<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
September 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 November 3, 1997, is 3,442,896.
<PAGE> 2
BALDWIN PIANO & ORGAN COMPANY
INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 1997 and December 31, 1996 ........ 3
Condensed Consolidated Statements of Earnings
for the three months and nine months ended
September 30, 1997 and 1996 ..................... 4
Condensed Consolidated Statements of Cash Flows
for the nine months ended
September 30, 1997 and 1996 ..................... 5
Notes to Condensed Consolidated Financial
Statements, September 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 ................... 11
Item 5. Other Information ........................... 11
Item 6. Exhibits and Reports on Form 8-K ............ 12
SIGNATURES ............................................ 13
INDEX TO EXHIBITS ..................................... 14
2
<PAGE> 3
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
---------------
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1997 and December 31, 1996
(in thousands of dollars)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1997 1996
------------- -----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash ............................................... $ 623 $ 774
Receivables, net ................................... 23,756 13,933
Inventories ........................................ 43,706 56,555
Deferred income taxes .............................. 3,532 3,533
Other current assets ............................... 4,327 4,496
--------- ---------
Total current assets ...................... 75,944 79,291
--------- ---------
Installment receivables,
less current portion ............................... 15,882 11,435
Property, plant and equipment, net .......................... 15,650 16,479
Other assets ................................................ 4,740 4,859
--------- ---------
Total assets ............................. $112,216 $ 112,064
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt .................. $ 27,808 $ 30,901
Accounts payable ................................... 7,330 8,915
Income taxes payable ............................... 1,568 154
Accrued liabilities ................................ 6,461 5,757
--------- ---------
Total current liabilities ................. 43,167 45,727
--------- ---------
Long-term debt, less current portion ........................ 2,675 3,350
Other liabilities ........................................... 7,069 6,712
--------- ---------
Total liabilities ......................... 52,911 55,789
--------- ---------
Shareholders' equity:
Common stock ....................................... 42 42
Additional paid-in capital ......................... 12,269 12,106
Retained earnings .................................. 53,281 50,334
--------- ---------
65,592 62,482
Less cost of treasury shares ....................... (6,287) (6,207)
--------- ---------
Total shareholders' equity ................ 59,305 56,275
--------- ---------
Total liabilities and
shareholders' equity ............. $ 112,216 $ 112,064
========= =========
</TABLE>
3
See accompanying Notes to Condensed Consolidated Financial Statements.
<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 Nine Months Ended
September 30, September 30,
---------------------- --------------------
1997 1996 1997 1996
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Net sales .................... $ 33,915 $ 26,508 $103,629 $ 79,794
Cost of goods sold ........... 26,539 21,543 83,324 63,634
-------- -------- -------- --------
Gross profit ........ 7,376 4,965 20,305 16,160
Income on the sale of
installment receivables ..... 1,790 1,404 5,461 4,338
Interest income on
installment receivables ..... 300 336 854 985
Other operating income, net .. 386 842 1,807 2,648
-------- -------- -------- --------
9,852 7,547 28,427 24,131
Selling, general and
administrative expenses ... 7,556 6,496 21,453 19,648
-------- -------- -------- --------
Operating profit .... 2,296 1,051 6,974 4,483
Interest expense ............. 592 827 2,248 2,009
-------- -------- -------- --------
Earnings before
income taxes ..... 1,704 224 4,726 2,474
Income taxes ................. 645 32 1,779 848
-------- -------- -------- --------
Net earnings ........ $ 1,059 $ 192 $ 2,947 $ 1,626
======== ======== ======== ========
Net earnings per share ....... $ .31 $ .06 $ .86 $ .48
======== ======== ======== ========
Average number of common
shares outstanding ........ 3,442 3,423 3,432 3,419
======== ======== ======== ========
</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)
Nine months ended
September 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 .................. $ 11,169 $(17,637)
Net cash used in investing activities .... (1,743) (3,365)
Cash flows from financing activities:
Installment contract
receivables written ............ (61,868) (51,096)
Installment receivables liquidated .... 6,441 6,157
Proceeds from sale of
installment receivables ........ 49,583 41,814
(Repayment) borrowing on long-term debt (3,768) 23,994
Other ................................. 35 104
-------- --------
Net cash (used in) provided by
financing activities ........ (9,577) 20,973
-------- --------
Net (decrease) in cash ................... (151) (29)
Cash at beginning of period .............. 774 429
-------- --------
Cash at end of period .................... $ 623 $ 400
======== ========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION
Cash paid during the quarter for:
Interest .............................. $ 2,295 $ 1,926
======== ========
Income taxes .......................... $ 286 $ 616
======== ========
</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)
September 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 nine
month periods ended September 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:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
FIFO cost:
Raw material ...................... $ 18,130 $ 15,540
Work-in-process ................... 7,733 8,257
Finished goods .................... 29,076 45,725
-------- --------
54,939 69,522
Excess of FIFO cost
over LIFO inventory value ......... (11,233) (12,967)
-------- --------
Net inventories .......... $ 43,706 $ 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
THIRD QUARTER AND NINE MONTHS OF 1997 COMPARED
TO THE THIRD QUARTER AND NINE MONTHS OF 1996
During the second quarter of 1997 the Company began to phase-out its
consignment inventory program. Under Baldwin's historical 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 floorplan financing, all
Baldwin stock in each of those dealer's possession is immediately sold to the
dealer. This transfer of title is a sale to the dealer and has created a large,
one-time, increase in Baldwin's sales.
Net sales for the third quarter of 1997 increased 28% to $33.9 million
from $26.5 million for the same period in 1996. Net sales for the first nine
months of 1997 increased 30% to $103.6 million from $79.8 million in 1996. The
increase in sales during the third quarter and the first nine months of 1997
included $2.3 million and $15.0 million, respectively, related to the one-time
phase-out of consignment, described above. Measured before the impact of the
phase-out of consignment, third quarter sales rose 19% and sales for the first
nine months increased 11%. The Company expects to recognize approximately $2.0
million of additional consignment-related sales in the fourth quarter of 1997.
