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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------
FORM 10-Q/A
Quarterly Report Pursuant to section 13 or 15(d) of
the Securities and Exchange Act of 1934
--------------------
For the Quarter ended Commission File Number
June 30, 1997 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 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, as of August 1, 1997 is 3,429,396.
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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
September 10, 1997 BY: /s/ Karen L. Hendricks
----------------------- ------------------------------------
Karen L. Hendricks, Chairman,
Chief Executive Officer and
President
DATE: September 10, 1997 BY: /s/ Perry H. Schwartz
----------------------- ------------------------------------
Perry H. Schwartz, Executive
Vice President and Chief
Financial Officer
14
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INDEX TO EXHIBITS
Exhibit Sequential
Number Exhibit Page Number
- ------- ------- -----------
10.1 Agreement of Employment between Baldwin Piano &
Organ Company and Karen L. Hendricks dated as of
June 19, 1997.* 16
19 1997 Second Quarter Report to Shareholders of the
Company. 24
99.1 Press Release, dated April 22, 1997, announcing
the Company's new manufacturing efficiencies and
the elimination of 78 manufacturing jobs.* 26
99.2 Press Release, dated April 24, 1997, announcing
the Company's financial results for the first
quarter of 1997. 28
99.3 Press Release, dated June 9, 1997, announcing that
Institutional Shareholder Service has recommended
that its institutional shareholder clients vote
for the Company's slate of five directors.* 31
99.4 Press Release, dated June 12, 1997, announcing
David L. Davis as the first recipient of the "D.H.
Baldwin Award".* 33
99.5 Press Release, dated June 12, 1997, announcing
preliminary indications that Company shareholders
have voted overwhelmingly to re-elect the
Company's five-member board.* 36
99.6 Press Release, dated June 19, 1997, announcing
that the final results of the shareholder vote
confirmed preliminary indications that the
Company's five directors had been re-elected.* 38
99.7 Press Release, dated June 25, 1997, announcing the
Company has begun to phase out consignment sales.* 40
99.8 Press Release dated July 23, 1997, announcing the
Company's financial results for the second quarter
of 1997.* 42
27 Financial Data Schedule.
* filed previously
15
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EXHIBIT 19
TO OUR SHAREHOLDERS
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August 4, 1997
Second-quarter net income was $1,642,000 or 48 cents per share,
compared with $750,000, or 22 cents per share, a year ago. Baldwin's phase-out
of its consignment inventory program accelerated sales and reduced inventory,
adding $2.3 million, or 67 cents per share, to second-quarter net earnings.
This gain was partially offset by an after-tax charge of $1,035,000 or 30 cents
per share, related to the sale of Baldwin's church organ business and
associated work force reductions.
Second-quarter sales rose 62 percent to $42,404,000, including
$12,690,000 of sales related to the phase-out of consignment. A year ago,
Baldwin reported total second-quarter sales of $26,139,000. Measured before the
impact of the phase-out of consignment, total second-quarter sales rose 14
percent.
For the first half of 1997, Baldwin reported net earnings of
$1,888,000, or 55 cents per share, on sales of $69,714,000. A year ago, the
company reported first-half net earnings of $1,434,000, or 42 cents per share,
on sales of $53,286,000.
Coming late in the second quarter, the phase-out of Baldwin's
consignment program did not produce a reduction in debt as of June 30, 1997. As
of July 22, 1997, however, debt was approximately $12 million less than at the
end of the second quarter.
Before adjustment for the phase-out of consignment, second-quarter
sales for the company's core music businesses rose a solid 17 percent, turning
in the strongest quarterly sales performance in more than two years. After a
flat first quarter, sales for Baldwin's contract electronics business rose 22
percent versus a year ago. Higher sales for the company's core music and
contract electronics businesses were offset, in part, by significantly lower
sales in contract music and contract furniture, businesses Baldwin decided to
exit in 1996.
In June, our shareholders gave us a resounding mandate to fulfill the
promise of our strategic plan by voting overwhelmingly to re-elect the full
Baldwin board of directors, putting an end to a distracting and costly proxy
fight. Since the proxy contest began, we estimate that Baldwin has incurred
related costs of approximately 10 cents per share.
The continuing strength in piano sales, contract electronics, and a
healthy financing business continues to move Baldwin in the right direction.
While margins in our music business will not begin to feel the positive impact
of our on-going cost reduction initiatives until the second half, we have
already taken out several million dollars of annualized costs and a number of
additional opportunities have yet to be tapped. The phase-out of consignment as
our primary means of dealer financing included a third-party financing program
that lowers financing costs for nearly all our dealers and frees up our sales
force to help dealers grow and strengthen their Baldwin business.
