<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, 2000 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.)
4680 Parkway Drive, Suite 200
Mason, Ohio 45040-7198
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (513) 754-4500
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, 2000 is 3,462,826.
<PAGE> 2
BALDWIN PIANO & ORGAN COMPANY
INDEX
<TABLE>
<CAPTION>
NUMBER
PAGE
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets as of
June 30, 2000 and December 31, 1999 .................... 3
Unaudited Condensed Consolidated Statements of Operations
for the three months ended and six months ended
June 30, 2000 and 1999 ........................... 4
Unaudited Condensed Consolidated Statements of Cash
Flows for the six months ended
June 30, 2000 and 1999 ........................... 5
Notes to Unaudited Condensed Consolidated Financial
Statements, June 30, 2000 .............................. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ........... 9
Item 3. Quantitative and Qualitative Disclosures About
Market Risk ................................... 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ...................................... 13
Item 2. Changes in Securities and Use of Proceeds .............. 13
Item 3. Defaults upon Senior Securities ........................ 13
Item 4. Submission of Matters to a Vote
of Security Holders ......................... 13
Item 5. Other Information ...................................... 14
Item 6. Exhibits and Reports on Form 8-K ....................... 14
Signatures ....................................................... 15
Exhibit Index .................................................... 16
</TABLE>
2
<PAGE> 3
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- ------------
<S> <C> <C>
Current assets:
Cash..................................... $ 262 $ 1,705
Receivables, net......................... 17,240 11,703
Installment receivables retained......... 4,124 5,344
Inventories.............................. 49,003 38,786
Deferred income taxes.................... 9,007 9,838
Other current assets..................... 2,213 2,974
Net assets of discontinued
operations.......................... 0 21,748
--------- ---------
Total current assets........... 81,849 92,098
Property, plant and equipment, net............. 20,423 20,985
Deferred income taxes.......................... 1,509 874
Other assets................................... 11,706 14,035
--------- ---------
Total assets................... $ 115,487 $ 127,992
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable......................... $ 19,992 $ 21,541
Current portion of long-term debt........ 7,729 12,765
Income taxes payable..................... 0 1,855
Accrued liabilities...................... 9,685 3,393
--------- ---------
Total current liabilities...... 37,406 39,554
Long-term debt, less current portion........... 24,913 32,582
Other liabilities.............................. 2,044 2,168
--------- ---------
Total liabilities.............. 64,363 74,304
--------- ---------
Shareholders' equity:
Common stock............................. 42 42
Additional paid-in capital............... 12,688 12,635
Accumulated other comprehensive
income (loss)....................... (372) (270)
Retained earnings........................ 45,262 47,777
--------- ---------
57,620 60,184
Less cost of treasury shares............. (6,496) (6,496)
--------- ---------
Total shareholders' equity..... 51,124 53,688
--------- ---------
Total liabilities and
shareholders' equity........ $ 115,487 $ 127,992
========= =========
</TABLE>
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements.
