<PAGE> 1
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
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.
<PAGE> 2
BALDWIN PIANO & ORGAN COMPANY
INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
June 30, 1997 and December 31, 1996 ...................... 3
Condensed Consolidated Statements of Earnings
for the three months and six months ended
June 30, 1997 and 1996 ................................... 4
Condensed Consolidated Statements of Cash Flows
for the six months ended
June 30, 1997 and 1996 ................................... 5
Notes to Condensed Consolidated Financial
Statements, June 30, 1997 ................................ 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................... 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings .......................................... 11
Item 2. Changes in Securities ...................................... 11
Item 3. Defaults upon Senior Securities ............................ 11
Item 4. Submission of Matters to a Vote
of Security Holders ................................... 12
Item 5. Other Information .......................................... 12
Item 6. Exhibits and Reports on Form 8-K ........................... 13
SIGNATURES .............................................................. 14
INDEX TO EXHIBITS ....................................................... 15
2
<PAGE> 3
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
--------------
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 1997 and December 31, 1996
(in thousands of dollars)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1997 1996
----------- ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash ........................................ $ 755 $ 774
Receivables, net ............................ 28,167 13,933
Inventories ................................. 44,344 56,555
Deferred income taxes ....................... 3,533 3,533
Other current assets ........................ 3,114 4,496
--------- ---------
Total current assets .............. 79,913 79,291
--------- ---------
Installment receivables,
less current portion ........................ 14,479 11,435
Property, plant and equipment, net ............... 15,533 16,479
Other assets ..................................... 4,762 4,859
--------- ---------
Total assets ...................... $ 114,687 $ 112,064
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt ........... $ 32,020 $ 30,901
Accounts payable ............................ 6,622 8,915
Income taxes payable ........................ 980 154
Accrued liabilities ......................... 7,053 5,757
--------- ---------
Total current liabilities ......... 46,675 45,727
--------- ---------
Long-term debt, less current portion ............. 2,900 3,350
Other liabilities ................................ 6,915 6,712
--------- ---------
Total liabilities ................. 56,490 55,789
--------- ---------
Shareholders' equity:
Common stock ................................ 42 42
Additional paid-in capital .................. 12,141 12,106
Retained earnings ........................... 52,221 50,334
--------- ---------
64,404 62,482
Less cost of treasury shares ................ (6,207) (6,207)
--------- ---------
Total shareholders' equity ........ 58,197 56,275
--------- ---------
Total liabilities and
shareholders' equity ......... $ 114,687 $ 112,064
========= =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 4
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
--------------
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
(in thousands, except net earnings per share)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
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, net ........ 687 947 1,421 1,806
------- ------- ------- -------
10,938 8,682 18,575 16,584
Selling, general and
administrative expenses ....... 7,440 6,826 13,897 13,152
------- ------- ------- -------
Operating profit ......... 3,498 1,856 4,678 3,432
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
------- ------- ------- -------
Net earnings ............. $ 1,642 $ 750 $ 1,888 $ 1,434
======= ======= ======= =======
Net earnings per share ............. $ .48 $ .22 $ .55 $ .42
======= ======= ======= =======
Average number of common
shares outstanding ............ 3,428 3,419 3,427 3,417
======= ======= ======= =======
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
4
<PAGE> 5
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
--------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six months ended
June 30, 1997 and 1996
(in thousands of dollars)
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH 1997 1996
- --------------------------- -------- --------
<S> <C> <C>
Net cash provided by (used in)
operating activities .......................... $ 4,169 $(11,377)
Net cash used in investing activities .............. (946) (1,876)
Cash flows from financing activities:
Installment contract
receivables written ...................... (41,257) (32,935)
Installment receivables liquidated ............ 3,311 4,215
Proceeds from sale of
installment receivables .................. 33,999 26,436
Borrowing under long-term debt ................ 669 15,590
Other ......................................... 36 67
-------- --------
Net cash (used in) provided by
financing activities ........... (3,242) 13,373
-------- --------
Net (decrease) increase in cash .................... (19) 120
Cash at beginning of period ........................ 774 429
-------- --------
Cash at end of period .............................. $ 755 $ 549
======== ========
SUPPLEMENTAL DISCLOSURE
- -----------------------
OF CASH FLOW INFORMATION
------------------------
Cash paid during the quarter for:
Interest ...................................... $ 1,630 $ 1,156
======== ========
Income taxes .................................. $ 225 $ 355
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
5
<PAGE> 6
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
--------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
June 30, 1997
(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 Baldwin Piano & Organ Company ("Baldwin" or "Company")
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted pursuant to such rules and regulations, although the Company
believes that the disclosures are adequate to make the information presented not
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, 1996.
The financial statements presented herewith reflect all adjustments
(consisting of normal recurring adjustments) which are, in the opinion of
management, necessary to fairly state the results for the three month and six
month periods ended June 30, 1997 and 1996. 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 (in thousands of dollars):
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------- ------------
<S> <C> <C>
FIFO cost:
Raw material ............................ $ 16,167 $ 15,540
Work-in-process ......................... 7,793 8,257
Finished goods .......................... 32,376 45,725
-------- --------
56,336 69,522
Excess of FIFO cost
over LIFO inventory value ............... (11,992) (12,967)
-------- --------
Net inventories .................... $ 44,344 $ 56,555
======== ========
</TABLE>
6
<PAGE> 7
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
----------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
RESULTS OF OPERATIONS
SECOND QUARTER AND SIX MONTHS OF 1997 COMPARED
TO THE SECOND QUARTER AND SIX MONTHS OF 1996
During the second quarter of 1997 the Company began to phase-out its
consignment inventory program. Under Baldwin's traditional consignment inventory
program, Baldwin pianos in the dealer's possession remained part of Baldwin's
inventory until actually sold by the dealer. As dealers opt out of the
consignment program in favor of more traditional financing, all Baldwin stock in
the dealer's possession will be immediately sold to the dealer, creating a large
adjustment on Baldwin's books to record the sale.
