Pacific Safety Products Inc.
TSX VENTURE : PSP

Pacific Safety Products Inc.

February 28, 2012 18:30 ET

Pacific Safety Products Inc. Reports Second Quarter of Fiscal 2012

ARNPRIOR, ONTARIO--(Marketwire - Feb. 28, 2012) - Pacific Safety Products Inc. (TSX VENTURE:PSP) ("PSP" or the "Company"), today reported financial results for the three month period ended December 31, 2011.

Highlights:

  • The Company is reporting under International Financial Reporting Standards ("IFRS") for the three month period ended December 31, 2011 including the restatement of comparative figures.

  • Sales for the second quarter were $3.6 million, an increase of $0.2 million or 4.4% from the first quarter of fiscal 2012, and approximately $1.5 million or 28.6% lower than the second quarter of the prior year which included revenue from the Company's former distribution business.

  • The gross margin percentage for the second quarter was 28.1%, an improvement over the gross margins of 24.3% for the first quarter of fiscal 2012 and 21.7% for the second quarter of the prior year. The increase in gross margin percentage, offset by lower sales, represented a decrease of $0.1 million in gross margin dollars or 7.4% compared to the second quarter of the prior year.

  • Operating expenses for the second quarter were $1.2 million, approximately 10.0% lower than the second quarter of the prior year of $1.4 million.

  • Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")[1] was a loss of $0.09 million for the second quarter compared to a loss of $0.02 million in the second quarter of the prior year.

  • The Company recorded an impairment charge with respect to intangible assets in the second quarter in the amount of $1.2 million.

  • Working capital declined from $2.9 million at June 30, 2011 to $2.5 million at December 31, 2011. The working capital ratio at December 31, 2011 was 1.74 and improved compared to 1.69 at June 30, 2011, and the debt to tangible net worth ratio at December 31, 2011 was 1.72 and improved compared to 1.87 at June 30, 2011 and 25.9 at July 1, 2010.

  • Effective January 16, 2012, the Company was awarded a new contract by the Ontario Ministry of Community Safety and Correctional Services for the delivery and disposal of ballistic personal soft body armour systems ("Contract"). This omnibus contract allows Municipal and Provincial agencies to acquire PSP's products through pre-negotiated arrangements. This Contract has an initial term of three years with an option for an additional two years. Based on historical data the Company estimates the potential sales value of this Contract to be between $12.5 million to $15 million, including the option years. The Company was the incumbent.

"The Contract award is evidence that our strategy is working", said Chief Executive Officer, Doug Lucky, "while in view of the proposed Sale Transaction, we continue to execute against our strategic goals to add value to our customer offering, achieve revenue growth, restore profitable operations and pursue value enhancing opportunities."

Transaction update

On January 23, 2012, the Company announced that it has entered into a letter of intent ("LOI") to sell substantially all of its assets on a cash-free, debt-free basis (the "Sale Transaction"). During an exclusivity period, the potential purchaser is completing a due diligence review, and the parties are endeavoring to negotiate a mutually satisfactory definitive purchase agreement.

The completion of the proposed Sale Transaction is subject to a number of conditions, including completion of satisfactory due diligence, execution of the definitive purchase agreement, and TSX Venture Exchange and shareholder approval. There can be no assurance that the Sale Transaction will be completed as proposed or at all or, if completed, that the net proceeds of the Sale Transaction would represent a premium to the current trading price of the Company's securities.

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, tactical clothing, and protective products against chemical and biological hazards. PSP is the largest body armour manufacturer in Canada, directly supplying the Canadian Department of National Defence, Federal Government Agencies and major Canadian law enforcement organizations. The Company, through its U.S. subsidiary Sentry Armor Systems Inc., provides body armour products under the GH Armor Systems® brand 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.

Forward-Looking Information: This news release contains certain statements which may constitute "forward-looking information" within the meaning of applicable securities laws. These statements relate to anticipated or assumed events or results including, without limitation, with respect to the anticipated value of the Contract, and are based on management's expectations, estimates and projections. Although the Company believes that the expectations conveyed by the forward-looking information are reasonable based on information currently available to it, these statements are not guarantees and involve a number of risks, uncertainties and assumptions. Many factors could cause results to differ materially from those stated including termination of the Contract, failure by the Ministry to exercise the option under the Contract, delays in receiving or shortages in the supplies necessary to manufacture the products, possible changes to the product orders or order patterns, constraints on purchasing budgets, as well various other factors which are discussed in the Company's filings with applicable securities regulatory authorities at www.sedar.com. 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.

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

[1] Adjusted EBITDA consists of earnings before interest expense, income taxes, stock based compensation, amortization, foreign exchange, 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.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Pacific Safety Products Inc.
    Douglas Lucky
    Chief Executive Officer
    (613) 623-6001
    www.pacsafety.com