LTEC LOUD Technologies Inc (CE)

LOUD Technologies Inc. (LOUD) (OTCBB:LTEC) today announced financial results for the third quarter and first nine months of 2005, highlighted by higher revenue and profitability compared to the same periods of 2004. "In addition to the substantial positive impact of the acquisition of St. Louis Music, LOUD's financial performance so far this year also has benefited from our programs to rein in operating costs, eliminate excess manufacturing capacity, rationalize our corporate structure, and solidify our balance sheet," said Chairman and CEO Jamie Engen. "We expect that our improved operating platform, as well as our larger scale of operations, will allow us to continue to leverage LOUD's expanding global distribution capability, growing portfolio of well-known branded products, and solid reputation for quality and innovation in the professional audio and music industries. Third Quarter Results For the three months ended September 30, 2005, revenue increased 74.2% to $54.0 million from $31.0 million for the third quarter of 2004. Revenue for this year's third quarter included $19.3 million attributable to St. Louis Music, Inc., which was acquired on March 4, 2005. Gross margin improved to 33.7% of revenue from 33.2% a year ago. Engen said that gross margin is expected to remain in the 31% to 35% range. Selling, general, and administrative expenses declined to 23.5% of revenue for this year's third quarter compared to 25.2% of revenue for the third quarter of 2004, while R&D expense declined slightly to 5.0% of revenue from 5.5% last year. Net income for the third quarter of 2005 was 379,000, or $0.02 per diluted share based on approximately 24.9 million weighted average diluted shares outstanding. This compares to a net loss for the third quarter last year of $603,000, or $0.03 per share based on approximately 22.5 million weighted average shares outstanding. On November 3, 2005, LOUD announced a 1-for-5 reverse stock split that will be effective after the close of the market on November 17, 2005. Nine Month Results For the nine months ended September 30, 2005, revenue increased 69.8% to $148.2 million from $87.3 million for the first nine months of 2004. St. Louis Music accounted for revenue of $44.4 million for this year's first nine months. Net income for the first nine months of 2005 was $2.0 million, or $0.09 per diluted share. This compares to a net loss for the first nine months of 2004 of $5.5 million, or $0.26 per share. Results for the first nine months of 2005 included a net gain of $2.8 million from the discontinued operations of the Company's former Italian subsidiary. Balance Sheet Highlights On August 29, 2005, LOUD entered into a new credit facility, which provides a $69.5 million senior secured loan facility and a $14.8 million senior subordinated note payable. The senior secured loan facility consists of a $40.0 million revolving loan and term loans totaling $29.5 million. At September 30, 2005, the company had an outstanding balance on the revolving portion of the credit facility of $17.4 million and available borrowing capacity of $13.0 million. "Our new credit facility has significantly strengthened LOUD's financial footing," Engen said. At September 30, 2005, working capital was $27.5 million and stockholders' equity was $7.3 million. This compares to working capital of $2.3 million and stockholders' equity of $3.3 million at December 31, 2004. About LOUD Technologies Inc. LOUD Technologies Inc. (www.loudtechinc.com) is one of the world's largest manufacturers and distributors of professional audio and music products. As the corporate parent for world-recognized brands including Alvarez, Ampeg, Crate, EAW, Knilling, Mackie, SIA, and TAPCO, LOUD Technologies produces and distributes a wide range of digital recording products, loudspeakers, commercial audio systems, audio and music software, guitars, guitar and bass amplifiers, and orchestral string instruments. LOUD Technologies' brands can be found in professional and project recording studios, video and broadcast suites, post-production facilities, sound reinforcement applications including churches and nightclubs, and retail locations and on major musical tours. Forward-Looking Statements Certain statements contained in this release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The words "believe", "expect", "anticipate", "intend", "will", and