**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C.  20549**

** **

**FORM 10-Q**

 

| **ý** |   | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 30, 2002** |
|------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|
|       |   |                                                                                                                                       |   |   |
| **o**      |   | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934**                                              |
|       |   |

 

**COMMISSIONFILE NUMBER 001-11911**

 

 

**STEINWAY MUSICAL INSTRUMENTS, INC.**(Exact name of registrant as specified in its charter)

 

 

 

| **DELAWARE**                              |   | **35-1910745**      |
|-------------------------------------------|--------|---------------------|
| (State or Other  Jurisdiction of          |   | (I.R.S. Employer    |
| Incorporation or  Organization)           |   | Identification No.) |
|                                      |   |                |
| **800  South Street, Suite 305**          |   |                |
| **Waltham,  Massachusetts**               |   | **02453**           |
| (Address of Principal  Executive Offices) |   | (Zip Code)          |

 

 

Registrant’s telephonenumber including area code:                    **(781) 894-9770**

 

 

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements during the past 90 days.   Yes ý   No o

 

Number of shares of Common Stock issued and outstanding as of April 30,2002:

                                                                                                                                                            ClassA           477,953

                                                                                                                                                            Ordinary       8,375,496

                                                                                                                                                            Total             8,853,449

 

 

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**STEINWAY MUSICAL INSTRUMENTS, INC.AND SUBSIDIARIES**

**FORM 10Q**

**INDEX**

 

 
| **PART  I.**  | **FINANCIAL INFORMATION**                                                                         |                                                                                                   |   |
|---------------|---------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------|--------|
|          |                                                                                              |                                                                                                   |   |   |   |
| **Item  1.**  | **Condensed Consolidated Financial Statements:**                                                  |                                                                                                   |
|          |                                                                                              |                                                                                                   |   |   |   |
|          |                                                                                              | Condensed  Consolidated Statements of Income  Three months ended March 31, 2001 and March 30, 2002     |   |   |
|          |                                                                                              |                                                                                                   |   |
|          |                                                                                              |                                                                                                   |   |   |   |
|          |                                                                                              | Condensed  Consolidated Balance Sheets  December 31, 2001 and March 30, 2002                           |   |   |
|          |                                                                                              |                                                                                                   |   |
|          |                                                                                              |                                                                                                   |   |   |   |
|          |                                                                                              | Condensed  Consolidated Statements of Cash Flows  Three months ended March 31, 2001 and March 30, 2002 |   |   |
|          |                                                                                              |                                                                                                   |   |
|          |                                                                                              |                                                                                                   |   |   |   |
|          | Notes  to Condensed Consolidated Financial Statements                                             |                                                                                                   |   |
|          |                                                                                              |                                                                                                   |   |   |   |
| **Item  2.**  | **Management’s  Discussion and Analysis of Financial Condition   and Results of Operations** |                                                                                                   |
|          |                                                                                              |                                                                                                   |   |   |   |
|          |                                                                                              |                                                                                                   |   |   |   |
| **Item  3.**  | **Quantitative  and Qualitative Disclosures about Market Risk**                                   |                                                                                                   |
|          |                                                                                              |                                                                                                   |   |   |   |
| **PART  II.** | **OTHER INFORMATION**                                                                             |                                                                                                   |   |
|          |                                                                                              |                                                                                                   |   |   |   |
| **Item 6.**   | **Exhibits and  Reports on Form 8-K**                                                             |                                                                                                   |   |
|          |                                                                                              |                                                                                                   |   |   |   |
|          | **Signatures**                                                                                    |                                                                                                   |   |
|               |                                                                                                   |                                                                                                        |        |  |  |  |  |

 

 

2

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** STEINWAY MUSICAL INSTRUMENTS, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENTS OFINCOME**

**(In Thousands Except Share and PerShare Amounts)**

**(Unaudited)**

 
|                       |   | **Three Months Ended** |    |
|----------------------------|--------|------------------------|---------|
|                       |   | **March, 31,  2001**   |    | **March 30,  2002** |   |
| Net sales                  |   | $                      | 101,581 |   | $ | 88,059 |   |
| Cost of sales              |   | 69,872                 |    | 62,696 |   |
|                       |   |                   |    |   |   |
| Gross Profit               |   | 31,709                 |    | 25,363 |   |
| Operating expenses:        |   |                   |    |   |   |
| Sales and marketing        |   | 11,769                 |    | 10,681 |   |
| General and administrative |   | 5,631                  |    | 5,567 |   |
| Amortization               |   | 1,115                  |    | 289 |   |
| Other operating expense    |   | 122                    |    | 157 |   |
| Total operating expenses   |   | 18,637                 |    | 16,694 |   |
|                       |   |                   |    |   |   |
| Income from operations     |   | 13,072                 |    | 8,669 |   |
|                       |   |                   |    |   |   |
| Interest expense, net      |   | 4,537                  |    | 3,301 |   |
| Other income, net          |   | (165                   | )       | (305 | ) |
|                       |   |                   |    |   |   |
| Income before income taxes |   | 8,700                  |    | 5,673 |   |
|                       |   |                   |    |   |   |
| Provision for income taxes |   | 3,500                  |    | 1,990 |   |
|                       |   |                   |    |   |   |
| Net income                 |   | $                      | 5,200   |   | $ | 3,683 |   |
|                       |   |                   |    |   |   |
| Net income per share:      |   |                   |    |   |   |
| Basic                      |   | $                      | 0.58    |   | $ | 0.42 |   |
| Diluted                    |   | $                      | 0.58    |   | $ | 0.42 |   |
|                       |   |                   |    |   |   |
| Weighted average shares:   |   |                   |    |   |   |
| Basic                      |   | 8,931,500              |    | 8,847,372 |   |
| Diluted                    |   | 8,931,500              |    | 8,853,917 |   |

 

 

See notes to condensedconsolidated financial statements.

