SUPVA Super Vision International (MM)

Super Vision International, Inc. (NASDAQ:SUPVA) (Class A Common), a world leader in solid-state LED and fiber optic lighting systems and controls used in commercial, architectural, signage, swimming pool and retail lighting applications today announced financial results for the first quarter ended March 31, 2006. Total revenue for the quarter was approximately $2.7 million, down 7% or $204,000 from approximately $2.9 million in the first quarter of 2005. Revenues were up 20% in our Pool and Spa division driven by market share gains and stronger demand for both LED and fiber optic/water feature products heading into the historically stronger spring and summer pool season. However, this increase was offset by lower revenue in our commercial and international divisions due to the timing of several large project-based shipments and lower sales in Asia and the United Kingdom. Commercial lighting sales were down 18% and international sales were down 28%, respectively, as compared to the same period in 2005. LED sales accounted for 48% of the company's total revenue, while fiber optic sales accounted for 46% and waterfall/water feature products represented 6% of overall revenue. "March commercial and international shipments were slower than we had planned, after solid sales growth in January and February, due to the timing of releases stemming from extended construction schedules. However, our sales efforts remain very strong and with production in place for our new award winning SaVi(TM) SHO floodlight, and new international distributor relationships being solidified after the Light + Building tradeshow in Frankfurt, Germany last month, we are optimistic about our commercial and international business for the balance of 2006," stated Mike Bauer, President and CEO of Super Vision. "We are very pleased with the results of our Pool and Spa lighting division during this quarter and with the ramp up of our new SaVi(TM) Pool and Spa lights as we head into the pool season, we feel these new products along with our new Symphony of Light(TM) product will continue to drive growth for the division." "Operationally, we launched our new web site, http://www.svision.com, and we successfully implemented a new CRM (Customer Relations Management) system that is integrated with our order processing, production and invoicing system to better serve our customers. We also continued to invest in our new product development efforts and installed a new state-of-the-art communications system at a lower operating cost. As we continue to transform and begin to grow the company, we expect to be in a stronger position to meet our customer's needs," continued Bauer. Gross margin in the first quarter was 36%, down from 41% in the same quarter of 2005. Direct gross margin, which is revenue less material costs, improved to 60% in Q1 of 2006 compared to 59% in the same period of 2005, as the company continues to make material cost reductions a major focus of its operational efforts. However, this improvement could not compensate for the impact of lower revenue and less absorption against fixed labor and overhead costs that directly impact gross margin. Dan Regalado, the Company's Executive Vice President and Chief Financial Officer stated, "Despite lower overall gross margins for the quarter driven by lower revenues to absorb fixed manufacturing overhead expenses, we are pleased with the improvement in our direct gross margins for the period. This improvement was driven mainly from material cost reductions in our LED product lines, which have now surpassed fiber optics as the main source of revenue for the company. We are also encouraged to see direct gross margins from our largest revenue market, pools & spas, improve substantially compared to the same quarter of 2005. When commercial and international revenue begin to improve, gross margin should also improve." Operating expenses in the first quarter of 2006 were approximately $1.37 million compared to $1.27 million in the same quarter of 2005. The increase in operating expenses was primarily due to the recording of stock-based compensation upon adoption of FAS123R Share Based Payment, increased wages and benefits and increased R&D expense, offset by lower selling expenses related to lower commissions paid against a lower sales base and lower legal expenses in 2006 compared to the same period in 2005. We expect to see increased R&D expenses through the balance of the year as we continue to expand our LED product development activities aimed at positioning Super Vision at the forefront of the industry in high wattage applications. As a result of the increased operating expenses and lower revenue, Super Vision reported a net loss of approximately $396,000 or $0.16 per common and diluted share for the first quarter of 2006 compared to a net loss of approximately $145,000 or $0.06 per common and diluted share in the same quarter of 2005. EBITDA, which is Earnings Before Interest, Taxes, Depreciation and Amortization, is a non-GAAP measure which management uses as part of its performance appraisal in reviewing the Company's ongoing operational business trends related to its financial condition and results of operations. For the quarter ended March 31, 2006, EBITDA was a loss of approximately $154,000 compared to income of approximately $86,000 in the same period of 2005. The Company had cash and investments of approximately $1.05 million and working capital of $3.81 million at March 31, 2006. About Super Vision International, Inc. Super Vision International's vision is to incorporate Light, Color and Imagination with advanced technology to become one of the world's leading suppliers of lighting and lighting control products that add visual excitement, accent, impact and identity to commercial and residential lighting projects around the world. For more information, please visit the Super Vision web site at http://www.svision.com. Certain of the above statements contained in this press release are forward-looking statements that involve a number of risks and uncertainties. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Reference is made to Super Vision's filings under the Securities Exchange Act for factors that could cause actual results to differ materially. Super Vision undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those indicated in the forward-looking statements as a result of various factors. Readers are cautioned not to place undue reliance on these forward-looking statements. -0- *T Super Vision International, Inc. Condensed Statements of Operations (Unaudited) Three Months Ended March 31, 2006 2005 ----------- ----------- Revenues $2,679,667 $2,883,756 Cost of sales 1,708,140 1,691,526 ----------- ----------- Gross margin 971,527 1,192,230 Operating expenses: Selling, general and administrative 1,197,115 1,165,165 Research and development 169,884 107,602 ----------- ----------- Total operating expenses 1,366,999 1,272,767 ----------- ----------- Operating loss (395,472) (80,537) Non-Operating Income (Expense): Interest income 11,742 9,892 Interest expense (87,312) (94,386) Other income 74,621 19,721 ----------- ----------- Total non-operating income (expense) (949) (64,773) ----------- ----------- Net loss $ (396,421) $ (145,310) =========== =========== Net Loss Per Common Share: Basic and diluted $ (0.16) $ (0.06) =========== =========== Weighted average shares outstanding: Basic and diluted 2,544,670 2,542,078 *T -0- *T Selected Consolidated Balance Sheet Data Unaudited Audited As of ----------------------- March 31, December 31, 2006 2005 Cash and Investments $1,051,007 $1,274,150 Current Assets $6,385,566 $6,311,190 Total Assets $9,480,578 $9,323,808 Current Liabilities $2,577,789 $1,995,530 Total Liabilities $4,809,141 $4,288,386 Total Shareholders Equity $4,671,437 $5,035,422 *T -0- *T Reconciliation of Non-GAAP Financial Measure The following table reconciles GAAP to non-GAAP financial measure: Earnings Before Interest Taxes Depreciation and Amortization (EBITDA) (Unaudited) Quarter Ended March 31, ---------------------------------------- 2006 2005 Change % ---------------------------------------- Net Loss $(396,421) $(145,310) $(251,111) (173%) Plus: Interest 87,312 94,386 (7,074) (7%) Depreciation 142,017 126,650 15,367 12% Amortization 13,046 10,611 2,435 23% - - - - ---------------------------------------- EBITDA $(154,046) $ 86,337 $(240,383) (278%) ======================================== % of Revenues (6%) 3% ==================== *T