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Rockford Q1 Sales Decline, Reports Loss

5/09/2006 02:09:00 PM Eastern

Tempe, Ariz. — Citing “softness” in the car audio specialist and mass retailers channels, Rockford announced that net sales for the first quarter of 2006 fell 24.5 percent to $29.9 million, down from $39.6 million in the first quarter last year.

Operating loss for the first quarter was $1.0 million, compared with an operating income of $271,000 in the same period of 2005. Net loss was $2.1 million for the quarter, compared with a net loss of $608,000 in the first quarter of 2005. The gross margin for the first quarter dropped to 28.2 percent, from 28.6 percent in last year’s opening quarter.

The company claimed that $4 million of the sales decline was due to absence of MB Quart’s domestic sales and the discontinuation of Rockford’s head-unit line and Omnifi products, which had been available in the first quarter last year.

Rockford also noted it delayed the delivery of the P3 shallow subwoofer, introduced at International CES, until 2007 due to manufacturing issues. CEO Gary Suttle said that Rockford found the P3s were not handling as much power as expected and decided to redesign them. This was discovered during a quality review phase prior to final manufacturing.

Rockford said it believes it will gain share this year with independent specialists, and it will launch several initiatives to boost sales in that channel.

The company also reported that its new 3Sixty OEM integration device is now shipping and it has been “slower out of the gate” in its delivery of the product than planned, but claimed that the product is being well received by retailers and that the predominance of orders is now shifting from the basic .1 version up to the higher margin .2 version with advanced sound processing. Sales of the 3Sixty, at present, are in backorder, said Suttle.

Operating expenses for the first quarter decreased 14.3 percent to $9.5 million; however, product development expenses were up “due to additional new product development activities,” said Suttle.

Rockford also said it completed the sale of the assets of Q Logic enclosures to a new company formed by the Q Logic management team.

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