Steinway Musical Instruments (LVB) 8-K Steinway Reports Q4 2005 Results

Exhibit 99.1

For Immediate Release:

Steinway Reports Q4 2005 Results

Band Division Sales up 11%

WALTHAM, MA — March 20, 2006 — Steinway Musical Instruments, Inc. (NYSE: LVB), one of the world’s leading manufacturers of musical instruments, today announced results for the quarter and twelve months ended December 31, 2005.

Net sales for the fourth quarter increased 3% over the prior year period and gross margins decreased 170 basis points.  Operating profits were $11 million and Adjusted EBITDA was $14 million.  The Company’s higher tax rate for the quarter negatively impacted EPS by $0.07, contributing to a decline in Basic EPS to $0.62.  Adjusted EPS was $0.66 compared to $0.84 in the prior year period.  Adjustments for the fourth quarter of 2005 are primarily comprised of a loss on the early extinguishment of debt.

For the twelve month period, sales rose 3%, to $387 million, and gross margins declined slightly, from 29.1% to 28.8%.  Operating profits increased 2% to $35 million.  Basic EPS was $1.71.

Piano Operations

For the fourth quarter, worldwide Steinway grand unit shipments increased 4%.  This increase offset a 6% decrease in unit shipments of the Company’s mid-priced lines, resulting in total piano unit shipments level with the prior year quarter.  Exchange rates negatively impacted revenue by nearly $2 million, contributing to a 2% decrease in piano revenue.  Manufacturing costs associated with the Company’s continuous improvement initiative as well as year end inventory adjustments negatively impacted piano gross margins, which decreased from 41.4% to 37.1%.

Wholesale unit shipments of Steinway grand pianos in 2005 were essentially even with the prior year.  However, retail shipments declined 7%, resulting in a 2% decrease in total Steinway grand shipments for the twelve month period.  Unit shipments of the Company’s Boston and Essex brands declined 6% for the year due to soft demand in the United States.  Total piano revenue for 2005 was $204 million, consistent with the prior year.  Gross margins declined, from 37.1% to 36.4%, primarily as a result of higher utility costs and lower retail sales.

Band Operations

Fourth quarter sales of band & orchestral instruments rose to $46 million, an 11% increase over the prior year quarter.  Unit shipments of woodwind and brass instruments increased 13%.  Gross margins increased from 14.6% to 18.2%, as production facilities continue to increase their efficiency.

For the twelve month period, sales increased 7%, to $184 million.  Unit shipments of woodwind and brass instruments increased 10% over 2004 and gross margins improved from 19.6% to 20.4%.

Refinancing

Steinway recently completed a successful refinancing transaction, replacing its outstanding 8.75% senior notes with 7% notes due 2014.  The Company estimates annual interest savings of approximately $2 million as a result of the more favorable interest rate.  In the first half of 2006, Steinway expects to recognize approximately $9 million of debt extinguishment costs.

In addition, the Company repaid one of its term loans which had a principal balance of $16.6 million. As a result, the Company will recognize a loss of approximately $1 million for the quarter ending March 31, 2006 due to elimination of the related deferred financing costs.

Comments

CEO Dana Messina commented, “We are very pleased with our performance.  Our band business posted a significant revenue increase in the fourth quarter, an indication of a strong start to our sales year.  Gross margins continue to improve as our outsourcing efforts gain traction and our domestic plants increase their production rates.”

Turning to piano operations, Messina added, “Our piano operations overseas continue to perform well, having shipped more Steinway grand pianos in 2005 than in any year since 2001.  In the U.S., our Steinway business improved during the fourth quarter but demand for our Boston pianos continued to be weak.”

Messina also said, “We have further opportunities to improve manufacturing efficiencies and levels of working capital in all of our facilities.  Our continuous improvement initiative is focused on these objectives and has been successful.  This program was a major contributor to the turnaround of our band business.”

Messina commented on management’s 2006 outlook, “While we expect our piano business overseas to stay strong, our U.S. piano business will remain challenging.  We have taken ten production days out of the first quarter of 2006 in order to reduce domestic piano inventories and these temporary plant shutdowns may have a negative impact on our gross margins.  Our band business should perform very well in 2006.  We expect the strong sales we saw in the fourth quarter to continue and we expect year over year gross margin improvement as well.”

The Company expects total sales and operating profits for 2006 to show improvement over the prior year.