/s/ Karen L. Hendricks
Karen L. Hendricks
Chairman, Chief Executive Officer
and President
<TABLE>
CONSOLIDATED SUMMARY OF EARNINGS (UNAUDITED)
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<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE JUNE 30, JUNE 30,
------------------ ----------------
1997 1996 1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $42,404 $26,139 $ 69,714 $ 53,286
Cost of goods sold 34,251 20,219 56,785 42,091
- ------------------------------------------------------------------------------------------------
Gross profit 8,153 5,920 12,929 11,195
Income on the sale of installment receivables 1,798 1,474 3,671 2,934
Interest income on installment receivables 300 341 554 649
Other operating income 687 947 1,421 1,806
Selling, general and administrative expenses (7,440) (6,826) (13,897) (13,152)
Interest expense (860) (657) (1,656) (1,182)
- ------------------------------------------------------------------------------------------------
Earnings before income taxes 2,638 1,199 3,022 2,250
Income taxes (996) (449) (1,134) (816)
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Net earnings $ 1,642 $ 750 $ 1,888 $ 1,434
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Net earnings per share $ .48 $ .22 $ .55 $ .42
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Average number of shares outstanding (000) 3,428 3,419 3,427 3,417
================================================================================================
</TABLE>
<TABLE>
CONSOLIDATED SUMMARY BALANCE SHEETS (UNAUDITED)
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(IN THOUSANDS) JUNE 30,
--------------------
1997 1996
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<S> <C> <C>
Receivables, net $ 28,167 $ 14,929
Inventories 44,344 60,885
Other current assets 7,402 6,911
- ------------------------------------------------------------------------------------------------
Total current assets 79,913 82,725
Installment receivables, less current portion 14,479 12,335
Property, plant and equipment, net 15,533 16,005
Other assets 4,762 5,316
- ------------------------------------------------------------------------------------------------
Total assets $114,687 $116,381
================================================================================================
Liabilities and Shareholders' Equity
Current portion of long-term debt $ 32,020 $ 33,685
Other current liabilities 14,655 16,159
- -------------------------------------------------------------------------------------------------
Total current liabilities 46,675 49,844
Long-term debt, less current portion 2,900 3,800
Other liabilities 6,915 7,122
Shareholders' equity 58,197 55,615
- ------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $114,687 $116,381
================================================================================================
</TABLE>
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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
RETAILING
Company owned outlets in Atlanta, Georgia;
Cincinnati, Ohio; Indianapolis, Indiana; Lexington
and Louisville, Kentucky
Independent keyboard dealers (400)
FINANCING
Consumer installment financing
HOME OFFICE
422 Wards Corner Road, Loveland, OH 45140-
8390, (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
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EXHIBIT 99.2
[BALDWIN LETTERHEAD]
BALDWIN NEWS RELEASE
CONTACTS: Perry Schwartz Wes Truesdell
Baldwin Piano The Dilenschneider Group
(513) 576-4518 (212) 922-0900
BALDWIN PIANO REPORTS FIRST-QUARTER RESULTS
STRONG SALES GAINS IN CORE MUSIC BUSINESS
STRUCTURAL CHANGES IN MANUFACTURING AND EXIT FROM
LOW MARGIN BUSINESSES IMPACT RESULTS, AS EXPECTED
LOVELAND, OH, April 24, 1997 -- Baldwin Piano and Organ Company
(NASDAQ:BPAO) today announced first-quarter net income of $246,000, or 7 cents
per share, compared with $684,000, or 20 cents per share, a year ago. As
expected, Baldwin's decision to exit several low-margin businesses temporarily
increased unit overhead costs and reduced first-quarter operating margins.
First-quarter sales for the company's core acoustic and digital music
businesses rose a strong 11 percent and 62 percent, respectively, while overall
sales increased only slightly to $27,309,000, versus last year's $27,147,000.
Higher sales for the company's core music businesses were entirely offset by a
$1.8 million sales decline in contract music and contract furniture, two
lower-margin businesses Baldwin decided to exit in the first quarter of 1996.
"We are encouraged by the continuing positive trend in sales of our core
music products and the continued profitability of our financing business," said
Karen L. Hendricks, president, chairman and chief executive officer. "The
increase in our digital music business was spectacular and the growth in
acoustic piano sales was one of the strongest ever. Given the continued strength
in music sales and the elimination of several
-more-
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-2-
lower-margin businesses, gross profits will catch up as the cost of goods sold
begins to reflect the significant cost reductions we are achieving in
re-engineering piano manufacturing.
"Earlier this week, we announced that our new synchronous manufacturing
process allowed us to eliminate nearly 80 manufacturing jobs at four Baldwin
factories. This will net us $1 million in savings in 1997 and considerably more
in future years. We also expect to see additional manufacturing savings before
year end." Ms. Hendricks added "The positive impact of improved manufacturing
efficiency and other strategic initiatives we've undertaken should begin to
materialize in the second half of 1997."
First-quarter results also reflect the required adoption of SFAS 125, which
governs the accounting treatment of revenue from the sales of new contracts in
Baldwin's financing subsidiary, Keyboard Acceptance Corporation.
Baldwin Piano & Organ Company has manufactured and marketed keyboard
musical products for 135 years and has been providing consumer financing for its
investments 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.
* * * *
"Safe Harbor" statement under the Private Securities Litigation Reform Act of
1995:
This release contains forward looking statements that are subject to risks
and uncertainties, including, but not limited to, the impact of competitive
products and pricing, product demand and market acceptance, reliance on key
strategic alliances, fluctuations in operating results and other risks detailed
from time to time in the Company's filings with the Securities and Exchange
Commission.
(Condensed income statements attached)
<PAGE> 3
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF EARNINGS
(IN THOUSANDS, EXCEPT NET EARNINGS PER SHARE)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
----------------------
1997 1996
-------- --------
<S> <C> <C>
Net sales $ 27,309 $ 27,147
Cost of goods sold 22,533 21,872
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Gross profit 4,776 5,275
Income on installment receivables 2,127 1,768
Other operating income 734 859
Selling, general and administrative expenses (6,457) (6,326)
Interest expense (796) (525)
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Earnings before income taxes 384 1,051
Income taxes 138 367
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Net earnings $ 246 $ 684
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Net earnings per share $ .07 $ .20
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Average number of shares outstanding 3,425 3,415
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</TABLE>
