Exhibit 99.1
DATE: November 10, 2006
From:
Safety Products Holdings, Inc. and Norcross Safety Products L.L.C.
2001 Spring Road
Suite 425
Oak Brook, IL 60523
Contact:
David F. Myers, Jr.
(630) 572-5715
FOR IMMEDIATE RELEASE
SAFETY PRODUCTS HOLDINGS, INC. AND NORCROSS SAFETY PRODUCTS L.L.C.
ANNOUNCE THIRD QUARTER 2006 RESULTS
OAK BROOK, IL November 10, 2006 — Safety Products Holdings, Inc. (“Holdings”) and Norcross Safety Products L.L.C. (“NSP” and collectively with Holdings, the “Company”), today announced results for the third quarter ended September 30, 2006. The following discussion presents results for both NSP and the Company where the results between the two differ.
For the third quarter 2006, net sales of the Company were $141.9 million compared to $118.6 million in the third quarter 2005. Income (loss) from operations was $13.8 million and $(8.2) million for NSP and $13.6 million and $(11.1) million for the Company for the three months ended September 30, 2006 and October 1, 2005, respectively. Adjusted earnings before interest, taxes, depreciation, and amortization (“Adjusted EBITDA”) increased to $21.1 million from $16.9 million in the third quarter of 2005 for NSP, and increased to $20.9 million from $16.9 million in the third quarter of 2005 for the Company, which represented an increase of 24.8% and 23.9%, respectively.
The Company’s net sales increase of $23.3 million, or 19.6%, was attributable to increased net sales in each of our three operating segments. In our general safety and preparedness segment, the net sales increase of $17.1 million, or 21.0%, reflects a combination of incremental net sales resulting from the acquisition of The Fibre-Metal Products Company (“Fibre-Metal”), overall organic growth in our domestic and international operations and favorable exchange rates. In our fire service segment, net sales increased $0.5 million, or 2.0%, as incremental net sales resulting from the acquisition of American Firewear, Inc. (“American Firewear”) were partially offset by postponed customer orders due in part to the combined impact of government grant holdups and a delay in the issuance of the new NFPA standard. In our electrical safety segment, net sales increased $5.7 million, or 36.5%, primarily driven by strong overall market demand, new product penetration and incremental net sales resulting from the acquisition of The White Rubber Corporation (“White Rubber”).
The Company’s gross profit increased by $13.0 million, or 34.5%, in the third quarter of 2006, primarily due to the increase in net sales. Excluding the impact of $3.0 million of lower purchase accounting adjustments, gross profit increased $10.0 million, or 24.6%. Excluding these same adjustments, the Company’s gross profit margin of 36.0% in the third quarter of 2006 compared favorably to the 34.6% gross profit margin in the prior-year quarter.
In the third quarter 2006, income from operations increased $22.0 million for NSP and $24.7 million for the Company. Key variances for the Company and NSP for the third quarter 2006 relative to the third quarter 2005 include: (1) lower inventory purchase accounting adjustments of $3.0 million, (2) lower amortization expense related to purchase accounting of $1.7 million and (3) lower management incentive compensation of $13.3 million and $16.1 million, respectively. Excluding these charges from both periods, income from operations increased $4.0 million, or 29.9% for NSP and $3.9 million, or 28.7% for the Company. In our general safety and preparedness segment (after adjusting for lower charges related to purchase accounting of
$2.8 million), income from operations increased by $4.0 million, or 50.2%, primarily due to higher net sales volume and favorable margin realization. In our fire service segment (after adjusting for lower charges related to purchase accounting of $1.8 million), income from operations decreased by $1.2 million, or 31.6%, primarily due to lower margin realization. In our electrical safety segment (after adjusting for lower charges related to purchase accounting of $0.1 million), income from operations increased by $1.4 million, or 40.4%, primarily due to higher net sales. Excluding the impact of the management incentive compensation expense, our corporate expenses increased by $0.2 million for NSP and $0.3 million for the Company, primarily due to higher payroll and administrative expenses during the three months ended September 30, 2006.