 

 

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**STEINWAY MUSICAL INSTRUMENTS, INC.AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

**(In Thousands)**

**(Unaudited)**

 

** **
|                                                                                                                         |   | **December 31,  2001** |    | **March 30,  2002** |   |
|------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|---------|---------------------|--------|
| ASSETS:                                                                                                                      |   |                   |    |                |   |
| Current assets:                                                                                                              |   |                   |    |                |   |
| Cash                                                                                                                         |   | $                      | 5,545   |                | $      | 17,787 |   |
| Accounts, notes and leases receivable, net of  allowance for bad debts of $10,909 and $10,955 in 2001 and 2002, respectively |   | 82,188                 |    | 85,430              |   |
| Inventories                                                                                                                  |   | 161,124                |    | 154,332             |   |
| Prepaid expenses and other current assets                                                                                    |   | 4,484                  |    | 3,269               |   |
| Deferred tax assets                                                                                                          |   | 5,636                  |    | 5,592               |   |
| Total current assets                                                                                                         |   | 258,977                |    | 266,410             |   |
|                                                                                                                         |   |                   |    |                |   |
| Property, plant and equipment, net of accumulated  depreciation of  $45,105 and $47,366 in 2001 and 2002, respectively       |   | 104,011                |    | 102,348             |   |
| Goodwill, net of accumulated amortization of $5,999  and $5,961  in 2001 and 2002, respectively                              |   | 27,917                 |    | 27,713              |   |
| Other assets, net                                                                                                            |   | 13,993                 |    | 13,449              |   |
| Trademarks, net of accumulated amortization of  $12,599 and $12,483  in 2001 and 2002, respectively                          |   | 9,142                  |    | 9,078               |   |
|                                                                                                                         |   |                   |    |                |   |
| TOTAL ASSETS                                                                                                                 |   | $                      | 414,040 |                | $      | 418,998 |   |
|                                                                                                                         |   |                   |    |                |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                    |   |                   |    |                |   |
| Current liabilities:                                                                                                         |   |                   |    |                |   |
| Current portion of long-term debt                                                                                            |   | $                      | 7,446   |                | $      | 6,812 |   |
| Accounts payable                                                                                                             |   | 7,682                  |    | 7,069               |   |
| Other current liabilities                                                                                                    |   | 34,095                 |    | 38,636              |   |
| Total current liabilities                                                                                                    |   | 49,223                 |    | 52,517              |   |
|                                                                                                                         |   |                   |    |                |   |
| Long-term debt                                                                                                               |   | 203,757                |    | 202,440             |   |
| Deferred tax liabilities                                                                                                     |   | 27,118                 |    | 26,884              |   |
| Other liabilities                                                                                                            |   | 13,571                 |    | 13,760              |   |
| Total liabilities                                                                                                            |   | 293,669                |    | 295,601             |   |
|                                                                                                                         |   |                   |    |                |   |
| Commitments and contingent liabilities                                                                                       |   |                   |    |                |   |
|                                                                                                                         |   |                   |    |                |   |
| Stockholders’ equity:                                                                                                   |   |                   |    |                |   |
| Common stock                                                                                                                 |   | 9                      |    | 9                   |   |
| Additional paid-in capital                                                                                                   |   | 72,178                 |    | 72,201              |   |
| Retained earnings                                                                                                            |   | 76,711                 |    | 80,394              |   |
| Accumulated other comprehensive income                                                                                       |   | (12,674                | )       | (13,354             | )      |
| Treasury stock, at cost                                                                                                      |   | (15,853                | )       | (15,853             | )      |
| Total stockholders’ equity                                                                                              |   | 120,371                |    | 123,397             |   |
|                                                                                                                         |   |                   |    |                |   |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                              |   | $                      | 414,040 |                | $      | 418,998 |   |

 

See notes to condensedconsolidated financial statements.

 

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**STEINWAY MUSICAL INSTRUMENTS, INC.AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENTS OFCASH FLOWS**

**(In Thousands)**

**(Unaudited)**

** **
|                                                                          |   | **Three Months Ended** |   |
|-------------------------------------------------------------------------------|--------|------------------------|--------|
|                                                                          |   | **March 31, 2001**     |   | **March 30, 2002** |   |
| Cash flows from operating activities:                                         |   |                   |   |   |   |
| Net income                                                                    |   | $                      | 5,200  |   | $ | 3,683 |   |
| Adjustments to reconcile net income to cash  flows from operating activities: |   |                   |   |   |   |
| Depreciation and amortization                                                 |   | 3,523                  |   | 2,777 |   |
| Deferred tax benefit                                                          |   | (348                   | )      | (99 | ) |
| Other                                                                         |   | 118                    |   | 124 |   |
| Changes in operating assets and liabilities:                                  |   |                   |   |   |   |
| Accounts, notes and leases receivable                                         |   | (8,440                 | )      | (3,544 | ) |
| Inventories                                                                   |   | (6,821                 | )      | 6,152 |   |
| Prepaid expenses and other current assets                                     |   | (169                   | )      | 970 |   |
| Accounts payable                                                              |   | (1,871                 | )      | (578 | ) |
| Other current liabilities                                                     |   | 5,055                  |   | 5,211 |   |
| Cash flows from operating activities                                          |   | (3,753                 | )      | 14,696 |   |
|                                                                          |   |                   |   |   |   |
| Cash flows from investing activities:                                         |   |                   |   |   |   |
| Capital expenditures                                                          |   | (1,428                 | )      | (1,033 | ) |
| Proceeds from disposals of fixed assets                                       |   | 1                      |   | — |   |
| Changes in other assets                                                       |   | 112                    |   | 486 |   |
| Cash flows from investing activities                                          |   | (1,315                 | )      | (547 | ) |
|                                                                          |   |                   |   |   |   |
| Cash flows from financing activities:                                         |   |                   |   |   |   |
| Net borrowings (repayments) under lines of credit                             |   | 7,175                  |   | (359 | ) |
| Repayments of long-term debt                                                  |   | (1,528                 | )      | (1,582 | ) |
| Proceeds from issuance of stock                                               |   | —                 |   | 23 |   |
| Cash flows from financing activities                                          |   | 5,647                  |   | (1,918 | ) |
|                                                                          |   |                   |   |   |   |
| Effect of foreign exchange rate changes on cash                               |   | 15                     |   | 11 |   |
|                                                                          |   |                   |   |   |   |
| Increase in cash                                                              |   | 594                    |   | 12,242 |   |
| Cash, beginning of period                                                     |   | 4,989                  |   | 5,545 |   |
|                                                                          |   |                   |   |   |   |
| Cash, end of period                                                           |   | $                      | 5,583  |   | $ | 17,787 |   |
|                                                                          |   |                   |   |   |   |
| Supplemental Cash Flow Information                                            |   |                   |   |   |   |
| Interest paid                                                                 |   | $                      | 2,097  |   | $ | 556 |   |
| Taxes paid                                                                    |   | $                      | 3,155  |   | $ | 1,590 |   |

 

 

See notes to condensedconsolidated financial statements.