Net sales for the second quarter of 1997 increased 62% to $42.4 million
from $26.1 million for the same period in 1996. Net sales for the first six
months of 1997 increased 31% to $69.7 million from $53.3 million in 1996. The
increase in sales during the second quarter and the first half of 1997 included
$12.7 million related to the one-time phase-out of consignment. Measured before
the impact of the phase-out of consignment, second-quarter sales rose 14% and
sales for the first half increased 7%. The Company expects to recognize
approximately $5 million of additional consignment-related sales in the third
quarter of 1997.
Measured before the impact of the phase-out of consignment, second-quarter
1997 sales for the Company's core acoustic and digital music businesses rose
$3.0 million (17%) over 1996. Additionally, second quarter sales for the
contract electronics business increased $1.6 million (22%) over 1996. Higher
sales for the Company's core music and contract electronics business were
offset, in part, by $.4 million lower sales in contract music and contract
furniture, two lower-margin businesses Baldwin decided to exit in the second
quarter of 1996 and $.4 million lower sales in the church organ business, which
was sold in the second quarter of 1997.
Net earnings for the second quarter of 1997 increased 118% to $1.6 million
($.48 per share)from $.8 million ($.22 per share) for the same period in 1996.
Net earnings for the first six months of 1997 increased 32% to $1.9 million
($.55 per share)from $1.4 million ($.42 per share). Net earnings for the second
quarter and the first six months of 1997 include an after-tax profit of $2.3
million ($.67 per share) from the phase-out of consignment sales described
above, partially offset by a non-recurring after-tax charge of $1.0 million
($.30 per share) related to the sale of the Company's church organ business and
associated work force reductions.
7
<PAGE> 8
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
----------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
-----------------------------------------------------------
Income on the sale of installment receivables generated by the Company's
financing operation for the second quarter and first six months of 1997
increased $.3 million and $.7, respectively. This increase is primarily the
result of the effect of the required adoption of SFAS 125, ACCOUNTING FOR
TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENT OF LIABILITIES.
This Statement is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996 and is to be
applied prospectively. This statement provides consistent standards for
distinguishing transfers of financial assets that are sales from transfers that
are secured borrowings.
Selling general and administrative expenses for the second quarter
increased by $.6 million from 1996. The increase was primarily due to costs
related to the proxy contest and costs connected with the sale of the church
organ business and associated work force reductions.
Interest expense for the second quarter and first six months of 1997
increased by $.2 million and $.5, respectively, resulting from higher interest
rates and higher debt levels necessary for pipeline inventories for the
Pianovelle(TM) digital piano line and the ConcertMaster(TM) autoplayer, compared
to year ago levels when these new products did not exist.
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
impact of higher employment costs per hour and higher raw material unit costs by
increases in sales prices.
The Company and its subsidiaries' operating results are sensitive to
changes in interest rates primarily because of fixed interest rates on
installment receivable contracts 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
increasing interest rates on its new installment receivable contracts. In
December 1996 and November 1995, the Company entered into two year interest rate
cap agreements in order to reduce the potential impact of increases in interest
rates on $44 million and $20 million, respectively, of floating-rate long-term
debt. The agreements entitle the Company to receive from the counterparty, on a
monthly basis, interest income to the extent the one-month commercial paper rate
exceeds 12%.
8
<PAGE> 9
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
----------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
-----------------------------------------------------------
The annual rate of interest under the revolving line of credit (Revolver)
ranges from 150 to 250 basis points plus the greater of the LIBOR on three month
deposits or the rate on 60 day high grade commercial paper.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires significant working capital to support its operations.
Under Baldwin's traditional consignment inventory program, inventory levels
would increase during each year to support its high fourth quarter seasonal
sales demand. During the second quarter of 1997 the Company began to phase-out
its consignment inventory program (see RESULTS OF OPERATIONS, above). This
phase-out accounted for most of the decrease in inventory and the increase in
receivables that occurred during the second quarter of 1997. Coming late in the
quarter, the phase-out did not produce a reduction in debt until July, 1997,
when the receivables were collected. As of July 22, 1997 debt was approximately
$12 million less than at the end of the second quarter.
The Company has a Revolver with a maximum commitment level of $50 million
and an initial due date of October 31, 2001. The Revolver is renewable for three
consecutive one-year periods beyond October 31, 2001. Amounts outstanding under
the Revolver are due one year after demand. However, the lender retains absolute
discretion regarding each advance, 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 carrying value of the Company's inventories and
trade accounts receivable. At June 30, 1997, the Company had approximately $14.4
million of additional borrowing available under this line of credit, and
considers this availability to be adequate.
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 the 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 $3.8 million
unpaid portion of the Company's term loan. Accordingly, at June 30, 1997,
approximately $10.6 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, the Company's finance subsidiary ("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.
9
<PAGE> 10
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
----------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
-----------------------------------------------------------
The Company has entered into negotiations with other potential lenders and
expects to sign a definitive agreement within the next several months on lending
terms more favorable than the terms of agreements with its present lender,
although such a result cannot be assured.
In 1996, 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 $100 million. Certain installment receivables
are not eligible for sale and are retained by Finance. 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. Finance continues to service all installment receivables 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 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 an increase in interest
rates on $20 million of installment contracts.
Proceeds from the sale of installment receivables amounted to $34.0 million
for the six months ended June 30, 1997 and $26.4 million for the comparable
period in 1996. This increase in 1997 compared to 1996 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 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 $85.9 million of installment
receivables. The Company believes an adequate allowance has been provided for
any uncollectible receivables.
Capital expenditures amounted to $.9 million in the first six months of
1997 and $1.9 million in the comparable period of 1996. At June 30, 1997, the
Company had no material outstanding capital commitments.
10
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in legal proceedings 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.
The Company does not anticipate that any environmental matters currently known
to the Company will result in any material liability.
ITEM 2. CHANGES IN SECURITIES
No changes have been made to the instruments defining the right of the
holders of the Company's common stock or to the rights of such shareholders.
In May 1997, the Company issued 4,000 shares of the Company's common stock
in connection with exercises of stock options by four officers of the Company.
The stock options were granted pursuant to the Company's 1986 Incentive Stock
Option Plan. The aggregate price paid by the exercising option grantees was
$34,000. The issuance of shares of the Company's common stock is exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933 because the
shares were issued in a private placement transaction with officers of the
Company.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company is not in default nor has it defaulted on any indebtedness. The
Company is not obligated to pay any dividends or other payment to any of its
shareholders.
