SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
____________________
FORM 10-Q
Quarterly Report Pursuant to section 13 or 15(d) of
the Securities and Exchange Act of 1934
____________________
For the Quarter ended Commission File Number
September 30, 1996 0-14903
Baldwin Piano & Organ Company
(Exact name of registrant as specified in its charter)
Delaware 31-1091812
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
422 Wards Corner Road
Loveland, Ohio 45140-8390
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (513) 576-4500
Indicate by check mark whether the registrant (1) has filed
all documents and reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---
The number of shares of the Common Stock outstanding of
Baldwin Piano & Organ Company ("Company"), as of November 1, 1996
is 3,425,396.
<PAGE>
BALDWIN PIANO & ORGAN COMPANY
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 1996 and December 31, 1995
Condensed Consolidated Statements of Earnings
for the three months and nine months ended
September 30, 1996 and 1995
Condensed Consolidated Statements of Cash Flows
for the nine months ended
September 30, 1996 and 1995
Notes to Condensed Consolidated Financial
Statements, September 30, 1996
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote
of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
______________
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1996 and December 31, 1995
(in thousands of dollars)
September 30, December 31,
ASSETS 1996 1995
------------ ------------
Current assets:
Cash ................................ $ 400 $ 429
Receivables, net .................... 15,414 14,338
Inventories ......................... 64,352 46,039
Other current assets ................ 7,358 8,791
-------- --------
Total current assets ......... 87,524 69,597
-------- --------
Installment receivables,
less current portion ................ 12,547 11,215
Property, plant and equipment, net ....... 16,800 14,934
Other assets ............................. 5,466 5,683
-------- --------
Total assets ................. $122,337 $101,429
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt ... $ 42,314 $ 17,646
Accounts payable .................... 6,464 10,227
Income taxes payable ................ 898 622
Accrued liabilities ................. 6,316 6,399
-------- -------
Total current liabilities .... 55,992 34,894
-------- -------
Long-term debt, less current portion ..... 3,575 4,250
Other liabilities ........................ 6,926 8,171
-------- -------
Total liabilities ............ 66,493 47,315
-------- -------
Shareholders' equity:
Common stock ........................ 42 42
Additional paid-in capital .......... 12,106 12,001
Retained earnings ................... 49,903 48,278
-------- -------
62,051 60,321
Less cost of treasury shares ........ (6,207) (6,207)
-------- -------
Total shareholders' equity ... 55,844 54,114
________ _______
Total liabilities and
shareholders' equity ......... $122,337 $101,429
======== ========
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
______________
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands of dollars, except net earnings per share)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1996 1995 1996 1995
------- -------- ------- -------
Net sales ...................... $26,508 $26,519 $79,794 $86,967
Cost of goods sold ............. 21,543 21,011 63,634 68,179
------- ------- ------- -------
Gross profit .......... 4,965 5,508 16,160 18,788
Income on the sale of
installment receivables ... 1,404 1,231 4,338 3,607
Interest income on
installment receivables ... 336 210 985 617
Other operating income, net .... 842 933 2,648 2,705
------- ------- ------- -------
7,547 7,882 24,131 25,717
Operating expenses:
Selling, general
and administrative ... 6,071 6,142 18,643 19,827
Provision for
doubtful accounts .... 425 234 1,005 731
------- ------- ------- -------
Operating profit .. 1,051 1,506 4,483 5,159
Interest expense ............... 827 465 2,009 1,490
------- ------- ------- -------
Earnings before
income taxes ......... 224 1,041 2,474 3,669
Income taxes 32 371 848 1,353
------- ------- ------- -------
Net earnings .......... $ 192 $ 670 $ 1,626 $ 2,316
======= ======= ======= =======
Net earnings per share ......... $.06 $.20 $.48 $.68
==== ==== ==== ====
Average number of common
shares outstanding ........ 3,423 3,415 3,419 3,415
===== ===== ===== =====
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
______________
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended
September 30, 1996 and 1995
(in thousands of dollars)
INCREASE (DECREASE) IN CASH 1996 1995
- --------------------------- -------- --------
Net cash (used in) provided by
operating activities ................... $(17,637) $ 3,442
Net cash used in investing activities ..... (3,365) (3,033)
Cash flows from financing activities:
Installment contract
