NXRA Nextera Enterprises Inc (CE)

Nextera Enterprises, Inc. (OTCBB:NXRA) today reported financial results for fiscal year ended December 31, 2006 included in its Annual Report filed with the SEC on April 17, 2007. Net sales for the fiscal year ended December 31, 2006 were $7.5 million. Net sales for 2006 reflect the operating results of the Woodridge Labs business from the March�9, 2006 acquisition date forward. Net sales for the 2006 period include a $2.3 million charge for expected returns related to the March�2007 voluntary recall of certain DermaFreeze365� products sold in 2006. There were no sales reported for the 2005 period as the Company had no business operations in 2005. For the fiscal year ended December 31, 2006, Nextera recorded a net loss of $7.3 million or $0.19, per share as compared to a net loss of $1.9 million or $0.07 per share, for the 2005 fiscal year. The 2006 year included an aggregate charge of $2.5 million, or $0.06 per share, for expected returns and a write-down of inventories related to the March�2007 voluntary product recall and a $1.4 million, or $0.03 per share, charge associated with the amortization of the step-up to fair value in the inventory acquired from Woodridge Labs, as required by SFAS 141. Additionally, the 2006 year included a $0.3 million, or $0.01 per share, restructuring charge associated with the relocation of the corporate headquarters from Boston, Massachusetts to Panorama City, California. As of December 31, 2006, Nextera had cash on-hand of $0.6 million. Outstanding debt under the Company�s credit facility was $11.7 million at December 31, 2006, $1.3 million lower than the initial debt balance at March 9, 2006. Contributing to the ability of the Company to repay its debt was the receipt of $0.3 million with respect to an indemnity claim under the purchase agreement for the acquisition of the Woodridge Labs business. Nextera also had Federal and State tax net operating loss carryforwards of approximately $55.6 million and $25.6 million, respectively, that expire between 2007 and 2026. A full valuation allowance is maintained on the Company�s deferred tax assets, which includes the loss carry-forwards, due to the uncertainty of utilization of the future tax benefits. For the fiscal year ended December 31, 2006, non-cash charges were $2.8 million, or $0.07 per share. Non-cash charges included $1.4 million related to the one-time inventory step-up charge, $0.8 million of amortization of intangible assets and depreciation, $0.2 million each for deferred tax expense relating to the goodwill generated in the Woodridge Labs acquisition, stock-based compensation and inventory write-downs. The inventory step-up charge was associated with purchase accounting resulting from the write-off of the step-up in the value of inventory acquired from Woodridge Labs. Inventory was stepped-up to its current fair market value in the acquisition and subsequently sold, results in a higher cost of goods sold during the periods in which the stepped-up inventory is sold. The resulting cost of goods sold and gross margins were negatively impacted as compared to historical and future periods in which the inventory sold represents the actual cost of products produced. The inventory step-up charge was $0.3 million in first quarter of 2006, $1.0 million in the second quarter of 2006 and $0.1 million in the third quarter of 2006. No further inventory step-up charges will be recorded in connection with the inventory acquired as part of the acquisition of the Woodridge Labs business. As a result of the 2006 financial impact of the March 2007 product recall and lower than expected operating results during the fourth quarter of 2006, the Company failed to comply with certain of its original financial covenants under its credit facility. However, the Company was successful in amending its financial covenants associated with its credit facility to provide for the deferral of certain covenants until 2008, as well as reducing the thresholds of other covenants that remain in effect throughout 2007. Additionally, the Company entered into various agreements with certain of its shareholders to obtain $4.5 million in additional subordinated financing which was funded during March and April 2007. Joe Millin, President of Nextera Enterprises, said, �The first year of Woodridge Labs operations under Nextera has been demanding. We are managing through the DermaFreeze365� product recall and there have been challenges in the mass retail space in 2006, including consolidation of retailers and a move towards retailer-specific proprietary brands. However, we feel Woodridge is positioned well in our niche to manage these opportunities. In 2006 we launched the Ellin LaVar Textures� hair care brand through exclusive distribution at a major retail pharmacy. Our first product shipments from the Ellin Lavar line in late December resulted in approximately $900,000 of revenue recognized in the first quarter of 2007. In the first quarter of 2007 we also announced the acquisition of the Heavy Duty� personal care brand with initial distribution in home-improvement retail, a sector that Woodridge had not previously had a presence.� �On the corporate front, in the first quarter of 2007 we reset our bank loan covenants to better match our 2007 operating projections. This restructuring included $4.5 million of financial support from existing shareholders to fund Nextera�s 2007 operations,� added Mr. Millin. About Nextera Enterprises, Inc. Nextera Enterprises Inc. operates through its wholly-owned subsidiary, Woodridge Labs, Inc. Woodridge is an independent developer and marketer of branded consumer products that offer simple, effective solutions to niche personal care needs. More information can be found at www.nextera.com and www.woodridgelabs.com. Forward-Looking Statements This release contains forward-looking statements that involve risks and uncertainties, including, but not limited to, estimates of future performance. Actual results may differ materially from the results predicted, and reported results should not be considered an indication of future performance. Important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements are detailed under �Item 1A.Risk Factors� and elsewhere in filings with the Securities and Exchange Commission made from time to time by Nextera, including, but not limited to: its Annual Report on Form 10-K for the year ended December 31, 2006 filed with the Securities and Exchange Commission on April 17, 2007; recent quarterly reports on Form 10-Q; and other current reports on Form 8-K. All forward-looking statements included in this news release should be considered in the context of these risk factors. Nextera undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Investors and prospective investors are cautioned not to place undue reliance on such forward-looking statements. NEXTERA ENTERPRISES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands, except per share amounts) � Year Ended December 31, � 2006� � 2005� � � Net revenue $ 7,481� $ --� Cost of sales � 5,307� � --� Gross profit 2,174� --� Selling, general and administrative expenses 7,775� 2,054� Amortization of intangible assets � 726� � --� Operating loss (6,327) (2,054) Interest income 193� 287� Interest expense (1,016) --� Other expense � --� � (188) Loss from continuing operations before income taxes (7,150) (1,955) Provision for income taxes � 236� � 24� Loss from continuing operations (7,386) (1,979) Income from discontinued operations � 69� � 78� Net loss $ (7,317) $ (1,901) Preferred stock dividends � (353) � (328) Net loss applicable to common stockholders $ (7,670) $ (2,229) � Net loss per common share, basic and diluted, from continuing operations $ (0.19) $ (0.07) Discontinued operations � 0.00� � 0.00� Net loss per common share, basic and diluted $ (0.19) $ (0.07) � � Weighted average common shares outstanding, basic and diluted � 40,738� � 33,870� NEXTERA ENTERPRISES, INC. �CONDENSED CONSOLIDATED BALANCE SHEETS � (amounts in thousands) � � December 31, ASSETS � 2006� � 2005� � CURRENT ASSETS: Cash and cash equivalents $ 597� $ 15,043� Inventories 2,595� --� Other current assets � 387� � 128� Total current assets 3,579� 15,171� � Goodwill 10,969� --� Intangible assets 12,827� --� Other assets � 768� � 64� Total assets $ 28,143� $ 15,235� � LIABILITIES AND STOCKHOLDERS' EQUITY � Accounts payable and accrued expenses $ 4,364� $ 542� Total current liabilities 4,364� 542� � Long-term debt 11,718� --� Deferred tax liability 236� --� Other long-term liabilities 1,334� 1,334� � Total stockholders' equity � 10,491� � 13,359� Total liabilities and stockholders' equity $ 28,143� $ 15,235