11
<PAGE> 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters have been submitted to a vote of security holders during the
second quarter of 1997, other than matters arising in connection with the annual
meeting of the Company's shareholders held on June 12, 1997. At that meeting,
the only matters submitted to a vote of the shareholders were the election of
directors and the approval of the appointment of the Company's auditors. All of
the Company's existing directors (Mr. Castrucci, Mr. Connell, Mr. Head, Ms.
Hendricks, Mr. Howe) were elected to serve as directors until the 1998 annual
shareholders meeting. The votes cast for each director or nominee are as
follows:
Votes
------------------------
For Withheld
--------- --------
George E. Castrucci .......... 2,409,170 490,193
William B. Connell ........... 2,409,471 489,892
Joseph H. Head, Jr ........... 2,409,371 489,992
Karen L. Hendricks ........... 2,408,470 490,893
Roger L. Howe ................ 2,409,470 489,893
Peter Cooper ................. 341,219 0
David Harmon ................. 341,219 0
Robert Lippert ............... 341,219 0
Edward McDonnell ............. 341,219 0
John West .................... 341,219 0
KPMG Peat Marwick LLP was approved as the Company's auditor for 1997 with
3,228,862 votes cast "For", 701 votes "Against" and 11,019 votes "Abstained".
ITEM 5. OTHER INFORMATION
Not applicable.
12
<PAGE> 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.1 Agreement of Employment between Baldwin Piano & Organ Company and
Karen L. Hendricks dated as of June 19, 1997.
19 1997 Second Quarter Report to Shareholders of the Company.
99.1 Press Release, dated April 22, 1997, announcing the Company's new
manufacturing efficiencies and the elimination of 78 manufacturing
jobs.
99.2 Press Release, dated April 24, 1997, announcing the Company's
financial results for the first quarter of 1997.
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.
99.4 Press Release, dated June 12, 1997, announcing David L. Davis as
the first recipient of the "D.H. Baldwin Award".
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.
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.
99.7 Press Release, dated June 25, 1997, announcing the Company has
begun to phase out consignment sales.
99.8 Press Release, dated July 23, 1997, announcing the Company's
financial results for the second quarter of 1997.
27 Financial Data Schedule.
------------------------------
Index to Exhibits appears on sequentially numbered page 15.
(b) REPORTS ON FORM 8-K
The Company filed no reports on Form 8-K during the second quarter
of 1997.
13
<PAGE> 14
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: August 8, 1997 BY: /s/ Karen L. Hendricks
----------------------- ------------------------------------
Karen L. Hendricks, Chairman,
Chief Executive Officer and
President
DATE: August 8, 1997 BY: /s/ Perry H. Schwartz
----------------------- ------------------------------------
Perry H. Schwartz, Executive
Vice President and Chief
Financial Officer
14
<PAGE> 15
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.
15
<PAGE> 1
EXHIBIT 10.1
AGREEMENT OF EMPLOYMENT
-----------------------
THIS AGREEMENT OF EMPLOYMENT ("Agreement") is made and entered into as
of June 19, 1997 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 L. Hendricks (the "Employee").
WITNESSETH:
WHEREAS, the Employee is currently employed as the Company's Chief
Executive Officer and President of the Company pursuant to that certain
Agreement of Employment by and between Employee and Company dated November 18,
1994, which expires by its terms on December 31, 1997 and is a member and
Chairman of the Board of the Company; and
WHEREAS, the Company and the Employee mutually desire that Employee
continues as the Company's Chief Executive Officer and President and as a
Director and Chairman of the Board of the Company; and
WHEREAS, the Company and Employee wish to enter into this new Agreement
to set forth their mutual understanding as to the terms and conditions of
Employee's continued 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, President and Chairman of the Board, 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 as set forth from time to time by the Board of Directors.
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 or which would divert substantial time or effort from the business
affairs of the Company. The Company has previously approved the Employee
serving as a Director of A.C. Neilson Corporation and the continuance of such
activities is expressly permitted.
2. BOARD OF DIRECTORS. 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's term of employment with the Company pursuant to
this Agreement shall begin as of January 1, 1997 (the "Commencement Date") and
shall continue
<PAGE> 2
through December 31, 1998, and thereafter, without a specified term, until
terminated by the Company or Employee pursuant to Section 5 hereof.
4. COMPENSATION AND BENEFITS. Except as otherwise provided upon a
termination of Employee's employment pursuant to Section 5 hereof, 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; PERFORMANCE REVIEW. The Company shall pay
Employee a minimum of $350,000 annual base salary during each year of
employment hereunder. For the year 1997, the salary adjustment shall be
effective as of January 1, 1997. Such salary will be payable in equal monthly
installments on the 25th day of each month. Employee shall receive an annual
formal performance review which shall be done in the last four months of each
calendar year by the entire Board of Directors of the Company, lead by the Lead
Director. Employee will also be eligible for an annual salary review (to be
completed by December 31) by the Executive Compensation Committee (the
"Committee") of the Company's Board of Directors and her annual base salary for
the following calendar year maybe adjusted as such Committee deems appropriate,
provided, however, that in no event shall Employee's annual base salary be less
than $350,000.
4.2 ANNUAL INCENTIVE. Employee shall participate in such Company
annual incentive compensation programs which include senior management as may
exist from time to time (the "MIP"). As a participant in any 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.
4.3 STOCK OPTIONS. Immediately upon the Commencement Date, the
Company shall grant to Employee a non-qualified stock option to acquire 19,000
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 June 19, 1997 or, if no trades are made on such date,
the next business day following such date on which trades of the Company's
common stock are reported. Employee's right to acquire the shares subject to
this option shall be immediately fully vested and exercisable. Such options
shall expire on the earlier of ten years from the date of grant or three months
following the termination of Employees employment for any reason other than
permanent disability or death, in which cases the option will continue to be
exercisable by Employee, her heirs or successors for the entire ten year term.
4.4 RESTRICTED STOCK GRANT. The Company hereby awards to Employee
12,500 shares of the Company's Common Stock subject to the terms and conditions
set forth herein.