For the first nine months of 2006, net sales of the Company were $420.0 million compared to $356.7 million in the first nine months of 2005. Income from operations was $46.2 million and $23.4 million for NSP and $46.0 million and $20.4 million for the Company for the nine months ended September 30, 2006 and October 1, 2005, respectively. Adjusted EBITDA increased to $67.8 million from $53.2 million for the first nine months of 2005 for NSP, and increased to $67.5 million from $52.9 million for the first nine months of 2005 for the Company, which represented an increase of 27.3% and 27.5%, respectively.
The Company’s net sales increase of $63.3 million, or 17.8%, was attributable to increased net sales in each of our three operating segments. In our general safety and preparedness segment, the net sales increase of $47.6 million, or 19.4%, reflects a combination of incremental Fibre-Metal net sales, overall organic growth in our domestic and international operations and favorable exchange rates. In our fire service segment, net sales increased $1.6 million, or 2.4%, as incremental American Firewear net sales were partially offset by postponed customer orders due in part to the combined impact of government grant holdups and a delay in the issuance of the new NFPA standard. In our electrical safety segment, net sales increased $14.1 million, or 31.4%, primarily driven by strong overall market demand, new product penetration and incremental White Rubber net sales.
The Company’s gross profit increased by $30.6 million, or 24.2%, primarily due to the increase in net sales. Excluding the impact of $2.2 million of lower inventory purchase accounting adjustments, gross profit increased by $28.4 million, or 21.9%. Excluding these same adjustments, the Company’s gross profit margin of 37.7% for the first nine months of 2006 compared favorably to the 36.5% gross profit margin in the prior-year period.
In the first nine months of 2006, income from operations increased by $22.8 million, or 97.6% for NSP and $25.6 million, or 126.5% for the Company. Key variances for the Company and NSP for the first nine months of 2006 relative to the first nine months of 2005 include: (1) lower inventory purchase accounting charges of $2.2 million; (2) higher amortization expense of $3.5 million related to purchase accounting; and (3) lower management incentive compensation charges of $12.3 million, and $15.1 million for NSP and the Company, respectively. Excluding these charges from both periods, income from operations increased by $11.8 million, or 26.3% for NSP and $11.8 million, or 26.5% for the Company. In our general safety and preparedness segment (after adjusting for incremental charges related to purchase accounting of $0.5 million), income from operations increased by $11.8 million, or 44.9%, primarily due to higher net sales volume and favorable margin realization. In our fire service segment (after adjusting for incremental charges related to purchase accounting of $0.2 million), income from operations decreased by $2.6 million, or 22.0%, as higher net sales were offset by lower margin realization and higher general and administrative expenses. In our electrical safety segment (after adjusting for incremental charges related to purchase accounting of $0.6 million), income from operations increased by $3.4 million, or 30.5%, primarily due to higher net sales. Excluding the impact of the management incentive compensation expense, our corporate expenses increased $0.8 million for NSP and the Company, primarily due to higher payroll and administrative expenses during the nine months ended September 30, 2006.
In September 2006, the Company completed the acquisition of all of the issued and outstanding capital stock of The New England Overshoe Company, Inc. (“NEOS”). The purchase price of $4.4 million (including acquisition costs of $0.1 million and net of cash acquired) was financed through cash on the balance sheet and the issuance of a $0.8 million subordinated seller note.
As of September 30, 2006, NSP and the Company had working capital of $145.2 million and $153.2 million and cash of $11.9 million and $12.5 million, respectively. The Company’s capital expenditures were $7.7 million in the first nine months of 2006 and $5.7 million in the first nine months of 2005.