receivables written ............... (51,096) (43,627)
Installment receivables liquidated ... 6,157 4,139
Proceeds from sale of
installment receivables ......... 41,814 37,861
Borrowing under long-term debt ....... 23,994 1,673
Other ................................ 104 --
-------- --------
Net cash provided by
financing activities ..... 20,973 46
-------- --------
Net (decrease) increase in cash ........... (29) 455
Cash at beginning of period ............... 429 344
-------- --------
Cash at end of period ..................... $ 400 $ 799
======== ========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION
- --------------------------
Cash paid during the period for:
Interest ............................. $ 1,926 $ 1,586
======== ========
Income taxes ......................... $ 616 $ 1,282
======== ========
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
______________
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
(in thousands of dollars)
(1) BASIS OF REPORTING FOR CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The unaudited condensed consolidated financial statements included
herein have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain informa-
tion and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been omitted pursuant to such rules and regulations, although the Company
believes that the disclosures are adequate to make the information
presented not misleading. These financial statements should be read in
conjunction with the financial statements and notes thereto included in
the Company's Annual Report and Form 10-K for the year ended December 31,
1995.
The financial statements presented herewith reflect all adjustments
(consisting of normal and recurring accruals) which, in the opinion of
management, are necessary to fairly state the results of operations for
the three month and nine month periods ended September 30, 1996 and 1995.
Certain prior year amounts have been reclassified to conform with current
year financial statement presentation. Results of operations for interim
periods are not necessarily indicative of results to be expected for an
entire year.
(2) INVENTORIES
Inventories consist of the following:
September 30, December 31,
1996 1995
------------ -----------
FIFO cost:
Raw material ......................... $ 19,049 $ 14,875
Work-in-process ...................... 7,880 7,490
Finished goods ....................... 50,179 35,611
-------- --------
77,108 57,976
Excess of FIFO cost
over LIFO inventory value ............ (12,756) (11,937)
-------- --------
Net inventories ................. $ 64,352 $ 46,039
======== ========
<PAGE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
______________
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
(in thousands of dollars)
(3) LONG-TERM DEBT
Long-term debt consists of the following:
September 30, December 31,
1996 1995
------------ -----------
Revolving line of credit $38,414 $16,896
Term loan 7,475 5,000
------- -------
45,889 21,896
Less current portion 42,314 17,646
------- -------
Long-term debt, less current portion $ 3,575 $ 4.250
======= =======
During the third quarter of 1996, the Company increased the revolving
line of credit from $40.0 million to $41.5 million and increased the
borrowing under the term loan by $3.0 million. These temporary increases
in the revolving line of credit and the term loan expire in November 1996.
During October 1996, the Company reached agreement with the revolving
lender to increase the line of credit to $50 million through October 2001.
Under this agreement, the interest rate on the revolving line of credit
will vary based on the Company's future earnings but will not exceed 250
basis points above LIBOR. The Company expects to finalize this agreement
during the fourth quarter of 1996.
<PAGE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
________________
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
1996 COMPARED TO 1995
Third quarter net sales were equal to last year, $26.5 million. Net
sales in the Company's core businesses of Music and Contract Electronics
each increased 8% for the quarter. However, overall sales do not reflect
this progress due to the negative impact on sales of the Company's
continuing exit from its non-strategic Contract Music/Furniture business,
which began in the second quarter of 1996.
Third quarter net earnings were $.2 million or $.06 per share as
compared to $.7 million or $.20 per share in 1995. The third quarter
earnings decline is attributable mainly to lower gross profit and higher
interest expense. While manufacturing costs associated with the Contract
Music/Furniture business have been reduced, they have not come down in
proportion to the rapid sales decline in this business, thereby reducing
gross profit margin. The Company has begun efforts to define and
implement specific plans to reduce manufacturing costs and selling,
general and administrative expenses.