3
<PAGE> 4
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except net earnings per share)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
----------------- --------------
2000 1999 2000 1999
------- ------- ------- ------
<S> <C> <C> <C> <C>
Net sales........................................... $ 33,832 $ 28,544 $ 65,807 $ 59,058
Cost of goods sold.................................. 29,563 24,808 58,282 52,693
-------- -------- -------- --------
Gross profit............................. 4,269 3,736 7,525 6,365
Other operating income, net......................... 24 84 191 273
-------- -------- -------- --------
Operating profit.................................... 4,293 3,820 7,716 6,638
Operating expenses:
Selling, general and
administrative........................... 5,813 6,240 11,097 12,179
Provision for doubtful accounts............... 85 86 170 171
-------- -------- -------- --------
Operating (loss) profit.................. (1,605) (2,506) (3,551) (5,712)
Interest expense.................................... 888 1,043 1,818 1,710
-------- -------- -------- --------
Earnings (loss) before
income taxes........................ (2,493) (3,549) (5,369) (7,422)
Income taxes........................................ 886 1,417 1,979 2,883
-------- -------- -------- --------
Net earnings (loss) from continuing
Operations.................................... (1,607) (2,132) (3,390) (4,539)
Discontinued operations:
Gain on sale of Retail Financing
(net of income tax of $444).............. 0 0 725 0
Income from operations of Retail
Financing discontinued (net of income
taxes for the six months ended of
$93 in 2000 and $982 in 1999 and
$644 for the three months ended 1999).... 0 770 150 1,336
-------- -------- -------- --------
Net earnings (loss)................. $ (1,607) $ (1,362) $ (2,515) $ (3,203)
-------- -------- -------- --------
Earnings (loss) per share:
Basic
Earnings (loss) from continuing
operations.................................... $ (0.46) $ (0.61) $ (0.98) $ (1.30)
Earnings from discontinued
operations.................................... 0.00 0.22 0.25 0.38
-------- -------- -------- --------
Net earnings (loss)................................. $ (0.46) $ (0.39) $ (0.73) $ (0.92)
-------- -------- -------- --------
Diluted
Earnings (loss) from continuing
operations.................................... $ (0.46) $ (0.61) $ (0.98) $ (1.30)
Earnings from discontinued
operations.................................... 0.00 0.22 0.25 0.38
-------- -------- -------- --------
Net earnings (loss)................................. $ (0.46) $ (0.39) $ (0.73) $ (0.92)
-------- -------- -------- --------
Weighted average number of
common shares................................. 3,463 3,453 3,463 3,453
======== ======== ======== ========
Weighted average number of
Common shares................................. 3,463 3,453 3,463 3,453
======== ======== ======== ========
</TABLE>
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements.
4
<PAGE> 5
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
INCREASE (DECREASE) IN CASH 2000 1999
--------------------------- --------- -----------
<S> <C> <C>
Cash flows from continuing
Operating activities
Net loss from continuing
operations .................................. $ (3,390) $ (4,539)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation / amortization .............. 2,104 1,608
Gain on sale of assets ................... 0 18
Provision for doubtful accounts .......... 170 171
Deferred income taxes .................... 196 (236)
Change in assets and liabilities -
Receivables, net ...................... (5,708) 1,525
Installment receivables retained ...... 1,221 0
Inventories ........................... (10,217) 4,657
Other current assets .................. 761 (1,470)
Other assets .......................... 1,988 (167)
Accounts payable, accrued and
other liabilities ..................... (3,048) (1,965)
Income taxes payable .................. (2,299) (215)
-------- --------
Net cash used in continuing operating
activities .................................... (18,222) (613)
-------- --------
Discontinued operations:
Income ...................................... 150 1,337
Adjustment to derive cash flows from
operating activities ...................... 1,018 2,567
-------- --------
Net cash provided by discontinued operations ..... 1,168 3,904
-------- --------
Net operating activities ......................... (17,054) 3,291
-------- --------
Cash flows from investing activities:
Plant, property and equipment ................. (1,149) (1,117)
Net proceeds from sale of Retail Financing .... 33,083 0
-------- --------
Net cash provided by (used in) continuing
operating activities .......................... 31,934 (1,117)
-------- --------
Cash flows from financing activities:
Repayment of long-term debt ................... (12,705) (2,210)
-------- --------
Net cash used in continuing operations ........... (12,705) (2,210)
Net cash (used in) provided by
discontinued operations ......................... (3,618) 167
-------- --------
Net financing activities ......................... (16,323) (2,043)
-------- --------
Net (decrease) increase in cash ............... (1,443) 131
Cash at beginning of period ................... 1,705 327
-------- --------
Cash at end of period ............................ $ 262 $ 458
-------- --------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
------------------------------------------------
Cash paid (refunded) during the
quarter for:
Interest ................................... $ 1,185 $ 1,450
======== ========
Income taxes ............................... $ 1,188 $ (288)
======== ========
</TABLE>
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements.
5
<PAGE> 6
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(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
accounting principles generally accepted in the United States of
America 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, 1999.
