KBL Healthcare Acquisition Corp. II to acquire Summer Infant Inc. Infant Health, Safety & Wellness September 18, 2006 Exhibit 99.3 |
2 Road Show Presentation The attached slide show was filed with the Securities and Exchange Commission as part of the amendment to Form 8-K filed by KBL Healthcare Acquisition Corp. II with the Securities and Exchange Commission on September 19, 2006 (“8K Amendment”). KBL is holding presentations for certain of its stockholders, as well as other persons who might be interested in purchasing KBL’s securities, regarding its acquisition with Summer Infant, Inc. and affiliated companies, as described in the September 5, 2006 8-K filing as amended by the 8-K Amendment. The attached slide show, as well as the September 5, 2006 8-K filing as amended by the 8-K Amendment, are being distributed to attendees of these presentations. Earlybird Capital, Inc. ("EBC"), the managing underwriter of KBL Healthcare's initial public offering ("IPO") consummated in April 2005, is assisting KBL Healthcare in these efforts without charge, other than the reimbursement of its out-of-pocket expenses, although EBC will be paid a cash fee at the closing of the acquisition equal to one percent (1%) of the consideration paid in the acquisition. KBL Healthcare and its directors and executive officers and EBC may be deemed to be participants in the solicitation of proxies for the special meeting of KBL Healthcare stockholders to be held to approve the acquisition. Stockholders of KBL Healthcare and other interested persons are advised to read, when available, KBL Healthcare's preliminary Proxy Statement and definitive Proxy Statement in connection with KBL Healthcare's solicitation of proxies for the special meeting because these proxy statements will contain important information. Such persons can also read KBL Healthcare's final Prospectus, dated April 21, 2005, for a description of the security holdings of KBL Healthcare’s officers and directors and of EBC and their respective interests in the successful consummation of this business combination. The definitive Proxy Statement will be mailed to stockholders as of a record date to be established for voting on the acquisition. Stockholders will also be able to obtain a copy of the definitive Proxy Statement, without charge, by directing a request to: KBL Healthcare Acquisition Corporation II, 757 3rd Ave, New York, NY 10017. The preliminary Proxy Statement and definitive Proxy Statement, once available, and the final Prospectus can also be obtained, without charge, at the Securities and Exchange Commission's internet site (Http://www.sec.gov). |
3 Safe Harbor This presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about KBL, Summer and their combined business after completion of the proposed acquisition. Forward-looking statements are statements that are not historical facts. Such forward-looking statements, based upon the current beliefs and expectations of KBL’s and Summer’s management, are subject to risks and uncertainties which could cause actual results to differ from the forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: business conditions; changing interpretations of generally accepted accounting principles; outcomes of government reviews; inquiries and investigations and related litigation; continued compliance with government regulations; legislation or regulatory environments; requirements or changes adversely affecting the businesses in which Summer is engaged; fluctuations in customer demand; management of rapid growth; intensity of competition from other providers of infant health, safety and wellness products; general economic conditions; geopolitical events and regulatory changes; as well as other relevant risks detailed in KBL’s filing with the Securities and Exchange Commission, including its reports on Form 10-QSB. The information set forth herein should be read in light of such risks. As well, Summer’s financial information were prepared by Summer as a private company, in accordance with U.S. generally accepted accounting principles, and may not conform to SEC Regulation S-X. Accordingly, such historical information may be adjusted and presented differently in KBL’s proxy statement to solicit stockholder approval of the acquisition. Neither KBL nor Summer assumes any obligation to update the information contained in this presentation. |
4 Summer Infant is a leading designer of innovative, branded infant health, safety and wellness products that is well-positioned to deliver continued strong organic growth and to implement a focused acquisition strategy |
