Steinway Reports Q1 2009 Results
Steinway Reports Q1 2009 Results
EPS $0.12
WALTHAM, Mass., May 5 /PRNewswire-FirstCall/ -- Steinway Musical Instruments, Inc. (NYSE:LVB) today reported results for the quarter ended March 31, 2009. The Company generated earnings of $0.12 per share.
"As expected, this was a very challenging quarter for our business," said Dana Messina, Chief Executive Officer. "The economic climate for our products was dreadful, but the sales decline was in line with our estimates. We exercised tight control over discretionary spending and will continue to look for additional savings as we move forward. With the credit markets' decline, we were able to repurchase nearly $11 million of our bonds this quarter at a significant discount."
First Quarter Results -- Sales of $70 million, down 26% -- Gross margin decreased to 26.6% from 29.1% -- Operating expenses reduced $4 million, or 17% -- Net income of $1 million, down 49%, which includes a gain on debt extinguishment -- Diluted earnings per share of $0.12, down 48% Balance Sheet Highlights -- Cash of $27 million -- Revolver availability of over $86 million -- Working capital of $223 million Outlook
Mr. Messina said, "In the second quarter, we anticipate continued softness in band instrument sales. We expect our back-to-school season in the third quarter to be better and are building inventories to meet the expected customer demand. Our new products are gaining traction in the marketplace; we are excited about their prospects and expect them to do well for us beginning in 2010."
"Piano sales have been dismal as dealers struggle with low traffic, a general lack of affordable financing and excess inventories," said Messina. "We expect continued soft sales during the next few quarters until dealers gain more confidence that consumer demand is improving. Given the conditions, we have further reduced factory headcount, lowered production rates and reduced production days at both of our piano plants. We have aggressively reduced staff headcount and salaries to keep our expenses in line with sales. Looking forward, we believe that we can adapt to this new expense structure and increase profitability as demand recovers."
Messina continued, "Our balance sheet remains strong. We are using a cautious approach to credit and we have not been required to increase reserves for any significant accounts. We are well positioned to endure the current environment."
Segment Information Band Segment -- Sales of $33 million, down 17% -- Gross margin decreased to 20.9% from 21.6% -- Operating expenses reduced 28% Piano Segment -- Sales of $37 million, down 32% -- Gross margin decreased to 31.6% from 34.5% -- Operating expenses reduced 13% Conference Call
Management will be discussing the Company's first quarter results as well as its outlook for the remainder of 2009 on a conference call today beginning at 5:00 p.m. ET. A live webcast and an archive of the call will be available to all interested parties on the Company's website, 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. Through its online music retailer, ArkivMusic, the Company also distributes classical music recordings.
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 in that it eliminates the impact of items that are either out of operating management's control or are otherwise 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 and amortization. The Company's domestic credit agreement, which provides for borrowings up to $110.0 million and is a material credit agreement to the Company, contains a minimum Fixed Charge Coverage Ratio which is based on Adjusted EBITDA. A minimum ratio of 1.1 to 1.0 is required to be met if the Company has had less than $20.0 million of availability on its line of credit in the last thirty days. At the end of the most recent period the Company had remaining borrowing availability on the line of credit of $86.1 million (net of letters of credit) and therefore this covenant did not apply. Should this covenant apply and not be met, the Company could be required to make immediate repayment of its line of credit borrowings, if it were unable to obtain a waiver from the lenders.
There are limitations in the use of Adjusted EBITDA because the Company's actual results do include the impact of the noted Adjustments. 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; work stoppages and slowdowns; ability to successfully consolidate band manufacturing; impact of dealer consolidations on orders; ability of dealers to obtain financing; 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; fluctuations in effective tax rates resulting from shifts in sources of income; and the ability to successfully 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 Email: ir@steinwaymusical.com STEINWAY MUSICAL INSTRUMENTS, INC. Condensed Consolidated Statements of Income (In Thousands, Except Per Share Data) (Unaudited) Three Months Ended ------------------ 3/31/2009 3/31/2008 --------- --------- Net sales $69,991 $94,186 Cost of sales 51,382 66,794 ------ ------ Gross profit 18,609 27,392 26.6% 29.1% Operating expenses: Sales and marketing 10,034 13,051 Provision for doubtful accounts 