EXHIBIT 99.3 STEINWAY MUSICAL INSTRUMENTS, INC. UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION Effective September 15, 2000, Steinway Musical Instruments, Inc. ("SMI"), through its wholly-owned subsidiary, The Selmer Company, Inc. ("Selmer"), completed the acquisition of United Musical Instruments Holdings, Inc. ("UMI"). The acquisition of UMI was accounted for as a purchase. The aggregate purchase price approximated $84.0 million, including the assumption of approximately $57.0 million of debt. The purchase price has been allocated to UMI's assets and liabilities based on their relative fair values as of the closing date. The following unaudited pro forma condensed combined financial statements are based on the respective historical consolidated financial statements and the notes thereto of SMI and UMI. For consistency of presentation, the six month period ended July 1, 2000 for SMI has been described as June 30, 2000. The unaudited pro forma condensed combined balance sheet assumes that the acquisition took place on June 30, 2000. The unaudited pro forma condensed combined statements of operations assume that the acquisition took place on January 1, 1999. The unaudited pro forma condensed combined financial statements are based on the estimates and assumptions set forth in the notes to such statements. The pro forma adjustments made in connection with the development of the pro forma information are preliminary and have been made solely for the purposes of developing such pro forma information. Although management does not expect that the final allocation will be materially different from these estimates, there can be no assurances that such differences, if any, will not be material. The unaudited pro forma condensed combined financial statements do not purport to be indicative of future results or the results that would have occurred had the acquisition taken place at the beginning of the periods presented. These unaudited pro forma condensed combined financial statements should be read in conjunction with the historical consolidated financial statements and related notes thereto of SMI included in SMI's Form 10-K for the year ended December 31, 1999, and quarterly report on Form 10-Q for the quarter ended July 1, 2000 and the financial statements of UMI included elsewhere in this report. STEINWAY MUSICAL INSTRUMENTS, INC. PRO FORMA CONDENSED COMBINED BALANCE SHEET JUNE 30, 2000 (In Thousands) (Unaudited) Historical ----------------------- Pro Forma SMI UMI Adjustments Combined --------- -------- ----------- --------- ASSETS Cash $ 4,273 $ 649 $ $ 4,922 Accounts receivable 75,645 40,521 (1,500)(1) 114,666 Inventories 107,336 29,520 10,400 (1) 147,256 Prepaid expenses 3,399 119 3,518 Deferred tax assets 5,951 (3,471)(1) 2,480 --------- -------- -------- --------- Total current assets 196,604 70,809 5,429 272,842 Property, plant and equipment, net 90,046 9,828 9,500 (1) 109,374 Other assets, net 11,677 727 1,301 (1) 13,705 Deferred financing costs 4,070 3,800 (3) 7,870 Cost in excess of fair value of net assets acquired, net 29,867 29,867 --------- -------- -------- --------- TOTAL ASSETS $ 332,264 $ 81,364 $ 20,030 $ 433,658 ========= ======== ======== ========= LIABILITIES AND STOCKHOLDERS' EQUITY Notes payable and current portion of long term debt $ 8,980 $ 28,893 $(28,893)(2) $ 8,980 Accounts payable 6,600 4,122 10,722 Other current liabilities 28,802 4,986 (507)(4) 33,281 --------- -------- -------- --------- Total current liabilities 44,382 38,001 (29,400) 52,983 Long-term debt 149,570 26,127 61,593 (2) 237,290 Deferred tax liabilities 20,342 1,565 3,705 (1) 25,612 Non-current pension liabilities 11,961 596 12,557 --------- -------- -------- --------- Total liabilities 226,255 66,289 35,898 328,442 --------- -------- -------- --------- Stockholders' equity: Common stock 9 1 (1) 9 Additional paid in capital 71,229 71,229 Retained earnings 58,208 14,740 (15,533)(5) 57,415 Accumulated other comprehensive income (9,485) 334 (334) (9,485) Treasury stock, at cost (13,952) (13,952) --------- -------- -------- --------- Total stockholders' equity 106,009 15,075 (15,868) 105,216 --------- -------- -------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 332,264 $ 81,364 $ 20,030 $ 433,658 ========= ======== ======== ========= STEINWAY MUSICAL INSTRUMENTS, INC. PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 (In Thousands Except Share and Per Share Amounts) (Unaudited) Historical ----------------------- Pro Forma SMI UMI Adjustments Combined ----------- ------- ----------- ---------- Sales $ 165,599 $33,930 $ $ 199,529 Cost of sales 114,061 22,763 208 (6) 137,032 ----------- ------- ------- ---------- Gross profit 51,538 11,167 (208) 62,497 Operating expenses 28,907 6,755 61 (7) 35,723 ----------- ------- ------- ---------- Income from operations 22,631 4,412 (269) 26,774 Interest expense, net 6,967 1,492 983 (8) 9,442 Other income, net (676) 19 (657) ----------- ------- ------- ---------- Other expense, net 6,291 1,511 983 8,785 Income before income taxes 16,340 2,901 (1,252) 17,989 Provision for income taxes 6,620 1,377 (488)(9) 7,509 ----------- ------- ------- ---------- Net income $ 9,720 $ 1,524 $ (764) $ 10,480 =========== ======= ======= ========== Net income per share: Basic $ 1.09 $ 1.18 =========== ========== Diluted $ 1.09 $ 1.18 =========== ========== Weighted average shares: Basic 8,915,569 8,915,569 =========== ========== Diluted 8,915,589 8,915,589 =========== ========== STEINWAY MUSICAL INSTRUMENTS, INC. PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 (In Thousands Except Share and Per Share Amounts) (Unaudited) Historical ----------------------- Pro Forma SMI UMI Adjustments Combined ----------- ------- ----------- ---------- Sales $ 304,636 $ 63,454 $ $ 368,090 Cost of sales 203,888 42,679 1,355 (6) 247,922 ----------- -------- ------- ---------- Gross profit 100,748 20,775 (1,355) 120,168 Operating expenses 59,608 12,463 1,423 (7) 73,494 ----------- -------- ------- ---------- Income from operations 41,140 8,312 (2,778) 46,674 Interest expense, net 13,276 2,228 2,048 (8) 17,552 Other income, net (1,881) (401) (2,282) ----------- -------- ------- ---------- Other expense, net 11,395 1,827 2,048 15,270 Income before income taxes 29,745 6,485 (4,826) 31,404 Provision for income taxes 12,400 2,494 (1,882)(9) 13,012 ----------- -------- ------- ---------- Net income $ 17,345 $ 3,991 $(2,944) $ 18,392 =========== ======== ======= ========== Net income per share: Basic $ 1.88 $ 2.00 =========== ========== Diluted $ 1.87 $ 1.98 =========== ========== Weighted average shares: Basic 9,213,145 9,213,145 =========== ========== Diluted 9,277,798 9,277,798 =========== ========== STEINWAY MUSICAL INSTRUMENTS, INC. NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (In Thousands) (1) The acquisition of UMI has been accounted for as a purchase. The total purchase cost will be allocated to UMI's assets and liabilities based on their relative fair values as of the closing date. Purchase cost of equity $ 27,200 Transaction costs 400 -------- Total purchase cost 27,600 Book value of net assets acquired 15,075 -------- Excess of purchase cost over net book value of assets acquired $ 12,525 ======== Allocated to: Inventory $ 10,400 Accounts Receivable (1,500) Property, plant and equipment 9,500 Other assets 1,301 Current deferred income taxes (3,471) Non-current deferred income taxes (3,705) -------- Total $ 12,525 ======== (2) Reflects the repayment of UMI's existing debt with proceeds from the Company's Second Amended and Restated Credit Agreement. (3) Reflects deferred financing costs related to the acquisition. (4) Reflects tax benefit associated with one-time expenses relating to the acquisition at an incremental tax rate of 39%. (5) Reflects adjustments to retained earnings as follows: Elimination of UMI retained earnings $(14,740) One-time acquisition related expenses, net of tax (793) -------- $(15,533) ======== STEINWAY MUSICAL INSTRUMENTS, INC. NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (In Thousands) Year Ended Six Months December 31, Ended June 30, 1999 2000 ------------ -------------- (6) Reflects an increase in cost of sales from: Increased inventory values resulting from the application of purchase accounting $ 125 $ -- Reversal of the LIFO adjustment for the year 813 -- Additional depreciation of buildings and equipment 417 208 ------ ------ $1,355 $ 208 ====== ====== (7) Reflects adjustments to operating expenses as follows: Amortization of deferred financing costs $ 605 $ 303 One-time expenses relating to the acquisition 1,300 -- Management and director's fees of the previous owner eliminated as a result of the acquisition (482) (242) ------ ------ Net adjustments $1,423 $ 61 ====== ====== (8) Reflects additional interest expense as a result of the acquisition. (9) Reflects the tax effect of the pro forma adjustments at an incremental tax rate of 39%.