(a) The Restricted Stock shall be issued to Employee in the
following amounts and on the following dates:
2
<PAGE> 3
<TABLE>
<S> <C>
On execution of the Agreement - 2,500 shares (20%)
First Anniversary (January 2, 1998) - 2,500 shares (20%)
Second Anniversary (January 2, 1999) - 2,500 shares (20%)
Third Anniversary (January 2, 2000) - 2,500 shares (20%)
Fourth Anniversary (January 2, 2001) - 2,500 shares (20%)
</TABLE>
if Employee is employed as a full-time employee of the Company on such dates.
(b) Upon the occurrence of any of the following:
(i) death of Employee; or
(ii) the occurrence of a "Change of Control" as defined
in the Change of Control Agreement referenced in Section 5.6
hereof; or
(iii) the termination of Employee's employment for any
reasons other than for "cause" as defined in Section 5.2 hereof;
then the Company shall within ten (10) days issue all shares of Restricted
Stock to Employee which have been awarded but not yet issued.
(c) If Employee elects to terminate her employment with the
Company subsequent to December 31, 1998 and if at the time of termination of
employment all of the following circumstances exist:
(i) no circumstances which would constitute "cause" as
defined in Section 5.6 hereof exist;
(ii) Employee gives the Board of Directors at least nine
(9) months prior written notice of termination; and
(iii) Employees works with the Board in good faith to
recruit a qualified successor, and, if recruited, to
accomplish an effective transition;
then, within ten (10) days of the effective date of termination of employment,
Company shall issue all shares of Restricted Stock to Employee which have been
awarded, but not yet issued.
(d) At any time during the term of this Agreement, at the
direction of the Board of Directors, the Company may, but is not required to
register the Restricted Stock with the Securities and Exchange Commission for
resale by the Employee. If not registered previously, the Company shall
exercise its best efforts to so register the Restricted Stock, within ninety
(90) days of the termination of this Agreement other than in the event of a
termination for cause as set forth in Section 5.6 hereof.
3
<PAGE> 4
(e) In the discretion of the Committee, the Employee may
receive additional grants of Restricted Stock in subsequent years. Unless
otherwise provided by the Committee, all Restricted Stock awarded in future
years shall be issued on the First through Fifth Anniversary of such award in
the same relative percentages as set forth in subsection (a) hereof and shall
be subject to the provisions of subsection (b), (c) and (d) hereof.
4.5. RETIREMENT PLAN/401(K) SAVINGS PLAN AND OTHER GROUP BENEFITS.
Employee shall continue to 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 such Plan and shall continue to
participate 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."
4.6. VACATION. Employee is entitled to, and expected to utilize, four
weeks of paid vacation in each calendar year.
4.7. ADDITIONAL INSURANCE. In addition to the various insurance
coverages available to Employee as describe in Section 4.5, the company shall
purchase as its own expense for Employee's benefit additional disability
insurance coverage and life insurance as set forth in this Section 4.7. For
each calendar year during the term of Employee's employment hereunder, the
Company shall purchase disability coverage covering employee 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 4.5. 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. TERMINATION OF AGREEMENT.
5.1. WITHOUT CAUSE. The Company may terminate Employee's employment
at any time, whether or not for cause (as "cause" is defined in Section 5.2.
below). In the event the Company terminates Employee's employment without
cause, the Company will pay Employee as severance a lump sum amount equal to
eighteen (18) months of Employees's base salary at the time of termination less
required withholdings and deductions; provided, however, if the Company
terminates Employee's employment without cause prior to December 31, 1998, the
Company shall pay employee as severance a lump sum amount equal to Employee's
base salary from the date of termination through December 31, 1998 plus
eighteen (18) months of Employee's base salary at the time of termination, less
required withholdings and deductions. Such severance payment shall be paid by
the Company within ninety (90) days following the date of Employee's
termination. In the event the Company terminates Employee's employment without
cause, the Company shall also pay the cost of out placement services for
Employee up to an amount equal to 15% of her annual base salary at the time her
employment is terminated. the Company shall have no further obligation to
Employee beyond the above payments.
4
<PAGE> 5
5.2 FOR CAUSE. The Company may terminate Employee's employment at any
time for cause (as defined below) effective immediately upon written notice to
Employees. 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, and the Company shall have no further
obligation to Employee. Such amounts hall be paid by the Company within thirty
(30) days of the effective date of such termination. 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 or breech of this Agreement.
5.3 DISABILITY. This Agreement may be terminated, at the 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 the essential
functions of her job 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 the
essential functions of her job 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 the essential functions of her job 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 and acceptable to Employee 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. Such amounts shall be paid
by the Company within thirty (30) days from the effective date of such
termination. 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. This Section 5.3
will be applied consistent with the Employer's obligations under applicable
federal and state law, including without limitation the Americans with
Disabilities Act.
5.4 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. Such amounts shall
be paid by the Company within thirty (30) days from the effective date of such
termination. the option granted to Employee in accordance with Section 4.3
shall remain exercisable for its entire ten year term by the person or persons
to whom the same is transferred by will or by the applicable laws of descent
and distribution.
5
<PAGE> 6
5.5 BY EMPLOYEE. If Employee terminates her employment with the Company
for any reason, Employee shall receive her salary through the effective date of
termination and all incentive payments earned but not yet paid to employee
prior to such date, and the Company shall have no further obligation to
Employee other than as set forth in Section 4.4 hereof. Such amount shall be
paid by the Company within thirty (30) days from the effective date of such
termination.
5.6 CHANGE IN CONTROL; ACCELERATED VESTING SCHEDULES. Notwithstanding
any other provision in this Agreement, in the event that Employee's employment
with the Company is terminated pursuant to the terms of that certain Change in
Control Agreement by and between the Company and Employee dated June 26, 1996
(the "Change in Control Agreement"), Employee shall be entitled solely to (i)
such benefits as are provided in the Change in Control Agreement plus (ii) the
Restricted Stock as provided in Section 4.4 hereof and the Company shall have no
further obligation to Employee beyond the provision of such benefits. The
parties hereby ratify and confirm each and every provision of the Change in
Control Agreement, provided, however, that in the event that the accelerated
vesting of the Restricted Stock would be treated as "Severance Payments"
subject to the provision of Section IV 2(g) of the Change in Control Agreement,
upon the Employee's written election, the provisions of this Section 5.6 shall
control and override the limitations of the Change in Control Agreement.
