Koala Corporation Announces Restructuring DENVER, May 7 /PRNewswire-FirstCall/ -- Koala Corporation (OTC Pink Sheets: KARE) today announced a restructuring of the Company that will significantly reduce corporate debt and allow management to focus on the operations of the KoalaPlay Group and Fibar business units, which collectively represented approximately 70% of the Company's total revenue stream for 2003. As part of the restructuring, Koala divested its convenience and activity products business, which includes the Koala Bear Kare baby changing station product line and trademarks. In a three-party transaction involving Koala, Bobrick Washroom Equipment, Inc. and Koala's bank group, Bobrick purchased the assets of the convenience and activities division. Privately held Bobrick is a California-based supplier of commercial washroom accessories to building owners and suppliers in both domestic and international markets. The transaction is valued at approximately $15.6 million, which includes the assumption by Bobrick of approximately $1.2 million in accounts payable and certain other liabilities of the convenience and activity business segment. The value of the transaction is subject to an upward adjustment of up to $1.4 million based on the business unit's final 2004 gross profit performance. Any such payment would be made to the bank group and would reduce the stated value of the Preferred Stock described below, unless used to satisfy other liabilities of Koala under its agreement with Bobrick. Approximately $13.6 million in proceeds from the transaction were applied toward the outstanding balance of Koala's senior credit facility, which was $29.5 million as of December 31, 2003. In addition, Koala's bank group reduced the balance due under Koala's term loan to $3 million, and extended Koala's current revolving line of credit up to a maximum of $4.5 million. In exchange for the reduced amounts owed under the term loan, Koala has issued the bank group shares of Koala 10% Series B Redeemable Cumulative Preferred Stock with a stated value of $10.725 million. Dividends on the Preferred Stock accrue at 10% per year and are payable in additional shares of Preferred Stock. If by December 31, 2005, Koala repays the current bank group in full its remaining term debt and the full balance on its revolving line of credit, Koala can redeem all of the Preferred Stock, including any shares issued as a dividend, for no cost. After December 31, 2005, the Company may redeem the Preferred Stock at redemption values that increase incrementally from 25% to 75% of stated value through December 31, 2007, after which time the shares would be redeemable at the full stated value. If the Company has not redeemed all of the Preferred Stock by December 31, 2007, the bank group may exercise voting rights that entitle them to elect the full board of directors of the Company. Green Manning & Bunch, a Denver-based investment banking firm, acted as financial advisor to Koala and rendered an opinion as to the fairness of the restructuring from a financial standpoint to Koala and its shareholders. James Zazenski, president and chief operating officer, said, "We are pleased with the terms of this transaction and the opportunities it creates for our business, customers and shareholders. We have significantly reduced both our debt load and our monthly debt service. In addition, we have eliminated all financial covenants under the credit agreement. Clearly, this transaction improves our balance sheet and financial position and should provide customers with renewed confidence in our ability to address their project requirements. In addition, we believe this restructuring represents an important step toward rebuilding shareholder value. "Our Baby Changing Station and the other products in our Koala Bear Kare line have played an important role in establishing the Koala brand. However, during recent years, our KoalaPlay Group modular play equipment business has emerged as our principal revenue channel, and we believe it represents our greatest opportunity for growth. We believe this is a prudent transaction that will allow us to focus on our primary business from a position of renewed financial strength." Bobrick has agreed to a minimum one-year sublease of the Denver facilities Koala currently occupies for the operations of the convenience and activity business. Zazenski estimates that the majority of the business unit's current staff will remain on site as employees of Bobrick. "Going forward, we will continue to sharpen our sales and marketing efforts and maintain our new product development programs," Zazenski said. "We look forward to updating customers and shareholders on our progress at our website, located at http://www.koala-corporation.com/." Koala expects that its audit of 2003 results will be completed soon and intends to include the audited financial statements in the annual meeting materials that will be sent to shareholders. Statements made in this news release that are not historical facts may be forward-looking statements. Such statements include statements of belief, such as statements about the Company's future operations and the projections regarding future events, such as prospects for the Company's business in the future, and are based upon Koala's current expectations and assumptions, which are subject to a number of risks and uncertainties. These include management's ability to successfully implement the Company's business plan with its remaining business units, Koala's ability to retire its outstanding remaining bank debt on or before December 31, 2005, or at all, the priority of the Preferred Stock as to dividends and on liquidation and, if the Preferred Stock remains outstanding after December 31, 2007, the ability of the holders of the Preferred Stock to elect all of the Board of Directors of the Company. Actual results may differ materially from those projected in any forward- looking statement. There are a number of important factors that could cause actual results to differ materially from those anticipated by any forward- looking information. DATASOURCE: Koala Corporation CONTACT: Geoff High of Pfeiffer High Public Relations, Inc., +1-303-393-7044, for Koala Corporation Web site: http://www.pfeifferhigh.com/ http://www.koala-corporation.com/

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