Nine-Month Revenues at a Record US$72 million; Year-over-Year
Growth of 46% YAHUD, Israel, November 10 /PRNewswire-FirstCall/ --
Magal Security Systems Ltd. (NASDAQ:MAGS)(TASE:MAGS) today
announced its consolidated financial results for the three and nine
month periods ended September 30, 2008. Revenues for the third
quarter of 2008, was $20.8 million, compared with US$21.0 million
in the third quarter of 2007. In the nine month period ended
September 30, 2008, revenues reached US$72.1 million, an increase
of 46.4% compared with US$49.2 million in the comparable period of
2007. Effective from September 1, 2007, Magal's financial
statements include the results of a European integration company
acquired in August 2007. Following the sale in December 2007 of
Magal's U.S. based video monitoring business, the results of that
business were reclassified as discontinued operations. Gross profit
for the third quarter of 2008 reached US$7.8 million compared with
US$7.7 million in the third quarter of 2007. Gross margin for the
quarter stood at 37.6% compared with 36.8% in the third quarter of
2007. Gross profit for the nine month period ended September 30,
2008, reached US$27.0 million compared with US$20.5 million in the
comparable period in 2007. Gross margin in the nine month period
ended September 30, 2008 was 37.5% compared with 41.7% in the
comparable period in 2007. The gross margin in the nine month
period of 2008 was adversely affected, by the ongoing weakness of
the US Dollar against the Israeli Shekel and Canadian Dollar, as
well as the shift in revenue mix towards larger scale integration
projects. On a GAAP basis, operating loss for the third quarter of
2008 was US$0.6 million compared with an operating income of US$0.2
million in the third quarter of 2007. Operating income for the nine
month period ended September 30, 2008 was $1.5 million, compared to
$1.9 million in the comparable period in 2007. Operating income on
a non-GAAP basis for the third quarter of 2008 was US$0.1 million
compared with US$1.2 million in the third quarter of 2007.
Operating income on a non-GAAP basis for the nine month period
ended September 30, 2008 was $4.8 million, an increase of 64.7%
compared with $2.9 million in the comparable period in 2007. Due to
the devaluation of the US Dollar against the Israeli shekel and
Canadian Dollar, operating expenses increased in the third quarter
by US$0.5 million, compared with that of the third quarter of last
year. The operating income on a GAAP basis for the quarter also
included a US$0.5 million amortization of intangible assets charge,
related to last year's acquisition of a European subsidiary. On a
GAAP basis, net loss for the third quarter of 2008 was US$1.4
million, or US$0.13 per share, compared with a net loss of US$1.6
million, or US$0.16 per share in the third quarter of 2007. Net
loss on a GAAP basis for the nine month period ended September 30,
2008 was $1.5 million, or $0.15 per share, compared to a net loss
of $1.0 million, or $0.10 per share, in the comparable period in
2007. On a non-GAAP basis, net loss for the third quarter of 2008
was US$0.8 million, or US$0.08 per share compared with a net loss
US$0.3 million, or US$0.02 per share in the third quarter of 2007.
Net income on a non-GAAP basis for the nine month period ended
September 30, 2008 was $1.2 million, or $0.12 per diluted share,
compared to $0.6 million, or $0.06 per diluted share, in the
comparable period in 2007. "In the first nine months of 2008 we
matched the revenues achieved in the whole of 2007, and we are on
track for a record year in revenues," commented Izhar Dekel, CEO of
Magal. "Despite our strong performance in the first six months of
2008, our third quarter revenues were below our expectations and
negatively affected our profitability. This was primarily due to
some bureaucratic delays with a recently announced US$20 million
Latin-American Fortis project, which was expected to generate
revenues in the third quarter. We believe the delay will be
temporary and hope to start deliveries for this project before the
end of the year." Continued Mr. Dekel, "On a personal note, today I
announced my intention to leave Magal in the coming months. During
my years at the helm of the Company, Magal has become a pioneer in
the security field. Our revenues have diversified internationally,
and we have introduced many new, market leading security products
such as the Fortis, which is currently generating revenues and very
strong interest throughout the world. I leave Magal in a strong
position to continue its growth, building on its leadership and
reputation in the global security market." Results Conference Call
The Company will be hosting a conference call today at 10:00 am ET.
On the call, management will review and discuss the results and
will be available to answer investor questions. To participate,
please call one of the following teleconferencing numbers: US
Dial-in Number: 1-888-281-1167 Israel Dial-in Number: 03-918-0691
UK Dial-in Number: 0-800-917-9141 International Dial-in Number:
+972-3-918-0691 at: 10:00 am Eastern Time; 7:00 am Pacific Time;
3:00pm UK Time; 5:00 pm Israel Time 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/. 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 the Company believes are the principal indicators
of the operating and financial performance of its business. The
non-GAAP financial measures exclude the effects of stock-based
compensation charges recorded in accordance with SFAS 123R as well
as amortization of customer related intangible assets and a loss
associated with a discontinued operation. Management believes the
non-GAAP financial measures provided are useful to investors'
understanding and assessment of the Company'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. 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.
