Steinway Fourth Quarter Results; EPS $0.49 vs $0.43.

WALTHAM, Mass.--(BUSINESS WIRE)--Feb. 23, 1999--Steinway Musical Instruments, Inc. (NYSE:LVB) today announced results for the fourth quarter and the full fiscal year ending December 31, 1998.

Net income for the quarter increased 12% to $4.6 million or $0.49 per diluted share versus $4.1 million or $0.43 per share in the fourth quarter of 1997. Net sales for the quarter rose nearly 4% to $72.4 million and operating profit increased over 4% to $11.9 million.

Overall sales for 1998 totaled $293.3 million, a $15.4 million or 6% increase over 1997. Gross profit also increased 6% to $98.5 million on consistent gross margins. Operating margins increased to 14.7% from 14.0%. Net income rose 22% to $16.7 million or $1.75 per diluted share up from $1.45 in 1997.

Commenting on the results, Dana D. Messina, Chief Executive Officer stated, "We are pleased with our record breaking 1998 financial performance. We continue to lead the industry in delivering high quality products and service. Our commitment to quality in all aspects of our business provided the competitive edge needed in a more challenging business environment. The tremendous breadth of our product offerings also provided stability during this volatile period. For instance, an 11% increase in our piano sales helped offset the weaker performance of other musical instruments. Similarly, the exceptional improvement in our piano gross margin offset a gross profit decline related to the manufacturing difficulties associated with the introduction of our new student saxophone."

Expanding on the piano segment, Mr. Messina continued, "Domestically, our piano division achieved record results in 1998. Unit shipments increased 17% over last year, led by the Boston Piano line which increased U.S. shipments by 28%. Domestic demand continues to outpace supply, with Steinway receiving orders for virtually all of its 1999 domestic piano production. In addition, our international operations have recently shown signs of improvement, with foreign shipments of Steinway pianos increasing 10% for the year."

Selmer Instruments

Fourth quarter shipments of percussion and stringed instruments achieved a combined unit increase of 16%, offsetting a 7% decline in the band instrument category. As a result, overall shipments for the quarter remained even with the prior year. The effects of the Asian economic crisis continued to impact our business, causing sales for the quarter to decline 2% to $23.2 million. A shift in product mix from higher margin professional instruments to lower margin student products, combined with the new saxophone costs, reduced the gross margin from 39.5% to 34.7%.

Revenues for 1998 remained essentially flat at $132.1 million, with total instrument shipments for 1998 decreasing 3% from the prior year. While combined unit shipments of percussion and stringed instruments were up over 6% for the year, the higher margin band units declined by 6%, contributing to a gross margin decrease from 33.7% to 31.3%.

Mr. Messina noted, "Selmer operated in an extremely challenging environment in 1998. While domestic sales were up for the year, an 11% downturn in exports, primarily to Asia, restrained our top line growth. Results were impacted not only by the weak Asian economies, but also by some internal manufacturing inefficiencies associated with the introduction of a new product. With these manufacturing issues behind us, management will now be able to focus greater attention on marketing and distribution strategies responsive to the increased competitive environment in the U.S. band instrument industry."

Steinway Pianos

Increased foreign demand for the Steinway & Sons line led an overall unit volume increase of 4% over the fourth quarter of 1997. The Boston piano line continued to grow at a strong pace, up 13% over the same quarter in 1997. Overall piano sales increased $3.1 million or 7% to $49.2 million. An increase in the sale of used Steinways coupled with a favorable yen exchange rate boosted gross margin to 36.5% from 34.7% in the fourth quarter of 1997.

For the full year, worldwide Steinway piano shipments increased 7% and Boston units were up over 17%, resulting in a revenue increase of $15.8 million or 11% to $161.1 million. Gross margins improved from 33.4% in 1997 to 35.4% in 1998. Mr. Messina commented, "1998 was an extraordinary year for Steinway & Sons, and with domestic demand for our pianos remaining strong, we expect 1999 to be another good year. In the U.S. we produced 7% more Steinways in 1998 and we anticipate a similar increase in the current year. With the economic climate in Europe improving, we are very enthusiastic about the prospects for our piano business in 1999."

Steinway Musical Instruments, Inc. through its Steinway and Selmer subsidiaries is one of the world's leading manufacturers of musical instruments. Its notable products include Steinway & Sons pianos, Selmer saxophones, Bach trumpets and Ludwig drums. Additional information can be obtained by visiting our web site:

www.steinwaymusical.com.

"Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995

This release contains "forward-looking statements" within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended. These forward-looking statements represent the Company's present expectations or beliefs concerning future events. The Company cautions that such statements are necessarily based on certain assumptions which are subject to risks and uncertainties, including, but not limited to, changes in general economic conditions, exchange rate fluctuations, and the availability of production capacity which could cause actual results to differ materially from those indicated herein. Further information on these risk factors is included in the Company's filings with the Securities and Exchange Commission. -0-

                  STEINWAY MUSICAL INSTRUMENTS, INC.
            Condensed Consolidated Statements of Operations
               (Dollars in Thousands, Except Share Data)


                               Three Months Ended   Fiscal Year Ended
                                 Dec 31    Dec 31    Dec 31   Dec 31
                                  1998      1997      1998     1997

Net sales                      $ 72,444  $ 69,793  $293,251  $277,848

Cost of sales                    46,439    44,420   194,772   184,567
                               --------  --------  --------  --------

      Gross profit               26,005    25,373    98,479    93,281

Operating expenses               14,096    14,013    55,511    54,349
                               --------  --------  --------  --------

      Earnings from operations   11,909    11,360    42,968    38,932

Interest expense, net             2,854     2,978    11,911    12,776
                               --------  --------  --------  --------

      Income before taxes         9,055     8,382    31,057    26,156

Provision for income taxes        4,455     4,288    14,406    12,456
                               --------  --------  --------  --------

      Net income               $  4,600  $  4,094  $ 16,651  $ 13,700
                               ========  ========  ========  ========



Per Share Data

 Net income - basic      $      0.49 $     0.43  $     1.78 $     1.45

 Net income - diluted    $      0.49 $     0.43  $     1.75 $     1.45



Weighted average
 common shares - basic     9,299,079  9,419,763   9,339,896  9,426,122

Weighted average
 common shares - diluted   9,358,837  9,527,650   9,505,640  9,458,841