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MARCH 9 I STEINWAY I FINANCIAL Steinway Musical Instruments’ fourth quarter sales dropped 22 percent while its year-end sales dipped 5 percent. The period ended Dec. 31, 2008. “We have a strong business powered by a portfolio of well-known brands and high-quality products, but we are certainly not immune to the current economic environment,” said Steinway CEO Dana Messina. “We have a clear plan to deal with these economic conditions and strengthen our long-term competitive position.” Piano sales were down 20 percent in the fourth quarter and down 3 percent for the full year. Steinway grand piano unit sales declined 28 percent and mid-priced pianos declined 13 percent worldwide in the fourth quarter. Its year-end unit sales worldwide dropped 14 percent for grands and 5 percent for mid-priced pianos over the prior year. Fourth quarter gross margins decreased from 41.3 to 37.2 percent. For the full year, gross margins decreased from 37 to 35.5 percent. In the band segment, sales were at $34 million, down 26 percent over the prior year period, and sales reached $159 million, down 7 percent, for the full year. Gross margin increased from 18.1 to 19.1 percent in the fourth quarter and increased from 20 to 21.6 percent for the full year. According to Messina, Steinway’s three priorities in 2009 will be to preserve its balance sheet, maintain profitability at lower unit volumes and focus on long-term growth. Some key balance sheet highlights released in Steinway’s report included $44 million in cash; revolver availability over $85 million; tangible book value of $13 per share; working capital of more than $225 million; and real estate holdings with low carrying values. Cost-Reduction Measures Steinway execs said they expect lower unit shipments across all of the company’s business lines in 2009. With uncertainty about the depth and duration of the economic crisis, the company has taken steps to reduce operating costs and discretionary spending for 2009. Since June 1, 2008, Steinway has reduced its workforce by 13 percent and has cut production days at its facilities to help reduce expenses. It has also suspended pay increases for its salaried employees and is taking steps to suspend, eliminate or reduce many of its benefit programs. For the fourth quarter report, operating expenses were reduced by $4 million. “We anticipate a slow start to 2009 as our dealers continue to reduce inventory in response to lower store activity and a severe contraction of third-party inventory financing,” Messina said. “Many musical instrument retailers are being negatively impacted by this downturn, and we believe that the industry will consolidate in 2009 and 2010. On a brighter note, our piano sales to institutions have been holding up well, and we expect that to mitigate the impact of continued weak consumer demand.” MI | |
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