**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

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**FORM 10-Q**

**QUARTERLYREPORT UNDERSECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

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| **x**      |   | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                    |
|------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |   |                                                                                                                                                                                      |
|       |   | **For the quarterly period ended September 30,  2006**                                                                                                                                    |
|       |   |                                                                                                                                                                                      |
| **OR**     |
|       |   |                                                                                                                                                                                      |
| **o**      |   | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                   |
| ** ** |   | ** **                                                                                                                                                                                |
| ** ** |   | **For the transition period from               to              ** |

**Commission File Number: 333-110531**

**NORCROSSSAFETY PRODUCTS L.L.C.**

(Exact name of registrantas specified in its charter)

| **Delaware**                                                    |   | **61-1283304**                        |
|-----------------------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of incorporation or organization) |   | (I.R.S. Employer  Identification No.) |
| ** **                                                      |   | ** **                            |
| **2001  Spring Road, Suite 425 Oak Brook, Illinois**       |   | **60523**                             |
| (Address of  Principal Executive Offices)                       |   | (Zip Code)                            |
| ** **                                                      |   | ** **                            |
| Registrant’s  telephone number, including area code:       |
| **(630)  572-5715**                                             |

Indicateby check mark whether the Registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.  Yes x   No o

Indicateby check mark whether the Registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the ExchangeAct.

Largeaccelerated filer  o  Accelerated filer  o  Non-accelerated filer  x

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act). Yes o  No x

On November 14, 2006 Norcross Safety ProductsL.L.C. had 100 units outstanding, all of which were owned by a holding company.

 

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** **

**NORCROSS SAFETY PRODUCTS L.L.C.FORM 10-Q QUARTERLY REPORT**

**For the Quarterly Period EndedSeptember 30, 2006**

**TABLEOF CONTENTS**
| **PART I Financial Information**   |                                                                                                |   |
|------------------------------------|-----------------------------------------------------------------------------------------------------|--------|
|                               |                                                                                                |   |   |
|                               | Item  1. Financial Statements (Unaudited)                                                           |   | 1 |
|                               |                                                                                                |   |   |
|                               | Consolidated Balance Sheets                                                                         |   | 1 |
|                               |                                                                                                |   |   |
|                               | Consolidated Statements of Operations                                                               |   | 2 |
|                               |                                                                                                |   |   |
|                               | Consolidated Statements of Cash Flows                                                               |   | 3 |
|                               |                                                                                                |   |   |
|                               | Item 2. Management’s Discussion and Analysis of  Financial Condition and Results of Operations |   | 21 |
|                               |                                                                                                |   |   |
|                               | Item 3. Quantitative and Qualitative Disclosures About  Market Risk                                 |   | 30 |
|                               |                                                                                                |   |   |
|                               | Item 4. Controls and Procedures                                                                     |   | 31 |
|                               |                                                                                                |   |   |
| **PART  II Other Information**     |                                                                                                | 32     |
|                               |                                                                                                |   |   |
|                               | Item  1. Legal Proceedings                                                                          |   | 32 |
|                               |                                                                                                |   |   |
|                               | Item 1A. Risk Factors                                                                               |   | 35 |
|                               |                                                                                                |   |   |
|                               | Item 6. Exhibits                                                                                    |   | 39 |
|                               |                                                                                                |   |   |
| **Signatures**                     |                                                                                                | 40     |
|                               |                                                                                                |   |   |
| **Form  10-Q Listing of Exhibits** |                                                                                                |   | 41 |
|                                    |                                                                                                     |        |  |  |

 

 

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**PART IFINANCIAL INFORMATION**

**Item 1. Financial Statements(Unaudited)**

**NORCROSS SAFETY PRODUCTS L.L.C.**

**CONSOLIDATED BALANCE SHEETS**

**(Amounts in Thousands) (Unaudited)**
| ** **                                                                                | ** ** | **Successor**         | ** ** |
|-------------------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                                | ** ** | **December 31,** | ** ** | **September 30,** | ** ** |
| ** **                                                                                | ** ** | **2005 (1)**     | ** ** | **2006** | ** ** |
| **Assets**                                                                                | ** ** | ** **            | ** ** | ** ** | ** ** |
| Current assets:                                                                           |       |                  |       |   |   |
| Cash and cash  equivalents                                                                |       | $                     | 20,683     |   | $ | 11,924 |   |
| Accounts  receivable, less allowance of $2,317 and $2,364 in 2005 and 2006,  respectively |       | 68,286                |       | 81,533 |   |
| Inventories                                                                               |       | 93,462                |       | 113,668 |   |
| Deferred income  taxes                                                                    |       | 3,230                 |       | 3,230 |   |
| Prepaid expenses  and other current assets                                                |       | 3,135                 |       | 3,041 |   |
| Total current assets                                                                      |       | 188,796               |       | 213,396 |   |
| Property, plant and  equipment, net                                                       |       | 67,315                |       | 69,443 |   |
| Deferred financing  costs, net                                                            |       | 7,513                 |       | 6,721 |   |
| Goodwill                                                                                  |       | 136,487               |       | 151,000 |   |
| Other intangible  assets, net                                                             |       | 276,842               |       | 288,218 |   |
| Other noncurrent assets                                                                   |       | 5,109                 |       | 5,311 |   |
| Total assets                                                                              |       | $                     | 682,062    |   | $ | 734,089 |   |
|                                                                                      |       |                  |       |   |   |
| **Liabilities and member’s equity**                                                  | ** ** | ** **            | ** ** | ** ** | ** ** |
| Current liabilities:                                                                      |       |                  |       |   |   |
| Accounts payable                                                                          |       | $                     | 21,229     |   | $ | 25,617 |   |
| Accrued expenses                                                                          |       | 34,683                |       | 39,179 |   |
| Current  maturities of long-term obligations                                              |       | 2,735                 |       | 3,432 |   |
| Total current  liabilities                                                                |       | 58,647                |       | 68,228 |   |
| Pension,  post-retirement and deferred compensation                                       |       | 32,340                |       | 30,900 |   |
| Long-term obligations                                                                     |       | 309,664               |       | 325,548 |   |
| Other noncurrent  liabilities                                                             |       | 5,376                 |       | 7,150 |   |
| Deferred income taxes                                                                     |       | 52,496                |       | 54,430 |   |
| Minority interest                                                                         |       | 176                   |       | 199 |   |
|                                                                                      |       | 400,052               |       | 418,227 |   |
| Member’s equity:                                                                     |       |                  |       |   |   |
| Contributed  capital                                                                      |       | 221,068               |       | 222,563 |   |
| Retained  earnings                                                                        |       | 308                   |       | 17,033 |   |
| Accumulated  other comprehensive income                                                   |       | 1,987                 |       | 8,038 |   |
| Total member’s equity                                                                |       | 223,363               |       | 247,634 |   |
| Total liabilities and member’s equity                                                |       | $                     | 682,062    |   | $ | 734,089 |   |

 

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(1)          December 31, 2005balances were obtained from audited financial statements.

*See notes to unaudited consolidated financialstatements.*

1

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**NORCROSS SAFETY PRODUCTS L.L.C.**

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**

**(Amountsin Thousands) (Unaudited)**

 
| ** **                                                                                                                                                                                                                                                                                                                                                                     | ** ** | **Predecessor**                                      | ** ** | **Successor**                                           | ** ** | **Predecessor**                                    | ** ** | **Successor**                                           | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|---------------------------------------------------------|------------|----------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                                                                                                                                                                     | ** ** | **July 3,  2005  through  July 19,  2005** | ** ** | **July 20,  2005  through  October 1,  2005** | ** ** | **Three  months  ended  September 30,  2006** | ** ** | **January 1,  2005  through  July 19,  2005** | ** ** | **July 20,  2005  through  October 1,  2005** | ** ** | **Nine  months  ended  September 30,  2006** | ** ** |
| Net sales                                                                                                                                                                                                                                                                                                                                                                      |       | $                                                    | 33,624     |                                                    | $          | 84,989                                             |       | $                                                       | 141,878    |   | $ | 271,694 |   | $ | 84,989 |   | $ | 420,000 |   |
| Cost of goods  sold                                                                                                                                                                                                                                                                                                                                                            |       | 22,586                                               |       | 58,271                                                  |       | 91,084                                             |       | 171,645                                                 |       | 58,271 |   | 262,563 |   |
| Gross profit                                                                                                                                                                                                                                                                                                                                                                   |       | 11,038                                               |       | 26,718                                                  |       | 50,794                                             |       | 100,049                                                 |       | 26,718 |   | 157,437 |   |
| Operating  expenses:                                                                                                                                                                                                                                                                                                                                                           |       |                                                 |       |                                                    |       |                                               |       |                                                    |       |   |   |   |   |
| Selling                                                                                                                                                                                                                                                                                                                                                                        |       | 3,156                                                |       | 7,664                                                   |       | 12,824                                             |       | 25,512                                                  |       | 7,664 |   | 38,938 |   |
| Distribution                                                                                                                                                                                                                                                                                                                                                                   |       | 2,014                                                |       | 4,427                                                   |       | 8,289                                              |       | 14,634                                                  |       | 4,427 |   | 24,276 |   |
| General and administrative, excludes amortization of  intangibles and includes $13,554 of management incentive compensation for the  period from January 1, 2005 through July 19, 2005 and the period from July 3,  2005 through July 19, 2005 and $265 and $1,345 of management incentive  compensation for the three and nine months ended September 30, 2006,  respectively |       | 16,057                                               |       | 7,814                                                   |       | 12,818                                             |       | 38,250                                                  |       | 7,814 |   | 39,446 |   |
| Amortization of intangibles                                                                                                                                                                                                                                                                                                                                                    |       | 46                                                   |       | 4,732                                                   |       | 3,073                                              |       | 329                                                     |       | 4,732 |   | 8,540 |   |
| Total operating  expenses                                                                                                                                                                                                                                                                                                                                                      |       | 21,273                                               |       | 24,637                                                  |       | 37,004                                             |       | 78,725                                                  |       | 24,637 |   | 111,200 |   |
| (Loss) income  from operations                                                                                                                                                                                                                                                                                                                                                 |       | (10,235                                              | )          | 2,081                                                   |       | 13,790                                             |       | 21,324                                                  |       | 2,081 |   | 46,237 |   |
| Other expense  (income):                                                                                                                                                                                                                                                                                                                                                       |       |                                                 |       |                                                    |       |                                               |       |                                                    |       |   |   |   |   |
| Interest expense                                                                                                                                                                                                                                                                                                                                                               |       | 1,845                                                |       | 3,516                                                   |       | 7,012                                              |       | 13,126                                                  |       | 3,516 |   | 20,090 |   |
| Interest income                                                                                                                                                                                                                                                                                                                                                                |       | (49                                                  | )          | (39                                                     | )          | (105                                               | )          | (464                                                    | )          | (39 | ) | (435 | ) |
| Other, net                                                                                                                                                                                                                                                                                                                                                                     |       | (77                                                  | )          | (110                                                    | )          | (19                                                | )          | 745                                                     |       | (110 | ) | (559 | ) |
| (Loss) income  before income taxes and minority interest                                                                                                                                                                                                                                                                                                                       |       | (11,954                                              | )          | (1,286                                                  | )          | 6,902                                              |       | 7,917                                                   |       | (1,286 | ) | 27,141 |   |
| Income tax  (benefit) expense                                                                                                                                                                                                                                                                                                                                                  |       | (148                                                 | )          | 68                                                      |       | 2,668                                              |       | 3,519                                                   |       | 68 |   | 9,635 |   |
| Minority  interest                                                                                                                                                                                                                                                                                                                                                             |       | 2                                                    |       | (2                                                      | )          | 8                                                  |       | 13                                                      |       | (2 | ) | 23 |   |
| Net (loss) income                                                                                                                                                                                                                                                                                                                                                              |       | $                                                    | (11,808    | )                                                       | $          | (1,352                                             | )          | $                                                       | 4,226      |   | $ | 4,385 |   | $ | (1,352 | ) | $ | 17,483 |   |

 

*Seenotes to unaudited consolidated financial statements.*

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**NORCROSS SAFETY PRODUCTS L.L.C.**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

**(Amounts in Thousands) (Unaudited)**

 
| ** **                                                                                           | ** ** | **Predecessor**                                         | ** ** | **Successor**                                           | ** ** |
|------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                                                                           | ** ** | **January 1,  2005  Through  July 19,  2005** | ** ** | **July 20,  2005  through  October 1,  2005** | ** ** | **Nine  months  ended  September 30,  2006** | ** ** |
| **Operating  activities**                                                                            | ** ** | ** **                                              | ** ** | ** **                                              | ** ** | ** ** | ** ** |
| Net income  (loss)                                                                                   |       | $                                                       | 4,385      |                                                    | $          | (1,352 | ) | $ | 17,483 |   |
| Adjustments to  reconcile net income (loss) to net cash provided by (used in) operating  activities: |       |                                                    |       |                                                    |       |   |   |
| Depreciation                                                                                         |       | 6,177                                                   |       | 2,417                                                   |       | 10,008 |   |
| Amortization of intangibles                                                                          |       | 329                                                     |       | 4,732                                                   |       | 8,540 |   |
| Amortization of deferred financing costs                                                             |       | 1,020                                                   |       | 223                                                     |       | 993 |   |
| Amortization of original issue discount (premium)                                                    |       | 58                                                      |       | (193                                                    | )          | (770 | ) |
| Loss on sale of property, plant and equipment                                                        |       | —                                                  |       | —                                                  |       | 54 |   |
| Deferred income taxes                                                                                |       | (86                                                     | )          | (651                                                    | )          | (205 | ) |
| Minority interest                                                                                    |       | 13                                                      |       | (2                                                      | )          | 23 |   |
| Management incentive compensation                                                                    |       | —                                                  |       | —                                                  |       | 1,345 |   |
| Changes in operating assets and liabilities:                                                         |       |                                                    |       |                                                    |       |   |   |
| Accounts receivable                                                                                  |       | (2,607                                                  | )          | (10,145                                                 | )          | (10,433 | ) |
| Inventories                                                                                          |       | (1,515                                                  | )          | 3,024                                                   |       | (16,055 | ) |
| Prepaid expenses and other current assets                                                            |       | 467                                                     |       | 414                                                     |       | 436 |   |
| Other noncurrent assets                                                                              |       | (477                                                    | )          | 115                                                     |       | (265 | ) |
| Accounts payable                                                                                     |       | (492                                                    | )          | 3,288                                                   |       | 2,409 |   |
| Accrued expenses                                                                                     |       | 14,177                                                  |       | (2,127                                                  | )          | 2,741 |   |
| Pension, postretirement, and deferred compensation                                                   |       | (1,210                                                  | )          | 135                                                     |       | (1,466 | ) |
| Other noncurrent liabilities                                                                         |       | (30                                                     | )          | (3                                                      | )          | (225 | ) |
| Other                                                                                                |       | 22                                                      |       | 4                                                       |       | — |   |
| Net cash  provided by (used in) operating activities                                                 |       | 20,231                                                  |       | (121                                                    | )          | 14,613 |   |
|                                                                                                 |       |                                                    |       |                                                    |       |   |   |
| **Investing  activities**                                                                            | ** ** | ** **                                              | ** ** | ** **                                              | ** ** | ** ** | ** ** |
| Purchase of  businesses, net of cash acquired                                                        |       | (653                                                    | )          | (204,707                                                | )          | (30,952 | ) |
| Purchases of  property, plant, and equipment                                                         |       | (4,250                                                  | )          | (1,471                                                  | )          | (7,681 | ) |
| Proceeds from  sale of property, plant and equipment                                                 |       | —                                                  |       | —                                                  |       | 113 |   |
| Net cash used in  investing activities                                                               |       | (4,903                                                  | )          | (206,178                                                | )          | (38,520 | ) |
|                                                                                                 |       |                                                    |       |                                                    |       |   |   |
| **Financing  activities**                                                                            | ** ** | ** **                                              | ** ** | ** **                                              | ** ** | ** ** | ** ** |
| Payment of  deferred financing costs                                                                 |       | —                                                  |       | (6,773                                                  | )          | (201 | ) |
| Proceeds from  borrowings                                                                            |       | —                                                  |       | 88,000                                                  |       | 15,000 |   |
| Payments of debt                                                                                     |       | (13,623                                                 | )          | (293                                                    | )          | (1,399 | ) |
| Net borrowings  under revolving credit facility                                                      |       | —                                                  |       | —                                                  |       | 2,000 |   |
| Due from NSP  Holdings L.L.C.                                                                        |       | (558                                                    | )          | —                                                  |       | — |   |
| Proceeds from  capital contribution                                                                  |       | —                                                  |       | 121,114                                                 |       | 150 |   |
| Dividends to NSP  Holdings L.L.C.                                                                    |       | (9                                                      | )          | —                                                  |       | — |   |
| Dividends to  Safety Products Holdings, Inc.                                                    |       | —                                                  |       | (335                                                    | )          | (758 | ) |
| Net cash (used  in) provided by financing activities                                                 |       | (14,190                                                 | )          | 201,713                                                 |       | 14,792 |   |
| Effect of  exchange rate changes on cash                                                             |       | (2,725                                                  | )          | 1,547                                                   |       | 356 |   |
| Net decrease in  cash and cash equivalents                                                           |       | (1,587                                                  | )          | (3,039                                                  | )          | (8,759 | ) |
| Cash and cash  equivalents at beginning of period                                                    |       | 35,731                                                  |       | 7,144                                                   |       | 20,683 |   |
| Cash and cash  equivalents at end of period                                                          |       | $                                                       | 34,144     |                                                    | $          | 4,105 |   | $ | 11,924 |   |

 

*Seenotes to unaudited consolidated financial statements*

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**NORCROSSSAFETY PRODUCTS L.L.C.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Amounts in Thousands)(Unaudited)**

**1.**                 Transactions

On July 19, 2005, Norcross Safety Products L.L.C. (the “Company” or“Norcross”) announced the closing of the transaction under which it wasacquired by Safety Products Holdings, Inc. (“Safety Products”), a new holdingcompany formed by Odyssey Investment Partners, LLC (“Odyssey”) for the purposeof completing the acquisition. Pursuant to the terms of the purchase agreement,Safety Products purchased all of the outstanding membership units of theCompany and all of the outstanding common stock of NSP Holdings Capital Corp.(“NSP Capital”), a wholly-owned subsidiary of NSP Holdings L.L.C. (“NSPHoldings”), and pursuant to which Safety Products assumed all of theoutstanding indebtedness of the Company and NSP Holdings, in exchange for abase purchase price to NSP Holdings of $472,000, plus the cash in the Companyas of April 2, 2005 in the amount of approximately $16,900, less (1) theindebtedness of the Company and its subsidiaries as of April 2, 2005 and (2)certain transaction fees and expenses. The cash purchase price was $204,488including direct costs of acquisition of $2,346, and excluding assumed debt of$260,523.

