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 third quarter and nine months ended September 30, 2006. Total revenue for the quarter was approximately $2.8 million, down 9% or $290,000 from approximately $3.1 million in the third quarter of 2005. Revenues were down 4% for both the Commercial lighting and Pool and Spa lighting divisions driven by lower sales of fiber optic products. International revenue saw a 25% decrease as compared to the same period in 2005. However, LED sales were up 70% or $188,000 in Commercial lighting for the quarter compared to the same period in 2005 and Pool and Spa LED sales were up $55,000 or 9% as sales of our new SaVi� brand lighting products continue to gain market acceptance. Overall, revenue from fiber optic sales in the third quarter decreased by 24%, or approximately $367,000 offset in part by a $99,000 or 7% increase in revenue from sales of our LED lighting systems. Fiber optic sales decreased mainly due to the timing of project releases in the Commercial market and lower demand for fiber optics in the Pool and Spa market for the quarter. International sales continued to see significantly lower revenues in both fiber optics and LED products in three major territories for the Company; the United Kingdom, the Middle East and China as the Company transitions to new distributors in these markets. This revenue decline was slightly offset by higher sales in Mexico and Europe. Gross margin for the quarter ended September 30, 2006 was approximately $1,056,000 or 38% as compared to approximately $1,279,000 or 41% for the quarter ended September 30, 2005. The decrease in gross margin for the quarter was mainly due to the 24% decline in revenue from higher gross margin fiber optic sales compared to the same period in 2005. Additionally lower revenues for the period did not absorb our fixed cost of sales at the same rate thus resulting in a lower gross margin in the third quarter of 2006. Direct gross margin, which is revenue less material cost, was 58% for the third quarters of both 2006 and 2005 despite the decrease in revenue from fiber optic products. Management continues its focus on material cost reductions especially in the Company�s LED product lines where a majority of revenue came from in the third quarter of 2006. Operating expenses in the third quarter of 2006 were approximately $1.4 million compared to $1.2 million in the same quarter of 2005. The increase in operating expenses was primarily due to increased legal and professional fees and commission expense offset by lower wages and benefits and lower R&D expenses as new products were completed compared to the same period in 2005. As a result of the increased operating expenses and lower revenue, Super Vision reported a net loss for the three months ended September 30, 2006 of approximately $383,000, or $0.15 per basic and diluted common share, as compared to net income of approximately $21,000, or $0.01 per basic and diluted common share, for the quarter ended September 30, 2005. �Although our LED business in the U.S. continues to grow and we are seeing significant traction from our new SaVi products, the softness in our fiber optic business, especially in the international market, could not be offset in the period. We believe that the major cost reduction efforts we implemented in July and August, including a 19% reduction in overall workforce will begin to fully impact our financial results in the 4th quarter and we are acutely focused on increasing our revenue while reducing our inventory and controllable expenses,� stated Mike Bauer, President and CEO of Super Vision. �Overall, we are flat year over year in both our Commercial and Pool and Spa divisions and down in our international business, where the decrease in sales is tied to three specific markets, two of which are markets where we changed distributors. However, our LED sales are up 21% year over year in the commercial market and our new SaVi products are beginning to gain momentum. We feel we are making progress in expanding the breadth of our product line to capitalize on the growing demand for LED lighting systems,� continued Bauer. Total revenues for the nine months ended September�30, 2006 were approximately $8,617,000 as compared to approximately $9,180,000 for the nine months ended September 30, 2005, a decrease of 6%. Year to date revenue in both the Commercial lighting and Pool and Spa lighting division was virtually flat with 2005, while sales through the international channel were down 23%, or approximately $543,000, for the nine month period, driving the overall decrease as compared to the same period in 2005. Commercial lighting sales, which were down 18% at the end of the first quarter of 2006, were behind by approximately $17,000 or 1% for the first nine months of 2006 compared to the same period in 2005. A 21% increase in the sale of LED lighting products and systems offset decreased sales in fiber optic lighting for the nine month period. Pool and Spa sales were also flat for the nine months ended September 30, 2006 over the same period in 2005, with sales of new products and market share gains offsetting a softer overall market related to the downturn in residential construction in the U.S. Gross margin for the first nine months of 2006 was 42%. Excluding the benefit of a $240,000 legal settlement in the second quarter of 2005, gross margin for the nine months ended September 30, 2005 was 41%. The slight increase in comparative gross margin for the nine months ended September 30, 2006 over the comparative period in 2005, excluding the one time legal settlement, resulted primarily from lower material costs and the capitalization of labor, overhead and freight on higher inventory balances at September 30, 2006 brought about by higher purchases during the second quarter compared to the prior period. Direct gross margin, which is revenue less material cost, increased to 59% for the nine month period, compared to 57% in the same period of 2005 as material cost reductions continue to be a major focus for the Company. Operating expenses in the first nine months of 2006 were approximately $4.3 million compared to $3.8 million in the same period of 2005. The increase in operating expenses was primarily due to increased legal and professional expenses and increased marketing expenses related to the launch of new products. �Despite our top line softness primarily driven by lower international sales, we have had success in our efforts to reduce our direct cost of sales and improve our direct gross margins across the board,� stated Dan Regalado, the Company�s Executive Vice President and CFO. �This is critical to our business as our LED product lines, which have traditionally lower gross margin, continue to grow as a percentage of our revenue. Direct gross margin on our LED products sold in the first nine months of 2006 improved by 3 full points to 50% compared to 47% in the same period in 2005 as direct gross margins from our fiber optic products were maintained at 67% for both comparable periods. Along with the various cost reduction efforts we have undertaken in the third quarter, we will continue to focus on improving our direct gross margins, driving more initiatives to streamline our production and product assembly and lowering costs,� concluded Mr. Regalado. The net loss for the nine months ended September 30, 2006 was approximately $724,000, or $0.28 per basic and diluted common share, as compared to net income of approximately $27,000, or $0.01 per basic and diluted common share, for the nine months ended September 30, 2005. Net income for the nine months ended September 30, 2005 included a non-recurring $240,000 legal settlement. Excluding this item, the nine months ended September 30, 2005 would have reported a net loss of approximately $213,000. Other factors with regards to the net loss in 2006 include reduced revenues, increased selling, general and administrative expenses and lower gross margins for the period. EBITDA for the nine months ended September 30, 2006 was approximately $42,000 as compared to approximately $721,000 for the nine months ended September 30, 2005. Excluding the one time benefit of a $240,000 legal settlement in the first half of 2005, EBITDA for the first nine months of 2005 would have been approximately $481,000, or 5% of revenue. The decline in EBITDA was primarily the result of reduced revenues and increased selling, general and administrative expenses as discussed above, increased interest expense on the Company�s line of credit facility and higher depreciation and amortization in the period compared to 2005. 