similar expressions are examples of words that identify forward-looking statements. These forward-looking statements are based on current expectations and assumptions based on information currently available to us. These forward-looking statements may be affected by the risks and uncertainties associated with our business and are qualified in their entirety by the cautionary statements and risk factor disclosure contained in our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2004. We do not assume, and expressly disclaim, any obligation to update these forward-looking statements to conform them to actual results or changes in the Company's expectations. -0- *T LOUD TECHNOLOGIES INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)(In thousands, except for per share data) Three months Nine months ended ended September 30, September 30, ----------------- ------------------ 2005 2004 2005 2004 ------- ------- -------- ------- Net sales $53,987 $31,041 $148,222 $87,253 Cost of sales 35,781 20,693 101,033 59,698 ------- ------- -------- ------- Gross profit 18,206 10,348 47,189 27,555 Operating expenses: Selling, general and administrative 12,669 7,841 35,079 24,625 Research and development 2,744 1,716 7,402 5,520 Total operating expenses 15,413 9,557 42,481 30,145 ------- ------- -------- ------- Operating income (loss) 2,793 791 4,708 (2,590) ------- ------- -------- ------- Other income (expense): Interest income 82 1 215 12 Interest expense (1,525) (625) (3,829) (2,268) Management fee (349) (100) (915) (300) Other (621) (669) (950) (357) ------- ------- -------- ------- Total other (expense) (2,413) (1,393) (5,479) (2,913) ------- ------- -------- ------- Income (loss) before income taxes and discontinued operations 380 (602) (771) (5,503) Provision for income taxes 1 1 44 11 ------- ------- -------- ------- Income (loss) from continuing operations 379 (603) (815) (5,514) Recognized gain on discontinued operations, net -- -- 2,827 -- ------- ------- -------- ------- Net income (loss) $ 379 $ (603) $ 2,012 $(5,514) ======= ======= ======== ======= Basic and diluted net income (loss) per share: Basic and diluted net income (loss) from continuing operations $ 0.02 $ (0.03) $ (0.03) $ (0.26) Basic and diluted net income from discontinued operations -- -- $ 0.12 -- ------- ------- -------- ------- Basic and diluted net income (loss) per share: $ 0.02 $ (0.03) $ 0.09 $ (0.26) ======= ======= ======== ======= Shares used in computing basic and diluted net income (loss) per share: Basic 23,866 22,482 23,712 21,425 Diluted 24,886 22,482 23,712 21,425 ======= =======- ======== ======= LOUD TECHNOLOGIES INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)(In thousands, except share amounts) Sep. 30, Dec. 31, 2005 2004 --------------- -------------- ASSETS Current assets: Cash and cash equivalents $ 409 $ 450 Accounts receivable, net 30,253 16,800 Income taxes receivable -- 30 Inventories 41,195 27,959 Prepaid expenses and other current assets 2,510 2,861 --------------- -------------- Total current assets 74,367 48,100 Property, plant and equipment, net 8,764 7,381 Goodwill 862 -- Other intangible assets, net 12,426 5,128 Deferred financing costs paid to related party 835 -- Other assets 2,234 186 --------------- -------------- Total assets $ 99,488 $ 60,795 =============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term borrowings $ 17,433 $ 11,826 Accounts payable 13,307 17,679 Accrued liabilities 10,225 6,972 Taxes payable 1,335 1,466 Current portion of long-term debt 2,645 300 Current portion of payable to former Italian subsidiary 2,000 7,587 --------------- -------------- Total current liabilities 46,945 45,830 Long-term debt, excluding current portion 41,605 11,612 Long-term portion of payable to former Italian subsidiary 700 -- Other liabilities 2,910 33 --------------- -------------- Total liabilities 92,160 57,475 Shareholders' equity: Preferred stock, no par value. Authorized 5,000,000 shares, no shares issued and outstanding -- -- Common stock, no par value. Authorized 40,000,000 shares, issued and outstanding 22,831,048 at September 30, 2005, and 22,138,191 at December 31, 2004 40,774 38,778 Accumulated deficit (33,446) (35,458) --------------- -------------- Total shareholders' equity 7,328 3,320 --------------- -------------- Total liabilities and shareholders' equity $ 99,488 $ 60,795 =============== ============== *T