Net Income on a Non-GAAP Basis for the Second Quarter Increases
108% Year-Over-Year to $0.9 Million YAHUD, Israel, July 30
/PRNewswire-FirstCall/ -- Magal Security Systems Ltd. (Nasdaq GM:
MAGS; TASE: MAGS) today announced its consolidated financial
results for the three and six month periods ended June 30, 2008.
Second Quarter 2008 Results Revenues for the second quarter of 2008
increased 77.6% reaching US$25.0 million, compared to US$14.1
million in the second quarter of 2007. Effective September 1, 2007,
Magal's financial statements consolidate 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
operated by Smart Interactive Systems Inc., the results of this
business were reclassified as discontinued operations. Gross profit
for the second quarter of 2008 increased by 47.6%, reaching US$9.5
million (38.0% of revenues) compared with $6.4 million (45.7% of
revenues) in the second quarter of 2007. Gross margin for the
quarter was adversely affected by the ongoing weakening of the US
dollar against the Israeli Shekel as well as the shift in revenue
mix towards larger scale integration projects. Operating expenses
on a GAAP basis in the second quarter of 2008 were US$8.7 million
or 34.7% of sales, compared to US$5.6 million or 39.6% of revenues
on a non-GAAP and GAAP basis in the second quarter 2007. Operating
expenses on a non-GAAP basis, for the second quarter of 2008,
totalled US$7.6 million or 30.2% of revenues. The operating
expenses for the quarter, on a GAAP basis, included a US$1.1
million amortization of intangible assets relating to a recently
acquired European subsidiary. Operating expenses for the quarter
were also adversely affected by the devaluation of the US dollar
against the Israeli Shekel and the Canadian Dollar, increasing
operating expenses by approximately US$0.7 million for the quarter
compared with the second quarter of 2007. Operating income on a
GAAP basis for the second quarter of 2008 decreased 4.4% reaching
US$0.8 million (3.3% of revenues) compared to US$0.9 million (6.1%
of revenues) in the second quarter of 2007 on a GAAP and non-GAAP
basis. Operating income on a non-GAAP basis for the second quarter
of 2008 increased 125.4% reaching US$1.9 million (7.7% of
revenues). Net income on a GAAP basis for the second quarter of
2008 reached US$0.1 million compared with net income of $0.3
million in the second quarter 2007. Diluted earnings per share on a
GAAP basis in the second quarter of 2008 was $0.01 compared to
$0.03 in the second quarter of 2007. Net income on a non-GAAP
basis, totalled US$0.9 million, compared with non-GAAP net income
of US$0.4 million in the second quarter of 2007. Diluted non-GAAP
earnings per share for the second quarter totalled US$0.09 compared
to non-GAAP diluted earnings per share of US$0.04 in the same
quarter of last year. "We are particularly encouraged by our strong
revenue growth over last year and our improved non-GAAP operating
profitability this quarter," commented Izhar Dekel, CEO of Magal.
"This year is shaping up as an exceptionally strong year in terms
of revenue growth, which increases our confidence in realizing our
target of doubling revenues within the next four to five years. We
are also encouraged by our operating margin improvement which
represents the initial fruits of our efforts to focus on increasing
profitability. At the same time, we are successfully executing on
our strategy of becoming a more project focused company, winning a
number of high profile projects." Continued Mr. Dekel, "Over the
past year, we have won a number of orders for municipal security
systems based on our Fortis system, which is becoming a growth
engine and strong revenue generator for Magal. While the majority
of our project wins have to date been for municipalities in Israel
and there still remains significant potential within Israel, we see
far greater prospects for this system outside of Israel. We have
already won some international orders based on our local success
and we are competing in a number of other international tenders at
magnitudes greater than what we have seen so far." 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.
