<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
March 31, 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 May 1, 2000 is 3,462,826.
<PAGE> 2
BALDWIN PIANO & ORGAN COMPANY
INDEX
NUMBER PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets as of
March 31, 2000 and December 31, 1999 ................. 3
Unaudited Condensed Consolidated Statements of Operations
for the three months ended
March 31, 2000 and 1999 ........................... 4
Unaudited Condensed Consolidated Statements of Cash
Flows for the three months ended
March 31, 2000 and 1999 ........................... 5
Notes to Unaudited Condensed Consolidated Financial
Statements, March 31, 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 ................................. 13
Item 6. Exhibits and Reports on Form 8-K .................. 14
Signatures ................................................. 17
Exhibit Index .............................................. 18
2
<PAGE> 3
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- ------------
ASSETS
Current assets:
<S> <C> <C>
Cash ....................................... $ 1,429 $ 1,705
Receivables, net ........................... 13,569 11,703
Installment receivables retained ........... 4,124 5,344
Inventories ................................ 45,694 38,786
Deferred income taxes ...................... 9,007 9,838
Other current assets ....................... 2,459 2,974
Net assets of discontinued
operations ............................ 0 21,748
--------- ---------
Total current assets ............. 76,282 92,098
Property, plant and equipment, net ............... 20,236 20,985
Deferred income taxes ............................ 874 874
Other assets ..................................... 13,370 14,035
--------- ---------
Total assets ..................... $ 110,762 $ 127,992
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................... $ 19,920 $ 21,541
Current portion of long-term debt .......... 9,670 12,765
Income taxes payable ....................... 1,304 1,855
Accrued liabilities ........................ 9,542 3,393
--------- ---------
Total current liabilities ........ 40,436 39,554
Long-term debt, less current portion ............. 15,447
32,582
Other liabilities ................................ 2,108 2,168
--------- ---------
Total liabilities ................ 57,991 74,304
--------- ---------
Shareholders' equity:
Common stock ............................... 42
42
Additional paid-in capital ................. 12,677 12,635
Accumulated other comprehensive
income (loss) ......................... (321) (270)
Retained earnings .......................... 46,869 47,777
--------- ---------
59,267 60,184
Less cost of treasury shares ............... (6,496) (6,496)
--------- ---------
Total shareholders' equity ....... 52,771 53,688
--------- ---------
Total liabilities and
shareholders' equity .......... $ 110,762 $ 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)
THREE MONTHS ENDED MARCH 31,
2000 1999
-------- --------
Net sales ............................................ $ 31,975 $ 30,514
Cost of goods sold ................................... 28,719 27,885
-------- --------
Gross profit ................................... 3,256 2,629
Other operating income, net .......................... 167 189
-------- --------
3,423 2,818
Operating expenses:
Selling, general and administrative ............ 5,284 5,938
Provision for doubtful accounts ................ 85 86
-------- --------
Operating (loss) profit ................... (1,946) (3,206)
Interest expense ..................................... 930 668
-------- --------
Earnings (loss) before income taxes ....... (2,876) (3,874)
Income taxes ......................................... 1,093 1,466
-------- --------
Net earnings (loss) from continuing
Operations ..................................... (1,783) (2,408)
Discontinued operations:
Gain on sale of Retail Financing (net of
income tax of $444) ....................... 725 0
Income from operations of Retail
Financing discontinued (net of
income taxes of $93 in 2000 and
$338 in 1999) .................................. 150 567
-------- --------
Net earnings (loss) ....................... $ (908) $ (1,841)
======== ========
Earnings (loss) per share:
Basic
Earnings (loss) from continuing operations ........... $ (0.51) $ (0.69)
Earnings from discontinued operations ................ .25 .16
-------- --------
Net earnings (loss) .................................. $ (0.26) $ (0,53)
======== ========
Diluted
Earnings (loss) from continuing operations ........... $ (0.51) $ (0.69)
Earnings from discontinued operations ................ .25 .16
-------- --------
Net earnings (loss) .................................. $ (0.26) $ (0.53)
======== ========
Weighted average number of common shares ............. 3,463 3,453
======== ========
Weighted average number of common and
common equivalent shares ....................... 3,463 3,453
======== ========
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>
THREE MONTHS ENDED MARCH 31,
INCREASE (DECREASE) IN CASH 2000 1999
- --------------------------- --------- ---------
<S> <C> <C>
Cash flows from continuing
Operating activities
Net earnings (loss) from continuing
operations ................................................................................. $ (1,783) $ (2,408)
Adjustments to reconcile net earnings (loss) to net cash provided by (used
in) operating activities:
Depreciation / amortization ............................................................. 920 797
Gain on sale of assets .................................................................. 0 20
Provision for doubtful accounts ......................................................... 85 86
Deferred income taxes ................................................................... 831 (236)
Change in assets and liabilities -
Receivables, net ..................................................................... (1,951) 2,469
Installment receivables retained ..................................................... 1,220 0
Inventories .......................................................................... (6,908) 1,561
Other current assets ................................................................. 515 (187)
Other assets ......................................................................... 575 (233)
Accounts payable, accrued and
other liabilities .................................................................... (3,149) (2,021)
Income taxes payable ................................................................. (995) (215)
-------- --------
Net cash used in continuing operating
activities ................................................................................... (10,640) (367)
-------- --------
Discontinued operations:
Income ..................................................................................... 150 567
Adjustment to derive cash flows from
operating activities ..................................................................... 1,018 2,229
-------- --------
Net cash provided by (used in)
discontinued operations ...................................................................... 1,168 2,796
-------- --------
Net operating activities ........................................................................ (9,472) 2,429
-------- --------
Cash flows from investing activities:
Plant, property and equipment ................................................................ (39) (734)
