Industry News
Conn-Selmer Kibosh on Kenosha Clarinet Compound PDF Print E-mail
Written by Colin Murray   
Sunday, 16 December 2007

Conn-Selmer to Close Kenosha Woodwind Facility


On Dec. 4, the Conn-Selmer subsidiary of Steinway Musical Instruments, Inc. announced it will be closing its woodwind manufacturing operations in Kenosha, Wis. The production of the 95,000-square-foot plant will be transferred to the company’s woodwind facility in Elkhart. Conn-Selmer reports it has sufficient inventory to meet customer needs during the transition of production, which is expected to be completed over the next 12 months.

The closing marks the end of an era in Kenosha, where the late Vito Pascucci founded G. Leblanc Corp. in 1946 and built it into a leader in the band instrument field. Conn-Selmer acquired Leblanc in August 2004 for $36.8 million. The acquisition also included the Holton brass instrument factory in nearby Elkhorn, Wis., which is not expected to be directly affected by the closing of the Kenosha woodwind facility.

John Stoner, president of Conn-Selmer, commented, "We have achieved a high level of expertise at our Elkhart facility through the team’s steady commitment to continuous improvement. This consolidation will help us gain efficiencies and remain a viable U.S. manufacturer in the student clarinet and flute categories."

As a result of the Kenosha plant closure, which will affect approximately 100 active employees, the company expects to incur charges of $800,000 to $1 million over the next few quarters. The charges include severance costs, make-ready costs to prepare the Elkhart plant, and costs for the relocation of machinery and inventory from Kenosha. In addition, the company expects to incur expenses associated with terminating the use of certain capital equipment and real estate assets.

Dana Messina, CEO of Steinway Musical Instruments, explained, "This very difficult decision regarding Kenosha reinforces our commitment to remain a profitable U.S. manufacturer of band instruments. We are confident that our strategy will improve profitability and allow us to compete with lower-cost offshore manufacturers."

 
Conn-Selmer (aka Steinway) Reports Q3 2007 Results PDF Print E-mail
Written by Colin Murray   
Saturday, 15 December 2007
Steinway Reports Q3 2007 Results
Band Segment Sales Up 14%

WALTHAM, MA – November 8, 2007 – Steinway Musical Instruments, Inc. (NYSE: LVB), one of the
world’s leading manufacturers of musical instruments, today announced results for the quarter and nine
months ended September 30, 2007.
Revenues for the third quarter increased 9% over the prior year period, led by a 14% increase in sales in the
Company’s band business. Gross profit increased $2.0 million, or 8%, as improved piano margins lessened
the impact of lower band margins. Operating profit increased 4% over the prior year.
For the quarter, the Company generated EPS of $0.35 compared to $0.12 in the prior year period. The $0.35
EPS compares to Adjusted EPS of $0.14 in the third quarter of 2006. Adjustments for 2006 are detailed in
the attached financial tables.
Band Operations
Sales of professional trumpets and trombones continued to improve in the third quarter, leading to a 14%
increase in revenues over the prior year period. Production levels at the Company’s Elkhart brass plant
remain on target, but continued costs resulting from the strike and lower levels of production of woodwind
instruments led to a reduction in overall band gross margins to 19.5% from 20.7% in the comparable quarter.
For the nine-month period ended September 30, 2007, sales declined to $125.7 million, or 7%, as a result of
dealer consolidation and customer inventory reduction. Gross margins improved to 20.7% from 19.3% on
improved sales mix of higher margin professional instruments and lower inventory reserve charges.

Turning to band operations, Messina said, “We’re happy to report that third quarter revenues in our band
segment were back to pre-strike levels. For the first time this year, we shipped more band instruments than
in the comparable prior year period. We were pleased that production and sales of professional brass
instruments increased, but the dealer consolidation we discussed earlier this year continues to affect
woodwind sales. We reduced production at our two woodwind facilities due to weaker than expected
orders.”
“In the third quarter of 2006, we began hiring replacement workers for our Elkhart brass plant and the size of
our production staff has more than doubled over a year ago,” noted Messina. “We are making significant
progress in product quality as well as unit output. However, this quarter we incurred a similar amount of
inefficient production expenses as last year due to the higher number of replacement workers and some
additional training as we shifted our production mix from our standard models to more specialized
instruments. We need to progress further on production efficiency in our domestic manufacturing facilities
to see increased margins.”
Looking at the fourth quarter, Messina commented, “The fourth quarter is the beginning of the selling season
in our band business. Although it is too early to evaluate our programs and product offerings, we expect
band sales in the fourth quarter to improve over the prior year. Looking at our piano business, the U.S. piano
market remains challenging. Our domestic inventories remain too high and our domestic production levels
will need to be reduced. Overseas, we expect our fourth quarter business to be stable.”
On yesterday’s decertification vote at the Company’s Elkhart brass facility, Messina said, “After continuous
appeals and delays by the UAW, our employees have finally had an opportunity to vote. Of the votes
counted, 105 were for decertification and 63 were for retention of the union. There are 144 challenged
ballots which have not been counted. The outcome of the vote will be determined by these ballots. The
disposition of the challenged ballots will be decided in the coming weeks by the National Labor Relations
Board. We continue to focus on producing and delivering the finest brass musical instruments in the world.
The outcome of this vote is not expected to materially affect our business going forward.”
Conference Call
If you'd like to hear what management discussed in a conference call on November 8, 2007, click here.

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.
Last Updated ( Saturday, 15 December 2007 )