Safety Products Holdings, Inc. and Norcross Safety Products L.L.C. Announce Third Quarter 2005 Results
OAK BROOK, Ill.--Nov. 1, 20054, 2005--Safety Products Holdings, Inc. ("Holdings"), as successor to NSP Holdings L.L.C. ("NSP Holdings"), and Norcross Safety Products L.L.C. ("NSP" and collectively with Holdings, the "Company"), today announced results for the third quarter ended October 1, 2005. On July 19, 2005, Holdings and NSP completed the transaction under which Holdings acquired all of the outstanding membership units of NSP and assumed and succeeded to all of the obligations of NSP Holdings under NSP Holdings' and NSP Holdings Capital Corp.'s outstanding $100.0 million 11 3/4% senior pay in kind notes due 2012 and the indenture governing such notes (the "Acquisition"). The following discussion presents results for both NSP and the Company only where the results between the two differ.For the third quarter of 2005, net sales of the Company were $119.5 million compared to $114.5 million in the third quarter of 2004. Adjusted earnings before interest, taxes, depreciation, and amortization (Adjusted EBITDA) increased to $16.9 million from $15.7 million in the third quarter of 2004 for NSP, and increased to $16.9 million from $15.4 million in the third quarter of 2004 for the Company.
The Company's net sales increase of $5.0 million, or 4.4%, was attributable to increased net sales in each of its three operating segments. In our general industrial segment, the net sales increase of $2.1 million, or 2.6%, reflects a combination of the following: overall organic growth in Canada, Europe, and South Africa, favorable exchange rates, and lower overall net sales in the United States, as strong overall market demand was offset by a decrease in government contract shipments. In our fire service segment, net sales increased $1.1 million, or 5.5%, reflecting continued strong market demand. In our utility/high voltage segment, net sales increased $1.8 million, or 13.2%, primarily driven by strong market demand and new product penetration. Both our general industrial and utility/high voltage segments realized increased sales from the recent hurricane activity in the southeastern United States.
The Company's gross profit decreased by $1.0 million, or 2.6%, primarily due to the impact of a $3.3 million charge related to inventory purchase accounting adjustments. Excluding these adjustments, the Company's gross profit increased $2.3 million, or 5.6%. Excluding the $3.3 million of inventory purchase accounting adjustments, the Company's gross profit margin of 35.1% in the third quarter of 2005 compared favorably to the 34.7% gross profit margin in the prior-year quarter.
The Company's income (loss) from operations decreased $24.0 million from $13.0 million in the third quarter of 2004 to $(11.0) million in the third quarter of 2005. NSP's income (loss) from operations decreased $21.2 million from $13.0 million in the third quarter of 2004 to $(8.2) million for the third quarter of 2005. Included in the Company's and NSP's operating (loss) for the third quarter of 2005 were: (1) inventory purchase accounting charges of $3.3 million; (2) incremental amortization expenses of $4.7 million related to purchase accounting; and (3) $16.4 million of management incentive compensation expense for the Company and $13.6 million of management incentive compensation expense for NSP recognized as a result of the Acquisition. The management incentive compensation was funded by the predecessor company from proceeds of the Acquisition. Excluding these charges, the Company's operating income increased $0.4 million, or 3.1%, and NSP's operating income increased $0.3 million, or 2.3%. In our general industrial segment (after adjusting for expenses related to purchase accounting), income from operations increased by $0.9 million, or 12.7%, due to the higher net sales volume. In our fire service segment (after adjusting for expenses related to purchase accounting), income from operations decreased $0.4 million, or 11.3%, as the higher net sales volume was offset by lower margin realization and higher administrative expenses. In our utility/high voltage segment (after adjusting for expenses related to purchase accounting), income from operations was flat at $3.2 million. Excluding the Company's $16.4 million and NSP's $13.6 million of management incentive compensation expense, corporate expenses increased $0.2 million for the Company and $0.1 million for NSP, both increases driven by higher payroll and administrative expenses including costs associated with public reporting and related compliance requirements of the Sarbanes-Oxley Act of 2002.
