Pacific Safety Products Inc.
TSX VENTURE : PSP

Pacific Safety Products Inc.

February 24, 2009 09:28 ET

Pacific Safety Products Inc. Announces Improved 2009 Second Quarter Results

KANATA, ONTARIO--(Marketwire - Feb. 24, 2009) - Pacific Safety Products Inc. (TSX VENTURE:PSP) ("PSP" or "the Company") today announced consolidated financial results for the three-month period ended December 31, 2008.

Mr. David Scott, Chief Executive Officer commented, "PSP had a very strong quarter. Sales during the quarter were up 32% as compared to the prior year. Gross Margins have significantly improved over last year as a result of consolidating manufacturing into one Canadian location, investing in production equipment and improvements in our quality management processes. I would also note that Sentry Armor Systems, our U.S. operations has doubled sales over last year. This reinforces the Company's decision to enter this large market, and our ability to compete and win market share against existing competitors. The decline in our operating expenses is a reflection of the integration and restructuring activities that occurred during the quarter, and management expects these actions will contribute to improved operating results in the future. The Company continues to be well within its operating line and bank covenants and has commenced repayment of its $1.5 million long-term debt. Cash flow continues to strengthen as the Company has generated almost $0.5 million of EBITDA after 6 months of operations. Overall we have had solid operational performance. The volatility of Canadian/U.S. exchange rates in this quarter had an impact on results. In the month of October alone the Canadian dollar weakened by as much as 20%. The company has taken action to buffer future volatility through improved risk management activities."

QUARTER HIGHLIGHTS:

- Sales increased by 32% or $2.3 million to $9.6 million as compared to the same period of the prior year.

- Gross margin improved by almost 7 percentage points to 25% as compared to the same period of the prior year.

- The Company announced a multi-year contract, with a potential value of up to $14 million with the Canada Border Services Agency.

- U.S. sales during the quarter more than doubled as compared the same period of the prior year.

- The Company's next generation military helmet liner was tested and recommended by the members of the US National Tactical Officers Association as disclosed in the Company's media release of November 24, 2008.

- Operating expenses decreased 6% during the quarter as compared to the same period of the prior year.

For complete consolidated financial statements with notes and management discussion and analysis please refer to PSP's annual report to shareholders. This report is posted on SEDAR (www.sedar.com) and on our web site. Summary consolidated financial results for the quarter ended December 31, 2008 and December 31, 2007, are as follows:



SUMMARY CONSOLIDATED BALANCE SHEETS (unaudited)
$Thousand

AS AT DECEMBER 31, 2008 JUNE 30, 2008
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ASSETS
CURRENT ASSETS $12,009 $11,236
PROPERTY, PLANT AND EQUIPMENT 1,844 1,683
OTHER ASSETS 1,754 1,137
INTANGIBLE ASSETS 3,272 3,462
GOODWILL 8,454 8,454
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TOTAL ASSETS $27,333 $25,972
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LIABILITIES
CURRENT LIABILITIES $ 9,192 $ 8,381
LONG-TERM DEBT 1,268 875
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TOTAL LIABILITIES 10,460 9,256
SHAREHOLDERS' EQUITY 16,873 16,716
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $27,333 $25,972
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SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
$Thousands

THREE THREE SIX SIX
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED
DECEMBER DECEMBER DECEMBER DECEMBER
31, 2008 31, 2007 31, 2008 31, 2007
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SALES 9,593 7,283 17,299 13,948
COST OF SALES 7,183 5,955 13,016 11,114
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GROSS MARGIN 2,410 1,328 4,283 2,834
25.1% 18.2% 24.8% 20.3%

OPERATING EXPENSES 1,989 2,124 3,781 3,623
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OPERATING INCOME/(LOSS) 421 (796) 502 (789)
AMORTIZATION 196 273 377 457
FOREIGN EXCHANGE 134 17 150 31
INTEREST 45 53 115 78

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INCOME /(LOSS) BEFORE
OTHER COSTS 46 (1,139) (140) (1,355)
RESTRUCTURING /
RELOCATION COSTS 152 744 152 505
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LOSS BEFORE INCOME
TAX RECOVERY (106) (1,883) (292) (1,860)
INCOME TAX RECOVERY (148) (519) (342) (615)
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NET INCOME / (LOSS) 42 (1,364) 50 (1,245)
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SUPPLEMENTARY DISCLOSURE (unaudited)
$Thousands

The following is a reconciliation of net income to Earnings Before
Interest, Taxes, Depreciation and Amortization (EBITDA)

THREE THREE SIX SIX
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED
DECEMBER DECEMBER DECEMBER DECEMBER
31, 2008 31, 2007 31, 2008 31, 2007
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NET INCOME /(LOSS) 42 (1,364) 50 (1,245)
INTEREST 45 53 115 78
INCOME TAX RECOVERY (148) (519) (342) (615)
STOCK BASED
COMPENSATION 47 40 139 80
AMORTIZATION 251 326 482 551
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EBITDA 237 (1,464) 444 (1,151)
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About PSP

The mission statement of Pacific Safety Products Inc. is ...we bring everyday heroes home safely™. PSP is an established industry leader in the production, distribution and sale of high-performance and high-quality safety products for the defence and security market. These products include body armour to protect against ballistic, stab and fragmentation threats, ballistic blankets to reduce blast effects, and protective products against chemical and biological hazards. PSP is the largest armour manufacturer in Canada, directly supplying the Canadian Department of Defence, Federal Government Agencies and major Canadian law enforcement organizations. The Company also provides specialized law enforcement and safety products through APS Distributors, a division of PSP that services law enforcement and public safety agencies across the country. The Company, through its U.S. subsidiary Sentry Armor Systems Inc., provides body armour products to U.S. based law enforcement and private security firms. The Company also produces tactical clothing and emergency medical kits. Pacific Safety Products is a reporting issuer in British Columbia, Alberta and Ontario, Canada and publicly trades under the symbol PSP on the TSX Venture Exchange. The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Forward Looking Statements: This news release may contain forward looking statements based on management's expectations, estimates and projections. All statements that address expectations or projections about the future, including statements about the Company's strategy for growth, product development, market position, expected expenditures, results of cost reduction initiatives and financial results are forward looking statements. Some of the forward looking statements may be identified by words like "expects", "anticipates", "plans", "intends", "projects", "indicates", and similar expressions. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. Many factors, including those discussed more fully elsewhere in this release and in documents filed with the British Columbia Securities Commission, the Alberta Securities Commission, the Ontario Securities Commission, the TSX Venture Exchange, as well as others, could cause results to differ materially from those anticipated. These factors include, but are not limited to the potential impact of the current economic downturn on the Company's business, the unpredictability of purchasing patterns by governmental agencies, the possibility of a deterioration in the Company's working capital position, the impact on the Company's liquidity if it were to go offside of the covenants in its debt facilities, the impact that changes in supplier payment terms or slow payment of accounts receivable could have on the Company's liquidity, the unavailability of or increase in price of external capital to finance the Company's research, development and growth initiatives, changes in the laws, regulations, policies and economic conditions, including inflation, interest and foreign currency exchange rates fluctuations of countries in which the Company does business; competitive pressures; successful integration of structural changes or downsizing initiatives, including restructuring plans, acquisitions, divestitures and alliances; cost of raw material, the uncertainty associated with the outcome of research and development of new products, including regulatory approval and market acceptance; and seasonality of sales in some products.

Contact Information

  • Pacific Safety Products Inc.
    David Scott
    Chief Executive Officer
    (613) 254-9488 ext. 322
    Website: www.pacsafety.com