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EXHIBIT 99.1
FOR IMMEDIATE RELEASE
NOVEMBER 15, 2000
SMARTERKIDS.COM, INC. AND EARLYCHILDHOOD.COM, LLC TO COMBINE
Combination to Create Large, Diversified, Multi-Channel Manufacturer and
Retailer of Children's Educational Products to Schools and Homes
Significant Marketing Benefits and Cost Reductions Expected in the Combination;
Combined Entity would have approximately $70 million of Pro Forma Revenue for
Nine Months ended 9/30/2000; Expected to Reach Cash Flow Breakeven in 2001
Al Noyes To Become Chief Executive Officer of New Company, William E. Simon and
Sons To Become Largest Stockholder
NEEDHAM, MA and MONTEREY, CA -- November 15, 2000 -- SmarterKids.com, Inc.
(Nasdaq: SKDS), a leading online educational toy store and Earlychildhood.com,
LLC (ECC), a leading nationwide manufacturer and retailer of educational
products founded in 1985, today announced that the board of directors of
SmarterKids.com and ECC's management committee agreed to combine their
respective companies.
The combination leverages ECC's strength in developing proprietary products for
the early childhood educational market, building traditional catalog and field
sales channels, and in establishing an integrated nationwide inventory
procurement and fulfillment operation with SmarterKid.com's award-winning, e-
commerce capabilities and technology infrastructure. The combination is subject
to a variety of conditions, including the approval of SmarterKids.com's
stockholders.
"The combination of ECC and SmarterKids.com anticipates vigorous growth and
profitability from the outset," said Al Noyes, Executive Vice President of
SmarterKids.com, who will become Chief Executive Officer of the new combined
company. "Together we will have superior catalog and online operations,
attractive operating margins and strong, complementary revenue streams in the
consumer and school markets. In addition, we will have a well-funded business
that can continue to grow rapidly without depending on additional investment
capital."
Earlychildhood.com, a privately-held limited liability company headquartered in
Monterey, CA, is a growing and innovative manufacturer and direct marketer of
educational products and toys focused on the early childhood market. In the 16
years since its inception, ECC has built a strong, multifaceted sales channel
and over the past few years has been consistently profitable. The company
currently mails over 2.5 million catalogs annually, has almost 50 field sales
representatives and has an active customer base targeting over 90,000 early
learning centers. ECC also owns Educational Products, Inc. (EPI), a leading
school fundraising company in Dallas, TX, which it acquired in 1999, and
Earlychildhood NEWS, a 12-year-old print
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publication for early childhood professionals and parents. ECC itself is owned
principally by an affiliate of William E. Simon and Sons Private Equity
Partners, L.P., a Los Angeles-based private equity fund, and by ECC management.
"This combination of ECC and SmarterKids.com joins a rapidly growing catalog
business with best-of-breed Web expertise," said Ronald Elliott, the current
Chief Executive Officer of ECC, who will serve as Chairman of the combined
company and continue to play an active role. "We've observed the excellent job
SmarterKids has done in creating a unique, easy-to-use Web site for parents that
incorporates state-of-the-art personalization technologies. SmarterKids fits
exceptionally well with the successful catalog distribution and manufacturing
business ECC has built, and the company clearly shares our deep commitment to
create real educational value. Together, we will be uniquely capable of
completing the circle between parents, teachers and administrators and we can
make our products and services readily available to customers across the United
States, in whatever manner our customers choose to buy them."
SmarterKids.com, headquartered in Massachusetts, is an award-winning online
educational toy store with tools and resources dedicated to helping parents help
their children learn, discover, and grow. Since the launch of its Web site two
years ago, over 254,000 customers have bought educational toys, books, software
and games through SmarterKids.com, and over 160,000 children's learning profiles
have been registered on the site. Founded in 1994, the company completed its
initial public offering in November 1999 and is traded on the Nasdaq National
Market under the symbol SKDS.
For the nine months ending September 30, 2000, ECC recognized pro forma,
consolidated revenue of approximately $65 million, 25 percent higher than in the
prior year's period, and was profitable. For the same period, SmarterKids.com
recognized revenue of approximately $4.5 million and delivered over 300 percent
annualized revenue growth.
Al Noyes also noted that SmarterKids.com's consumers will benefit from
ECC's proven expertise in product development and sourcing. "We can offer our
customers unique, highly desirable products which until now have been available
only to schools," said Noyes. "In turn, ECC's schools and teachers will
appreciate SmarterKids.com's educationally-oriented approach to e-commerce, not
only for themselves, but for their students' parents as well. Finally, by
bringing EPI's fundraising business to the Web, we should further accelerate its
growth and strengthen the link between home and school. Our new company will be
a leader in the educational retailing space."
As a result of the transaction, equity holders of SmarterKids.com and ECC will
each receive shares of the new combined company in exchange for their existing
equity interests. Each issued and outstanding share of SmarterKids.com will be
converted in to the right to receive one newly issued share of common stock of
the combined company, and holders of outstanding equity interests of
SmarterKids.com will acquire an aggregate of approximately one-third of the
outstanding common stock of the combined company. Upon completion of the
combination, all of the issued and outstanding equity interests of ECC will be
converted into the right to receive newly issued shares of the combined
company's common stock, and holders of outstanding interests in ECC will acquire
approximately two-thirds of the outstanding common
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stock of the combined company. It is anticipated that the new company will apply
for approval for quotation of its common stock on the Nasdaq national market,
and that a new market for trading in the newly formed combined company will
commence following the effectiveness of the combination, presently expected in
the spring of 2001. No cash is included in the merger consideration. An
affiliate of William E. Simon and Sons will become the largest stockholder in
the combined entity. SmarterKids.com will continue to trade on Nasdaq as SKDS
until the transaction closes.
