DEI Announces Agreement to Acquire Polk Audio

[Aaron Clinton 2,372]

Acquisition Will Significantly Expand Directed's Position in Home Audio Entertainment

VISTA, Calif., Aug 21, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- Directed Electronics, Inc. (Nasdaq: DEIX), today announced that it has entered into a definitive agreement to acquire Polk Audio, a leading provider of high performance home and mobile audio equipment. Consideration for the acquisition will be approximately $136 million in cash. Current Polk management will be joining the Directed team after the acquisition which is scheduled to close during the third quarter of 2006. Directed expects the acquisition to be accretive to its pro forma net earnings(1) in 2006 and beyond.

(Logo: http://www.newscom.com/cgi-bin/prnh/20020424/DIRECTLOGO)

"The acquisition of Polk, with its leading consumer brand, complements our current Definitive Technology product line. Having these two powerful brands under the Directed umbrella will give us the #1 position in the U.S. home speaker market according to industry data," commented Jim Minarik, President and CEO of Directed. "We look forward to working with the Polk team to expand our home audio business," he continued.

Founded in 1972, Polk has grown into a leading speaker brand in home entertainment. The company sells its products in all key channels of home electronics distribution including a diverse set of customers such as Circuit City, Tweeter, Fry's Electronics, Crutchfield, and AVAD Distributors. Polk's focus on brand management and product development has resulted in an impressive track record of growth in both home and mobile audio. Polk co-founders Matthew Polk and George Klopfer will remain actively engaged after the transaction by using their 35 years of industry experience to advise on the direction of Directed's home audio strategy. Including Polk Audio's approximately $86 million in net sales for the twelve months ended June 30, 2006, Directed's net sales would have been approximately $435 million for the same period.

"The addition of Polk Audio is significant in that it continues our strategy of building a growing and profitable security and entertainment platform," commented Kevin Duffy, Senior Vice President of Strategy, Corporate Development and Investor Relations. "We are also excited by Polk's broad product offering including the company's growing position in the expanding custom installation speaker market," he continued.

"We have worked hard to build Polk into a profitable leader in home and mobile audio," stated Jim Herd, President of Polk Audio. "We believe the Polk brand is positioned for continued growth through our existing customer base, as well as through the introduction of innovative entertainment products for both the home and vehicle environments. We look forward to partnering with Directed to build our business together."

Goldman, Sachs & Co. and Trivest Partners acted as financial advisors and Greenberg Traurig, LLP acted as legal advisor to Directed Electronics. Barrington Associates acted as the exclusive financial advisor and DLA Piper US LLP acted as legal advisor to Polk Audio.

The acquisition will be financed by an addition to Directed's senior credit facility. CIBC World Markets and J.P. Morgan Securities are providing committed financing for the acquisition and related expenses.

Investor Conference Call

Directed will hold a conference call tomorrow, Tuesday, August 22, 2006, at 10:00 a.m. Eastern Daylight Time to discuss Polk Audio, the acquisition, and the expected effect on Directed. Directed may discuss forward-looking information on this call.

To participate in the conference call, investors should dial 800-289-0494 ten minutes prior to the scheduled start time. International callers should dial 913-981-5520. If you are unable to participate in the live call, a replay will be available through Tuesday, September 5, at midnight Eastern Time. To access the replay, dial 888-203-1112 (passcode: 6855463). International callers should dial 719-457-0820 and use the same passcode.

The call will be open to all interested investors through a live audio Web broadcast via the Internet at www.directed.com. For those who are not available to listen to the live broadcast, the call will be archived.

About Directed Electronics, Inc.

Directed Electronics is the largest designer and marketer of consumer branded vehicle security and convenience systems in the United States based on sales and a major supplier of home audio, mobile audio and video, and satellite radio products. As the sales leader in the vehicle security and convenience category, Directed offers a broad range of products, including security, remote start, hybrid systems, GPS tracking and navigation, and accessories, which are sold under its Viper®, Clifford®, Python®, and other brand names. In the home audio market, Directed designs and markets award-winning Definitive Technology® and a/d/s/® premium loudspeakers. Directed's mobile audio products include speakers, subwoofers, and amplifiers sold under its Orion®, Precision Power®, Directed Audio®, a/d/s/®, and Xtreme® brand names. Directed also markets a variety of mobile video systems under the Directed Video®, Directed Mobile Media® and Automate® brand names. Directed also markets and sells certain SIRIUS-branded satellite radio products, with exclusive distribution rights for such products to Directed's existing U.S. retailer customer base.