Net proceeds from sale of Retail Financing ................................................... 33,083 0
-------- --------
Net cash provided by (used in) continuing
operating activities ......................................................................... 33,044 (734)
-------- --------
Cash flows from financing activities:
Repayment of long-term debt .................................................................. (20,230) (1,039)
-------- --------
Net cash used in continuing operations .......................................................... (20,230) (1,039)
Net cash used in discontinued operations ........................................................ (3,618) (707)
-------- --------
Net financing activities ........................................................................ (23,848) (1,746)
-------- --------
Net (decrease) increase in cash .............................................................. (276) (51)
Cash at beginning of period .................................................................. 1,705 327
-------- --------
Cash at end of period ........................................................................... $ 1,429 $ 276
-------- --------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid (refunded) during the
quarter for:
Interest .................................................................................. $ 935 $ 755
======== ========
Income taxes .............................................................................. $ 12 $ (412)
======== ========
</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
March 31, 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
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,
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 periods ended March 31, 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):
March 31, December 31,
2000 1999
---- ----
FIFO cost:
Raw material .......................... $ 18,375 $ 17,716
Work-in-process ....................... 10,267 9,247
Finished goods ........................ 27,703 22,474
-------- --------
56,345 49,437
Less revaluation to LIFO ................... (10,651) (10,651)
-------- --------
Net inventories ....................... $ 45,694 $ 38,786
======== ========
6
<PAGE> 7
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 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>
Three Months Ended March 31:
2000 1999
------------------------------- -------------------------------
PER PER
INCOME SHARES SHARE INCOME SHARES SHARE
-------- ------ --------- --------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Earnings per share $ (1,783) 3,463 $ (0.51) $ (2,408) 3,453 $ (0.69)
Dilutive effect of
options
-------- ----- -------- --------- ----- --------
Earnings per share-
assuming dilution $ (1,783) 3,463 $ (0.51) $ (2,408) 3,453 $ (0.69)
-------- ----- -------- --------- ----- --------
</TABLE>
(5) SEGMENT INFORMATION
Three Months Ended March 31,
2000 1999
- --------------------------------------------------------------------------------
Music and related $ 19,861 $ 18,789
Contract Electronics 12,114 11,725
- --------------------------------------------------------------------------------
SALES AND OTHER REVENUE $ 31,975 $ 30,514
- --------------------------------------------------------------------------------
Music and Related (*) $ (1,314) $ (1,797)
Contract Electronics 712 156
Corporate G&A and Other Unallocated (1,344) (1,565)
- --------------------------------------------------------------------------------
OPERATING (LOSS) PROFIT $ (1,946) $ (3,206)
- --------------------------------------------------------------------------------
Music and Related $ 71,515 $ 75,107
Contract Electronics 20,395 20,728
Discontinued Operations 0 20,891
Corporate G&A 18,852 10,375
- --------------------------------------------------------------------------------
IDENTIFIABLE ASSETS $ 110,762 $ 127,101
- --------------------------------------------------------------------------------
Music and Related $ 576 $ 509
Contract Electronics 141 173
Corporate G&A 203 115
- --------------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION $ 920 $ 797
- --------------------------------------------------------------------------------
Music and Related $ (10) $ 565
Contract Electronics 49 112
Corporate G&A 0 57
- --------------------------------------------------------------------------------
CAPITAL ADDITIONS $ 39 $ 734
- --------------------------------------------------------------------------------
* 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 would have been
$297 without the effect of the one-time costs.
7
<PAGE> 8
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 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, sales and an international dealer network. In addition, this
segment includes furniture and 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.
Comprehensive income (loss): Three Months Ended March 31,
2000 2000
-----------------------------------------------------------------------
Net earnings (loss) $ (908) $ 1,841)
Foreign currency
translation adjustment (51) (27)
-----------------------------------------------------------------------
Total comprehensive income (Loss) $ (959) $(1,868)
-----------------------------------------------------------------------
(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
FIRST QUARTER OF 2000 COMPARED
TO THE FIRST QUARTER OF 1999
Total first-quarter sales increased 5 percent to $32 million, from
$30.5 million a year ago. Excluding discontinued operations and the grand piano
consolidation charge, the Company's first quarter loss from continuing
operations was $1.8 million, or 51 cents per share, compared with a loss of $1.5
million, 42 cents per share, in the prior year. The major reason for the first
quarter loss was the higher cost of goods in Music. These costs will decrease
as a percentage of sales, as production increases. In the first quarter, the
newly consolidated grand piano production output increased 20 percent compared
with the fourth quarter of 1999, however it still lagged preconsolidation
production rates. As grand piano production continues to ramp up, the Company
expects to see additional improvements during the second quarter, at which time
grand piano production should achieve target output.
First quarter Music sales increased 6 percent to $19.9 million, up from
$18.8 million a year ago due to strong demand for all Baldwin products
throughout the quarter.
First quarter Contract Electronics (CE) sales increased 3 percent to
$12.1 million, up from $11.7 million a year ago. The increase was due to
increased sales to existing customers.
Earnings from discontinued operations, excluding the gain on the sale
of subsidiaries of 21 cents per share, were four cents per share, down from 16
cents per share a year ago. The lower earnings were generated by increased
interest costs on installment receivables sold and increased administrative
costs. Additionally, there is less than a full quarter of results from these
subsidiaries that were sold on March 10, 2000. On March 10, 2000, the Company
completed the sale of Keyboard Acceptance Corporation and Signature Leasing
Company to Deutsche Financial Services Corporation.
Selling, general and administrative expenses in the first quarter of
2000 were $5.3 million, a decrease of $0.6 million from $5.9 million in the
first quarter of 1999. This decrease resulted from cost containment by the
Company.