 

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**STEINWAY MUSICAL INSTRUMENTS, INC.AND SUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**MARCH 30, 2002**

**(In Thousands Except Share Data)**

**(Unaudited)**

 

 

**(1)****     ****Basis of Presentation**

 

        Theaccompanying condensed consolidated financial statements of Steinway MusicalInstruments, Inc. and subsidiaries (the “Company”) for the three months endedMarch 31, 2001 and March 30, 2002 are unaudited.  In the opinion of management, these statements have been preparedon the same basis as the audited consolidated financial statements as of andfor the year ended December 31, 2001, and include all adjustments which are ofa normal and recurring nature, necessary for the fair presentation of financialposition, results of operations and cash flows for the interim period.  The condensed consolidated financialstatements should be read in conjunction with the consolidated financialstatements and notes thereto contained in the Company’s Annual Report on Form10-K for the fiscal year ended December 31, 2001 filed with the Securities andExchange Commission.  The results ofoperations for the three months ended March 30, 2002 are not necessarilyindicative of the results that may be expected for the entire year.

 

 

**(2)****     ****Summary of Significant Accounting Policies**

 

        *Principles of Consolidation -*The consolidated financialstatements of the Company include the accounts of all of its direct andindirect wholly owned subsidiaries, including The Steinway Piano Company, Inc.(“Steinway”), The Selmer Company, Inc. (“Selmer”), and United MusicalInstruments Holdings, Inc. (“UMI”). Significant intercompany balances have been eliminated in consolidation.

 

        *Income per Common Share —*Basic income per share is computedusing the weighted average number of common shares outstanding during eachperiod.  Diluted income per common sharereflects the effect of the Company’s outstanding options using the treasurystock method, except when such items would be antidilutive.  A reconciliation of the weighted averageshares used for the basic and diluted computations for the three month periodsended March 31, 2001 and March 30, 2002 is as follows:

 
|                             |   | **Three months ended** |   |
|----------------------------------|--------|------------------------|--------|
|                             |   | **2001**               |   | **2002** |   |
| Weighted average shares:         |   |                   |   |   |   |
| For basic income per share       |   | 8,931,500              |   | 8,847,372 |   |
| Dilutive effect of stock options |   | —                 |   | 6,545 |   |
| For diluted income per share     |   | 8,931,500              |   | 8,853,917 |   |

 

 

 

6

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        *Comprehensive Income —*Other comprehensiveloss is comprised of foreign currency translation adjustments, additionalminimum pension liabilities, and unrealized gains and losses on certainlong-term assets.  Total comprehensiveincome for the three month periods ended March 31, 2001 and March 30, 2002 isas follows:

 

 
|                       |   | **Three months ended** |   |
|----------------------------|--------|------------------------|--------|
|                       |   | **2001**               |   | **2002** |   |
| Net Income                 |   | $                      | 5,200  |   | $ | 3,683 |   |
| Other comprehensive loss   |   | (2,248                 | )      | (680 | ) |
| Total comprehensive income |   | $                      | 2,952  |   | $ | 3,003 |   |

 

 

*        New AccountingPronouncements —*On January 1, 2002 the Company adopted SFAS No. 142, “Goodwill and IntangibleAssets,” which supersedes APB Opinion No. 17, “Intangible Assets.”  SFAS No. 142 eliminates the requirement toamortize goodwill and indefinite-lived assets. During the second quarter offiscal year 2002, the Company will complete the transitional impairment test asrequired by SFAS No. 142.  Based onfacts and circumstances in existence at March 30, 2002, the Company does notanticipate that, upon completion of the transitional impairment test, it willneed to change the nature or carrying amounts of its goodwill or trademarkassets.  If these rules had applied togoodwill and trademark assets for the first quarter of 2001, the result wouldhave been to increase related pretax income by approximately $764 and netincome by approximately $547, or $.06 per share.

 

        In June 2001, the FASB issued SFAS No. 143, “Accounting forAsset Retirement Obligations.”  SFAS No.143 addresses financial accounting and reporting for obligations associatedwith the retirement of tangible long-lived assets and the associated assetretirement costs.  SFAS No. 143 iseffective for fiscal years beginning after June 15, 2002.  The Company does not expect the adoption ofSFAS No. 143 to have a material impact on its financial position or results ofoperations.

 

        On January 1, 2002, the Company adopted SFAS No. 144,“Accounting for the Impairment or Disposal of Long-Lived Assets,” whichaddresses the financial accounting and reporting for the impairment or disposalof long-lived assets.  SFAS No. 144supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assetsand for Long-Lived Assets to Be Disposed Of,” and also supersedes theaccounting and certain reporting provisions of APB Opinion No. 30, “Reportingthe Results of Operations-Reporting the Effects of Disposal of a Segment of aBusiness, and Extraordinary, Unusual and Infrequently Occurring Events andTransactions,” for the disposal of a segment of a business.  The adoption of SFAS No. 144 did not have amaterial impact on the Company’s financial position or results of operations.

 

        *Reclassifications*— Certain prior year amounts have been reclassified to conform to the currentyear presentation.

