Exhibit 99.1
DATE: May 11, 2007
From:
Safety Products Holdings, Inc. and Norcross Safety Products L.L.C.
2001 Spring Road
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 FIRST QUARTER 2007 RESULTS
OAK BROOK, IL May 11, 2007 — Safety Products Holdings, Inc. (“Holdings”) and Norcross Safety Products L.L.C. (“NSP” and collectively with Holdings, the “Company”), today announced results for the quarter ended March 31, 2007. The following discussion presents results for both NSP and the Company only where the results between the two differ.
For the first quarter of 2007, net sales of the Company were $153.2 million compared to $141.9 million in the first quarter of 2006. Income from operations was $18.6 million and $16.3 million for NSP and $18.5 million and $16.2 million for the Company for the three months ended March 31, 2007 and April 1, 2006, respectively.
The Company’s net sales increase of $11.3 million, or 8.0%, was attributable to increased net sales in its general safety and preparedness and electrical safety segments. In the general safety and preparedness segment, the net sales increase of $5.3 million, or 5.4%, was the result of overall organic growth and favorable exchange rates. In the fire service segment, net sales decreased $0.2 million, or 0.9%. In the electrical safety segment, net sales increased $6.2 million, or 33.5%, primarily driven by strong overall market demand, new product penetration and incremental net sales resulting from the acquisition of The White Rubber Corporation.
The Company’s gross profit increased by $5.0 million, or 9.2%, primarily due to the increase in net sales. Excluding the impact of $0.7 million of inventory purchase accounting adjustments recognized in the three months ended April 1, 2006, the Company’s gross profit increased $4.3 million, or 7.7%. After adjusting for the inventory purchase accounting adjustments, the Company’s gross profit margin was 38.3% for the three months ended March 31, 2007, as compared to 38.4% for the three months ended April 1, 2006.
In the first quarter of 2007, income from operations increased by $2.3 million, or 13.9% for both NSP and the Company. In the general safety and preparedness segment, income from operations increased by $1.2 million, or 10.7%, primarily due to higher net sales volume, favorable margin realization and the impact of the inventory purchase accounting adjustments. In the fire service segment, income from operations increased by $0.3 million, or 11.1%, primarily as a result of lower general and administrative expenses. In the electrical safety segment, income from operations increased by $0.8 million, or 15.8%, primarily due to higher net sales. Excluding the impact of management incentive compensation of $0.8 million in 2006 and $0.3 million in 2007, corporate expenses for both NSP and the Company increased by $0.5 million, primarily due to higher payroll, administrative expenses and professional fees.
As of March 31, 2007, NSP and the Company had working capital of $154.1 million and $159.3 million and cash of $16.2 million and $16.9 million, respectively. The Company’s capital expenditures were $3.3 million in the first quarter of 2007 and $2.3 million in the first quarter of 2006.
“EBITDA” is net income plus interest expense, net, income tax expense and depreciation and amortization expense. EBITDA and the supplemental information are summarized below as management believes that EBITDA and the supplemental information are useful to investors as they provide investors with disclosures of NSP’s and the Company’s operating performance on the same basis as that used by management. EBITDA does not represent and should not be considered as an alternative to net income, 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 does not take into account NSP’s and the Company’s working capital requirements, debt service requirements and other commitments and, accordingly, is not necessarily indicative of amounts that may be available for discretionary use.
The following table reconciles net income to EBITDA for NSP:
| | Three Months Ended (1) | |
| | April 1, | | March 31, | |
| | 2006 | | 2007 | |
| | | | | |
Net income | | $ | 6,794 | | $ | 7,155 | |
Add: | | | | | |
Interest expense, net | | 6,299 | | 6,817 | |
Income tax expense | | 3,554 | | 4,676 | |
Depreciation and amortization expense | | 5,865 | | 6,566 | |
EBITDA | | $ | 22,512 | | $ | 25,214 | |
The following table reconciles net income to EBITDA for the Company:
| | Three Months Ended (1) | |
| | April 1, | | March 31, | |
| | 2006 | | 2007 | |
| | | | | |
Net income | | $ | 3,687 | | $ | 3,783 | |
Add: | | | | | |
Interest expense, net | | 11,085 | | 12,124 | |
Income tax expense | | 1,835 | | 2,683 | |
Depreciation and amortization expense | | 5,865 | | 6,566 | |
EBITDA | | $ | 22,472 | | $ | 25,156 | |
The following table sets forth supplemental information regarding items included in net income of both NSP and the Company:
| | Three Months Ended (1) | |
| | April 1, | | March 31, | |
| | 2006 | | 2007 | |
| | | | | |
Management incentive compensation | | $ | 800 | | $ | 340 | |
Inventory purchase accounting adjustment | | 741 | | — | |
(Gain) loss on sale of property, plant and equipment | | (79 | ) | 108 | |
Total | | $ | 1,462 | | $ | 448 | |
(1) The information for the three months ended March 31, 2007 and the three months ended April 1, 2006 has been derived from the unaudited statements of operations.
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 SafetyLine. 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 Monday, May 14th at 10:00 a.m. EDT. The call in number is (888) 882-0109. 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 21338289.
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)
| | Three Months Ended | |
| | April 1, | | March 31, | |
| | 2006 | | 2007 | |
| | | | | |
Net sales | | $ | 141,876 | | $ | 153,200 | |
Cost of goods sold | | 88,145 | | 94,545 | |
Gross profit | | 53,731 | | 58,655 | |
Operating expenses: | | | | | |
Selling | | 12,875 | | 13,922 | |
Distribution | | 7,926 | | 9,295 | |
General and administrative (1) | | 13,917 | | 13,916 | |
Amortization of intangibles | | 2,726 | | 2,965 | |
Total operating expenses | | 37,444 | | 40,098 | |
Income from operations | | 16,287 | | 18,577 | |
Other expense (income): | | | | | |
Interest expense | | 6,462 | | 7,042 | |
Interest income | | (163 | ) | (225 | ) |
Other, net | | (371 | ) | (97 | ) |
Income before income taxes and minority interest | | 10,359 | | 11,837 | |
Income tax expense | | 3,554 | | 4,676 | |
Minority interest | | 11 | | 6 | |
Net income | | $ | 6,794 | | $ | 7,155 | |
(1) General and administrative expenses exclude amortization of intangibles and include $800 and $340 of management incentive compensation for the three months ended April 1, 2006 and March 31, 2007, respectively.