For the first nine months of 2005, net sales of the Company were $358.8 million compared to $330.6 million in the first nine months of 2004. Adjusted EBITDA for the first nine months of 2005 increased to $53.2 million from $48.8 million for the first nine months of 2004 for NSP, and increased to $52.9 million from $48.0 million for the first nine months of 2004 for the Company.
The Company's net sales increase of $28.2 million, or 8.5%, was attributable to increased net sales in each of its three operating segments. In our general industrial segment, the net sales increase of $15.3 million, or 6.6%, reflects a combination of the following: overall organic growth in Canada, Europe, and South Africa, favorable exchange rates, and lower overall net sales in the United States, as strong overall market demand was offset by a decrease in government contract shipments. In our fire service segment, net sales increased $6.6 million, or 11.0%, reflecting strong market demand. In our utility/high voltage segment, net sales increased $6.3 million, or 16.6%, primarily driven by strong market demand and new product penetration. Both our general industrial and utility/high voltage segments realized increased sales from the recent hurricane activity in the southeastern United States.
The Company's gross profit increased by $10.4 million, or 8.8%. Excluding the impact of a $3.3 million charge related to inventory purchase accounting adjustments, the Company's gross profit increased $13.7 million, or 11.6%. Excluding the $3.3 million of inventory purchase accounting adjustments, the Company's gross profit margin of 36.8% for the first nine months of 2005 was favorable to the 35.8% gross profit margin for the first nine months of 2004.
For the first nine months of 2005, the Company's income from operations decreased $19.1 million from $39.4 million for the first nine months of 2004 to $20.3 million for the first nine months of 2005. NSP's income from operations decreased $16.3 million from $39.7 million for the first nine months of 2005 to $23.4 million for the first nine months of 2004. Included in the Company's and NSP's operating income for the first nine months of 2005 were: (1) inventory purchase accounting charges of $3.3 million; (2) incremental amortization expenses of $4.7 million related to purchase accounting; and (3) $16.4 million of management incentive compensation expense for the Company and $13.6 million of management incentive compensation expense for NSP. Included in income from operations for the nine months ended 2004 were $0.6 million of expenses related to exploring strategic alternatives. Excluding these charges, the Company's income from operations increased $4.7 million, or 11.7%, and NSP's income from operations increased $4.6 million, or 11.4%. In our general industrial segment (after adjusting for expenses related to purchase accounting), income from operations increased by $2.0 million, or 8.1%, primarily due to the higher net sales volume. In our fire service segment (after adjusting for expenses related to purchase accounting), income from operations increased $0.4 million, or 3.8%, as the higher net sales was partially offset by lower margin realization. In our utility/high voltage segment (after adjusting for expenses related to purchase accounting), income from operations increased $2.8 million, or 32.8%, due to the higher net sales volume and improved manufacturing performance. Excluding the Company's $16.4 million and NSP's $13.6 million of management incentive compensation expense during the first nine months of 2005 and $0.6 million of strategic alternatives expenses in the first nine months of 2004, corporate expenses increased $0.5 million for both the Company and NSP driven by higher payroll and administrative expenses including costs associated with public reporting and related compliance requirements of the Sarbanes-Oxley Act of 2002.
As of October 1, 2005, NSP and the Company had working capital of $122.1 million and $122.8 million and cash of $4.1 million and $4.2 million, respectively. The Company's capital expenditures were $5.7 million in the first nine months of 2005 and $4.3 million in the first nine months of 2004.