Conference Call

Management will be discussing the Company’s fourth quarter results and outlook for 2006 on a conference call today beginning at 5:00 p.m. EST.  A live web cast 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 Bach Stradivarius trumpets, Selmer Paris saxophones, C.G. Conn French horns, Leblanc clarinets, King trombones, Ludwig snare drums and Steinway & Sons pianos.

Non-GAAP Financial Measures Used by Steinway Musical Instruments

The Company uses the non-GAAP measurement Adjusted 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 Adjusted EBITDA because it is useful to management and investors as a measure of the Company’s core operating performance.  The Company also believes

Adjusted 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 Adjusted EBITDA calculations and the Company uses Adjusted EBITDA as the basis for determining bonuses for its managers.  However, Adjusted 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 certain non-comparable items.  The Company has provided Adjusted financial information because management uses it to make 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; fluctuations in effective tax rates resulting from shifts in sources of income; and the ability to successfully integrate and operate acquired businesses.  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.

(In Thousands, Except Per Share Data)

(Unaudited)

Condensed Consolidated Statements of Income

	Three Months Ended						Twelve Months Ended
	12/31/2005			12/31/2004			12/31/2005				12/31/2004
Net sales	$	110,126		$	106,632		$	387,143			$		375,034
Cost of sales	77,911			73,523			275,609				265,901
Gross profit	32,215			33,109			111,534				109,133
	29.3		%	31.0		%	28.8			%	29.1			%
Operating expenses	21,501			21,776			76,697				74,892
Income from operations	10,714			11,333			34,837				34,241
Interest expense, net	3,248			3,183			13,645				13,437
Other (income) expense, net	73			(1,011		)	(800			)	(3,163			)
Income before taxes	7,393			9,161			21,992				23,967
Provision for income taxes	2,360			2,180			8,200				8,100
Net income	$	5,033		$	6,981		$		13,792		$	15,867
Earnings per share - basic	$	0.62		$	0.87		$		1.71		$	1.97
Earnings per share - diluted	$	0.61		$	0.85		$		1.67		$	1.91
Weighted average common shares - basic	8,108			8,019			8,070				8,046
Weighted average common shares - diluted	8,255			8,230			8,265				8,304

Condensed Consolidated Balance Sheets

	12/31/2005				12/31/2004
Cash	$			34,952	$	27,372
Receivables, net	81,880				88,059
Inventories	159,310				172,346
Other current assets	19,307				20,984
Total current assets	295,449				308,761
Property, plant and equipment, net	96,664				102,944
Other assets	63,260				65,840
Total assets	$		455,373		$		477,545
Notes payable and current portion of long-term debt	$		12,977		$		14,212
Other current liabilities	58,214				58,681
Total current liabilities	71,191				72,893
Long-term debt	191,715				208,580
Other liabilities	43,637				50,519
Stockholders’ equity	148,830				145,553
Total liabilities and stockholders’ equity	$	455,373			$		477,545

STEINWAY MUSICAL INSTRUMENTS, INC.

(In Thousands, Except Per Share Data)

(Unaudited)

Reconciliation of GAAP Earnings to Adjusted Earnings

	Three Months Ended 12/31/05
	GAAP			Adjustments					Adjusted
Band sales	$	45,748		$	—				$	45,748
Piano sales	64,378			—					64,378
Total sales	110,126			—					110,126
Band gross profit	8,334			29			(1	)	8,363
Piano gross profit	23,881			—					23,881
Total gross profit	32,215			29					32,244
Band GM%	18.2		%						18.3		%
Piano GM%	37.1		%						37.1		%
Total GM%	29.3		%						29.3		%
Operating expenses	21,501			—					21,501
Income from operations	10,714			29					10,743
Interest expense, net	3,248			—					3,248
Other (income) expense, net	73			(538		)	(2	)	(465		)
Income before taxes	7,393			567					7,960
Provision for income taxes	2,360			181			(3	)	2,541
Net income	$	5,033		$	386				$	5,419
Earnings per share - basic	$	0.62							$	0.67
Earnings per share - diluted	$	0.61							$	0.66

	Three Months Ended 12/31/04
	GAAP			Adjustments					Adjusted
Band sales	$	41,195		$	—				$	41,195
Piano sales	65,437			—					65,437
Total sales	106,632			—					106,632
Band gross profit	6,032			242			(1	)	6,274
Piano gross profit	27,077			—					27,077
Total gross profit	33,109			242					33,351
Band GM%	14.6		%						15.2		%
Piano GM%	41.4		%						41.4		%
Total GM%	31.0		%						31.3		%
Operating expenses	21,776			287			(4	)	22,063
Income from operations	11,333			(45		)			11,288
Interest expense, net	3,183			—					3,183
Other (income) expense, net	(1,011		)	—					(1,011		)
Income before taxes	9,161			(45		)			9,116
Provision for income taxes	2,180			(11		)	(3	)	2,169
Net income	$	6,981		$	(34	)			$	6,947
Earnings per share - basic	$	0.87							$	0.87
Earnings per share - diluted	$	0.85							$	0.84

Notes to Reconciliation of GAAP Earnings to Adjusted Earnings

(1)  Reflects charges relating to the step-up of acquired inventory.