Interest expense increased by $0.2 million, from $0.7 million in the
first quarter of 1999 to $0.9 million in the first quarter 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%.
In December 1998, the Company entered into a two-year interest rate cap
agreement in order to reduce the potential impact of increases in interest rates
on $44 million of floating-rate long-term debt. The agreement entitled the
Company to receive from the counterparty, on a monthly basis, interest income to
the extent the one-month commercial paper rate exceeds 12%. The Company does not
hold or issue derivative financial instruments for trading purposes.
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, the 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.
10
<PAGE> 11
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
-----------------------------------------------------------
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, 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 March 31, 2000, the Company had outstanding indebtedness of $25.1
million.
Capital expenditures amounted to $39 thousand in the first quarter of
2000 and $734 thousand in the comparable period of 1999. At March 31, 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 manufacturing process.
At March 31, 2000, the carrying value and estimated fair value of
Company's debt totaled $25.1 million. All of the Company's debt at March 31,
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 has limited its risk related to interest rate changes by purchasing
certain interest rate caps discussed above under the "Inflation,
Operations and Interest Rates".
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
No matters have been submitted to a vote of security holders during the
first quarter of 2000.
ITEM 5. OTHER INFORMATION
The Company's annual meeting with shareholders will be held on Friday,
June 16, 2000. Shareholders of record as of May 15, 2000 will be entitled to
vote at the annual meeting.
13
<PAGE> 14
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
10.1 Credit Agreement dated as of March 24, 2000 among Baldwin
Piano & Organ Company, The Wurlitzer Company, Baldwin
Trading Company, The Baldwin Piano Company (Canada) Limited
and General Electric Capital Corporation (excluding
schedules not deemed material).*
10.2 Security Agreement dated as of March 24, 2000 among Baldwin
Piano & Organ Company, The Wurlitzer Company, Baldwin
Trading Company and General Electric Capital Corporation
(excluding schedules not deemed material).*
10.3 Baldwin Canada Security Agreement dated as of March 24, 2000
between The Baldwin Piano Company (Canada) Limited and
General Electric Capital Corporation (excluding schedules
not deemed material).*
10.4 Copyright Security Agreement dated as of March 24, 2000
among Baldwin Piano & Organ Company, The Wurlitzer Company
and General Electric Capital Corporation (excluding
schedules not deemed material).*
10.5 Trademark Security Agreement dated as of March 24, 2000
among Baldwin Piano & Organ Company, The Wurlitzer Company
and General Electric Capital Corporation (excluding
schedules not deemed material).*
10.6 Patent Security Agreement dated as of March 24, 2000 among
Baldwin Piano & Organ Company, The Wurlitzer Company and
General Electric Capital Corporation (excluding schedules
not deemed material).*
10.7 Subsidiary Guaranty dated as of March 24, 2000 among The
Wurlitzer Company, Baldwin Trading Company and General
Electric Capital Corporation.*
10.8 Baldwin Canada Guarantee dated as of March 24, 2000 between
The Baldwin Piano Company (Canada) Limited and General
Electric Capital Corporation.*
10.9 Pledge Agreement dated as of March 24, 2000 between Baldwin
Piano & Organ Company, The Baldwin Piano Company (Canada)
Limited and General Electric Capital Corporation.*
14
<PAGE> 15
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)
10.10 Mortgage, Security Agreement, Assignment of Rents and Leases
and Fixture Filing (Arkansas) dated as of March 24, 2000
from Baldwin Piano & Organ Company to General Electric
Capital Corporation (Trumann, Arkansas property) (excluding
exhibits not deemed material).* (a)
10.11 Intercreditor Agreement dated as of March 24, 2000 among
Deutsche Financial Services Corporation, General Electric
Capital Corporation and Baldwin Piano & Organ Company.*
10.12 Amendment to Amended and Restated Inventory Purchase and
Consignment Agreement dated as of March 23, 2000 between
Baldwin Piano and Organ Company and Deutsche Financial
Services Corporation.*
10.13 Sale agreement between Baldwin Piano & Organ Company and
Deutsche Financial Services (DFS) of the Company's Keyboard
Acceptance Corporation and Signature Leasing Company to DFS,
incorporated by reference to the Form 8-K of the Company
filed March 27, 2000.
10.14 New revolving line of credit facility agreement for the
Company with General Electric Capital Corporation,
incorporated by reference to the Form 8-K of the Company
filed April 6, 2000.
10.15 Baldwin Piano & Organ Company 1999 Management Incentive
Plan.
99.1 Press Release, dated March 13, 2000 announcing results for
the fourth quarter and year ended December 31, 1999,
incorporated by reference to the Form 10-K of the Company
for the period ended December 31, 1999.
99.2 Press Release, dated March 13, 2000 announcing the Company
completed the sale of Retail Financing units to Deutsche
Financial Services.
99.3 Press Release, dated May 2, 2000 announcing the Company's
financial results for the first quarter of 2000.
15
<PAGE> 16
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)
27 Financial Data Schedule.
* Incorporated by reference to the Form 8-K of the Company
filed April 6, 2000.
(a) Substantially similar agreements were entered into with
respect to the Company's properties located in Conway,
Arkansas, Fayetteville, Arkansas, Greenwood, Mississippi
and Marietta, Georgia
-------------------------------------------
Index to Exhibits appears on sequentially numbered page 19.
(b) REPORTS ON FORM 8-K
The Company filed a report on Form 8-K on March 27, 2000
announcing the sale of Keyboard Acceptance Corporation and
Signature Leasing Company to Deutsche Financial Services
Corporation.
The Company filed a report on Form 8-K on April 6, 2000
announcing a new revolving line of credit with General Electric
Capital Corporation to refinance the Company's old credit
facility and to finance its working capital requirements.
