Revenues for the Third Quarter Increased by 35.4% YOY YAHUD, Israel, November 5 /PRNewswire-FirstCall/ -- Magal Security Systems Ltd. (Nasdaq GM: MAGS; TASE: MAGS) today announced its consolidated financial results for the three and nine-month periods ended September 30, 2007. The results include the consolidation as of September 1, 2007, of its recently acquired European subsidiary, that is engaged in the installation and integration of security systems. Third Quarter Results Revenues for the third quarter of 2007 were US$21.9 million, an increase of 35.4% compared with the third quarter of 2006 and an increase of 46.4% compared with second quarter of 2007. Gross profit for the third quarter of 2007 reached US$7.9 million, an increase of 14.8% over the third quarter of 2006 and an increase of 19.9 % compared with second quarter of 2007. Gross margin for the third quarter was 36.1%, compared with 42.6% in the third quarter of 2006 and 44.1% in the second quarter 2007. The lower gross margin was the result of a special and prestigious project for the Israeli government which bears a low margin. Operating income for the third quarter of 2007, including a one-time charge of $960,000, totaled US$95,000, compared with US$1.2 million for the third quarter of 2006, and compared with US$761,000 in the second quarter 2007. The one-time charge relates to contractual post employment benefits for the Company's chairman who will retire at the end of the fourth quarter of 2007. Financial expenses for the third quarter of 2007 totaled US$981,000 and included approximately US$700,000 of foreign exchange losses resulting from the devaluation of the US dollar aginst both the new Israeli Shekel and the Canadian dollar. Income taxes for the third quarter of 2007 reached US$749,000, which include a tax provision for final tax assessments in the amount of US$500,000 relating to the years 2001-2004. Net loss for the third quarter of 2007, including the one-time charge relating to post-employment benefits and the tax provision for final tax assessment relating to prior years, totaled US$1.6 million, compared to net income of US$623,000 in the third quarter of 2006 and US$342,000 in the second quarter of 2007. Diluted loss per share was US$0.16, compared to diluted earnings per share of US$0.06 in the third quarter of 2006. Operating income, on a non-GAAP basis for the third quarter of 2007, which excludes the impact of the one-time post employment benefits charge of $960,000, reached US$1.1 million, a decrease of 14.1% over the third quarter of 2006, and a sequential increase of 38.6% over the second quarter of 2007. Operating margin for the quarter, excluding the one-time charge reached 4.8%, compared to 7.6% in the third quarter of 2006. Net loss on a non-GAAP basis for the third quarter of 2007 was US$367,000, or $0.04 per fully diluted share. Nine Month Results Revenues for the first nine months of 2007 reached US$51.9 million, an increase of 16.6% compared with the same period in 2006. Gross profit for the first nine months of 2007 reached US$21.0 million, an increase of 11.7% compared with the same period in 2006. Operating income for the first nine months of 2007 reached US$1.6 million, a decrease of 31.9% compared to US$2.4 million in the same period in 2006. Excluding the one-time charge recorded in relation to the special post employment benefit, operating income on a non-GAAP basis for the first nine months of 2007 increased to US$2.6 million, representing a 4.9% operating margin. Net loss for the first nine months period of 2007 reached US$1.0 million, compared to net income of US$1.0 million in the same period in 2006. Diluted loss per share for the first nine months ended September 30, 2007 was US$0.10, compared with diluted earnings per share of US$0.10 in the same period of last year. "We are very pleased to report another good quarter for the company in terms of generating strong revenues and signing new orders for our full basket of products, further expanding our global presence," commented Mr. Izhar Dekel, CEO of Magal. "We continue to generate strong demand for our products and expect to surpass 2006 in terms of revenues and excluding the one-time charges of this quarter, we expect that our operating profit will also surpass 2006." Mr. Dekel continued, "This quarter we took another substantial step in our strategy of expanding our global presence and range of solutions offerings. During the quarter we completed the acquisition of a European company involved in the installation and integration