Pacific Safety Products Inc.

Pacific Safety Products Inc.

August 31, 2005 16:17 ET

Pacific Safety Products Inc. Reports Preliminary 2005 Financial Results and Changes to Executive Leadership Team

KELOWNA, BRITISH COLUMBIA--(CCNMatthews - Aug. 31, 2005) - Pacific Safety Products Inc. (TSX VENTURE:PSP) ("PSP" or "the Company") announces preliminary financial results for the year ended June 30, 2005 and changes to its Executive Leadership Team.

Preliminary results for fiscal 2005, ending June 30th, report sales for the year of $16.7 million, representing an increase of $4.1 million, or 33.0% over last year's sales of $12.5 million. Before the adjustments noted below, the Company incurred a loss of $1.8 million, or $0.109 per share, compared to a loss of $0.6 million, or $0.050 per share, in fiscal 2004. Further to its review of the audited financial statements, the Board of Directors determined there was a permanent impairment of certain assets amounting to approximately $0.7 million, which will have the effect of increasing the loss for the year to approximately $2.5 million. Future income taxes will also be adjusted to reflect the impact of this change. Final results for the year will be released once these adjustments have been incorporated in the audited financial statements and approved by the Board of Directors.

The Company also announces changes to the Executive Leadership Team. Brad Field has accepted the new role of Vice-Chairman and Chief Technology Officer, responsible for new product development and liaison with key customers and the investment community. In order to take on this new position, Mr. Field has resigned as President and CEO of the Company. David Scott, Chairman of the Board of Directors, will assume the additional role of Interim President and Chief Executive Officer until a new appointment is made. Shawn VanderMeer has tendered his resignation as Chief Financial Officer and Vice President, Finance and Administration, but will remain with PSP through a transition period until a new Chief Financial Officer is appointed. A sub-committee of the Board has been formed to lead these search processes.

In announcing the changes in senior management, Brad Field stated, "The financial results for fiscal 2005 highlighted certain shortcomings in our management controls and financial reporting processes that resulted in overhead and administrative costs increasing throughout the year, and particularly in the fourth quarter, at a rate greater than the gross margin on incremental revenues. While we believe many of the issues that lead to these particular results are temporary in nature, we concluded that more substantive change to the management structure was warranted to improve the opportunity for the Company's long-term financial success. We believe these changes in the Executive Leadership Team will facilitate the required improvement, setting the stage for much better financial performance in 2006. I am delighted that David Scott has accepted the position of Interim President and Chief Executive Officer ensuring continuing strong leadership at PSP and I offer him my full support in his new role."

"The Board recognizes the significant contribution Brad Field has made to PSP since founding the Company over 20 years ago and leading it to its current market position," stated David Scott. "We are pleased that Brad will continue to contribute to PSP's future success in critical disciplines in which he excels. We also want to thank Shawn VanderMeer for his important contribution to the Company for several years and wish him well in his future endeavors. With regard to the business, PSP is now in full production on both the Fragmentation Protective Vest and the Horizon 1 Coverall contracts, following a somewhat disrupted start-up phase due to customer-driven changes. The challenge for the coming year will be to ensure the Company achieves the target profitability on these contracts while also growing our core business in Canada and the United States. We are confident both of these objectives are achievable and I look forward to reporting on our progress over the coming months."


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 armour to protect against ballistic, stab and fragmentation threats. PSP is the largest armor manufacturer in Canada and also has significant international customers. The Company also produces tactical clothing and emergency medical kits. These products are marketed under the labels Pacific Emergency Products®, PROTECTED by PSP™, EXPLOSAFE®, and O2B.O.S.S.™. The Company's primary customers include military agencies, law enforcement agencies, private security companies and emergency medical service organizations.

The Company strives to provide quality protection solutions by effectively integrating the latest technologies to serve these customers' needs. Founded in 1984, PSP has grown to include more than 260 employees at three Canadian facilities in Kelowna, British Columbia and Arnprior, Ontario. These facilities are equipped with complete design, production and research capabilities. The Kelowna facility has one of the most advanced non-government operated ballistic research labs in North America.

In light of the sensitive nature of its products and customers, PSP may not disclose all information regarding end-users, government agencies or countries purchasing its products. It continues to be PSP's corporate policy to conduct business only with recognized domestic law enforcement, military and government agencies and foreign agencies that are approved by the Canadian Department of Foreign Affairs and International Trade.

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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