16
<PAGE> 17
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: MAY 15, 2000 BY: /S/ KAREN L. HENDRICKS
---------------------- ------------------------------
Karen L. Hendricks, Chairman,
Chief Executive Officer and
President
DATE: MAY 15, 2000 BY: /S/ DUANE D. KIMBLE
---------------------- ------------------------------
Duane D. Kimble,
Executive Vice President, and
Chief Financial Officer
17
<PAGE> 18
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit
Number Exhibit
- ------- -------
10.1 Credit Agreement dated as of March 24, 2000 among Baldwin Piano &
Organ Company, The Wurlitzer Company, Baldwin Trading Company, The
Baldwin Piano Company (Canada) Limited and General Electric Capital
Corporation (excluding schedules not deemed material).*
10.2 Security Agreement dated as of March 24, 2000 among Baldwin Piano &
Organ Company, The Wurlitzer Company, Baldwin Trading Company and
General Electric Capital Corporation (excluding schedules not deemed
material).*
10.3 Baldwin Canada Security Agreement dated as of March 24, 2000 between
The Baldwin Piano Company (Canada) Limited and General Electric
Capital Corporation (excluding schedules not deemed material).*
10.4 Copyright Security Agreement dated as of March 24, 2000 among Baldwin
Piano & Organ Company, The Wurlitzer Company and General Electric
Capital Corporation (excluding schedules not deemed material).*
10.5 Trademark Security Agreement dated as of March 24, 2000 among Baldwin
Piano & Organ Company, The Wurlitzer Company and General Electric
Capital Corporation (excluding schedules not deemed material).*
10.6 Patent Security Agreement dated as of March 24, 2000 among Baldwin
Piano & Organ Company, The Wurlitzer Company and General Electric
Capital Corporation (excluding schedules not deemed material).*
10.7 Subsidiary Guaranty dated as of March 24, 2000 among The Wurlitzer
Company, Baldwin Trading Company and General Electric Capital
Corporation.*
10.8 Baldwin Canada Guarantee dated as of March 24, 2000 between The
Baldwin Piano Company (Canada) Limited and General Electric Capital
Corporation.*
10.9 Pledge Agreement dated as of March 24, 2000 between Baldwin Piano &
Organ Company, The Baldwin Piano Company (Canada) Limited and General
Electric Capital Corporation.*
10.10 Mortgage, Security Agreement, Assignment of Rents and Leases and
Fixture Filing (Arkansas) dated as of March 24, 2000 from Baldwin
Piano & Organ Company to General Electric Capital Corporation
(Trumann, Arkansas property) (excluding exhibits not deemed
material).*(a)
18
<PAGE> 19
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit
Number Exhibit
- ------- -------
10.11 Intercreditor Agreement dated as of March 24, 2000 among Deutsche
Financial Services Corporation, General Electric Capital Corporation
and Baldwin Piano & Organ Company.*
10.12 Amendment to Amended and Restated Inventory Purchase and Consignment
Agreement dated as of March 23, 2000 between Baldwin Piano and Organ
Company and Deutsche Financial Services Corporation.*
10.13 Sale agreement between Baldwin Piano & Organ Company and Deutsche
Financial Services (DFS) of the Company's Keyboard Acceptance
Corporation and Signature Leasing Company to DFS, incorporated by
reference to the Form 8-K of the Company filed March 27, 2000.
10.14 New revolving line of credit facility agreement for the Company with
General Electric Capital Corporation, incorporated by reference to the
Form 8-K of the Company filed April 6, 2000.
10.15 Baldwin Piano & Organ Company 1999 Management Incentive Plan.
99.1 Press Release, dated March 13, 2000 announcing results for the fourth
quarter and year ended December 31, 1999, incorporated by reference to
the Form 10-K of the Company for the period ended December 31, 1999.
99.2 Press Release, dated March 13, 2000 announcing the Company completed
the sale of Retail Financing units to Deutsche Financial Services.
99.3 Press Release, dated May 2, 2000 announcing the Company's financial
results for the first quarter of 2000.
27 Financial Data Schedule.
* Incorporated by reference to the Form 8-K of the Company filed
April 6, 2000.
(a) Substantially similar agreements were entered into with respect
to the Company's properties located in Conway, Arkansas,
Fayetteville, Arkansas, Greenwood, Mississippi and Marietta,
Georgia
19
<PAGE> 1
EXHIBIT 10.15
BALDWIN PIANO & ORGAN COMPANY
1999 MANAGEMENT INCENTIVE PLAN
1. PURPOSE. Baldwin Piano & Organ Company (the "Company") hereby amends and
restates the Baldwin Piano & Organ Company 1994 Management Incentive Plan in its
entirety, effective as of January 1, 1999, as the Baldwin Piano & Organ Company
1999 Management Incentive Plan (the "Plan"). The purpose of this Plan is to set
forth the components of the executive compensation package that the Company may
offer from time to time to its executive officers and certain other key
management personnel. Such compensation shall directly relate to the performance
of the company and of the participant's individual performance and is designed
to enhance both the short term and long term profitability of the Company. The
Plan also is intended to provide incentives to those participants and to enable
the Company and the Company's subsidiaries to attract and retain executive
officers and key managerial personnel.
2. ELIGIBILITY. Participation in the Plan shall be limited to the Company's
executive officers and other key managerial personnel of the Company or of the
Company's subsidiaries. The Company's Executive Compensation Committee (the
"Committee") will from time to time determine the employees who may participate
in this Plan and the extent to which such persons may participate.
3. COMPENSATION THAT MAY BE AWARDED UNDER THE PLAN. In the Committee's
discretion and in addition to any other benefits that the Company may offer to
its employees (e.g. benefits relating to health care, vacation, deferred
compensation, retirement, etc.), the compensation that may be awarded to
eligible employees pursuant to this Plan may consist of any one or more of the
following elements: (a) base salary, (b) annual cash bonus, (c) stock options
and (d) restricted shares of the Company's common stock.
4. BASE SALARY. Subject to approval by the Committee, the Company shall
establish an annual base salary for each participant in the Plan. In the
discretion of the Company, such annual salary may, but need not, be increased or
decreased each year depending primarily on the participant's individual
performance and secondarily upon the Company's performance. The Company and the
Committee may consider any and all such factors as it or they deem relevant in
adjusting each individual's base salary.
5. BALDWIN VALUE ADDED BONUS
(a) DEFINITIONS. As used in this Section of the Plan, the following terms,
when capitalized, shall have the following meanings:
<PAGE> 2
(1) "AVERAGE ANNUAL BVA" with respect to the 1999 calendar
year, means the BVA for 1998, and, unless modified by the Committee, with
respect to every calendar year thereafter, means the average BVA for all
calendar years from and including 1998.
(2) "BENEFICIAL OWNER" shall have the meaning ascribed to such
term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.
(3) "BOARD" or "BOARD OF DIRECTORS" means the Board of
Directors of the Company.
(4) "BVA" is an estimate of the true economic profit of the
Company after subtracting the cost of capital, shall be determined each calendar
year by the Committee, and shall generally be determined on the basis of the
following formula:
BVA = NOPAT - (Cost of Capital x Economic Capital)
NOPAT, Cost of Capital and Economic Capital are defined in the Baldwin Value
Added (BVA) Manual dated February, 1999, as it may be amended.
(5) "BVA BONUS" for any calendar year, means the award for a
participant determined by multiplying a participant's BVA Factor by Incentive
BVA.
(6) "BVA FACTOR" for any calendar year, means a participant's
percentage of Incentive BVA determined each year by the Committee.
(7) "CAUSE" shall mean the occurrence of any one of the
following:
(i) the willful and continued failure by a
participant to substantially perform his/her duties (other than any such failure
resulting from the participant's disability), after a written demand for
substantial performance is delivered to the participant that specifically
identifies the manner in which the Company, or any of its subsidiaries, as the
case may be, believes that the participant has not substantially performed
his/her duties, and the participant has failed to remedy the situation within
ten (10) business days of receiving such notice;
(ii) the participant's conviction for committing a
felony in connection with the employment relationship; or
(iii) the willful engaging by the participant in
gross misconduct materially and demonstrably injurious to the Company or any of
its subsidiaries. However, no act, or failure to act, on the participant's part
shall be considered "willful" unless done, or omitted to be done, by the
participant not in good faith and without reasonable belief that his/her action
or omission was in the best interest of the Company or any of its subsidiaries.
2
<PAGE> 3
(8) "CHANGE IN CONTROL" shall be deemed to have occurred if
the conditions set forth in any one of the following paragraphs shall have been
satisfied:
(i) any Person (other than a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
any of its subsidiaries, or a corporation owned directly or indirectly by the
common shareholders of the Company in substantially the same proportions as
their ownership of the common stock of the Company) is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company representing more
than 50% of the combined voting power of the Company's then outstanding
securities;
(ii) individuals who at the beginning of any one-year
period constitute the Board and any new director, whose election by the Board or
nomination for election by the Company's shareholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority of the Board at the end of such period; or
(iii) the shareholders of the Company approve (A) a
plan of complete liquidation of the Company; or (B) an agreement for the sale or
disposition of all or substantially all the Company's assets; or (C) a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted of voting securities of the
surviving entity) at least 50% of the combined voting power of the voting
securities of the Company (or such surviving entity) outstanding after such
merger or consolidation.
However, in no event shall a Change in Control be deemed to have occurred, with
respect to a participant, if the participant is part of a purchasing group which
consummates the Change in Control transaction. The participant shall be deemed
"part of a purchasing group..." for purposes of the preceding sentence if the
participant is an equity participant or has agreed to become an equity
participant in the purchasing company or group (except for (i) passive ownership
of less than 5% of the voting securities of the purchasing company or (ii)
ownership of equity participation in the purchasing company or group which is
otherwise not deemed to be significant, as determined prior to the Change in
Control by a majority of the nonemployee continuing members of the Board).
(9) "EXCESS BVA" for any calendar year, means the amount by
which the BVA for the year exceeds Average Annual BVA.
(10) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended from time to time.
(11) "INCENTIVE BVA" for any calendar year means the portion
of the Excess BVA allocated by the Board to provide BVA Bonuses under the terms
of the Plan.
3
<PAGE> 4
(12) "PERSON" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, including a "group" as defined in Section 13(d) thereof.
(13) "YEARS OF PARTICIPATION" means the calendar year for
which the participant's initial BVA Bonus is awarded and each calendar year
thereafter.
(b) AWARD OF BVA BONUS. In the discretion of the Committee, a
participant in the Plan may be granted the right to receive a BVA Bonus based
upon a BVA Factor determined by the Committee for the participant multiplied by
the Incentive BVA for the year. To the extent practical, the participant's BVA
Factor shall be established prior to the commencement of each calendar year
unless otherwise approved by the Committee. No BVA Bonus shall be payable under
this Plan with respect to any calendar year in which there is no Excess BVA for
the year.
(c) PAYMENT OF BVA BONUS. Subject to the provisions on Acceleration of
Payment at Subsection (d) below and the provisions on Forfeiture of BVA Bonus at
Subsection (e) below, any BVA Bonus with respect to a calendar year shall be
paid as follows:
(1) CASH PORTION. Sixty percent (60%) (or such other
percentage as established by the Committee from year to year) of a participant's
BVA Bonus for a calendar year shall be paid in cash to such participant as soon
as administratively feasible after the end of such calendar year if such
participant is employed with the Company, or any of the Company's subsidiaries,
on the last day of such calendar year.