Net sales for the first nine months of 1996 decreased to $79.8
million from $87.0 million. The sales decline is due to the impact of the
consolidation of Baldwin and Wurlitzer, particularly in the first and
second quarters of 1996, and due to the Company's exit from the Contract
Music/Furniture business. For the same reasons as those described for the
third quarter, net earnings for the first nine months of 1996 decreased to
$1.6 million or $.48 per share from $2.3 million or $.68 per share in
1995.
The Company values a substantial portion of its inventory on the
last-in, first-out (LIFO) method. The gross profit for the three months
and nine months ended September 30, 1996 was $.3 million and $.8 million
less than the amounts that would have been presented had the first-in,
first-out (FIFO) method been used.
Income on the sale of installment receivables generated by the
Company's financing operation increased $.2 million and $.7 million for
the three months and nine months ended September 30, 1996, respectively,
from the comparable periods in 1995. This increase was primarily the
result of growth in the dollar value of contracts sold and stable interest
rates.
Selling, general and administrative expenses decreased $1.2 million
for the nine months ended September 30, 1996, from the comparable period
in 1995. The decrease was primarily due to the Baldwin and Wurlitzer
dealer network consolidation.
<PAGE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
________________
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
-----------------------------------------------------------
The increase in the provision for doubtful accounts for the three
months and nine months ended September 30, 1996, was primarily due to the
continuing growth of the installment receivable portfolio. Losses, as a
percent of the installment receivable portfolio, remain in historical
ranges.
Interest expense for the third quarter is higher than last year
because inventory levels are up and because retail financing business
growth continues to be strong. The Company has put in place a comprehen-
sive inventory reduction plan to bring inventory levels back into
historical ranges by temporarily reducing production at Company plants and
lowering purchases from third parties.
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 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 November 1995 and December
1994, the Company entered into two year interest rate cap agreements in
order to reduce the potential impact of increases in interest rates on
$20.0 million and $40.0 million, respectively, of floating-rate long-term
debt. The agreements entitle the Company to receive from the counter-
party, 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 non-performance by the counterparty to its interest
<PAGE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
________________
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
-----------------------------------------------------------
rate caps, but has no off-balance sheet credit risk of accounting loss.
The Company anticipates, however, that the counterparty will be able to
fully satisfy its obligations under the contracts. The Company does not
obtain collateral or other security to support financial instruments
subject to credit risk but monitors the credit standing of the counter-
party.
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. As of
September 30, 1996, the interest rate was 7.16%.
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 to its Baldwin dealer network
on a consignment basis. 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. Because the Company finances inventory on
consignment to its 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.
The Company has a revolving line of credit (Revolver) with an initial
due date of February 15, 1999. The Revolver is renewable for three
consecutive one-year periods beyond February 15, 1999. Amounts outstand-
ing 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.
During the third quarter of 1996, the Company increased the revolving
line of credit from $40.0 million to $41.5 million and increased the
borrowing under the term loan by $3.0 million. These temporary increases
in the revolving line of credit and term loan expire in November 1996.
During October 1996, the Company reached agreement with the revolving
lender to increase the line of credit to $50 million through October 2001.
Under this agreement, the interest rate on the revolving line of credit
will vary based on the Company's future earnings but will not exceed 250
basis points above LIBOR. The Company expects to finalize this agreement
during the fourth quarter of 1996.
<PAGE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
________________
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
-----------------------------------------------------------
At September 30, 1996, the Company had approximately $3.1 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 September 30,
1996, the Company could not pay any dividends or repurchase any of its
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.
In 1995, 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 $86 million. During the fourth
quarter of 1996, the Company reached agreement with that independent
entity to increase the maximum outstanding principal amount to $111
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.
