Sound Advice Reports Operating Profit, Reduced Net Loss For Fiscal 1996 Third Quarter

Business Wire, May 15, 1996

DANIA, Florida--(BUSINESS WIRE)--May 15, 1996--Sound Advice, Inc. (Nasdaq/NNM:SUND) today announced improved operating profitability for the third quarter ended March 31, 1996.

Net sales for the recent quarter totaled $39.1 million, compared to $43.8 million in the third quarter of fiscal 1995. The Company recorded income from operations of $230,000 in the fiscal 1996 third quarter, reversing a loss from operations of $1.3 million in the year-earlier period. Included in the fiscal 1995 period's operating loss was a provision of $597,000 for asset impairment and postponed entry into a new market. The net loss declined to $64,000, or $0.02 per share, for the fiscal 1996 third quarter, versus a net loss of $1.1 million, or $0.29 per share, in the same fiscal 1995 period.

The decrease in net sales from the year-ago period primarily reflected the decision earlier this year to discontinue the sale of personal computers and other non-performing, low-margin products. The improved margin on the Company's current product mix, along with reductions in SG&A expenses and interest expense, were the main contributors to the improved operating profitability and sharply lower net loss.

For the first nine months of fiscal 1996, net sales were $136.5 million, compared with $151.4 million for the same fiscal 1995 period. The lower sales primarily reflected the decision to exit personal computers and certain low-margin products, increased competition, and generally weak retailing conditions. Sound Advice recorded a loss from operations of $2.2 million and a net loss of $2.7 million, or $0.75 per share, for the recent nine months. For the fiscal 1995 nine-month period, income from operations was $1.5 million and net income was $265,000, or $0.07 per share. The fiscal 1996 results included the $1.5 million provision for loss related to the discontinuation of personal computers and related accessories, while the fiscal 1995 period included the $597,000 provision for asset impairment and postponed entry into a new market.

"In the third quarter of fiscal 1996, we began to see positive results from our efforts to sharpen our focus on Sound Advice's traditional areas of strength, including high-end audio, video and mobile electronics. Sales of these products benefit from our value-added, service-oriented selling approach and typically produce a better profit margin. At the same time, we have been successful in cutting SG&A expenses, both in absolute dollars and as a percentage of sales," stated Peter Beshouri, Sound Advice Chairman and CEO.

The gross profit margin as a percentage of sales was 30.7% in the fiscal 1996 third quarter, rising from 28.0% in the same quarter a year ago. Excluding the loss provision for discontinued personal computer products, the fiscal 1996 nine-month gross profit margin was 29.4%, equal to the margin for the fiscal 1995 period.

Selling, general and administrative (SG&A) expenses decreased by 13.1% in the fiscal 1996 third quarter. SG&A expenses were reduced to 30.1% of sales for the recent quarter, on a 10.7% decrease in sales volume, as compared with 30.9% of sales in the fiscal 1995 period. For the first nine months of fiscal 1996, SG&A expenses declined 4.9% and represented 29.9% of sales, compared with 28.4% for the nine months ended March 31, 1995.

As a further indication of the Company's financial progress, Mr. Beshouri cited the recent announcement of Sound Advice's new $25 million revolving credit facility with Foothill Capital Corporation. The revolving credit facility is inventory-based and secured by the Company's assets, and bears interest at prime rate plus 1%. The term of the new facility matures on July 31, 1998. The new credit facility refinances the Company's previous $16 million revolving and term loan facility with NationsBank, N.A. (South).

Sound Advice, Inc. is a specialty retailer of a broad range of high quality, upscale entertainment and consumer electronics products. It currently operates 21 stores in the South Florida, Orlando, Tampa/St. Petersburg, Ft. Myers and Jacksonville markets. -0-