Exhibit 99.1
STEINWAY MUSICAL INSTRUMENTS, INC.
For Immediate Release:
Steinway Reports 1st Quarter Results
GAAP EPS $0.39 - Up $0.31
Adjusted EPS $0.49 - Up $0.21
WALTHAM, MA - May 6, 2004 - Steinway Musical Instruments, Inc. (NYSE: LVB), one of the world’s leading manufacturers of musical instruments, today announced results for the quarter ended March 31, 2004. The Company posted EPS of $0.39 compared to $.08 in the prior year period. Adjusted EPS was $0.49 compared to $0.28 in 2003. Adjustments for 2004 are comprised of costs associated with band instrument plant closures and are detailed in the attached financial tables.
Net sales increased 9% for the quarter, to $90 million. Gross margins improved to 28.6% from 25.2% in the prior year period and Adjusted gross margins improved 150 basis points to 30.1%. Cash flows from operations were $3 million higher than in the first quarter of 2003 and EBITDA increased 33%, to $13 million. A comparatively higher tax rate for the quarter negatively impacted EPS by $0.03. The Company ended the quarter with a cash balance of $45 million.
CEO Dana Messina commented, “We are very pleased with our first quarter results. The economies in many of the piano markets we serve have picked up and we foresee a continuation of healthy piano sales for the rest of the year.”
Messina continued, “As scheduled, we closed a second band instrument manufacturing facility on April 1st. With the plant closures complete and facility rationalization charges essentially behind us, we can better focus our efforts on our product and distribution strategies. We expect profitability in our band instrument business to continue to improve in the second half of 2004.”
The Company remains on track to achieve 2004 earnings of at least $1.90 per share on a GAAP basis.
10-Q Filing and Conference Call
Additional information and further discussion and analysis of Steinway’s first quarter results is included in the Company’s Quarterly Report on Form 10-Q filed today with the SEC. Management will also be discussing the Company’s results and outlook for the remainder of 2004 on a conference call today beginning at 5:30 p.m. EDT. The 10-Q, a live web cast of the call, and an archived version of the call will be available to all interested parties on the Company’s web site, www.steinwaymusical.com.
About Steinway Musical Instruments
Steinway Musical Instruments, Inc., through its Steinway and Conn-Selmer divisions, is one of the world’s leading manufacturers of musical instruments. Its notable products include Steinway & Sons pianos, Bach Stradivarius trumpets, Selmer Paris saxophones, C.G. Conn French horns, King trombones, and Ludwig snare drums.
Non-GAAP Financial Measures Used by Steinway Musical Instruments
The Company uses the non-GAAP measurement EBITDA, which it defines as earnings before net interest expense, income taxes, depreciation and amortization, adjusted to exclude non-recurring, infrequent or unusual items. The Company uses EBITDA because it is useful to management and investors as a measure of the Company’s core operating performance. The Company also believes EBITDA is helpful in determining the Company’s ability to meet future debt service, capital expenditures and working capital requirements. In addition, certain of the Company’s debt covenants are based upon EBITDA calculations and the Company uses EBITDA as the basis for determining bonuses for its managers. However, EBITDA should not be construed as a substitute for operating income or a better indicator of liquidity than cash flows from operating activities, which are determined in accordance with GAAP.
The Company has provided other non-GAAP measurements which present operating results on a basis excluding non-comparable items. The Company has provided Adjusted financial information because management uses it to better understand the Company’s core operating performance on a going forward basis. This Adjusted information also provides meaningful comparisons of performance between periods. However, there are limitations in the use of such information because the Company’s actual results do include the impact of these Adjustments. The non-GAAP measures are intended only as a supplement to the comparable GAAP measures.
“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995
This release contains “forward-looking statements” which represent the Company’s present expectations or beliefs concerning future events. The Company cautions that such statements are necessarily based on certain assumptions which are subject to risks and uncertainties which could cause actual results to differ materially from those indicated in this release. These risk factors include the following: changes in general economic conditions; recent geopolitical events; increased competition; work stoppages and slowdowns; exchange rate fluctuations; variations in the mix of products sold; market acceptance of new band instrument product and distribution strategies; ability of suppliers to meet demand; and fluctuations in effective tax rates resulting from shifts in sources of income. Further information on these risk factors is included in the Company’s filings with the Securities and Exchange Commission.