The following table reconciles net (loss) income to EBITDA and Adjusted EBITDA for NSP:
| | Three Months Ended (1) | | Nine Months Ended (1) | |
| | Combined (2) | | Successor | | Combined (2) | | Successor | |
| | October 1,
2005 | | September 30,
2006 | | October 1,
2005 | | September 30,
2006 | |
| | | | | | | | | |
Net (loss) income | | $ | (13,160 | ) | $ | 4,226 | | $ | 3,033 | | $ | 17,483 | |
Add: | | | | | | | | | |
Interest expense, net | | 5,273 | | 6,907 | | 16,139 | | 19,655 | |
Income tax (benefit) expense | | (80 | ) | 2,668 | | 3,587 | | 9,635 | |
Depreciation and amortization | | 8,061 | | 6,585 | | 13,665 | | 18,548 | |
EBITDA (3) | | 94 | | 20,386 | | 36,414 | | 65,321 | |
Add: | | | | | | | | | |
Management incentive compensation | | 13,554 | | 265 | | 13,554 | | 1,345 | |
Inventory purchase accounting adjustment | | 3,257 | | 318 | | 3,257 | | 1,062 | |
Loss on the sale of property, plant and equipment | | — | | 121 | | — | | 54 | |
Adjusted EBITDA (3) | | $ | 16,905 | | $ | 21,090 | | $ | 53,225 | | $ | 67,782 | |
The following table reconciles net (loss) income to EBITDA and Adjusted EBITDA for the Company:
| | Three Months Ended (1) | | Nine Months Ended (1) | |
| | Combined (2) | | Successor | | Combined (2) | | Successor | |
| | October 1,
2005 | | September 30,
2006 | | October 1,
2005 | | September 30,
2006 | |
| | | | | | | | | |
Net (loss) income | | $ | (25,392 | ) | $ | 889 | | $ | (19,486 | ) | $ | 8,045 | |
Add: | | | | | | | | | |
Interest expense, net | | 9,954 | | 11,946 | | 30,782 | | 34,266 | |
Income tax (benefit) expense | | (54 | ) | 759 | | 3,703 | | 4,184 | |
Depreciation and amortization | | 8,061 | | 6,585 | | 13,665 | | 18,548 | |
EBITDA (3) | | (7,431 | ) | 20,179 | | 28,654 | | 65,043 | |
Add: | | | | | | | | | |
Management incentive compensation | | 16,388 | | 265 | | 16,388 | | 1,345 | |
Inventory purchase accounting adjustment | | 3,257 | | 318 | | 3,257 | | 1,062 | |
Seller transaction expenses | | 4,646 | | — | | 4,646 | | — | |
Loss on the sale of property, plant and equipment | | — | | 121 | | — | | 54 | |
Adjusted EBITDA (3) | | $ | 16,860 | | $ | 20,883 | | $ | 52,945 | | $ | 67,504 | |
(1) The information for the three and nine months ended September 30, 2006 and the three and nine months ended October 1, 2005 has been derived from the unaudited statements of operations.
(2) The 2005 information is presented on a combined basis for comparative purposes. For the three months ended October 1, 2005, the predecessor (July 3, 2005 through July 19, 2005) and the successor (July 20, 2005 through October 1, 2005) results of operations are combined. For the nine months ended October 1, 2005, the predecessor (January 1, 2005 through July 19, 2005) and the successor (July 20, 2005 through October 1, 2005) results of operations are combined.
(3) EBITDA and Adjusted EBITDA do not represent and should not be considered as an alternative to net income or cash flow from operations, as determined by accounting principles generally accepted in the United States (GAAP), and NSP’s and the Company’s calculations thereof may not be comparable to that reported by other companies. EBITDA and Adjusted EBITDA are calculated above as it is a basis upon which NSP and the Company assess their performance and liquidity position and because we believe that they present useful information to investors regarding a company’s ability to service and/or incur indebtedness. This belief is based on NSP’s and the Company’s negotiations with its lenders who have indicated that the amount of indebtedness it will be permitted to incur will be based, in part, on measures similar to their EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA do not take into account NSP’s and the Company’s working capital requirements, debt service requirements
and other commitments and, accordingly, are not necessarily indicative of amounts that may be available for discretionary use.
