Safety Products Holdings, Inc. and Norcross Safety Products L.L.C. Announce Year End 2007 Results
OAK BROOK, Ill.--(Business Wire)--
Safety Products Holdings, Inc. ("Holdings") and Norcross Safety
Products L.L.C. ("NSP", and collectively with Holdings, the
"Company"), today announced results for the year ended December 31,
2007. The following discussion presents results for both NSP and the
Company where the results between the two differ.
In 2007, net sales of the Company were $608.9 million compared to
$537.7 million in 2006. Gross profit of the Company was $233.0 million
in 2007 compared to $201.0 million in 2006. Income from operations was
$70.6 million and $60.2 million for NSP and $70.4 million and $59.9
million for the Company for the years ended December 31, 2007 and
2006, respectively.
The Company's net sales increase of $71.2 million, or 13.2%, was
attributable to increased net sales in each of its three operating
segments. In our general safety and preparedness segment, the net
sales increase of $40.0 million, or 10.8%, was the result of overall
North American and international organic growth and favorable exchange
rates. In our fire service segment, net sales increased by $12.7
million, or 14.5%, due in part to a more normalized pattern of fire
grant acts when compared to 2006. In addition, the issuance of the new
National Fire Protection Association ("NFPA") standard is creating
increased demand for the Company's patented products. In our
electrical safety segment, net sales increased by $18.5 million, or
23.4%, 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 $32.0 million, or 15.9%,
primarily due to the increase in net sales, favorable margin
realization and the favorable impact of lower inventory purchase
accounting adjustments and LIFO charges. The Company's gross profit
margin of 38.3% in 2007 compared favorably to the 37.4% gross profit
margin in 2006.
In 2007, income from operations increased by $10.4 million, or
17.1% for NSP and $10.5 million, or 17.5% for the Company. In our
general safety and preparedness segment, income from operations
increased by $6.0 million, or 13.1%, primarily due to the higher net
sales volume, favorable margin realization and the favorable impact of
lower inventory purchase accounting adjustments and LIFO charges,
partially offset by higher restructuring and merger-related charges.
In 2006, there was a curtailment gain recognized as a result of
freezing our U.S. defined benefit plans and 2007 was favorably
impacted by a reduction in the reserve for respiratory claims. In our
fire service segment, income from operations increased by
$4.1 million, or 48.7%, primarily as a result of higher net sales and
improved margin performance. In our electrical safety segment, income
from operations increased by $3.2 million, or 21.5%, as higher net
sales and the favorable impact of lower inventory purchase accounting
adjustments and LIFO charges were partially offset by higher
restructuring and merger-related charges and inefficiencies associated
with acquisition integration activities. Excluding the impact of
management incentive compensation of $1.7 million in 2007 and $1.6
million in 2006, corporate expenses increased by $2.8 million for NSP
and $2.7 million for the Company, primarily due to higher payroll,
administrative expenses and professional fees. The increase in
professional fees was partially due to fees associated with the
engagement of a supply-chain improvement consulting firm.
As of December 31, 2007, NSP and the Company had working capital
of $186.3 million and $188.1 million, respectively, and cash of
$70.1 million and $70.8 million, respectively. The Company's capital
expenditures were $12.0 million in 2007 and $11.6 million in 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:
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Year Ended December 31,
-----------------------
2006 2007
----------- -----------
Net income $21,861 $27,070
Add:
Interest expense, net 26,602 26,299
Income tax expense 13,119 13,736
Depreciation and amortization 25,713 26,527
----------- -----------
EBITDA $87,295 $93,632
=========== ===========
*T
The following table reconciles net income to EBITDA for the
Company:
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Year Ended December 31,
-----------------------
2006 2007
----------- -----------
Net income $8,864 $12,781
Add:
Interest expense, net 46,252 48,075
Income tax expense 6,140 6,064
Depreciation and amortization 25,713 26,527
----------- -----------
EBITDA $86,969 $93,447
=========== ===========
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The following table sets forth supplemental information regarding
items that are included in net income of both NSP and the Company:
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Year Ended December 31,
-----------------------
2006 2007
----------- -----------
Management incentive compensation $1,610 $1,679
Inventory purchase accounting adjustments 1,062 --
Loss on the sale of property, plant and
equipment 99 523
Non-cash pension curtailment gain (6,751) --
LIFO charges 944 514
(Income) loss from discontinued operations,
net of tax (1) (220) 2,813
Respiratory claims reserve reduction -- (1,800)
Supply chain consulting fees -- 1,570
Restructuring and merger-related charges 1,539 3,696
----------- -----------
Total $(1,717) $8,995
=========== ===========
*T
(1) Represents discontinued operations related to the disposal of
the Company's South African subsidiary. The Company has reflected
South Africa's historical results of operations and transaction loss
as discontinued 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 Safety Line. Our broad product
offering includes, among other things, respiratory protection,
protective footwear, hand protection, turnout gear and linemen
equipment.
We have scheduled a conference call to discuss our financial
results on Friday, March 14th at 10:00 a.m. EDT. The call in number is
(800) 952-3470. 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
21378469.
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.