The following table reconciles net income to EBITDA and Adjusted
EBITDA for NSP:
Three Months Ended Nine Months Ended
------------------------ ------------------------
Predecessor Combined (1) Predecessor Combined (1)
------------------------ ------------------------
October 2, October 1, October 2, October 1,
2004 2005 2004 2005
----------- ------------ ----------- ------------
Net income (loss) $6,715 $(13,160) $19,286 $3,033
Add:
Interest expense,
net 5,509 5,273 16,741 16,139
Income tax expense 545 (80) 2,821 3,587
Depreciation and
amortization 2,975 8,061 8,907 13,655
----------- ------------ ----------- ------------
EBITDA (2) 15,744 94 47,755 36,414
Add:
Inventory purchase
accounting
adjustment -- 3,257 -- 3,257
Management
incentive
compensation -- 13,554 -- 13,554
Strategic
alternatives 3 -- 616 --
Loss on the sale of
property, plant
and equipment -- -- 384 --
----------- ------------ ----------- ------------
Adjusted EBITDA (2) $15,747 $16,905 $48,755 $53,225
=========== ============ =========== ============
The following table reconciles net income to EBITDA and Adjusted
EBITDA for the Company:
Three Months Ended Nine Months Ended
------------------------ ------------------------
Predecessor Combined (1) Predecessor Combined (1)
------------------------ ------------------------
October 2, October 1, October 2, October 1,
2004 2005 2004 2005
----------- ------------ ----------- ------------
Net income (loss) $2,859 $(25,392) $8,395 $(19,486)
Add:
Interest expense,
net 8,973 9,954 26,814 30,782
Income tax expense 556 (54) 2,915 3,703
Depreciation and
amortization 2,975 8,061 8,907 13,655
----------- ------------ ----------- ------------
EBITDA (2) 15,363 (7,431) 47,031 28,654
Add:
Inventory purchase
accounting
adjustment -- 3,257 -- 3,257
Management incentive
compensation -- 16,388 -- 16,388
Seller transaction
expenses -- 4,646 -- 4,646
Strategic
alternatives 3 -- 616 --
Loss on the sale of
property, plant and
equipment -- -- 384 --
----------- ------------ ----------- ------------
Adjusted EBITDA (2) $15,366 $16,860 $48,031 $52,945
=========== ============ =========== ============
(1) The 2005 information is presented on a combined basis for
comparative purposes and has been derived from the unaudited
statements of operations. For the three months ended October 1,
2005 the predecessor (July 3, 2005 through July 19, 2005) and
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
successor (July 20, 2005 through October 1, 2005) results of
operations are combined.
(2) 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 assesses their
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 personal protection equipment industry. We manufacture and market a full line of personal protection equipment for workers in the general industrial, fire service and utility/high voltage industries. We sell products under trusted, long-standing and well-recognized brand names, including North, Morning Pride, Ranger, Servus, Pro-Warrington and Salisbury. 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 15, 2005 at 11:00 a.m. EST. The call in number is (800) 399-4592. 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 21269142.
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)
-------------------- --------------------------
Three July 3, July 20, Three
Months 2005 2005 Months
Ended Through Through Ended
October 2, July 19, October 1, October 1,
2004 2005 2005 2005
---------- --------- ------------ -------------
Net sales $114,508 $33,806 $85,738 $119,544
Cost of goods sold 74,797 22,586 58,271 80,857
---------- --------- ------------ ------------
Gross profit 39,711 11,220 27,467 38,687
Operating expenses:
Selling 10,688 3,338 8,413 11,751
Distribution 5,712 2,014 4,427 6,441
General and
administrative 10,170 2,503 7,814 10,317
Amortization of
intangibles 130 46 4,732 4,778
Strategic alternatives 3 -- -- --
Management incentive
compensation -- 13,554 -- 13,554
---------- --------- ------------ ------------
Total operating
expenses 26,703 21,455 25,386 46,841
---------- --------- ------------ ------------
Income (loss) from
operations 13,008 (10,235) 2,081 (8,154)
Other expense (income):
Interest expense 5,573 1,845 3,516 5,361
Interest income (64) (49) (39) (88)
Other, net 233 (77) (110) (187)
---------- --------- ------------ ------------
Income (loss) before
income taxes and
minority interest 7,266 (11,954) (1,286) (13,240)
Income tax expense
(benefit) 545 (148) 68 (80)
Minority interest 6 2 (2) --
---------- --------- ------------ ------------
Net income (loss) $6,715 $(11,808) $(1,352) $(13,160)
========== ========= ============ ============
(1) On July 19, 2005, all the outstanding units of Norcross Safety
Products L.L.C. ("NSP") were acquired by Safety Products Holdings,
Inc. ("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 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.