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 under the floating
interest rate provision, is remitted to Finance as a service fee. In
February 1994, Finance entered into a five year interest rate swap
agreement in order to reduce the potential impact of increases in interest
rates on $20.0 million of installment contracts. 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
requires Finance to pay interest expense to the extent the floating rate
is less than 6%. Finance is exposed to credit losses in the event of non-
performance 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 its
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.
<PAGE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
________________
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
-----------------------------------------------------------
Proceeds from sale of installment receivables amounted to $41.8
million for the first nine months of 1996 compared to $37.9 million for
the same period of 1995.
Under the sale agreements, Finance is required to repurchase accounts
that become more than 120 days past due or accounts that are deemed
uncollectible. The repurchase price is equal to the remaining unpaid
principal balance of the contract on the date repurchased, less the
related 10% holdback. Finance is responsible for all credit losses
associated with the sold receivables. Finance remains contingently liable
on approximately $76.3 million of installment receivables as of September
30, 1996. Management believes an adequate allowance has been provided for
any uncollectible receivables.
Certain former Wurlitzer dealers finance their inventory with floor
plan loans from an independent bank. These former 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 $1.0
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 November 1, 1996, the Company has
repurchased 701,300 shares of its common stock at an aggregate purchase
price of $5.7 million under the plan.
Capital expenditures amounted to $3.4 million in the first nine
months of 1996 and $3.0 million in the comparable period of 1995. At
September 30, 1996, the Company had no material outstanding capital
commitments.
The foregoing discussion sets forth forward looking statements within
the meaning of Section 27A of the Securities Act of 1933. Such statements
are subject to a number of risks and uncertainties. Actual results in the
future could differ materially from those described in the forward looking
statements. Factors that could cause actual results to differ materially
include, but are not limited to, the ability to achieve increased sales,
the ability to achieve targeted cost savings, interest rates, competition
and the economy in general.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in litigation arising in its normal course of
business. The Company does not believe that any existing claim or suit
will have a material adverse effect on the business or financial condition
of the Company.
ITEM 2. CHANGES IN SECURITIES
(a) No changes have been made to the instruments defining the right
of the holders of the Company's common stock.
(b) On September 3, 1996, the Company's Board of Directors authorized
the issuance of one common share purchase right (a "Right") with respect
to each share of the Company's common stock outstanding as of September
10, 1996. The Rights are exercisable if a party acquires 15% or more of
the Company's voting stock or announces a tender offer to do so, without
the consent of the Company's Board of Directors. The initial purchase
price for each share of common stock issuable upon exercise of a Right is
$60, subject to adjustment upon the occurrence of certain events. The
Rights expire as of the close of business as of September 3, 2006, unless
the expiration date is extended or the Rights are earlier redeemed or
exchanged by the Company. Additional details regarding the Rights are
incorporated herein by reference from the Company's Form 8-A Registration
Statement filed with the Securities and Exchange Commission on September
13, 1996, as amended on September 27, 1996 and October 3, 1996.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company is not in default nor has it defaulted on any indebted-
ness. The Company is not obligated to pay any dividends or other payment
to any of its shareholders.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters have been submitted to a vote of security holders during
the third quarter of 1996.
ITEM 5. OTHER INFORMATION
Not applicable.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
10.1 Amendment #6 dated as of August 9, 1996, 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.
19.1 1996 Third Quarter Report to Shareholders of the
Company.
99.1 Press Release dated September 4, 1996.
99.2 Press Release dated October 24, 1996.
99.3 Press Release dated November 12, 1996
27.1 Financial Data Schedule.
------------------------------
Index to Exhibits appears on sequentially numbered page 15.
(b) Reports on Form 8-K
-------------------
The Company filed a report on Form 8-K during the third
quarter of 1996. The report on Form 8-K related to the
Company's adoption of a shareholder rights plan.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
BALDWIN PIANO & ORGAN COMPANY
DATE: November 7, 1996 BY: KAREN L. HENDRICKS
------------------------- ------------------------------
Karen L. Hendricks, Chief
Executive Officer (Principal
Executive Officer) and
President
DATE: November 7, 1996 BY: CARL SIMS
------------------------- ------------------------------
Carl Sims, Vice President
Controller/Secretary
(Principal Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Exhibit
- -------------- -------
10.1 Amendment #6 dated as of
August 9, 1996, 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.