Measured before the impact of the phase-out of consignment, third
quarter 1997 sales for the Company's core acoustic and digital music businesses
rose $4.2 million (24%) over 1996. This increase is due to strong demand for
pianos coupled with strides the Company has made in improving the raw material
purchase-to-piano delivery cycle times and in rolling out new marketing
programs. Additionally, third quarter sales for the Company's contract
electronics business increased $1.2 million (15%) over 1996, as a result of new
customers.
Net earnings for the third quarter of 1997 increased more than five
fold, to $1.1 million ($0.31 per share) vs. $0.2 million ($0.06 per share) for
the same period in 1996. Net earnings for the third quarter of 1997 includes an
after-tax profit of $0.1 million ($0.02 per share) from the phase-out of
consignment sales. Net earnings for the first nine months of 1997 increased 81%
to $2.9 million ($0.86 per share) vs. $1.6 million ($0.48 per share). Without
the impact of discontinuing consignment sales and other events (sale of the
church organ business and the costs associated with the proxy contest relating
to the Company's 1997 annual meeting of shareholders), net earnings through the
first nine months of 1997 would have been $1.9 million ($0.55 per share).
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 third quarter and first nine months of
1997 increased $0.3 million and $1.0 million, 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. SFAS 125 is effective for transfers and servicing of financial
assets and extinguishments of liabilities occurring after December 31, 1996 and
is applied prospectively. It provides consistent standards for distinguishing
transfers of financial assets that are sales from transfers that are secured
borrowings.
Other operating income decreased for the third quarter and the first
nine months of 1997 by $0.5 million and $0.8 million, respectively, primarily
due to lower display income. This result of the phase-out of the consignment
inventory program is offset by lower interest cost than would have occurred
otherwise.
Selling, general and administrative expenses for the third quarter
increased by $1.1 million from 1996. This increase primarily relates to higher
advertising and promotional spending, increased investor relations activity and
costs related to developing new business opportunities. For the first nine
months of 1997, selling, general and administrative expenses increased by $1.8
million from 1996. This increase was primarily the result of the above mentioned
items for the third quarter, as well as costs related to the proxy contest and
costs connected with the sale of the church organ business, together with the
one-time costs associated work force reductions.
Interest expense for the third quarter of 1997 decreased by $0.2
million from 1996 due to lower debt levels as a result of the phase-out of
consignment sales and the related decrease in inventory levels. During the first
nine months of 1997, interest expense increased by $0.2 million due to higher
debt levels necessary during the first and second quarters for pipeline
inventories for the Pianovelle(TM) digital piano line and the ConcertMaster(TM)
autoplayer.
INFLATION, OPERATIONS AND INTEREST RATES
The impact of inflation on manufacturing and operating costs may 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 manufacturing efficiencies and increases in sales prices.
8
<PAGE> 9
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
---------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
The Company's operating results are sensitive to changes in interest
rates primarily because of fixed interest rate income on Keyboard Acceptance
Corporation's installment receivable contracts and floating interest rates on
the related indebtedness. Additionally, the buyer of those installment
receivables earns interest on the outstanding principal balance of the contracts
based upon a floating interest rate provision. Keyboard Acceptance Corporation
is a wholly owned subsidiary of Baldwin.
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 1997, 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%.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires significant working capital to support its
operations. Under Baldwin's historical consignment inventory program, its
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 current receivables that occurred in 1997. Also during 1997, the
level of installment receivables increased as a result of the adoption of SFAS
125 (see RESULTS OF OPERATIONS, above) and a larger portfolio of installment
receivable contracts.
The phase-out of the consignment inventory program has resulted in
higher third quarter sales, and includes sales which, under consignment, would
take place in the fourth quarter. The Company estimates that approximately half
of the third quarter sales increase was a result of shipments that would have
otherwise fallen into the fourth quarter. This does not change the Company's
outlook for a strong improvement in full-year financial performance, but will
make fourth-quarter sales comparisons less favorable than would otherwise be the
case.
During October, 1997 the Company entered into a new revolving line of
credit (Revolver) to finance its working capital requirements. The Revolver has
a maximum commitment level of $40 million and a due date of October 1, 2000;
however the Company can terminate the agreement at any time with sixty days
notice. Under the Revolver, the lender is committed to make available a line of
credit based upon certain defined percentages of the carrying value of the
Company's inventories and trade accounts receivable. The annual rate of interest
under the Revolver is 150 basis points over LIBOR.
9
<PAGE> 10
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
---------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
The Company's debt agreements contain covenants that restrict,
among other things, the repurchase of the Company's common stock, the Company's
ability to incur new indebtedness and acquire new businesses. The Company's debt
agreements contain provisions by which a default under one agreement constitutes
a default under the other agreements.
In October, 1997, the Company's Keyboard Acceptance
Corporation subsidiary (Finance) amended its agreements with an independent
entity, to sell substantially all of its installment receivable contracts.
Included in these amendments is the buyer's commitment to purchase receivable
contracts up to a maximum outstanding principal amount of $150 million, if
certain criteria are met. Certain installment receivables are not eligible for
sale and are retained by Finance. At the time of each installment receivable
sale, Finance receives cash from the buyer equal to the unpaid principal balance
of the contract, less a holdback of 10% of the principal balance. Finance
continues to service all installment receivables it sells.
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 any increase in
interest rates on $20 million of installment contracts.
Proceeds from the sale of installment receivables amounted to $49.6
million for the nine months ended September 30, 1997 and $41.8 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.
Under the sale agreements, Finance is required to repurchase
installment 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 $86.4 million
of installment receivables. The Company believes an adequate allowance has been
provided for any uncollectible receivables.
Capital expenditures were $1.7 million in the first nine months of 1997
and $3.4 million in the comparable period of 1996. At September 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.
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters have been submitted to a vote of security holders during the
third quarter of 1997.
