Pacific Safety Products Inc.
TSX VENTURE : PSP

Pacific Safety Products Inc.

February 28, 2011 21:38 ET

Pacific Safety Products Inc. Reports Second Quarter of Fiscal 2011

KANATA, ONTARIO--(Marketwire - Feb. 28, 2011) - Pacific Safety Products Inc. (TSX VENTURE:PSP) ("PSP" or the "Company") today reported financial results for the three month period ended December 31, 2010.

Highlights:



-- Sales for the second quarter of fiscal 2011 were $5.1 million, an
increase of 17.5% from the first quarter of fiscal 2011 but 32% lower
than the second quarter of the prior year.

-- The gross margin percentage for the second quarter was 21.9%, in line
with 22.1% for the first quarter of fiscal 2011 and 22.4% for the second
quarter of the prior year, and on lower sales during the second quarter
of the prior year this represented a decrease of $0.6 million in gross
margin dollars or 33.6%.

-- Operating expenses for the second quarter of $1.4 million decreased $0.2
million or 15.2% from $1.6 million in the first quarter of fiscal 2011,
and decreased $0.4 million or 22.8% from the second quarter of the prior
year.

-- Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA")(1) was breakeven for the second quarter compared to a loss of
$0.4 million for the first quarter of fiscal 2011 and income of $0.2
million in the second quarter of the prior year.

-- On December 31, 2010 pursuant to a court approved plan of arrangement,
PSP acquired all of the outstanding shares of Zuni Holdings Inc.
("Zuni") in exchange for PSP common shares at a one for one exchange
ratio. Zuni was amalgamated with a subsidiary of PSP and continued as
Zuni Holdings Inc. The transaction was accounted for as the acquisition
of the assets and liabilities of Zuni in exchange for PSP common shares
valued at the date of completion of the acquisition.

-- Working capital improved from $0.3 million at June 30, 2010 to $3.4
million at December 31, 2010. The working capital ratio at December 31,
2010 was 1.44 compared to 1.05 at June 30, 2010 and the debt to tangible
net worth ratio at December 31, 2010 was 2.33 compared to 9.06 at June
30, 2010.


(1) Adjusted EBITDA consists of earnings before interest expense, income taxes, stock based compensation, amortization, and other one-time charges and gains. PSP believes EBITDA is a useful measure in the evaluation of performance. EBITDA is not a measure recognized under Generally Accepted Accounting Principles ("GAAP") and does not have a standardized meaning as prescribed by GAAP. Therefore, EBITDA may not be comparable to similar measures presented by other entities. Investors are cautioned that EBITDA should not be construed as an alternative to net loss determined in accordance with GAAP.

"We are focused on customer relationship stability and growth in the marketplace", says Chief Executive Officer, Doug Lucky, "With the merger financing complete, we are building from a sound foundation of capabilities including valued supplier partnerships, and we are aggressively moving forward to address market opportunities."

Financial Covenant Update:

The Company signed a forbearance agreement (the "Forbearance Agreement") with its principal Canadian Bank (the "Bank") on August 17, 2010. The Bank agreed pursuant to the Forbearance Agreement not to take steps to realize under the facility prior to February 28, 2011 (the "Forbearance Period") unless a terminating event as defined in the Forbearance Agreement occurs. During this Forbearance Period, the Company has been subject to, and in compliance with, amended covenants. The Company is in discussions with the Bank regarding normalization of the credit facility, and the Bank has agreed to extend the Forbearance Period until March 31, 2011 to complete the process.

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 body 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. 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.

For complete consolidated financial statements with notes and management discussion and analysis, refer to SEDAR (www.sedar.com).

Forward-Looking Information: This news release contains forward-looking information based on management's expectations, estimates and projections. All statements that address expectations or projections about the future, including statements about the Company's growth strategy, 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, the possible failure to successfully plan and execute business improvement strategies, restrictions on covenants contained in the Company's credit agreement and the existence of defaults under such covenants, the inability to reach agreement with the Bank regarding the normalization of the Company's credit facility, the potential impact of the recent 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 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 rate fluctuations of countries in which the Company does business, competition in the Company's markets, 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. The Company assumes no obligation to update forward-looking information should circumstances or management's estimates or opinions change, except as required by applicable law.

Contact Information

  • Pacific Safety Products Inc.
    Douglas Lucky
    Chief Executive Officer
    (613) 254-9488
    www.pacsafety.com