Norcross Safety Products L.L.C.
Consolidated Statements of Operations
(Amounts in Thousands) (Unaudited)
Predecessor (1) Successor (1) Combined (2)
---------------------- ---------------------------
Nine January 1, July 20, Nine
Months 2005 2005 Months
Ended Through Through Ended
October 2, July 19, October 1, October 1,
2004 2005 2005 2005
----------- ---------- ------------- -------------
Net sales $330,586 $273,074 $85,738 $358,812
Cost of goods sold 212,129 171,645 58,271 229,916
----------- ---------- ------------- -------------
Gross profit 118,457 101,429 27,467 128,896
Operating expenses:
Selling 31,514 26,892 8,413 35,305
Distribution 16,607 14,634 4,427 19,061
General and
administrative 29,644 24,696 7,814 32,510
Amortization of
intangibles 380 329 4,732 5,061
Strategic
alternatives 616 -- -- --
Management
incentive
compensation -- 13,554 -- 13,554
----------- ---------- ------------- -------------
Total operating
expenses 78,761 80,105 25,386 105,491
----------- ---------- ------------- -------------
Income from
operations 39,696 21,324 2,081 23,405
Other expense
(income):
Interest expense 16,869 13,126 3,516 16,642
Interest income (128) (464) (39) (503)
Other, net 826 745 (110) 635
----------- ---------- ------------- -------------
Income (loss) before
income taxes and
minority interest 22,129 7,917 (1,286) 6,631
Income tax expense 2,821 3,519 68 3,587
Minority interest 22 13 (2) 11
----------- ---------- ------------- -------------
Net income (loss) $19,286 $4,385 $(1,352) $3,033
=========== ========== ============= =============
(1) On July 19, 2005, all the outstanding units of Norcross Safety
Products L.L.C. ("NSP") were acquired by Safety Products Holdings,
Inc. ("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 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.
Norcross Safety Products L.L.C.
Consolidated Balance Sheets
(Amounts in Thousands) (Unaudited)
Predecessor (1) Successor (1)
--------------- ---------------
December 31, October 1,
2004 2005
--------------- ---------------
Assets
Current assets:
Cash and cash equivalents $35,731 $4,105
Accounts receivable, less allowance of
$2,063 and $2,268 in 2004 and 2005,
respectively 61,167 73,919
Inventories 82,532 90,479
Deferred income taxes 60 61
Prepaid expenses and other current
assets 3,183 2,392
--------------- ---------------
Total current assets 182,673 170,956
Property, plant, and equipment, net 51,809 63,838
Deferred financing costs, net 9,394 6,550
Goodwill 132,662 116,817
Other intangible assets, net 6,256 238,405
Other noncurrent assets 5,689 5,564
--------------- ---------------
Total assets $388,483 $602,130
=============== ===============
Liabilities and member's equity
Current liabilities:
Accounts payable $17,871 $20,667
Accrued expenses 28,127 26,011
Current maturities of long-term
obligations 15,252 2,159
--------------- ---------------
Total current liabilities 61,250 48,837
Pension, post-retirement and deferred
compensation 22,923 32,571
Long-term obligations 238,314 245,924
Other noncurrent liabilities 1,653 1,620
Deferred income taxes 4,799 50,861
Minority interest 142 175
--------------- ---------------
267,831 331,151
Member's equity:
Contributed capital 116,060 221,068
Accumulated deficit (42,447) (1,687)
Due from NSP Holdings L.L.C. (17,740) --
Accumulated other comprehensive income 3,529 2,761
--------------- ---------------
Total member's equity 59,402 222,142
--------------- ---------------
Total liabilities and member's equity $388,483 $602,130
=============== ===============
(1) On July 19, 2005, all the outstanding units of Norcross Safety
Products L.L.C. ("NSP") were acquired by Safety Products Holdings,
Inc. ("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.
