KBL Healthcare Acquisition Corp. II (OTC BB: KBLH / KBLHU / KBLHW) to acquire Summer Infant, Inc. Infant Health, Safety & Wellness January 9, 2007 Exhibit 99.3 |
Road Show Presentation The attached slide show was filed with the Securities and Exchange Commission (“SEC”) as part of the amendment to Form 8-K filed by KBL Healthcare Acquisition Corp. II (“KBL”) with the SEC on January 9, 2007 (“8-K Amendment No. 5”). 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 8-K Amendment No. 1 filed September 19, 2006, 8-K Amendment No. 2 filed October 23, 2006, 8-K Amendment No. 3 filed October 23, 2006, 8-K Amendment No. 4 filed November 16, 2006 and 8-K Amendment No. 5. The attached slide show, as well as the September 5, 2006 filing as amended by the 8-K Amendments are being distributed to attendees of these presentations. Earlybird Capital, Inc. ("EBC"), the managing underwriter of KBL's initial public offering ("IPO") consummated in April 2005, is assisting KBL 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 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 stockholders to be held to approve the acquisition. Stockholders of KBL and other interested persons are advised to read KBL's preliminary Proxy Statement filed with the SEC on October 23, 2006, amended preliminary Proxy Statement filed with the SEC on December 12, 2006 and, when available, definitive Proxy Statement in connection with KBL's solicitation of proxies for the special meeting because these proxy statements will contain important information. Such persons can also read KBL's final Prospectus, dated April 21, 2005, for a description of the security holdings of KBL’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, 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 SEC's internet site (http://www.sec.gov). 2 |
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, some of Summer’s financial information was 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. 3 |
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 4 |
Summer Investment Highlights • Large, growing industry with favorable dynamics • Proven management team with excellent track record • Emerging brand, strong relationships with major retailers • Rapid sales and EBITDA growth – historical and projected $0 $25,000 $50,000 $75,000 2004 Actual 2005 Actual 2006 Guidance 2007 Guidance $0 $2,000 $4,000 $6,000 $8,000 2004 Actual 2005 Actual 2006 Guidance 2007 Guidance Net Sales (000) EBITDA (000) 50-53% CAGR 101-105% CAGR High Low High Low 5 |
The Transaction • KBLH/Summer Infant business combination pending – Acquisition agreement signed September 2006 – Expected closing late February or early March 2007 • Purchase price = $53.6 million + contingent payments – $20.0 million in cash – $21.9 million in KBLH common shares, locked up to April 2008 (3,916,667 shares valued at $5.59 closing price on 1/5/07) – $11.7 million in assumed debt (balance at 9/30/06) – Future contingent payments: • 50% of EBITDA in excess of $4.2mm, $10.0mm, $15.0mm for 2006, 2007, 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 • Attractive valuation for rapid-growth consumer products co. – Current year multiples: 0.7-0.8x sales, 6.7-7.1x EBITDA – Prior year multiples: 1.0x sales, 10.7x EBITDA 6 |
Post-Transaction Cap Table 1 Does not include contingent payments 2 Does not include underwriter purchase option and assumes no KBL stockholder conversions in the transaction 3 Warrants calculated using the treasury method and a $5.59 KBLH stock price (closing price on January 5, 2007) 100.0 17,059 Fully-Diluted Shares 11.4 1,942 Warrants 2,3 88.6 100.0 15,117 Common Shares 53.9 60.9 9,200 KBL Investors 2 11.7 13.2 2,000 KBL Management 23.0 25.9 3,917 Summer Shareholders 1 % Diluted % Common Shares (000) Holder 7 |
Summer Infant “Delivering the best for you and your baby” • Competes in large, growing infant and juvenile products industry • Designs and markets proprietary products under the Summer brand • Unique positioning at the high-end of the mass market based on product innovation and new product development • Excellent mass merchant customer relationships • Emerging brand known by retailers and gaining consumer momentum • Experienced management team and scalable infrastructure; can support much larger company 8 |
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, U.S. Military PXs, Mothercare, Tesco New Products: Handheld video monitor, new gates, new bed rails, new baby baths, new potty seat 2006 Added Retailers: Sears, Sears Canada, Wal-Mart.com, Amazon.com, Argos New Products: Soft goods, further expansion within existing categories 9 $36M (guidance) Net Sales: Net Sales: $52-53M |
The Juvenile Products Industry • Industry is estimated to be $12 billion worldwide – Durable goods (Summer’s business) represents $4 billion – Summer’s current categories represent $1 billion • Favorable demographics drive above-average growth – Baseline demand supported by annual births (4mm/yr in US) – Sales per child increasing due to: • Increase in disposable income associated with trend towards having children later in life • Consumer focus on quality, safety, innovation and style; spending priority for consumers – reinforced by media and legislation • “Grandparent effect”, second homes, mobile lifestyles – Strong retailer commitment to expand shelf space • Category is popular, profitable and repeat purchase-driven • Wal-Mart, Target, Amazon.com have announced new initiatives • Few pure-play investment opportunities available, particularly with significant growth 10 |
