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Rockford Reports Net Loss

Tempe, Ariz.. —Rockford Corp, announced a net loss for the third quarter ended Sept. 30, 
citing macro economic conditions and the “financial meltdown” in September which caused some retailers to postpone purchasing.

Net loss for the quarter was $900,000, compared to a net income of $100,000 million for the comparable period in 2007. Net sales were $18.2 million compared to $18.7 million in the same period in 2007. The shortfall in sales was partially offset by a one-time promotional shipment of approximately $3 million to a major customer for a fourth quarter retail promotion.

As a percentage of sales, gross margins decreased to 27.9 percent compared to 33.6 percent for the same period in 2007. The decrease was primarily due to significantly lower royalty revenue and the one-time promotional shipment, which was at substantially lower gross margin than normal, said the company.

Rockford president, Bill Jackson, commented, “We are disappointed in the results for the third quarter. The mobile electronics business continues to be negatively affected by the recent economic conditions. Our retailers report that they saw reduced store traffic and softer than expected third quarter sales. In addition, the financial meltdown at the end of September led many of our specialist dealers to postpone their end-of-quarter purchases because of the fearfully uncertain conditions in the final few days of the quarter.”

He added, “We do not know whether we will be able to recover some of these sales in the fourth quarter, but our planning takes into account the increased uncertainty and risks associated with the recessionary environment we are facing.”

Royalties were down for the period as the decline in SUV sales impacted Rockford’s OEM programs with Nissan. The company’s OEM sales with Mitsubishi were also impacted by the economy.

Jackson said the company is responding by adding promotional tools for retailers to help build traffic for the holidays and Rockford is bolstering its in-house sales staff “to provide improved communication with and service to the specialist dealers who are at the heart of our business.”

Jackson added, “We are on track to complete our outsourcing plans by the end of 2008. From an operations standpoint, we have lowered our expenses and breakeven point. Our goal is to operate the company as efficiently as possible.”

Operating expenses for the quarter were relatively flat at $5.8 million.