing of the counterparty.
Effective February 15, 1994, the annual rate of interest under the revolving
line of credit (Revolver) is 150 basis points plus the greater of the LIBOR
on three month deposits or the rate on 60 day high grade commercial paper.
<PAGE>
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 $60.0 million to
$40.0 million and extended the initial 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 December 31, 1994, the Company had approximately
$23.3 million of additional borrowing available under this line of credit.
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 December 31, 1994,
approximately $18.3 million is available for the payment of dividends
or the repurchase of the Company's common stock. Also, under the covenants
of the Company's debt agreements, Finance can only pay dividends or
repurchase its own stock to the extent its net worth exceeds $4.0 million.
The Company's debt agreements contain provisions by which a default under
one agreement constitutes a default under the other agreements.
The Company is in compliance with these covenants.
In December 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 $82.0 million from $72.0 million.
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.
<PAGE>
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. In
February 1994, Finance entered into a five year interest rate modification
agreement in order to reduce the potential impact of increases in interest
rates on $20.0 million. The agreement entitles Finance to receive from the
counterparty, on a monthly basis, 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%. Finance is exposed to credit
losses in the event of nonperformance by the counterparty to its interest
rate swap, but has no off-balance sheet credit risk of accounting loss.
Finance anticipates, however, that the counterparty will be able to fully
satisfy their obligations under the contract. Finance does not obtain
collateral or other security to support financial instruments subject to
credit risk but monitors the credit standing of the counterparty.
Proceeds from sale of installment receivables amounted to $53.6 million for
1994, $43.6 million for 1993 and $41.5 million for 1992. The increase in 1994
compared to 1993 and 1992 is largely the result of an increase in the volume
of new installment contracts written at traditional keyboard dealers and at
Company sponsored "event 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 10% holdback. Finance
remains contingently liable on approximately $68.3 million of installment
receivables. Management believes an adequate allowance has been provided for
any uncollectable receivables.
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 $2.2 million of
the outstanding dealer notes. The Company believes the financial statements
contain adequate provisions for any loss that may be incurred as a result of
this commitment.
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
$12.4 million in dollar value. From the date the plan was adopted in November
1987 through March 1, 1994, the Company has repurchased 701,300 shares of its
common stock at an aggregate purchase price of $5.7 million under the plan.
<PAGE>
Capital expenditures amounted to $2.5 million in 1994 and $2.1 million in
1993. At December 31, 1994, the Company had no material outstanding capital
commitments.
SHAREHOLDER INFORMATION
HOME OFFICE
422 Wards Corner Rd., Loveland, OH 45140-8390
(513) 576-4500
MANUFACTURING LOCATIONS
Conway, Fayetteville and Trumann, Arkansas;
Greenwood, Mississippi; Juarez, Mexico
RETAIL LOCATIONS
Company Owned Outlets:
Atlanta, Georgia; Chicago, Illinois; Cincinnati, Ohio;
Indianapolis, Indiana; Louisville and Lexington, Kentucky
Independent Keyboard Dealers (800)
REGISTRAR AND TRANSFER AGENT
The Provident Bank, One East Fourth St.
Cincinnati, Ohio 45202
AUDITORS
KPMG Peat Marwick LLP
Cincinnati, Ohio
SECURITIES MARKET
The NASDAQ National Market; Symbol: BPAO
ANNUAL MEETING
The Annual Meeting of Baldwin shareholders will be held on May 9, 1995,
beginning at 11:00 a.m. at the Company's headquarters located at 422 Wards
Corner Rd., Loveland, Ohio.
FORM 10-K
A copy of the Company's Form 10-K as filed with the Securities and Exchange
Commission is available to shareholders by writing to Mr. Charles R.
Juengling, Vice President, Treasurer and Secretary, Baldwin Piano & Organ
Company, 422 Wards Corner Rd., Loveland, OH 45140.
MARKET AND DIVIDEND INFORMATION
The Company's common stock is not listed on any national securities exchange
and its principal United States trading market is the NASDAQ National Market.
Quotations reflect inter-dealer prices, without mark-up, mark-down or
commission, and may not necessarily represent actual transactions. As of
March 17, 1995, the number of outstanding shares of the Company's common
stock was 3,415,196 and the approximate number of record holders of such
shares was 144.
<PAGE>
In connection with the Company's annual meetings of shareholders, the
Company routinely polls the Depository Trust Company's participants to
determine the number of sets of proxy materials required by each participant.
The results of such polls, plus the shareholders of record, indicate the
Company had approximately 800 beneficial shareholders including those held
in "street name" by CEDE and Co., as of its last annual meeting. This number
is consistent with the last three year average of proxy materials sent to
the Company's shareholders.
The Company has paid no dividends since its inception and intends to
continue its policy of retaining earnings to finance future growth. See Note
6 of Notes to Consolidated Financial Statements regarding limitations on the
payment of dividends.