Contact: | Julie A. Theriault |
| Telephone: 781-894-9770 |
| E-mail: ir@steinwaymusical.com |
STEINWAY MUSICAL INSTRUMENTS, INC.
Condensed Consolidated Statements of Income
(In Thousands, Except Per Share Data)
|
| Three Months Ended |
| ||||
|
| 3/31/2004 |
| 3/29/2003 |
| ||
Net sales |
| $ | 90,061 |
| $ | 82,509 |
|
Cost of sales |
| 64,336 |
| 61,677 |
| ||
Gross profit |
| 25,725 |
| 20,832 |
| ||
|
| 28.6% |
| 25.2 | % | ||
|
|
|
|
|
| ||
Operating expenses |
| 17,627 |
| 17,428 |
| ||
Income from operations |
| 8,098 |
| 3,404 |
| ||
Interest expense, net |
| 3,141 |
| 2,972 |
| ||
Other (income) expense, net |
| (612 | ) | (621 | ) | ||
Income before taxes |
| 5,569 |
| 1,053 |
| ||
Provision for income taxes |
| 2,225 |
| 370 |
| ||
Net income |
| $ | 3,344 |
| $ | 683 |
|
|
|
|
|
|
| ||
Earnings per share - basic |
| $ | 0.41 |
| $ | 0.08 |
|
Earnings per share - diluted |
| $ | 0.39 |
| $ | 0.08 |
|
|
|
|
|
|
| ||
Weighted average common shares - basic |
| 8,210 |
| 8,906 |
| ||
Weighted average common shares - diluted |
| 8,520 |
| 8,906 |
|
Condensed Consolidated Balance Sheets
|
| 3/31/2004 |
| 3/29/2003 |
| 12/31/2003 |
| |||
Cash |
| $ | 45,050 |
| $ | 15,134 |
| $ | 42,283 |
|
Receivables, net |
| 84,037 |
| 85,246 |
| 76,403 |
| |||
Inventories |
| 155,284 |
| 155,594 |
| 152,029 |
| |||
Other current assets |
| 17,409 |
| 15,160 |
| 17,555 |
| |||
Total current assets |
| 301,780 |
| 271,134 |
| 288,270 |
| |||
|
|
|
|
|
|
|
| |||
Property, plant and equipment, net |
| 97,615 |
| 101,428 |
| 98,937 |
| |||
Other assets |
| 58,496 |
| 53,886 |
| 58,458 |
| |||
Total assets |
| $ | 457,891 |
| $ | 426,448 |
| $ | 445,665 |
|
|
|
|
|
|
|
|
| |||
Notes payable and current portion of long-term debt |
| $ | 11,129 |
| $ | 8,407 |
| $ | 10,638 |
|
Other current liabilities |
| 57,710 |
| 46,496 |
| 50,666 |
| |||
Total current liabilities |
| 68,839 |
| 54,903 |
| 61,304 |
| |||
|
|
|
|
|
|
|
| |||
Long-term debt |
| 215,066 |
| 190,956 |
| 185,964 |
| |||
Other liabilities |
| 45,332 |
| 47,999 |
| 45,762 |
| |||
Stockholders’ equity |
| 128,654 |
| 132,590 |
| 152,635 |
| |||
Total liabilities and stockholders’ equity |
| $ | 457,891 |
| $ | 426,448 |
| $ | 445,665 |
|
STEINWAY MUSICAL INSTRUMENTS, INC.
Reconciliation of GAAP Earnings to Adjusted Earnings
(In Thousands, Except Per Share Data)
(Unaudited)
|
| Three Months Ended 3/31/04 |
| |||||||
|
| GAAP |
| Adjustments |
| Adjusted |
| |||
Net sales |
| $ | 90,061 |
| $ | — |
| $ | 90,061 |
|
Cost of sales |
| 64,336 |
| (1,412 | )(1) | 62,924 |
| |||
|
|
|
|
|
|
|
| |||
Gross profit |
| 25,725 |
| 1,412 |
| 27,137 |
| |||
|
| 28.6% |
|
|
| 30.1 | % | |||
|
|
|
|
|
|
|
| |||
Operating expenses |
| 17,627 |
| 76 | (2) | 17,703 |
| |||
|
|
|
|
|
|
|
| |||
Income from operations |
| 8,098 |
| 1,336 |
| 9,434 |
| |||
|
|
|
|
|
|
|
| |||
Interest expense, net |
| 3,141 |
| — |
| 3,141 |
| |||
Other (income) expense, net |
| (612 | ) | — |
| (612 | ) | |||
|
|
|
|
|
|
|
| |||
Income before taxes |
| 5,569 |
| 1,336 |
| 6,905 |
| |||
|
|
|
|
|
|
|
| |||
Provision for income taxes |
| 2,225 |
| 534 | (3) | 2,759 |
| |||
|
|
|
|
|
|
|
| |||
Net income |
| $ | 3,344 |
| $ | 802 |
| $ | 4,146 |
|
|
|
|
|
|
|
|
| |||
Earnings per share - basic |
| $ | 0.41 |
|
|
| $ | 0.51 |
| |
Earnings per share - diluted |
| $ | 0.39 |
|
|
| $ | 0.49 |
| |
|
|
|
|
|
|
|
| |||
Weighted average common shares - basic |
| 8,210 |
|
|
| 8,210 |
| |||
Weighted average common shares - diluted |
| 8,520 |
|
|
| 8,520 |
|
Notes to Reconciliation of GAAP Earnings to Adjusted Earnings
(1) Reflects employee severance costs associated with plant closures.