5 Summer Investment Highlights • Experienced, proven management team with demonstrated expertise in product development/ innovation • Emerging brand and strong relationships with major retailers including: Babies “R” Us, Target, K-Mart, Baby Depot, Buy Buy Baby, Wal-Mart, MotherCare • Rapid Sales and EBITDA growth – 2005 Net Sales: $35.4 million, up >65% from 2004 – 2005 EBITDA: $2.1 million, up ~50% from 2004 – 1H ‘06 Net Sales: $26.1 million, up >55% from 1H ‘05 – 1H ‘06 EBITDA: $2.5 million, up ~150% from 1H ‘05 • Well-positioned in a $12 billion, expanding global industry that is ripe for acquisitions/consolidation • Attractive valuation These numbers were obtained using private company accounting, are unaudited and subject to change |
6 The Transaction • KBLH/Summer Infant business combination pending – Acquisition agreement signed September 2006 – Expected closing late 2006/early 2007 • Terms of the transaction – $20.0 million cash – 3,916,667 KBLH common shares (locked-up through April 2008) • Worth ~$21.2 million at KBLH closing stock price of $5.42/share on September 15, 2006 – Assumption or repayment of outstanding net debt at closing • Balance of ~$10.1 million at June 30, 2006 – Future contingent payments • 50% of EBITDA in excess of $4.2mm for 2006, $10.0 million for 2007 and $15.0 million for 2008 (payable in cash; payments capped at $5 million total) • 2.5 million KBLH common shares if post-acquisition stock price closes above $8.50 for 20 out of 30 days prior to April 2009 |
7 Post-Transaction Cap Table 100 15,116,667 Total 61 9,200,000 2 KBL Investors 1 Does not include contingent payments 2 Does not include warrants or underwriter purchase option and assumes no KBL stockholder conversions in the transaction 13 2,000,000 KBL Management 26 3,916,667 1 Summer Shareholders % Common Shares Holder |
8 Infant Health, Safety & Wellness • 90% of products fall under healthcare classification (preventive or diagnostic) defined by the Department of Health and Human Services* • Majority of children’s deaths occur in first year and >80% of children’s deaths of those under 15 years old occur before age 5 – According to the NIH, Accidents are, by far, the leading cause of death among children and adolescents. (2003) • Summer’s baby care products are subject to rigorous certification and testing ensuring high quality standards – Food and Drug Administration (FDA) – Consumer Product Safety Commission – Juvenile Products Manufacturers Association (JPMA) – American Society for Testing Materials (ASTM) *http://www.cms.hhs.gov/apps/hipaa2decisionsupport/CoveredEntityFlowcharts.pdf |
9 Summer Infant “Delivering the best for you and your baby” • Designs and markets proprietary baby products under the Summer brand • Innovation & new product development fueling market share gain – Significant number of products are patent-protected • Excellent customer relationships • Emerging brand gaining retailer & consumer momentum • Experienced management team with scalable infrastructure • $12 billion worldwide baby products industry – Durables segment - $4 billion worldwide, Summer currently competes in ~25% – Stable and growing - tied to births, new parents with higher disposable incomes and desire to provide the best for their babies (regardless of cost) |
10 Company History 2001 & 2002 Founded in autumn Purchased name and bouncer product molds Initial Sales to Babies “R” US New Products: Thermometers, grooming aids, audio/video monitors Net Sales: 2002 - $6M 2003 Added retailers Baby Depot, Buy Buy Baby, One Step Ahead New Products: Bed Rails, gates, bath products Started Summer Europe Net Sales: $18M 2004 Added retailers Target, JCPenny, Toys “R” US Canada, The Right Start, Meijer New Products: Booster seats, safely aids, further expansion within existing categories Net Sales: $21M 2005 Added Retailers: K-Mart, Sears, Sears Canada, U.S. Military PXs, Mothercare, Tesco New Products: Handheld video monitor, new gates, new bed rails, new baby baths, new potty seat Net Sales: $35M 2006 Added Retailers: Wal-Mart.com, Argos New Products: Soft goods, further expansion within existing categories Net Sales: 1H ’06 - $26M These numbers were obtained using private company accounting, are unaudited and subject to change |
11 Innovative Products • Focus on new product development – Experienced product development team – Plan to introduce 15-20 new products annually • First or early to market with: – Handheld video monitor – Double-sided bed rail – Audible alarmed gate – “Grow with me” ear thermometer – Baby bath spa & shower • 40% market share in the high-growth video monitor segment • The majority of products have FDA, Consumer Product Safety Commission and JPMA approval • Products sold through major retailers & infant specialty stores in the US, Canada & the UK • US industry sales concentrated through 7 -10 retailers |
