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.
