Pacific Safety Products Inc.
TSX VENTURE : PSP

Pacific Safety Products Inc.

August 17, 2006 06:00 ET

Pacific Safety Products Inc.: Fiscal 2007 Outlook

KELOWNA, BRITISH COLUMBIA--(CCNMatthews - Aug. 17, 2006) - Pacific Safety Products Inc. (TSX VENTURE:PSP) ("PSP" or "the Company")

Pacific Safety Products will enter fiscal 2007 with a strong backlog, solid opportunities for future growth and an improved balance sheet. The productivity gains realized in the latter half of fiscal 2006 will continue to yield improvement to our historical financial performance and also provide a foundation for future product enhancements. The strategic repositioning of the company, planned for the fall of 2006, is focused on enhancing the company's ability to enter new market segments and expand market reach. We see the domestic and international Defence and Security market continuing to expand in the selected areas where PSP has an interest, including body armor and other protective devices. Our U.S. company, Sentry Armor Systems, plans to contribute at least ten per cent of the company's total revenue in fiscal 2007.

A key element of our strategy is to expand our product offering to Canadian Law Enforcement Agencies and the Department of National Defence (DND) through development of new products and through partnering with other suppliers and systems integrators. Areas of interest include the Public Safety and Security market and expanded DND requirements. In the U.S. we will develop U.S. specific solutions for our existing product lines and begin to establish a footprint in this large market.

Beyond fiscal 2007 we see the introduction of new requirements such as Canada's Department of National Defence program, "Integrated Soldier System" as a significant opportunity. This major program is anticipated to begin generating business opportunities by our fiscal 2008 assuming the Government funds this requirement in a timely fashion. During the next 12 months PSP will actively engage with technology and integration partner companies in order to provide the wining solution for the Canadian Forces.

Our backlog going into fiscal 2007 totals $43 million which is comprised of the following business:

Federal Government Contracts & Options $38.0M

Law Enforcement Standing Orders $ 5.0M

With respect to revenue and earnings we see growth through the following initiatives:

- Expansion of our Law Enforcement soft armour markets into Quebec and Atlantic Canada

- The addition of Blast protection and clothing system products to our sales portfolio

- Increasing the number of Canadian and Provincial Government Agency customers

- Realizing the options associated with the current DND contracts

- Obtaining Government funding for advanced product development

- Expanding our U.S. Law Enforcement markets through additional distribution and pursuing U.S. Federal Government Agencies and Department of Defence opportunities

As a result of the above, appropriately discounted for risk, our forecast of revenues for fiscal year 2007 is $35M to $36M and Operating Income before Income Taxes of $1.8M to $2.0M. We believe that this potential double digit growth in revenue and triple digit growth in earnings over fiscal 2006 results will continue to add to shareholder value.

Management will update or confirm this view at the end of our second quarter or as significant events occur that may change this forecast.

It should be noted that our business is comprised of both firm orders and contracts, as well as standing orders from which certain customers draw down individual requirements.

There are also orders and contracts with options, some of which are specified with respect to volume and timeframe while others, although priced, have no specific quantity or timeline. We have estimated this portion of the backlog based on historical ordering activity and management's judgment on future order activity. The reader should understand that as a result of the foregoing, the order backlog may translate to greater or lesser revenue than the estimate we provide in this outlook. Some contracts and standing orders run over multiple years.

Our guidance for fiscal 2007 is based on management's plan for fiscal 2007 and makes assumptions as to certain events and the timing of these events. The reader should be aware of the risks associated with this plan. These include the normal set of business risks ranging from natural disasters to foreign exchange fluctuation to material supply chain delivery constraints. Wherever possible management has risk mitigation strategies to address these issues. There are also specific risks associated with the nature of our business. These include government funding for new business opportunities, competitive tendering processes, changes in government legislation or policy as it pertains to trade, taxes and credits, uncertainties with respect to technology development timing and success in product qualification.

OVERVIEW OF THE BUSINESS

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. These products primarily include body armor to protect against ballistic, stab and fragmentation threats. PSP is the largest armor manufacturer in Canada and has significant international customers. 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.

Forward-Looking Statements: This 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 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 which may be 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 stated. These factors include, but are not limited to changes in the laws, regulations, policies and economic conditions, including inflation, interest and foreign currency exchange rates, of countries in which the Company does business; competitive pressures; successful integration of structural changes, including restructuring plans, acquisitions, divestitures and alliances; cost of raw material, research and development of new products, including regulatory approval and market acceptance; and seasonality of sales in some products.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

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