Baldwin Piano & Organ reports on 1996 4th quarter and full year; strategic initiatives impact performance Core piano business grew strongly in 2nd half.

LOVELAND, Ohio--(BUSINESS WIRE)--Feb. 27, 1997--Baldwin Piano & Organ Company (NASDAQ: BPAO) said today that aggressive initiatives to improve future profitability reduced fourth-quarter and full-year 1996 sales and earnings below year-earlier levels. The positive impact of these strategic initiatives is expected to begin to materialize in the second half of 1997.

In the three-month period ended December 31, 1996 sales were $35.3 million, compared with $35.7 million in the year-earlier period; and net earnings amounted to $430,000, or 13 cents a share, versus $1.6 million and 48 cents per share.

For the full year 1996, sales were $115.1 million, as compared with $122.6 million in 1995. Earnings in the latest year were $2.1 million, or 60 cents a share, compared with $4.0 million and $1.16 per share in 1995.

Fourth quarter inventories decreased by $7.8 million and debt decreased $11.6 million relative to the third quarter. However, inventories at December 31, 1996 were up $10.5 million and debt was $12.4 million higher than year-end 1995 -- the result of pipe- line inventories for the new ConcertMaster autoplayer and Pianovelle digital piano line and additional purchases of Wurlitzer grand pianos.

Chairman and Chief Executive Karen L. Hendricks said, "Our core piano business has shown strong progress. Dollar sales increased 8 percent in the last half of 1996 versus a year ago, as a result of 7 percent unit sales growth. This is a very positive accomplishment given the overall decline in the U.S. piano category in the second half of 1996, a period in which our industry leading market share in acoustic pianos rose from 26 to 29 percent.

"All of our basic businesses--Music, Contract Electronics and Keyboard Acceptance Corporation--were profitable in 1996 but, as a whole, their performance was offset by strategic initiatives designed to enhance our future competitiveness. We expect to begin seeing the first results from our strategy later this year.

"The decline in sales and earnings in the quarter and year was largely the result of decisions made in 1995 and 1996 to exit our non-strategic contract music and furniture businesses, and this process is nearing completion," she said.

"There were also some lingering effects from the earlier streamlining of the dealer network in Baldwin's Wurlitzer piano line, from elimination of redundancies between the Baldwin and Wurlitzer product lines, and the introduction of a multi-brand marketing strategy. The fourth quarter was also affected by a one-time charge equivalent to 10 cents a share, which was related to a workforce reduction of 50 salaried employees.

"We believe that these and other actions, while having a negative effect on 1996 results, better position Baldwin to compete effectively and more profitably in its core piano businesses. We expect to continue to refine and implement our strategic plan during 1997," she continued.

Retention of Lehman Brothers

Ms. Hendricks noted that Baldwin is in the midst of executing a strategic plan to increase shareholder value, and that in the past two years a number of decisions were made to focus on core company businesses and streamline operations. To advise and assist us in the continuing execution of the company's strategic plan, Baldwin has retained the internationally known investment banking firm of Lehman Brothers," she concluded.

Baldwin Piano & Organ Company has made and sold keyboard musical products for 135 years. Its piano brands are Baldwin, Chickering and Wurlitzer. The company, which is the U.S. leader in acoustic pianos, also markets digital pianos and makes electronic and electromechanical components for OEM manufacturers. Its Keyboard Acceptance Corporation provides financing to keyboard dealers' retail customers.

"Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: This release contains forward looking statements that are subject to risks and uncertainties, including, but not limited to, the impact of competitive products and pricing, product demand and market acceptance, reliance on key strategic alliances, fluctuations in operating results and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission. -0-

             BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
                   CONSOLIDATED SUMMARY OF EARNINGS
             (In Thousands, except net earnings per share)

                     Three Months Ended      Twelve Months Ended
                        December 31,            December 31,
                      1996      1995           1996       1995

Net sales         $  35,276   $  35,667     $ 115,070  $ 122,634
Cost of goods sold   28,861      28,154        92,495     96,333
Gross profit          6,415       7,513        22,575     26,301
Gross profit % of
 net sales             18.2%       21.1%         19.6%      21.4%
Interest income on
 installment
 receivables          1,784       1,628         7,107      5,852
Other operating
 income, net            828       1,305         3,476      4,010
Selling, general and
 administrative      (7,538)     (7,197)      (27,186)   (27,755)
Operating profit      1,489       3,249         5,972      8,408
Operating profit %
 of net sales           4.2%        9.1%          5.2%       6.9%
Interest expense       (859)       (597)       (2,868)    (2,087)
Earnings before
 income taxes           630       2,652         3,104      6,321
Income taxes            200       1,008         1,048      2,361
Net earnings      $     430   $   1,644      $  2,056   $  3,960
Net earnings per share $.13   $     .48      $    .60   $   1.16
Average number of
 shares outstanding   3,425       3,415         3,421      3,415

                      CONSOLIDATED SUMMARY BALANCE SHEETS
                                 (In thousands)

                              September 30,        December 31,
                                  1996           1996      1995
Assets
Receivables, net               $  15,414     $  13,933  $ 14,338
Inventories                       64,352        56,555    46,039
Other current assets               7,758         8,803     9,220
Total current assets              87,524        79,291    69,597
Installment receivables, less
 current portion                  12,547        11,435    11,215
Property, plant and equipment,
 net                              16,800        16,479    14,934
Other assets                       5,466         4,859     5,683
Total assets                   $ 122,337     $ 112,064 $ 101,429
Liabilities and Shareholders'
 Equity
Current portion of long-term
 debt                          $  42,314     $  30,901 $  17,646
Other current liabilities         13,678        14,826    17,248
Total current liabilities         55,992        45,727    34,894
Long-term debt, less current
 portion                           3,575         3,350     4,250
Other liabilities                  6,926         6,712     8,171
Shareholders' equity              55,844        56,275    54,114
Total liabilities and
 shareholders' equity          $ 122,337     $ 112,064 $ 101,429

CONTACT: Perry Schwartz Art Gormley

Baldwin Piano The Dilenschneider Group

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