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NORCROSS SAFETY PRODUCTS L.L.C.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands)
Year ended December 31,
-----------------------
2006 2007
----------- ----------
Net sales $537,675 $608,897
Cost of goods sold 336,633 375,924
----------- ----------
Gross profit 201,042 232,973
Operating expenses:
Selling 49,974 55,250
Distribution 31,589 37,080
General and administrative (1) 46,179 54,883
Amortization of intangibles 11,508 11,485
Restructuring and merger-related charges 1,539 3,696
----------- ----------
Total operating expenses 140,789 162,394
----------- ----------
Income from operations 60,253 70,579
Other expense (income):
Interest expense 27,207 27,829
Interest income (605) (1,530)
Other, net (1,132) 639
----------- ----------
Income from continuing operations before
income taxes and minority interest 34,783 43,641
Income tax expense 13,119 13,736
Minority interest 23 22
----------- ----------
Income from continuing operations 21,641 29,883
(Income) loss from discontinued operations
(including loss on disposal of subsidiary of
$3,022 in 2007), net of income tax (220) 2,813
----------- ----------
Net income $21,861 $27,070
=========== ==========
*T
(1) General and administrative expenses exclude amortization of
intangibles and include $1,610 and $1,679 of management incentive
compensation for the years ended December 31, 2006 and 2007,
respectively.
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NORCROSS SAFETY PRODUCTS L.L.C.
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
December 31,
-----------------
2006 2007
-------- --------
Assets
Current assets:
Cash and cash equivalents $26,096 $70,093
Accounts receivable, less allowance of $2,323
and $2,332 in 2006 and 2007, respectively 73,306 76,359
Inventories 108,270 108,415
Deferred income taxes 2,143 1,762
Prepaid expenses and other current assets 3,555 3,602
-------- --------
Total current assets 213,370 260,231
Property, plant and equipment, net 69,627 68,676
Deferred financing costs, net 6,387 5,045
Goodwill 158,011 165,023
Other intangible assets, net 281,438 275,325
Other noncurrent assets 5,119 7,234
-------- --------
Total assets $733,952 $781,534
======== ========
Liabilities and member's equity
Current liabilities:
Accounts payable $21,891 $20,283
Accrued expenses 40,543 40,823
Current maturities of long-term obligations 5,830 12,802
-------- --------
Total current liabilities 68,264 73,908
Long-term liabilities:
Pension, postretirement and deferred
compensation 17,082 13,792
Long-term obligations 320,666 307,677
Due to Safety Products Holdings, Inc. 1,339 4,484
Other noncurrent liabilities 7,008 12,163
Deferred income taxes 64,602 64,142
-------- --------
Total long-term liabilities 410,697 402,258
Minority interest 199 221
Member's equity:
Contributed capital 222,828 224,472
Retained earnings 21,169 47,510
Accumulated other comprehensive income 10,795 33,165
-------- --------
Total member's equity 254,792 305,147
-------- --------
Total liabilities and member's equity $733,952 $781,534
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SAFETY PRODUCTS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands)
Year ended December 31,
-----------------------
2006 2007
---------- -----------
Net sales $537,675 $608,897
Cost of goods sold 336,633 375,924
---------- -----------
Gross profit 201,042 232,973
Operating expenses:
Selling 49,974 55,250
Distribution 31,589 37,080
General and administrative (1) 46,505 55,068
Amortization of intangibles 11,508 11,485
Restructuring and merger-related charges 1,539 3,696
---------- -----------
Total operating expenses 141,115 162,579
---------- -----------
Income from operations 59,927 70,394
Other expense (income):
Interest expense 46,857 49,624
Interest income (605) (1,549)
Other, net (1,132) 639
---------- -----------
Income from continuing operations before
income taxes and minority interest 14,807 21,680
Income tax expense 6,140 6,064
Minority interest 23 22
---------- -----------
Income from continuing operations 8,644 15,594
(Income) loss from discontinued operations
(including loss on disposal of subsidiary of
$3,022 in 2007), net of income tax (220) 2,813
---------- -----------
Net income $8,864 $12,781
========== ===========
*T
(1) General and administrative expenses exclude amortization of
intangibles and include $1,610 and $1,679 of management incentive
compensation for the years ended December 31, 2006 and 2007,
respectively.
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SAFETY PRODUCTS HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
December 31,
-----------------
2006 2007
-------- --------
Assets
Current assets:
Cash and cash equivalents $26,796 $70,811
Accounts receivable, less allowance of $2,323
and $2,332 in 2006 and 2007, respectively 73,306 76,359
Inventories 108,270 108,415
Deferred income taxes 2,143 1,762
Prepaid expenses and other current assets 3,624 3,665
-------- --------
Total current assets 214,139 261,012
Property, plant and equipment, net 69,627 68,676
Deferred financing costs, net 16,517 13,149
Goodwill 157,242 164,254
Other intangible assets, net 281,438 275,325
Other noncurrent assets 5,119 7,234
-------- --------
Total assets $744,082 $789,650
======== ========
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $21,891 $20,283
Accrued expenses 40,596 40,942
Current maturities of long-term obligations 4,820 11,654
-------- --------
Total current liabilities 67,307 72,879
Long-term liabilities:
Pension, postretirement and deferred
compensation 17,082 13,792
Long-term obligations 470,140 477,059
Other noncurrent liabilities 7,008 12,163
Deferred income taxes 55,460 50,231
-------- --------
Total long-term liabilities 549,690 553,245
Minority interest 199 221
Shareholders' equity:
Common shares 110 110
Contributed capital 111,883 113,527
Retained earnings 4,098 16,503
Accumulated other comprehensive income 10,795 33,165
-------- --------
Total shareholders' equity 126,886 163,305
-------- --------
Total liabilities and shareholders' equity $744,082 $789,650
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Safety Products Holdings, Inc. and
Norcross Safety Products L.L.C.
David F. Myers, Jr.
(630) 572-5715
Copyright Business Wire 2008
