Pacific Safety Products Inc. Announces Fourth Quarter and Fiscal 2009 Results

KANATA, ONTARIO -- (Marketwire) -- 10/19/09 -- Pacific Safety Products Inc. (TSX VENTURE: PSP) ("PSP" or "the Company") today announced its consolidated financial results for the three and twelve month period ended June 30, 2009.

FISCAL 2009 SIGNIFICANT EVENTS:

- Announced almost $35 million in new multi-year contract awards.

- Increased sales from U.S. operations by almost 50% as compared to the prior year.

- Generated more than $1.2 million of Normalized Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"); an almost threefold increase as compared to the prior year.

- Increased gross margins by almost 1% as compared to the prior year.

- Decreased selling, general and administrative expenses by $0.5 million or almost 7% as compared to the prior year.

- Established a $1.4 million USD operating line of credit to fund working capital of growing U.S. operations.

- Entered into a contract with the National Research Council Canada with a Contribution Agreement valued at up to $0.5 million to begin development of a next generation Integrated Helmet for soldier modernization.

- A significant and sustained decrease in the market capitalization of the Company led to an $8.5 million non-cash Goodwill impairment charge.

Mr. David Scott, Chief Executive Officer commented, "I am extremely pleased with our progress this year. In spite of the current economic environment and the completion of two significant multi-year military contracts during the year, we were able to achieve a modest sales increase. In addition, operational improvements precipitated an almost 1% improvement in gross margins in spite of increased costs related to the weakness of the Canadian dollar. Management also expects that the restructuring activities during the year will yield an almost $1.0 million reduction in operating costs on an annualized basis."

Mr. Scott also commented, "Notwithstanding the improved operational results, the Company recorded a non-cash Goodwill impairment charge of approximately $8.5 million during the fourth quarter. This action is primarily as a result of a sustained decrease in the market capitalization of the Company. In previous periods, with less favourable operating results, there was no impairment to Goodwill as our market capitalization met the implied value. Unfortunately the new normal for valuation of micro cap stock in the market is significantly less than in earlier times. The non-cash impairment charge does not reflect the current operating performance or potential of the Company. The Company is well within its operating lines of credit and bank covenants, operational improvements continue to yield positive results and cash flow continues to strengthen."

For complete consolidated financial statements with notes and management discussion and analysis please refer to PSP's annual report to shareholders. This report is posted on SEDAR (www.sedar.com) and on our web site.

Summary consolidated financial results for the three and twelve month
period ended June 30, 2009, are as follows:

SUMMARY CONSOLIDATED BALANCE SHEETS
$Thousands                                                JUNE 30,  JUNE 30,
AS AT                                                        2009      2008
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ASSETS
CURRENT ASSETS                                           $  8,799  $ 11,893
PROPERTY AND EQUIPMENT                                      1,711     1,683
OTHER ASSETS                                                1,912     1,138
INTANGIBLE ASSETS                                           3,078     3,462
GOODWILL                                                        -     8,454
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TOTAL ASSETS                                             $ 15,500  $ 26,630
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LIABILITIES
CURRENT LIABILITIES                                      $  6,628  $  9,038
OTHER LIABILITIES                                              59         -
LONG-TERM DEBT                                              1,161       876
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TOTAL LIABILITIES                                           7,848     9,914
SHAREHOLDERS' EQUITY                                        7,652    16,716
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY               $ 15,500  $ 26,630
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SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
$Thousands
                                        THREE     THREE    TWELVE    TWELVE
                                       MONTHS    MONTHS    MONTHS    MONTHS
                                        ENDED     ENDED     ENDED     ENDED
                                      JUNE 30,  JUNE 30,  JUNE 30,  JUNE 30,
                                         2009      2008      2009      2008
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SALES                                $  7,188  $ 10,210  $ 35,035  $ 34,798
COST OF SALES                           5,631     7,941    26,580    26,734
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GROSS MARGIN                            1,557     2,269     8,455     8,064
                                         21.7%     22.2%     24.1%     23.2%