of security systems that is active in geographic areas where Magal has historically had limited activity. This is a very important milestone for our company in terms of our expansion in the integration field, particularly in countries with strong growth potential. Furthermore, we continue to see increased demand for Magal's solutions from both the military and civilian space, worldwide." Use of Non-GAAP Financial Information In addition to disclosing financial results calculated in accordance with United States generally accepted accounting principles (GAAP), this release of operating results also contains non-GAAP financial measures, which Magal believes are the principal indicators of the operating and financial performance of its business. The non-GAAP financial measures exclude the effects of one time post-employment benefit charges and a provision for final tax assessments for prior years. Management believes the non-GAAP financial measures provided are useful to investors' understanding and assessment of Magal's on-going core operations and prospects for the future, as the charges eliminated are not part of the day-to-day business or reflective of the core operational activities of the company. Management uses these non-GAAP financial measures as a basis for strategic decisions, forecasting future results and evaluating the company's current performance. However, such measures should not be considered in isolation or as substitutes for results prepared in accordance with GAAP. Reconciliation of the non-GAAP measures to the most comparable GAAP measures are provided in the schedules attached to this release. Conference Call The Company will be hosting a conference call later today at 10:00 am EST. On the call, Mr. Izhar Dekel, CEO and Mrs. Raya Asher, V.P. Finance & CFO, will review and discuss the results and will be available to answer investor questions. To participate, please call one of the following teleconferencing numbers. Please begin placing your calls at least 10 minutes before the conference call commences. If you are unable to connect using the toll-free numbers, please try the international dial-in number. US Dial-in Number: 1-888-668-9141 UK Dial-in Number: 0-800-917-5108 Israel Dial-in Number: 03-918-0688 International Dial-in Number: +972-3-918-0688 at: 10:00 am Eastern Time; 7:00 am Pacific Time; 5:00 pm Israel Time A replay of the call will be available from the day after the call. The link to the replay will be accessible from Magal's website at: http://magal-ssl.com/. About Magal Security Systems, Ltd.: Magal Security Systems Ltd. (Magal) is engaged in the development, manufacturing and marketing of computerized security systems, which automatically detect, locate and identify the nature of unauthorized intrusions. Magal also supplies video monitoring services through Smart Interactive Systems, Inc., a subsidiary in the U.S. The Company's products are currently used in more than 70 countries worldwide to protect national borders, airports, correctional facilities, nuclear power stations and other sensitive facilities from terrorism, theft and other threats. Magal trades under the symbol MAGS in the U.S. on the Nasdaq Global Market and in Israel on the Tel-Aviv Stock Exchange (TASE). This press release contains forward-looking statements, which are subject to risks and uncertainties. Such statements are based on assumptions and expectations which may not be realized and are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, financial and otherwise, may differ from the results discussed in the forward-looking statements. A number of these risks and other factors that might cause differences, some of which could be material, along with additional discussion of forward-looking statements, are set forth in the Company's Annual Report on Form 20-F filed with the Securities and Exchange Commission. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (All numbers except EPS expressed in thousands of US$) Nine Months Ended Quarter Ended September September 30, 30, 2007 2006 % change 2007 2006 % change Revenues 51,886 44,506 16.6 21,884 16,160 35.4 Cost of revenues 30,881 25,700 20.2 13,981 9,276 50.7 Gross profit 21,005 18,806 11.7 7,903 6,884 14.8 Operating expenses: Research and development, net 3,885 3,802 2.2 1,283 1,152 11.4 Selling and marketing 9,734 8,115 20.0 3,858 2,830 36.3 General and administrative 4,825 4,537 6.3 1,707 1,674 2.0 Special post employment benefit 960 - - 960 - - Total operating expenses 19,404 16,454 17.9 7,808 5,656 38.0 Operating income 1,601 2,352 (31.9) 95 1,228 (92.3) Financial expense, net 1,419 640 121.7 981 260 277.3 Income (loss) from continuing operations before income taxes 182 1,712 (89.4) (886) 968 - Income taxes 1,177 616 91.1 749 345 117.1 Net income (loss) from continuing operations (995) 1,096 - (1,635) 623 - Loss on discontinued operations, net - 55 - - - - Net income (loss) (995) 1,041 - (1,635) 623 - Net income (loss) per share: Basic $ (0.10) $ 0.10 - $ (0.16) $ 0.06 - Diluted $ (0.10) $ 0.10 - $ (0.16) $ 0.06 - Weighted average number of shares Outstanding: Basic 10,394 10,382 10,395 10,390 Diluted 10,442 10,447 10,429 10,435 FINANCIAL RATIOS Nine Months Ended Quarter Ended September 30, September 30, 2007 2006 2007 2006 Gross margin 40.5 42.3 36.1 42.6 Research and development, net as a % of revenues 7.5 8.5 5.9 7.1 Selling and Marketing as a % of revenues 18.8 18.2 17.6 17.5 General and administrative as a % of revenues 9.3 10.2 7.8 10.4 Operating margin 3.1 5.3 0.4 7.6 Net income margin (after discontinued operation) (1.9) 2.3 (7.5) 3.9 Total bank debt to total capitalization * 0.55 **0.43 * 0.55 **0.43 Current ratio * 1.75 **2.12 * 1.75 **2.12 * As of September 30, 2007 ** As of December 31, 2006 MAGAL SECURITY SYSTEMS LTD. Reconciliation of GAAP to NonGAAP Measures (Unaudited) (All numbers except EPS expressed in thousands of US$) Quarter Ended September 30,2007 GAAP Non-GAAP Revenues $ 21,884 $ 21,884 Cost of revenues 13,981 13,981 Gross profit 7,903 7,903 Operating expenses: Research and development, net 1,283 1,283 Selling and marketing 3,858 3,858 General and administrative 1,707 1,707 Special post employment benefit 960 - Total operating expenses 7,808 6,848 Operating income 95 1,055 Financial expense, net 981 981 Income (loss) from continuing operations before income taxes (886) 74 Income taxes 749 441 Net income (loss) from continuing operations (1,635) (367) Loss on discontinued operations, net - - Net income (loss) $ (1,635) $ (367) Net income (loss) per share: Basic $ (0.16) $ (0.04) Diluted $ (0.16) $ (0.04) Weighted average number of shares outstanding: Basic 10,395 10,395 Diluted 10,429 10,429 Non-GAAP net income (loss) $ (367) Reconciliation items: Special post employment benefit (960) Income taxes with respect to 192 Special post employment benefit Income taxes * (500) GAAP net loss $ (1,635) *) final tax assessments relating to the years 2001-2004. FINANCIAL RATIOS GAAP Non-GAAP Gross margin 36.1 36.1 Research and development, net as a % of revenues 5.9 5.9 Selling and Marketing as a % of revenues 17.6 17.6 General and administrative as a % of revenues 7.8 7.8 Operating margin 0.4 4.8 Net income margin (after discontinued operation) (7.5) (1.7) MAGAL SECURITY SYSTEMS LTD. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (All numbers expressed in thousands of US$) September December 30, 31, 2007 2006 CURRENT ASSETS: Cash and cash equivalents $ 6,447 $ 4,908 Marketable securities 4,105 3,067 Short term bank deposits 14,841 14,186 Trade receivables 28,624 28,027 Unbilled accounts receivable 7,475 5,389 Other accounts receivable and prepaid expenses 4,887 3,995 Deferred income taxes 2,120 1,604 Inventories 16,395 13,971 Total current assets 84,894 75,147 Long term investments and receivables: Long-term trade receivables 281 224 Long-term loans 715 622 Long-term bank deposits 1,800 4,800 Severance pay fund 2,592 2,401 Total long term investments and receivables 5,388 8,047 PROPERTY AND EQUIPMENT, NET 14,148 14,366 OTHER ASSETS, NET 16,494 6,121 Total assets $ 120,924 $103,681 CURRENT LIABILITIES: Short-term bank credit $ 25,013 $ 17,026 Current maturities of long-term bank debt 795 795 Trade payables 10,295 6,001 Other accounts payable, accrued expenses and customer advances 12,517 11,608 Total current liabilities 48,620 35,430 LONG-TERM LIABILITIES: Long-term bank debt 7,937 7,399 Long-term accounts payable - 178 Accrued severance pay 3,346 2,524 Total long-term liabilities 11,283 10,101 SHAREHOLDERS' EQUITY 61,021 58,150 TOTAL LIABILITIES AND $ 120,924 $103,681 SHAREHOLDERS' EQUITY Contacts: Company Investor Relations Magal Security Systems, Ltd Gelbart Kahana Investor Relations Raya Asher, CFO Ehud Helft/Kenny Green Tel: +972-3-5391444 Tel: +1-866-704-6710 E-mail: E-mail: DATASOURCE: Magal Security Systems Ltd CONTACT: Contacts: Company: Magal Security Systems, Ltd, Raya Asher, CFO, Tel: +972-3-5391444, E-mail: ; Investor Relations, Gelbart Kahana Investor Relations, Ehud Helft/Kenny Green, Tel: +1-866-704-6710, E-mail:

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