12 Diverse Product Mix (as a % of 2005 Net Sales) 28% 19% 27% 9% 8% 9% Gates Monitors Bath Medical Rails Seats, Bouncers & Other |
13 Sales and Marketing • Market directly to retail chain buyers – Management & sales force has long-standing relationships with key buyers – Significant recurring revenue – Every major customer increased purchases in 2006 over 2005 • Early commitments from retailers lead to strong sales visibility – Buying decisions primarily made in the summer for next calendar year purchases – Purchase commitments are for one year • Very little seasonality |
14 Strong Customer Relationships Argos Sainsbury Europe North America |
15 Operational Infrastructure Scalable, low cost business model Suburban London European operations HQ - North Smithfield, RI Electronics and QC - Shunde China R&D Approximately 70-80 worldwide Employees Leased facilities in Rhode Island, California, Suburban London Warehousing North Smithfield, RI (new HQ in Woonsocket, RI to be completed in Q1’07) Headquarters 80% in Southern China 20% in Massachusetts Manufacturing |
16 Management 31 years experience; GE Healthcare, Organogenesis VP Operations Paul DiCicco 20 years experience; Safety 1 st (CFO), Staples, KPMG Peat Marwick Chief Financial Officer Joseph Driscoll Dorel, Dolly, Inc., and Gibson Greetings VP of Sales William Basset 10 years experience; The First Years VP Quality & Assurance Anthony Paolo Financial positions with Trammell Crow, Action Automation and Controls VP Finance & IT Mark Gorton 20 years industry experience; Safety 1 st VP Research & Development Brian Sundberg 20 years industry experience; Mothercare, Dorel Juvenile Group Europe VP European Operations Rachelle Harel 20 years experience; Little Kids, Inc., Safety 1 st , Hasbro SVP Product Development Steve Gibree Founder; 20 years experience; Safety 1 st , CR Bard, & Hasbro CEO, President, Principal Owner Jason Macari Background Title Management |
17 Rapid Growth in Sales & EBITDA 2002-1Q’06 RR CAGR: Net Sales = 74% , EBITDA = 171% $000; unaudited These numbers were obtained using private company accounting, are unaudited and subject to change Net Sales CAGR = 82% EBITDA CAGR = 158% Net Sales increase = 57% EBITDA increase = 147% $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 2002A 2003A 2004A 2005A 1H '05 1H '06 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 Net Sales (000) EBITDA (000) |
18 Multiple Growth Drivers • Summer positioned to continue to grow much faster than the overall market – Organic growth • New products • Increased product penetration (more products at each customer) • Broadened mass merchant distribution (more stores) • Increased store penetration (more stores with existing customers) • Additional retail relationships, e.g. large food and drug chains, price clubs, home centers, web-based retailers • International expansion • Increased operating efficiencies – Opportunistic acquisitions that provide access to innovative products, new product categories, new retailers, new geographies and/or new brands |
19 Acquisition Opportunities • Opportunity for Summer to be consolidator – Strong balance sheet – Relationships with mass merchants – Experienced product and management team • Large and fragmented market: ~ 400 infant product companies – ~ 5-10 are $250 million - $1 billion – ~ 20-30 are $50 million- $250 million – ~ 30-50 are $10 million - $50 million – ~ 300+ are under $10 million • Summer’s products currently address less than 10% of the $12 billion market • Summer currently does not compete in the following large and growing segments of the market: – Baby mobility - strollers, car seats, travel systems – Baby gear - play yards, high chairs, swings, walkers, etc. – Nursery care - feeding & accessories, nursery needs – Soft goods - bedding, blankets, bedding sets, etc. |
20 Investment Conclusion • Simple, scalable business with rapidly growing sales & profits with good visibility • Increasing market share due to: – Innovative designs – Superior product quality – Strong value proposition – New product introductions – Strong relationships with major retailers • Experienced, proven management team • Organic and acquisition-based growth opportunities available • Enhanced financial position |
21 Appendix |
22 Summer Products 02090 Day & Night Color Handheld Video Monitor First to give moms and dads handheld portability 02170 Secure Sounds™ 2.4 GHz Digital Monitor - Secure and private audio transmissions 02180 Baby’s Quiet Sounds™ Video Monitor - Leading video monitor on the market 07160 Custom-Fit Gate - First gate to accommodate openings up to 12’ 07030 Sure and Secure™ Top-of-Stairs Gate with Alarm - Audible alarmed gate for added safety 08190 Soothing Spa and Shower Baby Bath - The first whirlpool tub for baby |
