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Aearo Co I (1290498) SEC Filing 10-Q Quarterly report for the period ending Thursday, June 30, 2005

Aearo Co I

CIK: 1290498

EX-99
2
exh_991081205.txt
PRESS RELEASE




                  Aearo Announces Record Third Quarter Results


INDIANAPOLIS, August 12, 2005 - Aearo Company I (the "Company"), today announced
that net sales for the three months ended June 30, 2005 increased $16.1 million,
or 16.6%,  to $113.2  million from $97.1  million in the three months ended June
30, 2004. Adjusted EBITDA increased 18.5% to $22.2 million for the third quarter
from $18.7 million in the third  quarter of last year.  Net income for the third
quarter  increased  to $10.4  million  from a net loss of $14.2  million for the
third quarter of last year.  This  performance  represents  the best quarter for
sales and earnings in the Company's history.

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 $1.8  million or
1.9%.

Gross profit for the third quarter increased to $55.1 million from $29.0 million
for the third  quarter of last year.  Gross profit in the third  quarter of last
year was  negatively  impacted  by a  purchase  accounting  adjustment  of $17.1
million  due to the sale of the  Company  in that  time  period.  Excluding  the
effects of the purchase accounting  adjustment,  gross profit as a percentage of
net sales for the third  quarter  was 48.7% as  compared  to 47.4% for the third
quarter of last year.

The  provision  for  income  taxes  for the three  months  ended  June 30,  2005
increased to $1.6 million from $1.0 million for the third  quarter of last year.
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.

Year to Date

Net sales for the nine months ended June 30, 2005 increased  $46.7  million,  or
17.5%,  to $313.4  million from $266.7 million in the nine months ended June 30,
2004. Adjusted EBITDA increased 27.4% to $57.2 million for the nine months ended
June 30, 2005 from $44.9 million in the nine months ended June 30, 2004. Year to
date net  income  increased  to  $27.6  million  compared  to a net loss of $5.7
million for the nine months ended June 30, 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 $7.0  million or
2.6%.

Gross profit for the nine months ended June 30, 2005  increased  40.3% to $153.7
million  from  $109.5  million for the nine months  ended June 30,  2004.  Gross
profit in the nine  months  ended June 30,  2004 was  negatively  impacted  by a
purchase  accounting  adjustment of $17.1 million due to the sale of the company
in  that  time  period.   Excluding  the  effects  of  the  purchase  accounting
adjustment,  gross profit as a percentage of net sales for the nine months ended
June 30, 2005 was 49.2% as compared to 47.5% for the nine months  ended June 30,
2004.

The year to date provision for income taxes  decreased to $0.4 million from $3.1
million for the nine months ended June 30,  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.

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 nine month periods ended June 30, 2005 and 2004, respectively:



Three Months Ended Nine Months Ended June 30, June 30, -------------------------- ---------------------- 2005 2004 2005 2004 Adjusted EBITDA $ 22,200 $ 18,739 $ 57,154 $ 44,874 Depreciation 3,125 3,006 8,131 8,937 Amortization of intangibles 1,313 101 3,928 343 Other non-cash charges (income), net (105) (43) 391 (410) Inventory purchase accounting -- 17,067 -- 17,067 Restructuring -- -- -- (1,091) Bond call premium -- 1,532 -- 1,532 Interest 5,856 10,292 16,785 21,128 Taxes 1,569 1,031 358 3,051 Net Income $ 10,442 $ (14,247) $ 27,561 $ (5,683)
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. Holding Company Financing On August 3, 2005, the Company's parent, Aearo Corporation, issued $54 million of 12% senior notes (the "Holdco Notes") for approximately $54 million and used the proceeds, net of fees and expenses, to pay a cash dividend to AC Safety Holding Corp., the Company's ultimate parent. AC Safety Holding Corp. then used the proceeds to make a full redemption of its then remaining outstanding preferred stock. Prior to the fifth anniversary of closing, Aearo Corporation will have the option of capitalizing interest of the Holdco Notes and adding it to the principal amount. After the fifth anniversary of closing, interest will be payable in cash quarterly. Earnings Call The Company has scheduled a conference call to discuss its financial results on Monday, August 15, 2005 at 4:00 p.m. Eastern. The call in number is (866) 837-9789, conference ID 756151. 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 (888) 266-2081, conference ID 756151. About Aearo Headquartered in Indianapolis, Ind., Aearo Company (www.aearo.com) is one of the world's leading designers, manufacturers and marketers of a broad range of personal protective products 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.
Condensed Consolidated Statements of Operations (In Thousands) (Unaudited) Nine Three Six Months Months Months Three Months Ended Ended Ended Ended June 30, June 30, June 30, March 31, 2005 2004 2005 2004 2004 Successor Successor Predecessor Net sales $ 113,198 $ 97,126 $ 313,437 $ 97,126 $ 169,579 Cost of sales 58,124 68,144 159,757 68,144 89,056 ------------------ ------------------ --------------- ----------------------------------- Gross profit 55,074 28,982 153,680 28,982 80,523 Selling and administrative 34,172 28,149 98,583 28,149 56,835 Research and technical services 2,234 1,966 6,665 1,966 3,623 Amortization 1,313 101 3,928 101 242 Other (income) charges, net (512) 1,690 (200) 1,690 (506) Restructuring -- -- -- -- (1,091) ------------------ ------------------ --------------- ----------------------------------- Operating income (loss) 17,867 (2,924) 44,704 (2,924) 21,420 Interest expense, net 5,856 10,292 16,785 10,292 10,836 ------------------ ------------------ --------------- ----------------------------------- Income (loss) before provision for income taxes 12,011 (13,216) 27,919 (13,216) 10,584 Provision for income taxes 1,569 1,031 358 1,031 2,020 ------------------ ------------------ --------------- ----------------------------------- Net income (loss) $ 10,442 $ (14,247) $ 27,561 $ (14,247) $ 8,564 ------------------ ------------------ --------------- -----------------------------------
Condensed Consolidated Balance Sheets - Assets (In Thousands) June 30, September 30, 2005 2004 ----------------- -------------- (Unaudited) CURRENT ASSETS: Cash and cash equivalents $ 16,019 $ 27,724 Accounts receivable (net of allowance for doubtful accounts of $1,463 and $1,358, respectively) 60,553 54,159 Inventories 44,424 40,849 Deferred and prepaid expenses 5,602 4,146 ----------------- ---------------- Total current assets 126,598 126,878 ----------------- ---------------- LONG TERM ASSETS: Property, plant and equipment, net 51,317 54,750 Other intangible assets, net 182,050 185,855 Other assets 13,403 15,144 Goodwill 116,596 133,745 ----------------- ---------------- Total assets 489,964 516,372 ================= ================ CURRENT LIABILITIES: Current portion of long-term debt 3,455 1,639 Accounts payable and accrued liabilities 55,684 46,730 Accrued interest 3,067 6,996 Accrued income taxes 1,947 1,648 ----------------- ---------------- Total current liabilities 64,153 57,013 ----------------- ---------------- LONG TERM LIABILITIES: Long-term debt 298,299 302,842 Deferred income taxes 40,587 59,699 Other liabilities 14,169 14,726 ----------------- -------------- Total liabilities 417,208 434,280 ----------------- -------------- STOCKHOLDER'S EQUITY: Common stock, $.01 par value- Authorized--100 shares Issued and outstanding--100 shares - - Paid in capital 101,640 101,610 Accumulated deficit (26,848) (19,415) Accumulated other comprehensive loss (2,036) (103) Total stockholder's equity 72,756 82,092 --------------- ---------------- Total liabilities and stockholder's equity $ 489,964 $ 516,372 ================ ================
Condensed Consolidated Statements of Cash Flows (In Thousands) (Unaudited) Nine Three Six Months Months Months Ended Ended Ended June 30, June 30 March 31, -------------------------------------------- 2005 2004 | 2004 -----------------------------|--------------- CASH FLOWS FROM OPERATING ACTIVITIES: Successor | Predecessor Net income (loss) $ 27,561 $ (14,247)| $ 8,564 Adjustments to reconcile net income (loss) to cash provided by | operating activities- | Depreciation 8,131 3,006 | 5,931 Amortization of intangible assets 3,928 101 | 242 Amortization of deferred financing costs 1,068 4,234 | 2,026 Inventory purchase accounting adjustment -- 17,067 | -- Deferred income taxes (3,310) (7)| -- Stock based compensation 30 10 | Restructuring -- -- | (1,091) Loss on disposal of assets 3 | 682 Changes in assets and liabilities- | Accounts receivable (6,755) (2,242)| (1,113) Inventories (4,166) 2 | (3,464) Accrued income taxes 432 522 | (1,453) Accrued interest (3,928) 767 | 3 Accounts payable and accrued liabilities 7,107 2,667 | (3,224) Prepaid expenses and other assets 427 986 | 633 Other liabilities 1,012 928 | 1,299 Net cash provided by operating activities 31,540 13,794 | 9,035 | CASH FLOWS FROM INVESTING ACTIVITIES: | Additions to property, plant and equipment (5,404) (2,810)| (5,006) Proceeds provided by disposals of property, plant and | equipment 64 -- | 12 Net cash used by investing activities (5,340) (2,810)| (4,994) | CASH FLOWS FROM FINANCING ACTIVITIES: | Distribution to shareholder to effect the merger -- (86,852)| -- Repayment of old credit facility -- (78,333)| -- Repayment of 12.5% senior subordinated notes -- (98,000)| -- Proceeds from 8.25 senior subordinated notes -- 175,000 | -- Debt issue costs -- (10,408)| Dividend to parent (34,994) (14,305)| -- Proceeds from (repayment of) revolving credit facility, net -- (15,600)| 3,950 Proceeds from (repayment of) term loans (961) 125,000 | (8,949) Repayment of capital lease obligations (200) (61)| (122) Repayment of long term debt (273) (26)| (119) | Net cash used for financing activities (36,428) (3,585)| (5,240) | EFFECT OF EXCHANGE RATE ON CASH (1,477) (858)| (789) | INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (11,705) 6,541 | (1,988) | CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 27,724 5,313 | 7,301 | CASH AND CASH EQUIVALENTS, END OF PERIOD $ 16,019 $ 11,854 | $ 5,313

The following information was filed by Aearo Co I on Friday, August 12, 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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CIK: 1290498
Form Type: 10-Q Quarterly Report
Accession Number: 0001290498-05-000031
Submitted to the SEC: Mon Aug 15 2005 4:57:10 PM EST
Accepted by the SEC: Mon Aug 15 2005
Period: Thursday, June 30, 2005
Industry: Miscellaneous Manufacturing Industries

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