Magal Security Systems Ltd. Announces Fourth Quarter and Full Year 2007 Financial Results

Record Annual Revenues, Up 14% Over 2006 YAHUD, Israel, March 6 /PRNewswire-FirstCall/ -- Magal Security Systems Ltd. (NASDAQ:MAGS) (TASE:MAGS) today announced its consolidated financial results for the three and twelve month periods ended December 31, 2007. Effective September 1, 2007, Magal's financial statements include the consolidation of its recently acquired European integration subsidiary. Furthermore, following the sale of Magal's U.S. based video monitoring business operated by Smart Interactive Systems Inc., the results of this business, for the fourth quarter and the years ended December 31, 2006 and 2007, were reclassified as discontinued operations. Fourth Quarter Results Revenues for the fourth quarter of 2007 increased 7.0 percent over the fourth quarter 2006, reaching US$23.2 million. Gross profit for the fourth quarter of 2007 increased 4.1 percent over the fourth quarter of 2006, reaching US$8.3 million, or 35.9 percent of revenues. Gross margin for the quarter was negatively affected by a strategic and prestigious project performed for the Israeli government. The majority of this project was completed by the end of 2007. Operating income in the fourth quarter of 2007, reached US$826,000 compared with US$877,000 for the fourth quarter of 2006. Net income from continuing operations in the fourth quarter of 2007 increased 157 percent over the fourth quarter of 2006, reaching US$857,000. Net income in the fourth quarter of 2007, reached US$2.9 million, compared with a net loss of US$231,000 in the fourth quarter of 2006. Net income for the quarter includes the discontinued operations of Magal's U.S. based video monitoring business operated by Smart Interactive Systems Inc., which business was sold in the fourth quarter 2007 to iVerify US, Inc. for $8.5 million. The sale follows Magal's strategy to focus on its core business of perimeter security projects and products. Diluted earnings per share from continuing operations for the fourth quarter of 2007 was US$0.08, compared with US$0.03 in the same period last year. Diluted net earnings per share for the fourth quarter of 2007 was US$0.28, compared with diluted loss per share of US$0.02 in the same period last year. Full Year Results Revenues for the year ended December 31, 2007 increased 13.8 percent compared with 2006, reaching US$72.4 million. Gross profit for the year ended December 31, 2007 increased 9.5 percent, reaching US$28.9 million, or 39.9 percent of revenues, compared with US$26.4 million for 2006, or 41.5 percent of revenue. Operating income for the year ended December 31, 2007, including a one-time charge of $904,000, totalled US$2.8 million, compared with US$3.8 million for 2006. The one-time charge relates to contractual post employment benefits for the Company's founder and former chairman who retired at the end of the fourth quarter of 2007. Financial expenses for the full year of 2007 totalled US$2.3 million and includes approximately US$1.5 million of foreign exchange losses resulting from the devaluation of the US dollar against both the new Israeli Shekel and the Canadian dollar. Net income from continuing operations for 2007 totalled US$196,000 compared with $2 million in 2006. Net income for the year totalled US$1.9 million, compared to US$0.8 million for full year 2006. Diluted earnings per share from continuing operations for the year ended December 31, 2007 was US$0.02, compared with diluted earnings per share of US$0.20 in the year 2006. Diluted net earnings per share for the year ended December 31, 2007 was US$0.18, compared with diluted earnings per share of US$0.08 in the year 2006. Commenting on the results, Mr. Izhar Dekel, CEO of Magal, said, "2007 was very much a year of meeting strategic milestones. This included targeting larger scale integration projects, expanding our global presence and acquiring complementary businesses. During the year we acquired a European integrator, offering us access to new markets, while expanding our capabilities to target larger projects." Mr. Dekel added, "We are pleased that we had another year of revenue growth in 2007. During the fourth quarter we continued to focus our efforts and resources to maximize our synergies and the integration of the capabilities of our recent and accretive European acquisition. Furthermore, we continued to focus on our core competencies, and, as such, sold our US-based video monitoring systems' business. Looking ahead, and based on the significant new orders that we received in recent months, we believe that Magal will generate increased revenues and improved results in 2008." The Company will be hosting its quarterly conference call at 10:00am EST today. Management will review and discuss the fourth quarter 2007 results. They will then be available to answer questions. To participate, you may call one of the teleconferencing numbers that follows. Please place your calls 5-10 minutes before the conference call commences. If you are unable to connect using one of the toll-free numbers, please try the international dial-in number. US Dial-in Number: 1-888-668-9141 Canada Dial-in Number: 1-800-917-9141 ISRAEL Dial-in Number: 03-918-0609 INTERNATIONAL Dial-in Number: +972-3-918-0609 At: 10:00am Eastern Time; 7:00am Pacific Time; 5:00pm Israel Time About Magal Security Systems, Ltd.: Magal Security Systems Ltd. is engaged in the development, manufacturing and marketing of computerized security systems, which automatically detect, locate and identify the nature of unauthorized intrusions. 