ITEM 5. OTHER INFORMATION
During October, 1997 the Company entered into a new revolving line of
credit (Revolver) to finance its working capital requirements. The Revolver has
a maximum commitment level of $40 million and a due date of October 1, 2000;
however the Company can terminate the agreement at any time with sixty days
notice. Under the Revolver, the lender is committed to make available a line of
credit based upon certain defined percentages of the carrying value of the
Company's inventories and trade accounts receivable.
In October, 1997, the Company's Keyboard Acceptance Corporation
subsidiary (Finance) amended its agreements with an independent entity, to sell
substantially all of its installment receivable contracts. Included in these
amendments is the buyer's commitment to purchase receivable contracts up to a
maximum outstanding principal amount of $150 million, if certain criteria are
met. Finance continues to service all installment receivables it sells.
11
<PAGE> 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
10.1 Agreement of Employment between Baldwin Piano &
Organ Company and Randy R. Marks as Executive Vice
President, Piano Operations, dated as of July 29,
1997.
19 1997 Third Quarter Report to Shareholders of the
Company.
99.1 Press Release, dated July 9, 1997, announcing the
signing of a letter of intent to form a third-party
business venture at the Company's Greenwood,
Mississippi factory facility.
99.2 Press Release, dated September 2, 1997, announcing
the promotion of Stephen P. Brock to the position of
Executive Vice President and General Manager of the
Company's Music Division.
99.3 Press Release, dated September 25, 1997, announcing
that the Company ended its negotiations to form a
third-party business venture at the Company's
Greenwood, Mississippi factory facility.
99.4 Press Release, dated October 21, 1997, announcing
the Company's financial results for the third
quarter of 1997.
27 Financial Data Schedule.
-------------------------
Index to Exhibits appears on sequentially numbered page 14.
(b) Reports On Form 8-K
-------------------
The Company filed no reports on Form 8-K during the third
quarter of 1997.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BALDWIN PIANO & ORGAN COMPANY
DATE: November 7, 1997 By: /S/ KAREN L. HENDRICKS
------------------------------ -------------------------------
Karen L. Hendricks, Chairman,
Chief Executive Officer and
President
DATE: November 7, 1997 BY: /S/ PERRY H. SCHWARTZ
------------------------------ -------------------------------
Perry H. Schwartz, Executive
Vice President and Chief
Financial Officer
13
<PAGE> 14
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
Exhibit Sequential
Number Page Number
- ------ -----------
<S> <C> <C>
10.1 Agreement of Employment between Baldwin Piano & Organ Company
and Randy R. Marks as Executive Vice President, Piano
Operations, dated as of July 29, 1997. 15
19 1997 Third Quarter Report to Shareholders of the Company. 24
99.1 Press Release, dated July 9, 1997, announcing the signing of a
letter of intent to form a third-party business venture at the
Company's Greenwood, Mississippi factory facility. 26
99.2 Press Release, dated September 3, 1997, announcing the promotion
of Stephen P. Brock to the position of Executive Vice President
and General Manager of the Company's Music Division. 28
99.3 Press Release, dated September 25, 1997, announcing that the
Company ended its negotiations to form a third-party business
venture at the Company's Greenwood, Mississippi factory
facility. 30
99.4 Press Release, dated October 21, 1997, announcing the Company's
financial results for the third quarter of 1997. 32
27 Financial Data Schedule.
</TABLE>
14
<PAGE> 1
EXHIBIT 10.1
[LOGO BALDWIN PIANO LETTERHEAD]
- -------------------------------------------------------------------------------
July 29, 1997
Mr. Randy R. Marks
13729 Vista De Los Pinos
Jamul, CA 91935
Dear Randy:
This letter agreement is to formally outline the offer of employment by
Baldwin Piano and Organ Company to employ you as Executive Vice President, Piano
Operations.
The following is more specific information about the offer. Of course,
all of these items are subject to the details of the specific plan documents
referred to herein. If you have any questions or want more detailed information,
please feel free to contact Cindy Moeller at 576-4652.
POSITION You would serve as Executive Vice President,
Piano Operations for the Company and would
report to the Chief Executive Officer of the
Company. You would be based at the Company's
Corporate Offices in Loveland, Ohio.
TERM OF
EMPLOYMENT The term of your employment with the Company
will commence on January 1, 1998 (the
"Commencement Date") and shall continue
through December 31, 2000 (the "Expiration
Date"), unless earlier terminated by the
Company or you as hereinafter provided. Upon
mutual agreement between you and the
Company, the term of your employment may be
extended beyond the Expiration Date.
COMPENSATION
Base Salary Your starting annual base salary will
be $215,000 (less withholdings and
deductions), which will be paid monthly on
the 25th of the month. The Company will
review your salary annually.
Annual Incentive You will be entitled to participate in
Baldwin's Management Incentive Plan ("MIP"),
which provides an opportunity for an annual
cash bonus. Pursuant to the MIP, you will be
eligible for an annual incentive of 24%,
30%, or 45% of your Base Salary, subject to
the level of the performance of the Company.
The plan runs on a fiscal year basis, and
your participation will begin in 1999 based
on performance of the Company for 1998. For
the period from the Commencement Date
through December 31, 1998, the Company will
agree that your cash bonus for
15
<PAGE> 2
Randy R. Marks
July 29, 1997
Page 2
1998 will not be less than $38,700. (75% of
threshold, which is 24% of your base
salary.)
Annual Incentive
Stock Options In 1999, you will be eligible for an annual
incentive stock option grant, determined by
the CEO, based on your individual
contribution for fiscal 1998.
Special Stock
Option Grant On the Commencement Date, the Company will
grant you a qualified option to acquire
10,000 shares of the Company's common stock
and a non-qualified option to acquire an
additional 10,000 shares of the Company's
common stock. The per share exercise price
for all such options will equal the closing
share price of the Company's common stock on
the NASDAQ Market on the Commencement Date
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.. Your right to exercise 20% of
these options will vest immediately on the
Commencement Date, and an additional 20% of
the options will vest on each anniversary of
the Commencement Date. These options will
expire on the earlier of the following: ten
years from the date of the grant or three
months following termination of your
employment.
