Steinway Reports 1Q 2013 Sales of $77 Million and EPS of $0.21

-- EPS increases fourfold; EBITDA up 85%

-- Sale of West 57th Street property on track for 2Q

-- Production capabilities increasing in Europe

-- Strong outlook for full year 2013

08 May, 2013, 16:05 ET from Steinway Musical Instruments, Inc.

WALTHAM, Mass., May 8, 2013 /PRNewswire/ -- Steinway Musical Instruments, Inc. (NYSE: LVB) today announced its financial results for the first quarter ended March 31, 2013.

Net sales for the first quarter of 2013 totaled $76.8 million compared to net sales of $78.0 million for the first quarter of 2012.  The Company reported net income of $2.7 million, or $0.21 per diluted share, for the 2013 period compared to $0.6 million, or $0.05 per diluted share, for the prior-year period.

CEO Michael Sweeney commented, "Our first-quarter results demonstrate significant improvement in our profitability profile. Overall, our gross margin jumped 330 basis points while EPS rose fourfold. Our band division turned in an outstanding operating performance, with gross profit up more than 16%. While we posted a slight decrease in total revenue as compared to the prior-year period, we are confident that the robust U.S. piano sales we saw this quarter will continue and that our strong order position in Europe and Asia will contribute to solid results for the year overall.

"As announced in March, we entered into an agreement with JDS Development Group to sell our interest in the Steinway Hall building on West 57th Street in New York City for $46 million, subject to an upward adjustment associated with certain post-closing conditions. We expect the transaction to close during the second quarter, enabling us to recognize a taxable gain of approximately $22 million. The sale will strengthen our already healthy balance sheet, opening up many options to enhance our capital structure, and will enable us to focus all our attention on growing our musical instruments business."

Piano Operations First quarter revenue totaled $45.4 million, a 2.9% increase over the prior-year quarter.  A 13.5% increase in unit shipments of Steinway grand pianos in the Americas was offset by lower shipments in our European and Asia-Pacific regions, resulting in a 4.5% decrease as compared to the year-ago period.  Worldwide, unit shipments of Boston and Essex pianos rose 23.3% over the first quarter of 2012.  Gross margin improved 100 basis points despite increased training costs for new production workers in Germany.

Band Operations Revenues for the first quarter totaled $31.4 million, a decrease of 7.2% from the prior-year period, due to lower overall shipments. As compared to the prior-year quarter, the mix of products sold shifted toward professional instruments and sourced student instruments. Sales of these higher-margin instruments, coupled with price increases, led to exceptional gross margin improvement of 600 basis points over the first quarter of 2012. 

Outlook Mr. Sweeney concluded, "We see an exciting path to growth for our Company. The steps we took in mid-2012 to ramp up Steinway grand piano production will soon enable us to realize even more fully the operating leverage inherent in our business. We increased our German production workforce by almost 20% over the last 12 months and will finish training the new workers by June. These expanded capabilities will enable us to fulfill orders for Steinway grand pianos in Europe and Asia in the second half of 2013. At our band division, we expect a pick-up in orders and deliveries as we enter the peak selling season and dealers have more visibility into their customers' needs.  We expect to benefit from the higher profitability that even a modest improvement in band revenue produces." 

Capitalization As of March 31, 2013, the Company's cash balance totaled $61.7 million.  The Company's West 57th Street building and its related assets and liabilities were reclassified as current due to the pending sale of the building.

Conference Call Management will hold a conference call and webcast to review and discuss the Company's results.  Details are as follows:

What:

Steinway Musical Instruments, Inc. Q1 2013 Financial Results Conference Call

When:

Wednesday, May 8, 2013

Time:

5:00 p.m. EDT

Live Call:

(888) 771-4371, passcode 34754868 -- domestic 

(847) 585-4405, passcode 34754868 -- domestic / international

Replay:

(888) 843-7419, passcode 34754868# -- domestic

(630) 652-3042, passcode 34754868# -- domestic / international 

Webcast:

www.steinwaymusical.com/investorrelations (live and replay)

The telephone replay will be available on May 8, 2013 beginning at 7:15 p.m. EDT until May 15, 2013 at 11:59 p.m. EDT.  The webcast replay can be accessed in the Audio Archive section of the Company's Investor Relations website.