We are a leading designer, manufacturer and marketer of branded products in the fragmented personal protection equipment industry. We manufacture and market a full line of personal protection equipment for workers in the general safety and preparedness, fire service and electrical safety industries. We sell our products under trusted, long-standing and well-recognized brand names, including North, KCL, Fibre-Metal, NEOS, Morning Pride, Ranger, Servus, Pro-Warrington, American Firewear, Salisbury and Safety Line. Our broad product offering includes, among other things, respiratory protection, protective footwear, hand protection, bunker gear and linemen equipment.
We have scheduled a conference call to discuss our financial results on Tuesday, November 14th at 10:00 a.m. EST. The call in number is (800) 633-8684. A recording of the conference call will be available for 72 hours after the completion of the call. The recording can be accessed by dialing (800) 633-8284 and entering reservation number 21309459.
This press release contains forward-looking information. These statements reflect management’s expectations, estimates, and assumptions based on information available at the time of the statement. Forward-looking statements include, but are not limited to, statements regarding future events, plans, goals, objectives, and expectations. The words ‘‘anticipate,’’ ‘‘believe,’’ ‘‘estimate,’’ ‘‘expect,’’ ‘‘plan,’’ ‘‘intent,’’ ‘‘likely,’’ ‘‘will,’’ ‘‘should,’’ and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks, uncertainties, and other factors, including those set forth below, which may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by those statements. Important factors that could cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by those statements include, but are not limited to: (i) our high degree of leverage and significant debt service obligations; (ii) the impact of current and future laws and governmental regulations affecting us or our product offerings; (iii) the impact of governmental spending; (iv) our ability to retain existing customers, maintain key supplier status with those customers with which we have achieved such status, and obtain new customers; (v) the highly competitive nature of the personal protection equipment industry; (vi) any future changes in management; (vii) acceptance by consumers of new products we develop or acquire; (viii) the importance and costs of product innovation; (ix) unforeseen problems associated with international sales, including gains and losses from foreign currency exchange and restrictions on the efficient repatriation of earnings; (x) the unpredictability of patent protection and other intellectual property issues; (xi) cancellation of current orders; (xii) the outcome of pending product liability claims and the availability of indemnification for those claims; (xiii) general risks associated with the personal protection equipment industry; and (xiv) the successful integration of acquired companies on economically acceptable terms. We undertake no obligation to publicly update or revise any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, or changes to future results over time.
Norcross Safety Products L.L.C.
Consolidated Statements of Operations
(Amounts in Thousands) (Unaudited)
| | Predecessor(1) | | Successor(1) | | Combined(2) | | Successor(1) | |
| | July 3,
2005
through
July 19,
2005 | | July 20,
2005
through
October 1,
2005 | | Three
Months
ended
October 1,
2005 | | Three
Months
ended
September 30,
2006 | |
| | | | | | | | | |
Net sales | | $ | 33,624 | | $ | 84,989 | | $ | 118,613 | | $ | 141,878 | |
Cost of goods sold | | 22,586 | | 58,271 | | 80,857 | | 91,084 | |
Gross profit | | 11,038 | | 26,718 | | 37,756 | | 50,794 | |
Operating expenses: | | | | | | | | | |
Selling | | 3,156 | | 7,664 | | 10,820 | | 12,824 | |
Distribution | | 2,014 | | 4,427 | | 6,441 | | 8,289 | |
General and administrative, excludes amortization of intangibles and includes $13,554 of management incentive compensation for the period from July 3, 2005 through July 19, 2005 and the combined three months ended October 1, 2005 and $265 of management incentive compensation charges for the three months ended September 30, 2006 | | 16,057 | | 7,814 | | 23,871 | | 12,818 | |
Amortization of intangibles | | 46 | | 4,732 | | 4,778 | | 3,073 | |