Long-Term
Incentive Plan You will be entitled to participate in any
Long-Term Incentive Plan which may be
adopted by the Company.
BENEFITS Pursuant to 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" you will be entitled to the
following benefits:
Medical and
Dental Benefits You will be eligible to participate in the
medical and dental plan on the first of the
month following 90 days of employment. The
current medical plan is a point-of-service
plan, and you will select a primary care
physician, who will direct your medical
care. In 1997 the monthly employee
contribution for family medical and dental
coverage is $120.00. We anticipate a modest
increase in employee contribution rates in
1998. These premiums may be paid on a
pre-tax basis through the Baldwin
16
<PAGE> 3
Randy R. Marks
July 29, 1997
Page 3
Piano & Organ Company Cafeteria Plan (the
"Cafeteria Plan"). The maximum annual dental
benefit is $1,000 for each family member.
Co-pay for doctors' visits in the network is
$12.00. There is a prescription card with a
co-pay of $7.00 for generic drugs and $12.00
for branded drugs. Also, there is a mail
order prescription provision with a $7.00
co-pay for a three-month supply for
maintenance drugs.
Flexible Spending
Plan You also will be eligible under the
Cafeteria Plan to participate in the
flexible spending account arrangements which
allow you through salary deferrals to pay
certain items with pre-tax dollars. You may
defer up to $2,000 annually to the
Medical/Dental Reimbursement Account and up
to $5,000 to the Dependent Care
Reimbursement Account.
Retirement Plan After the prescribed waiting period, you
will be eligible to participate in the
Baldwin Piano & Organ Company Retirement
Plan for Salaried Employees (the "Retirement
Plan"). After you have been employed for 30
days, you will be eligible to make salary
deferral contributions to the Retirement
Plan (up to a certain limit). Second, after
you have been employed for one year, the
Company will contribute on an annual basis
to your account an amount equal to 3% of
your salary, plus match your salary deferral
contributions at the rate of 50% (up to a
certain overall limit).
In addition, Baldwin has a Nonqualified
Deferred Compensation Plan, to which you
also will be able to make salary deferral
contributions (up to a certain limit) after
30 days of employment. After one year of
employment, your deferrals to this Plan will
be matched at the rate of 50% (again, up to
a certain overall limit).
You will choose from the options available
in each plan how to direct the investment of
these funds.
You will be 100% vested in all Company
contributions after five years.
Vacation You will be entitled to four weeks of paid
vacation annually beginning in 1998.
17
<PAGE> 4
Randy R. Marks
July 29, 1997
Page 4
Long-Term
Disability You will be offered long-term disability at
group rates.
Life Insurance The Company provides life insurance in an
amount equal to 1 1/2 times your annual W-2
earnings. This amount is adjusted annually.
Educational
Assistance You will be eligible for educational
assistance after one year of employment.
Relocation
Expenses We provide a comprehensive relocation
program, administered by Prudential
Relocation that provides assistance with
home marketing, home finding, closing
management, and other relocation services.
These are described in detail in our
relocation policy, of which you have already
received a copy.
Our policy includes a repayment provision.
If you voluntarily terminate your employment
with Baldwin within twelve months of your
Commencement Date, you will be required to
pay up to 100% of the relocation expenses.
This provision is explained in detail in the
Repayment Agreement, which is attached to
the Relocation Policy. You are required to
sign this Repayment Agreement.
TERMINATION
Termination
Without Cause The Company may terminate your employment at
any time, whether or not for Cause (as
"Cause" is defined below). In the event the
Company terminates your employment without
Cause, the Company will continue to pay you
your Base Salary (less required withholdings
and deductions) through the Expiration Date
on a monthly basis. The Company shall have
no further obligation to you beyond the
above payments.
Termination
"For Cause" The Company may terminate your employment at
any time for Cause (as defined below)
effective immediately upon written notice to
you. In such event, you shall receive your
Base Salary through the effective date of
termination and all incentive payments
earned by you but not yet paid to you prior
to such date, and the Company shall have no
further obligation to you. For purposes of
this letter agreement, "Cause" shall mean a
violation by you of the Baldwin Piano &
Organ Company Corporate
18
<PAGE> 5
Randy R. Marks
July 29, 1997
Page 5
Policy on Ethics and Business, and/or any
acts by you against the Company amounting to
fraud, intentional misrepresentation and/or
embezzlement or breach of this letter
agreement.
Termination due
to Disability This letter agreement may be terminated, at
the option of the Company or you, if during
the term of your employment, you become
disabled, meaning because of ill health,
physical or mental disability, or for any
other disability ("disability"), and you
shall have been continuously unable or shall
have otherwise failed to perform the
essential functions of your job hereunder
for 90 days, or if, during any calendar year
during the term hereof because of
disability, you shall have been unable or
shall have otherwise failed to perform the
essential functions of your job hereunder
for a total period of 120 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 your
failure to perform the essential functions
of your job for any specific time period, if
you shall be declared by a Court having
jurisdiction of that matter, or when you
have been declared by any two physicians
selected by the Company and acceptable to
you admitted to the practice of medicine in
the place where you are then domiciled. In
the event of the termination of your
employment due to disability, the Company
will pay your monthly Base Salary through
the end of month in which such termination
upon disability occurs and all incentive
payments earned by but not yet paid to you
prior to your termination upon disability.
All Stock Options granted to you as provided
herein and which have vested may continue to
be exercised within the applicable period
provided by the Internal Revenue Code of
1986, as amended, and the Company shall have
no further obligation to you. This provision
will be applied consistent with the
Company's obligations under applicable
federal and state law, including without
limitation the Americans with Disabilities
Act.