(2) DEFERRED PORTION. The payment of forty percent (40%) (or
such other percentage as established by the Committee from year to year) of a
participant's BVA Bonus shall be deferred and paid as follows:
(i) One half (1/2) of the deferred portion of a
participant's BVA Bonus with respect to a calendar year, as adjusted in
accordance with Subsection (c)(3) below, shall be paid as soon as
administratively feasible after the first anniversary of the last day such
calendar year, and
(ii) One half (1/2) of the deferred portion of a
participant's BVA Bonus with respect to such calendar year, as adjusted in
accordance with Subsection (c)(3) below, shall be paid as soon as
administratively feasible after the second anniversary of the last day such
calendar year.
(3) EARNINGS ON DEFERRED PORTION. The deferred portion of the
BVA Bonus with respect to a calendar year shall be deemed to have been invested
in Company common stock on a phantom stock basis as of the first day of the
calendar year following such calendar year and the Committee shall adjust the
deferred portion of the BVA in a manner it determines is appropriate to reflect
increases (or decreases) in value, dividends, and any other capital adjustments
with respect
4
<PAGE> 5
to the actual outstanding shares of Company common stock until such amount is
paid in accordance with Subsection (c)(2) above.
(d) ACCELERATION OF PAYMENT. Notwithstanding any provision to the
contrary contained herein, the following events shall accelerate of the payment
of the deferred portion of any BVA Bonus that has not yet been paid to a
participant:
(1) CHANGE IN CONTROL. In the event of a Change in Control of
the Company, the deferred portion of any BVA Bonus shall not thereafter be
forfeitable under Subsection (e) below, shall be adjusted in accordance with
Subsection (c)(3) above through the date of the Change in Control, and shall be
paid in cash to the participant as soon as administratively feasible after such
Change in Control.
(2) DEATH. In the event of the death of a participant, the
deferred portion of any BVA Bonus shall be adjusted in accordance with
Subsection (c)(3) above through the date of the participant's death, and shall
be paid in cash to the participant's beneficiary as soon as administratively
feasible after such death.
(3) DISABILITY. In the event of the participant becomes
disabled, as determined by the Committee, the deferred portion of any BVA Bonus
shall be adjusted in accordance with Subsection (c)(3) above through the date
the Committee determines that the participant is disabled, and shall be paid in
cash to the participant as soon as administratively feasible after such
determination of disability.
(e) FORFEITURE OF BVA BONUS. If a participant is not employed by the
Company, or any of the Company's subsidiaries, on the last day of the calendar
year for which the participant has been awarded a BVA Bonus, the participant
shall forfeit the entire BVA Bonus for that year, including both the cash
portion and the deferred portion. Subject to Subsection (d)(3) above, if prior
to the completion of three (3) Years of Participation, a participant either
voluntarily terminates his employment with the Company, and all of the Company's
subsidiaries, or is terminated for Cause, the deferred portion of any BVA Bonus
that has not yet been paid to the participant shall be forfeited.
6. INCENTIVE STOCK OPTIONS. In the discretion of the Committee, a participant in
the Plan may be granted incentive stock options pursuant to the Company's 1994
Incentive Stock Option Plan in accordance with the terms and conditions set
forth in that plan. Such grants shall be made no more frequently than annually
and will be based primarily upon the participant's performance and level of
responsibilities within the Company. The Committee shall also consider the
performance of the Company in determining whether stock option grants should be
awarded and the size of the awards.
7. AWARDS OF RESTRICTED SHARES OF COMMON STOCK. In the discretion of the
Committee, a participant in the Plan may be granted the right to receive awards
of restricted shares of the Company's Common Stock pursuant to the Company's
1994 Long Term Incentive Plan in accordance with the terms and conditions set
forth in that plan. Such grants shall be made no more
5
<PAGE> 6
frequently than once every three years to such plan participants and the awards
will be based upon the Company's total shareholder returns and the participant's
level of responsibilities within the Company.
8. AWARDS UNDER OMNIBUS STOCK PLAN. A participant in the Plan may be granted
incentive stock options, nonqualified stock options, stock appreciation rights,
restricted stock, performance units and performance shares pursuant to the
Company's 1998 Omnibus Stock Plan in accordance with the terms and conditions
set forth in that plan.
9. DURATION OF PLAN; AMENDMENTS. This plan shall become effective upon approval
by the Company's Board of Directors and shall continue until terminated by the
Company's Board of Directors. Neither the expiration nor the termination of this
Plan shall affect any compensation award theretofore made hereunder. The Board
may from time to time amend this Plan and any amendment of this Plan shall apply
to all awards made on or after the date of such amendment.
10. EFFECT ON EMPLOYMENT. Nothing contained in this Plan or in any other plan
contemplated or referred to herein shall give, or be construed as giving, to any
participant the right to be retained in the employ of the Company or of any of
the Company's subsidiaries nor create any obligation on the part of the Company
to continue the employment of any participant.
11. OTHER INCENTIVE PLANS. The adoption of this Plan does not preclude the
adoption by appropriate means of any other incentive plan for employees of the
Company or its subsidiaries, whether or not such employees are eligible to
participate in this Plan.
12. NO RIGHTS GRANTED; UNIFORMITY. No person shall have any claim or right to
any award under this Plan or in any other plan contemplated or referred to
herein. Neither the Company nor the Committee has any obligation to treat all
participants uniformly and awards may vary with respect to each participant as
the Company or the Committee deems appropriate in its sole discretion.
13. PLAN ADMINISTRATION. This Plan and all other plans contemplated or referred
to herein shall be administered by the Committee, or if no Committee has been
appointed by the Company's Board of Directors, shall be administered by the
Board. The Committee shall have full power to administer and interpret this Plan
and all other plans contemplated or referred to herein. In making any
compensation decisions, the Committee shall be entitled to rely on opinions,
reports, or statements of officers or employees of the Company and its
subsidiaries and of counsel, public accountants and other professional or expert
persons. Notwithstanding anything in this Plan or in any other plan to the
contrary, the Committee may from time to time delegate authority to appropriate
officers of the Company to make compensation decisions and awards with respect
to eligible employees other than the Company's executive officers. All actions
of the Committee shall be subject to the approval of the Board.
14. NOTICES. All notices given, made, delivered, or transmitted to a participant
by the Company shall be deemed duly given when mailed first class mail, postage
prepaid, and addressed to the
6
<PAGE> 7
participant at the address last appearing on the records of the Company. A
participant may change the address as shown on the records of the Company by
giving written notice thereof to the Company.
15. GOVERNING LAW. This Plan and all other plans contemplated or referred to
herein, and the actions taken in connection thereto, shall be governed and
construed in accordance with the laws of the State of Ohio.
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Consolidated
Balance Sheet, Statement of Operations and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,429
<SECURITIES> 0
<RECEIVABLES> 18,616
<ALLOWANCES> 923
<INVENTORY> 45,694
<CURRENT-ASSETS> 76,282
<PP&E> 40,843
<DEPRECIATION> 20,607
<TOTAL-ASSETS> 110,762
<CURRENT-LIABILITIES> 40,436
<BONDS> 15,447
0
0
<COMMON> 42
<OTHER-SE> 52,729
<TOTAL-LIABILITY-AND-EQUITY> 110,762
<SALES> 31,975
<TOTAL-REVENUES> 32,142
<CGS> 28,719
<TOTAL-COSTS> 28,719
<OTHER-EXPENSES> 5,284
<LOSS-PROVISION> 85
<INTEREST-EXPENSE> 930
<INCOME-PRETAX> (2,876)
<INCOME-TAX> (1,093)
<INCOME-CONTINUING> (1,783)
<DISCONTINUED> 875
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (908)
<EPS-BASIC> (.26)
<EPS-DILUTED> (.26)
</TABLE>
<PAGE> 1
Exhibit 99.2
CONTACTS: Duane Kimble Ken Di Paola or Joel Pomerantz
Baldwin Piano & Organ Company The Dilenschneider Group
(513) 754-4647 (212) 922-0900
BALDWIN PIANO COMPLETES SALE OF
RETAIL FINANCING UNITS TO DEUTSCHE FINANCIAL SERVICES
SALE WILL SHARPLY REDUCE DEBT AND IMPROVE FOCUS ON
BALDWIN'S CORE PIANO AND CONTRACT ELECTRONICS BUSINESSES
Mason, Ohio, March 13, 2000 -- Baldwin Piano & Organ Company (NASDAQ:
BPAO) today announced that it has completed the sale of its two wholly owned
retail financing units -- Keyboard Acceptance Corporation (KAC) and Signature
Leasing Corporation (SLC)- to Deutsche Financial Services Corporation (DFS).
Baldwin received gross proceeds of $35 million. After transaction expenses,
Baldwin expects to net approximately $32.5 million for an after-tax gain of
$700,000, or 20 cents per share.
Karen L. Hendricks, Chairman, President, and Chief Executive Office of
Baldwin said, "With this sale completed, Baldwin can focus on its two
manufacturing-based businesses, pianos and contract electronics. Debt reduction
and a significant deleveraging of our balance sheet will benefit our remaining
businesses and our shareholders. Looking ahead, we feel we have an aggressive
but realistic business plan that is clearly focused on returning the company to
profitability."
Key elements of the transaction include commitments from Baldwin to
continue to use KAC and SLC to service the retail financing needs of its
company-owned stores and to use Baldwin's retail outlets to sell pianos
repossessed by KAC and SLC. Baldwin also agreed to retain a contingent
obligation for certain past-due installment receivables for a period of two
years.
-more-
<PAGE> 2
-2-
Baldwin Piano & Organ Company has marketed keyboard musical products
for over 138 years. Baldwin, maker of America's best selling pianos, also
manufactures electronic and electro-mechanical components for Original Equipment
Manufacturers.
Deutsche Financial Services Corporation, a unit of Deutsche Bank Group,
is an international leader in providing financing and servicing programs that
facilitate the product distribution and sales process. Programs and services
include inventory financing, middle market secured lending, leveraged
acquisition financing, non-funded service programs, consumer and commercial
end-user financing, franchise financing, leasing, extended warranty programs and
related financial services.
Deutsche Financial Services Corporation, based in St. Louis, Missouri,
operates across the United States, Canada, Europe and Puerto Rico. Deutsche Bank
Group is the world's largest financial institution with assets in excess of $840
billion on December 31, 1999. Additional information about DFS may be found on
the World Wide Web at http://www.dfsc.com.
# # #
"Safe Harbor" statement under the Private Securities Litigation Reform Act of
1995: This release contains forward-looking statements that are subject to risks
and uncertainties, including, but not limited to, the impact of competitive
products and pricing, product demand and market acceptance, reliance on key
strategic alliances, fluctuations in operating results and other risks detailed
from time to time in the company's filings with the Securities and Exchange
Commission.