6. COVENANT NOT TO COMPETE.
6.1. At all times during the term of this Agreement, and for a
period of one year thereafter if terminated by Employee for any reason or if
terminated by the Company pursuant to Sections 5.2 or 5.3, 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.
6.2. The Company and Employee each hereby acknowledge and agree as
follows:
(a) The covenants, restrictions and obligations set forth in
Section 6.1 above are founded upon valuable consideration and are reasonable in
duration and geographic scope;
(b) In the event of a breach or threatened breach by Employee
of any of the covenants, restrictions, agreements and obligations set forth
herein, monetary damages or the other remedies at law that may be available to
the Company for such breach or threatened breach will be inadequate and,
without prejudice to the Company's right to pursue any other remedies at law or
in equity available to it for such breach or threatened breach, including,
without limitation, the recovery of damages from Employee, the Company will be
entitled to injunctive relief;
(c) The time period and geographical area set forth in Section
6.1 hereof are each divisible and separable, and, in the event that the
covenants not to compete contained therein are judicially held invalid or
unenforceable as to such time period and/or geographical area, they will be
valid and enforceable in such geographical area(s) and for such time period(s)
which
6
<PAGE> 7
the court determines to be reasonable and enforceable. The Employee agrees that
in the event any court of competent jurisdiction determines that the above
covenants are invalid or unenforceable to join with the Company in requesting
that court to construe the applicable provision by limiting or reducing it so
as to be enforceable to the extent compatible with the then applicable law.
Furthermore, any period of restriction or covenant herein stated shall not
include any period of violation or period of time required for litigation to
enforce such restriction or covenant; and
(d) The provisions of this Section 6 shall survive the termination
of the Agreement.
7. CONFIDENTIALITY. Employee hereby ratifies and confirms each and
every provision of that certain Agreement dated 5/31/97.
---------- -------
8. 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.
9. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, any one of which shall constitute an original without reference
to the others.
10. SEVERABILITY OF CLAUSES. Each of the paragraphs of this Agreement
shall stand independently and severable, 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.
11. 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 proceeding
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:
/s/ Linda Ketteler By: /s/ William B. Connell
- -------------------------- ------------------------------
Title: Director
--------------------------
7
<PAGE> 8
"EMPLOYEE"
/s/ Karen L. Hendricks
--------------------------
KAREN L. HENDRICKS
8
<PAGE> 1
EXHIBIT 19
TO OUR SHAREHOLDERS
- --------------------------------------------------------------------------------
August 4, 1997
Second-quarter net income was $1,642,000 or 88 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 $68,714,000. 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
premise of our strategic plan by voting overwhelmingly to re-elect the full
Baldwin board of directors, pursuing 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)
- ---------------------------------------------------------------------------------------------
<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)
- ------------------------------------------------------------------------------------------------
Net earnings $ 1,642 $ 750 $ 1,888 $ 1,434
- ------------------------------------------------------------------------------------------------
Net earnings per share $ .48 $ .22 $ .55 $ .42
- ------------------------------------------------------------------------------------------------
Average number of shares outstanding (000) 3,428 3,419 3,427 3,417
================================================================================================
</TABLE>
<TABLE>
CONSOLIDATED SUMMARY BALANCE SHEETS (UNAUDITED)
- ------------------------------------------------------------------------------------------------
(IN THOUSANDS) JUNE 30,
--------------------
1997 1996
- ------------------------------------------------------------------------------------------------
<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
- ------------------------------------------------------------------------------------------------
Other 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>
<PAGE> 2
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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEET AND STATEMENT OF EARNINGS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 755
<SECURITIES> 0
<RECEIVABLES> 29,702
<ALLOWANCES> 1,535
<INVENTORY> 44,344
<CURRENT-ASSETS> 79,913
<PP&E> 32,403
<DEPRECIATION> 16,870
<TOTAL-ASSETS> 114,687
<CURRENT-LIABILITIES> 46,675
<BONDS> 2,900
<COMMON> 42
0
0
<OTHER-SE> 58,155
<TOTAL-LIABILITY-AND-EQUITY> 114,687
<SALES> 69,714
<TOTAL-REVENUES> 75,360
<CGS> 56,785
<TOTAL-COSTS> 56,785
<OTHER-EXPENSES> 13,272
<LOSS-PROVISION> 625
<INTEREST-EXPENSE> 1,656
<INCOME-PRETAX> 3,022
<INCOME-TAX> 1,134
<INCOME-CONTINUING> 1,888
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,888
<EPS-PRIMARY> .55
<EPS-DILUTED> .55
</TABLE>
<PAGE> 1
EXHIBIT 99.1
[BALDWIN LETTERHEAD]
BALDWIN NEWS RELEASE
CONTACTS: Perry Schwartz Joel Pomerantz
Baldwin Piano The Dilenschneider Group
(513) 576-4518 (212) 922-0900
NEW MANUFACTURING EFFICIENCIES ELIMINATE
78 JOBS AT FOUR BALDWIN PIANO FACILITIES
COMPANY EXPECTS SAVINGS OF $1 MILLION IN 1997;
MORE IN LATER YEARS
LOVELAND, OH, April 22, 1997 -- Baldwin Piano & Organ Company,
(NASDAQ:BPAO) said today that its piano manufacturing initiative, which includes
the implementation of synchronous manufacturing, has made it possible to
eliminate 78 manufacturing jobs at its facilities in Conway, Arkansas; Trumann,
Arkansas; Greenwood, Mississippi; and Juarez, Mexico. This represents nearly 8
percent of the total workforce at the four plants.
Baldwin said it expects the reductions to result in 1997 savings of
approximately $1 million dollars, net of severance cost, with even greater
savings in future years. Nearly all of the eliminated jobs are hourly jobs. No
special charges are anticipated.
"We are making tremendous strides in streamlining our manufacturing
processes, and the implementation of synchronous manufacturing is a key element
of this initiative," said Karen L. Hendricks, Baldwin's president, chairman and
chief executive officer. "Over time the savings will go well beyond just
personnel costs."