YEAR 1994
COMMON STOCK PRICE RANGE
------------------------
Quarter High Low
------------------------
First $18 1/2 $15
Second $16 1/2 $13
Third $14 1/2 $11 3/4
Fourth $14 1/2 $10 1/4
YEAR 1993
COMMON STOCK PRICE RANGE
------------------------
Quarter High Low
------------------------
First $18 1/2 $16 1/2
Second $18 $16 1/2
Third $17 3/4 $15 7/8
Fourth $17 1/2 $15
Exhibit 21.1
SUBSIDIARIES OF REGISTRANT
Jurisdiction of
Name Incorporation
---- -------------
Keyboard Acceptance Corporation Delaware
The Wurlitzer Company Delaware
The Baldwin Piano Company Canada
(Canada) Limited
Fabricantes Tecnicos, S.A. Mexico
Korean American Musical Instrument Korea
Corporation
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Baldwin Piano & Organ Company:
We consent to the incorporation by reference in the registration
statement of Baldwin Piano & Organ Company on Form S-8 (File No. 33-53809)
of our report dated February 28, 1995 relating to the consolidated balance
sheets of Baldwin Piano & Organ Company and subsidiaries as of December 31,
1994 and 1993 and the related consolidated statements of earnings, retained
earnings and cash flows for each of the years in the three-year period ended
December 31, 1994 and related schedule, which is incorporated by reference
in the annual report on Form 10-K of Baldwin Piano & Organ Company.
KPMG Peat Marwick LLP
Cincinnati, Ohio
February 28, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 344,389
<SECURITIES> 0
<RECEIVABLES> 10,690,265
<ALLOWANCES> 3,811,868
<INVENTORY> 47,036,258
<CURRENT-ASSETS> 68,797,580
<PP&E> 28,455,284
<DEPRECIATION> 14,600,304
<TOTAL-ASSETS> 97,460,272
<CURRENT-LIABILITIES> 32,356,983
<BONDS> 5,000,000
<COMMON> 41,649
0
0
<OTHER-SE> 50,112,415
<TOTAL-LIABILITY-AND-EQUITY> 97,460,272
<SALES> 122,346,862
<TOTAL-REVENUES> 131,239,231
<CGS> 97,029,254
<TOTAL-COSTS> 97,029,254
<OTHER-EXPENSES> 30,246,651
<LOSS-PROVISION> 1,303,876
<INTEREST-EXPENSE> 2,100,742
<INCOME-PRETAX> 558,708
<INCOME-TAX> 214,000
<INCOME-CONTINUING> 344,708
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 344,708
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
Exhibit 99.4
BALDWIN
Baldwin Piano & Organ Company
422 Wards Corner Road
Loveland, Ohio 45140-8390
(513) 576-4500
FOR IMMEDIATE RELEASE
---------------------
LOVELAND, OHIO, MARCH 1, 1995 - Baldwin Piano & Organ Company's 1994
fourth quarter net sales of $38.1 million were comparable to the $38.0
million in fourth quarter 1993. Baldwin incurred a net loss of $1.7
million in fourth quarter 1994 due to charges of $3.0 million, after tax,
primarily from inventory write-downs related to decisions to upgrade
technology on certain musical instruments and expenses associated with
the transition of senior management. In addition, fourth quarter 1994
earnings were less than 1993, due to a successful piano promotion and
favorable inventory adjustments in 1993.
Net sales for the full year 1994 increased to $122.3 million from $120.6
million in 1993. Net earnings for 1994 declined to $.3 million ($.10 per
share) from $6.2 million ($1.81 per share) before cumulative effect of
accounting changes in 1993. 1994 earnings were down for three main
reasons: (1) the fourth quarter charges noted above; (2) lower operating
margins on a changing mix of sales in both music products and electronic
contracting businesses; (3) nonrecurring favorable items in 1993: a
successful piano promotion, a large one-time order in the electronic
contracting business and LIFO inventory adjustment.
There were, however, several noteworthy results for the Company in 1994.
In the electronic contracting segment, sales to the top fifteen customers
increased 23%, signifying the Company's growing credibility as a high
quality, service-oriented electronics contractor. In the music business,
the Company created a program to access new customers in locations not
serviced by existing Baldwin or Wurlitzer dealers. This was successful
in generating new sales from customers not otherwise available to
Baldwin. In addition, the total number of installment contracts from
new piano customers grew 19% in 1994.
Karen Hendricks, the recently appointed Chief Executive Officer and
President of Baldwin, stated, "Although the overall results for 1994 were
disappointing, the Company's strong financial position will provide
management access to the resources necessary to position Baldwin for
growth. We will focus on the core musical products, electronic
contracting and financial services for continued growth. We intend to
improve cost control by gaining operational efficiencies and upgrading
business processes throughout the organization. Finally, we will
continue to emphasize product quality, excellence in new product
execution and superior customer orientation."
<PAGE>
Three Months Ended Twelve Months Ended
(In Thousands, Except December 31, December 31,
Per Share Data) 1994 1993 1994 1993
---- ---- ---- ----
NET SALES $38,129 $37,987 $122,347 $120,657
======= ======= ======== ========
NET EARNINGS (LOSS):
Before cumulative effects of
changes in accounting principles $(1,705) $ 2,952 $ 345 $ 6,165
Cumulative effects of changes in
accounting for postretirement
and postemployment benefits -- -- -- (1,604)
------- ------- -------- --------
Net Earnings (Loss) $(1,705) $ 2,952 $ 345 $ 4,561
======= ======= ======== ========
NET EARNINGS (L0SS) PER SHARE:
Before cumulative effects of changes
in accounting principles $(.50) $.86 $.10 $1.81
Cumulative effects of changes in
accounting for postretirement
and postemployment benefits -- -- -- (.47)
------- ------- -------- --------
Net Earnings (Loss) Per Share $(.50) $.86 $.10 $1.34
======= ======= ======== ========
AVERAGE NUMBER OF SHARES
OUTSTANDING (000) 3,415 3,415 3,415 3,409
======= ======= ======== ========
Baldwin Piano & Organ Company is the largest domestic manufacturer of keyboard
musical instruments, and also manufactures printed circuit boards and a variety
of wood products.
###
CONTACT: Charles Juengling (513) 576-4522
