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Aearo Co I (1290498) SEC Filing 10-Q Quarterly report for the period ending Thursday, March 31, 2005

Aearo Co I

CIK: 1290498

EX-99
2
ex_991-050505.txt
EARNINGS RELEASE



                 Aearo Reports First Half Sales Increase of 18%


INDIANAPOLIS,  May 5, 2005 - Aearo Company I (the "Company"), one of the world's
leading  designers,  manufacturers  and  marketers  of a broad range of personal
protective  products,  today  announced  that net sales for the six months ended
March 31, 2005 increased  18.1% to $200.2 million from $169.6 million in the six
months ended March 31, 2004.  The increase in net sales was primarily  driven by
organic  growth in the Safety  Products and  Specialty  Composites  segments and
foreign currency translation. The weakness of the U.S. dollar favorably impacted
net sales by $5.2 million or 3.1%.

Gross  profit for the six months ended March 31, 2005  increased  22.5% to $98.6
million from $80.5 million for the six months ended March 31, 2004. Gross profit
as a  percentage  of net sales for the six months ended March 31, 2005 was 49.2%
as compared to 47.5% for the six months ended March 31, 2004.

Operating  expenses for the six months ended March 31, 2005  increased  21.4% to
$71.8  million  from $59.1  million for the six months ended March 31, 2004 with
the  growth   consistent  with  the  increase  in  sales  volume.   Selling  and
administrative  expenses as a percentage of net sales  improved to 32.2% for the
six months  ended March 31,  2005 as compared to 33.5% for the six months  ended
March 31, 2004.

Interest  expense,  net,  for the six months  ended March 31, 2005  increased to
$10.9  million from $10.8  million for the six months ended March 31, 2004.  The
increase is due to the  increase in the level of the  Company's  debt  partially
offset by lower weighted  average  interest rates under the Company's new credit
facility and the 8.25% senior subordinated notes.

The  provision  for income  taxes for the six months  ended March 31, 2005 was a
benefit of $1.2  million  compared to expense of $2.0 million for the six months
ended March 31, 2004. At September 30, 2004, the Company's net operating  losses
were partially offset by a valuation  allowance of $7.5 million.  During the six
month period ended March 31, 2005,  management  determined that based on current
domestic  operating  results,  it is more  likely  than  not that  domestic  net
operating  losses will be realized  and  consequently  reversed the $7.5 million
valuation allowance.

Primarily  due to the  factors  mentioned  above,  net income for the six months
ended March 31, 2005  increased  to $17.1  million from $8.6 million for the six
months ended March 31, 2004.

Adjusted  EBITDA,  defined as earnings  before  interest,  taxes,  depreciation,
amortization and other non-cash charges increased 33.7% to $35.0 million for the
six months  ended March 31, 2005 from $26.1  million in the three  months  ended
March 31, 2004.  A reconciliation  of Adjusted EBITDA to income before provision
for income taxes determined in accordance with accounting  principals  generally
accepted in the United States of America ("GAAP") is set forth below.

Net sales for the three  months ended March 31, 2005  increased  15.6% to $104.5
million  from $90.4  million  in the three  months  ended  March 31,  2004.  The
increase  in net sales was  primarily  driven by  organic  growth in the  Safety
Products and Specialty Composites segments and foreign currency translation. The
weakness of the U.S.  dollar  favorably  impacted  net sales by $2.5  million or
2.8%.

Gross profit for the three months ended March 31, 2005 increased  19.6% to $51.6
million from $43.1  million for the three  months  ended March 31,  2004.  Gross
profit as a  percentage  of net sales for the three  months ended March 31, 2005
was 49.3% as compared to 47.7% for the three months ended March 31, 2004.

Operating  expenses for the three months ended March 31, 2005 increased 18.6% to
$36.6 million from $30.8 million for the three months ended March 31, 2004, with
growth consistent with the increase in sales volume.  Selling and administrative
expenses as a  percentage  of net sales  improved to 31.3% for the three  months
ended March 31, 2005 as compared to 32.5% for the three  months  ended March 31,
2004.

Interest  expense,  net, for the three months ended March 31, 2005  increased to
$5.7 million  from $5.4  million for the three months ended March 31, 2004.  The
increase is due to the  increase in the level of the  Company's  debt  partially
offset by lower weighted  average  interest rates under the Company's new credit
facility and the 8.25% senior subordinated notes.

