SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): March 30, 1999
STEINWAY MUSICAL INSTRUMENTS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 001-11911 35-1910745
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
800 SOUTH STREET, SUITE 425
WALTHAM, MASSACHUSETTS 02453-1472
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (781) 894-9770
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On March 30, 1999, Steinway, Inc. ("Steinway"), an indirect, wholly-owned
subsidiary of Steinway Musical Instruments, Inc., acquired the building
located at 109-111 West 57th Street in New York, New York. Since its
construction in 1925 this 17-story building has been the site of Steinway's
flagship retail store known as Steinway Hall. Steinway currently occupies
approximately 17% of the building.
The acquisition was accomplished as follows: Steinway paid $29,328,000 to
purchase an interest in 111 West 57th Street Associates, L.P., a limited
partnership that owned the property (see Exhibit 10.1). Simultaneous with
this acquisition, Steinway redeemed its partnership interest for fee title to
the building (see Exhibit 10.2) and entered into a ninety-nine year land
lease (see Exhibit 10.3). Annual rent payable under the land lease will be
$2,170,000 for the first ten years, $2,790,000 for the subsequent ten year
period and shall thereafter be adjusted every twenty years to the greater of
the existing rent or 4% of the fair market value of the land and building
combined.
Additional fees assumed and/or incurred by Steinway in connection with the
acquisition, including legal, brokerage, transfer taxes, mortgage recording
fees, title insurance and similar charges, approximated $2,100,000.
Funds for the acquisition were provided from cash on hand and a new
$22,500,000 mortgage loan provided by Steinway's existing domestic lender.
The mortgage, due in monthly installments of $170,000, bears interest at the
30-day Libor rate plus 1.5%.
In connection with the acquisition, Steinway entered into a ten-year master
lease whereby all of Steinway's interest in the land and building was leased
back to the owner of the land (see Exhibit 10.4). Annual rent payable to
Steinway under this master lease is $4,650,000. Steinway has no plans to
change the use of the building.
On a pro forma basis using current interest rates, the approximate effect of
the acquisition on the Company's annual operations will be as follows:
earnings before interest, depreciation and taxes will increase $2,175,000,
offset by additional interest and depreciation of $2,050,000 and $770,000,
respectively. The annual net decrease in earnings after taxes will be
approximately $385,000, or $.04 per fully diluted share.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
NUMBER DESCRIPTION
------ -----------
10.1 Partnership Interest Purchase Agreement, dated as of March 23,
1999, by and between NI Reproma Inc., Manhattan 57th Street
Associates, and Steinway, Inc.
10.2 Redemption and Lease Agreement, dated as of March 23, 1999, by and
between Steinway, Inc. and 111 West 57th Street Associates, L.P.
10.3 Ground Lease Agreement, dated as of March 30, 1999, between 111
West 57th Street Associates, L.P. and Steinway, Inc.
10.4 Master Lease Agreement, dated as of March 30, 1999, between 111
West 57th Street Associates, L.P. and Steinway, Inc.
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 hereunto duly authorized.
STEINWAY MUSICAL INSTRUMENTS, INC.
/s/ Dana D. Messina
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Dana D. Messina
Director, President and Chief Executive Officer
Date: April 12, 1999