On November 1, 2005, the Company completed the acquisition of all ofthe issued and outstanding capital stock of The Fibre-Metal Products Company(“Fibre-Metal”). The purchase price was $68,723, including acquisition costs of$723. The Company financed the acquisition through additional term borrowingsunder the senior credit facility and cash on the balance sheet. The Company believes the acquisition ofFibre-Metal will broaden its eye, head and face product portfolio.  The results of operations ofFibre-Metal are included in the Company’s consolidated statement of operationsfrom the date of acquisition.

OnFebruary 2, 2006, the Company completed the acquisition of all of the issuedand outstanding capital stock of American Firewear, Inc. (“American Firewear”).The purchase price consisted of $4,453 in cash (including acquisition costs of$203 and net of cash acquired of $183) and a $1,000 subordinated seller note.In addition, the purchase price may be increased by $750 over the next fouryears based on American Firewear achieving certain financial and operatingobjectives. The Company financed the acquisition through cash on the balancesheet and the issuance of the $1,000 subordinated seller note. The Company believes the acquisition of AmericanFirewear will stenghten its hand protection product line.  The results of operations of AmericanFirewear are included in the Company’s consolidated statement of operationsfrom the date of acquisition. 

OnJune 9, 2006, the Company completed the acquisition of all of the issued andoutstanding capital stock of The White Rubber Corporation (“White Rubber”). Thepurchase price was $22,182 (including acquisition costs of $636 and gross ofoutstanding checks of $773). The Company financed the acquisition throughadditional term borrowings under the senior credit facility and cash on thebalance sheet.  The Company believes the acquisition of White Rubber will stenghten itshand protection product line.  Theresults of operations of White Rubber are included in the Company’sconsolidated statement of operations from the date of acquisition.  The Company has not finalized the allocationof purchase price as of September 30, 2006.

OnSeptember 19, 2006, the Company completed the acquisition of all of the issuedand outstanding capital stock of The New England Overshoe Company, Inc.(“NEOS”).  The purchase price consistedof $3,639 in cash (including acquisition costs of $139 and net of cash acquiredof $6) and a $750 subordinated seller note. In addition, the purchase price may be increased over the next fiveyears based on NEOS achieving certain net sales targets.  The Company financed the acquisition throughcash on the balance sheet and the issuance of the $750 subordinated sellernote.  TheCompany believes the acquisition of NEOS will broaden its footwear productportfolio.  The results of NEOSare included in the Company’s consolidated statement of operations from thedate of acquisition.  The Company has notfinalized the allocation of purchase price as of September 30, 2006.

The acquisition of Norcross is referred to as the “NorcrossTransaction”, the acquisition of Fibre-Metal is referred to as the “Fibre-MetalTransaction”, the acquisition of American Firewear is referred to as the“American Firewear Transaction”, the acquisition of White Rubber is referred toas the “White Rubber Transaction” and the acquisition of NEOS is referred to asthe “NEOS Transaction.”  Collectively,the Norcross Transaction, the Fibre-

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Metal Transaction, the American Firewear Transaction,the White Rubber Transaction and the NEOS Transaction are referred to as the“Transactions.”

**2.**                 Basis ofPresentation

The accompanyingunaudited consolidated financial statements of the Company have been preparedin accordance with accounting principles generally accepted in the UnitedStates for interim financial information. Accordingly, they do not include allof the information and notes required by accounting principles generallyaccepted in the United States for complete financial statements.

In the opinion of management, all adjustments(consisting only of adjustments of a normal and recurring nature) considerednecessary for a fair presentation of the financial position and results ofoperations have been included. Interim results are not necessarily indicativeof the results that might be expected for any other interim period or for thefiscal year ending December 31, 2006. The financial statements presented shouldbe read in conjunction with the consolidated financial statements and footnotesthereto included in our 2005 consolidated financial statements, included in theCompany’s annual report on Form 10-K.

Predecessor — The consolidated financial statements of the Predecessorrepresent the consolidated results of operations of Norcross Safety ProductsL.L.C. prior to the Norcross Transaction.

Successor — The consolidated financial statements of the Successorrepresent the consolidated results of operations of Norcross Safety ProductsL.L.C. subsequent to the Norcross Transaction.

The consolidated financial statements of the Successor reflect theTransactions under the purchase method of accounting, in accordance with the FinancialAccounting Standards Board (“FASB”) Statement of Accounting Standards (“SFAS”)No. 141, *Business Combinations*.

The following table presents the pro forma net sales, income fromoperations, and net income of the Company assuming the Transactions hadoccurred on January 1, 2005:
| ** **              | ** ** | **Predecessor**                                | ** ** | **Successor**                                           | ** ** |
|-------------------------|------------|------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **              | ** ** | **Nine  months  ended  October 1,  2005** | ** ** | **Nine   months  ended  September 30,  2006** | ** ** |
| Net sales               |       | $402,767                                       |       | $429,866                                                |       |
| Income from  operations |       | 25,702                                         |       | 49,465                                                  |       |
| Net (loss) income       |       | (1,073                                         | )          | 19,137                                                  |       |

 

**3.**                 Reclassifications

Certain account balances have been reclassified from the prior year toconform with current year presentation. Specifically, discounts and rebateexpenses were reclassified from selling expenses to net sales. The impact ofthis reclassification resulted in a reduction of selling expenses and net salesof  $1,380, $182 and $749 for the periodfrom January 1, 2005 through July 19, 2005, the period from July 3, 2005through July 19, 2005 and the period from July 20, 2005 through October 1,2005, respectively.

**4.      Recent Accounting Pronouncements**

In July 2006, the FASB issued FASB Interpretation No. 48, *Accounting for Uncertainty in Income Taxes* (“FIN 48”), whichclarifies the accounting for uncertainty in tax positions.  This Interpretation requires that the Companyrecognize in the financial statements, the impact of a tax position, if thatposition is more likely than not of being sustained on audit, based on thetechnical merits of the position.  Inaddition, FIN 48 provides guidance on the derecognition, classification,accounting in interim periods and disclosure requirements for uncertain taxpositions.  The accounting provision of FIN48 will be effective as of the beginning of the 2007 fiscal year, with the 

5

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cumulative effect of the change in accountingprinciple recorded as an adjustment to the beginning retained earnings.  The Company is currently evaluating theimpact, if any, of adopting FIN 48 on its financial statements.

In September 2006, the FASB issued SFASNo. 157, *Fair Value Measurements*,which defines fair value, establishes a framework for measuring fair value, andexpands disclosures about fair value measurements. The provisions of SFAS No.157 are effective for the Company as of the beginning of its fiscal year endedDecember 31, 2008. The Company is in the process of determining the effects, ifany, that adoption of SFAS No. 157 will have on its financial statements.

 

In September 2006, the FASB issued SFASNo. 158, *Employers' Accounting for DefinedBenefit Pension and Other Postretirement Plans – an amendment of FASBStatements No. 87, 88, 106 and 132(R*). SFAS No. 158 requires anemployer to recognize in its statement of financial position an asset for aplan's overfunded status or a liability for a plan's underfunded status, measurea plan's assets and its obligations that determine its funded status as of theend of the employer's fiscal year, and recognize changes in the funded statusof a defined benefit postretirement plan in the year in which the changesoccur. Those changes will be reported in comprehensive income and as a separatecomponent of shareholders’ equity. SFAS No. 158 does not change the amount ofnet periodic benefit cost included in net earnings. The requirement torecognize the funded status of defined benefit postretirement plans iseffective for the Company as of December 31, 2007. The requirement to measureplan assets and benefit obligations as of the end of the fiscal year iseffective for the Company no later than December 31, 2008. Retrospective applicationof both the recognition and measurement date provisions of SFAS No. 158 is notpermitted. The Company is in the process of determining the effects, if any,that adoption of SFAS No. 158 will have on its financial statements.

 

In September 2006, the Securities and Exchange Commission (SEC) issuedStaff Accounting Bulletin No. 108 (SAB 108), *Considering the Effects of Prior Year Misstatements when QuantifyingMisstatements in Current Year Financial Statements*, to addressdiversity in practice in quantifying financial statement misstatements. SAB 108provides interpretive guidance on the consideration of the effects of prioryear misstatements in quantifying current year misstatements for the purpose ofa materiality assessment. SAB 108 is effective for the Company in its yearended December 31, 2006, and allows a one-time transitional cumulative effectadjustment to retained earnings as of January 1, 2006 for errors that werenot previously deemed material, but are material under the guidance in SAB 108.The Company is in the process of determining the effects, if any, that SAB 108will have on its financial statements.

** **

**5.**                 ManagementIncentive Compensation

Safety Products’ Option Plan (as amended, the “Plan”)was adopted and approved by the Board of Directors in December 2005, andprovides for the issuance of up to 1,436,631 shares of common stock of SafetyProducts in connection with the granting of non-qualified or incentive stockoptions. The principal purposes of the Plan are: 1) to further the growth, developmentand financial success of Safety Products and its subsidiaries, by providingadditional incentives to employees, consultants and independent directors (asdefined) of Safety Products and its subsidiaries and 2) to enable SafetyProducts and its subsidiaries to obtain and retain the services of the type ofprofessional, technical and managerial employees, consultants and independentdirectors considered essential to the long-range success of Safety Products.

Prior to December 31,2005, the Company accounted for stock-based compensation programs according tothe provisions of Accounting Principles Board Opinion (“ABP”) No. 25, *Accounting for Stock Issued to**Employees*(“APB No. 25”), as permitted by SFAS No. 123, *Accounting for Stock-Based**Compensation*. Effective January 1, 2006, the Company adoptedthe fair value recognition provisions of SFAS 123 (R), *Share-Based Payments*(“SFAS No. 123(R)”). As a result ofadopting SFAS No. 123(R) on January 1, 2006, income before income taxes and netincome for the nine months ended September 30, 2006, are $1,345 and $822 lower,respectively, than if the Company had continued to account for share-basedcompensation under APB No. 25. The application of the fair 

6

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value provisions of SFAS No. 123(R) would not have hadan impact on the Company’s results for the nine months ended October 1,2005.  

In January 2006, Safety Products granted a total of1,213,559 non-qualified options in connection with the Plan. Outstandingnon-qualified stock options have an expiration date ten years from the date ofgrant and have an exercise price of $10 per share. All non-qualified stockoptions were granted with an exercise price equal to the fair market value on thedate of grant. During the nine months ended September 30, 2006, no options wereforfeited or exercised.

The non-qualified stock options are scheduled to vestover an approximate eight year period. In addition, a portion of thenon-qualified stock options are subject to accelerated vesting provisions whencertain performance targets are met. The first performance target was met, andtherefore the first installment was vested as of September 30, 2006. If certainadditional performance targets are met, the remaining four installments willvest on, or within 120 days following, December 31 of each calendar year 2006through 2009. The non-qualified stock options are subject to furtheracceleration clauses based on change in control provisions. As of September 30,2006, 340,156 shares of non-qualified stock options were vested. As of  September 30, 2006, there was approximately$3,454 of unrecognized management incentive compensation related to nonvestednon-qualified stock options.  The Companyexpects to recognize this management incentive compensation over a weightedaverage period of 4.0 years.

The Company used the Black-Scholes option-pricingmodel to estimate the fair value of each option grant as of the date of grant.Expected volatilities are based on historical volatility of the common stock ofcomparable public companies. The Company estimated the expected life of theoptions based on the likelihood of the achievement of performance targets,change in control provisions, and historic employee termination data. Therisk-free interest rate is based on U.S. Treasury yields in effect at the timeof grant. The estimated weighted-average fair values of and related assumptionsfor options granted were as follows:
| Weighted-average  fair value of options granted: |   |   |   |
|--------------------------------------------------|--------|--------|--------|
|                                             |   |   |   |
| At fair value                                    |   | $      | 3.95   |   |
|                                             |   |   |   |
| Assumptions:                                     |   |   |   |
| Dividend yield                                   |   | 0.0    | %      |
| Expected volatility                              |   | 40.0   | %      |
| Risk-free interest rate                          |   | 5.0    | %      |
| Expected life of  option (years)                 |   | 5.0    |   |
|                                                  |        |        |        |  |

 

 

As aresult of the Norcross Transaction, the Predecessor recognized $13,554 inmanagement incentive compensation expense during the July 3, 2005 through July 19,2005 predecessor period.  The expenseswere funded by the Predecessor from proceeds realized upon the consummation ofthe Norcross Transaction.  

 

**6.**                 Inventories

Inventories consist of the following:
| ** **               | ** ** | **Successor**               | ** ** |
|--------------------------|------------|-----------------------------|------------|
| ** **               | ** ** | **December 31,  2005** | ** ** | **September 30,  2006** | ** ** |
| At FIFO cost:            |       |                        |       |   |   |
| Raw materials            |       | $                           | 23,755     |   | $ | 28,244 |   |
| Work in process          |       | 12,745                      |       | 13,988 |   |
| Finished goods           |       | 57,126                      |       | 71,600 |   |
|                     |       | 93,626                      |       | 113,832 |   |
| Adjustment to  LIFO cost |       | (164                        | )          | (164 | ) |
|                     |       | $                           | 93,462     |   | $ | 113,668 |   |

 

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# **7.****              Long-Term Obligations**

The Company’s long-term obligations consist of thefollowing:
| ** **                                         | ** ** | **Successor**               | ** ** |
|----------------------------------------------------|------------|-----------------------------|------------|
| ** **                                         | ** ** | **December 31,  2005** | ** ** | **September 30,  2006** | ** ** |
| Revolving credit  facilities                       |       | $                           | —     |   | $ | 2,000 |   |
| Term loan                                          |       | 152,390                     |       | 166,147 |   |
| Senior  subordinated notes                         |       | 152,500                     |       | 152,500 |   |
| European term  loans                               |       | 248                         |       | 167 |   |
| Subordinated  seller notes                         |       | —                      |       | 1,750 |   |
| Capital lease  obligations                         |       | 75                          |       | — |   |
| Unamortized  premium on senior subordinated notes  |       | 7,186                       |       | 6,416 |   |
|                                               |       | 312,399                     |       | 328,980 |   |
| Less: Current  maturities of long-term obligations |       | 2,735                       |       | 3,432 |   |
|                                               |       | $                           | 309,664    |   | $ | 325,548 |   |

 

Aggregate maturities of long-term obligations as of September30, 2006, are as follows:
| 2007       |   | $       | 3,432   |   |
|------------|--------|---------|---------|--------|
| 2008       |   | 3,530   |    |
| 2009       |   | 3,639   |    |
| 2010       |   | 5,174   |    |
| 2011       |   | 155,598 |    |
| Thereafter |   | 157,607 |    |
|       |   | $       | 328,980 |   |

 

**8.      Income Taxes**

The income taxexpense (benefit) for the Predecessor differs from the amount of income taxexpense (benefit) computed by applying the U.S. federal income tax rate toincome (loss) before income taxes and minority interest primarily due to:1) the tax structure of certain U.S. subsidiaries which requires incometaxes to be distributed to and paid by the unitholders, 2) net operatingloss carryforwards in the United States and 3) the settlement of incometax audits in the Company’s foreign subsidiaries.

The income taxexpense (benefit) for the Successor differs from the amount of income taxexpense (benefit) computed by applying the U.S. federal income tax rate toincome (loss) before income taxes and minority interest primarily due to: 1)net operating loss carryforwards in the United States, 2) the impact ofpurchase accounting adjustments related to the Transactions and 3) the impactof foreign statutory rate changes on the Company’s deferred taxes.

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**9.      Employee Benefit Plans**

The following table sets forth the components of netperiodic benefit cost for the Company’s penion benefits:
| ** **                          | ** ** | **Predecessor**                                      | ** ** | **Successor**                                                 | ** ** | **Predecessor**                                    | ** ** | **Successor**                                           | ** ** |
|-------------------------------------|------------|------------------------------------------------------|------------|---------------------------------------------------------------|------------|----------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                          | ** ** | **July 3,  2005  through  July 19,  2005** | ** ** | **July 20,  2005   through  October 1,  2005** | ** ** | **Three  months  ended  September 30,  2006** | ** ** | **January 1,  2005  through  July 19,  2005** | ** ** | **July 20,  2005  through  October 1,  2005** | ** ** | **Nine  months  ended  September 30,  2006** | ** ** |
|                                |       |                                                 |       |                                                          |       |                                               |       |                                                    |       |   |   |   |   |
| Service cost                        |       | $                                                    | 69         |                                                          | $          | 384                                                |       | $                                                       | 594        |   | $ | 903 |   | $ | 384 |   | $ | 1,576 |   |
| Interest cost                       |       | 150                                                  |       | 756                                                           |       | 998                                                |       | 1,960                                                   |       | 756 |   | 2,886 |   |
| Expected return  on plan assets     |       | (226                                                 | )          | (724                                                          | )          | (755                                               | )          | (1,780                                                  | )          | (724 | ) | (2,567 | ) |
| Amortization of  prior service cost |       | 1                                                    |       | —                                                        |       | —                                             |       | 3                                                       |       | — |   | — |   |
| Amortization of  actuarial loss     |       | (41                                                  | )          | —                                                        |       | —                                             |       | 527                                                     |       | — |   | — |   |
|                                |       | $                                                    | (47        | )                                                             | $          | 416                                                |       | $                                                       | 837        |   | $ | 1,613 |   | $ | 416 |   | $ | 1,895 |   |

 

The following table sets forth the components of netperiodic benefit cost for the Company’s post-retirement benefits:
| ** **                          | ** ** | **Predecessor**                                      | ** ** | **Successor**                                                 | ** ** | **Predecessor**                                    | ** ** | **Successor**                                           | ** ** |
|-------------------------------------|------------|------------------------------------------------------|------------|---------------------------------------------------------------|------------|----------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                          | ** ** | **July 3,  2005  through  July 19,  2005** | ** ** | **July 20,  2005   through  October 1,  2005** | ** ** | **Three  months  ended  September 30,  2006** | ** ** | **January 1,  2005  through  July 19,  2005** | ** ** | **July 20,  2005  through  October 1,  2005** | ** ** | **Nine  months  ended  September 30,  2006** | ** ** |
|                                |       |                                                 |       |                                                          |       |                                               |       |                                                    |       |   |   |   |   |
| Service cost                        |       | $                                                    | 2          |                                                          | $          | 5                                                  |       | $                                                       | 7          |   | $ | 14 |   | $ | 5 |   | $ | 19 |   |
| Interest cost                       |       | 3                                                    |       | 15                                                            |       | 18                                                 |       | 43                                                      |       | 15 |   | 54 |   |
| Amortization of  prior service cost |       | 2                                                    |       | —                                                        |       | —                                             |       | 10                                                      |       | — |   | — |   |
| Amortization of actuarial  loss     |       | 4                                                    |       | —                                                        |       | —                                             |       | 48                                                      |       | — |   | — |   |
|                                |       | $                                                    | 11         |                                                          | $          | 20                                                 |       | $                                                       | 25         |   | $ | 115 |   | $ | 20 |   | $ | 73 |   |

 

 

**10.**          Restructuring andMerger-Related Charges

In conjunctionwith the Fibre-Metal Transaction, the Company initiated a restructuring plan toclose the Fibre-Metal manufacturing facility located in Concordville,Pennsylvania and move production to its Cranston, Rhode Island and Mexicali,Mexico facilities. In addition, the Company plans to close certain Fibre-Metaldistribution centers and integrate Fibre-Metal distribution into its existingdistribution facilities. The Company initiated this plan in order to increaseprofitability by utilizing excess capacity at its existing plants and movingmanufacturing to locations with favorable labor costs. As of the date of theFibre-Metal Transaction, the Company recorded an accrual for costs associatedwith the plan of $1,716, comprised of $1,383 in severance costs and $333 infacility closure and other exit costs. Since the Fibre-Metal Transaction therehave been $131 of payments recorded against the liability.