Norcross Safety Products L.L.C.
Consolidated Statements of Cash Flows
(Amounts in Thousands) (Unaudited)
Predecessor (1) Successor(1)
----------------- ------------
Nine January July 20,
months 1, 2005 2005
ended through through
October July October
2, 2004 19, 2005 1, 2005
-------- -------- ------------
Operating activities
Net income (loss) $19,286 $ 4,385 $(1,352)
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Depreciation 8,527 6,177 2,417
Amortization of intangibles 380 329 4,732
Amortization of deferred financing
costs 1,324 1,020 223
Amortization of original issue
discount (premium) 68 58 (193)
Loss on sale of property, plant and
equipment 384 -- --
Deferred income taxes 731 (86) (651)
Minority interest 15 13 (2)
Changes in operating assets and
liabilities:
Accounts receivable (16,700) (2,607) (10,145)
Inventories (2,170) (1,515) 3,024
Prepaid expenses and other current
assets 789 467 414
Other noncurrent assets 15 (477) 115
Accounts payable 347 (492) 3,288
Accrued expenses (4,365) 14,177 (2,127)
Pension, postretirement, and
deferred compensation 706 (1,210) 135
Other noncurrent liabilities (31) (30) (3)
Other 2 22 4
-------- -------- ---------
Net cash provided by (used in) operating
activities 9,308 20,231 (121)
Investing activities
Purchase of businesses, net of cash
acquired (490) (653) (204,707)
Purchases of property, plant, and
equipment (4,284) (4,250) (1,471)
Proceeds from sale of property, plant and
equipment 480 -- --
Due from NSP Holdings L.L.C. (459) -- --
-------- -------- ---------
Net cash used in investing activities (4,753) (4,903) (206,178)
Financing activities
Payments of deferred financing costs -- -- (6,773)
Proceeds from borrowings -- -- 88,000
Payments of debt (2,228) (13,623) (293)
Due from NSP Holdings L.L.C. (1,116) (558) --
Proceeds from capital contributions -- -- 121,114
Dividends to NSP Holdings L.L.C. (1,927) (9) --
Dividends to Safety Products Holdings,
Inc. -- -- (335)
-------- -------- ---------
Net cash (used in) provided by
financing activities (5,271) (14,190) 201,713
Effect of exchange rate changes on cash 738 (2,725) 1,547
-------- -------- ---------
Net increase (decrease) in cash and cash
equivalents 22 (1,587) (3,039)
Cash and cash equivalents at beginning of
period 16,341 35,731 7,144
-------- -------- ---------
Cash and cash equivalents at end of
period $16,363 $34,144 $ 4,105
======== ======== =========
(1) On July 19, 2005, all the outstanding units of Norcross Safety
Products L.L.C. ("NSP") were acquired by Safety Products Holdings,
Inc. ("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.
Safety Products Holdings, Inc.