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 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. Super Vision International, Inc. Condensed Statements of Operations � Unaudited � Three Months Nine Months Ended September 30, Ended September 30, 2006� 2005� 2006� 2005� � Revenues $ 2,803,289� $ 3,093,166� $ 8,617,301� $ 9,179,673� Cost of sales 1,747,309� 1,814,662� 4,969,807� 5,181,428� Gross margin 1,055,980� 1,278,504� 3,647,494� 3,998,245� � Operating expenses: Selling, general and administrative 1,277,976� 1,064,978� 3,880,999� 3,425,710� Research and development 120,677� 147,184� 428,987� 406,064� Gain on disposal of property and equipment --� --� (300) (6,000) Total operating expenses 1,398,653� 1,212,162� 4,309,686� 3,825,774� � Operating Income (Loss) (342,673) 66,342� (662,192) 172,471� � Non-Operating Income (Expense): Interest income 11,270� 15,529� 29,669� 38,636� Interest expense (109,659) (91,294) (287,630) (278,919) Other income 57,775� 30,108� 196,434� 95,299� Total non-operating income (expense) (40,614) (45,657) (61,527) (144,984) � Net Income (Loss) $ (383,287) $ 20,685� $ (723,719) $ 27,486� � Net Income (Loss) Per Common Share: � Basic and diluted $ (0.15) $ 0.01� $ (0.28) $ 0.01� � Weighted average shares outstanding: Basic 2,544,863� 2,542,132� 2,544,798� 2,542,096� � Diluted 2,544,863� 2,591,871� 2,544,798� 2,570,423� Selected Consolidated Balance Sheet Data (Unaudited) (Audited) As of September 30, 2006 December 31, 2005 Cash and Unrestricted Investments $ 179,160� $ 1,274,150� � Restricted Investments $ 500,000� $ -� � Current Assets $ 6,917,177� $ 6,311,190� � Total Assets $ 9,845,778� $ 9,323,808� � Current Liabilities $ 3,310,709� $ 1,995,530� � Total Liabilities $ 5,402,957� $ 4,288,386� � Total Shareholders Equity $ 4,442,821� $ 5,035,422� Reconciliation of Non-GAAP Financial Measure The following table reconciles GAAP to non-GAAP financial measures: � (Unaudited) Quarter Ended September 30, 2006� 2005� Change % � Net income (loss) $ (383,287) $ 20,685� $ (403,972) (1,953%) Plus: Interest 109,659� 91,295� 18,364� 20% Depreciation 152,083� 130,479� 21,604� 17% Amortization 11,743� 7,533� 4,210� 56% Taxes -� -� -� -� EBITDA $ (109,802) $ 249,992� $ (359,794) (144%) � % of Revenues (4%) 8% (Unaudited) Nine Months Ended September 30, 2006� 2005� Change % � Net income (loss) $ (723,719) $ 27,486� $ (751,205) (2,733%) Plus: Interest 287,630� 278,919� 8,711� 3% Depreciation 440,727� 385,549� 55,178� 14% Amortization 37,695� 28,935� 8,760� 30% Taxes --� --� � � EBITDA $ 42,333� $ 720,899� $ (678,556) (94%) � % of Revenues 0% 8% 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 third quarter and nine months ended September 30, 2006. Total revenue for the quarter was approximately $2.8 million, down 9% or $290,000 from approximately $3.1 million in the third quarter of 2005. Revenues were down 4% for both the Commercial lighting and Pool and Spa lighting divisions driven by lower sales of fiber optic products. International revenue saw a 25% decrease as compared to the same period in 2005. However, LED sales were up 70% or $188,000 in Commercial lighting for the quarter compared to the same period in 2005 and Pool and Spa LED sales were up $55,000 or 9% as sales of our new SaVi(TM) brand lighting products continue to gain market acceptance. Overall, revenue from fiber optic sales in the third quarter decreased by 24%, or approximately $367,000 offset in part by a $99,000 or 7% increase in revenue from sales of our LED lighting systems. Fiber optic sales decreased mainly due to the timing of project releases in the Commercial market and lower demand for fiber optics in the Pool and Spa market for the quarter. International sales continued to see significantly lower revenues in both fiber optics and LED products in three major territories for the Company; the United Kingdom, the Middle East and China as the Company transitions to new distributors in these markets. This revenue decline was slightly offset by higher sales in Mexico and Europe. Gross margin for the quarter ended September 30, 2006 was approximately $1,056,000 or 38% as compared to approximately $1,279,000 or 41% for the quarter ended September 30, 2005. The decrease in gross margin for the quarter was mainly due to the 24% decline in revenue from higher gross margin fiber optic sales compared to the same period in 2005. Additionally lower revenues for the period did not absorb our fixed cost of sales at the same rate thus resulting in a lower gross margin in the third quarter of 2006. Direct gross margin, which is revenue less material cost, was 58% for the third quarters of both 2006 and 2005 despite the decrease in revenue from fiber optic products. Management continues its focus on material cost reductions especially in the Company's LED product lines where a majority of revenue came from in the third quarter of 2006. Operating expenses in the third quarter of 2006 were approximately $1.4 million compared to $1.2 million in the same quarter of 2005. The increase in operating expenses was primarily due to increased legal and professional fees and commission expense offset by lower wages and benefits and lower R&D expenses as new products were completed compared to the same period in 2005. As a result