In conjunctionwith the White Rubber Transaction, the Company initiated a restructuring planto move certain production and distribution functions located in Ohio andWashington to its Charleston, South Carolina, Skokie, Illinois and Chicago,Illinois facilities.  The Companyinitiated this plan in order to increase profitability by utilizing excesscapacity and consolidating distribution functions.  As of the date of the White RubberTransaction, the Company recorded an accrual for costs associated with the planof $1,018, comprised of severance costs.  Since the White Rubber Transaction there have been $98 of payments recordedagainst the liability.

**11.**          Legal Proceedings

The Company is subject to various claims arising in the ordinary courseof business. Most of these lawsuits and claims are product liability mattersthat arise out of the use of respiratory product lines manufactured by theCompany’s North Safety Products subsidiary. As of September 30, 2006, theCompany’s North Safety Products subsidiary, along with its predecessors and/orthe former owners of such business were named as defendants in approximately 657lawsuits involving respirators allegedly manufactured and sold by it or itspredecessors. The Company is also monitoring an additional 12 lawsuits in whichit feels that North Safety Products, its predecessors 

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and/or the former owners of such businesses may benamed as defendants. Collectively, these 669 lawsuits represent a total ofapproximately 8,769 plaintiffs. Approximately 91% of these lawsuits involveplaintiffs alleging injury resulting from exposure to silica dust, with theremainder alleging injury resulting from exposure to other dust particles,including asbestos. These lawsuits typically allege that the purposed injuriesresulted in part from respirators that were negligently designed ormanufactured. Invensys plc (“Invensys”), formerly Siebe plc, is contractuallyobligated to indemnify the Company for any losses, including costs of defendingclaims, resulting from respiratory products manufactured or sold prior to theacquisition of North Safety Products in October 1998.

In addition, the Company’s North Safety Products subsidiary iscontractually entitled to indemnification from Norton Company, an affiliate ofSaint-Gobain, which owned the North Safety Products business prior to Invensys.Pursuant to a December 14, 1982 asset purchase agreement, Siebe Norton, Inc., anewly formed wholly-owned subsidiary of Norton Company, acquired the assets ofNorton’s Safety Products Division and the stock of this company was in turnacquired by Siebe Gorman Holdings PLC. Under the terms of the agreement, SiebeNorton, Inc. did not assume any liability for claims relating to productsshipped by Norton Company prior to the closing date. Moreover, Norton Companycovenanted in the agreement to indemnify Siebe Norton, Inc. and its successorsand assigns against any liability resulting from or arising out of any state offacts, omissions or events existing or occurring on or before the closing date,including, without limitation, any claims arising from products shipped byNorton Company or any of its affiliates prior to the closing date. SiebeNorton, Inc., whose name was subsequently changed to Siebe North Inc., wassubsequently acquired by the Company as part of the 1998 acquisition of theNorth Safety Products business from Invensys.

Despite these indemnification arrangements, the Company couldpotentially be liable for losses or claims relating to products manufacturedprior to the October 1998 acquisition date if Invensys fails to meet itsobligations to indemnify the Company and the Company could potentially beliable for losses and claims relating to products sold prior to January 10,1983 if both Invensys and Norton fail to meet their obligations to indemnifythe Company. The Company could also be liable if the alleged exposure involvedthe use of a product manufactured by the Company after the October 1998acquisition of the North Safety Products business.  The Company believes that Invensys has theability to pay these claims based on its current financial position, aspublicly disclosed by Invensys.

Effective July 1, 2006, the Company entered into a joint defenseagreement through December 31, 2008 with the former owners of the North SafetyProducts business (the “Joint Defense Agreement”).  Under the terms of the Joint DefenseAgreement, the Company agreed to pay a weighted average percentage of defensecosts associated with defending the Company and the prior owners of the NorthSafety Products business subject to a cap of $525, $960 and $1,000 for theperiod from July 1, 2006 through December 31, 2006, the year ended December 31,2007 and the year ended December 31, 2008, respectively.  The cap excludes settlement costs and othercosts incurred exclusively by the Company, including trial costs and specialrequests of counsel.  Separately, theCompany agreed to pay Invensys $200 related to settled cases through June 30,2006 in which Invensys claimed that the period of alleged exposure includedperiods after October 1998.

Based upon information provided to the Company by Invensys, the Companybelieves activity related to these lawsuits was as follows for the nine monthsended September 30, 2006:
| ** **                                | ** ** | **Plaintiffs** | ** ** | **Cases** | ** ** |
|-------------------------------------------|------------|----------------|------------|-----------|------------|
| Beginning  lawsuits as of January 1, 2006 |       | 18,459         |       | 1,148     |       |
| New lawsuits                              |       | 626            |       | 473       |       |
| Settlements                               |       | (5             | )          | (5        | )          |
| Dismissals and  other                     |       | (10,311        | )          | (947      | )          |
| Ending lawsuits as of  September 30, 2006 |       | 8,769          |       | 669       |       |

 

 Plaintiffs have assertedspecific dollar claims in approximately 28% of the approximately 657 casespending as of September 30, 2006 in which North Safety Products, itspredecessors and/or the former owners of such businesses have been named asdefendants. A majority of jurisdictions prohibit specifying damages in tortcases such as these, and most of the remaining jurisdictions do not requiresuch specification. In those cases in which plaintiffs choose to assertspecific dollar amounts in their complaints, brought in states that permit suchpleading, the amounts claimed are typically not meaningful as an indicator of acompany’s potential liability. This is 

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because (1) the amounts claimed typically bear norelation to the level of the plaintiff’s injury, (2) the complaints typicallyassert claims against numerous defendants, and (3) many cases are brought onbehalf of plaintiffs who have not suffered any medical injury, and ultimatelyare resolved without any payment or payment of a small fraction of the damagesinitially claimed. Of the 657 complaints maintained in the Company’s records, 472do not specify the amount of damages sought, 25 generally allege damages inexcess of $50, one alleges compensatory damages in excess of $50 and anunspecified amount of punitive damages, 81 allege compensatory damages and punitivedamages, each in excess of $25, two generally allege damages in excess of $100,nine allege compensatory damages and punitive damages, each in excess of $50,20 generally allege damages in excess of $15,000, one generally alleges damagesof $23,000, one alleges compensatory damages and punitive damages, each inexcess of $10, four allege general damages of $18,000 and punitive damages of$10,000, two allege general damages of $13,000 and punitive damages of $10,000,one alleges compensatory and punitive damages, each in excess of $15, twoallege punitive damages in excess of $25, one alleges punitive damages inexcess of $50, nine generally allege damages in excess of $15, 12 generallyallege damages in excess of $25, one alleges compensatory damages of $18,000and punitive damages of $10,000, one alleges punitive damages of $13,500 andcompensatory damages of $10,000, one alleges punitive damages of $13,000 andcompensatory damages of $10,000, eight allege compensatory damages of $13,000and punitive damages of $10,000, one alleges compensatory and punitive damages,each of $15 and two allege compensatory and punitive damages, each in excess of$15,000. The Company currently does not have access to the complaints withrespect to the previously mentioned additional 12 monitored cases, andtherefore it does not know whether these cases allege specific damages, or ifso, the amount of such damages, but is in the process of seeking to obtain suchinformation. Due to the reasons noted above and to the indemnificationarrangements benefiting the Company, it does not believe that the damageamounts specified in these complaints are a meaningful factor in any assessmentof the Company’s potential liability.

The Predecessor recorded a $1,250 reserve for respiratory claims. TheCompany increased this reserve to $7,000 and recorded the increase as part ofthe purchase price allocation process associated with the Norcross Transaction.The increase represents a decision by new ownership to enter into the JointDefense Agreement with the prior owners of North Safety Products. This reserverepresents a reasonable estimate of the Company’s probable and estimableliabilities for claims alleging injury resulting from exposure to silica dustand other dust particles, including asbestos as determined by the Company inconsultation with an independent consultant. The Company has determined that afive-year projection of claims and related defense costs is the most reasonableapproach. However, it is possible that the Company may incur liabilities inexcess of the amounts currently reserved. This reserve will be re-evaluatedperiodically and additional charges or credits will be recorded to operatingexpenses as additional information becomes available.

It is possible that the Company may incur liabilities in an amount inexcess of amounts currently reserved. However, taking into account currentlyavailable information, historical experience, and the Company’s indemnificationfrom Invensys, but recognizing the inherent uncertainties in the projection ofany future events, the Company believes that these suits or claims should notresult in final judgments or settlements in excess of its reserve.

In connection with an ongoing dispute, one of the Company’s competitorshas filed a complaint against it alleging that the Company has made a series ofmisrepresentations concerning this competitor and its products. The complaintseeks a retraction of all statements alleged to have been made by the Companyand unspecified damages, including legal fees. A bench trial on the issue ofliability was held in February 2006 and the matter is now awaiting ruling bythe court. The Company intends to vigorously defend against these claims.

The Company is not otherwise involved in any material lawsuits. TheCompany historically has not been required to pay any material liabilityclaims. The Company maintains insurance against product liability claims (withthe exception of asbestosis and silicosis cases, for which coverage is notcommercially available), but it is possible that its insurance coverage willnot continue to be available on terms acceptable to the Company or that suchcoverage will not be adequate for liabilities actually incurred.

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**12.**                               Segment Data

The following table presents information about theCompany by segment:
| ** **                                 | ** ** | **General  Safety &  Preparedness** | ** ** | **Fire  Service** | ** ** | **Electrical  Safety** | ** ** | **Corporate** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
|--------------------------------------------|------------|----------------------------------------------|------------|-------------------|------------|------------------------|------------|---------------|------------|------------------|------------|-----------|------------|
| **Predecessor**                            |       |                                         |       |              |       |                   |       |          |       |             |       |      |       |
| **July 3, 2005 through July 19,  2005**    |       |                                         |       |              |       |                   |       |          |       |             |       |      |       |
| Net sales—third parties               |       | $                                            | 22,553     |              | 6,616      |                   | 4,455      |          | —     |             | $          | —    |       | $ | 33,624 |   |
| Net sales—intersegment                |       | 693                                          |       | —            |       | —                 |       | —        |       | (693             | )          | —    |       |
| Income (loss) from  operations             |       | 1,834                                        |       | 1,188             |       | 615                    |       | (13,872       | )          | —           |       | (10,235   | )          |
|                                       |       |                                         |       |              |       |                   |       |          |       |             |       |      |       |
| **Successor**                              |       |                                         |       |              |       |                   |       |          |       |             |       |      |       |
| **July 20, 2005 through October  1, 2005** |       |                                         |       |              |       |                   |       |          |       |             |       |      |       |
| Net sales—third parties               |       | 59,039                                       |       | 14,770            |       | 11,180                 |       | —        |       | —           |       | 84,989    |       |
| Net sales—intersegment                |       | 1,571                                        |       | —            |       | —                 |       | —        |       | (1,571           | )          | —    |       |
| Income (loss) from  operations             |       | 2,029                                        |       | (400              | )          | 1,576                  |       | (1,124        | )          | —           |       | 2,081     |       |
|                                       |       |                                         |       |              |       |                   |       |          |       |             |       |      |       |
| **Successor**                              |       |                                         |       |              |       |                   |       |          |       |             |       |      |       |
| **Three Months Ended September  30, 2006** |       |                                         |       |              |       |                   |       |          |       |             |       |      |       |
| Net sales—third parties               |       | 98,725                                       |       | 21,817            |       | 21,336                 |       | —        |       | —           |       | 141,878   |       |
| Net sales—intersegment                |       | 2,243                                        |       | —            |       | —                 |       | —        |       | (2,243           | )          | —    |       |
| Income (loss) from  operations             |       | 10,624                                       |       | 1,430             |       | 3,597                  |       | (1,861        | )          | —           |       | 13,790    |       |
|                                       |       |                                         |       |              |       |                   |       |          |       |             |       |      |       |
| **Predecessor**                            |       |                                         |       |              |       |                   |       |          |       |             |       |      |       |
| **January 1, 2005 through July  19, 2005** |       |                                         |       |              |       |                   |       |          |       |             |       |      |       |
| Net sales—third parties               |       | 186,434                                      |       | 51,702            |       | 33,558                 |       | —        |       | —           |       | 271,694   |       |
| Net sales—intersegment                |       | 5,548                                        |       | —            |       | —                 |       | —        |       | (5,548           | )          | —    |       |
| Income (loss) from  operations             |       | 19,937                                       |       | 9,332             |       | 8,442                  |       | (16,387       | )          | —           |       | 21,324    |       |
|                                       |       |                                         |       |              |       |                   |       |          |       |             |       |      |       |
| **Successor**                              |       |                                         |       |              |       |                   |       |          |       |             |       |      |       |
| **July 20, 2005 through October  1, 2005** |       |                                         |       |              |       |                   |       |          |       |             |       |      |       |
| Net sales—third parties               |       | 59,039                                       |       | 14,770            |       | 11,180                 |       | —        |       | —           |       | 84,989    |       |
| Net sales—intersegment                |       | 1,571                                        |       | —            |       | —                 |       | —        |       | (1,571           | )          | —    |       |
| Income (loss) from  operations             |       | 2,029                                        |       | (400              | )          | 1,576                  |       | (1,124        | )          | —           |       | 2,081     |       |
|                                       |       |                                         |       |              |       |                   |       |          |       |             |       |      |       |
| **Successor**                              |       |                                         |       |              |       |                   |       |          |       |             |       |      |       |
| **Nine Months Ended September 30,  2006**  |       |                                         |       |              |       |                   |       |          |       |             |       |      |       |
| Net sales—third parties               |       | 293,120                                      |       | 68,073            |       | 58,807                 |       | —        |       | —           |       | 420,000   |       |
| Net sales—intersegment                |       | 7,146                                        |       | —            |       | —                 |       | —        |       | (7,146           | )          | —    |       |
| Income (loss) from operations              |       | 33,383                                       |       | 6,118             |       | 12,745                 |       | (6,009        | )          | —           |       | 46,237    |       |
|                                            |            |                                              |            |                   |            |                        |            |               |            |                  |            |           |            |  |  |  |

 

**13.**                               SubsidiaryGuarantors

All of the Company’s direct or indirect 100% ownedactive domestic subsidiaries, fully, unconditionally, jointly and severallyguarantee the senior subordinated notes.  NSP Capital is a 100% owned finance subsidiaryof Safety Products with no assets or operations.  NSP Capital is not a guarantor of the seniorsubordinated notes.  Separate financialstatements of the guarantor subsidiaries are not separately presented because,in the opinion of management, such financial statements are not material toinvestors. The non-guarantor subsidiaries include wholly owned subsidiaries ofthe Company organized under the laws of foreign jurisdictions and inactive subsidiaries,all of which are included in the consolidated financial statements. Thefollowing is summarized combining financial information for Norcross SafetyProducts L.L.C. on a stand-alone basis (NSP), Norcross Capital Corp. (NCC) (a 