The financial statements presented herewith reflect all adjustments
(consisting of normal recurring adjustments) which are, in the opinion
of management, necessary to a fair statement of the results for the
three month and six-month periods ended June 30, 2000 and 1999. Results
of operations for interim periods are not necessarily indicative of
results to be expected for an entire year.
(2) DISCONTINUED OPERATIONS
On March 10, 2000, the Company completed the sale of its Retail
Financing subsidiaries. Gross proceeds from the sale were approximately
$35 million and an after-tax gain of $725,000 has been recorded in the
first quarter of 2000. Under the terms of the sales agreement, the
Company is contingently liable for and must repurchase all accounts
that become 120 days past due during a two year period after the
closing date. The Company has segregated on its balance sheet the
accounts repurchased under this agreement as "installment receivables
retained" and has recorded a liability for potential losses in accrued
liabilities.
The results of operations for all periods presented have been restated
for the discontinued operations.
(3) INVENTORIES
Inventories consist of the following (in thousands of dollars):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- ------
<S> <C> <C>
FIFO cost:
Raw material ...................... $ 19,905 $ 17,716
Work-in-process ................... 10,686 9,247
Finished goods .................... 29,063 22,474
-------- --------
59,654 49,437
Less revaluation to LIFO ............... (10,651) (10,651)
-------- --------
Net inventories ................... $ 49,003 $ 38,786
======== ========
</TABLE>
6
<PAGE> 7
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(in thousands of dollars)
(4) EARNINGS PER SHARE FROM CONTINUING OPERATIONS
A reconciliation of the numerator and denominator of basic earnings per
share to diluted earnings per share is as follows (in thousands, except
per share amounts):
<TABLE>
<CAPTION>
Six Months Ended June 30:
2000 1999
------------------------------------------ -----------------------------
Per Per
Income Shares Share Income Shares Share
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Earnings (loss)
per share ........ $(3,390) 3,463 $ (0.98) $(4,539) 3,453 $ (1.30)
Dilutive effect of
options
------- ------- ------- ------- ------- -------
Earnings (loss)
per share -
assuming dilution $(3,390) 3,463 $ (0.98) $(4,539) 3,453 $ (1.30)
------- ------- ------- ------- ------- -------
</TABLE>
(5) SEGMENT INFORMATION
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
-------------------------- -----------------------------
2000 1999 2000 1999
-------- -------- -------- ------
<S> <C> <C> <C> <C>
Music and related ......................... $ 22,807 $ 17,139 $ 42,668 $ 35,928
Contract Electronics ...................... 11,025 11,405 23,139 23,130
--------- --------- --------- ---------
SALES AND OTHER REVENUE ................... $ 33,832 $ 28,544 $ 65,807 $ 59,058
--------- --------- --------- ---------
Music and related (*) ..................... $ (430) $ (853) $ (1,744) $ (2,650)
Contract Electronics ...................... 393 392 1,105 548
Corporate G&A and
other unallocated ....................... (1,568) (2,045) (2,912) (3,610)
--------- --------- --------- ---------
OPERATING (LOSS) PROFIT ................... $ (1,605) $ (2,506) $ (3,551) $ (5,712)
--------- --------- --------- ---------
Music and related ......................... $ 75,255 $ 71,450 $ 72,255 $ 71,450
Contract Electronics ...................... 20,856 20,809 20,856 20,809
Discontinued Operations ................... 0 20,513 0 20,513
Corporate G&A ............................. 19,376 13,052 19,376 13,052
--------- --------- --------- ---------
IDENTIFIABLE ASSETS ....................... $ 115,487 $ 125,824 $ 115,487 $ 125,824
--------- --------- --------- ---------
Music and related ......................... $ 627 $ 514 $ 1,203 $ 1,023
Contract Electronics ...................... 150 175 291 348
Corporate G&A ............................. 407 122 610 237
--------- --------- --------- ---------
DEPRECIATION AND
AMORTIZATION ............................ $ 1,184 $ 811 $ 2,104 $ 1,608
--------- --------- --------- ---------
Music and related ......................... $ 1,102 $ 408 $ 1,092 $ 973
Contract Electronics ...................... 35 (49) 84 63
Corporate G&A ............................. (27) 24 (27) 81
--------- --------- --------- ---------
CAPITAL ADDITIONS ......................... $ 1,110 $ 383 $ 1,149 $ 1,117
--------- --------- --------- ---------
</TABLE>
* During the first quarter of 1999 the Company consolidated its grand
piano production. This created a large, one-time decrease in Baldwin's Music and
Related operating profit. Operating loss for Music and Related for the six month
ended June 30, 1999 would have been $1,150 without the effect of the one-time
costs.