Ms. Hendricks indicated that this marks the first tangible, bottom-line
effect of the manufacturing initiative and that she expects this initiative to
produce additional long-term savings before the end of 1997.
-more-
<PAGE> 2
-2-
Baldwin Piano & Organ Company has manufactured and marketed keyboard
musical products for 135 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.
---------------------
"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.
# # #
April 22, 1997
<PAGE> 1
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-
<PAGE> 2
-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
-------- --------
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)
-------- --------
Earnings before income taxes 384 1,051
Income taxes 138 367
-------- --------
Net earnings $ 246 $ 684
======== ========
Net earnings per share $ 07 $ 20
======== ========
Average number of shares outstanding 3,425 3,415
======== ========
</TABLE>
<PAGE> 1
EXHIBIT 99.3
[BALDWIN LETTERHEAD]
BALDWIN NEWS RELEASE
CONTACTS: Perry Schwartz Wes Truesdell
Baldwin Piano The Dilenschneider Group
(513) 576-4518 (212) 922-0900
INSTITUTIONAL SHAREHOLDER SERVICES (ISS)
BACKS BALDWIN BOARD IN PROXY CONTEST
ISS AGREES HENDRICKS IS MOVING BALDWIN IN THE RIGHT DIRECTION
LOVELAND, OH, June 9, 1997 -- Baldwin Piano and Organ Company (NASDAQ:BPAO)
today announced that Institutional Shareholder Services (ISS), the nation's most
influential, independent proxy advisory service, has recommended that its
institutional shareholder clients vote for Baldwin's slate of five directors,
rejecting the five candidates proposed by Kenneth W. Pavia, Sr., general partner
of Bolero Investments Group, L.P., and an 8.1 percent holder of Baldwin shares.
Baldwin's Annual Meeting of Shareholders will be held in Cincinnati on June 12,
1997.
In its analysis, ISS said, "[W]e believe management's efforts to turn the
company around have been considerable, and we believe Baldwin has significant
potential in the future...Baldwin has made significant strides toward
modernizing its manufacturing capabilities and improving the overall operation
of the company." Addressing the strategic plan Baldwin has in place, ISS
indicated it concurred with the company's position that disrupting that plan by
replacing the board would not be in shareholders' best interests," adding,
"...the strategic plan and the improved results are moving the company in the
right direction."
Karen L. Hendricks, chairman and CEO of Baldwin said, "We are pleased that
ISS, a neutral party that is well-versed in these matters, has endorsed
Baldwin's slate of experienced and dedicated incumbent directors. ISS's
thoughtful, independent assessment should weigh heavily on the balance of the
vote. We are confident that shareholders who take a realistic look at their
options will likewise vote to re-elect the current Baldwin board."
-more-
<PAGE> 2
-2-
She added, "Next Thursday's vote is a matter of re-electing a board that
offers a clear-cut strategic plan for Baldwin's future, versus casting one's lot
with a group of challengers who offer no plan, no new ideas and no experience in
the music business."
Institutional Shareholder Services, based in Bethesda, Maryland, is a
longstanding advisor on proxy contests, corporate governance and related issues
to many major institutional shareholders.
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.
# # #
<PAGE> 1
EXHIBIT 99.4
[BALDWIN LETTERHEAD]
BALDWIN NEWS RELEASE
CONTACTS: Cindy Moeller Joel Pomerantz
Baldwin Piano The Dilenschneider Group
(513) 576-4652 (212) 922-0900
(Photo Available)
ARKANSAS PLANT MANAGER IS FIRST TO RECEIVE
PRESTIGIOUS NEW AWARD NAMED FOR
CINCINNATIAN D.H. BALDWIN,
FOUNDER OF BALDWIN PIANO & ORGAN COMPANY
HONORED AT BALDWIN'S ANNUAL MEETING IN CINCINNATI
CINCINNATI, June l2 -- A 35-year-old Baldwin Piano & Organ Company
employee, who "learned on the job," rising from entry-level position to plant
manager in just 14 years, has been selected as the first recipient of the "D.H.
Baldwin Award."
The prestigious award is named in honor of Cincinnatian Dwight Hamilton
Baldwin, who founded the nation's oldest and best-known piano manufacturing
company here in l862.
"This award recognizes exemplary performance over time by an employee "who
has shown significant initiative and a genuine openness to learning and trying
innovative ways of doing things," said Karen L. Hendricks, Baldwin's CEO, who
made the presentation. The honor will be awarded only periodically "to
exceptional individuals whose unusual accomplishments merit such recognition."
David L. Davis, who, at 17, began working at Baldwin's newly-opened
Trumann, Arkansas plant, has managed that major manufacturing facility since
l993. He received the award, represented by a miniature crystal grand piano,
during the 135- year-old company's annual stockholders' meeting held here today.
Mr. Davis was honored for his leadership abilities and "the high standards
of quality and craftsmanship" he has maintained at the Trumann, Arkansas plant.
-more-
<PAGE> 2
-2-
In her presentation remarks, Ms. Hendricks stressed Mr. Davis' dedication
and industriousness. "He wasn't just lucky. He worked very, very hard for what
he achieved. David Davis exemplifies the initiative, leadership, willingness to
learn, and courage that we hope all Baldwin employees will demonstrate," she
said.
"He was determined to learn everything there was to know about building
quality pianos. Every week, he worked long hours to finish his required duties
in four days and used the fifth day to learn about every other job at the
plant."
Two years after joining Baldwin, the winner of the first D.H. Baldwin Award
was made a management trainee and proceeded to rise very quickly within the
company ranks. He served, successively, as a first-line supervisor, quality
control technician, quality control chief, superintendent of production, and
general production superintendent. In l993, at 31, he was appointed one of the
youngest plant managers in the country.
David Hamilton Baldwin, for whom the new award is named, began his career
as a music teacher. In 1856, he secured a job as a teacher in the Cincinnati
schools. Six years later, during the Civil War, he opened a retail piano store
on Fourth Street using his life savings of $2,000. From 1862 to 1889, the
Baldwin Company grew rapidly, opening branches in Indianapolis, Louisville, and
numerous rural Ohio towns.