of the increased operating expenses and lower revenue, Super Vision reported a net loss for the three months ended September 30, 2006 of approximately $383,000, or $0.15 per basic and diluted common share, as compared to net income of approximately $21,000, or $0.01 per basic and diluted common share, for the quarter ended September 30, 2005. "Although our LED business in the U.S. continues to grow and we are seeing significant traction from our new SaVi products, the softness in our fiber optic business, especially in the international market, could not be offset in the period. We believe that the major cost reduction efforts we implemented in July and August, including a 19% reduction in overall workforce will begin to fully impact our financial results in the 4th quarter and we are acutely focused on increasing our revenue while reducing our inventory and controllable expenses," stated Mike Bauer, President and CEO of Super Vision. "Overall, we are flat year over year in both our Commercial and Pool and Spa divisions and down in our international business, where the decrease in sales is tied to three specific markets, two of which are markets where we changed distributors. However, our LED sales are up 21% year over year in the commercial market and our new SaVi products are beginning to gain momentum. We feel we are making progress in expanding the breadth of our product line to capitalize on the growing demand for LED lighting systems," continued Bauer. Total revenues for the nine months ended September 30, 2006 were approximately $8,617,000 as compared to approximately $9,180,000 for the nine months ended September 30, 2005, a decrease of 6%. Year to date revenue in both the Commercial lighting and Pool and Spa lighting division was virtually flat with 2005, while sales through the international channel were down 23%, or approximately $543,000, for the nine month period, driving the overall decrease as compared to the same period in 2005. Commercial lighting sales, which were down 18% at the end of the first quarter of 2006, were behind by approximately $17,000 or 1% for the first nine months of 2006 compared to the same period in 2005. A 21% increase in the sale of LED lighting products and systems offset decreased sales in fiber optic lighting for the nine month period. Pool and Spa sales were also flat for the nine months ended September 30, 2006 over the same period in 2005, with sales of new products and market share gains offsetting a softer overall market related to the downturn in residential construction in the U.S. Gross margin for the first nine months of 2006 was 42%. Excluding the benefit of a $240,000 legal settlement in the second quarter of 2005, gross margin for the nine months ended September 30, 2005 was 41%. The slight increase in comparative gross margin for the nine months ended September 30, 2006 over the comparative period in 2005, excluding the one time legal settlement, resulted primarily from lower material costs and the capitalization of labor, overhead and freight on higher inventory balances at September 30, 2006 brought about by higher purchases during the second quarter compared to the prior period. Direct gross margin, which is revenue less material cost, increased to 59% for the nine month period, compared to 57% in the same period of 2005 as material cost reductions continue to be a major focus for the Company. Operating expenses in the first nine months of 2006 were approximately $4.3 million compared to $3.8 million in the same period of 2005. The increase in operating expenses was primarily due to increased legal and professional expenses and increased marketing expenses related to the launch of new products. "Despite our top line softness primarily driven by lower international sales, we have had success in our efforts to reduce our direct cost of sales and improve our direct gross margins across the board," stated Dan Regalado, the Company's Executive Vice President and CFO. "This is critical to our business as our LED product lines, which have traditionally lower gross margin, continue to grow as a percentage of our revenue. Direct gross margin on our LED products sold in the first nine months of 2006 improved by 3 full points to 50% compared to 47% in the same period in 2005 as direct gross margins from our fiber optic products were maintained at 67% for both comparable periods. Along with the various cost reduction efforts we have undertaken in the third quarter, we will continue to focus on improving our direct gross margins, driving more initiatives to streamline our production and product assembly and lowering costs," concluded