7
<PAGE> 8
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(in thousands of dollars)
The Music and Related segment includes a broad range of acoustic and
electronic instruments serving a broad consumer base. Music products
are sold through Company-owned retail stores, domestic wholesale
dealers, factory direct sales and an international dealer network. In
addition, this segment includes musical components produced on behalf
of other manufacturers.
The Contract Electronics segment assembles printed circuit boards and
electromechanical devices for original equipment manufacturers (OEMs)
outside the music industry.
The Company uses the LIFO method of valuing music products inventory
and the FIFO method for Contract Electronics inventory.
(6) RESTRUCTURING
On January 6, 1999, the Company announced the consolidation of its
grand piano assembly from its Conway, Arkansas plant to its Trumann,
Arkansas facility. In connection with this consolidation, the Company
recorded a restructuring charge of approximately $587,000 in the first
quarter of 1999 primarily related to severance and direct exit costs.
Other costs associated with the consolidation incurring in the first
quarter of 1999 amounted to $913,000. These costs are included in cost
of goods sold. The consolidation was completed during the second
quarter of 1999.
(7) COMPREHENSIVE INCOME
The Company currently records as other comprehensive income the change
in cumulative translation adjustment resulting from changes in exchange
rates and the effect of those changes upon translation of the financial
statements of the Company's foreign operations.
<TABLE>
<CAPTION>
Comprehensive income (loss): Six Months Ended June 30,
2000 1999
-------------------------------------------------------------------------------------
<S> <C> <C>
Net earnings (loss) $ (2,515) $ (3,203)
Foreign currency
Translation Adjustment (102) (216)
-------------------------------------------------------------------------------------
Total Comprehensive Income (Loss) $ (2,617) $ (3,419)
-------------------------------------------------------------------------------------
</TABLE>
(8) ACCOUNTING PRONOUNCEMENTS
During June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging
Activities". The Company will be required to adopt SFAS No. 133 no
later than January 2001. Management has not yet determined what impact
this statement will have on the Company's financial statements.
8
<PAGE> 9
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
ITEM II
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SECOND QUARTER OF 2000 COMPARED
TO THE SECOND QUARTER OF 1999
Net sales for the second quarter increased 18% to $33.8 million, an
increase from $28.5 million a year ago. The net loss from continuing operations
for the quarter was $1,607,000, or 46 cents per share, versus a comparable loss
of $2,132,000, or 61 cents a share, a year ago. In the second quarter of 1999,
the Company recorded income from its discontinued retail financing operations of
$770,000, or 22 cents per share, resulting in a final net loss of $1,362,000, or
39 cents per share, for the second quarter a year ago.
For the first half, the Company's net sales increased 11 percent to
$65.8 million, an increase from $59.1 million for the first six months of 1999.
First-half losses from continuing operations decreased to $3,390,000, or 98
cents per share, down from last year's loss of $4,539,000, or $1.30 per share,
which included restructuring and other non-recurring charges of 27 cents per
share related to the consolidation of grand piano assembly operations. The
company also reported first half 2000 per share earnings from discontinued
operations of 25 cents, including a gain of 21 cents per share on the sale of
the Company's retail financing subsidiaries. A year earlier, the Company had
reported earnings from discontinued operations of 38 cents per share. For the
first six months, the Company reported a net loss of $2,515,000, or 73 cents per
share, versus last year's net loss of $3,203,000, or 92 cents per share.
First half Music sales increased 19 percent to $42.7 million, up from
$35.9 million a year ago due to strong demand for all Baldwin products
throughout the quarter.