SELLING, GENERAL AND ADMINISTRATIVE
 EXPENSES                               1,814     1,955     7,318     7,842
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OPERATING INCOME / (LOSS)                (257)      314     1,137       222
AMORTIZATION                              195       201       797       852
FOREIGN EXCHANGE (GAIN) / LOSS            160        (8)      291       151
INTEREST                                   41        86       207       273
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INCOME / (LOSS) BEFORE OTHER ITEMS       (653)       35      (158)   (1,054)
RESTRUCTURING / RELOCATION COSTS          265       160       418     1,140
GAIN ON SALE OF BUILDING                    -      (718)        -    (1,432)
GOODWILL IMPAIRMENT CHARGE              8,454         -     8,454         -
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INCOME / (LOSS) BEFORE INCOME TAX      (9,372)      593    (9,030)     (762)
INCOME TAX EXPENSE / (RECOVERY)           306      (132)      181      (541)
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NET AND COMPREHENSIVE INCOME / (LOSS) ($9,678) $    725   ($9,211)    ($221)
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SUPPLEMENTARY DISCLOSURE
$Thousands

The following is a reconciliation of Net and Comprehensive Income (Loss) to
Normalized Earnings Before Interest, Taxes, Depreciation and Amortization
(EBITDA)
                                        THREE     THREE    TWELVE    TWELVE
                                       MONTHS    MONTHS    MONTHS    MONTHS
                                        ENDED     ENDED     ENDED     ENDED
                                      JUNE 30,  JUNE 30,  JUNE 30,  JUNE 30,
                                         2009      2008      2009      2008
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NET INCOME / (LOSS)                   ($9,678) $    725   ($9,211)    ($221)
INTEREST EXPENSE                           41        86       207       273
INCOME TAX EXPENSE / (RECOVERY)           306      (132)      181      (541)
STOCK BASED COMPENSATION                   66        26       168       159
AMORTIZATION                              251       247     1,019     1,050
ONE-TIME GAIN ON SALE OF BUILDING           -      (718)        -    (1,432)
ONE-TIME RESTRUCTURING COSTS              265       160       418     1,140
GOODWILL IMPAIRMENT CHARGE              8,454         -     8,454         -
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Normalized EBITDA                       ($295) $    394  $  1,236  $    428
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About PSP

The mission statement of Pacific Safety Products Inc. is ...we bring everyday heroes home safely(TM). PSP is an established industry leader in the production, distribution and sale of high-performance and high-quality safety products for the defence and security markets. These products include body armour to protect against ballistic, stab and fragmentation threats, ballistic blankets to reduce blast effects, and protective products against chemical and biological hazards. PSP is the largest armour manufacturer in Canada, directly supplying the Canadian Department of Defence, Federal Government Agencies and major Canadian law enforcement organizations. The Company also provides specialized law enforcement and safety products through APS Distributors, a division of PSP that services law enforcement and public safety agencies across the country. The Company, through its U.S. subsidiary Sentry Armor Systems Inc., provides body armour products to U.S. based law enforcement and private security firms. The Company also produces tactical clothing and emergency medical kits. Pacific Safety Products is a reporting issuer in British Columbia, Alberta and Ontario, Canada and publicly trades under the symbol PSP on the TSX Venture Exchange.

Forward Looking Statements: This media release may contain forward looking statements based on expectations, estimates and projections of the management of Pacific Safety Products Inc. (the "Company"). All statements that address expectations or projections about the future, including statements about the Company's strategy for growth, product development, market position, expected expenditures, results of cost reduction initiatives and financial results are forward looking statements. Some of the forward looking statements may be identified by words like "expects", "anticipates", "plans", "intends", "projects", "indicates", and similar expressions. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. Many factors, including those discussed more fully elsewhere in this media release and in documents filed with the British Columbia Securities Commission, the Alberta Securities Commission, the Ontario Securities Commission, the TSX Venture Exchange, as well as others, could cause results to differ materially from those anticipated. These factors include, but are not limited to the potential impact of the current economic downturn on the Company's business, the unpredictability of purchasing patterns by governmental agencies, the possibility of a deterioration in the Company's working capital position, the impact on the Company's liquidity if it were to go offside of the covenants in its debt facilities, the impact that changes in supplier payment terms or slow payment of accounts receivable could have on the Company's liquidity, the unavailability of or increase in the price of external capital to finance the Company's research, development and growth initiatives, changes in the laws, regulations, policies and economic conditions, including inflation, interest and foreign currency exchange rates fluctuations of countries in which the Company does business, competitive pressures, successful integration of structural changes or downsizing initiatives, including restructuring plans, acquisitions, divestitures and alliances, cost of raw material, the uncertainty associated with the outcome of research and development of new products, including regulatory approval and market acceptance, and seasonality of sales in some products.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.