12

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wholly-owned subsidiary of the Company and co-issuer of the seniorsubordinated notes), the guarantor subsidiaries of the Company and thenon-guarantor subsidiaries of the Company:
| ** **                                          | ** ** | **NSP**    | ** ** | **NCC**    | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total**  | ** ** |
|-----------------------------------------------------|------------|------------|------------|------------|------------|-----------------------------|------------|-----------------------------------|------------|------------------|------------|------------|------------|
| **Successor**                                       |       |       |       |       |       |                        |       |                              |       |             |       |       |       |
| **September  30, 2006**                             | ** ** | ** ** | ** ** | ** ** | ** ** | ** **                  | ** ** | ** **                        | ** ** | ** **       | ** ** | ** ** | ** ** |
| Current assets:                                     |       |       |       |       |       |                        |       |                              |       |             |       |       |       |
| Cash and cash equivalents                           |       | $          | 7,763      |       | $          | —                      |       | $                                 | (1,452     | )                | $          | 5,613      |       | $ | — |   | $ | 11,924 |   |
| Accounts receivable, net                            |       | 10,471     |       | —     |       | 39,047                      |       | 32,015                            |       | —           |       | 81,533     |       |
| Inventories                                         |       | 14,902     |       | —     |       | 53,721                      |       | 45,045                            |       | —           |       | 113,668    |       |
| Deferred income taxes                               |       | 434        |       | —     |       | 2,796                       |       | —                            |       | —           |       | 3,230      |       |
| Prepaid expenses and other current assets           |       | 650        |       | —     |       | 1,826                       |       | 565                               |       | —           |       | 3,041      |       |
| Total current  assets                               |       | 34,220     |       | —     |       | 95,938                      |       | 83,238                            |       | —           |       | 213,396    |       |
| Property, plant  and equipment, net                 |       | 7,865      |       | —     |       | 40,338                      |       | 21,240                            |       | —           |       | 69,443     |       |
| Deferred  financing costs, net                      |       | 6,721      |       | —     |       | —                      |       | —                            |       | —           |       | 6,721      |       |
| Goodwill                                            |       | 20,857     |       | —     |       | 84,464                      |       | 45,679                            |       | —           |       | 151,000    |       |
| Other intangible  assets, net                       |       | 28,857     |       | —     |       | 222,167                     |       | 37,194                            |       | —           |       | 288,218    |       |
| Investment in  subsidiaries                         |       | 445,782    |       | —     |       | 98,797                      |       | —                            |       | (544,579         | )          | —     |       |
| Other noncurrent  assets                            |       | —     |       | —     |       | 3,821                       |       | 1,490                             |       | —           |       | 5,311      |       |
| Total assets                                        | ** ** | $          | 544,302    |       | $          | —                      |       | $                                 | 545,525    |             | $          | 188,841    |       | $ | (544,579 | ) | $ | 734,089 | ** ** |
|                                                | ** ** | ** ** |       |       | ** ** | ** **                  | ** ** | ** **                        | ** ** | ** **       | ** ** | ** ** | ** ** |
| Current  liabilities:                               |       |       |       |       |       |                        |       |                              |       |             |       |       |       |
| Accounts payable                                    |       | $          | 3,867      |       | $          | —                      |       | $                                 | 11,651     |             | $          | 10,099     |       | $ | — |   | $ | 25,617 |   |
| Accrued expenses                                    |       | 7,036      |       | —     |       | 22,595                      |       | 9,548                             |       | —           |       | 39,179     |       |
| Current maturities of long-term obligations         |       | 3,065      |       | —     |       | 334                         |       | 33                                |       | —           |       | 3,432      |       |
| Total current  liabilities                          |       | 13,968     |       | —     |       | 34,580                      |       | 19,680                            |       | —           |       | 68,228     |       |
| Pension,  post-retirement and deferred compensation |       | 29         |       | —     |       | 30,602                      |       | 269                               |       | —           |       | 30,900     |       |
| Long-term  obligations                              |       | 324,748    |       | —     |       | 666                         |       | 134                               |       | —           |       | 325,548    |       |
| Intercompany  balances                              |       | (44,997    | )          | —     |       | (2,426                      | )          | 47,423                            |       | —           |       | —     |       |
| Other noncurrent  liabilities                       |       | —     |       | —     |       | 7,117                       |       | 33                                |       | —           |       | 7,150      |       |
| Deferred income  taxes                              |       | 2,920      |       | —     |       | 34,738                      |       | 16,772                            |       | —           |       | 54,430     |       |
| Minority  interest                                  |       | —     |       | —     |       | —                      |       | 199                               |       | —           |       | 199        |       |
|                                                |       | 282,700    |       |       |       | 70,697                      |       | 64,830                            |       | —           |       | 418,227    |       |
| Member’s equity:                               |       |       |       |       |       |                        |       |                              |       |             |       |       |       |
| Contributed capital                                 |       | 222,563    |       | —     |       | 399,359                     |       | 92,118                            |       | (491,477         | )          | 222,563    |       |
| Retained earnings                                   |       | 17,033     |       | —     |       | 40,889                      |       | 12,213                            |       | (53,102          | )          | 17,033     |       |
| Accumulated other comprehensive income              |       | 8,038      |       | —     |       | —                      |       | —                            |       | —           |       | 8,038      |       |
| Total member’s  equity                         |       | 247,634    |       | —     |       | 440,248                     |       | 104,331                           |       | (544,579         | )          | 247,634    |       |
| Total liabilities and  member’s equity         | ** ** | $          | 544,302    |       | $          | —                      |       | $                                 | 545,525    |             | $          | 188,841    |       | $ | (544,579 | ) | $ | 734,089 | ** ** |

 

13

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| ** **                                          | ** ** | **NSP**    | ** ** | **NCC**    | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total**  | ** ** |
|-----------------------------------------------------|------------|------------|------------|------------|------------|-----------------------------|------------|-----------------------------------|------------|------------------|------------|------------|------------|
| **Successor**                                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** **                  | ** ** | ** **                        | ** ** | ** **       | ** ** | ** ** | ** ** |
| **December  31, 2005**                              | ** ** | ** ** | ** ** | ** ** | ** ** | ** **                  | ** ** | ** **                        | ** ** | ** **       | ** ** | ** ** | ** ** |
| Current assets:                                     |       |       |       |       |       |                        |       |                              |       |             |       |       |       |
| Cash and cash equivalents                           |       | $          | 17,885     |       | $          | —                      |       | $                                 | (265       | )                | $          | 3,063      |       | $ | — |   | $ | 20,683 |   |
| Accounts receivable, net                            |       | 10,812     |       | —     |       | 31,134                      |       | 26,340                            |       | —           |       | 68,286     |       |
| Inventories                                         |       | 10,228     |       | —     |       | 41,720                      |       | 41,514                            |       | —           |       | 93,462     |       |
| Deferred income taxes                               |       | 434        |       | —     |       | 2,791                       |       | 5                                 |       | —           |       | 3,230      |       |
| Prepaid expenses and other current assets           |       | 809        |       | —     |       | 1,432                       |       | 894                               |       | —           |       | 3,135      |       |
| Total current  assets                               |       | 40,168     |       | —     |       | 76,812                      |       | 71,816                            |       | —           |       | 188,796    |       |
| Property, plant  and equipment, net                 |       | 6,606      |       | —     |       | 38,776                      |       | 21,933                            |       | —           |       | 67,315     |       |
| Deferred  financing costs, net                      |       | 7,513      |       | —     |       | —                      |       | —                            |       | —           |       | 7,513      |       |
| Goodwill                                            |       | 19,266     |       | —     |       | 74,099                      |       | 43,122                            |       | —           |       | 136,487    |       |
| Other intangible  assets, net                       |       | 25,007     |       | —     |       | 215,630                     |       | 36,205                            |       | —           |       | 276,842    |       |
| Investment in  subsidiaries                         |       | 387,606    |       | —     |       | 86,614                      |       | —                            |       | (474,220         | )          | —     |       |
| Other noncurrent  assets                            |       | —     |       | —     |       | 3,555                       |       | 1,554                             |       | —           |       | 5,109      |       |
| Total assets                                        |       | $          | 486,166    |       | $          | —                      |       | $                                 | 495,486    |             | $          | 174,630    |       | $ | (474,220 | ) | $ | 682,062 |   |
| Current  liabilities:                               |       |       |       |       |       |                        |       |                              |       |             |       |       |       |
| Accounts payable                                    |       | $          | 3,492      |       | $          | —                      |       | $                                 | 9,266      |             | $          | 8,471      |       | $ | — |   | $ | 21,229 |   |
| Accrued expenses                                    |       | 13,568     |       | —     |       | 14,180                      |       | 6,935                             |       | —           |       | 34,683     |       |
| Current maturities of long-term obligations         |       | 2,598      |       | —     |       | 68                          |       | 69                                |       | —           |       | 2,735      |       |
| Total current  liabilities                          |       | 19,658     |       | —     |       | 23,514                      |       | 15,475                            |       | —           |       | 58,647     |       |
| Pension,  post-retirement and deferred compensation |       | 70         |       | —     |       | 32,000                      |       | 270                               |       | —           |       | 32,340     |       |
| Long-term  obligations                              |       | 309,478    |       | —     |       | —                      |       | 186                               |       | —           |       | 309,664    |       |
| Intercompany  balances                              |       | (67,712    | )          | —     |       | 20,135                      |       | 47,577                            |       | —           |       | —     |       |
| Other noncurrent  liabilities                       |       | —     |       | —     |       | 5,318                       |       | 58                                |       | —           |       | 5,376      |       |
| Deferred income  taxes                              |       | 1,309      |       | —     |       | 33,579                      |       | 17,608                            |       | —           |       | 52,496     |       |
| Minority  interest                                  |       | —     |       | —     |       | —                      |       | 176                               |       | —           |       | 176        |       |
|                                                |       | 243,145    |       | —     |       | 91,032                      |       | 65,875                            |       | —           |       | 400,052    |       |
| Member’s equity:                               |       |       |       |       |       |                        |       |                              |       |             |       |       |       |
| Contributed capital                                 |       | 221,068    |       | —     |       | 373,312                     |       | 92,117                            |       | (465,429         | )          | 221,068    |       |
| Retaining earnings                                  |       | 308        |       | —     |       | 7,628                       |       | 1,163                             |       | (8,791           | )          | 308        |       |
| Accumulated other comprehensive income              |       | 1,987      |       | —     |       | —                      |       | —                            |       | —           |       | 1,987      |       |
| Total member’s  equity                         |       | 223,363    |       | —     |       | 380,940                     |       | 93,280                            |       | (474,220         | )          | 223,363    |       |
| Total liabilities and  member’s equity         |       | $          | 486,166    |       | $          | —                      |       | $                                 | 495,486    |             | $          | 174,630    |       | $ | (474,220 | ) | $ | 682,062 |   |

 

14

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| ** **                                        | ** ** | **NSP**    | ** ** | **NCC**    | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total**  | ** ** |
|---------------------------------------------------|------------|------------|------------|------------|------------|-----------------------------|------------|-----------------------------------|------------|------------------|------------|------------|------------|
| **Successor**                                     | ** ** | ** ** | ** ** | ** ** | ** ** | ** **                  | ** ** | ** **                        | ** ** | ** **       | ** ** | ** ** | ** ** |
| **Nine  months ended September 30, 2006**         | ** ** | ** ** | ** ** | ** ** | ** ** | ** **                  | ** ** | ** **                        | ** ** | ** **       | ** ** | ** ** | ** ** |
| Third party                                       |       | $          | 50,223     |       | $          | —                      |       | $                                 | 218,725    |             | $          | 151,052    |       | $ | — |   | $ | 420,000 |   |
| Intercompany                                      |       | 5,868      |       | —     |       | 8,839                       |       | 11,930                            |       | (26,637          | )          | —     |       |
| Net sales                                         |       | 56,091     |       | —     |       | 227,564                     |       | 162,982                           |       | (26,637          | )          | 420,000    |       |
| Cost of goods  sold                               |       | 38,731     |       | —     |       | 146,136                     |       | 104,333                           |       | (26,637          | )          | 262,563    |       |
| Gross profit                                      |       | 17,360     |       | —     |       | 81,428                      |       | 58,649                            |       | —           |       | 157,437    |       |
| Operating  expenses:                              |       |       |       |       |       |                        |       |                              |       |             |       |       |       |
| Selling                                           |       | 2,683      |       | —     |       | 20,159                      |       | 16,096                            |       | —           |       | 38,938     |       |
| Distribution                                      |       | 3,136      |       | —     |       | 10,983                      |       | 10,157                            |       | —           |       | 24,276     |       |
| General and administrative                        |       | 8,397      |       | —     |       | 20,315                      |       | 10,734                            |       | —           |       | 39,446     |       |
| Amortization of intangibles                       |       | 806        |       | —     |       | 6,348                       |       | 1,386                             |       | —           |       | 8,540      |       |
| Total operating  expenses                         |       | 15,022     |       | —     |       | 57,805                      |       | 38,373                            |       | —           |       | 111,200    |       |
| Income from  operations                           |       | 2,338      |       | —     |       | 23,623                      |       | 20,276                            |       | —           |       | 46,237     |       |
| Other expense  (income):                          |       |       |       |       |       |                        |       |                              |       |             |       |       |       |
| Interest expense                                  |       | 20,007     |       | —     |       | 56                          |       | 27                                |       | —           |       | 20,090     |       |
| Interest income                                   |       | (359       | )          | —     |       | —                      |       | (76                               | )          | —           |       | (435       | )          |
| Intercompany charges                              |       | (30,228    | )          | —     |       | (13,672                     | )          | 11,192                            |       | 32,708           |       | —     |       |
| Other, net                                        |       | 6          |       | —     |       | (348                        | )          | (217                              | )          | —           |       | (559       | )          |
| Income before  income taxes and minority interest |       | 12,912     |       | —     |       | 37,587                      |       | 9,350                             |       | (32,708          | )          | 27,141     |       |
| Income tax  (benefit) expense                     |       | (4,571     | )          | —     |       | 11,576                      |       | 2,630                             |       | —           |       | 9,635      |       |
| Minority  interest                                |       | —     |       | —     |       | —                      |       | 23                                |       | —           |       | 23         |       |
| Net income                                        |       | $          | 17,483     |       | $          | —                      |       | $                                 | 26,011     |             | $          | 6,697      |       | $ | (32,708 | ) | $ | 17,483 |   |

 

15

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| ** **                                        | ** ** | **NSP** | ** ** | **NCC** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
|---------------------------------------------------|------------|---------|------------|---------|------------|-----------------------------|------------|-----------------------------------|------------|------------------|------------|-----------|------------|
| **Predecessor**                                   |       |    |       |    |       |                        |       |                              |       |             |       |      |       |
| **January  1, 2005 through July 19, 2005**        |       |    |       |    |       |                        |       |                              |       |             |       |      |       |
| Third party                                       |       | $       | 36,196     |    | $          | —                      |       | $                                 | 137,515    |             | $          | 97,983    |       | $ | — |   | $ | 271,694 |   |
| Intercompany                                      |       | 4,647   |       | —  |       | 5,457                       |       | 5,850                             |       | (15,954          | )          | —    |       |
| Net sales                                         |       | 40,843  |       | —  |       | 142,972                     |       | 103,833                           |       | (15,954          | )          | 271,694   |       |
| Cost of goods  sold                               |       | 28,049  |       | —  |       | 92,160                      |       | 67,390                            |       | (15,954          | )          | 171,645   |       |
| Gross profit                                      |       | 12,794  |       | —  |       | 50,812                      |       | 36,443                            |       | —           |       | 100,049   |       |
| Operating  expenses:                              |       |    |       |    |       |                        |       |                              |       |             |       |      |       |
| Selling                                           |       | 1,908   |       | —  |       | 12,475                      |       | 11,129                            |       | —           |       | 25,512    |       |
| Distribution                                      |       | 2,422   |       | —  |       | 5,790                       |       | 6,422                             |       | —           |       | 14,634    |       |
| General and administrative                        |       | 17,997  |       | —  |       | 13,314                      |       | 6,939                             |       | —           |       | 38,250    |       |
| Amortization of intangibles                       |       | 187     |       | —  |       | —                      |       | 142                               |       | —           |       | 329       |       |
| Total operating  expenses                         |       | 22,514  |       | —  |       | 31,579                      |       | 24,632                            |       | —           |       | 78,725    |       |
| (Loss) income  from operations                    |       | (9,720  | )          | —  |       | 19,233                      |       | 11,811                            |       | —           |       | 21,324    |       |
| Other expense  (income):                          |       |    |       |    |       |                        |       |                              |       |             |       |      |       |
| Interest expense                                  |       | 13,028  |       | —  |       | 15                          |       | 83                                |       | —           |       | 13,126    |       |
| Interest income                                   |       | (422    | )          | —  |       | —                      |       | (42                               | )          | —           |       | (464      | )          |
| Intercompany charges                              |       | (26,715 | )          | —  |       | (4,070                      | )          | 5,702                             |       | 25,083           |       | —    |       |
| Other, net                                        |       | (10     | )          | —  |       | (7                          | )          | 762                               |       | —           |       | 745       |       |
| Income before  income taxes and minority interest |       | 4,399   |       | —  |       | 23,295                      |       | 5,306                             |       | (25,083          | )          | 7,917     |       |
| Income tax  expense                               |       | 14      |       | —  |       | 606                         |       | 2,899                             |       | —           |       | 3,519     |       |
| Minority  interest                                |       | —  |       | —  |       | —                      |       | 13                                |       | —           |       | 13        |       |
| Net income                                        |       | $       | 4,385      |    | $          | —                      |       | $                                 | 22,689     |             | $          | 2,394     |       | $ | (25,083 | ) | $ | 4,385 |   |

 

16

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| ** **                                               | ** ** | **NSP** | ** ** | **NCC** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
|----------------------------------------------------------|------------|---------|------------|---------|------------|-----------------------------|------------|-----------------------------------|------------|------------------|------------|-----------|------------|
| **Successor**                                            |       |    |       |    |       |                        |       |                              |       |             |       |      |       |
| **July  20, 2005 through October 1, 2005**               |       |    |       |    |       |                        |       |                              |       |             |       |      |       |
| Third party                                              |       | $       | 13,760     |    | $          | —                      |       | $                                 | 42,843     |             | $          | 28,386    |       | $ |   |   | $ | 84,989 |   |
| Intercompany                                             |       | 1,325   |       | —  |       | 1,190                       |       | 1,689                             |       | (4,204           | )          | —    |       |
| Net sales                                                |       | 15,085  |       | —  |       | 44,033                      |       | 30,075                            |       | (4,204           | )          | 84,989    |       |
| Cost of goods  sold                                      |       | 11,460  |       | —  |       | 29,732                      |       | 21,283                            |       | (4,204           | )          | 58,271    |       |
| Gross profit                                             |       | 3,625   |       | —  |       | 14,301                      |       | 8,792                             |       | —           |       | 26,718    |       |
| Operating  expenses:                                     |       |    |       |    |       |                        |       |                              |       |             |       |      |       |
| Selling                                                  |       | 607     |       | —  |       | 3,946                       |       | 3,111                             |       | —           |       | 7,664     |       |
| Distribution                                             |       | 742     |       | —  |       | 1,778                       |       | 1,907                             |       | —           |       | 4,427     |       |
| General and administrative                               |       | 1,584   |       | —  |       | 4,066                       |       | 2,164                             |       | —           |       | 7,814     |       |
| Amortization of intangibles                              |       | 1,077   |       | —  |       | 3,449                       |       | 206                               |       | —           |       | 4,732     |       |
| Total operating  expenses                                |       | 4,010   |       | —  |       | 13,239                      |       | 7,388                             |       | —           |       | 24,637    |       |
| (Loss) income  from operations                           |       | (385    | )          | —  |       | 1,062                       |       | 1,404                             |       | —           |       | 2,081     |       |
| Other expense  (income):                                 |       |    |       |    |       |                        |       |                              |       |             |       |      |       |
| Interest expense                                         |       | 3,497   |       | —  |       | 9                           |       | 10                                |       | —           |       | 3,516     |       |
| Interest income                                          |       | (25     | )          | —  |       | —                      |       | (14                               | )          | —           |       | (39       | )          |
| Intercompany charges                                     |       | (2,499  | )          | —  |       | (564                        | )          | 1,474                             |       | 1,589            |       | —    |       |
| Other, net                                               |       | (6      | )          | —  |       | (5                          | )          | (99                               | )          | —           |       | (110      | )          |
| (Loss) income  before income taxes and minority interest |       | (1,352  | )          | —  |       | 1,622                       |       | 33                                |       | (1,589           | )          | (1,286    | )          |
| Income tax  expense (benefit)                            |       | —  |       | —  |       | 75                          |       | (7                                | )          | —           |       | 68        |       |
| Minority  interest                                       |       | —  |       | —  |       | —                      |       | (2                                | )          | —           |       | (2        | )          |
| Net (loss) income                                        |       | $       | (1,352     | )       | $          | —                      |       | $                                 | 1,547      |             | $          | 42        |       | $ | (1,589 | ) | $ | (1,352 | ) |

 