(NSP Holdings L.L.C. as predecessor)
Consolidated Statements of Operations
(Amounts in Thousands) (Unaudited)
Predecessor (1) Successor (1) Combined (2)
------------------- --------------------------
Three July 3, July 20, Three
Months 2005 2005 Months
Ended Through Through Ended
October 2, July 19, October 1, October 1,
2004 2005 2005 2005
--------- --------- ------------ -------------
Net sales $114,508 $33,806 $85,738 $119,544
Cost of goods sold 74,797 22,586 58,271 80,857
--------- --------- ------------ ------------
Gross profit 39,711 11,220 27,467 38,687
Operating expenses:
Selling 10,688 3,338 8,413 11,751
Distribution 5,712 2,014 4,427 6,441
General and
administrative 10,171 2,528 7,834 10,362
Amortization of
intangibles 130 46 4,732 4,778
Strategic alternatives 3 -- -- --
Management incentive
compensation -- 16,388 -- 16,388
--------- --------- ------------ ------------
Total operating expenses 26,704 24,314 25,406 49,720
--------- --------- ------------ ------------
Income (loss) from
operations 13,007 (13,094) 2,061 (11,033)
Other expense (income):
Interest expense 9,037 2,927 7,151 10,078
Interest income (64) (85) (39) (124)
Seller transaction
expenses -- 4,646 -- 4,646
Other, net 613 (77) (110) (187)
--------- --------- ------------ ------------
Income (loss) before
income taxes and
minority interest 3,421 (20,505) (4,941) (25,446)
Income tax expense
(benefit) 556 (138) 84 (54)
Minority interest 6 2 (2) --
--------- --------- ------------ ------------
Net income (loss) $2,859 $(20,369) $(5,023) $(25,392)
========= ========= ============ ============
(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 11 3/4% 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 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 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.
(NSP Holdings L.L.C. as predecessor)
Consolidated Statements of Operations
(Amounts in Thousands) (Unaudited)
Predecessor (1) Successor (1) Combined (2)
------------------- ----------------------------
Nine January July 20, Nine
Months 1, 2005 2005 Months
Ended Through Through Ended
October 2, July 19, October 1, October 1,
2004 2005 2005 2005
--------- --------- -------------- -------------
Net sales $330,586 $273,074 $85,738 $358,812
Cost of goods sold 212,129 171,645 58,271 229,916
--------- --------- -------------- -------------
Gross profit 118,457 101,429 27,467 128,896
Operating expenses:
Selling 31,514 26,892 8,413 35,305
Distribution 16,607 14,634 4,427 19,061
General and
administrative 29,988 24,956 7,834 32,790
Amortization of
intangibles 380 329 4,732 5,061
Strategic
alternatives 616 -- -- --
Management incentive
compensation -- 16,388 -- 16,388
--------- --------- -------------- -------------
Total operating
expenses 79,105 83,199 25,406 108,605
--------- --------- -------------- -------------
Income from operations 39,352 18,230 2,061 20,291
Other expense
(income):
Interest expense 26,942 24,584 7,151 31,735
Interest income (128) (914) (39) (953)
Seller transaction
expenses -- 4,646 -- 4,646
Other, net 1,206 745 (110) 635
--------- --------- -------------- -------------
Income (loss) before
income taxes and
minority interest 11,332 (10,831) (4,941) (15,772)
Income tax expense 2,915 3,619 84 3,703
Minority interest 22 13 (2) 11
--------- --------- -------------- -------------
Net income (loss) $8,395 $(14,463) $(5,023) $(19,486)
========= ========= ============== =============
(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 11 3/4% 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 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 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.
Safety Products Holdings, Inc.
(NSP Holdings L.L.C. as predecessor)
Consolidated Balance Sheets
(Amounts in Thousands) (Unaudited)
Predecessor (1) Successor (1)
--------------- -------------
December 31, October 1,
2004 2005
--------------- -------------
Assets
Current assets:
Cash and cash equivalents $35,731 $4,241
Accounts receivable, less allowance of
$2,063 and $2,268 in 2004 and 2005,
respectively 61,167 73,919
Inventories 82,532 90,479
Deferred income taxes 60 61
Prepaid expenses and other current
assets 3,183 2,494
--------------- -------------
Total current assets 182,673 171,194
Property, plant, and equipment, net 51,809 63,838
Deferred financing costs, net 9,960 19,212
Goodwill, net 132,662 116,817
Other intangible assets, net 6,256 238,405
Other noncurrent assets 5,831 5,564
--------------- -------------
Total assets $389,191 $615,030
=============== =============
Liabilities and members' deficit / equity
Current liabilities:
Accounts payable $17,871 $20,667
Accrued expenses 29,024 26,809
Current maturities of long-term
obligations 15,252 938
--------------- -------------
Total current liabilities 62,147 48,414
Pension, post-retirement and deferred
compensation 22,923 32,571
Long-term obligations 238,314 373,981
Mandatorily redeemable preferred units 134,310 --
Other noncurrent liabilities 1,653 1,620
Deferred income taxes 4,799 50,861
Minority interest 142 175
--------------- -------------
402,141 459,208
Members' deficit / equity:
Class E units 1 --
Common units:
Class A units 38,676 --
Class C units 188 --
Class D units 1,248 --
Common shares -- 110
Contributed capital -- 109,560
Accumulated deficit (118,739) (5,023)
Accumulated other comprehensive income 3,529 2,761
--------------- -------------
Total members' deficit / equity (75,097) 107,408
--------------- -------------
Total liabilities and members' deficit /
equity $389,191 $615,030
=============== =============
(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 11 3/4% 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 acquisition, the pre-acquisition
financial statements are not comparable with those after the
acquisition in certain respects.