Termination as a
result of your
Death Should you die during the term of this
letter agreement, your employment will
terminate effective on the date of your
death. Your spouse or estate, as the case
may be, shall be entitled to retain your
salary installment for the month in which
you death occurs and shall be entitled to
all incentive payments earned by you but not
yet paid to you prior to the date of death.
All Stock Options granted to you as provided
herein shall remain exercisable for its
entire ten year term by the person or
persons to whom
19
<PAGE> 6
Randy R. Marks
July 29, 1997
Page 6
the same is transferred by will or by the
applicable laws of descent and distribution.
Termination
By Employee If you terminate your employment with the
Company for any reason, you shall receive
your Base Salary through the effective date
of termination and all incentive payments
earned but not yet paid to you prior to such
date, and the Company shall have no further
obligation to you.
Acceleration of
Stock Options
Upon Termination If the Company elects to terminate your
employment without Cause, or
If you elect to terminate your employment
with the Company subsequent to June 30,
1999, and if at the time of such voluntary
termination of employment all of the
following circumstances exist:
(I) no circumstances which
would constitute "Cause"
as defined herein;
(ii) You have given the CEO at
least six months prior
written notice of
termination; and
(iii) You work with the Company
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, all stock
options granted to you at any time prior to
January 1 of the year in which your
termination of employment shall occur shall
immediately vest in you and may be exercised
within three months following termination of
your employment.
COVENANT NOT
TO COMPETE At all times during the term of your
employment and for a period of one year
thereafter, if your employment is terminated
by you for any reason or if terminated by
the Company for Cause, you agree that you
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
20
<PAGE> 7
Randy R. Marks
July 29, 1997
Page 7
or otherwise, which directly or indirectly
competes with the Company in any market in
which the Company does or may do business.
You agree that the covenants, restrictions
and obligations set forth in this letter
agreement are founded upon valuable
consideration and are reasonable in duration
and geographic scope.
In the event of a breach or threatened
breach by you 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 you, the Company will be
entitled to injunctive relief.
The time period and geographical area set
forth herein are each divisible and
separable, and, in the event that the
covenants not to compete contained herein
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 the court determines to be
reasonable and enforceable. You agree 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.
This covenant not to compete shall survive
the termination of your employment and the
termination of this letter agreement.
CONFIDENTIAL INFORMATION You recognize and acknowledge that
information gained by you while in the
Company's employ, including without
limitation that concerning the Company's
customers and suppliers, and the methods,
techniques, devices and operations of the
Company, as they may exist from time to
time, are of a confidential nature and are
valuable, special and unique assets of the
Company's business. You shall not during the
term of, or after the termination of
employment, disclose in any way any such
confidential
21
<PAGE> 8
Randy R. Marks
July 29, 1997
Page 8
information to any person, firm, corporation
or any other operation or entity, or use the
same on your own behalf, for any reason or
purpose. Upon termination of employment, you
shall deliver up to the Company all lists of
the Company's customers and suppliers and
all copies thereof, and all notes, records,
memoranda, complete correspondence files and
other papers, and all copies thereof,
relating to the methods, techniques, devices
and operations of the Company, and you do
not have nor can you acquire any property
right therein or claim thereto or in the
underlying confidential information. This
provision shall survive the termination of
your employment and the termination of this
letter agreement.
OTHER
Change of
Control Agreement Attached to this letter is the Change of
Control Agreement that has been approved by
the Board of Directors for a few select,
critical senior executives. This Change of
Control Agreement will supersede this
compensation package in the event of a
change of control as defined in the Change
of Control Agreement. This will give you
assurance of financial protection for a
period of time if the Company has a change
of control and your employment is terminated
either directly or constructively as a
result.
Drug Screen/
Background Check This letter agreement is contingent upon
successful completion of a pre- employment
drug screen and a background check.
Proof of Identity To comply with federal law, you will need
you to provide the Company with appropriate
proof of identity and an appropriate
document that establishes employment
eligibility.
Governing Law This letter agreement shall be governed by
the laws of the State of Ohio.
Entire Agreement This letter agreement sets forth the entire
agreement between you and the Company
regarding the terms of your employment with
the Company and cannot be modified except in
a writing signed by the Company and you.
22
<PAGE> 9
Randy R. Marks
July 29, 1997
Page 9
Randy, I am certainly looking forward to having you join us at Baldwin.
If the terms of this offer are acceptable to you, please indicate your agreement
by returning a signed copy of this letter to me.
Sincerely,
Baldwin Piano & Organ Company
By: /s/ Karen L. Hendricks
--------------------------------
Karen L. Hendricks, Chairman, Chief
Executive Officer and President
I have read, understand and agree to all of the provisions of this letter
agreement:
/s/ Randy R. Marks
- --------------------------
Randy R. Marks
Date: _____________________
23
<PAGE> 1
EXHIBIT 19
[BALDWIN PIANO LOGO]
422 Wards Corner Road, Loveland, OH 45140-8390
BUSINESSES
- ---------------------------------------------------------------------------
Manufacturing
Acoustic pianos
Printed circuit boards and electro-mechanical assemblies for OEM
manufacturers of electronic-based products.
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
(PHOTO)
Baldwin Model 243
<PAGE> 2
THIRD QUARTER STATEMENT
TO OUR SHAREHOLDERS
November 3, 1997
Strong demand for pianos coupled with strides we have made in improving
cycle times and in rolling out new marketing programs contributed to the
ongoing positive trend in our music business.
Third-quarter sales rose 28% to $33.9 million, up from $26.5 million last
year. Net income rose more than five fold to $1.1 million, or 31 cents per
share, compared with $192,000, or 6 cents per share, for the same quarter
a year ago.
The third-quarter impact of Baldwin's second-quarter 1997 decision to
phase-out consignment sales added $2.3 million to sales and 2 cents per
share to earnings for the quarter.
For the first nine months of 1997, net income rose to $2.9 million, or 86
cents per share, on sales of $103.6 million, compared with the net income
of $1.6 million, or 48 cents per share, on sales of $79.8 million, a year
ago. Without the impact of discontinuing consignment sales and other
one-time events, net income through the first nine months of 1997 would
have been $1.9 million, or 55 cents per share, on sales of $88.6 million.