 

 

7

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**(3)   Inventories**

 

        Inventories consist of the following:

 
|            |   | **December 31,  2001** |    | **March 30,  2002** |   |
|-----------------|--------|------------------------|---------|---------------------|--------|
| Raw materials   |   | $                      | 20,948  |                | $      | 19,106 |   |
| Work in process |   | 52,967                 |    | 55,047              |   |
| Finished goods  |   | 87,209                 |    | 80,179              |   |
| Total           |   | $                      | 161,124 |                | $      | 154,332 |   |

 

 

 

 

**(4)   Other (Income)Expense, Net**

 

**       **Other (income) expense, net consists ofthe following:

 
|                        |   | **Three months ended** |   |
|-----------------------------|--------|------------------------|--------|
|                        |   | **March 31,  2001**    |   | **March 30,  2002** |   |
|                        |   |                   |   |   |   |
| West 57th Building income   |   | $                      | (1,163 | ) | $ | (1,163 | ) |
| West 57th building expenses |   | 814                    |   | 814 |   |
| Foreign exchange loss, net  |   | 334                    |   | 110 |   |
| Miscellaneous               |   | (150                   | )      | (66 | ) |
| Other (income) expense, net |   | $                      | (165   | ) | $ | (305 | ) |

 

 

**(5)   Commitments andContingent Liabilities**

 

        Certainenvironmental matters are pending against a subsidiary of the Company, whichmight result in monetary damages, the amount of which, if any, cannot bedetermined at the present time.  PhilipsElectronics, a previous owner of a subsidiary of the Company, has agreed tohold the Company harmless from any financial liability arising from theseenvironmental matters which were pending as of December 29, 1988.  Management believes that these matters willnot have a material adverse impact on the Company’s results of operations orfinancial condition.

 

 

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**(6)   SegmentInformation**

 

        The Company has identified two distinctand reportable segments: the piano segment and the band and orchestralinstrument segment.  These segments wereselected based upon the way in which management oversees and evaluates theresults of each operation.  The followingtables present information about the Company’s operating segments for the threemonth periods ended March 31, 2001 and March 30, 2002:

 
| **Three months ended 2001**       |   | **Piano Segment** |   | **Band and Orchestral Segment** |   | **Other** |   | **Consol** |
|-----------------------------------|--------|-------------------|--------|---------------------------------|--------|-----------|--------|------------|
|                              |   | **U.S.**          |   | **Germany**                     |   | **Other** |   | **Total**  |   | **U.S.** |   | **Other** |   | **Total** |   | **& Elim** |   | **Total** |
| Revenues from external  customers |   | $                 | 29,327 |                            | $      | 9,347     |   | $          | 6,222 |   | $ | 44,896 |   | $ | 55,410 |   | $ | 1,275 |   | $ | 56,685 |   | $ | — |   | $ | 101,581 |
| Net income (loss)                 |   | 574               |   | 656                             |   | 875       |   | 2,105      |   | 226 |   | (14 | ) | 212 |   | 2,883 |   | 5,200 |
|                                   |        |                   |        |                                 |        |           |        |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 
| **Three months ended 2002**       |   | **Piano Segment** |   | **Band and Orchestral Segment** |   | **Other** |   | **Consol** |
|-----------------------------------|--------|-------------------|--------|---------------------------------|--------|-----------|--------|------------|
|                              |   | **U.S.**          |   | **Germany**                     |   | **Other** |   | **Total**  |   | **U.S.** |   | **Other** |   | **Total** |   | **& Elim** |   | **Total** |
| Revenues from external  customers |   | $                 | 23,498 |                            | $      | 8,050     |   | $          | 4,872 |   | $ | 36,420 |   | $ | 50,670 |   | $ | 969 |   | $ | 51,639 |   | $ | — |   | $ | 88,059 |
| Net income (loss)                 |   | 230               |   | 677                             |   | 416       |   | 1,323      |   | (411 | ) | 16 |   | (395 | ) | 2,755 |   | 3,683 |
|                                   |        |                   |        |                                 |        |           |        |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

**(7)****                    ****Summary of Guarantees**

 

        On April 19, 2001, the Company completeda $150.0 million 8.75% Senior Note offering. The proceeds of the offering were used to redeem all of the thenoutstanding 11% Senior Subordinated Notes, with the balance paying down thedomestic revolving credit facility.

 

        The Company’s payment obligations underthe 8.75% Senior Notes are fully and unconditionally guaranteed on a joint andseveral basis by Selmer, Steinway, UMI and certain direct and indirectwholly-owned subsidiaries of the Company, each a Guarantor (the “GuarantorSubsidiaries”).  These subsidiariesrepresent all of the operations of the Company (the “Issuer”) conducted in theUnited States.  The remainingsubsidiaries, which do not guarantee the 8.75% Senior Notes, represent non-U.S.operations (the “Non Guarantor Subsidiaries”).

 

        The following condensed consolidatingsupplementary data illustrates the composition of the combined Guarantors.  Separate complete financial statements ofthe respective Guarantors would not provide additional material informationthat would be useful in assessing the financial composition of theGuarantors.  No single Guarantor has anysignificant legal restrictions on the ability of investors or creditors to obtainaccess to its assets in event of default on the Guarantee other than itssubordination to senior indebtedness.

 

        Investments in subsidiaries are recordedby the Issuer on the cost method for purposes of the supplemental consolidatingpresentation.  Earnings of subsidiariesare therefore not reflected in the Issuer’s investment accounts andearnings.  The principal eliminationentries eliminate investments in subsidiaries and intercompany balances andtransactions.

 

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** STEINWAY MUSICAL INSTRUMENTS, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATING STATEMENTS OFINCOME**

**THREE MONTHS ENDED MARCH 30, 2002**

** (In Thousands)**

**(Unaudited)**

 

 