Total operating expenses | | 21,273 | | 24,637 | | 45,910 | | 37,004 | |
(Loss) income from operations | | (10,235 | ) | 2,081 | | (8,154 | ) | 13,790 | |
Other expense (income): | | | | | | | | | |
Interest expense | | 1,845 | | 3,516 | | 5,361 | | 7,012 | |
Interest income | | (49 | ) | (39 | ) | (88 | ) | (105 | ) |
Other, net | | (77 | ) | (110 | ) | (187 | ) | (19 | ) |
(Loss) income before income taxes and minority interest | | (11,954 | ) | (1,286 | ) | (13,240 | ) | 6,902 | |
Income tax (benefit) expense | | (148 | ) | 68 | | (80 | ) | 2,668 | |
Minority interest | | 2 | | (2 | ) | — | | 8 | |
Net (loss) income | | $ | (11,808 | ) | $ | (1,352 | ) | $ | (13,160 | ) | $ | 4,226 | |
(1) On July 19, 2005, all the outstanding units of NSP were acquired by Holdings, with the result that NSP became a wholly-owned subsidiary of Holdings. NSP’s financial position and results of operations prior to the acquisition are presented separately in the consolidated financial statements as “Predecessor” financial statements, while the financial position and results of operations following the acquisition are presented as “Successor” financial statements. Due to the revaluation of assets as a result of purchase accounting associated with the acquisition, the pre-acquisition financial statements are not comparable with those after the acquisition in certain respects.
(2) Although the Predecessor and Successor results are not comparable by definition in certain respects due to the acquisition and resulting revaluation, for ease of comparison, the financial data for the period after the acquisition, July 20, 2005 through October 1, 2005 (Successor period), has been added to the financial data for the period from July 3, 2005 through July 19, 2005 (Predecessor period), to arrive at the combined three months ended October 1, 2005.
Norcross Safety Products L.L.C.
Consolidated Statements of Operations
(Amounts in Thousands) (Unaudited)
| | Predecessor(1) | | Successor(1) | | Combined(2) | | Successor(1) | |
| | January 1,
2005
through
July 19,
2005 | | July 20,
2005
through
October 1,
2005 | | Nine
Months
ended
October 1,
2005 | | Nine
Months
ended
September 30,
2006 | |
| | | | | | | | | |
Net sales | | $ | 271,694 | | $ | 84,989 | | $ | 356,683 | | $ | 420,000 | |
Cost of goods sold | | 171,645 | | 58,271 | | 229,916 | | 262,563 | |
Gross profit | | 100,049 | | 26,718 | | 126,767 | | 157,437 | |
Operating expenses: | | | | | | | | | |
Selling | | 25,512 | | 7,664 | | 33,176 | | 38,938 | |
Distribution | | 14,634 | | 4,427 | | 19,061 | | 24,276 | |
General and administrative, excludes amortization of intangibles and includes $13,554 of management incentive compensation for the period from January 1, 2005 through July 19, 2005 and the combined nine months ended October 1, 2005 and $1,345 of management incentive compensation for the period ended September 30, 2006 | | 38,250 | | 7,814 | | 46,064 | | 39,446 | |
Amortization of intangibles | | 329 | | 4,732 | | 5,061 | | 8,540 | |
Total operating expenses | | 78,725 | | 24,637 | | 103,362 | | 111,200 | |
Income from operations | | 21,324 | | 2,081 | | 23,405 | | 46,237 | |
Other expense (income): | | | | | | | | | |
Interest expense | | 13,126 | | 3,516 | | 16,642 | | 20,090 | |
Interest income | | (464 | ) | (39 | ) | (503 | ) | (435 | ) |
Other, net | | 745 | | (110 | ) | 635 | | (559 | ) |
Income (loss) before income taxes and minority interest | | 7,917 | | (1,286 | ) | 6,631 | | 27,141 | |
Income tax expense | | 3,519 | | 68 | | 3,587 | | 9,635 | |
Minority interest | | 13 | | (2 | ) | 11 | | 23 | |
Net (loss) income | | $ | 4,385 | | $ | (1,352 | ) | $ | 3,033 | | $ | 17,483 | |
(1) On July 19, 2005, all the outstanding units of NSP were acquired by Holdings, with the result that NSP became a wholly-owned subsidiary of Holdings. NSP’s financial position and results of operations prior to the acquisition are presented separately in the consolidated financial statements as “Predecessor” financial statements, while the financial position and results of operations following the acquisition are presented as “Successor” financial statements. Due to the revaluation of assets as a result of purchase accounting associated with the acquisition, the pre-acquisition financial statements are not comparable with those after the acquisition in certain respects.
