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Loud Expands Supply Chain, Dispels Bankruptcy Rumors

Loud Technologies recently announced two new contract manufacturing (CM) partners and the reallocation of production for certain EAW and Mackie products across its worldwide supply chain.

The expansion helps replace capacity lost when the prior CM for those products discontinued operations in December 2008. Meanwhile, supplies of all other EAW and Mackie products — as well as Alvarez, Ampeg, Crate and Martin branded products — continue uninterrupted, as they are manufactured by other Loud CM partners.

Bankruptcy Rumors ‘Unfounded’
In related news, at the onset of The NAMM Show, Testa’s Convention TV reported that Loud Technologies would either be purchased or file for bankruptcy protection. Loud executives said that report was unfounded.

“Loud is well-positioned to emerge from this period in a very strong position,” said Rodney Olson, Loud CEO and leader of a new management team that came in last August. In an interview with Frank Alkyer, publisher of UpBeat Daily and Music Inc. magazines, Olson said Loud is closely examining its business and responding to the economic downturn. The following is an edited transcript of the interview.

Frank Alkyer: There are rumors at the show regarding Loud Technologies’ financial issues. What is the status of the company right now?

Rodney Olson: The rumors about Loud are just that — rumors. Like everyone in today’s uncertain economy, we have examined our organizational and cost structures and made reductions to position us well for the current downturn.

Alkyer: You decided to delist yourself from the NASDAQ. Why did you do so?

Olson: The costs of being a public company far outweigh the benefits. In fact, we spend close to $1 million per year on legal fees and other activities that we believe are better invested in the business. By voluntarily delisting, we will be able to redirect these dollars into building our supply chain and the products our customers want.

Alkyer: There was a news report at the show that Loud would be seeking bankruptcy protection. Is there any truth to that?

Olson: Unfortunately, this report was totally unsubstantiated and painted the wrong picture of our situation. The truth is Loud has an envied senior management team, supportive ownership in Sun Capital and a solid plan for success.

Loud’s top priority is reallocating production of some Mackie and EAW products lost when one of our contract manufacturers stopped production in late 2008. While this will generate some short-term shortages of those products, the good news is we are now fixing long-standing product availability issues that have been limiting our growth, as well as our customers’ growth, for quite some time.
In fact, we just added two new contract manufacturers to our supply chain and already have replacement production lined up and running for EAW, KF and SB loudspeakers, as well as Mackie HRmk2 and MR studio monitors. And we will add additional lines every few weeks until production is stabilized and product is flowing normally.

It’s also important to note that production of the rest of the Mackie and EAW product lines, as well as Alvarez, Ampeg, Blackheart, Crate and Martin Audio products, were not impacted by this facility’s closure, as they are produced at other Loud contract manufacturers.

Alkyer: What are your thoughts on the business environment for the coming year?

Olson: There’s no doubt the industry will face significant challenges in 2009, as we feel the effects of the downturn. That said, Loud is well-positioned to emerge from this period in a strong position. We have a well-diversified portfolio of brands with leadership positions in both the MI and pro markets, a streamlined and focused organizational structure and a more efficient operating budget. And when you combine all of that with what will soon be a very stable and high-capacity supply chain, there’s no question we will succeed.

Alkyer: In November, you announced your decision to sell the SLM Marketplace, Knilling and Austin brands to U.S. Band & Orchestra. How will that sale affect the company?

Olson: The sale of the SLM Marketplace business, as well as the Knilling and Austin brands, is good for Loud and the customers of those businesses. It allows Loud to focus and invest in its core markets and brands, MI and pro, and ensures the customers for those businesses continue to receive the high levels of service they need. MI