As expected, our exit from consignment has resulted in higher third quarter
sales and includes sales which, under consignment, would take place in the
fourth quarter. In fact, we estimate that approximately half of our third-
quarter sales increase was a result of shipments that would have otherwise
fallen into the fourth quarter. While this in no way changes our outlook
for a strong improvement in full-year financial performance, it will take
a toll on fourth-quarter sales comparisons.
Contract Electronics has also begun to contribute to Baldwin's improving
financial results. New customer development has produced the strongest
sales increase in three years, fueling sales growth of 15 percent and 12
percent for the third quarter and first nine months, respectively.
Through the end of the third quarter, Baldwin's phase-out of consignment
sales and the related decrease in inventory levels, has lowered Baldwin's
debt to $30.4 million, a reduction of more than $15 million compared with
a year ago. The company anticipates additional debt reduction in the fourth
quarter.
All of Baldwin's major business segments experienced profitable growth in
the third quarter. There is every indication that Contract Electronics
growth will continue into the fourth quarter. Stripping away the impact of
consignment sales, the Music side of our business will likewise be strong,
but this will be less evident because of the quarter-to-quarter sales shift
cited earlier.
/s/ Karen L. Hendricks
Karen L. Hendricks
Chairman, Chief Executive Officer
and President
<TABLE>
<CAPTION>
===============================================================================
CONSOLIDATED SUMMARY OF EARNINGS (UNAUDITED)
(in thousands, except earnings per share)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 33,915 $ 26,508 $ 103,629 $ 79,794
Cost of goods sold 26,539 21,543 83,324 63,634
- --------------------------------------------------------------------------------------------------
Gross profit 7,376 4,965 20,305 16,160
Income on the sale of installment receivables 1,790 1,404 5,461 4,338
Interest income on installment receivables 300 336 854 985
Other operating income 386 842 1,807 2,648
Selling, general and administrative expenses (7,556) (6,496) (21,453) (19,648)
Interest expense (592) (827) (2,248) (2,009)
- --------------------------------------------------------------------------------------------------
Earnings before income taxes 1,704 224 4,726 2,474
Income taxes (645) (32) (1,779) (848)
- --------------------------------------------------------------------------------------------------
Net earnings $ 1,059 $ 192 $ 2,947 $ 1,626
- --------------------------------------------------------------------------------------------------
Net earnings per share $ .31 $ .06 $ .86 $ .48
==================================================================================================
Average number of shares outstanding (000) 3,442 3,423 3,432 3,419
==================================================================================================
<CAPTION>
CONSOLIDATED SUMMARY BALANCE SHEETS (UNAUDITED)
===============================================================================
(in thousands)
September 30,
-------------
1997 1996
- --------------------------------------------------------------------------------------------------
Assets
<S> <C> <C>
Receivables, net $ 23,756 $ 15,414
Inventories 43,706 64,352
Other current assets 8,482 7,758
- --------------------------------------------------------------------------------------------------
Total current assets 75,944 87,524
Installment receivables, less current portion 15,882 12,547
Property, plant and equipment, net 15,650 16,800
Other assets 4,740 5,466
- --------------------------------------------------------------------------------------------------
Total assets $ 112,216 $ 122,337
==================================================================================================
Liabilities and Shareholders' Equity
Current portion of long-term debt $ 27,808 $ 42,314
Other current liabilities 15,359 13,678
- --------------------------------------------------------------------------------------------------
Total current liabilities 43,167 55,992
Long-term debt, less current portion 2,675 3,575
Other liabilities 7,069 6,926
Shareholders' equity 59,305 55,844
- --------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 112,216 $ 122,337
=================================================================================================
</TABLE>
<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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 623
<SECURITIES> 0
<RECEIVABLES> 25,239
<ALLOWANCES> 1,483
<INVENTORY> 43,706
<CURRENT-ASSETS> 75,944
<PP&E> 31,513
<DEPRECIATION> 15,863
<TOTAL-ASSETS> 112,216
<CURRENT-LIABILITIES> 43,167
<BONDS> 2,675
0
0
<COMMON> 42
<OTHER-SE> 59,263
<TOTAL-LIABILITY-AND-EQUITY> 112,216
<SALES> 103,629
<TOTAL-REVENUES> 111,751
<CGS> 83,324
<TOTAL-COSTS> 83,324
<OTHER-EXPENSES> 20,451
<LOSS-PROVISION> 1,002
<INTEREST-EXPENSE> 2,248
<INCOME-PRETAX> 4,726
<INCOME-TAX> 1,779
<INCOME-CONTINUING> 2,947
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,947
<EPS-PRIMARY> .86
<EPS-DILUTED> .86
</TABLE>
<PAGE> 1
EXHIBIT 99.1
[BALDWIN PIANO LOGO] NEWS RELEASE
CONTACTS: Perry Schwartz Wes Truesdell
Baldwin Piano The Dilenschneider Group
(513) 576-4518 (212) 922-0900
BALDWIN IN TALKS TO BRING NEW BUSINESS TO ITS LARGEST PLANT
COMPANY WILL RETAIN INTEREST IN UNDERUTILIZED PLANT
AND REMAIN ITS LARGEST CUSTOMER
BALDWIN EXPECTS NEW VENTURE TO PRODUCE FIRST-YEAR SAVINGS OF $1 MILLION
LOVELAND, OH, July 9, 1997 -- Baldwin Piano and Organ Company
(NASDAQ:BPAO) today announced that the company and an unidentified third party
have signed a letter of intent to form a business venture that will bring new
business to its Greenwood, Mississippi woodworking plant and dramatically
improve utilization of its largest manufacturing facility.