(2) Although the Predecessor and Successor results are not comparable by definition in certain respects due to the acquisition and resulting revaluation, for ease of comparison, the financial data for the period after the acquisition, July 20, 2005 through October 1, 2005 (Successor period), has been added to the financial data for the period from January 1, 2005 through July 19, 2005 (Predecessor period), to arrive at the combined nine months ended October 1, 2005.
Safety Products Holdings, Inc.
Consolidated Statements of Operations
(Amounts in Thousands) (Unaudited)
| | Predecessor (1) | | Successor (1) | | Combined (2) | | Successor (1) | |
| | July 3,
2005
through
July 19,
2005 | | July 20,
2005
through
October 1,
2005 | | Three
Months
ended
October 1,
2005 | | Three
Months
ended
September 30,
2006 | |
Net sales | | $ | 33,624 | | $ | 84,989 | | $ | 118,613 | | $ | 141,878 | |
Cost of goods sold | | 22,586 | | 58,271 | | 80,857 | | 91,084 | |
Gross profit | | 11,038 | | 26,718 | | 37,756 | | 50,794 | |
Operating expenses: | | | | | | | | | |
Selling | | 3,156 | | 7,664 | | 10,820 | | 12,824 | |
Distribution | | 2,014 | | 4,427 | | 6,441 | | 8,289 | |
General and administrative, excludes amortization of intangibles and includes $16,388 of management incentive compensation for the period from July 3, 2005 through July 19, 2005 and the combined three months ended October 1, 2005 and $265 of management incentive compensation for the three months ended September 30, 2006 | | 18,916 | | 7,834 | | 26,750 | | 13,025 | |
Amortization of intangibles | | 46 | | 4,732 | | 4,778 | | 3,073 | |
Total operating expenses | | 24,132 | | 24,657 | | 48,789 | | 37,211 | |
(Loss) income from operations | | (13,094 | ) | 2,061 | | (11,033 | ) | 13,583 | |
Other expense (income): | | | | | | | | | |
Interest expense | | 2,927 | | 7,151 | | 10,078 | | 12,051 | |
Interest income | | (85 | ) | (39 | ) | (124 | ) | (105 | ) |
Seller transaction expenses | | 4,646 | | — | | 4,646 | | — | |
Other, net | | (77 | ) | (110 | ) | (187 | ) | (19 | ) |
(Loss) income before income taxes and minority interest | | (20,505 | ) | (4,941 | ) | (25,446 | ) | 1,656 | |
Income tax (benefit) expense | | (138 | ) | 84 | | (54 | ) | 759 | |
Minority interest | | 2 | | (2 | ) | — | | 8 | |
Net (loss) income | | $ | (20,369 | ) | $ | (5,023 | ) | $ | (25,392 | ) | $ | 889 | |
(1) On July 19, 2005, all the outstanding units of NSP were acquired by Holdings from NSP Holdings L.L.C. (“NSP Holdings”), with the result that Holdings became the sole unit holder of NSP and assumed, pursuant to a supplemental indenture, the obligations of NSP Holdings and NSP Holdings Capital Corp. (“Capital”) under their outstanding $100 million 11¾% Senior Pay in Kind Notes due 2012 and the indenture governing such notes. NSP Holdings’ financial position and results of operations prior to the acquisition are presented separately in the consolidated financial statements as “Predecessor” financial statements, while the financial position and results of operations of Holdings following the acquisition are presented as “Successor” financial statements. Due to the revaluation of assets as a result of purchase accounting associated with the transaction, the pre-acquisition financial statements are not comparable with those after the acquisition in certain respects.