Safety Products Holdings, Inc.
(NSP Holdings L.L.C. as predecessor)
Consolidated Statements of Cash Flows
(Amounts in Thousands) (Unaudited)
Successor
Predecessor (1) (1)
------------------ ---------
Nine July 20,
months January 2005
ended 1, 2005 through
October through October
2, July 19, 1,
2004 2005 2005
-------- --------- ---------
Operating activities
Net income (loss) $ 8,395 $(14,463 ) $(5,023)
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Depreciation 8,527 6,177 2,417
Amortization of intangibles 380 329 4,732
Amortization of deferred financing
costs 1,324 1,311 623
Amortization of net original issue
discount (premium) 68 58 (32)
Loss on sale of property, plant and
equipment 384 -- --
Deferred income taxes 731 (86 ) (651)
Minority interest 15 13 (2)
Noncash interest 10,041 11,167 3,075
Changes in operating assets and
liabilities:
Accounts receivable (16,700 ) (2,607 ) (10,145)
Inventories (2,170 ) (1,515 ) 3,024
Prepaid expenses and other current
assets 789 467 312
Other noncurrent assets 15 (477 ) 115
Accounts payable 348 (492 ) 3,288
Accrued expenses (4,377 ) 20,902 (1,329)
Pension, postretirement, and
deferred compensation 706 (1,210 ) 135
Other noncurrent liabilities (31 ) (30 ) (3)
Other 2 20 4
-------- --------- ---------
Net cash provided by operating
activities 8,447 19,564 540
Investing activities
Purchase of businesses, net of cash
acquired (490 ) (653 )(204,707)
Purchases of property, plant, and
equipment (4,284 ) (4,250 ) (1,471)
Proceeds from sale of property, plant and
equipment 480 -- --
-------- --------- ---------
Net cash used in investing activities (4,294 ) (4,903 )(206,178)
Financing activities
Payments for deferred financing costs -- (3,246) (19,835)
Proceeds from borrowings -- 100,000 111,646
Payments of debt (3,284 ) (13,623 ) (293)
Proceeds from capital contributions 1 -- 109,670
Distributions on preferred units -- (60,000 ) --
Distributions on common units (1,927 ) (2,509 ) --
-------- --------- ---------
Net cash (used in) provided by financing
activities (5,210 ) 20,622 201,188
Effect of exchange rate changes on cash 1,079 (2,725 ) 1,547
-------- --------- ---------
Net increase (decrease) in cash and cash
equivalents 22 32,558 (2,903)
Cash and cash equivalents at beginning of
period 16,341 35,731 7,144
-------- --------- ---------
Cash and cash equivalents at end of
period $16,363 $ 68,289 $ 4,241
======== ========= =========
(1) On July 19, 2005, all the outstanding units of NSP were acquired
by Holdings from NSP Holdings L.L.C. ("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 11 3/4% 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 acquisition, the pre-acquisition financial
statements are not comparable with those after the acquisition in
certain respects.