In 1889, Mr. Baldwin decided to build the instruments himself rather than
rely on some "distant" Eastern manufacturer. That year, the company opened its
first plant in a rented Chicago loft.
Today, Baldwin is the nation's largest piano manufacturer. A
publicly-traded company (NASDAQ:BPAO) with annual sales in excess of $115
million, Baldwin currently employs 1,425 workers. It is headquartered in
Loveland, Ohio, with plants in Trumann, Fayetteville, and Conway, Arkansas;
Greenwood, Mississippi; and Juarez, Mexico.
-more-
<PAGE> 3
-3-
Baldwin markets three of the best-known brand names in the music industry,
Baldwin, Chickering, and Wurlitzer, plus a full line of digital pianos under the
Pianovelle name. The company's products are sold through a network of 400
independent keyboard dealers as well as company-owned retail stores in
Cincinnati, Atlanta, Indianapolis, Louisville, and Lexington.
# # #
<PAGE> 1
EXHIBIT 99.5
[BALDWIN LETTERHEAD]
BALDWIN NEWS RELEASE
CONTACTS: Perry Schwartz Wes Truesdell
Baldwin Piano The Dilenschneider Group
(513) 576-4518 (212) 922-0900
BALDWIN BOARD LIKELY TO BE
RE-ELECTED BY OVERWHELMING MARGIN
-----------------
VOTE SIGNALS RESOUNDING MANDATE FOR MANAGEMENT'S STRATEGIC PLAN
-------------------
CINCINNATI, OH, June 12, 1997 -- Preliminary indications are that
shareholders of Baldwin Piano and Organ Company (NASDAQ:BPAO) have voted
overwhelmingly to re-elect the company's five-member board at the company's
annual meeting here today, thus soundly defeating an opposition slate proposed
by Bolero Investment Group, L.P., of Newport Beach, California.
The vote is subject to verification by independent inspectors of election.
A final shareholder vote tally is expected next week.
"The central issue here was Baldwin's ongoing strategic plan and whether
Bolero's candidates, without a plan and no music industry experience, offered a
viable alternative to our capable and experienced board," said Karen L.
Hendricks, Baldwin chairman and CEO. "The overwhelming vote in our favor gives
us a clear mandate to continue executing our strategic growth plan for Baldwin."
Re-elected to the Baldwin board along with Ms. Hendricks were George E.
Castrucci, William B. Connell, Joseph H. Head, Jr., and Roger L. Howe. "We are
most gratified by today's resounding show of support from our institutional and
individual shareholders," Ms. Hendricks said.
-more-
<PAGE> 2
-2-
In her remarks to shareholders, Mrs. Hendricks talked about the company's
program to lower its cost structure by improving manufacturing efficiency and
better utilize human and physical assets at its four piano-making plants: "We
have introduced a contemporary industrial engineering concept called synchronous
manufacturing; and we are already seeing significant and measurable
benefits...reduced cycle time, and reduced scrap and rework. These reduce costs
and increase gross profit margins."
Ms. Hendricks also said she was very pleased with dealer and marketplace
reaction to two of the company's newest products, Baldwin's digital Pianovelle;
and its proprietary acoustic piano autoplayer--the Baldwin ConcertMaster. "We
believe these products will contribute significantly to the company's future
success," she added.
Baldwin's CEO said the company is studying global expansion for its
acoustic piano business. "With the U.S. representing less than 20 percent of the
world market, and the remainder overseas, we are developing products to appeal
to these markets and have hired experienced sales representatives to explore
these opportunities."
Also at the meeting, Ms. Hendricks, in a change of pace, presented a
newly-created award--the D. H. Baldwin Award, named for the company's 1862
founder--to David L. Davis who is manager of Baldwin's largest piano assembly
plant in Trumann, Arkansas. Mr. Davis came to the plant in 1980 as a trainee
fresh out of high school, and learned so much about piano-making in the next 14
years that, after a succession of promotions, he was named plant manager at age
31 in 1993.
Baldwin Piano and 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.
# # #
<PAGE> 1
EXHIBIT 99.6
[BALDWIN LETTERHEAD]
BALDWIN NEWS RELEASE
CONTACTS: Perry Schwartz Wes Truesdell
Baldwin Piano The Dilenschneider Group
(513) 576-4518 (212) 922-0900
BALDWIN DIRECTORS WIN RE-ELECTION
BY OVERWHELMING MARGIN
FINAL VOTE TALLY REVEALS MAGNITUDE OF BOLERO'S DEFEAT
LOVELAND, OH, June 19, 1997 -- Baldwin Piano and Organ Company
(NASDAQ:BPAO) said today that it has received the final Inspectors of Election
Report from CT Corporation System on the results of last week's shareholder
vote. The report confirmed preliminary indications that the company's five
directors had been re-elected by an overwhelming margin, receiving approximately
74 percent of the 3.2 million shares represented at Baldwin's June 12
shareholder meeting. Approximately 490,000 shares, or 15 percent of the shares
represented at the meeting, did not vote for directors.
Discounting the approximately 279,000 shares beneficially owned or
controlled by challenger Bolero Investments Group, L.P. and its sole general
partner, Kenneth W. Pavia, Sr., Bolero's director slate only garnered votes from
approximately 62,000 shares that it did not already control.
"We view this overwhelming margin of victory as a clear mandate to continue
executing our strategic growth plan for Baldwin," said Karen L. Hendricks,
Baldwin chairman and CEO.
Re-elected to the Baldwin board along with Ms. Hendricks were George E.
Castrucci, William B. Connell, Joseph H. Head, Jr., and Roger L. Howe.
-more-
<PAGE> 2
-2-
In her remarks to shareholders last week, Ms. Hendricks spoke
enthusiastically of the various programs Baldwin has initiated to improve
manufacturing efficiency and asset utilization, and ultimately the company's
financial performance. She also cited positive dealer and marketplace reaction
to two new products -- Baldwin's digital Pianovelle and its proprietary acoustic
piano autoplayer, the Baldwin ConcertMaster -- as among her key reasons for
renewed optimism.
Baldwin Piano and 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.