(2) Although the Predecessor and Successor results are not comparable by definition in certain respects due to the acquisition and the resulting revaluation, for ease of comparison, the financial data for the period after the acquisition, July 20, 2005 through October 1, 2005 (Successor period), has been added to the financial data for the period from July 3, 2005 through July 19, 2005 (Predecessor period), to arrive at the combined three months ended October 1, 2005.
Safety Products Holdings, Inc.
Consolidated Statements of Operations
(Amounts in Thousands) (Unaudited)
| | Predecessor (1) | | Successor (1) | | Combined (2) | | Successor (1) | |
| | January 1,
2005
through
July 19,
2005 | | July 20,
2005
through
October 1,
2005 | | Nine
Months
ended
October 1,
2005 | | Nine
Months
ended
September 30,
2006 | |
Net sales | | $ | 271,694 | | $ | 84,989 | | $ | 356,683 | | $ | 420,000 | |
Cost of goods sold | | 171,645 | | 58,271 | | 229,916 | | 262,563 | |
Gross profit | | 100,049 | | 26,718 | | 126,767 | | 157,437 | |
Operating expenses: | | | | | | | | | |
Selling | | 25,512 | | 7,664 | | 33,176 | | 38,938 | |
Distribution | | 14,634 | | 4,427 | | 19,061 | | 24,276 | |
General and administrative, excludes amortization of intangibles and includes $16,388 of management incentive compensation for the period from January 1, 2005 through July 19, 2005 and the combined nine months ended October 1, 2005 and $1,345 of management incentive compensation for the nine months ended September 30, 2006 | | 41,344 | | 7,834 | | 49,178 | | 39,724 | |
Amortization of intangibles | | 329 | | 4,732 | | 5,061 | | 8,540 | |
Total operating expenses | | 81,819 | | 24,657 | | 106,476 | | 111,478 | |
Income from operations | | 18,230 | | 2,061 | | 20,291 | | 45,959 | |
Other expense (income): | | | | | | | | | |
Interest expense | | 24,584 | | 7,151 | | 31,735 | | 34,701 | |
Interest income | | (914 | ) | (39 | ) | (953 | ) | (435 | ) |
Seller transaction expenses | | 4,646 | | — | | 4,646 | | — | |
Other, net | | 745 | | (110 | ) | 635 | | (559 | ) |
(Loss) income before income taxes and minority interest | | (10,831 | ) | (4,941 | ) | (15,772 | ) | 12,252 | |
Income tax expense | | 3,619 | | 84 | | 3,703 | | 4,184 | |
Minority interest | | 13 | | (2 | ) | 11 | | 23 | |
Net (loss) income | | $ | (14,463 | ) | $ | (5,023 | ) | (19,486 | ) | $ | 8,045 | |
| | | | | | | | | | | | | |
(1) On July 19, 2005, all the outstanding units of NSP were acquired by Holdings from NSP Holdings, with the result that Holdings became the sole unit holder of NSP and assumed, pursuant to a supplemental indenture, the obligations of NSP Holdings and Capital under their outstanding $100 million 11¾% Senior Pay in Kind Notes due 2012 and the indenture governing such notes. NSP Holdings’ financial position and results of operations prior to the acquisition are presented separately in the consolidated financial statements as “Predecessor” financial statements, while the financial position and results of operations of Holdings following the acquisition are presented as “Successor” financial statements. Due to the revaluation of assets as a result of purchase accounting associated with the transaction, the pre-acquisition financial statements are not comparable with those after the acquisition in certain respects.
(2) Although the Predecessor and Successor results are not comparable by definition in certain respects due to the acquisition and the resulting revaluation, for ease of comparison, the financial data for the period after the acquisition, July 20, 2005 through October 1, 2005 (Successor period),
has been added to the financial data for the period from January 1, 2005 through July 19, 2005 (Predecessor period), to arrive at the combined nine months ended October 1, 2005.