(2)  Reflects a loss on early extinguishment of debt.

(3)  Reflects the tax effect of Adjustments at the Company’s effective rate for the period.

(4)  Reflects a gain on the sale of property associated with plant closures.

STEINWAY MUSICAL INSTRUMENTS, INC.

(In Thousands, Except Per Share Data)

(Unaudited)

Reconciliation of GAAP Earnings to Adjusted Earnings

	Twelve Months Ended 12/31/05
	GAAP			Adjustments					Adjusted
Band sales	$	183,626		$	—				$	183,626
Piano sales	203,517			—					203,517
Total sales	387,143			—					387,143
Band gross profit	37,458			1,573			(1	)	39,031
Piano gross profit	74,076			—					74,076
Total gross profit	111,534			1,573					113,107
Band GM%	20.4		%						21.3		%
Piano GM%	36.4		%						36.4		%
Total GM%	28.8		%						29.2		%
Operating expenses	76,697			—					76,697
Income from operations	34,837			1,573					36,410
Interest expense, net	13,645			—					13,645
Other (income) expense, net	(800		)	(538		)	(2	)	(1,338		)
Income before taxes	21,992			2,111					24,103
Provision for income taxes	8,200			787			(3	)	8,987
Net income	$	13,792		$	1,324				$	15,116
Earnings per share - basic	$	1.71							$	1.87
Earnings per share - diluted	$	1.67							$	1.83

	Twelve Months Ended 12/31/04
	GAAP			Adjustments				Adjusted
Band sales	$	171,346		$	—			$	171,346
Piano sales	203,688			—				203,688
Total sales	375,034			—				375,034
Band gross profit	33,567			2,618		(4	)	36,185
Piano gross profit	75,566			—				75,566
Total gross profit	109,133			2,618				111,751
Band GM%	19.6		%					21.1		%
Piano GM%	37.1		%					37.1		%
Total GM%	29.1		%					29.8		%
Operating expenses	74,892			363		(5	)	75,255
Income from operations	34,241			2,255				36,496
Interest expense, net	13,437			—				13,437
Other (income) expense, net	(3,163		)	—				(3,163		)
Income before taxes	23,967			2,255				26,222
Provision for income taxes	8,100			762		(3	)	8,862
Net income	$	15,867		$	1,493			$	17,360
Earnings per share - basic	$	1.97						$	2.16
Earnings per share - diluted	$	1.91						$	2.09

Notes to Reconciliation of GAAP Earnings to Adjusted Earnings

(1)  Reflects charges relating to the step-up of acquired inventory.
(2)  Reflects a loss on early extinguishment of debt.
(3)  Reflects the tax effect of Adjustments at the Company’s effective rate for the period.
(4)  Reflects $1,418 of employee severance costs associated with plant closures; and $1,200 of charges relating to
	the step up of acquired inventory
(5)  Reflects a gain on sale of property and equipment associated with plant closures.

STEINWAY MUSICAL INSTRUMENTS, INC.

(In Thousands)

(Unaudited)

Reconciliation from Cash Flows from Operating Activities to Adjusted EBITDA

	Three Months Ended
	12/31/2005			12/31/2004
Cash flows from operating activities	$	26,246		$	31,557
Changes in operating assets and liabilities	(18,571		)	(23,847		)
Income taxes, net of deferred tax benefit	2,708			4,354
Net interest expense	3,248			3,183
Other	(136		)	127
Non-recurring, infrequent or unusual cash charges	436			(45		)
Adjusted EBITDA	$	13,931		$	15,329

	Twelve Months Ended
	12/31/2005			12/31/2004
Cash flows from operating activities	$	28,724		$	23,873
Changes in operating assets and liabilities	(4,151		)	1,305
Income taxes, net of deferred tax benefit	8,876			10,597
Net interest expense	13,645			13,437
Other	(59		)	(625		)
Non-recurring, infrequent or unusual cash charges	1,980			2,255
Adjusted EBITDA	$	49,015		$	50,842