About Steinway Musical Instruments Steinway Musical Instruments, Inc., through its Steinway and Conn-Selmer divisions, is a global leader in the design, manufacture, marketing and distribution of high quality musical instruments. These products include Bach Stradivarius trumpets, Selmer Paris saxophones, C.G. Conn French horns, Leblanc clarinets, King trombones, Ludwig snare drums and Steinway & Sons pianos. Through its online music retailer, ArkivMusic, the Company also produces and distributes classical music recordings. For more information about Steinway Musical Instruments, Inc. please visit the Company's website at www.steinwaymusical.com.

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 (if any). The Company uses Adjusted EBITDA because it is useful to management and investors as a measure of the Company's core operating performance in that it eliminates the impact of items that are unrelated to how well the Company is completing its manufacturing and operating responsibilities. In addition, the Company uses Adjusted EBITDA as the basis for determining bonuses for its managers. 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 as it factors out non-cash expenses such as depreciation, amortization, and impairment charges.

Accordingly, Adjusted EBITDA should be used as a supplement to the comparable GAAP measures and should not be construed as a substitute for income from operations or net income, or a better indicator of liquidity than cash flows from operating activities, which are determined in accordance with GAAP.

"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; reductions in school budgets; increased competition; exchange rate fluctuations; variations in the mix of products sold; market acceptance of new products; ability of suppliers to meet demand; concentration of credit risk; ability to fulfill piano orders in a timely manner; failure to consummate the sale of the West 57th Street building; 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.

Company Contact: Julie A. Theriault Steinway Musical Instruments, Inc. (781) 894-9770 ir@steinwaymusical.com

Investor Relations Contact: Harriet Fried / Jody Burfening LHA (212) 838-3777 hfried@lhai.com

 

STEINWAY MUSICAL INSTRUMENTS, INC.

Condensed Consolidated Statements of Operations

(In Thousands, Except Per Share Data)

(Unaudited)

Three Months Ended

3/31/2013

3/31/2012

Net sales

$     76,803

$     77,953

Cost of sales

51,453

54,806

Gross profit

25,350

23,147

33.0%

29.7%

Operating expenses:

Sales and marketing

11,280

11,985

General and administrative

8,470

8,961

Other

19

38

Total operating expenses

19,769

20,984

Income from operations

5,581

2,163

Other (income) expense, net

401

354

Interest expense, net

917

850

Income before income taxes

4,263

959

Income tax provision

1,573

369

Net income

$       2,690

$          590

Earnings per share - basic

$0.22

$0.05

Earnings per share - diluted

$0.21

$0.05

Weighted average common shares - basic

12,459

12,368

Weighted average common shares - diluted

12,540

12,506

Condensed Consolidated Balance Sheets

(In Thousands)

(Unaudited)

3/31/2013

3/31/2012

12/31/2012

Cash

$     61,724

$     43,668

$     73,406

Receivables, net

40,282

42,491

43,536

Inventories, net

130,434

138,169

125,081

Other current assets

40,680

26,080

14,309

Total current assets

273,120

250,408

256,332

Property, plant and equipment, net

67,225

88,455

91,485

Other assets

76,513

73,151

77,850

Total assets

$   416,858

$   412,014

$   425,667

Debt

$     67,978

$          604

$          576

Other current liabilities

47,461

47,696

53,042

Total current liabilities

115,439

48,300

53,618

Long-term debt

-

70,383

67,431

Other liabilities

59,352

58,993

62,773

Stockholders' equity

242,067

234,338

241,845

Total liabilities and stockholders' equity

$   416,858

$   412,014

$   425,667

 

STEINWAY MUSICAL INSTRUMENTS, INC.

(In Thousands)

(Unaudited)

Reconciliation from Cash Flows from Operating Activities to Adjusted EBITDA

Three Months Ended

3/31/2013

3/31/2012

Cash flows from operating activities

$      (9,871)

$      (7,720)

Changes in operating assets and liabilities

15,490

11,099

Stock-based compensation expense

(96)

(111)

Income tax provision, net of deferreds

1,476

445

Net interest expense

917

850

Provision for doubtful accounts

(246)

(688)

Other

(152)

197

Adjusted EBITDA

$        7,518

$        4,072

Reconciliation from Net Income to Adjusted EBITDA

Three Months Ended

3/31/2013

3/31/2012

Net income

$        2,690

$           590

Income tax provision

1,573

369

Net interest expense

917

850

Depreciation

2,075

2,001

Amortization

263

262

Adjusted EBITDA

$        7,518

$        4,072

 

SOURCE Steinway Musical Instruments, Inc.



RELATED LINKS

http://www.steinwaymusical.com