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. 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. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (All
numbers except EPS expressed in thousands of US$) Nine Months Ended
Three months Sept. 30, Ended Sept. 30, 2008 2007 % change 2008 2007
% change Revenues 72,080 49,220 46.4 20,769 21,016 (1.2) Cost of
revenues 45,077 28,673 57.2 12,955 13,291 (2.5) Gross profit 27,003
20,547 31.4 7,814 7,725 1.2 Operating expenses: Research and
development, net 4,777 3,885 23.0 1,623 1,283 26.5 Selling and
marketing 13,790 9,531 44.7 4,863 3,794 28.2 General and
administrative 6,510 4,228 54.0 1,948 1,505 29.4 Special
post-employment benefit 438 960 (54.4) 960 (100.0) Total operating
expenses 25,515 18,604 37.1 8,434 7,542 11.8 Operating income
(loss) 1,488 1,943 (23.4) (620) 183 Financial expense, net 1,782
1,425 25.1 383 981 (60.1) Income (loss) from continuing operations
before income taxes (294) 518 (1,003) (798) 25.7 Income tax 885
1,177 (24.8) 314 749 (58.1) Net Income (loss) from continuing
operations (1,179) (659) 78.9 (1,317) (1,547) (14.9) Loss on
discontinued operations, net 351 336 42 88 (52.3) Net loss (1,530)
(995) 53.8 (1,359) (1,635) (16.9) Basic and diluted loss per share
from continuing operations (0.12)$ (0.07)$ (0.13)$ (0.15)$ Basic
and diluted loss per share from discontinued operations, net
(0.03)$ (0.03)$ (0.00)$ (0.01)$ Basic and diluted net loss per
share (0.15)$ (0.10)$ (0.13) (0.16) FINANCIAL RATIOS Nine Months
Ended Sep.30, Three months Ended Sep.30, 2008 2007 2008 2007 Gross
margin 37.5 41.7 37.6 36.8 Research and development, net as a % of
revenues 6.6 7.9 7.8 6.1 Selling and marketing as a % of revenues
19.1 19.4 23.4 18.1 General and administrative as a % of revenues
9.0 8.6 9.4 7.2 Special post employment benefit 0.6 2.0 - 4.6
Operating margin (loss) 2.1 3.9 (3.0) 0.9 Net income (loss) margin
(before discontinued operation) (1.6) (1.3) (6.3) (7.4) Loss on
discontinued operation (0.5) (0.7) (0.2) (0.4) Net income (loss)
margin (after discontinued operation) (2.1) (2.0) (6.5) (7.8) MAGAL
SECURITY SYSTEMS LTD. Reconciliation of GAAP to Non-GAAP Measures
(All numbers expressed in thousands of US$) Nine Months Ended Three
months Sept. 30, Ended Sept. 30, 2008 2007 2008 2007 GAAP operating
income (loss) 1,488 1,943 (620) 183 Amortization of customer
related intangible assets 2,637 - 537 - Special post employment
benefit 438 960 - 960 Amortization of deferred stock based
compensation 252 20 138 20 Non-GAAP operating income 4,815 2,923 55
1,163 GAAP operating income (loss) as a percentage of revenues 2.1%
3.9% (3.0%) 0.9% Non-GAAP operating income as a percentage of
revenues 6.7% 5.9% 0.3% 5.5% Nine Months Ended Three months Ended
Sep 30, Sep 30, 2008 2007 2008 2007 GAAP net loss (1,530) (995)
(1,359) (1,635) Amortization of customer related intangible assets
2,637 - 537 - Special post employment benefit 438 960 - 960 Loss on
discontinued operation, net 351 336 42 88 Amortization of deferred
stock based compensation 252 20 138 20 Income taxes with respect to
the above items (929) (192) (161) (192) Income taxes with respect
to final tax assessment relating to the years 2001-4 - 500 - 500
Non-GAAP net income (loss) 1,219 629 (803) (259) GAAP net loss as a
percentage of revenues (2.1) (2.0) (6.5) (7.8) Non GAAP net income
(loss) as a percentage of revenues 1.7 1.3 (3.9) (1.2) GAAP basic
and diluted net loss per share (0.15) (0.10) (0.13) (0.16) Non-GAAP
basic and diluted net earnings (loss) per share 0.12 0.06 (0.08)
(0.02) MAGAL SECURITY SYSTEMS LTD. UNAUDITED CONDENSED CONSOLIDATED
BALANCE SHEETS (All numbers expressed in thousands of US$) Sept.
30, December 31, 2008 2007 CURRENT ASSETS: Cash and cash
equivalents 11,665 9,205 Marketable securities 6,017 9,464 Short
term bank deposits 1,448 11,220 Trade receivables 25,578 26,775
Unbilled accounts receivable 5,846 4,053 Other accounts receivable
and prepaid expenses 6,490 5,753 Deferred income taxes 2,916 1,936
Inventories 15,832 23,785 Total current assets 75,792 92,191 Long
term investments and receivables: Long-term trade receivables 1,978
2,019 Long-term loans 980 808 Long-term bank deposits 1,834 1,846
Escrow deposit 921 4,442 Severance pay fund 3,080 2,765 Total
long-term investments and receivables 8,793 11,880 PROPERTY AND
EQUIPMENT, NET 9,080 8,429 DEFERRED INCOME TAXES 2,203 763 OTHER
INTANGIABLE ASSETS, NET 4,371 7,040 GOODWILL 12,905 5,610 ASSETS
ATTRIBUTED TO DISCONTINUED OPERATION 36 244 Total assets 113,180
126,157 CURRENT LIABILITIES: Short-term bank credit 16,130 16,434
Current maturities of long-term bank debt 803 4,303 Trade payables
5,078 7,344 Other accounts payable, accrued expenses and customer
advances 19,354 22,584 Total current liabilities 41,365 50,665
LONG-TERM LIABILITIES: Long-term bank debt 2,493 3,095 Deferred
income taxes 1,127 2,097 Accrued severance pay 4,097 3,873 Total
long-term liabilities 7,717 9,065 LIABILITIES ATRIBUTED TO
DISCONTINUED OPERATION 222 849 SHAREHOLDERS' EQUITY 63,876 65,578
TOTAL LIABILITIES AND SHAREHOLDERS' 113,180 126,157 EQUITY Total
bank debt to total capitalization 0.30 0.36 Current ratio 1.83 1.82
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:
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