17

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| ** **                                            | ** ** | **NSP** | ** ** | **NCC** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
|-------------------------------------------------------|------------|---------|------------|---------|------------|-----------------------------|------------|-----------------------------------|------------|------------------|------------|-----------|------------|
| **Successor**                                         |       |    |       |    |       |                        |       |                              |       |             |       |      |       |
| **Nine  months ended September 30, 2006**             |       |    |       |    |       |                        |       |                              |       |             |       |      |       |
| **Operating  activities**                             |       |    |       |    |       |                        |       |                              |       |             |       |      |       |
| Net cash (used  in) provided by operating activities  |       | $       | (15,277    | )       | $          | —                      |       | $                                 | 24,093     |             | $          | 5,797     |       | $ | — |   | $ | 14,613 |   |
| **Investing  activities**                             |       |    |       |    |       |                        |       |                              |       |             |       |      |       |
| Purchase of  businesses, net of cash acquired         |       | (4,116  | )          | —  |       | (26,635                     | )          | (201                              | )          | —           |       | (30,952   | )          |
| Purchase of  property, plant and equipment            |       | (2,346  | )          | —  |       | (3,764                      | )          | (1,571                            | )          | —           |       | (7,681    | )          |
| Proceeds from  sale of property, plant and equipment  |       | —  |       | —  |       | —                      |       | 113                               |       | —           |       | 113       |       |
| Net cash used in  investing activities                |       | (6,462  | )          | —  |       | (30,399                     | )          | (1,659                            | )          | —           |       | (38,520   | )          |
| **Financing  activities**                             |       |    |       |    |       |                        |       |                              |       |             |       |      |       |
| Payments for  deferred financing costs                |       | (201    | )          | —  |       | —                      |       | —                            |       | —           |       | (201      | )          |
| Proceeds from  borrowings                             |       | 15,000  |       | —  |       | —                      |       | —                            |       | —           |       | 15,000    |       |
| Payments of debt                                      |       | (1,243  | )          | —  |       | (68                         | )          | (88                               | )          | —           |       | (1,399    | )          |
| Net borrowings  under revolving credit facility       |       | 2,000   |       | —  |       | —                      |       |                              |       |             |       | 2,000     |       |
| Intercompany                                          |       | (3,331  | )          | —  |       | 3,485                       |       | (154                              | )          | —           |       | —    |       |
| Capital  contribution                                 |       | 150     |       | —  |       | —                      |       | —                            |       | —           |       | 150       |       |
| Dividends to  Safety Products Holdings, Inc.          |       | (758    | )          | —  |       | —                      |       | —                            |       | —           |       | (758      | )          |
| Net cash  provided by (used in) financing activities  |       | 11,617  |       | —  |       | 3,417                       |       | (242                              | )          | —           |       | 14,792    |       |
| Effect of  exchange rate changes on cash              |       | —  |       | —  |       | 1,702                       |       | (1,346                            | )          | —           |       | 356       |       |
| Net (decrease)  increase in cash and cash equivalents |       | (10,122 | )          | —  |       | (1,187                      | )          | 2,550                             |       | —           |       | (8,759    | )          |
| Cash and cash  equivalents at beginning of period     |       | 17,885  |       | —  |       | (265                        | )          | 3,063                             |       | —           |       | 20,683    |       |
| Cash and cash  equivalents at end of period           |       | $       | 7,763      |    | $          | —                      |       | $                                 | (1,452     | )                | $          | 5,613     |       | $ | — |   | $ | 11,924 |   |

 

18

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| ** **                                            | ** ** | **NSP**    | ** ** | **NCC**    | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total**  | ** ** |
|-------------------------------------------------------|------------|------------|------------|------------|------------|-----------------------------|------------|-----------------------------------|------------|------------------|------------|------------|------------|
| **Predecessor**                                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** **                  | ** ** | ** **                        | ** ** | ** **       | ** ** | ** ** | ** ** |
| **January  1, 2005 through July 19, 2005**            |       |       |       |       |       |                        |       |                              |       |             |       |       |       |
| **Operating  activities**                             |       |       |       |       |       |                        |       |                              |       |             |       |       |       |
| Net cash (used  in) provided by operating activities  |       | $          | (881       | )          | $          | —                      |       | $                                 | 19,282     |             | $          | 1,830      |       | $ | — |   | $ | 20,231 |   |
| **Investing  activities**                             |       |       |       |       |       |                        |       |                              |       |             |       |       |       |
| Purchase of  businesses, net of cash acquired         |       | (304       | )          | —     |       | (275                        | )          | (74                               | )          | —           |       | (653       | )          |
| Purchase of  property, plant and equipment            |       | (924       | )          | —     |       | (2,298                      | )          | (1,028                            | )          | —           |       | (4,250     | )          |
| Net cash used in  investing activities                |       | (1,228     | )          | —     |       | (2,573                      | )          | (1,102                            | )          | —           |       | (4,903     | )          |
| **Financing  activities**                             |       |       |       |       |       |                        |       |                              |       |             |       |       |       |
| Payments of debt                                      |       | (12,850    | )          | —     |       | (512                        | )          | (261                              | )          | —           |       | (13,623    | )          |
| Intercompany                                          |       | 15,974     |       | —     |       | (13,913                     | )          | (2,061                            | )          | —           |       | —     |       |
| Due from NSP  Holdings L.L.C.                         |       | (558       | )          | —     |       | —                      |       | —                            |       | —           |       | (558       | )          |
| Dividends to NSP  Holdings L.L.C.                     |       | (9         | )          | —     |       | —                      |       | —                            |       | —           |       | (9         | )          |
| Net cash  provided by (used in) financing activities  |       | 2,557      |       | —     |       | (14,425                     | )          | (2,322                            | )          | —           |       | (14,190    | )          |
| Effect of  exchange rate changes on cash              |       | —     |       | —     |       | (1,940                      | )          | (785                              | )          | —           |       | (2,725     | )          |
| Net increase  (decrease) in cash and cash equivalents |       | 448        |       | —     |       | 344                         |       | (2,379                            | )          | —           |       | (1,587     | )          |
| Cash and cash  equivalents at beginning of period     |       | 32,859     |       | —     |       | (2,780                      | )          | 5,652                             |       | —           |       | 35,731     |       |
| Cash and cash  equivalents at end of period           |       | $          | 33,307     |       | $          | —                      |       | $                                 | (2,436     | )                | $          | 3,273      |       | — |   | $ | 34,144 |   |
|                                                       |            |            |            |            |            |                             |            |                                   |            |                  |            |            |            |  |  |  |  |  |  |

 

19

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| ** **                                            | ** ** | **NSP**    | ** ** | **NCC**    | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total**  | ** ** |
|-------------------------------------------------------|------------|------------|------------|------------|------------|-----------------------------|------------|-----------------------------------|------------|------------------|------------|------------|------------|
| **Successor**                                         | ** ** | ** ** | ** ** | ** ** | ** ** | ** **                  | ** ** | ** **                        | ** ** | ** **       | ** ** | ** ** | ** ** |
| **July  20, 2005 through October 1, 2005**            |       |       |       |       |       |                        |       |                              |       |             |       |       |       |
| **Operating  activities**                             |       |       |       |       |       |                        |       |                              |       |             |       |       |       |
| Net cash (used  in) provided by operating activities  |       | $          | (7,846     | )          | $          | —                      |       | $                                 | 6,910      |             | $          | 815        |       | $ | — |   | $ | (121 | ) |
| **Investing  activities**                             |       |       |       |       |       |                        |       |                              |       |             |       |       |       |
| Purchase of  businesses, net of cash acquired         |       | (38,257    | )          | —     |       | (116,338                    | )          | (50,112                           | )          | —           |       | (204,707   | )          |
| Purchase of  property, plant and equipment            |       | (103       | )          | —     |       | (718                        | )          | (650                              | )          | —           |       | (1,471     | )          |
| Net cash used in  investing activities                |       | (38,360    | )          | —     |       | (117,056                    | )          | (50,762                           | )          | —           |       | (206,178   | )          |
| **Financing  activities**                             |       |       |       |       |       |                        |       |                              |       |             |       |       |       |
| Payments for  deferred financing fees                 |       | (6,773     | )          | —     |       | —                      |       | —                            |       | —           |       | (6,773     | )          |
| Proceeds from  borrowings                             |       | 88,000     |       | —     |       | —                      |       | —                            |       | —           |       | 88,000     |       |
| Payments of debt                                      |       | (220       | )          | —     |       | (22                         | )          | (51                               | )          | —           |       | (293       | )          |
| Intercompany                                          |       | (156,971   | )          | —     |       | 108,803                     |       | 48,168                            |       | —           |       | —     |       |
| Capital  contribution                                 |       | 121,114    |       | —     |       | —                      |       | —                            |       | —           |       | 121,114    |       |
| Dividends to  Safety Products Holdings, Inc.          |       | (335       | )          | —     |       | —                      |       | —                            |       | —           |       | (335       | )          |
| Net cash  provided by financing activities            |       | 44,815     |       | —     |       | 108,781                     |       | 48,117                            |       | —           |       | 201,713    |       |
| Effect of  exchange rate changes on cash              |       | —     |       | —     |       | 1,435                       |       | 112                               |       | —           |       | 1,547      |       |
| Net (decrease)  increase in cash and cash equivalents |       | (1,391     | )          | —     |       | 70                          |       | (1,718                            | )          | —           |       | (3,039     | )          |
| Cash and cash equivalents  at beginning of period     |       | 6,307      |       | —     |       | (2,436                      | )          | 3,273                             |       | —           |       | 7,144      |       |
| Cash and cash  equivalents at end of period           |       | $          | 4,916      |       | $          | —                      |       | $                                 | (2,366     | )                | $          | 1,555      |       | — |   | $ | 4,105 |   |
|                                                       |            |            |            |            |            |                             |            |                                   |            |                  |            |            |            |  |  |  |  |  |  |

 

 

**14.****                               ComprehensiveIncome (Loss)**

Total Predecessorcomprehensive loss (which includes the impact of foreign currency translation) amountedto $(1,266) and $(10,395) for the period from January 1, 2005 through July 19,2005, and the period from July 3, 2005 through July 19, 2005,respectively.  Total Successorcomprehensive income amounted to $1,409, $3,337 and $23,534 for the period fromJuly 20, 2005 through October 1, 2005 and the three and nine month periodsended September 30, 2006, respectively.  

 

20

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**Item 2.Management’s Discussion and Analysis of Financial Condition and Results ofOperations**

**Overview**

We are a leading designer, manufacturer and marketerof branded products in the fragmented personal protection equipment industry.We manufacture and market a full line of personal protection equipment forworkers in the general safety and preparedness, fire service and electricalsafety industries. We sell our products under trusted, long-standing andwell-recognized brand names, including *North*, *KCL**, Fibre-Metal, NEOS, *Morning Pride**, *Ranger*, *Servus*, *Pro-Warrington, American Firewear, Salisburyand Safety Line*. Our broad product offering includes, among otherthings, respiratory protection, protective footwear, hand protection, bunkergear and linemen equipment.

We classify our diverse product offerings into threeoperating segments:

*General Safety andPreparedness*. We offer a diverse portfolio of leadingproducts for a wide variety of industries, including manufacturing,agriculture, automotive, construction, food processing and pharmaceuticalindustries and the military, under the *North*, *KCL, Fibre-Metal, NEOS, Ranger and Servus* brand names. Ourproduct offering is one of the broadest in the personal protection equipmentindustry and includes respiratory protection, protective footwear, handprotection, eye, head and face protection, first aid, hearing protection andfall protection. We sell our general safety and preparedness products primarilythrough industrial distributors.

*Fire Service*.We manufacture and market one of the broadest lines of personal protectionequipment for the fire service market, offering firefighters head-to-toeprotection. Our products include bunker gear, fireboots, helmets, gloves andother accessories. We market our products under our Total Fire Group umbrella,using the brand names of *MorningPride*, *Ranger*, *Servus*,*Pro-Warrington and American Firewear*. Weare the vendor of choice for many of the largest fire departments in NorthAmerica. We sell our fire service products primarily through specialized fireservice distributors.

*Electrical Safety*.We manufacture and market a broad line of personal protection equipment for theutility market under the *Salisbury, Safety Line* and *Servus* brands.Our products, including linemen equipment, gloves, sleeves and footwear, aredesigned to protect workers from up to 36,000 volts of electricity. All of ourproducts either meet or exceed the applicable standards of the AmericanNational Standards Institute (“ANSI”) and the American Society for Testing ofMaterials (“ASTM”). We distribute our electrical safety products throughspecialized distributors, test labs, utilities and electrical contractors.

**Predecessorand Successor**

In May 2005, Safety Products entered into a purchaseand sale agreement with NSP Holdings and Norcross to purchase from NSP Holdingsall of the outstanding equity interests of Norcross and NSP Capital for anaggregate purchase price of approximately $481.0 million, which included theassumption or repayment of indebtedness but excluded payment of fees andexpenses. The acquisition closed on July 19, 2005 and was funded with proceedsto Safety Products from the issuance and sale of senior pay in kind notes aswell as an equity investment from affiliates of Odyssey and General ElectricPension Trust (“GEPT”) and certain members of management of Norcross.Concurrently with the acquisition, Norcross entered into a new senior creditfacility, consisting of a revolving credit facility that provides for up to$50.0 million of borrowings and an $88.0 million term loan. As a result of theacquisition, Safety Products became the sole unit holder of Norcross. Norcross,following the Norcross Transaction, is referred to as the “Successor.”Norcross, prior to the Norcross Transaction, is referred to as the “Predecessor.”

In accordance with GAAP, our historical financialresults for the Predecessor and the Successor are presented separately. Theseparate presentation is required under GAAP in situations when there is achange in accounting basis, which occurred when purchase accounting was appliedto the Norcross Transaction. Purchase accounting requires that the historicalcarrying value of assets acquired and liabilities assumed be adjusted to fairvalue, which may yield results that are not comparable on a period-to-periodbasis due to the different, and sometimes higher, cost basis associated withthe allocation of the purchase price. There have been no material changes tothe operations or customer relationships of our business as a result of theNorcross Transaction.

21

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**Acquisitions**

InNovember 2005, we completed the acquisition of all of the issued andoutstanding capital stock of Fibre-Metal. The purchase price of $68.7 million(including $0.7 million of acquisition costs) was financed through $65.0million of additional term borrowings under the senior credit facility and cashon the balance sheet.

InFebruary 2006, we completed the acquisition of all of the issued andoutstanding capital stock of American Firewear. The purchase price consisted of $4.5 million in cash (includingacquisition costs of $0.2 million and net of cash acquired of $0.2 million) anda $1.0 million subordinated seller note. In addition, the purchase price may be increased by $0.8 million overthe next four years based on American Firewear achieving certain financial andoperating objectives.  We financed theacquisition through cash on the balance sheet and the issuance of the $1.0million subordinated seller note.

InJune 2006, we completed the acquisition of all of the issued and outstandingcapital stock of White Rubber. The purchase price of $22.2 million (including$0.6 million of acquisition costs and gross of outstanding checks of $0.8million) was financed through $15.0 million of additional term borrowings underthe senior credit facility and cash on the balance sheet.

InSeptember 2006, we completed the acquisition of all of the issued andoutstanding capital stock of NEOS.  Thepurchase price consisted of $3.6 million in cash (including acquisition costsof $0.1 million and net of cash acquired) and a $0.8 million subordinatedseller note.  In addition, the purchaseprice may be increased over the next five years based on NEOS achieving certainnet sales targets.  We financed theacquisition through cash on the balance sheet and the issuance of the $0.8million subordinated seller note.

**Resultsof Operations**

The followingtables set forth our results of operations in dollars and as a percentage ofnet sales for the three and nine months ended October 1, 2005 andSeptember 30, 2006 and have been derived from the unaudited statements ofoperations. Although the Predecessor and Successor results are not comparableby definition in certain respects due to the Norcross Transaction and theresulting revaluations, the 2005 information is presented on a combined basisfor comparative purposes.  For the three months ended October 1,2005, the Predecessor (July 3, 2005 through July 19, 2005) andSuccessor (July 20, 2005 through October 1, 2005) results ofoperations 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 arecombined.