 
|                                    |   | **Issuer  of Notes** |   | **Guarantor Subsidiaries** |   | **Non   Guarantor Subsidiaries** |   | **Reclass/ Eliminations** |   | **Consolidated** |   |
|-----------------------------------------|--------|----------------------|--------|----------------------------|--------|----------------------------------|--------|---------------------------|--------|------------------|--------|
| Net sales                               |   | $                    | — |                       | $      | 76,736                           |   | $                         | 14,144 |             | $      | (2,821 | ) | $ | 88,059 |   |
| Cost of sales                           |   | —               |   | 56,601                     |   | 8,854                            |   | (2,759                    | )      | 62,696           |   |
|                                    |   |                 |   |                       |   |                             |   |                      |   |             |   |
| Gross profit                            |   | —               |   | 20,135                     |   | 5,290                            |   | (62                       | )      | 25,363           |   |
|                                    |   |                 |   |                       |   |                             |   |                      |   |             |   |
| Operating expenses:                     |   |                 |   |                       |   |                             |   |                      |   |             |   |
| Sales and marketing                     |   | —               |   | 8,499                      |   | 2,191                            |   | (9                        | )      | 10,681           |   |
| General and administrative              |   | 1,123                |   | 3,335                      |   | 1,109                            |   | —                    |   | 5,567            |   |
| Amortization                            |   | 113                  |   | 175                        |   | 1                                |   | —                    |   | 289              |   |
| Other operating (income) expense        |   | (742                 | )      | 675                        |   | 215                              |   | 9                         |   | 157              |   |
| Total operating expenses                |   | 494                  |   | 12,684                     |   | 3,516                            |   | —                    |   | 16,694           |   |
|                                    |   |                 |   |                       |   |                             |   |                      |   |             |   |
| Income (loss) from operations           |   | (494                 | )      | 7,451                      |   | 1,774                            |   | (62                       | )      | 8,669            |   |
|                                    |   |                 |   |                       |   |                             |   |                      |   |             |   |
| Interest (income) expense, net          |   | (275                 | )      | 3,508                      |   | 68                               |   | —                    |   | 3,301            |   |
| Other income, net                       |   | —               |   | (281                       | )      | (24                              | )      | —                    |   | (305             | )      |
|                                    |   |                 |   |                       |   |                             |   |                      |   |             |   |
| Income (loss) before income taxes       |   | (219                 | )      | 4,224                      |   | 1,730                            |   | (62                       | )      | 5,673            |   |
|                                    |   |                 |   |                       |   |                             |   |                      |   |             |   |
| Provision for (benefit of) income taxes |   | (69                  | )      | 1,393                      |   | 688                              |   | (22                       | )      | 1,990            |   |
|                                    |   |                 |   |                       |   |                             |   |                      |   |             |   |
| Net income (loss)                       |   | $                    | (150   | )                          | $      | 2,831                            |   | $                         | 1,042  |             | $      | (40 | ) | $ | 3,683 |   |

 

 

10

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**STEINWAY MUSICAL INSTRUMENTS, INC.AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATING BALANCE SHEETS**

**MARCH 30, 2002**

**(In Thousands)**

**(Unaudited)**

 

 
|                                             |   | **Issuer********of Notes** |   | **Guarantor********Subsidiaries** |   | **Non********Guarantor********Subsidiaries** |   | **Reclass/********Eliminations** |   | **Consolidated** |   |
|--------------------------------------------------|--------|----------------------------|--------|-----------------------------------|--------|----------------------------------------------|--------|----------------------------------|--------|------------------|--------|
| ASSETS                                           |   |                       |   |                              |   |                                         |   |                             |   |             |   |
| Current assets:                                  |   |                       |   |                              |   |                                         |   |                             |   |             |   |
| Cash                                             |   | $                          | — |                              | $      | 1,073                                        |   | $                                | 2,119  |             | $      | 14,595 |   | $ | 17,787 |   |
| Accounts, notes and leases  receivable, net      |   | —                     |   | 76,891                            |   | 8,773                                        |   | (234                             | )      | 85,430           |   |
| Inventories                                      |   | —                     |   | 128,912                           |   | 26,369                                       |   | (949                             | )      | 154,332          |   |
| Prepaid expenses and other  current assets       |   | 297                        |   | 2,327                             |   | 645                                          |   | —                           |   | 3,269            |   |
| Deferred tax assets                              |   | —                     |   | 5,544                             |   | 4,590                                        |   | (4,542                           | )      | 5,592            |   |
| Total current assets                             |   | 297                        |   | 214,747                           |   | 42,496                                       |   | 8,870                            |   | 266,410          |   |
|                                             |   |                       |   |                              |   |                                         |   |                             |   |             |   |
| Property, plant and  equipment, net              |   | 200                        |   | 89,828                            |   | 12,320                                       |   | —                           |   | 102,348          |   |
| Investment in subsidiaries                       |   | 71,143                     |   | 254,961                           |   | —                                       |   | (326,104                         | )      | —           |   |
| Goodwill, net                                    |   | —                     |   | 18,795                            |   | 8,918                                        |   | —                           |   | 27,713           |   |
| Other assets, net                                |   | 5,039                      |   | 8,114                             |   | 296                                          |   | —                           |   | 13,449           |   |
| Trademarks,  net                                 |   | —                     |   | 6,280                             |   | 2,798                                        |   | —                           |   | 9,078            |   |
|                                             |   |                       |   |                              |   |                                         |   |                             |   |             |   |
| TOTAL ASSETS                                     |   | $                          | 76,679 |                              | $      | 592,725                                      |   | $                                | 66,828 |             | $      | (317,234 | ) | $ | 418,998 |   |
|                                             |   |                       |   |                              |   |                                         |   |                             |   |             |   |
|                                             |   |                       |   |                              |   |                                         |   |                             |   |             |   |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY       |   |                       |   |                              |   |                                         |   |                             |   |             |   |
| Current liabilities:                             |   |                       |   |                              |   |                                         |   |                             |   |             |   |
| Current portion of  long-term debt               |   | $                          | — |                              | $      | 6,020                                        |   | $                                | 792    |             | $      | — |   | $ | 6,812 |   |
| Accounts payable                                 |   | 149                        |   | 5,408                             |   | 1,746                                        |   | (234                             | )      | 7,069            |   |
| Other current liabilities                        |   | (10,674                    | )      | 42,421                            |   | 12,312                                       |   | (5,423                           | )      | 38,636           |   |
| Total current liabilities                        |   | (10,525                    | )      | 53,849                            |   | 14,850                                       |   | (5,657                           | )      | 52,517           |   |
|                                             |   |                       |   |                              |   |                                         |   |                             |   |             |   |
| Long-term debt                                   |   | 150,042                    |   | 37,803                            |   | —                                       |   | 14,595                           |   | 202,440          |   |
| Intercompany                                     |   | (117,541                   | )      | 113,739                           |   | 3,802                                        |   | —                           |   | —           |   |
| Deferred tax liabilities                         |   | —                     |   | 20,822                            |   | 6,062                                        |   | —                           |   | 26,884           |   |
| Other liabilities                                |   | 338                        |   | 2,049                             |   | 11,373                                       |   | —                           |   | 13,760           |   |
| Total liabilities                                |   | 22,314                     |   | 228,262                           |   | 36,087                                       |   | 8,938                            |   | 295,601          |   |
|                                             |   |                       |   |                              |   |                                         |   |                             |   |             |   |
| Stockholders’ equity                        |   | 54,365                     |   | 364,463                           |   | 30,741                                       |   | (326,172                         | )      | 123,397          |   |
|                                             |   |                       |   |                              |   |                                         |   |                             |   |             |   |
| TOTAL LIABILITIES AND  STOCKHOLDERS’ EQUITY |   | $                          | 76,679 |                              | $      | 592,725                                      |   | $                                | 66,828 |             | $      | (317,234 | ) | $ | 418,998 |   |