23 Summer Products 08160 Mother’s Touch™ Large Comfort Bather - The perfect alternative to bathing bigger babies 01350 Deluxe Soft Embrace™ Comfort Bouncer- The next best thing to being cradled in mom’s arms 12020 Sure and Secure™ Double Bedrail - Double protection and fully assembled 08040 Newborn-to-Toddler Bath Center & Shower -The first baby bath with a clean rinse shower 04520 Deluxe Baby Essentials Kit Everything baby needs for a healthy start 03200 “Grow with Me” Ear Thermometer - fast & accurate temperature readings with no fuss in about 1 second |
24 Competition Fisher-Price, Safety 1 st , The First Years, Kids II Small Furniture Safety 1 st , The First Years, Braun, Vicks Infant Health Evenflo, KidCo, North States, Safety 1st Gates Fisher-Price, Kids II, Graco, Safety 1 st Bouncers Safety 1 st , The First Years, Regalo, Dex Products Bed Rails The First Years, Fisher-Price, Safety 1 st , Evenflo Baby Bath Safety 1 st , Bebe Sounds, Mobi A/V Monitor |
25 Select Industry Transactions • MGA Entertainment, Inc. acquiring Little Tikes (announced September 2006) • Prentice Capital Management, L.P. and D.E. Shaw Laminar Portfolios, L.L.C. purchase 42.2% of Russ Berrie and Company, Inc. (NYSE: RUS) (completed August 2006) • 3i Group plc (LSE: III) acquires Mayborn Group plc (AIM: MBY) (announced May 2006) • Royal Philips Electronics (NYSE:PHG, AEX:PHI) acquires AVENT Holdings Ltd. (announced May 2006) • JAKKS Pacific, Inc. (NASDAQ: JAKK) acquires Creative Designs International, Ltd. (completed February 2006) • The Carlyle Group acquires Britax Childcare (completed September 2005) • Russ Berrie and Company, Inc. (NYSE: RUS) acquires Kids Line, LLC (completed December 2004) • RC2 Corporation (NASDAQ: RCRC), acquires The First Years, Inc. (NASDAQ: KIDD) (completed September 2004) • Harvest Partners acquires Evenflo Company, Inc. (completed August 2004) • Dorel Industries, Inc. (TSE: DII.A, DII.B; NASDAQ: DIIBF) acquires The Ampa Group (Bebe Comfort) (announced January 2003) • Russ Berrie and Co., Inc. (NYSE: RUS) acquires Sassy, Inc. (completed September 2002) • Dorel Industries, Inc. (TSE: DII.A, DII.B; NASDAQ: DIIBF) acquires Safety 1st, Inc. (NASDAQ: SAFT) (completed June 2000) • Playtex Products, Inc. acquires Diaper Genie business (completed January 1999) • Graco Children’s Products, Inc. acquires Century Products Company (announced May 1998) • Evenflo Company, Inc. acquires Gerry Baby Products Co. (completed April 1997) • Rubbermaid, Inc. acquires Graco Children’s Products, Inc. (completed October 1996) • Mattel, Inc. (NYSE: MAT) acquires Fisher-Price, Inc. (completed November 1993) |
26 Public Market Comparables |
27 Recent Transaction Multiples |
28 KBL Healthcare Acquisition Corp. II • A Specified Purpose Acquisition Company (“SPAC”) designed to provide a profitable investment in a health-related company • Each KBLH unit, issued at $6.00, consists of one share of common stock and two warrants – Cash per share in trust at 6/30/06 of approximately $5.57/share ($51.2 million in trust at 6/30/06); increases with additional interest earned • Lockup of insider shares until April 2008 |
29 About KBL • KBL Founders Also Run KBL Healthcare Ventures – ~$94mm venture capital fund – L.Ps include Novartis, Allianz, PA State Teachers Retirement System, William Blair, Others – Representive investments include • Lumenos: sold to Wellpoint for $185mm • Spinal Concepts: sold to Abbott for $180mm • KBL Healthcare Acquisition Corp. I (prior SPAC) – IPO in March 1993 raised $17.5 mm gross proceeds – Merger with Concord Health Group, a long-term care/assisted living company in August 1994 – Concord sold for cash to Multicare Companies in February 1996 – Investors in KBL IPO realized 34.7 % IRR |
30 The KBL Team • Zachary Berk – Chairman and President – Managing Director/founder of KBL Healthcare Ventures • Founder: Prolong Pharmaceuticals, Lumenos, Transgenic Sciences (now part of Genzyme) • Chairman: Prolong Pharmaceutiocals • B.S. and Doctorate of Optometry from Pacific University • Marlene Krauss, M.D. – CEO, Secretary and Director • Managing Director/founder of KBL Healthcare Ventures • Founder/seed financed: Lumenos (sold to Wellpoint for $185mm), Summit Technology (sold to Alcon for $900mm), Candela Laser (CLZR), Cambridge Heart (CAMH) • Board Member: Cardio Focus, PneumRx, Prolong Pharmaceuticals • B.S. Cornell University, M.B.A. Harvard University( Alumni Achievement Award), M.D. Harvard Medical School (vitreoretinal surgeon) • Michael Kaswan – COO and Director • Managing Director of KBL Healthcare Ventures • Founder: Lumenos • Board Member: Scandius, Remon • BS University of Virginia, MBA Harvard Business School |