 
| ** **                                               | ** ** | **Predecessor**                                      | ** ** | **Successor**                                           | ** ** | **Combined**                                    | ** ** | **Successor**                                      | ** ** | **Predecessor**                                         | ** ** | **Successor**                                           | ** ** | **Combined**                                   | ** ** | **Successor**                                     | ** ** |
|----------------------------------------------------------|------------|------------------------------------------------------|------------|---------------------------------------------------------|------------|-------------------------------------------------|------------|----------------------------------------------------|------------|---------------------------------------------------------|------------|---------------------------------------------------------|------------|------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                               | ** ** | **July 3,  2005  through  July 19,  2005** | ** ** | **July 20,  2005  through  October 1,  2005** | ** ** | **Three  months  ended  October 1,  2005** | ** ** | **Three  months  ended  September 30,  2006** | ** ** | **January 1,  2005  through  July 19,  2005** | ** ** | **July 20,  2005  through  October 1,  2005** | ** ** | **Nine  months  ended  October 1,  2005** | ** ** | **Nine  months  ended  September 30,  2006** | ** ** |
| Net sales:                                               |       |                                                 |       |                                                    |       |                                            |       |                                               |       |                                                    |       |                                                    |       |                                           |       |                                              |       |
| General Safety & Preparedness                        |       | $                                                    | 22,553     |                                                    | $          | 59,039                                          |       | $                                                  | 81,592     |                                                    | $          | 98,725                                                  |       | $                                              | 186,434    |                                              | $          | 59,039 |   | $ | 245,473 |   | $ | 293,120 |   |
| Fire Service                                             |       | 6,616                                                |       | 14,770                                                  |       | 21,386                                          |       | 21,817                                             |       | 51,702                                                  |       | 14,770                                                  |       | 66,472                                         |       | 68,073                                            |       |
| Electrical Safety                                        |       | 4,455                                                |       | 11,180                                                  |       | 15,635                                          |       | 21,336                                             |       | 33,558                                                  |       | 11,180                                                  |       | 44,738                                         |       | 58,807                                            |       |
| Total net sales                                          |       | 33,624                                               |       | 84,989                                                  |       | 118,613                                         |       | 141,878                                            |       | 271,694                                                 |       | 84,989                                                  |       | 356,683                                        |       | 420,000                                           |       |
| Cost of goods  sold                                      |       | 22,586                                               |       | 58,271                                                  |       | 80,857                                          |       | 91,084                                             |       | 171,645                                                 |       | 58,271                                                  |       | 229,916                                        |       | 262,563                                           |       |
| Gross profit                                             |       | 11,038                                               |       | 26,718                                                  |       | 37,756                                          |       | 50,794                                             |       | 100,049                                                 |       | 26,718                                                  |       | 126,767                                        |       | 157,437                                           |       |
| Operating  expenses                                      |       | 21,273                                               |       | 24,637                                                  |       | 45,910                                          |       | 37,004                                             |       | 78,725                                                  |       | 24,637                                                  |       | 103,362                                        |       | 111,200                                           |       |
| Income from  operations:                                 |       |                                                 |       |                                                    |       |                                            |       |                                               |       |                                                    |       |                                                    |       |                                           |       |                                              |       |
| General Safety & Preparedness                        |       | 1,834                                                |       | 2,029                                                   |       | 3,863                                           |       | 10,624                                             |       | 19,937                                                  |       | 2,029                                                   |       | 21,966                                         |       | 33,383                                            |       |
| Fire Service                                             |       | 1,188                                                |       | (400                                                    | )          | 788                                             |       | 1,430                                              |       | 9,332                                                   |       | (400                                                    | )          | 8,932                                          |       | 6,118                                             |       |
| Electrical Safety                                        |       | 615                                                  |       | 1,576                                                   |       | 2,191                                           |       | 3,597                                              |       | 8,442                                                   |       | 1,576                                                   |       | 10,018                                         |       | 12,745                                            |       |
| Corporate                                                |       | (13,872                                              | )          | (1,124                                                  | )          | (14,996                                         | )          | (1,861                                             | )          | (16,387                                                 | )          | (1,124                                                  | )          | (17,511                                        | )          | (6,009                                            | )          |
| Total (loss) income from operations                      |       | (10,235                                              | )          | 2,081                                                   |       | (8,154                                          | )          | 13,790                                             |       | 21,324                                                  |       | 2,081                                                   |       | 23,405                                         |       | 46,237                                            |       |
| Other expense  (income):                                 |       |                                                 |       |                                                    |       |                                            |       |                                               |       |                                                    |       |                                                    |       |                                           |       |                                              |       |
| Interest expense                                         |       | 1,845                                                |       | 3,516                                                   |       | 5,361                                           |       | 7,012                                              |       | 13,126                                                  |       | 3,516                                                   |       | 16,642                                         |       | 20,090                                            |       |
| Interest income                                          |       | (49                                                  | )          | (39                                                     | )          | (88                                             | )          | (105                                               | )          | (464                                                    | )          | (39                                                     | )          | (503                                           | )          | (435                                              | )          |
| Other, net                                               |       | (77                                                  | )          | (110                                                    | )          | (187                                            | )          | (19                                                | )          | 745                                                     |       | (110                                                    | )          | 635                                            |       | (559                                              | )          |
| (Loss) income  before income taxes and minority interest |       | (11,954                                              | )          | (1,286                                                  | )          | (13,240                                         | )          | 6,902                                              |       | 7,917                                                   |       | (1,286                                                  | )          | 6,631                                          |       | 27,141                                            |       |
| Income tax  (benefit) expense                            |       | (148                                                 | )          | 68                                                      |       | (80                                             | )          | 2,668                                              |       | 3,519                                                   |       | 68                                                      |       | 3,587                                          |       | 9,635                                             |       |
| Minority interest                                        |       | 2                                                    |       | (2                                                      | )          | —                                          |       | 8                                                  |       | 13                                                      |       | (2                                                      | )          | 11                                             |       | 23                                                |       |
| Net (loss) income                                        |       | $                                                    | (11,808    | )                                                       | $          | (1,352                                          | )          | $                                                  | (13,160    | )                                                       | $          | 4,226                                                   |       | $                                              | 4,385      |                                              | $          | (1,352 | ) | $ | 3,033 |   | $ | 17,483 |   |

 

22

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| ** **                                               | ** ** | **Predecessor**                                      | ** ** | **Successor**                                           | ** ** | **Combined**                                    | ** ** | **Successor**                                      | ** ** | **Predecessor**                                         | ** ** | **Successor**                                           | ** ** | **Combined**                                   | ** ** | **Successor**                                     | ** ** |
|----------------------------------------------------------|------------|------------------------------------------------------|------------|---------------------------------------------------------|------------|-------------------------------------------------|------------|----------------------------------------------------|------------|---------------------------------------------------------|------------|---------------------------------------------------------|------------|------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                               | ** ** | **July 3,  2005  through  July 19,  2005** | ** ** | **July 20,  2005  through  October 1,  2005** | ** ** | **Three  months  ended  October 1,  2005** | ** ** | **Three  months  ended  September 30,  2006** | ** ** | **January 1,  2005  through  July 19,  2005** | ** ** | **July 20,  2005  through  October 1,  2005** | ** ** | **Nine  months  ended  October 1,  2005** | ** ** | **Nine  months  ended  September 30,  2006** | ** ** |
| Net sales:                                               |       |                                                 |       |                                                    |       |                                            |       |                                               |       |                                                    |       |                                                    |       |                                           |       |                                              |       |
| General Safety  & Preparedness                       |       | 67.1                                                 | %          | 69.4                                                    | %          | 68.8                                            | %          | 69.6                                               | %          | 68.6                                                    | %          | 69.4                                                    | %          | 68.9                                           | %          | 69.8                                              | %          |
| Fire Service                                             |       | 19.7                                                 | %          | 17.4                                                    | %          | 18.0                                            | %          | 15.4                                               | %          | 19.0                                                    | %          | 17.4                                                    | %          | 18.6                                           | %          | 16.2                                              | %          |
| Electrical Safety                                        |       | 13.2                                                 | %          | 13.2                                                    | %          | 13.2                                            | %          | 15.0                                               | %          | 12.4                                                    | %          | 13.2                                                    | %          | 12.5                                           | %          | 14.0                                              | %          |
| Total net sales                                          |       | 100.0                                                | %          | 100.0                                                   | %          | 100.0                                           | %          | 100.0                                              | %          | 100.0                                                   | %          | 100.0                                                   | %          | 100.0                                          | %          | 100.0                                             | %          |
| Cost of goods  sold                                      |       | 67.2                                                 | %          | 68.6                                                    | %          | 68.2                                            | %          | 64.2                                               | %          | 63.2                                                    | %          | 68.6                                                    | %          | 64.5                                           | %          | 62.5                                              | %          |
| Gross profit                                             |       | 32.8                                                 | %          | 31.4                                                    | %          | 31.8                                            | %          | 35.8                                               | %          | 36.8                                                    | %          | 31.4                                                    | %          | 35.5                                           | %          | 37.5                                              | %          |
| Operating  expenses                                      |       | 63.3                                                 | %          | 29.0                                                    | %          | 38.7                                            | %          | 26.1                                               | %          | 29.0                                                    | %          | 29.0                                                    | %          | 29.0                                           | %          | 26.5                                              | %          |
| Income from  operations:                                 |       |                                                 |       |                                                    |       |                                            |       |                                               |       |                                                    |       |                                                    |       |                                           |       |                                              |       |
| General Safety  & Preparedness                       |       | 5.5                                                  | %          | 2.4                                                     | %          | 3.3                                             | %          | 7.5                                                | %          | 7.3                                                     | %          | 2.4                                                     | %          | 6.1                                            | %          | 7.9                                               | %          |
| Fire Service                                             |       | 3.5                                                  | %          | (0.5                                                    | )%         | 0.7                                             | %          | 1.0                                                | %          | 3.4                                                     | %          | (0.5                                                    | )%         | 2.5                                            | %          | 1.5                                               | %          |
| Electrical Safety                                        |       | 1.8                                                  | %          | 1.8                                                     | %          | 1.8                                             | %          | 2.5                                                | %          | 3.1                                                     | %          | 1.8                                                     | %          | 2.8                                            | %          | 3.0                                               | %          |
| Corporate                                                |       | (41.3                                                | )%         | (1.3                                                    | )%         | (12.7                                           | )%         | (1.3                                               | )%         | (6.0                                                    | )%         | (1.3                                                    | )%         | (4.9                                           | )%         | (1.4                                              | )%         |
| Total (loss)  income from operations                     |       | (30.5                                                | )%         | 2.4                                                     | %          | (6.9                                            | )%         | 9.7                                                | %          | 7.8                                                     | %          | 2.4                                                     | %          | 6.5                                            | %          | 11.0                                              | %          |
| Other expense  (income):                                 |       |                                                 |       |                                                    |       |                                            |       |                                               |       |                                                    |       |                                                    |       |                                           |       |                                              |       |
| Interest expense                                         |       | 5.5                                                  | %          | 4.1                                                     | %          | 4.5                                             | %          | 4.9                                                | %          | 4.8                                                     | %          | 4.1                                                     | %          | 4.7                                            | %          | 4.8                                               | %          |
| Interest income                                          |       | (0.1                                                 | )%         | (0.0                                                    | )%         | (0.1                                            | )%         | (0.1                                               | )%         | (0.2                                                    | )%         | (0.0                                                    | )%         | (0.1                                           | )%         | (0.1                                              | )%         |
| Other, net                                               |       | (0.3                                                 | )%         | (0.1                                                    | )%         | (0.1                                            | )%         | 0.0                                                | %          | 0.3                                                     | %          | (0.1                                                    | )%         | 0.1                                            | %          | (0.2                                              | )%         |
| (Loss) income  before income taxes and minority interest |       | (35.6                                                | )%         | (1.6                                                    | )%         | (11.2                                           | )%         | 4.9                                                | %          | 2.9                                                     | %          | (1.6                                                    | )%         | 1.8                                            | %          | 6.5                                               | %          |
| Income tax  (benefit) expense                            |       | (0.5                                                 | )%         | 0.0                                                     | %          | (0.1                                            | )%         | 1.9                                                | %          | 1.3                                                     | %          | 0.0                                                     | %          | 0.9                                            | %          | 2.3                                               | %          |
| Minority interest                                        |       | 0.0                                                  | %          | (0.0                                                    | )%         | 0.0                                             | %          | 0.0                                                | %          | 0.0                                                     | %          | (0.0                                                    | )%         | 0.0                                            | %          | 0.0                                               | %          |
| Net (loss) income                                        |       | (35.1                                                | )%         | (1.6                                                    | %)%        | (11.1                                           | )%         | 3.0                                                | %          | 1.6                                                     | %          | (1.6                                                    | )%         | 0.9                                            | %          | 4.2                                               | %          |

 

***Three Months Ended September 30, 2006 as Compared toCombined Three Months Ended October 1, 2005***

*Net sales.*Net sales increased by $23.3 million, or19.6%, from $118.6 million for the three months ended October 1, 2005 to $141.9million for the three months ended September 30, 2006. In our general safetyand preparedness segment, net sales increased by $17.1 million, or 21.0%, from$81.6 million for the three months ended October 1, 2005 to $98.7 million forthe three months ended September 30, 2006. The increase reflects a combinationof the following: incremental Fibre-Metal net sales of $10.4 million, combinedorganic growth in our European and South African operations of $3.2 million,favorable exchange rates, which had an impact of $1.9 million, overall organicgrowth in our North American non-government business of $2.2 million and adecrease in 

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government contract shipments of $0.6 million. In our fire servicesegment, net sales increased by $0.5 million, or 2.0%, from $21.3 million forthe three months ended October 1, 2005 to $21.8 million for the three monthsended September 30, 2006 as incremental American Firewear net sales of $1.8million were offset by postponed customer orders due in part to the combinedimpact of government grant holdups and the delayed of the new NFPAstandard.  In our electrical safetysegment, net sales increased by $5.7 million, or 36.5%, from $15.6 million forthe three months ended October 1, 2005 to $21.3 million for the three monthsended September 30, 2006 primarily driven by strong market demand, new productpenetration and incremental White Rubber net sales of $4.3 million.

*Gross profit.*Gross profit increased by $13.0 million,or 34.5%, from $37.8 million for the three months ended October 1, 2005 to $50.8million for the three months ended September 30, 2006, primarily due to the$23.3 million, or 19.6%, increase in net sales. Excluding the impact of inventory purchase accounting adjustments of$3.3 million for the three months ended October 1, 2005 and $0.3 million forthe three months ended September 30, 2006, gross profit increased $10.0million, or 24.6%.  After adjusting forthe inventory purchase accounting adjustments, our gross profit margin of 36.0%for the three months ended September 30, 2006 was favorable to the 34.6% grossprofit margin for the three months ended October 1, 2005. In our general safetyand preparedness segment (after adjusting for charges related to purchaseaccounting of $2.0 million for the three months ended October 1, 2005), grossprofit increased by $8.7 million, or 30.7%, from $28.5 million for the threemonths ended October 1, 2005 to $37.2 million for the three months endedSeptember 30, 2006. This increase was primarily due to the overall net salesincrease of $17.1 million, or 21.0%, and improved margin realization in ourEuropean and North American operations (in part due to the favorablecontribution of Fibre-Metal).  In ourfire service segment (after adjusting for charges related to purchaseaccounting of $1.3 million for the three months ended October 1, 2005), grossprofit decreased by $1.1 million, or 16.6%, from $6.8 million for the threemonths ended October 1, 2005 to $5.7 million for the three months endedSeptember 30, 2006 as the increase in net sales of $0.5 million, or 2.0%, wasoffset by lower margin realization (in part due to the inherent lower margin ofAmerican Firewear products and product line integration costs). In ourelectrical safety segment (after adjusting for charges related to purchase accountingof $0.3 million for the three month period ended September 30, 2006), grossprofit increased by $2.4 million, or 43.2%, from $5.8 million for the threemonths ended October 1, 2005 to $8.2 million for the three months endedSeptember 30, 2006, primarily due to the $5.7 million, or 36.5%, increase innet sales.

*Operating expenses. *Operating expenses decreased by $8.9 million, or19.4%, from $45.9 million for the three months ended October 1, 2005 to $37.0million for the three months ended September 30, 2006. In our general safetyand preparedness segment, operating expenses increased $4.0 million, or 17.4%,from $22.6 million for the three months ended October 1, 2005 to $26.6 millionfor the three months ended September 30, 2006 as incremental Fibre-Metaloperating expenses of $2.0 million and increased variable selling anddistribution expenses associated with the $17.1 million, or 21.0%, increase innet sales were partially offset by lower amortization expense of $0.8 millionassociated with intangible assets recorded as part of purchase accounting.  In our fire service segment, operatingexpenses decreased $0.5 million, or 9.9%, from $4.7 million for the threemonths ended October 1, 2005 to $4.2 million for the three months endedSeptember 30, 2006, primarily due to lower amortization expense of $0.5 millionassociated with intangible assets recorded as part of purchase accounting. Inour electrical safety segment, operating expenses increased by $0.7 million, or21.4%, from $3.6 million for the three months ended October 1, 2005 to $4.3million for the three months ended September 30, 2006 as incremental WhiteRubber operating expenses of $0.9 million and increased variable selling anddistribution expenses related to the $5.7 million, or 36.5%, increase in netsales were partially offset by lower amortization expense of $0.4 millionassociated with intangible assets recorded as part of purchase accounting.Corporate expenses for the three months ended October 1, 2005 consisted of$1.4 million of general and administrative expenses and $13.6 million ofmanagement incentive compensation expense related to the NorcrossTransaction.  Corporate expenses for thethree months ended September 30, 2006 consisted of $1.6 million of general andadministrative expenses and $0.3 million of management incentive compensationexpense.  The increase in corporategeneral and administrative expenses of $0.2 million was primarily due tohigher payroll and administrative expenses.

* Income from operations.*Income from operations increased by $22.0million, from $(8.2) million for the three months ended October 1, 2005 to$13.8 million for the three months ended September 30, 2006. Key variances forthe three months ended September 30, 2006 relative to the three months endedOctober 1, 2005 include: (1) lower inventory purchase accounting charges of$3.0 million, (2) lower amortization expense of $1.7 million related topurchase accounting and (3) lower management incentive compensation charges of$13.3 million. Excluding 

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these charges from both periods, income from operations increased by$4.0 million, or 29.9%. Excluding these same charges, as a percentage of netsales, income from operations increased from 11.3% for the three months endedOctober 1, 2005 to 12.3% for the three months ended September 30, 2006. In ourgeneral safety and preparedness segment (after adjusting for lower chargesrelated to purchase accounting of $2.8 million), income from operationsincreased by $4.0 million, or 50.2%, from $8.0 million for the three monthsended October 1, 2005 to $12.0 million for the three months ended September 30,2006, primarily due to higher net sales of $17.1million, or 21.0%, andfavorable margin realization. In our fire service segment (after adjusting forlower charges related to purchase accounting of $1.8 million), income fromoperations decreased by $1.2 million, or 31.6%, from $3.7 million for the threemonths ended October 1, 2005 to $2.5 million for the three months endedSeptember 30, 2006, primarily as a result of lower margin realization. In ourelectrical safety segment (after adjusting for lower charges related topurchase accounting of $0.1 million), income from operations increased by $1.4million, or 40.4%, from $3.2 million for the three months ended October 1, 2005to $4.6 million for the three months ended September 30, 2006, primarily due tohigher net sales of $5.7 million, or 36.5%. Corporate expenses for the threemonths ended October 1, 2005 consisted of $1.4 million of general andadministrative expenses and $13.6 million of management incentive compensationexpense related to the Norcross Transaction. Corporate expenses for the three months ended September 30, 2006consisted of $1.6 million of general and administrative expenses and $0.3million of management incentive compensation expense.  The increase in corporate general andadministrative expenses of $0.2 million was primarily due to higherpayroll and administrative expenses.

Included in income from operations for the threemonths ended September 30, 2006 and October 1, 2005 were depreciation andamortization expenses of $6.6 million and $8.1 million, respectively. Of theseamounts, $4.0 million, $1.2 million, and $1.4 million were attributable to thegeneral safety and preparedness, fire service, and electrical safety segments,respectively, for the three months ended September 30, 2006 and $4.7 million,$1.7 million, and $1.7 million were attributable to these segments for thethree months ended October 1, 2005.

*Interest expense.*Interestexpense increased by $1.6 million, or 30.8%, from $5.4 million for the threemonths ended October 1, 2005 to $7.0 million for the three months endedSeptember 30, 2006, primarily due to higher outstanding debt balances relatedto the Fibre-Metal and White Rubber Transactions. Interest expense incurred byNorcross and the subsidiary guarantors totaled $7.0 million for the threemonths ended September 30, 2006 and $5.3 million for the three months endedOctober 1, 2005.

 *Other, net.*Other, net increased by $0.2 millionfrom $(0.2) million for the three months ended October 1, 2005 to $0.0 millionfor the three months ended September 30, 2006.

*Income tax expense.*Income tax expense increased by $2.8million, from $(0.1) million for the three months ended October 1, 2005 to $2.7million for the three months ended September 30, 2006, primarily as a result ofhigher domestic income tax expense.

*Net income.*Net income increased by $17.4 million,from $(13.2) million for the three months ended October 1, 2005 to $4.2 millionfor the three months ended September 30, 2006. This was the result of thereasons discussed above.