19.1 1996 Third Quarter Report to
Shareholders of the Company.
99.1 Press Release dated
September 4, 1996.
99.2 Press Release dated
October 24, 1996.
99.3 Press Release dated
November 12, 1996.
27.1 Financial Data Schedule.
-------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 400,208
<SECURITIES> 0
<RECEIVABLES> 10,695,384
<ALLOWANCES> 3,665,143
<INVENTORY> 64,352,142
<CURRENT-ASSETS> 87,523,784
<PP&E> 31,858,165
<DEPRECIATION> 15,057,583
<TOTAL-ASSETS> 122,337,507
<CURRENT-LIABILITIES> 55,992,144
<BONDS> 4,475,000
0
0
<COMMON> 41,751
<OTHER-SE> 55,802,163
<TOTAL-LIABILITY-AND-EQUITY> 122,337,507
<SALES> 79,793,633
<TOTAL-REVENUES> 87,764,661
<CGS> 63,633,619
<TOTAL-COSTS> 63,633,619
<OTHER-EXPENSES> 18,643,193
<LOSS-PROVISION> 1,004,787
<INTEREST-EXPENSE> 2,009,493
<INCOME-PRETAX> 2,473,569
<INCOME-TAX> 848,000
<INCOME-CONTINUING> 1,625,569
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,625,569
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
AMENDMENT #6 TO REVOLVING CREDIT AND SECURITY AGREEMENT
-------------------------------------------------------
AMENDMENT #6, dated as of August 9, 1996, 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 by Amendment #1 dated as of August 27, 1992, Amendment #2
dated as of May 1993, Amendment #3 dated as of February 15, 1994,
Amendment #4 dated as of September 30, 1994 and Amendment #5 dated
as of March 28, 1995, the "Agreement;" terms not defined herein
being used herein as therein defined).
WITNESSETH:
----------
WHEREAS, Borrower and 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. Amendments. Sections 2.1(a), 2.2(b) of the
----------
Agreement are hereby amended by deleting the amount, "$40,000,000"
set forth in each such Section and substituting in lieu thereof the
amount, "$41,500,000".
SECTION 2. Conditions of Effectiveness. 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, and this Amendment shall terminate and be of no further
force and effect on November 7, 1996.
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.
<PAGE>
(c) This Amendment has been duly executed and delivered
by Borrower and each of this Amendment and the Agreement as amended
hereby constitutes a legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its
terms.
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 and remedy of Lender under any of
the Loan Documents , nor constitute a waiver of any provision of
any of the Loan Documents.
SECTION 5. Costs and Expenses. Borrower agrees to pay
------------------
on demand all costs and expenses of Lender in connection with the
preparation, execution and delivery of this Amendment, including,
without limitation, 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 principals thereof regarding conflict of
laws.
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.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed
this Amendment as of the day and year first above written
GENERAL ELECTRIC CAPITAL CORPORATION
By: DANIEL W. PORTER
------------------------
Name:
Title:
BALDWIN PIANO & ORGAN COMPANY
By: C. R. JUENGLING
------------------------
Name: C. R. Juengling
Title: Vice President
CONSENT OF WURLITZER
The undersigned, a party to a Guaranty, dated as of
February 23, 1988, hereby consents to the terms of Amendment #6 to
the Restated Credit Agreement (to which this Consent is annexed)
and confirms that such Guaranty remains in full force and effect
and continues to secure the obligations pursuant to the terms
thereof.
Dated as of August 9, 1996
THE WURLITZER COMPANY
By: C. R. JUENGLING
----------------------
Name: C. R. Juengling
Title: Vice President
BALDWIN
THIRD QUARTER REPORT 1996
TO OUR SHAREHOLDERS
- -----------------------------------------------------------------------------
November 1, 1996
Third quarter net sales were equal to last year, $26.5 million. Sales
in the Company's core businesses of Music and Contract Electronics were
strong, both up 8% for the quarter. However, overall sales do not reflect
this progress due to the impact on sales of the Company's continuing exit
from its non-strategic Contract Music/Furniture business, which began in
the second quarter.
Third quarter net earnings were $.2 million or $.06 per
share as compared to $.7 million or $.20 per share in 1995. The third
quarter earnings decline is attributable mainly to lower gross profit and
higher interest expense. While manufacturing costs associated with the
Contract Music/Furniture business have been reduced, they have not come
down in proportion to the rapid sales decline in this business, thereby
hurting gross profit margin. The Company has begun efforts to define and
implement specific plans to reduce manufacturing costs and selling, general
and administrative expenses.
Interest expense for the third quarter is higher than last year
because inventory levels are up and because retail financing business
growth continues to be strong. Management has put in place a comprehensive
inventory reduction plan to bring inventory levels back into historical
ranges.
Net sales for the first nine months of 1996 decreased to $79.8
million from $87.0 million. The sales decline is due to the impact of the
consolidation of Baldwin and Wurlitzer, particularly in the first and
second quarters of 1996, and due to the Company's exit from the Contract
Music/Furniture business. For reasons similar to those described for the
third quarter, net earnings for the first nine months of 1996 decreased
to $1.6 million or $.48 per share from $2.3 million or $.68 per share in
1995.
KAREN L. HENDRICKS
Karen L. Hendricks
Chief Executive Officer and President
<PAGE>
CONSOLIDATED SUMMARY OF EARNINGS (unaudited)
- -----------------------------------------------------------------------------
(in thousands, except earnings per share)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1996 1995 1996 1995
- ------------------------------------------------------------------------------
Net sales $ 26,508 $ 26,519 $ 79,794 $ 86,967
Cost of goods sold 21,543 21,011 63,634 68,179
- ------------------------------------------------------------------------------
Gross profit 4,965 5,508 16,160 18,788
Income on the sale of installment
receivables 1,404 1,231 4,338 3,607
Interest income on installment
receivables 336 210 985 617
Other operating income 842 933 2,648 2,705
Selling, general and
administrative expenses (6,496) (6,376) (19,648) (20,558)
Interest expense (827) (465) (2,009) (1,490)
- ------------------------------------------------------------------------------
Earnings before income taxes 224 1,041 2,474 3,669
Income taxes 32 371 848 1,353
- ------------------------------------------------------------------------------
Net earnings $ 192 $ 670 $ 1,626 $ 2,316
==============================================================================
Net earnings per share $ .06 $ .20 $ .48 $ .68
==============================================================================
Average number of shares
outstanding 3,423 3,415 3,419 3,415
==============================================================================
<PAGE>
CONSOLIDATED SUMMARY BALANCE SHEETS (unaudited)
- ------------------------------------------------------------------------------
(in thousands)
September 30,
-------------------
1996 1995
- ------------------------------------------------------------------------------
Assets
Receivables, net $ 15,414 $ 13,047
Inventories 64,352 47,606
Other current assets 7,785 8,125
- ------------------------------------------------------------------------------
Total current assets 87,524 68,778
Installment receivables, less current portion 12,547 9,911
Property, plant and equipment, net 16,800 15,229
Other assets 5,466 6,650
- ------------------------------------------------------------------------------
Total assets $122,337 $100,568
==============================================================================
Liabilities and Shareholders' Equity
Current portion of long-term debt $ 42,314 $ 18,945
Other current liabilities 13,678 15,828
- ------------------------------------------------------------------------------
Total current liabilities 55,992 34,773
Long-term debt, less current portion 3,575 4,475
Other liabilities 6,926 8,850
Shareholders' equity 55,844 52,470
- ------------------------------------------------------------------------------