(2) Reflects gain on sale of equipment associated with plant closures.
(3) Reflects the tax effect of Adjustments at the Company’s effective rate for the period.
STEINWAY MUSICAL INSTRUMENTS, INC.
Reconciliation of GAAP Earnings to Adjusted Earnings
(In Thousands, Except Per Share Data)
(Unaudited)
|
| Three Months Ended 3/29/03 |
| |||||||
|
| GAAP |
| Adjustments |
| Adjusted |
| |||
Net sales |
| $ | 82,509 |
| $ | — |
| $ | 82,509 |
|
Cost of sales |
| 61,677 |
| (2,761 | )(1) | 58,916 |
| |||
|
|
|
|
|
|
|
| |||
Gross profit |
| 20,832 |
| 2,761 |
| 23,593 |
| |||
|
| 25.2% |
|
|
| 28.6 | % | |||
|
|
|
|
|
|
|
| |||
Operating expenses |
| 17,428 |
| — |
| 17,428 |
| |||
|
|
|
|
|
|
|
| |||
Income from operations |
| 3,404 |
| 2,761 |
| 6,165 |
| |||
|
|
|
|
|
|
|
| |||
Interest expense, net |
| 2,972 |
| — |
| 2,972 |
| |||
Other (income) expense, net |
| (621 | ) | — |
| (621 | ) | |||
|
|
|
|
|
|
|
| |||
Income before taxes |
| 1,053 |
| 2,761 |
| 3,814 |
| |||
|
|
|
|
|
|
|
| |||
Provision for income taxes |
| 370 |
| 969 | (2) | 1,339 |
| |||
|
|
|
|
|
|
|
| |||
Net income |
| $ | 683 |
| $ | 1,792 |
| $ | 2,475 |
|
|
|
|
|
|
|
|
| |||
Earnings per share - basic |
| $ | 0.08 |
|
|
| $ | 0.28 |
| |
Earnings per share - diluted |
| $ | 0.08 |
|
|
| $ | 0.28 |
| |
|
|
|
|
|
|
|
| |||
Weighted average common shares - basic |
| 8,906 |
|
|
| 8,906 |
| |||
Weighted average common shares - diluted |
| 8,906 |
|
|
| 8,906 |
|
Notes to Reconciliation of GAAP Earnings to Adjusted Earnings
(1) �� Reflects $1,903 paid in accordance with the terms of expired labor contracts and $858 impact of labor strikes.
(2) Reflects the tax effect of Adjustments at the Company’s effective rate for the period.
STEINWAY MUSICAL INSTRUMENTS, INC.
Reconciliation from Cash Flows from Operating Activities to EBITDA
(In Thousands)
|
| Three Months Ended |
| ||||
|
| 3/31/2004 |
| 3/29/2003 |
| ||
Cash flows from operating activities |
| $ | 985 |
| $ | (1,987 | ) |
Changes in operating assets and liabilities |
| 4,819 |
| 5,428 |
| ||
Income taxes, net of deferred tax benefit |
| 2,352 |
| 493 |
| ||
Net interest expense |
| 3,141 |
| 2,972 |
| ||
Other |
| 116 |
| (63 | ) | ||
Non-recurring, infrequent or unusual cash charges |
| 1,336 |
| 2,761 |
| ||
EBITDA |
| $ | 12,749 |
| $ | 9,604 |
|