Mr. Regalado. The net loss for the nine months ended September 30, 2006 was approximately $724,000, or $0.28 per basic and diluted common share, as compared to net income of approximately $27,000, or $0.01 per basic and diluted common share, for the nine months ended September 30, 2005. Net income for the nine months ended September 30, 2005 included a non-recurring $240,000 legal settlement. Excluding this item, the nine months ended September 30, 2005 would have reported a net loss of approximately $213,000. Other factors with regards to the net loss in 2006 include reduced revenues, increased selling, general and administrative expenses and lower gross margins for the period. EBITDA for the nine months ended September 30, 2006 was approximately $42,000 as compared to approximately $721,000 for the nine months ended September 30, 2005. Excluding the one time benefit of a $240,000 legal settlement in the first half of 2005, EBITDA for the first nine months of 2005 would have been approximately $481,000, or 5% of revenue. The decline in EBITDA was primarily the result of reduced revenues and increased selling, general and administrative expenses as discussed above, increased interest expense on the Company's line of credit facility and higher depreciation and amortization in the period compared to 2005. 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 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 Nine Months Ended September 30, Ended September 30, 2006 2005 2006 2005 ---------- ---------- ---------- ---------- Revenues $2,803,289 $3,093,166 $8,617,301 $9,179,673 Cost of sales 1,747,309 1,814,662 4,969,807 5,181,428 ---------- ---------- ---------- ---------- Gross margin 1,055,980 1,278,504 3,647,494 3,998,245 Operating expenses: Selling, general and administrative 1,277,976 1,064,978 3,880,999 3,425,710 Research and development 120,677 147,184 428,987 406,064 Gain on disposal of property and equipment -- -- (300) (6,000) ---------- ---------- ---------- ---------- Total operating expenses 1,398,653 1,212,162 4,309,686 3,825,774 ---------- ---------- ---------- ---------- Operating Income (Loss) (342,673) 66,342 (662,192) 172,471 Non-Operating Income (Expense): Interest income 11,270 15,529 29,669 38,636 Interest expense (109,659) (91,294) (287,630) (278,919) Other income 57,775 30,108 196,434 95,299 ---------- ---------- ---------- ---------- Total non-operating income (expense) (40,614) (45,657) (61,527) (144,984) ---------- ---------- ---------- ---------- Net Income (Loss) $ (383,287)$ 20,685 $ (723,719)$ 27,486 ========== ========== ========== ========== Net Income (Loss) Per Common Share: Basic and diluted $ (0.15)$ 0.01 $ (0.28)$ 0.01 ========== ========== ========== ========== Weighted average shares outstanding: Basic 2,544,863 2,542,132 2,544,798 2,542,096 ========== ========== ========== ========== Diluted 2,544,863 2,591,871 2,544,798 2,570,423 ========== ========== ========== ========== *T -0- *T Selected Consolidated Balance Sheet Data (Unaudited) (Audited) As of -------------------------- September 30, December 31, 2006 2005 ------------- ------------ Cash and Unrestricted Investments $ 179,160 $ 1,274,150 Restricted Investments $ 500,000 $ - Current Assets $ 6,917,177 $ 6,311,190 Total Assets $ 9,845,778 $ 9,323,808 Current Liabilities $ 3,310,709 $ 1,995,530 Total Liabilities $ 5,402,957 $ 4,288,386 Total Shareholders Equity $ 4,442,821 $ 5,035,422 *T -0- *T Reconciliation of Non-GAAP Financial Measure The following table reconciles GAAP to non-GAAP financial measures: ---------------------------------------------------------------------- (Unaudited) Quarter Ended September 30, ---------------------------------------- 2006 2005 Change % ---------------------------------------- Net income (loss) $(383,287) $20,685 $(403,972) (1,953%) Plus: Interest 109,659 91,295 18,364 20% Depreciation 152,083 130,479 21,604 17% Amortization 11,743 7,533 4,210 56% Taxes - - - - ======================================== EBITDA $(109,802) $249,992 $(359,794) (144%) ======================================== % of Revenues (4%) 8% ==================== *T -0- *T (Unaudited) Nine Months Ended September 30, ------------------------------------------- 2006 2005 Change % ------------------------------------------- Net income (loss) $(723,719) $27,486 $(751,205) (2,733%) Plus: Interest 287,630 278,919 8,711 3% Depreciation 440,727 385,549 55,178 14% Amortization 37,695 28,935 8,760 30% Taxes -- -- ------------------------------------------- EBITDA $42,333 $720,899 $(678,556) (94%) =========================================== % of Revenues 0% 8% ====================== *T