Klipsch Announces New Distribution Strategy and Retail Partner

INDIANAPOLIS (February 13, 2003) - Klipsch Audio Technologies announced today a bold new distribution strategy that includes ending relationships with two key dealers, part of which was announced on Tuesday, and adding a major new retail partner. According to company officials, the changes will bring order to the market, address escalating regional conflicts, and provide a consistent brand story across all channels of distribution.

As of Tuesday, Klipsch has discontinued its relationships with Magnolia Hi-Fi and the Tweeter Home Entertainment Group and its subsidiaries. Additionally, Klipsch will begin selling a limited line of its award-winning Synergy Series loudspeakers, excluding installed and outdoor models, at Best Buy stores across the country on Memorial Day weekend this May.

The Reference Series, Klipsch's flagship line of high-performance loudspeakers, will continue to be sold exclusively through audio/video specialists nationwide.

Fred Klipsch, chairman and owner of Klipsch Audio Technologies, said Ultimate Electronics and Good Guys immediately embraced the new strategy, and that Klipsch has named them "flagship" retailers along with remaining PRO Group members and many of Klipsch's top 25 independent specialists.

"The specialty retail landscape has undergone radical change due to aggressive retail acquisition and consolidation," said Klipsch. "We are moving forward with a strategic realignment that eliminates regional conflicts and creates order in our core business of specialty retail distribution with the Klipsch Reference Series. At the same time, we will broaden our market penetration and brand exposure through Best Buy with the Klipsch Synergy Series."

According to Paul Jacobs, chief operating officer of the Klipsch Worldwide Products Group, Klipsch has been selling its ProMedia line of computer speakers through Best Buy for two years, and it has been successful as a brand strategy to increase demand for high-performance home theater systems. He expects the changes announced today will have an even greater positive impact on the Klipsch brand.

Jacobs explained that the Reference Series and the Synergy Series will be managed by separate product development and engineering teams. He said this two-line strategy would allow Klipsch to focus distinct products towards uniquely different retail selling environments, and that the internal separation would guarantee continued delineation between the product lines.

"The audio/video specialists who fully supported the Klipsch Reference Series experienced marked increases in sales," Jacobs said. "This distribution realignment builds on the success of that full line strategy and creates a consistent brand story in every market with our Reference Series.

"We are excited that the Synergy Series will be offered at Best Buy because they are an excellent retailer whose effective merchandising will communicate a consistent brand story."