Total liabilities and shareholders' equity $122,337 $100,568
==============================================================================
<PAGE>
BUSINESSES
- --------------------------------------------------------------------------
MANUFACTURING
Acoustic pianos
Actions and keys for the piano industry
Printed circuit boards and electro-mechanical assemblies for OEM
manufacturers of electronic-based products inside and outside the music
industry
SALES/MARKETING
Acoustic pianos
Electronic keyboards
RETAILING
Company owned outlets in Atlanta, Georgia; Cincinnati, Ohio;
Indianapolis, Indiana; Lexington and Louisville, Kentucky
Independent keyboard dealers (400)
FINANCING
Consumer installment financing and dealer consignment
HOME OFFICE
422 Wards Corner Road, Loveland, OH 45140, (513)576-4500
MANUFACTURING LOCATIONS
Conway, Fayetteville and Trumann, Arkansas; Greenwood, Mississippi;
Juarez, Mexico
REGISTRAR AND TRANSFER AGENT
The Provident Bank, One East Fourth Street Cincinnati, OH 45202
Baldwin Piano & Organ Company common stock is traded on The Nasdaq
National Market;
Symbol: BPAO
Caption for photo
Chickering Grand Piano
BALDWIN
Baldwin Piano & Organ Company
422 Wards Corner Road
Loveland, Ohio 45140-8390
(513) 576-4500
FOR IMMEDIATE RELEASE
- ---------------------
BALDWIN PIANO & ORGAN ADOPTS SHAREHOLDER RIGHTS PLAN
LOVELAND, OHIO, SEPTEMBER 4, 1996 - Baldwin Piano & Organ Company
(NASDAQ:BPAO) announced today that its Board of Directors has
adopted a shareholder rights plan. The Board declared a dividend
distribution of one Common Share Purchase Right for each
outstanding share of Baldwin's common stock.
"This plan has been designed and put in place to enhance the
Board's ability to assure that all Baldwin shareholders are treated
fairly in the event that the company is faced with a coercive or
unfair takeover attempt," stated Karen L. Hendricks, President and
Chief Executive Officer of Baldwin. "While we have received no
overtures, this plan is important to our shareholders because it
allows the Board time to evaluate any offer and to consider any and
all alternatives to such an offer. The plan does not stop the
Board from considering or accepting an offer if the Board believes
such an action is in the best interests of the company and its
shareholders."
Baldwin's shareholder rights plan is similar to those in place at
many public companies today. Under the plan, shareholders of
record on September 10, 1996, will receive one right for each
common share held on that date. This distribution is not taxable
to shareholders. The rights have a ten year life, and may be
exercised if a party acquires 15 percent or more of Baldwin's
common stock, or announces a tender offer to do so, without the
consent of the Board of Directors of Baldwin.
Baldwin Piano & Organ Company has manufactured and marketed
keyboard musical products for more than 130 years. The market
leader of acoustic pianos in the United States, Baldwin also
manufactures electronic and electro-mechanical components for
Original Equipment Manufacturers.
###
CONTACT: Karen L. Hendricks (513) 576-4693
BALDWIN
Baldwin Piano & Organ Company
422 Wards Corner Road
Loveland, Ohio 45140-8390
(513) 576-4500
LOVELAND, OHIO, OCTOBER 24, 1996 - Baldwin Piano & Organ Company reports net
earnings of $.2 million or $.06 per share in the third quarter of 1996, as
compared to $.7 million or $.20 per share in 1995. Net sales were $26.5
million, equal to last year.
Sales in the Company's core businesses of Music and Contract Electronics were
strong, both up 8% for the quarter. However, overall sales do not reflect
this progress due to the impact on sales of the Company's continuing exit
from its non-strategic Contract Music/Furniture business, which began second
quarter.
The third quarter earnings decline is attributable mainly to lower gross
profit and higher interest expense. While manufacturing costs associated
with the Contract Music/Furniture business have been reduced, they have not
come down in proportion to the rapid sales decline in this business, thereby
hurting gross profit margin. Baldwin has initiated significant cost
reduction efforts focused on manufacturing costs and SG&A expense.