586 353 General and administrative 7,454 8,583 Amortization 335 198 Other operating expenses 251 403 ------ ------ Total operating expenses 18,660 22,588 (Loss) income from operations (51) 4,804 Interest income (562) (952) Interest expense 3,084 3,109 Other income, net (3,992) (673) ------ ------ Income before taxes 1,419 3,320 Income tax provision 414 1,345 ------ ------ Net income $1,005 $1,975 ====== ====== Earnings per share - basic $0.12 $0.23 Earnings per share - diluted $0.12 $0.23 Weighted average common shares - basic 8,533 8,579 Weighted average common shares - diluted 8,535 8,655 Condensed Consolidated Balance Sheets (In Thousands) (Unaudited) 3/31/2009 3/31/2008 12/31/2008 --------- --------- ---------- Cash $26,753 $30,750 $44,380 Receivables, net 53,147 70,521 60,581 Inventories, net 170,155 162,933 166,508 Other current assets 26,523 24,606 25,798 ------ ------ ------ Total current assets 276,578 288,810 297,267 Property, plant and equipment, net 88,774 94,158 88,708 Other assets 66,404 78,739 67,343 ------ ------ ------ Total assets $431,756 $461,707 $453,318 ======== ======== ======== Debt $2,021 $2,508 $3,325 Other current liabilities 50,287 64,454 59,229 ------ ------ ------ Total current liabilities 52,308 66,962 62,554 Long-term debt 174,490 168,305 183,425 Other liabilities 49,891 55,282 50,258 Stockholders' equity 155,067 171,158 157,081 ------- ------- ------- Total liabilities and stockholders' equity $431,756 $461,707 $453,318 ======== ======== ======== STEINWAY MUSICAL INSTRUMENTS, INC. Reconciliation of GAAP Earnings to Adjusted Earnings (In Thousands, Except Per Share Data) (Unaudited) Three Months Ended 3/31/09 -------------------------- GAAP Adjustments Adjusted ---- ----------- -------- Band sales $32,712 $- $32,712 Piano sales 37,279 - 37,279 ------ ------- ------ Total sales 69,991 - 69,991 Band gross profit 6,845 - 6,845 Piano gross profit 11,764 - 11,764 ------ ------- ------ Total gross profit 18,609 - 18,609 Band GM % 20.9% 20.9% Piano GM % 31.6% 31.6% Total GM % 26.6% 26.6% Operating expenses 18,660 - 18,660 ------ ------- ------ (Loss) from operations (51) - (51) Interest expense, net 2,522 - 2,522 Other (income) expense, net (3,992) 3,434(1) (558) ------ ------- ------ Income (loss) before income taxes 1,419 (3,434) (2,015) Income tax provision (benefit) 414 (721)(2) (307) ------ ------- ------ Net income (loss) $1,005 $(2,713) $(1,708) ====== ======= ======= Earnings (loss) per share - basic $0.12 ($0.20) Earnings (loss) per share - diluted $0.12 ($0.20) Weighted average common shares - basic 8,533 8,533 Weighted average common shares - diluted 8,535 8,533 Three Months Ended 3/31/08 -------------------------- GAAP Adjustments Adjusted ---- ----------- -------- Band sales $39,500 $- $39,500 Piano sales 54,686 - 54,686 ------- --------- -------- Total sales 94,186 - 94,186 Band gross profit 8,525 432(3) 8,957 Piano gross profit 18,867 - 18,867 ------- --------- -------- Total gross profit 27,392 432 27,824 Band GM% 21.6% 22.7% Piano GM% 34.5% 34.5% Total GM% 29.1% 29.5% Operating expenses 22,588 - 22,588 ------- --------- -------- Income from operations 4,804 432 5,236 Interest expense, net 2,157 - 2,157 Other (income) expense, net (673) 636(1) (37) ------ --------- -------- Income before income taxes 3,320 (204) 3,116 Income tax provision 1,345 (78)(2) 1,267 ------- --------- -------- Net income $1,975 $(126) $1,849 ======= ========= ======== Earnings per share - basic $0.23 $0.22 Earnings per share - diluted $0.23 $0.21 Weighted average common shares - basic 8,579 8,579 Weighted average common shares - diluted 8,655 8,655 Notes to Reconciliation of GAAP Earnings to Adjusted Earnings (1) Reflects a gain on early extinguishment of debt. (2) Reflects the tax effect of Adjustments. (3) Reflects costs (primarily employee severance) associated with a plant closure. STEINWAY MUSICAL INSTRUMENTS, INC. (In Thousands) (Unaudited) Reconciliation from Cash Flows from Operating Activities to Adjusted EBITDA Three Months Ended ------------------ 3/31/2009 3/31/2008 --------- --------- Cash flows from operating activities $(9,100) $(2,279) Changes in operating assets and liabilities 9,622 5,883 Stock based compensation expense (269) (245) Income tax provision, net of deferred tax benefit 1,093 2,642 Net interest expense 2,522 2,157 Provision for doubtful accounts (586) (353) Other (91) (279) Non-recurring, infrequent or unusual cash charges - 432 ------ ------ Adjusted EBITDA $3,191 $7,958 ====== ====== Reconciliation from Net Income to Adjusted EBITDA Three Months Ended ------------------ 3/31/2009 3/31/2008 --------- --------- Net income $1,005 $1,975 Income tax provision 414 1,345 Net interest expense 2,522 2,157 Depreciation 2,349 2,487 Amortization 335 198 Non-recurring, infrequent or unusual items (3,434) (204) ------ ---- Adjusted EBITDA $3,191 $7,958 ====== ======
First Call Analyst:
FCMN Contact:
Source: Steinway Musical Instruments, Inc.
CONTACT: Julie A. Theriault, +1-781-894-9770,
ir@steinwaymusical.com
Web Site: http://www.steinwaymusical.com/
Profile: International Entertainment
posted by EntertainmentNews @ 1:14 PM
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