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[Aaron Clinton 2,372]

Forward-Looking Statements

Certain statements in this news release that are not historical fact constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements typically are identified by the use of terms such as "may," "should," "might," "believe," "expect," "anticipate," "estimate" and similar words, although some may be expressed differently. Forward-looking statements in this release include, but are not limited to, statements as to expected closing of the Polk Audio acquisition, expected financial effect of the acquisition, and the effect of customer growth strategies. Shareholders and other readers are cautioned not to place undue reliance on these forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results of Directed to be materially different from historical results or from any results expressed or implied by such forward-looking statements. These factors include the ability to complete the acquisition, competition in the consumer electronics industry, development of new products and changing demand of customers, reliance on certain key customers, adverse developments affecting SIRIUS Satellite Radio, challenge of the Company's pricing and promotional practices, reliance on certain manufacturers and their ability to maintain satisfactory delivery schedules, disruption in supply chain, shortages of components and materials, disruption in imports, quality installation of products by customers, significant product returns or product liability claims, compliance with various state and local regulations, remediation of any internal control deficiencies and identified material weaknesses in internal control over financial reporting, risks with international operations, claims related to intellectual property, ability to service debt obligations, disruption in distribution centers, decline in consumer spending, outcome of existing litigation, dependence on senior management, ability to realize on investments made in the business, and integration of acquired businesses. Certain of these factors, as well as various additional factors, are discussed from time to time in the reports filed by Directed with the Securities and Exchange Commission, including the Form 10-K for the year ended December 31, 2005. Directed disclaims any intent or obligation to update these forward-looking statements.

[Aaron Clinton 2,372]

(1) On a GAAP basis, Directed expects that the acquisition will be

dilutive to net earnings in 2006, as the company sells through

acquired inventories which are required to be written up to fair

value less cost to sell. Pro forma net earnings exclude the effects

of charges related to purchase accounting for the transaction

including the short-term impact on gross profit from selling acquired

inventories that will be written up to fair value less cost to sell,

charges for the amortization of acquisition-related intangible

assets, and compensation expense related to employee equity awards,

the impact of which is expected to be reflected in Directed's

financial statements beginning in the third quarter of 2006.

SOURCE Directed Electronics, Inc.

John D. Morberg, Vice President - Finance and Chief Financial Officer, or Kevin

Duffy, Sr. Vice President - Strategy, Corporate Development and Investor Relations,

both of Directed Electronics, Inc., +1-760-598-6200; or John Mills or Allyson Pooley,

both of Integrated Corporate Relations, +1-310-954-1100, for Directed Electronics,

Inc.

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[///M5 2,833]

Who else can they buy, jeez.

[Scarenius 0]

One more brand name I totally lost interest in. *shrugs*

[PaulD 0]

mega companies are the in thing these days

[KickinAudio 5]

Whats wrong with buying other companies?

[CBFryman 2]

I never throught polk or DEI was all to amazing in the first place.

[Eldorado 0]

x2

was never a fan of either

[Eldorado 0]

Whats wrong with buying other companies?

<{POST_SNAPBACK}>

Usually the quality degrades

[flakko 1]

you know what that means right? look for huge polk discounts in the future

[Eldorado 0]

Only thing worth buying was their component set

[CBFryman 2]

Only thing worth buying was their component set

<{POST_SNAPBACK}>

[CBFryman 2]

Looking for a smiley to fit the bill I hop to Gimp.

[dave_Edwards 1]

I hope that means the SR series comps are gonna get cheaper!!!

[Aaron Clinton 2,372]

I have always have had a little thing for Polk, there are from here and I have always been a fan of their home audio speakers. Wanted to try the SR5600's but do not have the cash, maybe their amplifers will come down in price too, since I never understood if they were worth the money or not.

[CBFryman 2]

Heh, I'd like to pick up one of their nice componet sets. I'd just like a nice componet set. The girl teases me because I salivate over a $1200 Diamond Audio set at the local shop. Complete with actice Xovers and Mohogony (sp?) case with with purple velvet inside.