First half Contract Electronics (CE) sales were $23.1 million versus
$23.1 million a year ago, and CE had its second consecutive profitable quarter.
Selling, general and administrative expenses in the first half of 2000
were $11.3 million, a decrease of $1.1 million from $12.4 million in the first
half of 1999. This decrease resulted from the cost controls put in place during
the past year by the Company.
Interest expense increased by $0.1 million, from $1.7 million in the
first half of 1999 to $1.8 million in the first half of 2000. This increase
resulted from rate increases on the Company's debt.
9
<PAGE> 10
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
INFLATION, OPERATIONS AND INTEREST RATES
Cost inflation 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 improved efficiency and increases in sales
prices. During 1998 and early 1999, this was not the case for vertical piano
selling prices.
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.
The annual rate of interest under the Company's new revolving credit
facility is equal to an index rate plus applicable index margins. The index rate
is equal to the latest 30-day commercial paper rate for high-grade unsecured
notes sold through dealers by major corporations. The applicable index margins
at credit facility inception are 2.5% for applicable index margin and 2.0% for
applicable letter of credit margin. The applicable index margins can be adjusted
prospectively after the first year based on the operating cash flow ratio of the
Company. The applicable index margin can be adjusted between 2.0% and 3.0%, and
the applicable letter of credit margin can be adjusted between 1.75% and 2.5%.
LIQUIDITY AND CAPITAL RESOURCES
On March 24, 2000 the Company entered into a new revolving line of
credit (the "Credit Facility") with General Electric Capital Corporation (GECC)
to refinance the Company's old credit facility and to finance its working
capital requirements. The Credit Facility has a maximum commitment level of $40
million and a due date of March 24, 2003. Under the Credit Facility, GECC is
committed to make available a line of credit based upon certain defined
percentages of the carrying value of the Company's inventories, trade accounts
receivable and property, plant and equipment. The annual rate of interest under
the Credit Facility is based upon the 30-day commercial paper rate for
high-grade unsecured notes as reported in The Wall Street Journal and varies
quarterly, after the first year, depending upon performance criteria set forth
in the Credit Facility. The initial rate is 250 basis points above such
commercial paper rate.
The Credit Facility contains financial covenants which require the
Company to maintain certain financial ratios and tangible net worth within
defined amounts and restrict the amount of capital expenditures that can be made
each year. The Credit Facility also contains covenants that restrict, among
other things, the Company's ability to incur new indebtedness, pay dividends,
make loans or investments, prepay debt, issue securities, repurchase the
Company's common stock, guarantee debt, create liens on assets, sell assets,
enter into sale-leaseback transactions, change its operations or business,
purchase real estate,
10
<PAGE> 11
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
merge or consolidate with other entities or acquire new businesses.
Additionally, the Credit Facility contains provisions by which a change of
control of the Company or a default under the Company's other debt agreements
would constitute a default under the Credit Facility. Substantially all of the
assets of the Company and its subsidiaries are pledged as collateral under the
Credit Facility
As of June 30, 2000, the Company had outstanding indebtedness of $32.6
million.
Capital expenditures amounted to $1.1 million in the first half of 2000
and $1.1 million in the comparable period of 1999. At June 30, 2000, the Company
has less than $500 thousand in outstanding capital commitments. The Company
expects 2000 capital expenditures to be less than depreciation expense.
FORWARD LOOKING STATEMENTS
This document contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements include, without
limitations, the Company's beliefs about trends in the Company's industries, and
its views about the long-term future of these industries and the Company. The
following factors, among others, could cause the Company's financial performance
to differ materially from that expressed in such statements: (i) changes in
consumer preferences resulting in a decline in the demand for pianos, (ii) the
inability to reduce SG&A expenses as expected, (iii) an increase in the price of
raw materials, (iv) political and/or economic instability in foreign countries
where the Company has operations or has suppliers who supply the Company, (v) an
unexpected increase in interest rates, and, (vi) a shift in strength of the
overall U.S. economy thereby possibly reducing durable goods purchases.
