KANATA, ONTARIO--(Marketwire - May 27, 2011) - Pacific Safety Products Inc. (TSX VENTURE:PSP) ("PSP" or the "Company") today reported financial results for the three month period ended March 31, 2011.


  • Sales for the third quarter of fiscal 2011 were $8.2 million, an increase of 63% from the second quarter of fiscal 2011 and an increase of 7% from the third quarter of the prior year.
  • The gross margin percentage for the third quarter was 21.2%, in line with 21.9% for the second quarter of fiscal 2011 and a decline compared with 23.9% for the third quarter of the prior year. The decline in gross margin percentage, offset by higher sales, represented a decrease of $0.1 million in gross margin dollars or 5.2% compared with the third quarter of the prior year.
  • Operating expenses for the third quarter of $1.8 million increased $0.4 million or 32.5% from $1.4 million in the second quarter of fiscal 2011, and decreased $0.05 million or 2.7% from the third quarter of the prior year.
  • Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")1 was $0.3 million for the third quarter compared to breakeven for the second quarter of fiscal 2011 and $0.2 million in the third quarter of the prior year.
  • Working capital improved from $0.3 million at June 30, 2010 to $3.4 million at December 31, 2010 and $3.5 million at March 31, 2011. The working capital ratio at March 31, 2011 was 1.48 compared to 1.05 at June 30, 2010 and the debt to tangible net worth ratio at March 31, 2011 was 2.15 compared to 9.06 at June 30, 2010.
  • Subsequent Event: On May 5, 2011, the Company completed the sale of certain assets and the operations of APS Distributors, a division of PSP located in Bedford, Nova Scotia. Net proceeds of the sale have been used to reduce debt obligations.

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 have completed a strong quarter of progressive financial performance, winning contracts and options, and announcing new NIJ.06 product portfolio certifications," says Chief Executive Officer, Doug Lucky. "The sale of APS Distributors allows us to squarely focus management time and capital on our core competency and core business as a manufacturer and supplier of personal protection solutions."

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. The Bank has extended the Forbearance Period until maturity of the facility on August 31, 2011 and consequently the Company is exploring financing alternatives including utilization of the $2.5 million cash being held in escrow expected to be released in June 2011. During the Forbearance Period, the Company has been subject to, and in compliance with, amended covenants.

About PSP:

Pacific Safety Products Inc.'s mission statement 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. 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 may contain 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 applicable securities regulators, 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 renew the Company's credit facility on maturity, 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 the 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.

Neither 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) 254-9488