Interest expense for the third quarter is higher than last year because
inventory levels are up and because retail financing business growth
continues to be strong. The management has put in place a comprehensive
inventory reduction plan to bring inventory levels back into historical
ranges.
Net sales for the first nine months of 1996 decreased to $79.8 million from
$87.0 million. The sales decline is due to first half impact of the
consolidation of Baldwin and Wurlitzer, particularly in the first and second
quarters of 1996, and due to the Company's exit from the Contract
Music/Furniture business. For reasons similar to those described for third
quarter, net earnings for the first nine months of 1996 decreased to $1.6
million or $.48 per share from $2.3 million or $.68 per share in 1995.
...continued
<PAGE>
Page 2
Three Months Ended Nine Months Ended
(in thousands, except September 30, September 30,
net earnings per share) 1996 1995 1996 1995
---- ---- ---- ----
Net sales $26,508 $26,519 $79,794 $86,967
Cost of goods sold 21,543 21,011 63,634 68,179
------- ------- ------- -------
Gross profit 4,965 5,508 16,160 18,788
Income on the sale of
installment receivables 1,404 1,231 4,338 3,607
Interest income on
installment receivables 336 210 985 617
Other operating income 842 933 2,648 2,705
Selling, general and
administrative expenses (6,496) (6,376) (19,648) (20,558)
Interest expense (827) (465) (2,009) (1,490)
------- ------- ------- -------
Earnings before
income taxes 224 1,041 2,474 3,669
Income taxes 32 371 848 1,353
------- ------- ------- -------
Net earnings $ 192 $ 670 $ 1,626 $ 2,316
======= ======= ======= =======
Net earnings per share $.06 $.20 $.48 $.68
==== ==== ==== ====
Average number of
shares outstanding 3,423 3,415 3,419 3,415
===== ===== ===== =====
Baldwin Piano & Organ Company has manufactured and marketed keyboard musical
products over 130 years and has been providing consumer financing for its
instruments for nearly a century. The market leader of acoustic pianos in
the United States, Baldwin also manufactures electronic and electro-
mechanical components for Original Equipment Manufacturers.
###
CONTACT: Carl Sims (513) 576-4506
BALDWIN
Baldwin Piano & Organ Company
422 Wards Corner Road
Loveland, Ohio 45140-8390
(513) 576-4500
BALDWIN PIANO & ORGAN ACTS TO REDUCE EXPENSES
LOVELAND, OHIO, NOVEMBER 12, 1996 -- Baldwin Piano & Organ Company
(NASDAQ: BPAO) announced today that it is taking significant steps
to improve its competitiveness by reducing overhead expenses to
improve earnings.
The first step includes the elimination of about 15 percent of its
salaried workforce. This reduction in workforce represents
approximately 50 salaried positions at four locations: the
headquarters in Loveland, Ohio; and the manufacturing plants in
Greenwood, Mississippi; Trumann, Arkansas; and Fayetteville,
Arkansas. Today the company notified those employees who will be
affected.
"Due to the loss of contract manufacturing for two piano companies
earlier in the year, we must get our overhead costs in line with
revenues," stated Karen L. Hendricks, CEO and President. A key
portion of this lost business was a result of Kimball International's
decision to exit the piano business. Ms. Hendricks continued, "It is
essential we streamline our organization and focus our energy on our
core businesses and not on the non-strategic contract music and
furniture business."
On October 24, 1996, Baldwin reported net sales of $79.8 million for
the nine months which ended September 30, 1996, a decline of 8.2
percent from net sales of $87.0 million in the same period of 1995.
Net earnings for the nine months of 1996 decreased to $1.6 million,
or $0.48 per share, from $2.3 million, or $0.68 per share in the same
period of 1995.
Baldwin Piano & Organ Company has manufactured and marketed keyboard
musical products for more than 130 years and has been providing
consumer financing for its instruments for nearly a century. The
market leader in acoustic pianos in the United States, Baldwin also
manufactures electronic and electro-mechanical components for Original
Equipment Manufacturers.
# # #
CONTACT: Karen L. Hendricks, (513) 576-4693