***Nine Months Ended September 30, 2006 as Compared to CombinedNine Months Ended October 1, 2005***

*Net sales.*Net sales increased by $63.3 million, or17.8%, from $356.7 million for the nine months ended October 1, 2005 to $420.0million for the nine months ended September 30, 2006. In our general safety andpreparedness segment, net sales increased by $47.6 million, or 19.4%, from$245.5 million for the nine months ended October 1, 2005 to $293.1 million forthe nine months ended September 30, 2006. The increase reflects a combinationof the following: incremental Fibre-Metal net sales of $31.5 million, combinedorganic growth in our European and South African operations of $10.2 million,favorable exchange rates, which had an impact of $2.9 million, overall organicgrowth in our North American non-government business of $6.6 million, and adecrease in government contract shipments of $3.6 million.  In our fire service segment, net salesincreased by $1.6 million, or 2.4%, from $66.5 million for the nine monthsended October 1, 2005 to $68.1 million for the nine months ended September 30,2006 as incremental American Firewear net sales of $4.8 million were partiallyoffset by postponed customer orders due in part to the combined impact ofgovernment grant holdups and the delayed issuance of the 

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new NFPA standard.  In ourelectrical safety segment, net sales increased by $14.1 million, or 31.4%, from$44.7 million for the nine months ended October 1, 2005 to $58.8 million forthe nine months ended September 30, 2006 primarily driven by strong marketdemand, new product penetration, and incremental White Rubber net sales of $5.9million.

*Gross profit.*Gross profit increased by $30.6 million,or 24.2%, from $126.8 million for the nine months ended October 1, 2005 to$157.4 million for the nine months ended September 30, 2006, primarily due tothe $63.3 million, or 17.8%, increase in net sales. Excluding the impact ofinventory purchase accounting adjustments of $3.3 million for the nine monthsended October 1, 2005 and $1.1 million for the nine months ended September 30,2006, gross profit increased by $28.4 million, or 21.9%. After adjusting for theinventory purchase accounting adjustments, our gross profit margin of 37.7% forthe nine months ended September 30, 2006 was favorable to the 36.5% grossprofit margin for the nine months ended October 1, 2005. In our general safetyand preparedness segment (after adjusting for charges related to purchaseaccounting of $2.0 million for the nine months ended October 1, 2005 and $0.8million for the nine months ended September 30, 2006), gross profit increasedby $23.6 million, or 26.2%, from $90.9 million for nine months ended October 1,2005 to $114.5 million for the nine months ended September 30, 2006. Thisincrease was primarily due to the overall net sales increase of $47.6 million,or 19.4%, and improved margin realization in our North American operations (inpart due to the favorable contribution of Fibre-Metal).  In our fire service segment (after adjustingfor charges related to purchase accounting of $1.3 million for the nine monthsended October 1, 2005), gross profit decreased $1.1 million, or 5.4%, from$21.0 million for the nine months ended October 1, 2005 to $19.9 million forthe nine months ended September 30, 2006 as the increase in net sales of$1.6 million, or 2.4%, was offset by lower margin realization (in part dueto the inherent lower margin of American Firewear products and product lineintegration costs). In our electrical safety segment (after adjusting forcharges related to purchase accounting of $0.3 million for the nine monthsended September 30, 2006), gross profit increased by $5.9 million, or32.1%, from $18.2 million for the nine months ended October 1, 2005 to$24.1 million for the nine months ended September 30, 2006, primarily dueto the $14.1 million, or 31.4%, increase in net sales.

*Operating expenses.*Operating expenses increased by$7.8 million, or 7.6%, from $103.4 million for the nine months endedOctober 1, 2005 to $111.2 million for the nine months ended September 30,2006. In our general safety and preparedness segment, operating expensesincreased by $13.5 million, or 20.3%, from $66.9 million for the ninemonths ended October 1, 2005 to $80.4 million for the nine months endedSeptember 30, 2006, primarily due to higher amortization expense of $1.7million associated with the intangible assets recorded as part of purchaseaccounting, incremental Fibre-Metal operating expenses of $6.4 million, andincreased variable distribution and selling expenses associated with the $47.6million, or 19.4%, increase in net sales. In our fire service segment,operating expenses increased $3.0 million, or 27.6%, from $10.8 millionfor the nine months ended October 1, 2005 to $13.8 million for the ninemonths ended September 30, 2006, primarily due to higher amortization expenseof $1.5 million associated with intangible assets recorded as part of purchaseaccounting, incremental American Firewear operating expenses of $0.5 million,and additional general and administrative expenses, including legal costsrelated to litigation with a competitor. In our electrical safety segment,operating expenses increased by $2.8 million, or 34.3%, from $8.2 millionfor the nine months ended October 1, 2005 to $11.0 million for the ninemonths ended September 30, 2006, primarily due to higher amortization expenseof $0.3 million associated with intangible assets recorded as part of purchaseaccounting, incremental White Rubber operating expenses of $1.2 million, andincreased variable selling and distribution expenses related to the $14.1million, or 31.4%, increase in net sales. Corporate expenses for the ninemonths ended October 1, 2005 consisted of $3.9 million of general andadministrative expenses and $13.6 million of management incentive compensationexpense related to the Norcross Transaction. Corporate expenses for the nine months ended September 30, 2006consisted of $4.7 million of general and administrative expenses and $1.3million of management incentive compensation expense.  The increase in corporate general andadministrative expenses of $0.8 million was primarily due to higherpayroll and administrative expenses.

*Income from operations.*Income from operations increased by$22.8 million, or 97.6%, from $23.4 million for the nine months endedOctober 1, 2005 to $46.2 million for the nine months ended September 30,2006.  Key variances for the nine monthsended September 30, 2006 relative to the nine months ended October 1, 2005include: (1) lower inventory purchase accounting charges of $2.2 million, (2)incremental amortization expense of $3.5 million related to purchase accountingand (3) lower management incentive compensation charges of $12.3 million. 

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Excluding these charges from both periods, income from operationsincreased by $11.8 million, or 26.3%. Excluding these same charges, as apercentage of net sales, income from operations increased from 12.7% for thenine months ended October 1, 2005 to 13.6% for the nine months ended September30, 2006. In our general safety and preparedness segment (after adjusting forincremental charges related to purchase accounting of $0.5 million), incomefrom operations increased by $11.8 million, or 44.9%, from $26.4 million forthe nine months ended October 1, 2005 to $38.2 million for the nine monthsended September 30, 2006, primarily due to higher net sales of $47.6 million,or 19.4%, and favorable margin realization. In our fire service segment (afteradjusting for incremental charges related to purchase accounting of $0.2million), income from operations decreased by $2.6 million, or 22.0%, from$11.8 million for the nine months ended October 1, 2005 to $9.2 million for thenine months ended September 30, 2006, as higher net sales of $1.6 million, or2.4%, were offset by lower margin realization and higher general andadministrative expenses, including legal costs related to litigation with a competitor.In our electrical safety segment (after adjusting for incremental chargesrelated to purchase accounting of $0.6 million), income from operationsincreased by $3.4 million, or 30.5%, from $11.0 million for the nine monthsended October 1, 2005 to $14.4 million for the nine months ended September 30,2006, primarily due to higher net sales of $14.1 million, or 31.4%. Corporateexpenses for the nine months ended October 1, 2005 consisted of $3.9million of general and administrative expenses and $13.6 million of managementincentive compensation expense related to the Norcross Transaction.  Corporate expenses for the nine months endedSeptember 30, 2006 consisted of $4.7 million of general and administrative expensesand $1.3 million of management incentive compensation expense.  The increase in corporate general andadministrative expenses of $0.8 million was primarily due to higherpayroll and administrative expenses.

Included in income from operations for the nine monthsended September 30, 2006 and October 1, 2005 were depreciation and amortizationexpenses of $18.5 million and $13.7 million, respectively. Of these amounts,$12.0 million, $3.4 million, and $3.1 million were attributable to the generalsafety and preparedness, fire service, and electrical safety segments,respectively, for the nine months ended September 30, 2006 and $9.3 million,$1.9 million, and $2.5 million were attributable to these segments for the ninemonths ended October 1, 2005.

*Interest expense.*Interest expense increased by $3.5million, or 20.7%, from $16.6 million for the nine months ended October 1, 2005to $20.1 million for the nine months ended September 30, 2006 due to higheroutstanding debt balances related to the Fibre-Metal and White RubberTransactions. Interest expense incurred by Norcross and the subsidiaryguarantors totaled $20.1 million for the nine months ended September 30, 2006and $16.5 million for the nine months ended October 1, 2005.

*Other, net.*Other, net decreased by $1.2 million from$0.6 million for the nine months ended October 1, 2005 to $(0.6) million forthe nine months ended September 30, 2006, primarily due to unrealized foreignexchange rate gains.

*Income tax expense.*Income tax expense increased by$6.0 million, from $3.6 million for the nine months ended October 1,2005 to $9.6 million for the nine months ended September 30, 2006,primarily as a result of higher domestic income tax expense.

*Net income.*Net income increased by$14.5 million from $3.0 million for the nine months ended October 1,2005 to $17.5 million for the nine months ended September 30, 2006. Thiswas the result of the reasons discussed above.

**Liquidityand Capital Resources**

We have historically used internal cash flow fromoperations, commercial borrowings on our lines of credit, seller notes,investments from our equityholders and capital markets transactions to fund ouroperations, acquisitions, capital expenditures and working capitalrequirements. For the nine months ended September 30, 2006 and October 1, 2005,net cash provided by operating activities was $14.6 million and $20.1 million,respectively. The $5.5 million decrease was primarily attributable to higherincome from operations of $11.8 million (after adjusting for expenses relatedto purchase accounting and management incentive compensation), which was offsetby increased inventory and accounts receivable balances due in part to the$63.3 million, or 17.8%, increase in net sales.

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Historically, our principal uses of cash have beencapital expenditures, acquisitions and working capital. Our capitalexpenditures were $7.7 million for the nine months ended September 30, 2006 and$5.7 million for the nine months ended October 1, 2005. Investing activitiesfor the nine months ended September 30, 2006 included $22.2 million for theacquisition of White Rubber, $4.5 million for the acquisition of AmericanFirewear, $3.6 million for the acquisition of NEOS and $0.7 million of royaltypayments made to the sellers of Muck Boot and Arbin. During the nine monthsended September 30, 2006, we received cash proceeds of $0.1 million related tothe sale of property, plant, and equipment. For the predecessor period fromJanuary 1, 2005 through July 19, 2005, investing activities included $0.7million of royalty payments.  The successorperiod investing activities from July 20, 2005 through October 1,2005 included $204.5 million of cash purchase price related to the NorcrossTransaction recorded as part of push down purchase accounting and $0.2 ofroyalty payments.

As of September 30, 2006, we had working capital of$145.2 million and cash of $11.9 million. We maintain inventory levelssufficient to satisfy customer orders on demand, with generally a three monthsupply on hand. Bunker gear is an exception and is generally made to order. Ouraccounts receivable terms are generally 30 days, net.

For the nine months ended September 30, 2006, net cashprovided by financing activities was $14.8 million, consisting of thefollowing: proceeds from additional term borrowings of $15.0 million under thesenior credit facility related to the White Rubber Transaction, proceeds fromborrowings under the revolving credit facility of $2.0 million, $1.4 million ofpayments on long-term obligations, $0.8 million of dividends to SafetyProducts, $0.2 million of capital contributions, and $0.2 million of paymentsfor deferred financing costs. For the predecessor period from January 1, 2005through July 19, 2005, net cash used in financing activities was$14.2 million, including an excess cash flow sweep payment under the termsof our former senior credit facility of $12.2 million and $0.6 million of cashfunded to NSP Holdings. For the successor period from July 20, 2005through October 1, 2005, net cash provided by financing activities was $201.7million, including $88.0 million of borrowings under our new senior creditfacility used to fund the Norcross Transaction and $121.1 million of capitalcontributions from Safety Products recorded as part of push down purchaseaccounting related to the Norcross Transaction. Additionally, we paid and $6.8 million in deferred financing costsconsisting of expenses associated with the new senior credit facility and the$152.5 million senior subordinated notes.

As of September 30, 2006, borrowings under the newsenior credit facility bore interest at a weighted average rate of 7.6%. As ofSeptember 30, 2006, there was approximately $168.1 million of outstandingindebtedness under the senior credit facility and approximately $44.8 millionof available borrowings under the revolving credit facility.

We believe that our internal cash flows and borrowingsunder our new senior credit facility will provide us with sufficient liquidityand capital resources to meet our current and future financial obligations forthe foreseeable future, including funding our operations, debt service andcapital expenditures. Our future operating performance will be subject tofuture economic conditions and to financial, business and other factors, manyof which are beyond our control. If our future cash flow from operations andother capital resources are insufficient to pay our obligations as they matureor to fund our liquidity needs, we may be forced to reduce or delay ourbusiness activities and capital expenditures, sell assets, obtain additionaldebt or equity capital or restructure or refinance all or a portion of ourdebt, including the senior subordinated notes, on or before maturity. We cannotassure you that we would be able to accomplish any of these alternatives on atimely basis or on satisfactory terms, if at all. In addition, the terms of ourexisting and future indebtedness, including our senior subordinated notes andour senior credit facility, may limit our ability to pursue any of thesealternatives.

**Forward-Looking Statements**

This Management’s Discussion and Analysis of FinancialCondition and Results of Operations contains forward-looking information. Thesestatements reflect management’s expectations, estimates, and assumptions basedon information available at the time of the statement. Forward-lookingstatements 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 

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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 futureresults, performance, or achievements expressed or implied by those statements.Important factors that could cause our actual results, performance, or achievementsto be materially different from any future results, performance, orachievements expressed or implied by those statements include, but are notlimited to: (i) our high degree of leverage and significant debt serviceobligations; (ii) the impact of current and future laws and governmentalregulations affecting us or our product offerings; (iii) the impact ofgovernmental spending; (iv) our ability to retain existing customers, maintainkey supplier status with those customers with which we have achieved suchstatus, and obtain new customers; (v) the highly competitive nature of thepersonal protection equipment industry; (vi) any future changes in management;(vii) acceptance by consumers of new products we develop or acquire; (viii) theimportance and costs of product innovation; (ix) unforeseen problems associatedwith international sales, including gains and losses from foreign currencyexchange and restrictions on the efficient repatriation of earnings; (x) theunpredictability of patent protection and other intellectual property issues;(xi) cancellation of current orders; (xii) the outcome of pending productliability claims and the availability of indemnification for those claims;(xiii) general risks associated with the personal protection equipmentindustry; and (xiv) the successful integration of acquired companies oneconomically acceptable terms. We undertake no obligation to publicly update orrevise any forward-looking statements to reflect changed assumptions, theoccurrence of anticipated or unanticipated events, or changes to future resultsover time.

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**Item 3.Quantitative and Qualitative Disclosures About Market Risk**

There have been nomaterial changes to our exposure to market risk since December 31, 2005.

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**Item 4. Controls and Procedures**

Based on their evaluation as of the end of the periodcovered by this quarterly report on Form 10-Q, our Chief ExecutiveOfficer and Chief Financial Officer have concluded that our disclosure controlsand procedures (as defined in Rules 13a-15(e) and 15d-15(e) underthe Securities Exchange Act of 1934, as amended (the “Exchange Act”)) areeffective. There was no change in our internal control over financial reporting(as defined in Rules 13a-15(f) and 15d-15(f) under the ExchangeAct) identified in connection with the evaluation required by Rule 13a-15(d)of the Exchange Act that occurred during the period covered by this quarterlyreport on Form 10-Q that has materially affected, or is reasonably likelyto materially affect, our internal control over financial reporting.

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**PART IIOTHER INFORMATION**

**Item1. Legal Proceedings**

As of September 30, 2006, our North Safety Productssubsidiary, along with its predecessors and/or the former owners of suchbusiness were named as defendants in approximately 657 lawsuits involvingrespirators allegedly manufactured and sold by it or its predecessors. We arealso monitoring an additional 12 lawsuits in which we feel that North SafetyProducts, its predecessors and /or the former owners of such businessesmay be named as defendants. Collectively, these 669 lawsuits representapproximately 8,769 (excluding spousal claims) plaintiffs. Approximately 91% ofthese lawsuits involve plaintiffs alleging injury resulting from exposure tosilica dust, with the remainder alleging injury from exposure to otherparticles, including asbestos. These lawsuits typically allege that thepurported injuries resulted in part from respirators that were negligentlydesigned and/or manufactured. The defendants in these lawsuits are often numerous,and include, in addition to respirator manufacturers, employers of theplaintiffs and manufacturers of sand (used in sand blasting) and asbestos. Weacquired our North Safety Products subsidiary on October 2, 1998 fromSiebe plc. In connection with the acquisition, Siebe, which was subsequentlymerged with BTR plc (now known as “Invensys plc”), contractually agreed toindemnify us for any losses, including costs of defending claims, resultingfrom respiratory products manufactured or sold prior to our acquisition ofNorth Safety Products in October 1998.

In addition, our North Safety Products subsidiary iscontractually entitled to indemnification from Norton Company, an affiliate ofSaint-Gobain, which owned the North Safety Products business prior to Invensys.Pursuant to a December 14, 1982 asset purchase agreement, SiebeNorton, Inc., a newly formed wholly-owned subsidiary of Norton Company,acquired the assets of Norton’s Safety Products Division and the stock of thiscompany was in turn acquired by Siebe Gorman Holdings PLC. Under the terms ofthe agreement, Siebe Norton, Inc. did not assume any liability for claimsrelating to products shipped by Norton Company prior to the closing date.Moreover, Norton Company covenanted in the agreement to indemnify Siebe Norton,Inc. and its successors and assigns against any liability resulting from orarising out of any state of facts, omissions or events existing or occurring onor before the closing date, including, without limitation, any claims arising fromproducts shipped by Norton Company or any of its affiliates prior to theclosing date.  Siebe Norton, Inc., whosename was subsequently changed to Siebe North Inc., was subsequently acquired byus as part of the 1998 acquisition of the North Safety Products businessfrom Invensys.

Despite these indemnification arrangements, we couldpotentially be liable for losses or claims relating to products manufacturedprior to the October 1998 acquisition date if Invensys fails to meet itsobligations to indemnify us and we could potentially be liable for losses andclaims relating to products sold prior to January 10, 1983 if bothInvensys and Norton fail to meet their obligations to indemnify us. We couldalso be liable if the alleged exposure involved the use of a productmanufactured by us after our October 1998 acquisition of the North SafetyProducts business.

 

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Effective July 1, 2006, we entered into a joint defense agreementthrough December 31, 2008 with the former owners of the North Safety Productsbusiness (the “Joint Defense Agreement”). Under the terms of the Joint Defense Agreement, we agreed to pay a weightedaverage percentage of defense costs associated with defending ourselves and theprior owners of the North Safety Products business subject to a cap of$525,000, $960,000 and $1.0 million for the period from July 1, 2006 throughDecember 31, 2006, the year ended December 31, 2007 and the year ended December31, 2008, respectively.  The cap excludessettlement costs and other costs incurred exclusively by us, including trialcosts and special requests of counsel. Separately, we agreed to pay Invensys $200,000 related to settled casesthrough June 30, 2006 in which Invensys claims that the period of allegedexposure included periods after October 1998.