11
<PAGE> 12
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
ITEM III
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The principal market risk (i.e. the risk of loss arising from adverse
changes in market rates and prices) to which the Company is exposed is interest
rates on debt and the commodity price of wood used in the manufacture of pianos.
At June 30, 2000, the carrying value and estimated fair value of
Company's debt totaled $32.6 million. All of the Company's debt at June 30, 2000
was at variable interest rates. For such floating rate debt, interest rate
changes generally do not affect the fair market value but do impact earnings and
cash flows, assuming other factors are held constant. Holding other variables
constant (such as foreign exchange rates and debt levels), the earnings and cash
flows impact for the next year resulting from a one percentage point increase in
interest rates on variable rate debt would be approximately $0.3 million.
The Company is subject to market risk with respect to certain
commodities, principally wood prices, because the ability to recover increased
costs through higher pricing may be limited by the competitive environment in
which the Company operates. The Company does not use futures contracts to hedge
anticipated purchases of wood used in the manufacturing and assembly of piano
cases.
12
<PAGE> 13
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
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 pollutants into the
environment. The Company does not anticipate that any environmental matters
currently known to the Company will result in proceedings against the Company or
in any material liability.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) 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
At the Company's 2000 Annual Meeting of Shareholders held on June 16,
2000, the following actions were taken:
The following Directors were elected for terms of office expiring at
the Annual Meeting of Shareholders in 2001 -
<TABLE>
<CAPTION>
Authority
Votes for Withheld
--------- ---------
<S> <C> <C>
Brent D. Baird 2,805,191 618,337
William B. Connell 2,128,591 1,294,937
Herbert A. Denton 2,805,090 618,438
John H. Gutfreund 2,782,990 640,538
Joseph H. Head, Jr. 2,128,490 1,295,038
James T. Heffernan 2,803,091 620,437
Karen L. Hendricks 1,795,021 1,628,507
</TABLE>
13
<PAGE> 14
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
PART II. OTHER INFORMATION
VOTES FOR AGAINST ABSTAIN
Appointment of
Deloitte & Touche LLP as
independent accountants
for 2000 3,385,604 20,023 17,901
Shareholder proposal 1,457,294 1,853,925 18,010
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.1 Certificate of Incorporation of the Company, as
amended. Incorporated by reference from the Company's
Form S-1 Registration Statement as declared
effective by the Commission on October 8, 1986.
10.2 Amended and Restated Bylaws of the Company dated as
of February 10, 1997. Incorporated by reference from
the Company's Form 8-K dated February 10, 1997 as
filed with the Commission on February 27, 1997.
99.1 Press Release, dated June 16, 2000 announcing
re-election of Directors and rejection of shareholder
proposal.
99.2 Press Release, dated August 3, 2000 announcing the
Company's financial results for the second quarter of
2000.
27 Financial Data Schedule.
------------------------------
Index to Exhibits appears on sequentially numbered page 19.
(b) REPORTS ON FORM 8-K
The Company filed no reports on Form 8-K during the quarter
ended June 30, 2000.
14
<PAGE> 15
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
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 14, 2000 By: /S/ KAREN L. HENDRICKS
----------------------- ------------------------
Karen L. Hendricks, Chairman,
Chief Executive Officer and
President
DATE: August 14, 2000 BY: /S/ DUANE D. KIMBLE
------------------------ -----------------------------
Duane D. Kimble,
Executive Vice President, and
Chief Financial Officer
15
<PAGE> 16
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit
Number Exhibit
------- -------
10.1 Certificate of Incorporation of the Company, as amended. Incorporated
by reference from the Company's Form S-1 Registration Statement as
declared effective by the Commission on October 8, 1986.
10.2 Amended and Restated Bylaws of the Company dated as of February 10,
1997. Incorporated by reference from the Company's Form 8-K dated
February 10, 1997 as filed with the Commission on February 27, 1997.
99.1 Press Release, dated June 16, 2000 announcing re-election of Directors
and rejection of shareholder proposal.
99.2 Press Release, dated August 3, 2000 announcing the Company's financial
results for the second quarter of 2000.
27 Financial Data Schedule.