The  provision  for income taxes for the three months ended March 31, 2005 was a
benefit of $2.8 million compared to expense of $1.2 million for the three months
ended March 31, 2004. At September 30, 2004, the Company's net operating  losses
were partially offset by a valuation allowance of $7.5 million. During the three
month period ended March 31, 2005,  management  determined that based on current
domestic  operating  results,  it is more  likely  than  not that  domestic  net
operating  losses will be realized  and  consequently  reversed the $7.5 million
valuation allowance.

Primarily due to the factors  mentioned  above,  net income for the three months
ended March 31, 2005  increased to $12.1 million from $5.7 million for the three
months ended March 31, 2004.

Adjusted  EBITDA  increased  29.8% to $19.2  million for the three  months ended
March 31, 2005 from $14.8  million in the three  months  ended March 31, 2004. A
reconciliation  of Adjusted  EBITDA to income before  provision for income taxes
determined in accordance with accounting  principals  generally  accepted in the
United States of America ("GAAP") is set forth below.

The  Company  uses  Adjusted  EBITDA,  as defined  above,  a non-GAAP  financial
measure,  as a management tool to measure and monitor financial  performance and
as part of the  calculation  of  Company  performance  as stated in senior  bank
facility  covenants.  While the  Company  believes  Adjusted  EBITDA is a useful
indicator  of its  ability  to  service  debt,  Adjusted  EBITDA  should  not be
considered as a substitute for net income (loss)  determined in accordance  with
GAAP as an indicator of operating performance, or as an alternative to cash flow
as a measure of liquidity.  Investors  should be aware that Adjusted  EBITDA may
not be comparable to similarly titled measures  presented by other companies and
comparisons could be misleading unless all companies and analysts calculate this
measure in the same fashion.


The following table provides a  reconciliation  of Adjusted EBITDA to net income
for  the  three  and  six  months   periods  ended  March  31,  2005  and  2004,
respectively:





                             Three Months Ended           Six Months Ended
                                   March 31,                   March 31,
                             ------------------------------------------------
                               2005         2004          2005        2004
                            -------     ---------      --------    --------
Adjusted EBITDA              $19,202    $ 14,789       $ 34,954    $ 26,135

Depreciation                   2,429       3,002          5,006       5,363
Amortization of intangibles    1,297         134          2,615         132
Other non-cash charges
 (income), net                   494         471            496         311
Restructuring                     --      (1,091)            --      (1,091)
Interest                       5,688       5,370         10,929      10,836
Taxes                         (2,807)      1,229         (1,211)      2,020
                             -------     ---------      --------    --------
Net Income               $    12,101    $  5,674        $17,119     $ 8,564
                            -------     ---------      --------    --------


Other non-cash charges are defined as extraordinary gains or losses, or gains or
losses from sales of assets other than in the ordinary course of business.

On May 4, 2005, the Company's Board of Directors  declared a cash dividend to be
paid to the  Company's  parent,  Aearo  Corporation,  the sole  holder of common
stock, par value $.01 per share, of approximately $35 million. Aearo Corporation
will in turn pay a cash  dividend  to AC Safety  Holding  Corp.,  the  Company's
ultimate parent,  who will use the proceeds to make a partial  redemption of its
preferred stock, par value $.01 per share.

The Company has scheduled a conference call to discuss its financial  results on
Monday, May 9, 2005 at 12:00 p.m. Eastern. The call in number is (800) 226-0630,
conference  code 6135016.  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) 642-1687, ID 6135016.

Headquartered in Indianapolis,  Ind., Aearo Company (www.aearo.com) is a leading
manufacturer and supplier of personal protective  equipment and energy-absorbing
products,  including  head and  hearing  protection  devices,  prescription  and
non-prescription  eyewear,  and  eye/face  protection  devices for use in a wide
variety of industrial and household applications.









The following information was filed by Aearo Co I on Thursday, May 5, 2005 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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Aearo Co I's Definitive Proxy Statement (Form DEF 14A) filed after their 2005 10-K Annual Report includes:

  • Voting Procedures
  • Board Members
  • Executive Team
  • Salaries, Bonuses, Perks
  • Peers / Competitors

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CIK: 1290498
Form Type: 10-Q Quarterly Report
Accession Number: 0001290498-05-000022
Submitted to the SEC: Mon May 09 2005 12:00:20 PM EST
Accepted by the SEC: Mon May 09 2005
Period: Thursday, March 31, 2005
Industry: Miscellaneous Manufacturing Industries

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