Upon completion of the combination, based on currently outstanding shares of
stock or interests in the companies, the new company will have approximately
69,583,000 shares of common stock outstanding.
Annual revenues of the combined entities on a pro forma consolidated basis had
they been combined for the year ended December 31, 1999 would have been
approximately $68 million and for the nine months ended September 30, 2000 would
have been approximately $70 million.
"ECC is a great partner for SmarterKids.com," said David Blohm, current
President and CEO of SmarterKids.com, who will be stepping down once the
combination is complete. "The combined company will have a strong and
synergistic foundation in the preschool, elementary school, and home markets.
This a great move forward for SmarterKids.com's stockholders."
Ronald Elliott, ECC's President and Chief Executive Officer, will hold the
position of Chairman of the new company. Mr. Noyes will serve as the combined
entity's Chief Executive Officer. ECC's Chief Operating Officer, Judith McGuinn,
will become Chief Operating Officer of the new company and Bob Cahill, Chief
Financial Officer of SmarterKids.com, will be Chief Financial Officer.
SIGNIFICANT ECONOMIES EXPECTED IN THE COMBINATION
The new company would have had pro forma cash of approximately $34 million, had
it been combined as of September 30, 2000. Management expects to achieve EBITDA
breakeven in 2001. SmarterKids.com's operating expenses will be reduced
significantly in connection with the combination. SmarterKids.com's customer
acquisition, warehousing and fulfillment operations will leverage ECC's school-
focused direct marketing operations. ECC will take advantage of
SmarterKids.com's technical staff and infrastructure to propel their online
efforts targeted at schools.
The new company will consolidate key administrative functions at facilities in
Monterey (California) and Needham (Massachusetts).
ABOUT SMARTERKIDS.COM
SmarterKids.com, Inc. (Nasdaq:SKDS), a Delaware corporation, is a leading
education store and resource dedicated to helping parents help their children
learn, discover, and grow. The site offers one of the most personalized shopping
experiences, matching a child's learning style and needs with teacher-reviewed
toys, games, books, software, music, and videos. The company
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features specialty centers for special needs and gifted children, the Grade
Expectations! guide to education standards, state-specific test information and
product recommendations in the State Test Prep Center, and thousands of
educational toys and services for children ages infant through 15. SmarterKids
is headquartered in Needham, Mass. More information on the company can be found
at www.SmarterKids.com.
ABOUT EARLYCHILDHOOD.COM
Earlychildhood.com (ECC) sells thousands of educational products and supplies,
through catalogs and through a field sales force, to early childhood educators
targeting over 90,000 preschools, elementary schools and child care centers
nationwide. Founded in 1985 by Ronald Elliott, the company develops, markets and
distributes a variety of proprietary products including the BioColor line of
biodegradable paints, and distributes its products through four warehouses with
approximately 380,000 square feet of space combined.
ECC also publishes Earlychildhood NEWS, which sponsors a popular continuing
education program through the University of Wisconsin-Stout, as well as the 12-
year-old Directors' Choice Awards program recognizing excellence in the design
and manufacture of products for young children.
ECC is also a leader in creating school fund-raising programs utilizing custom-
packaged school supplies through its Educational Products, Inc. (EPI)
subsidiary. EPI, founded in 1980, has served almost one million children with
school supplies in 2000. ECC has over 400 employees and is headquartered in
Monterey, CA. For more information, visit ECC's Web site at
www.Earlychildhood.com and EPI's at www.educationalproducts.com.
Chase H&Q served as financial advisor to SmarterKids.com; Thomas Weisel
Partners, LLP served as financial advisor to Earlychildhood.com.
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 PROVIDES A "SAFE HARBOR"
FOR FORWARD-LOOKING STATEMENTS. CERTAIN INFORMATION INCLUDED IN THIS PRESS
RELEASE (AS WELL AS INFORMATION INCLUDED IN ORAL STATEMENTS OR OTHER WRITTEN
STATEMENTS MADE OR TO BE MADE BY SMARTERKIDS.COM) CONTAINS STATEMENTS THAT ARE
FORWARD-LOOKING, INCLUDING STATEMENTS RELATING TO CONSUMMATION OF THE
COMBINATION, FUTURE ANTICIPATED REVENUES OF THE COMBINED COMPANIES, COST SAVINGS
AND OTHER SYNERGIES RESULTING FORM THE COMBINATION, SUCCESS OF CURRENT PRODUCT
OFFERINGS AND OTHER MATTERS. SUCH FORWARD-LOOKING INFORMATION INVOLVES
IMPORTANT RISKS AND UNCERTAINTIES THAT COULD SIGNIFICANTLY AFFECT ANTICIPATED
RESULTS IN THE FUTURE AND, ACCORDINGLY, SUCH RESULTS MAY DIFFER MATERIALLY FROM
THOSE EXPRESSED IN ANY FORWARD-LOOKING STATEMENTS MADE BY OR ON BEHALF OF
SMARTERKIDS.COM. FOR A DESCRIPTION OF ADDITIONAL RISKS AND UNCERTAINTIES,
PLEASE REFER TO THE SMARTERKIDS.COM FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION, INCLUDING ANNUAL AND QUARTERLY REPORTS ON FORMS 10-K AND 10-Q.
CONTACT: Pauline O'Keeffe, Director of Corporate Communications of
SmarterKids.com, Inc., (781) 292-3048.
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