 

 

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**STEINWAY MUSICAL INSTRUMENTS, INC.AND SUBSIDIARIES**

**CONDENSED CONSOLIDATING STATEMENTS OFCASH FLOWS**

**THREE MONTHS ENDED MARCH 30, 2002**

** (In Thousands)**

**(Unaudited)**

** **
|                                                                                  |   | **Issuer********of Notes** |   | **Guarantor********Subsidiaries** |   | **Non********Guarantor********Subsidiaries** |   | **Reclass/********Eliminations** |   | **Consolidated** |   |
|---------------------------------------------------------------------------------------|--------|----------------------------|--------|-----------------------------------|--------|----------------------------------------------|--------|----------------------------------|--------|------------------|--------|
| Cash flows from operating  activities:                                                |   |                       |   |                              |   |                                         |   |                             |   |             |   |
| Net income (loss)                                                                     |   | $                          | (150   | )                                 | $      | 2,831                                        |   | $                                | 1,042  |             | $      | (40 | ) | $ | 3,683 |   |
| Adjustments to reconcile  net income (loss)  to cash flows from operating activities: |   |                       |   |                              |   |                                         |   |                             |   |             |   |
| Depreciation and  amortization                                                        |   | 129                        |   | 2,266                             |   | 382                                          |   | —                           |   | 2,777            |   |
| Deferred tax benefit                                                                  |   | —                     |   | (65                               | )      | (34                                          | )      | —                           |   | (99              | )      |
| Other                                                                                 |   | —                     |   | 90                                |   | 34                                           |   | —                           |   | 124              |   |
| Changes in operating assets  and liabilities:                                         |   |                       |   |                              |   |                                         |   |                             |   |             |   |
| Accounts, notes and leases  receivable                                                |   | —                     |   | (4,642                            | )      | 986                                          |   | 112                              |   | (3,544           | )      |
| Inventories                                                                           |   | —                     |   | 7,835                             |   | (1,745                                       | )      | 62                               |   | 6,152            |   |
| Prepaid expenses and other  current assets                                            |   | (120                       | )      | 1,006                             |   | 84                                           |   | —                           |   | 970              |   |
| Accounts payable                                                                      |   | 65                         |   | (672                              | )      | 141                                          |   | (112                             | )      | (578             | )      |
| Other current liabilities                                                             |   | 5,131                      |   | 1,111                             |   | (1,009                                       | )      | (22                              | )      | 5,211            |   |
| Cash flows from operating  activities                                                 |   | 5,055                      |   | 9,760                             |   | (119                                         | )      | —                           |   | 14,696           |   |
|                                                                                  |   |                       |   |                              |   |                                         |   |                             |   |             |   |
| Cash flows from investing  activities:                                                |   |                       |   |                              |   |                                         |   |                             |   |             |   |
| Capital expenditures                                                                  |   | —                     |   | (990                              | )      | (43                                          | )      | —                           |   | (1,033           | )      |
| Changes in other assets                                                               |   | 4                          |   | 482                               |   | —                                       |   | —                           |   | 486              |   |
| Cash flows from investing  activities                                                 |   | 4                          |   | (508                              | )      | (43                                          | )      | —                           |   | (547             | )      |
|                                                                                  |   |                       |   |                              |   |                                         |   |                             |   |             |   |
| Cash flows from financing  activities:                                                |   |                       |   |                              |   |                                         |   |                             |   |             |   |
| Net borrowings (repayments)  under  lines of credit                                   |   | 22                         |   | (13,973                           | )      | (359                                         | )      | 13,951                           |   | (359             | )      |
| Repayment of long-term debt                                                           |   | —                     |   | (1,582                            | )      | —                                       |   | —                           |   | (1,582           | )      |
| Proceeds from issuance of  stock                                                      |   | 23                         |   | —                            |   | —                                       |   | —                           |   | 23               |   |
| Intercompany transactions                                                             |   | (5,104                     | )      | 5,704                             |   | (600                                         | )      | —                           |   | —           |   |
| Cash flows from financing  activities                                                 |   | (5,059                     | )      | (9,851                            | )      | (959                                         | )      | 13,951                           |   | (1,918           | )      |
|                                                                                  |   |                       |   |                              |   |                                         |   |                             |   |             |   |
| Effect of exchange rate  changes on cash                                              |   | —                     |   | —                            |   | 11                                           |   | —                           |   | 11               |   |
|                                                                                  |   |                       |   |                              |   |                                         |   |                             |   |             |   |
| Increase (decrease) in cash                                                           |   | —                     |   | (599                              | )      | (1,110                                       | )      | 13,951                           |   | 12,242           |   |
| Cash, beginning of period                                                             |   | —                     |   | 1,672                             |   | 3,229                                        |   | 644                              |   | 5,545            |   |
|                                                                                  |   |                       |   |                              |   |                                         |   |                             |   |             |   |
| Cash, end of period                                                                   |   | $                          | — |                              | $      | 1,073                                        |   | $                                | 2,119  |             | $      | 14,595 |   | $ | 17,787 |   |

 

 

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**ITEM 2****                                       ****MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS****(Dollars in thousands)**

 

**Introduction**

 

The Company, through its operating subsidiaries, is aworld leader in the design, manufacture and marketing of high quality musicalinstruments.  The piano divisionconcentrates on the high-end grand piano segment of the industry, hand craftingits Steinway pianos in New York and Germany, but also offers vertical pianosand two mid-priced lines of pianos under the Boston and Essex brand names.  Moreover, the Company is the largestdomestic producer of band and orchestral instruments and offers a complete lineof brasswind, woodwind, percussion and stringed instruments and relatedaccessories with well known brand names such as Bach, C.G. Conn, King, andLudwig.  The Company sells its productsthrough dealers and distributors worldwide. Piano customers consist of professional artists, amateur pianists, andinstitutions such as concert halls, universities, and music schools.  Band and orchestral instrument customersconsist primarily of middle school and high school students, but also includeadult amateur and professional musicians.

 

 

**SignificantAccounting Policies**

 

                      The natureof the Company’s business - the production and sale of musical instruments - issuch that it rarely involves application of highly complex or subjectiveaccounting principles.  The accountingpolicies that are subject to significant management estimates are thosenormally found in traditional businesses and include inventory reserves,accounts receivable reserves, recourse reserves on notes receivable, andwarranty reserves.  The Company hasavailable more than a century of experience and data on which to base theseestimates.  Historical information isadjusted for specific uncertainties, such as new product introductions, andcontemporaneous information, such as price fluctuations.  Management regularly performs assessments ofthe underlying assumptions and believes that they provide a reasonable basisfor the estimates contained in the Company’s financial statements.

 

 

**Forward-LookingStatements**

 

            Certain statements contained in thisdocument are “forward-looking statements” within the meaning of Section 21E ofthe Securities and Exchange Act of 1934, as amended.  These forward-looking statements represent the Company’s presentexpectations or beliefs concerning future events.  The Company cautions that such statements are necessarily basedon certain assumptions which are subject to risks and uncertainties which couldcause actual results to differ materially from those indicated herein.  These risk factors include, but are not limitedto, changes in general economic conditions, increased competition, exchangerate fluctuations, variations in the mix of product sold, fluctuations ineffective tax rates resulting from shifts in sources of income and the abilityto successfully integrate and operate acquired businesses.  Further information on these risk factors isincluded in the Company’s Annual Report on Form 10-K for the year endedDecember 31, 2001 and its Final Prospectus filed in August 1996.

 

 

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**Resultsof Operations**

 

*ThreeMonths Ended March 30, 2002 Compared to Three Months Ended March 31, 2001*

 

*                      Net Sales -*Net sales decreased $13.5 million (13%)to $88.1 million in the first quarter of 2002. Piano sales decreased $8.5 million(19%) on a 27% decrease in Steinway shipments, which was partially offset by a4% increase in Boston shipments.  Thedecrease in Steinway shipments, which was more pronounced in the U.S., withunits down 34% as compared to an 11% decrease in shipments abroad, wasprimarily a result of the economic slowdown. Band and orchestral instrument sales decreased $5.0 million (9%) on anoverall unit decrease of 14%.   Thisdecrease resulted from fewer dealer orders, which were exacerbated by awoodwind instrument promotion held in the fourth quarter of 2001 that shifted asignificant number of unit sales, which typically would have occurred in thefirst quarter, to the prior year.

 

G*ross Profit -* Gross profit decreased by$6.3 million (20%) to $25.4 million. Gross margins decreased from 31.2% in 2001 to 28.8% in 2002.  Piano margins decreased slightly from 36.3%in 2001 to 35.7% in 2002 as a result of both the lower proportion of concertgrands sold abroad and the under absorption of overhead resulting from the periodicshutdowns at the Company’s domestic piano manufacturing facility.  Band and orchestral instrument marginsdecreased from 27.2% in 2001 to 23.9% in 2002. This change was due to under absorption of overhead resulting fromreduced production levels in consideration of current demand, as well astemporary inefficiencies caused by the implementation of the manufacturingrevitalization project at one of the Company’s brasswind manufacturing plants.The Company expects that the implementation of the manufacturing revitalizationproject will continue to have an impact on band and orchestral instrumentmargins through the second quarter as the project draws to completion.

 

*                      Operating Expenses* — Overall operating expenses decreasedby $1.9 million (10%) to $16.7 million in the first quarter.  $1.1 million of this decrease isattributable to reduced sales and marketing expenses associated with tradeshows and advertising.  The remainingdecrease is due to the Company’s implementation of SFAS No. 142, which resultedin a decrease in amortization expense of approximately $0.8 million.

 

*                      Other Expense, net -*Other expenses, primarily interestexpense, decreased by $1.4 million (31%) to $3.0 million. Lower averageoutstanding debt balances resulting from decreased inventory levels and lowerinterest rates on the Company’s borrowings contributed significantly to thedecrease.

 

                      *Income Taxes*— The Company’s effective tax rate decreased from 40.2% in 2001 to 35.1% in2002 as a result of a shift towards income generated by the Company’s Germandivisions and a corresponding increased utilization of foreign tax credits.

 

 

**Liquidityand Capital Resources**

 

                      The Companyhas relied primarily upon cash provided by operations, supplemented asnecessary by seasonal borrowings under its working capital line, to finance itsoperations, repay long-term indebtedness and fund capital expenditures.

 

                      Cash used inoperations in the first three months of 2001 was $3.8 million, compared to cashprovided by operations of $14.7 million in the first three months of 2002.  This change is due primarily to 

 

14

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management’s control of working capital and the significant reductionof inventory balances in the current year period.

 

                      Capitalexpenditures of $1.4 million and $1.0 million in the first three months of 2001and 2002, respectively, were used primarily for the purchase of new machinery,EPA compliance projects, and production facility improvements.  The Company expects to expend approximately$5-6 million in 2002 for capital projects primarily related to equipmentmodernization and production efficiency.

 

                      TheCompany’s real estate term loan, acquisition term loan and domestic seasonalborrowing requirements are accommodated through a committed credit facilitywith a syndicate of domestic lenders (the “Credit Facility”).  The Credit Facility, which was amended toaccommodate the $150.0 million 8.75% Senior Note offering completed on April19, 2001, provides the Company with a potential borrowing capacity of up to$85.0 million in revolving credit loans, based on eligible accounts receivableand inventory balances.  The acquisitionterm loan and revolving credit loan portions of the Credit Facility bear interestat average 30-day LIBOR plus 1.75%, and the real estate term loan bearsinterest at average 30-day LIBOR plus 1.5%.  The Credit facility expires on September 14, 2008.  As of March 30, 2002, there were no revolvingcredit loans outstanding and availability based on eligible accounts receivableand inventory balances was approximately $85.0 million.  Open account loans with foreign banks alsoprovide for borrowings by Steinway’s foreign subsidiaries of up to €19.9million ($17.3 million at the March 30, 2002 exchange rate).