As contemplated, the proposed business venture will form a new company
to which Baldwin will contribute its Greenwood assets and the third party will
contribute capital and on-going operational management, and provide an influx of
new business to improve the plant's cost structure. Baldwin, which will continue
to be the plant's largest customer, will retain an equity interest and hold two
seats on the company's board.
"If we proceed, this will be a win, win proposition for all concerned,"
said Karen L. Hendricks, chairman and CEO of Baldwin. "For Baldwin, it will
address Greenwood's long-standing under-utilization problem and ensure that the
plant's highly-skilled workforce remains intact. For our partner, it will
provide trained woodworkers and much needed new manufacturing capacity. For our
dealers, the new venture's investment in technology will further improve the
high quality of the
-more-
BALDWIN PIANO & ORGAN COMPANY
422 Wards Corner Road
Loveland, OH 45140-8390
(513) 576-4500
26
<PAGE> 2
-2-
woodworking used in our fine pianos. And for the community, it will mean saved
jobs and a real opportunity for future growth."
Ms. Hendricks added, "Our strategic plan to build shareholder value
revolves around improving manufacturing efficiency and concentrating our
energies on those critical parts and assemblies that define the high quality of
the fine pianos that Baldwin produces. We expect this new manufacturing
arrangement to yield first-year savings of $1 million, and even more in future
years."
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.
# # #
27
<PAGE> 1
[BALDWIN PIANO LETTERHEAD] EXHIBIT 99.2
NEWS RELEASE
CONTACTS: Joel Pomerantz or
Valerie Lucznikowska
The Dilenschneider Group
(212) 922-0900
BALDWIN PIANO NAMES
STEPHEN BROCK EXECUTIVE VICE PRESIDENT
LOVELAND, OHIO, September 2 -- The Baldwin Piano & Organ Company
(NASDAQ:BPAO), the nation's best-selling piano manufacturer, today announced the
promotion of Stephen P. Brock to the position of executive vice president and
general manager of the firm's Music Division. Mr. Brock, 42, was formerly senior
vice president, marketing and sales of Baldwin's Music Division.
In his new position, Mr. Brock will have immediate profit-and-loss
responsibility for the Music Division of the 135-year-old company, which last
year accounted for $83 million of Baldwin's total annual revenues of $115
million.
Commenting on the appointment, Baldwin Chairman and CEO Karen L.
Hendricks said: "Since Steve Brock arrived at Baldwin some two years ago, he has
energized our piano marketing effort with his drive, strategic thinking, and
leadership abilities -- especially strengthening Baldwin's products and programs
to its sizable dealer network. His strong background in music, as well as
marketing, has been a particular asset and we're delighted to extend this to all
aspects of our music business."
Prior to joining Baldwin, Mr. Brock spent over a decade with Procter &
Gamble in a variety of marketing and advertising positions. When he resigned to
join Baldwin in June, 1995, he was marketing director, worldwide strategic
planning for the company's major laundry category.
-more-
28
<PAGE> 2
-2-
Baldwin's new executive vice president began his professional career in
1979 on the business side of the classical music industry with the well-known
Cincinnati Opera Company, the nation's tenth largest opera company. He served
successively as public relations director, marketing director and, finally,
administrative manager, supervising all business and managerial activities at
the Company.
Mr. Brock holds a Master of Fine Arts In Opera Performance from
Pittsburgh's Carnegie-Mellon University and a Bachelor of Music In Music
Education degree from the State University of New York. He resides in Madeira, a
Cincinnati suburb, with his wife, Paula, and their two children.
The Baldwin Piano & Organ Company's Music Division markets three
leading acoustic piano brands: Baldwin, Wurlitzer, and Chickering as well as the
Pianovelle line of digital pianos and Baldwin's newest product, the computerized
ConcertMaster(R) player piano system.
Other company units include the Keyboard Acceptance Corporation, which
provides retail consumer financing for Baldwin dealers across the country; and
the Special Products Division, which manufactures electronic parts and
components for original equipment manufacturers.
Baldwin currently employs some 1,500 workers at corporate headquarters
in Loveland, Ohio, and five manufacturing plants located in Arkansas,
Mississippi, and Mexico.
# # #
September 2, 1997
29
<PAGE> 1
[BALDWIN PIANO LETTERHEAD] EXHIBIT 99.3
NEWS RELEASE
CONTACTS: Joel Pomerantz or
Ken DiPaola
The Dilenschneider Group
(212) 922-0900
BALDWIN PIANO ENDS NEGOTIATIONS
ON GREENWOOD, MISSISSIPPI WOOD-WORKING FACILITY
LOVELAND, OHIO, September 25, 1997 -- The Baldwin Piano & Organ Company
(NASDAQ:BPAO), maker of America's best-selling acoustic pianos, today announced
that it has ended its previously disclosed negotiations to form a third-party
venture to manage Baldwin's largest manufacturing facility in Greenwood,
Mississippi. The company said that recent industry developments have reduced the
attractiveness of such a venture and opened up some promising new opportunities
to better utilize its highly skilled workforce and reduce excess capacity at the
facility. The Greenwood facility manufactures and finishes piano cases for the
company's fine pianos.
The company added that while it was premature to furnish additional
details, it still anticipates first-year annual savings at Greenwood to at least
equal the $1 million cited in Baldwin's July 9, 1997 announcement.
Referring to the options for the company's Greenwood facility, Karen L.
Hendricks, chairman and chief executive officer of Baldwin, said: "Our ongoing
cost containment programs at Greenwood continue to make noticeable progress. In
addition to lowering costs, they have opened up fresh opportunities to address
capacity utilization in ways that are core to our piano business, long term in
nature, and more financially advantageous for Baldwin. In fact, it is reasonable
to expect increased production from this facility as some of these opportunities
become realities."
-more-
30
<PAGE> 2
-2-
The Baldwin Piano & Organ Company's Music Division makes and markets
America's best selling acoustic pianos under the Baldwin, Wurlitzer, and
Chickering brand names, as well as the Pianovelle(R) line of digital pianos and
Baldwin's newest product, the computerized ConcertMaster(R) player piano system.