Differentiated Products • Strategy driven by product innovation – Internal product development and engineering team creates majority of new products (15-20 per year) – Supplemented via opportunistic external sourcing • Products deliver incremental value to consumers – Ability to command higher price points; leads to higher revenue & margin potential for Summer and its retail customers • Continuous product innovation reduces competitive risk – Do not compete on price – Products are unique and highly-engineered – Several products also protected by patents & trade secrets – Retailers loyal to product innovators that drive sales – Have yet to experience significant erosion due to competition • Currently hold strong/dominant share in higher-end of monitor, gate and bath categories in mass merchant channel – Plan to replicate strategy in other categories 11 |
Diverse Product Mix (as a % of 3Q YTD ‘06 Net Sales) Monitors Gates Bath Bed Rails Medical/Infant Health Seats, Bouncers & Other 35% 17% 29% 8% 6% 5% • Mix will further diversify in the future with new products • Margins tend to be strongest in highest-volume products, regardless of category 12 |
Sales and Marketing • Products sold through major retailers and infant specialty stores in the US, UK & Canada • US industry sales concentrated through 7-10 retailers • Market directly to retail chain buyers – Management & sales force have long-standing relationships with key buyers – Significant recurring revenue – Every major customer increased purchases in 2007 over 2006 • 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 13 |
Strong Customer Relationships Europe North America 14 |
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 15 |
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 and Gibson Greetings VP of Sales William Basset 10 years experience: The First Years VP Quality & Assurance Anthony Paolo 17 years experience: Dorel/Safety 1 st , Mattel, Eden Toys, Russ Berrie VP Marketing Lois DiMartinis 20 years industry experience: Safety 1 st VP Research & Development Brian Sundberg 20 years experience: Mothercare, Dorel Juvenile Group Europe VP European Operations Rachelle Harel 20 years experience: Little Kids, Safety 1 st , Hasbro EVP Product Development Steve Gibree Founder; 20 years experience: Safety 1 st , CR Bard, & Hasbro CEO, President, Principal Owner Jason Macari Background Title Management 16 |
Post-Closing Board of Directors EVP Product Development, Summer Infant Steve Gibree Former President of New Business Development, Hasbro and former President, Hasbro - Playskool Baby division Robert Stebenne Former President, Safety 1 st ; former partner, DB Capital; former board member: The First Years, Radica, Jenny Craig Richard Wenz Former Professor, Harvard Business School, Co-founder, Staples; current board member: Office Depot, Royal Ahold Myra Hart Former SVP and General Merchandise Manager, Toys R Us and Babies R Us; former President, Baby Trend Martin Fogelman CEO, Summer Infant Jason Macari CEO, KBL Healthcare Acquisition Corp. II Marlene Krauss, Chairperson Background Name 17 |
Multiple Growth Drivers • Summer positioned to continue to grow much faster than the overall market – Organic growth • Increased product penetration (more products at each store) • Increased store penetration (more stores within each chain) • New products (at existing and new customers) • New mass merchant customers (new retail chains) • New channels (food and drug chains, price clubs, home centers, additional web-based retailers) • New geographies (international expansion) • Increased operating efficiencies – Opportunistic acquisitions that provide access to innovative products, new product categories, new retailers, new geographies and/or new brands 18 |
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 19 |
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 20 |
Appendix 21 |
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 22 |
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 23 |
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 Monitors 24 |
Select Industry Transactions • MGA Entertainment, Inc. acquires Little Tikes (completed November 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) 25 |
Public Market Comparables 26 |
Recent Transaction Multiples 27 |
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 28 |
KBL Healthcare Acq. 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 9/30/06 of approximately $5.61/share ($51.7 million in trust at 9/30/06); increases with additional interest earned • Lockup of insider shares until April 2008 29 |
About KBL • 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 • KBL Founders Also Run KBL Healthcare Ventures – ~$94mm venture capital fund – L.Ps include Novartis, Allianz, PA State Teachers Retirement System, William Blair, Driehaus Cap’l, Others – Representive investments include • Spinal Concepts: sold to Abbott for $180mm in July 2003 • Lumenos: sold to Wellpoint for $185mm in June 2005 • Achillion Pharmaceuticals: successful IPO in October 2006 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 & CEO: 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 (Chairman), Remon Medical • BS University of Virginia, MBA Harvard Business School 31 |