<PAGE> 1
Exhibit 99.3
CONTACTS: Duane Kimble Ken Di Paola
Baldwin Piano The Dilenschneider Group
(513) 754-4647 (212) 922-0900
BALDWIN PIANO REPORTS FIRST QUARTER RESULTS
TOTAL SALES UP 5%; SG&A EXPENSE REDUCED
MASON, OH, May 2, 2000 -- Baldwin Piano & Organ Company (NASDAQ: BPAO)
today announced results for the first quarter ended March 31, 2000. During the
first quarter, Baldwin completed the sale of its Retail Finance subsidiaries to
Deutsche Financial Services for $35 million, and experienced sales growth in
both of its remaining businesses.
Total first-quarter sales improved five percent to $32 million, up from
$30.5 million a year ago. The increase reflects a six percent increase in Music
sales and a three percent gain in Contract Electronics sales. Demand for all
Baldwin products was strong throughout the quarter. The net loss for the quarter
was 26 cents per share, an improvement from a 53 cents per share loss a year
ago. First quarter 2000 was favorably impacted by a 21 cent per share gain from
the sale of the Retail Finance subsidiaries. This gain is included in earnings
from discontinued operations. The 1999 first quarter loss included a
restructuring and other non-recurring charges of 27 cents per share for the
consolidation of grand piano assembly operations.
Earnings from discontinued operations, excluding the gain on the sale
of subsidiaries of 21 cents per share, were four cents per share, down from 16
cents per share a year ago. The lower earnings were generated by increased
interest costs on installment receivables sold and increased administrative
costs. Additionally, there is less than a full quarter of results from these
subsidiaries that were sold on March 10, 2000.
-more-
<PAGE> 2
-2-
Excluding discontinued operations and the grand piano consolidation
charge, Baldwin's first quarter loss from continuing operations was $1.8
million, or 51 cents per share, compared with a loss of $1.5 million, or 42
cents per share, in the prior year.
Karen L. Hendricks, chairman, president and chief executive officer of
Baldwin said, "While first quarter results from continuing operations did not
improve compared with the first quarter of 1999, all indicators point to
improvement next quarter. In the first quarter, topline sales grew, and selling,
general and administrative expenses improved to 17 percent of sales, compared
with 20 percent a year ago. In Contract Electronics, profits increased
significantly as a result of cost savings and labor efficiency improvements.
"The major reason for the first quarter loss was the higher cost of
goods in Music. These costs will decrease as a percentage of sales, as
production increases. In the first quarter, the newly consolidated grand piano
production output increased 20 percent compared with the fourth quarter of 1999,
however it still lagged preconsolidation production rates. As grand piano
production continues to ramp up, we expect to see additional improvements during
the second quarter, at which time grand piano production should achieve target
output," Ms. Hendricks concluded.
Baldwin Piano & Organ Company has marketed keyboard musical products
for over 138 years. 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 risk 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 filing with the Securities and Exchange Commission.
(Unaudited Consolidated Statement of Operations and Balance Sheet Attached)
<PAGE> 3
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF OPERATIONS
(In Thousands, except earnings per share)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------------------
2000 1999
----------------------- ----------------------
<S> <C> <C>
Net sales $ 31,975 $ 30,514
Cost of goods sold 28,719 27,885
----------------------- ----------------------
Gross profit 3,256 2,629
Other operating income, net 167 189
Selling, general and administrative (5,369) (6,024)
Interest expense (930) (667)
----------------------- ----------------------
Earnings (loss) before income taxes (2,876) (3,873)
Income taxes (1,093) (1,466)
----------------------- ----------------------
Net earnings (loss) from continuing operations (1,783) (2,407)
Discontinued operations:
Income from operations of Retail Financing to be
disposed of (net of income taxes of $537 in 2000
and $338 in 1999) 875 567
----------------------- ----------------------
Net earnings (loss) $ (908) $ (1,840)
======================= ======================
Earning (loss) per share
Basic
Earnings (loss) from continuing operations $ (0.51) $ (0.69)
Earnings from discontinued operations 0.25 0.16
----------------------- ----------------------
Net earnings (loss) $ (0.26) $ (0.53)
======================= ======================
Diluted
Earnings (loss) from continuing operations $ (0.51) $ (0.69)
Earnings from discontinued operations $ 0.25 $ 0.16
----------------------- ----------------------
Net earnings (loss) $ (0.26) $ (0.53)
======================= ======================
Average number of shares outstanding 3,463 3,453
======================= ======================
Diluted number of shares outstanding 3,463 3,453
======================= ======================
</TABLE>
CONSOLIDATED SUMMARY BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
March 31, March 31, December 31,
2000 1999 1999
(unaudited) (unaudited)
---------------------- ----------------------- ----------------------
<S> <C> <C> <C>
Assets
Receivables, net $ 13,569 $ 11,829 $ 11,703
Installment receivables retained 4,124 6,785 5,344
Inventories 45,694 49,528 38,786
Other current assets 12,895 763 14,517
Net assets of discontinued operations 0 20,891 21,748
---------------------- ----------------------- ----------------------
Total current assets 76,282 89,796 92,098
Property, plant and equipment, net 20,236 22,701 20,985
Other assets 14,244 14,604 14,909
---------------------- ----------------------- ----------------------
Total assets $ 110,762 $ 127,101 $ 127,992
====================== ======================= ======================
Liabilities and Shareholders' Equity
Current portion of long-term debt $ 9,670 $ 11,204 $ 12,765
Other liabilities 30,766 11,879 26,789
---------------------- ----------------------- ----------------------
Total current liabilities 40,436 23,083 39,554
Long-term debt, less current portion 15,447 41,955 32,582
Other liabilities 2,108 2,640 2,168
Shareholders' equity 52,771 59,423 53,688
---------------------- ----------------------- ----------------------
Total liabilities and shareholders' equity $ 110,762 $ 127,101 $ 127,992
====================== ======================= ======================
</TABLE>