Baldwin also provides its dealers with retail consumer financing through
Keyboard Acceptance Corporation and produces electronic parts and components for
original equipment manufacturers through Baldwin's Special Products Division.
Baldwin currently employs some 1,400 workers at six locations,
including corporate headquarters in Loveland, Ohio, and five manufacturing
facilities in Arkansas, Mississippi, and Mexico.
-------
"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.
# # #
31
<PAGE> 1
EXHIBIT 99.4
[BALDWIN PIANO LETTERHEAD]
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
CONTACTS: Perry Schwartz Ken DiPaola or Joel Pomerantz
Baldwin Piano The Dilenschneider Group, Inc.
(513) 576 - 4518 (212) 922 - 0900
BALDWIN PIANO REPORTS HIGHER THIRD-QUARTER RESULTS
MUSIC SALES UP 22%; NET INCOME UP MORE THAN FIVE FOLD
LOVELAND, OH, October 21, 1997 --- Baldwin Piano and Organ Company
(NASDAQ:BPAO) today announced results for the third quarter and nine months
ending September 30, 1997.
The third-quarter sales rose 28 percent to $ 33.9 million, up from
$26.5 million last year. Net income rose more than five fold to $1.0 million, or
31 cents per share, compared with $192,000, or 6 cents per share, for the same
quarter a year ago.
The third-quarter impact of Baldwin's second-quarter 1997 decision to
phase-out consignment sales was insignificant, adding only $2.3 million to sales
and 2 cents per share to earnings for the quarter.
For the first nine months of 1997, net income rose to $2.9 million, or
86 cents per share, on sales of $103.6 million, compared with net income of $1.6
million, or 48 cents per share, on sales of $79.8 million, a year ago. Without
the impact of discontinuing consignment sales and other one-time events, net
income through the first nine months of 1997 would have been $1.9 million, or 55
cents per share, on sales of $88.6 million.
Karen L. Hendricks, Baldwin's president, chairman and chief executive
officer commented on the third quarter gains, "Strong demand for pianos coupled
with strides we have made in improving cycle times and rolling out new marketing
programs contributed to the ongoing positive trend in our Music business.
-more-
32
<PAGE> 2
-2-
"As expected, our exit from consignment has resulted in accelerated
sales recognition, shifting sales from the fourth quarter, traditionally our
strongest, into the third quarter. In fact, we estimate that approximately half
of our third-quarter sales increase was a result of shipments that would have
otherwise fallen in the fourth quarter. While this in no way changes our outlook
for a strong improvement in full-year financial performance, it will take a toll
on fourth-quarter sales comparisons," she noted.
"Contract Electronics has also begun to contribute to Baldwin's
improving financial results," she said. "New customer development has produced
the strongest sales increase in three years, fueling sales growth of 15 percent
and 12 percent for the third quarter and first nine months, respectively."
Ms. Hendricks noted that through the end of the third quarter,
Baldwin's phase-out of consignment sales and the related decrease in inventory
levels, has lowered Baldwin's debt to $30.4 million, a reduction of more than
$15 million compared with a year ago. She also said the company anticipates
additional debt reduction in the fourth quarter.
Ms. Hendricks concluded, "All of Baldwin's major business segments
experienced profitable growth in the third quarter. There is every indication
that Contract Electronics growth will continue into the fourth quarter.
Stripping away the impact of consignment sales, the Music side of our business
will likewise be strong, but this will be less evident because of the
quarter-to-quarter sales shift cited earlier."
Baldwin Piano & Organ Company has manufactured and marketed keyboard
musical products for 135 years and has been providing consumer financing for the
keyboard industry 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)
33
<PAGE> 3
<TABLE>
<CAPTION>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF EARNINGS
(IN THOUSANDS, EXCEPT NET EARNINGS PER SHARE)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- ------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 33,915 $ 26,508 $ 103,629 $ 79,794
Cost of goods sold 26,539 21,543 83,324 63,634
--------- --------- --------- ---------
Gross profit 7,376 4,965 20,305 16,160
Interest income on
installment receivables (1) 2,090 1,740 6,315 5,323
Other operating income, net 386 842 1,807 2,648
Selling, general and administrative (7,556) (6,496) (21,453) (19,648)
Interest expense (592) (827) (2,248) (2,009)
--------- --------- --------- ---------
Earnings before income taxes 1,704 224 4,726 2,474
Income taxes 645 32 1,779 848
--------- --------- --------- ---------
Net earnings $ 1,059 $ 192 $ 2,947 $ 1,626
========= ========= ========= =========
Net earnings per share $ 0.31 $ 0.06 $ 0.86 $ 0.48
========= ========= ========= =========
Average number of
shares outstanding 3,442 3,423 3,432 3,419
========= ========= ========= =========
<CAPTION>
CONSOLIDATED SUMMARY BALANCE SHEETS
(IN THOUSANDS)
SEPTEMBER 30,
------------------------
1997 1996
--------- --------
<S> <C> <C>
Assets
Receivables, net $ 23,756 $ 15,414
Inventories 43,706 64,352
Other current assets 8,482 7,758
--------- --------
Total current assets 75,944 87,524
Installment receivables, less current portion 15,882 12,547
Property, plant and equipment, net 15,650 16,800
Other assets 4,740 5,466
--------- --------
Total assets $ 112,216 $122,337
========= ========
Liabilities and Shareholders' Equity
Current portion of long-term debt $ 27,808 $ 42,314
Other liabilities 15,359 13,678
--------- --------
Total current liabilities 43,167 55,992
Long-term debt, less current portion 2,675 3,575
Other liabilities 7,069 6,926
Shareholders' equity 59,305 55,844
--------- --------
Total liabilities and shareholders' equity $ 112,216 $122,337
========= ========
<FN>
(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 $975,000, respectively, for the third quarter and first
nine months of fiscal 1997. FAS 125 was not applicable to fiscal 1996
and earlier periods.
</TABLE>
34