# # #
<PAGE> 1
EXHIBIT 99.7
[BALDWIN LETTERHEAD]
BALDWIN NEWS RELEASE
CONTACTS: Perry Schwartz Wes Truesdell
Baldwin Piano The Dilenschneider Group
(513) 576-4518 (212) 922-0900
BALDWIN TO PHASE OUT CONSIGNMENT SALES
AND SHIFT DEALERS TO LOWER COST FINANCING
SHIFT WILL PRODUCE A POSITIVE ONE-TIME INCREASE IN SALES AND EARNINGS
LOVELAND, OH, June 25, 1997 -- Baldwin Piano and Organ Company
(NASDAQ:BPAO) today announced that it has begun to phase out consignment sales
and will help its dealers obtain lower-cost financing for their inventories.
When fully implemented, the change will reduce Baldwin's debt by about $25
million. At the end of the first quarter, March 31, 1997, Baldwin had
outstanding debt of approximately $39 million.
The phase-out of consignment sales will also accelerate cash flow and
income recognition at Baldwin, producing a substantial one-time increase in
sales and earnings as dealers end their reliance on consignment financing.
Following several months of negotiations with Anaheim, California-based
Deutche Financial Services (DFS), Baldwin has created a program that will reduce
financing costs for nearly all of its dealers. Baldwin's sales force and
representatives of DFS are now in the field helping dealers make the transition.
Initial dealer reaction to the plan, which was finalized in mid-March, was
described by the company as "very positive."
"Our strategic plan to build shareholder value is moving ahead right on
schedule and phasing out consignment is an important part of that plan," said
Karen L. Hendricks, chairman and CEO of Baldwin. "It is a win, win situation for
Baldwin and its dealers. Our dealers get favorable financing and we get sharply
reduced debt and interest expense
-more-
<PAGE> 2
-2-
and lower administrative costs. Our dealers also get a Baldwin sales force that
can devote full time to helping them grow their businesses. Under the current
consignment program, our sales representatives spend up to 40 percent of their
time managing and accounting for inventory."
With the transition still in progress, the company declined to quantify the
savings but described the reduced interest expense, accelerated revenue
recognition and improvements in sales force efficiency as "very substantial."
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.
<PAGE> 1
EXHIBIT 99.8
[BALDWIN LETTERHEAD]
BALDWIN NEWS RELEASE
CONTACTS: Perry Schwartz Joel Pomerantz
Baldwin Piano The Dilenschneider Group
(513) 576-4518 (212) 922-0900
BALDWIN PIANO REPORTS SECOND-QUARTER RESULTS
CORE MUSIC SALES UP 17% BEFORE ADDITION OF CONSIGNMENT SALES
MAJOR STRUCTURAL IMPROVEMENTS IN MANUFACTURING WILL BENEFIT SECOND HALF
LOVELAND, OH, July 23, 1997 -- Baldwin Piano and Organ Company
(NASDAQ:BPAO) today announced second-quarter net income of $1,642,000, or 48
cents per share, compared with $750,000, or 22 cents per share, a year ago.
Baldwin's previously disclosed decision to phase-out its consignment
inventory program* accelerated sales and reduced inventory, adding $2.3 million,
or 67 cents per share, to second-quarter net income. This gain was partially
offset by a non-recurring 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
consignment, total second-quarter sales rose 14 percent. Baldwin said it expects
to recognize approximately $5 million of additional consignment-related sales in
the third quarter.
- --------
* Under Baldwin's traditional consignment inventory program, Baldwin pianos in
the dealer's possession remain part of Baldwin's inventory until actually sold
by the dealer. As dealers opt out of consignment in favor of more traditional
financing, all Baldwin stock in the dealer's possession is immediately sold to
the dealer, creating a large catch-up adjustment on Baldwin's books to record
the sale.
- more -
<PAGE> 2
2
For the first half of 1997, Baldwin reported net income of $1,888,000, or
55 cents per share, on sales of $69,714,000. A year ago, the company reported
first-half net income 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 consignment, second-quarter sales for the company's
core acoustic and digital 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, two lower-margin businesses Baldwin
decided to exit in the second quarter of 1996.
"The continuing strength in piano sales and contract electronics and a very
healthy financing business continue to move Baldwin in the right direction,"
said Karen L. Hendricks, president, chairman and chief executive officer. "While
margins in our music business will not begin to feel the positive impact of our
ongoing 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
- more -
<PAGE> 3
3
grow and strengthen their Baldwin business," she said. "We expect a more
aggressive marketing effort and some of the industry's most innovative new
products to enable us to sustain growth and continue to expand our share of the
market."
Ms. Hendricks added, "In June, our shareholders gave us a resounding
mandate to fulfill the promise of our strategic plan by voting overwhelming to
re-elect the full Baldwin board of directors, putting an end to a distracting
and costly proxy fight. While Baldwin's corporate bylaws clearly allow for such
challenges, shareholders should also be aware that such actions impost a cost,
since the company must retain lawyers, bankers, proxy solicitors, election
monitors and other professionals to respond to such challenges. For example,
since the proxy contest began, we estimate that Baldwin has incurred related
costs of approximately 10 cents per share -- a very considerable sum for a
company of Baldwin's size."
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. Baldwin, maker of America's best selling
pianos, 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 Statement Attached)
<PAGE> 4
4
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF EARNINGS
(IN THOUSANDS, EXCEPT NET EARNINGS PER SHARE)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
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
Interest income on
installment receivables (1) 2,098 1,815 4,225 3,583
Other operating income, net 687 947 1,421 1,806
Selling, general and administrative (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
Net earnings $ 1,642 $ 750 $ 1,888 $ 1,434
======== ======== ======== ========
Net earnings per share $ 0.48 $ 0.22 $ 0.55 $ 0.42
======== ======== ======== ========
Average number of
shares outstanding 3,428 3,419 3,427 3,417
======== ======== ======== ========
</TABLE>
(1) Baldwin's adoption of FAS 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities, by its Keyboard
Acceptance unit (KAC) resulted in additional pre-tax revenue of $325,000 and
$650,000, respectively, for the second quarter and first half of fiscal
1997. FAS 125 was not applicable to fiscal 1996 and earlier periods.