Based upon informationprovided to us by Invensys, we believe activity related to these lawsuits was asfollows for the nine months ended September 30, 2006:
| ** **                                | ** ** | **Plaintiffs** | ** ** | **Cases** | ** ** |
|-------------------------------------------|------------|----------------|------------|-----------|------------|
| Beginning lawsuits as  of January 1, 2006 |       | 18,459         |       | 1,148     |       |
| New lawsuits                              |       | 626            |       | 473       |       |
| Settlements                               |       | (5             | )          | (5        | )          |
| Dismissals and other                      |       | (10,311        | )          | (947      | )          |
| Ending lawsuits as of September 30, 2006  |       | 8,769          |       | 669       |       |

 

Plaintiffs haveasserted specific dollar claims in approximately 28% of the approximately 657cases pending as of September 30, 2006, in which North Safety Products, itspredecessors and/or the former owners of such businesses have been named asdefendants. A majority of jurisdictions prohibit specifying damages in tortcases such as these, and most of the remaining jurisdictions do not requiresuch specification. In those cases in which plaintiffs choose to assertspecific dollar amounts in their complaints, brought in states that permit suchpleading, the amounts claimed are typically not meaningful as an indicator of acompany’s potential liability. This is because (1) the amounts claimedtypically bear no relation to the level of the plaintiff’s injury, (2) thecomplaints typically assert claims against numerous defendants, and(3) many cases are brought on behalf of plaintiffs who have not sufferedany medical injury, and, ultimately, are resolved without any payment orpayment of a small fraction of the damages initially claimed. Of the 657complaints maintained in our records, 472 do not specify the amount of damagessought, 25 generally allege damages in excess of $50,000, one allegescompensatory damages in excess of $50,000 and an unspecified amount of punitivedamages, 81 allege compensatory damages and punitive damages, each in excess of$25,000, two generally allege damages in excess of $100,000, nine allegecompensatory damages and punitive damages, each in excess of $50,000, 20generally allege damages of $15.0 million, one generally alleges damages of$23.0 million, one alleges compensatory damages and punitive damages, each inexcess of $10,000, four allege general damages of $18.0 million and punitivedamages of $10.0 million, two allege general damages of $13.0 million andpunitive damages $10.0 million, one alleges compensatory and punitive damages,each in excess of $15,000, two allege punitive damages in excess of $25,000,one alleges punitive damages in excess of $50,000, nine generally allegedamages in excess of $15,000, 12 generally allege damages in excess of $25,000,one alleges compensatory damages of $18.0 million and punitive damages of $10.0million, one alleges punitive damages of $13.5 million and compensatory damagesof $10.0 million, one alleges punitive damages of $13.0 million andcompensatory damages of $10.0 million, eight allege compensatory damages of$13.0 million and punitive damages of $10.0 million, one alleges compensatoryand punitive damages, each of $15,000, and two allege compensatory and punitivedamages, each in excess of $15.0 million. We currently do not have access tothe complaints with respect to the previously mentioned additional 12 monitoredcases, and therefore do not know whether these cases allege specific damages,and if so, the amount of such damages, but are in the process of seeking toobtain such information. Due to the reasons noted above and to theindemnification arrangements benefiting us, we do not believe that the damageamounts specified in these complaints are a meaningful factor in any assessmentof our potential liability.

Bankruptcy filings of companies with asbestos andsilica-related litigation could increase our cost over time. If we were foundliable in these cases and either Invensys or Norton Company failed to meet itsindemnification obligations to us or the suit involved products manufactured byus after our October 1998 

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acquisitionof North Safety Products, it would have a material adverse effect on our business.

The Predecessor recorded a $1.25 million reserve forrespiratory claims. We increased this reserve to $7.0 million and recorded theincrease as part of our purchase price allocation process associated withthe Norcross Transaction. The increase represents a decision by new ownershipto enter into the Joint Defense Agreement with the prior owners of North SafetyProducts. We believe that this reserve represents a reasonable estimate of ourprobable and estimable liabilities for product claims alleging injury resultingfrom exposure to silica dust and other particles, including asbestos, asdetermined by us in consultation with an independent consultant. We believethat a five-year projection of claims and related defense costs is the mostreasonable approach. However, it is possible that we may incur liabilitiesin excess of the amounts currently reserved. This reserve will be re-evaluatedperiodically and additional charges or credits will be recorded to operatingexpenses as additional information becomes available.

It is possible that we may incur liabilities inan amount in excess of amounts currently reserved. However, taking into accountcurrently available information, historical experience, and our indemnificationfrom Invensys, but recognizing the inherent uncertainties in the projection ofany future events, we believe that these suits or claims should not result infinal judgments or settlements in excess of our reserve.

In connection with an ongoing dispute, one of ourcompetitors has filed a complaint against us alleging that we have made aseries of misrepresentations concerning this competitor and its products.The complaint seeks a retraction of all statements alleged to have been made byus and unspecified damages, including legal fees. A bench trial on the issue ofliability was held in February 2006 and the matter is now awaiting rulingby the court. We intend to vigorously defend against these claims.

We are not otherwise involved in any materiallawsuits. We historically have not been required to pay any material liabilityclaims. We maintain insurance against product liability claims (with theexception of asbestosis and silicosis cases, for which coverage is notcommercially available), but it is possible that insurance coverage will notcontinue to be available on terms acceptable to us or that such coverage willnot be adequate for liabilities actually incurred.

We are subject to legal proceedings and claims thatarise in the ordinary course of our business. In our opinion, the outcome ofthese actions will not have a material adverse effect on our financial positionor results of operations.

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**Item 1A. Risk Factors**

In addition to thefactors discussed elsewhere in this Form 10-Q, the following are importantfactors which could cause actual results or events to differ materially fromthose contained in any forward-looking statements made by or on behalf of theCompany.

***If we are unableto retain senior executives and other qualified professionals our growth may behindered.***

Our successdepends in part on our ability to attract, hire, train and retain qualifiedmanagerial, sales and marketing personnel. Competition for these types ofpersonnel is intense. We may be unsuccessful in attracting and retaining thepersonnel we require to conduct and expand our operations successfully. Ourresults of operations could be materially and adversely affected if we areunable to attract, hire, train and retain qualified personnel. Our success alsodepends to a significant extent on the continued service of our managementteam. The loss of any member of the management team could have a materialadverse effect on our business, results of operations and financial condition.

***The markets inwhich we compete are highly competitive, and some of our competitors havegreater financial and other resources than we do. The competitive pressuresfaced by us could materially and adversely affect our business, results ofoperations and financial condition.***

The personalprotection equipment market is highly competitive, with participants ranging insize from small companies which focus on single types of safety products, tolarge multinational corporations which manufacture and supply many types ofsafety products. Our main competitors vary by region and product. We believethat participants in this industry compete primarily on the basis of productcharacteristics (such as functional performance, design and style), price,brand name recognition and service. Some of our competitors have greaterfinancial and other resources than we do and our cash flows from operationscould be adversely affected by competitors’ new product innovations and pricingchanges made by us in response to competition from existing or new competitors.Individual competitors have advantages and strengths in different segments ofthe industry, in different products and in different areas, includingmanufacturing and distribution systems, geographic market presence, customerservice and support, breadth of product, delivery time, costs of labor andprice. We may not be able to compete successfully against current and futurecompetitors and the competitive pressures faced by us could materially andadversely affect our business, results of operations and financial condition.

***Many of ourproducts are subject to existing regulations and standards, changes in whichcould materially and adversely affect our results of operations.***

Our net sales maybe materially and adversely affected by changes in safety regulations andstandards covering industrial workers, firefighters and utility workers in theU.S. and Canada, including safety regulations of OSHA and standards of theNFPA, ANSI and ASTM. Our net sales could also be adversely affected by areduction in the level of enforcement of such regulations. Changes inregulations could reduce the demand for our products or require us toreengineer our products, thereby creating opportunities for our competitors.

***A reduction in thespending patterns of government agencies could materially and adversely affectour net sales.***

We sell asignificant portion of our products in the U.S. and Canada to variousgovernmental agencies. In addition, a portion of our products are sold togovernment agencies through fixed price contracts awarded by competitive bidssubmitted to state and local agencies. Many of these governmental agencycontracts are awarded on an annual basis. Accordingly, notwithstanding ourlong-standing relationship with various governmental agencies, we may lose ourcontracts with such agencies to lower bidders in the competitive bid process.Moreover, the terms 

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andconditions of such sales and the government contract process are subject toextensive regulation by various federal, state and local authorities in theU.S. and Canada.

***In most markets inwhich we compete, there are frequent introductions of new products and productline extensions. If we fail to introduce successful new products, we may losemarket position and our financial performance may be negatively impacted.***

If we are unableto identify emerging consumer and technological trends, maintain and improvethe competitiveness of our products and introduce these products on a globalbasis, we may lose market position, which could have a material adverse effecton our business, financial condition and results of operations. Continuedproduct development and marketing efforts have all the risks inherent in thedevelopment of new products and line extensions, including development delays,the failure of new products and line extensions to achieve anticipated levelsof market acceptance and the cost of failed product introductions.

***Our internationaloperations are subject to various uncertainties and a significant reduction ininternational sales of our products could have a material adverse effect on ourresults of operations.***

Our internationaloperations are subject to various political, economic and other uncertaintieswhich could adversely effect our business. A significant reduction of ourinternational business due to any of these risks would adversely affect ourrevenues. In 2005, approximately 35.0% of our net sales were outside the U.S.These risks include:

·                  unexpected changes in regulatory requirements;

·                  currency exchange rate fluctuations;

·                  changes in trade policy or tariff regulations;

·                  customs matters;

·                  longer payment cycles;

·                  higher tax rates and potentially adverse tax consequences, includingrestrictions on repatriating earnings and the threat of “double taxation”;

·                  additional tax withholding requirements;

·                  intellectual property protection difficulties;

·                  difficulty in collecting accounts receivable;

·                  complications in complying with a variety of foreign laws andregulations, many of which conflict with U.S. laws;

·                  costs and difficulties in integrating, staffing and managing internationaloperations; and

·                  strains on financial and other systems to properly administer VAT andother taxes.

In addition,foreign operations involve uncertainties arising from local business practices,cultural considerations and international political and trade tensions. Forexample, in 2002, we recorded a non-cash impairment charge with regard to ourformer Zimbabwe subsidiary due to adverse economic and political conditions. Inaddition, a portion of our manufacturing and outsourcing relationships involveChina. If we are unable to successfully manage the risks associated withexpanding our global business or to adequately manage operational 

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fluctuationsinternationally, it could have a material adverse effect on our business,financial condition or results of operations.

***We may incurrestructuring or impairment charges that would reduce our earnings.***

We have in thepast and may in the future restructure some of our operations, including ourrecently acquired subsidiaries. In such circumstances, we may take actions thatwould result in a charge related to discontinued operations, thereby reducingour earnings. These restructurings have or may be undertaken to realign oursubsidiaries, eliminate duplicative functions, rationalize our operatingfacilities and products, and reduce our staff. For example, in conjunction withthe Fibre-Metal Transaction, we recorded an accrual of $1.7 million, comprisedof $1.4 million in severance costs and $0.3 million in facility closure andother exit costs. On January 1, 2002 we adopted Statement of FinancialAccounting Standards (SFAS) No. 142, “Goodwill and Other IntangibleAssets,” which requires that goodwill and intangible assets that have anindefinite useful life be tested at least annually for impairment. We carry avery significant amount of goodwill and intangible assets and SFAS No. 142requires us to perform an annual assessment for possible impairment. As ofSeptember 30, 2006, we had goodwill and other intangible assets ofapproximately $439.2 million.

***We may be unableto successfully execute or effectively integrate acquisitions, which mayadversely affect our results of operations.***

One of our keyoperating strategies is to selectively pursue acquisitions. Acquisitionsinvolve a number of risks including:

·                  failure of the acquired businesses to achieve the results we expect;

·                  diversion of our management’s attention from operational matters;

·                  our inability to retain key personnel of the acquired businesses;

·                  risks associated with unanticipated events or liabilities;

·                  the potential disruption of our existing business; and

·                  customer dissatisfaction or performance problems at the acquiredbusinesses.

If we are unableto integrate or successfully manage any business that we may acquire in thefuture, we may not realize anticipated cost savings, improved manufacturingefficiencies and revenue growth, which may result in reduced profitability oroperating losses. In addition, we expect to face competition for acquisitioncandidates, which may limit the number of our acquisition opportunities and maylead to higher acquisition prices. Moreover, acquisitions of businesses mayrequire additional debt financing, resulting in additional leverage. Thecovenants in the senior credit facility, the indenture governing SafetyProducts’ senior pay in kind notes and the indenture governing the seniorsubordinated notes may further limit our ability to complete acquisitions. Therealization of all or any of the risks described above could materially andadversely affect our reputation and our results of operations.

***Our continuedsuccess depends on our ability to protect our intellectual property. If we areunable to protect our intellectual property, our sales could be materially andaversely affected.***

Our successdepends, in part, on our ability to obtain and enforce patents, maintain tradesecret protection and operate without infringing on the proprietary rights ofthird parties. We have been issued patents and have registered trademarks withrespect to many of our products, but our competitors could independentlydevelop similar or superior products or technologies, duplicate any of ourdesigns, trademarks, processes or other intellectual property or design aroundany processes or designs on which we have or may obtain patents or trademarkprotection. In addition, it is possible that third parties may have or acquirelicenses for other technology or designs that we may use or desire to use, sothat we may need to acquire licenses to, or to contest the validity of, suchpatents or 

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trademarksof third parties. Such licenses may not be made available to us on acceptableterms, if at all, and we may not prevail in contesting the validity ofthird-party rights.

In addition topatent and trademark protection, we also protect trade secrets, know-how andother confidential information against unauthorized use by others or disclosureby persons who have access to them, such as our employees, through contractualarrangements. These agreements may not provide meaningful protection for our tradesecrets, know-how or other proprietary information in the event of anyunauthorized use, misappropriation or disclosure of such trade secrets,know-how or other proprietary information. If we are unable to maintain theproprietary nature of our technologies, our sales could be materially adverselyaffected.

***We do not havelong-term contracts with many of our customers and they may terminate theirrelationship with us at any time, which could have a material adverse effect onour operating results.***

A significantportion of our contracts are not long-term contacts and are terminable at willby either party. If a significant number of our customers choose to terminatetheir contracts or to not renew their contracts with us upon expiration, itwould have a material adverse effect on our business, financial condition andresults of operations.

***We face aninherent business risk of exposure to product liability claims which could havea material adverse effect on our operating results.***

We face aninherent business risk of exposure to product liability claims arising from theclaimed failure of our products to prevent the types of personal injury ordeath against which they are designed to protect. We have not experienced anymaterial uninsured losses due to product liability claims, but it is possiblethat we could experience material losses in the future.  For more information, see “Item 1. LegalProceedings.”

***We are subject to various environmental lawsand any violation of these laws could adversely affect our results ofoperations.***

We are subject tofederal, state and local laws, regulations and ordinances relating to theprotection of the environment, including those governing discharges to air andwater, handling and disposal practices for solid and hazardous wastes,hazardous substance contamination and the maintenance of a safe workplace.These laws impose penalties for noncompliance and liability for response costsand certain damages resulting from past and current spills, disposals or otherreleases of hazardous materials. We could incur substantial costs as a resultof noncompliance with or liability pursuant to these environmental laws and toattain and maintain compliance with evolving regulatory requirements underenvironmental laws. Environmental laws continue to evolve and we may be subjectto more stringent environmental laws in the future. If more stringentenvironmental laws are enacted, these future laws could have a material adverseeffect on our results of operations.

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**Item 6. Exhibits**
| Exhibit  No. | ** ** | **Description**                                                                                                        |
|--------------|------------|------------------------------------------------------------------------------------------------------------------------|
|         |       |                                                                                                                   |
| 10.1         |       | Employment Letter Agreement by and between William  Hayes and Norcross Safety Products L.L.C., dated September 8, 2006 |
|         |       |                                                                                                                   |
| 10.2         |       | Amendment No. 1 to the 2005 Option Plan of Safety  Products Holdings, Inc.                                             |
|         |       |                                                                                                                   |
| 31.1         |       | Certification of Chief Executive Officer Pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002               |
|         |       |                                                                                                                   |
| 31.2         |       | Certification of Chief Financial Officer Pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002                    |
|         |       |                                                                                                                   |
| 32.1         |       | Certification of Chief Executive Officer Pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002                    |
|         |       |                                                                                                                   |
| 32.2         |       | Certification of Chief Financial Officer Pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002                    |

 

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**SIGNATURES**

Pursuant to the requirements of the Securities ExchangeAct of 1934, Norcross Safety Products L.L.C. has duly caused this report to besigned on its behalf by the undersigned thereunto duly authorized.
|                    | NORCROSS SAFETY PRODUCTS L.L.C. |
|--------------------|---------------------------------|
|               |                            |
|               |                            |
| November 14,  2006 | By:                             | /s/ ROBERT A. PETERSON |
|               |                            | Robert A. Peterson |
|               |                            | President, Chief Executive Officer and Manager |
|               |                            | (Principal Executive Officer) |
|               |                            |   |
|               |                            |   |
| November 14,  2006 | By:                             | /s/ DAVID F. MYERS, JR. |
|               |                            | David F. Myers, Jr. |
|               |                            | Executive Vice President, Chief Financial Officer, |
|               |                            | Secretary and Manager |
|               |                            | (Principal Financial and Accounting Officer) |

 

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**NORCROSSSAFETY PRODUCTS L.L.C.**

**FORM 10-Q LISTINGOF EXHIBITS**
| Exhibit No. | ** ** | **Description**                                                                                                        |
|-------------|------------|------------------------------------------------------------------------------------------------------------------------|
|        |       |                                                                                                                   |
| 10.1        |       | Employment Letter Agreement by and between William  Hayes and Norcross Safety Products L.L.C., dated September 8, 2006 |
|        |       |                                                                                                                   |
| 10.2        |       | Amendment No. 1 to the 2005 Option Plan of Safety  Products Holdings, Inc.                                             |
|        |       |                                                                                                                   |
| 31.1        |       | Certification of Chief Executive Officer Pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002               |
|        |       |                                                                                                                   |
| 31.2        |       | Certification of Chief Financial Officer Pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002                    |
|        |       |                                                                                                                   |
| 32.1        |       | Certification of Chief Executive Officer Pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002                    |
|        |       |                                                                                                                   |
| 32.2        |       | Certification of Chief Financial Officer Pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002                    |

 

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