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 on the Nasdaq since 1993 and 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. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (All numbers except EPS expressed in thousands of US$) Year Ended December 31, Quarter Ended December 31, 2007 2006 (* % 2007 2006 (* % change change Revenues 72,375 63,600 13.8 23,155 21,635 7.0 Cost of revenues 43,510 37,236 16.8 14,837 13,648 8.7 Gross profit 28,865 26,364 9.5 8,318 7,987 4.1 Operating expenses: Research and development, net 5,764 5,378 7.2 1,879 1,576 19.2 Selling and marketing 13,029 11,603 12.3 3,498 3,861 (9.4) General and administrative 6,399 5,547 15.4 2,171 1,673 29.8 Special post employment benefit 904 - (56) - Total operating Expenses 26,096 22,528 15.8 7,492 7,110 5.4 Operating income 2,769 3,836 (27.8) 826 877 (5.8) Financial expenses, net 2,259 864 161.5 832 216 285.2 Income (loss) from continuing operations before income taxes 510 2,972 (82.8) (6) 661 Income tax (tax benefit) 314 943 (66.7) (863) 327 Net Income from continuing operations 196 2,029 (90.3) 857 334 156.6 Net Income (loss) from discontinued operations 1,686 (1,219) 2,022 (565) Net income (loss) 1,882 810 132.3 2,879 (231) Basic net earnings per share from continuing operations $0.02 $0.20 $0.08 $0.03 Basic net earnings (loss) per share from discontinued operations $0.16 $(0.12) $0.20 $(0.05) Basic net earnings (loss) per share $0.18 $ 0.08 $0.28 ($0.02) Weighted average number of shares outstanding used in computing basic net earnings per share (in thousands) 10,395 10,384 10,397 10,392 Diluted net earnings per share from continuing operations $0.02 $0.20 $0.08 $0.03 Diluted net loss per share from discontinued operations $0.16 $(0.12) $0.20 $(0.05) Diluted net earnings (loss) per share $0.18 $0.08 $0.28 $(0.02) Weighted average number of shares outstanding used in computing diluted net earnings per share (in thousands) 10,431 10,442 10,398 10,427 (*Reclassified FINANCIAL RATIOS Year ended Quarter ended December 31 December 31 2007 2006 (* 2007 2006 (* Gross margin 39.9% 41.5% 35.9% 36.9% Research and development, net as a % of revenues 8.0% 8.5% 8.1% 7.3% Selling and Marketing as a % of revenues 18.0% 18.2% 15.1% 17.8% General and administrative as a % of revenues 8.8% 8.7% 9.4% 7.7% Operating income margin 3.8% 6.0% 3.6% 4.1% Net income margin (before discontinued operation) 0.3% 3.2% 3.7% 1.5% Net income (loss) margin (after discontinued operation) 2.6% 1.3% 12.4% (1.1)% Total bank debt to total Capitalization * 0.36 ** 0.43 * 0.36 ** 0.43 Current ratio *1.75 **2.15 *1.75 **2.15 * As of December 31, 2007 ** As of December 31, 2006 (* Reclassified MAGAL SECURITY SYSTEMS LTD. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (All numbers expressed in thousands of US$) December 31, December 31, 2007 2006 (* CURRENT ASSETS: Cash and cash equivalents $ 9,814 $ 4,908 Marketable securities 9,464 3,067 Short term bank deposits 11,220 14,186 Trade receivables 26,623 27,754 Unbilled accounts receivable 4,003 5,389 Other accounts receivable and prepaid expenses 6,976 3,821 Deferred income taxes 1,847 1,604 Inventories 23,816 13,971 Total current assets 93,763 74,700 Long term investments and receivables: Long-term trade receivables 2,019 40 Long-term loans 808 622 Long-term bank deposits 1,846 4,800 Escrow deposit 4,442 - Severance pay fund 2,765 2,401 Total long-term investments and receivables 11,880 7,863 PROPERTY AND EQUIPMENT, NET 8,429 7,707 OTHER ASSETS, NET 13,755 6,002 ASSETS ATTRIBUTED TO DISCONTINUED OPERATION 244 7,409 Total assets $128,071 $103,681 CURRENT LIABILITIES: Short-term bank credit $ 16,434 $ 17,026 Current maturities of long-term bank debt 4,303 795 Trade payables 7,344 5,954 Deferred income taxes 687 - Other accounts payable, accrued expenses and customer advances 24,791 11,041 Total current liabilities 53,559 34,816 LONG-TERM LIABILITIES: Long-term bank debt 3,095 7,399 Long-term accounts payable - 178 Deferred income taxes 1,218 - Accrued severance pay 3,873 2,524 Total long-term liabilities 8,186 10,101 LIABILITIES ATTRIBUTED TO DISCONTINUED OPERATION 849 614 SHAREHOLDERS' EQUITY 65,477 58,150 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $128,071 $103,681 (* Reclassified Contacts: Company Magal Security Systems, Ltd Lian Goldstein, CFO Tel: +972-3-5391444 Fax: +972-3-5366245 E-mail: Investor Relations GK Investor Relations Ehud Helft/Kenny Green Tel: +1-646-201-9246 E-mail: DATASOURCE: Magal Security Systems Ltd CONTACT: Contacts: Company, Magal Security Systems, Ltd, Lian Goldstein, CFO, Tel: +972-3-5391444, Fax: +972-3-5366245, E-mail: . Investor Relations, GK Investor Relations, Ehud Helft/Kenny Green, Tel: +1-646-201-9246, E-mail: