LOUD Technologies Inc. (LOUD) (NASDAQ:LTEC) today announced results of operations for the three and nine month periods ended September 30, 2006, highlighted by net income of $1.4 million, or $0.29 per diluted common share, for the third quarter, compared with $0.08 per diluted common share for the third quarter of 2005.

Third Quarter Results

Revenue for the third quarter of 2006 decreased $0.6 million to $53.4 million from $54.0 million for the third quarter of 2005.

Gross profit was $18.2 million, or 34.1% of net sales, in the third quarter of 2006 compared to $18.2 million, or 33.7% of net sales, in the comparable period in 2005.

SG&A expenses decreased to $11.6 million for the third quarter of 2006 compared to $12.7 million in the third quarter of 2005, a reduction of 8%. This decrease was primarily attributable to consolidating the St. Louis Music operations, to the ongoing cost benefits of our direct sales program, and to cost-cutting programs implemented in June 2006.

Operating income for the third quarter of 2006 was $3.6 million, which included restructuring costs of $0.2 million for severance payments related to reductions in workforce in the consolidation of the St. Louis Music and service operations. This represents a 30% increase in operating income when compared to the $2.8 million result for the third quarter of 2005.

Nine Month Results

Revenue for the nine months ended September 30, 2006 increased by $17.4 million to $165.6 million compared to $148.2 million for the nine months ended September 30, 2005. The 2006 period includes a full nine months of sales from the historical St. Louis Music brands as opposed to the comparable period in 2005 which includes sales from the historical St. Louis Music brands only from the acquisition date of March 5 through September 30.

Operating income for the nine months ended September 30, 2006 was $7.2 million, which included restructuring costs of $0.8 million for severance payments related to reductions in workforce in the consolidation of the St. Louis Music and service operations. This represents an increase of $2.5 million, or 52%, over our operating income of $4.7 million for the comparable period in 2005.

Net income for the nine months ended September 30, 2006 was $1.2 million, or $0.24 per diluted share. This represents a decrease of $0.8 million, or 42%, when compared to net income of $2.0 million, or $0.42 per diluted share, in the comparable period in 2005. However, nine-month net income for 2005 included only a partial year of performance from the St. Louis Music acquisition and included a gain from the discontinued operations of the Company's former Italian subsidiary of $2.8 million, or $0.60 per diluted share.

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 include statements about the anticipated success of our management initiatives in driving future profitability, and 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, 2005. 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.

(table attached)

LOUD TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except for per share data)

 
Three months ended

September 30,

Nine months ended

September 30,

2006  2005  2006  2005 
 
Net sales $ 53,445  $ 53,987  $ 165,556  $ 148,222 
Cost of sales 35,242  35,781  109,948  101,033 
Gross profit 18,203  18,206  55,608  47,189 
 
Operating expenses:
Selling, general and administrative 11,624  12,669  38,370  35,079 
Research and development 2,778  2,744  9,264  7,402 
Restructuring costs 173  ?  818  ? 
Total operating expenses 14,575  15,413  48,452  42,481 
 
Operating income 3,628  2,793  7,156  4,708 
 
Other income (expense):
Interest income 27  82  151  215 
Interest expense (1,641) (1,525) (4,941) (3,829)
Management fee (241) (349) (772) (915)
Other (198) (621) (220) (950)
Total other expense (2,053) (2,413) (5,782) (5,479)
 
Income (loss) before income taxes and discontinued operations 1,575  380  1,374  (771)
 
Provision for income taxes 127  1  201  44 
 
Income (loss) from continuing operations 1,448  379  1,173  (815)
 
Recognized gain on discontinued operations, net of income tax expense of $58 ? 

? 

?  2,827 
 
Net income $ 1,448  $ 379  $ 1,173  $ 2,012 
 
Basic net income (loss) per share:
Net income (loss) from continuing operations $ 0.30  $ 0.08  $ 0.24  $ (0.18)
Net income from discontinued operations ?  ?  ?  0.60 
Net income per share $ 0.30  $ 0.08  $ 0.24  $ 0.42 
 
Diluted net income (loss) per share:
Net income (loss) from continuing operations $ 0.29  $ 0.08  $ 0.24  $ (0.18)
Net income from discontinued operations ?  ?  ?  0.60 
Net income per share $ 0.29  $ 0.08  $ 0.24  $ 0.42 
 
Shares used in computing basic and diluted net income (loss) per share:
Basic 4,806  4,773  4,806  4,742 
Diluted   4,996    4,977    4,984    4,742 

LOUD TECHNOLOGIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share amounts)

 
September 30,

2006

December 31,

2005

ASSETS
Current assets:
Cash and cash equivalents $ 596  $ 468 
Accounts receivable, net of allowances of $2,005 and $2,224, respectively 28,901  28,224 
Inventories 43,966  39,290 
Prepaid expenses and other current assets 2,165  1,859 
Total current assets 75,628  69,841 
 
Property, plant and equipment, net 7,104  7,863 
Goodwill 2,248  2,248 
Other intangible assets, net 11,570  12,198 
Deferred financing costs 2,863  3,378 
Other assets 17  17 
Total assets $ 99,430  $ 95,545 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 12,503  $ 9,595 
Accounts payable 18,298  16,133 
Accrued liabilities 9,955  10,009 
Taxes payable 1,416  1,293 
Current portion of long-term debt 3,306  3,306 
Current portion of payable to former Italian subsidiary 1,200  2,200 
Other current liabilities 3,093  ? 
Total current liabilities 49,771  42,536 
 
Long-term debt, excluding current portion 38,960  40,944 
Deferred tax liabilities 81  40 
Other liabilities 5  2,938 
Total liabilities 88,817  86,458 
 
Commitments and contingencies
 
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 4,566,202 at September 30, 2006 and December 31, 2005

41,141  40,788 
Accumulated deficit (30,528) (31,701)
Total shareholders' equity 10,613  9,087 
Total liabilities and shareholders' equity $ 99,430  $ 95,545