Magal Security Systems Ltd. Announces First Quarter 2006 Results

YAHUD, Israel, May 1 /PRNewswire-FirstCall/ -- Magal Security Systems Ltd. (Nasdaq NM:MAGS; TASE:MAGS) today announced its consolidated financial results for the three-month period ended March 31, 2006. Revenues for the first quarter of 2006 reached US$13.5 million, a decrease of 1.9 percent from the first quarter of 2005. Operating income reached US$479,000 and net income reached US$149,000, a decrease of 50.7 percent and 49.5 percent respectively from the first quarter of 2005. Compared with the fourth quarter of 2005, revenues decreased by 33 percent, operating income decreased by 58 percent and net income decreased by 80 percent. Operating expenses for the first quarter of 2006 reached US$5.2 million, about the same as in the first quarter of last year and decreased by 24.5 percent from the fourth quarter of 2005. Diluted earnings per share for the first quarter reached US$0.01, a decrease of 66.7 percent from the same period of last year. Commenting on the results, Mr. Jacob Even-Ezra, Chairman of Magal, said, "Revenues for the first quarter of 2006 were in the upper range of our estimate of between $12.5 to $14 million that we provided in our press release of April 7, 2006. Historically, our first quarter is the weakest quarter of the year." Mr. Jacob Even-Ezra continued, "The decrease in revenues in the first quarter was also affected by the previously reported termination of an agreement by a European customer and due to a number of orders that we expected to obtain in the first quarter that were delayed to subsequent quarters." Mr. Even-Ezra concluded, "Despite the first quarter results and based on the current backlog, management remains confident that the Company will have a good year in 2006, with revenue growth over 2005." The Company will be hosting its quarterly conference call at 10:00am EST. On the call, Mr. Jacob Even-Ezra, Chairman of the Board & CEO, and Mrs. Raya Asher, CFO, will review and discuss the first quarter 2006 results. They will then be available to answer questions. To participate, please call one of the following teleconferencing numbers. Please begin placing your calls 5 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: 1-866-860-9642 Canada DDial-in Number: 1-866-485-239 ISRAEL Dial-in Number: 03-918-0610 INTERNATIONAL Dial-in Number: +972-3-918-0610 At: 10:00am Eastern Time 7:00am Pacific Time 5:00pm Israel Time The call will also be broadcast live on the web, and can be accessed through a link on Magal's website. A replay of the call will be available for three months from the day after the call. The webcast and the replay will both be accessible from Magal's website at: http://www.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. Israeli-based Magal has subsidiaries in the U.S., Canada, the U.K., Germany, Romania, Mexico and an office in China. Magal trades under the symbol MAGS in the U.S. on the Nasdaq National Market since 1993 and in Israel on the Tel-Aviv Stock Exchange (TASE) since July 2001. 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. Contacts: Company Investor Relations Magal Security Systems, Ltd GK Investor Relations Raya Asher, CFO Ehud Helft/Kenny Green Tel: +972-3-5391444 Tel: +1-866-7046710 Fax: +972-3-5366245 E-mail: E-mail: MAGAL SECURITY SYSTEMS LTD. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (All numbers except EPS expressed in thousands of US$) Quarter ended March 31 _______________________ 2006 2005(*) % _______________________ change Revenues $13,472 $13,726 -1.9 Cost of revenues 7,763 7,459 4.1 __________ _________ Gross Profit 5,709 6,267 -8.9 __________ _________ Operating expenses: Research & development, net 1,200 1,156 3.8 Selling & marketing, net 2,583 2,726 -5.3 General & administrative 1,447 1,413 2.4 __________ _________ 5,230 5,295 -1.2 __________ _________ Operating income 479 972 -50.7 Financial expenses, net 154 329 -53.2 __________ _________ Income from continuing operations 325 643 -49.5 before taxes on income Taxes on income 153 318 -51.9 __________ _________ Income from continuing operations 172 325 -47.1 Loss on discontinued operations, net 23 30 -23.3 __________ _________ Net income 149 $ 295 -49.5 __________ _________ Basic net earnings per share $ 0.01 $ 0.03 __________ _________ Diluted net earnings per share $ 0.01 $ 0.03 __________ _________ Weighted average ordinary shares outstanding (in thousands) 10,375 8,672 __________ _________ Weighted average ordianry shares outstanding, assuming dilution (in thousands) 10,462 8,675 __________ _________ (*)Reclassified Quarter Ended March 31, _______________________ 2006 2005 _______________________ Gross Margin (%) 42.4 45.7 Research & development net as a % of 8.9 8.4 Revenues Selling & Marketing as a % of Revenues 19.2 19.9 General & Administrative as a % of 10.7 10.3 Revenues Operating margin (%) 3.6 7.1 Net income margin (%) 1.1 2.1 Total Bank Debt to Total Capitalization 0.36 0.38(**) Current Ratio 2.22 2.12(**) **) as of December 31, 2005 MAGAL SECURITY SYSTEMS LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (All numbers expressed in thousands of US$) March 31, December 31, 2006 2005 ___________ __________ CURRENT ASSETS: Cash and cash equivalents $11,514 $10,099 Short term bank deposits 14,032 17,053 Trade receivables 20,743 24,912 Unbilled accounts receivable 10,904 11,252 Other accounts receivable 2,326 2,221 Deferred income taxes 973 910 Inventories 13,305 10,888 ___________ __________ Total current assets 73,797 77,335 ___________ __________ Long term investments and trade receivables: Long-term trade receivables 315 290 Long-term bank deposits and structure notes 1,800 1,800 Severance pay fund 2,052 2,126 ___________ __________ Total long term investments and trade 4,167 4,216 ___________ __________ receivables PROPERTY AND EQUIPMENT, NET 16,101 15,587 ___________ __________ OTHER ASSETS, NET 5,363 5,365 ___________ __________ Total assets $99,428 $102,503 ___________ __________ CURRENT LIABILITIES: Short-term bank credit 16,942 18,068 Current maturities of long-term bank loans 3,647 3,647 Trade payables 4,668 6,360 Other accounts payable and accrued expenses 7,925 8,486 ___________ __________ Total current liabilities 33,182 36,561 ___________ __________ LONG-TERM LIABILITIES: Long-term bank loans 1,617 1,653 Accrued severance pay 2,187 2,131 Long-term liability in respect of forward 13 50 ___________ __________ contracts Total long terms liabilities 3,817 3,834 ___________ __________ SHAREHOLDERS' EQUITY 62,429 62,108 ___________ __________ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $99,428 $102,503 ___________ __________ DATASOURCE: Magal Security Systems Ltd. CONTACT: Company, Magal Security Systems, Ltd, Raya Asher, CFO, Tel: +972-3-5391444, Fax: +972-3-5366245, E-mail: , Investor Relations, GK Investor Relations, Ehud Helft/Kenny Green, Tel: +1-866-7046710, E-mail: ,