 

                      TheCompany’s long-term financing consists primarily of $150.0 million of 8.75%Senior Notes, $58.5 million of term loans outstanding under the Credit Facilityand $792 of notes payable to foreign banks. On April 19, 2001, the Company completed a $150.0 million senior noteoffering at 8.75%.  The proceeds of theoffering were used to redeem $110.0 million of previously outstanding SeniorSubordinated Notes, with the balance paying down the Credit Facility.  The early retirement of the SeniorSubordinated Notes, which were redeemed on June 1, 2001 at 102.75% of theprincipal amount, generated an extraordinary charge of approximately $4.0million, net of tax of $2.7 million. The Company’s debt agreements contain restrictive covenants that placecertain restrictions on the Company, including restrictions on its ability toincur additional indebtedness, to make investments in other entities and to paycash dividends.

 

                      The Companyanticipates that revenues and results from operations for 2002 will becomparable to 2001.  Management expectsto continue its focus on maintaining sufficient, but not excessive, inventorylevels, repaying debt, expanding market share, and improving productionefficiency.  The Company is not aware ofany trends, demands, commitments, or costs of resources that are expected tomaterially impact liquidity or capital resources.  Therefore, management believes that cash on hand, together withcash flows anticipated from operations and available borrowings under theCredit Facility, will be adequate to meet existing debt service requirements,fund continuing capital requirements and satisfy working capital and generalcorporate needs through 2002.

 

 

**NewAccounting Pronouncements**

 

                      OnJanuary 1, 2002 the Company adopted SFAS No. 142, “Goodwill and IntangibleAssets,” which supersedes APB Opinion No. 17, “Intangible Assets.”  SFAS No. 142 eliminates the requirement toamortize goodwill and indefinite-lived assets. During the second quarter offiscal year 2002, the Company will complete the transitional impairment test asrequired by SFAS No. 142.  Based onfacts and circumstances in existence at March 30, 2002, the Company does notanticipate that, upon completion of the transitional impairment test, it willneed to change the nature or carrying amounts of its 

 

 

15

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goodwill or trademark assets.  If these rules had applied to goodwill andtrademark assets for the first quarter of 2001, the result would have been toincrease related pretax income by approximately $764 and net income byapproximately $547, or $.06 per share.

 

                      In June 2001, the FASB issued SFAS No. 143,“Accounting for Asset Retirement Obligations.” SFAS No. 143 addresses financial accounting and reporting forobligations associated with the retirement of tangible long-lived assets andthe associated asset retirement costs. SFAS No. 143 is effective for fiscal years beginning after June 15,2002.  The Company does not expect theadoption of SFAS No. 143 to have a material impact on its financial position orresults of operations.

 

                      On January1, 2002, the Company adopted SFAS No. 144, “Accounting for the Impairment orDisposal of Long-Lived Assets,” which addresses the financial accounting andreporting for the impairment or disposal of long-lived assets.  SFAS No. 144 supersedes SFAS No. 121,“Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assetsto Be Disposed Of,” and also supersedes the accounting and certain reportingprovisions of APB Opinion No. 30, “Reporting the Results ofOperations-Reporting the Effects of Disposal of a Segment of a Business, andExtraordinary, Unusual and Infrequently Occurring Events and Transactions,” forthe disposal of a segment of a business. The adoption of SFAS No. 144 did not have a material impact on theCompany’s financial position or results of operations.

 

 

**ITEM 3**                                        QUANTITATIVE AND QUALITATIVE DISCLOSURESABOUT MARKET RISK

** **

**                      The Company is exposed tomarket risk associated with changes in foreign currency exchange rates andinterest rates.  The Company mitigatesits foreign currency exchange rate risk by maintaining foreign currency cashbalances and holding forward foreign currency contracts.  These contracts are used as a hedge againstintercompany transactions and are not used for trading or speculativepurposes.  The fair value of the forwardforeign currency exchange contracts is sensitive to changes in foreign currencyexchange rates.  The impact of an adversechange in foreign currency exchange rates would not be materially differentthan that disclosed in the Company’s Annual Report on Form 10-K for the yearended December 31, 2001.**

** **

**                      Although the majority ofthe Company’s long-term debt is at a fixed interest rate, the Company’srevolving loans and term loans bear interest at rates that fluctuate withchanges in LIBOR.  As such, theCompany’s interest expense on its revolving loans and term loans and the fairvalue of its fixed long-term debt are sensitive to changes in market interestrates.  The effect of an adverse changein market interest rates on the Company’s interest expense and the fair valueof its long-term debt would not be materially different than that disclosed inthe Company’s Annual Report on Form 10-K for the year ended December 31, 2001.**

 

 

 

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**PARTII****       OTHERINFORMATION**

 

 

**ITEM6         EXHIBITS AND REPORTS ON FORM 8-K**

 

(a)   Exhibits

 

        None

 

(b)   Reports on Form 8-K

 

The Company did not fileany reports on Form 8-K during the quarter ended March 30, 2002.

 

 

 

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SIGNATURES

 

                      Pursuantto the requirements of the Securities Exchange Act of 1934, the Registrantshave duly caused this report to be signed on their behalf by the undersigned,thereunto duly authorized.

 

 

 

 

                                                                                                    STEINWAYMUSICAL INSTRUMENTS, INC.

 

                                                                                                     /s/  Dana D. Messina                                                              

                                                                                                    DanaD. Messina

                                                                                                    Director,President and Chief Executive Officer

 

                                                                                                     /s/  Dennis M. Hanson                                                           

                                                                                                    DennisM. Hanson

                                                                                                    SeniorExecutive Vice President and

                                                                                                    ChiefFinancial Officer

 

 

 

Date:   May 10, 2002

 

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