Results Conference Call The Company will be hosting its quarterly
conference call later today at 9:00am ET. On the call, management
will review and discuss the second quarter 2008 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: +1-866-345-5855
Israel Dial-in Number: 03-918-0688 International Dial-in Number:
+972-3-918-0688 at: 9:00 am Eastern Time; 6:00 am Pacific Daylight
Time; 4:00 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/. 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 (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. CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (All numbers except EPS expressed
in thousands of US$) Six Months Ended Three months Ended June 30,
June 30, 2008 2007 % change 2008 2007 % change Revenues 51,311
28,204 81.9 25,021 14,091 77.6 Cost of 32,122 15,382 108.8 15,514
7,650 102.8 revenues Gross profit 19,189 12,822 49.7 9,507 6,441
47.6 Operating expenses: Research and 3,154 2,602 21.2 1,529 1,148
33.0 development, net Selling and 8,927 5,737 55.6 4,691 3,028 54.9
marketing General and 4,562 2,723 67.5 2,467 1,407 75.3
administrative Special Post 438 employment benefit Total 17,081
11,062 54.4 8,687 5,583 55.6 operating expenses Operating 2,108
1,760 19.8 820 858 (4.4) income Financial 1,399 444 215.1 415 140
196.4 expense, net Income from 709 1,316 (46.1) 405 718 (43.6)
continuing operations before income taxes Income tax 571 428 279
280 Net Income 138 888 (84.5) 126 438 (71.2) from continuing
operations Loss on 309 248 61 96 discontinued operations, net Net
income (171) 640 65 342 (81.0) (loss) Basic and 0.01 0.08 0.01 0.04
diluted net earnings per share from continuing operations Basic and
(0.03) (0.02) (0.005) (0.01) diluted loss per share from
discontinued operations, net Basic and (0.02) 0.06 0.005 0.03
diluted net earnings (loss) per share FINANCIAL RATIOS Six Months
Ended Three months Ended June 30, June 30, 2008 2007 2008 2007
Gross margin 37.4 45.5 38.0 45.7 Research and 6.1 9.2 6.1 8.1
development, net as a % of revenues Selling and 17.4 20.3 18.7 21.5
marketing as a % of revenues General and 8.9 9.7 9.9 10
administrative as a % of revenues Special post 0.9 - - - employment
benefit Operating 4.1 6.2 3.3 6.1 margin Net income (0.3) 2.3 0.3
2.4 margin (after discontinued operation) MAGAL SECURITY SYSTEMS
LTD. Reconciliation of GAAP to Non-GAAP Measures (All numbers
expressed in thousands of US$) Six Months Ended Three months June
30, Ended June 30, 2008 2007 2008 2007 GAAP operating income 2,108
1,760 820 858 Amortization of customer 2,101 - 1,056 - related
intangible assets Special post employment 438 - - benefit
Amortization of deferred 114 - 57 - stock based compensation
Non-GAAP operating income 4,761 1,760 1,933 858 GAAP operating
income as a 4.1% 6.2% 3.3% 6.1% percentage of revenues Non-GAAP
operating income as 9.3% 6.2% 7.7% 6.1% a percentage of revenues
Six Months Three months Ended June 30, Ended June 30, 2008 2007
2008 2007 GAAP net income (loss) (171) 640 65 342 Amortization of
customer 2,101 1,056 related intangible assets Special post
employment 438 benefit Loss on discontinued 309 248 61 96
operation, net Amortization of deferred 114 57 stock based
compensation Income taxes with respect to (768) (332) the above
items Non-GAAP net income 2,023 888 907 438 GAAP net income (loss)
as a (0.3) 2.3 0.3 2.4 percentage of revenues Non GAAP net income
as a 3.9 3.1 3.6 3.1 percentage of revenues GAAP basic and diluted
net (0.02) 0.06 0.005 0.03 earnings (loss) per share Non-GAAP basic
and diluted 0.19 0.08 0.09 0.04 net earnings per share MAGAL
SECURITY SYSTEMS LTD. UNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEETS (All numbers expressed in thousands of US$) June 30,
December 31, 2008 2007 CURRENT ASSETS: Cash and cash equivalents
12,220 9,205 Marketable securities 9,732 9,464 Short term bank
deposits 4,496 11,220 Trade receivables 24,282 26,775 Unbilled
accounts receivable 5,204 4,053 Other accounts receivable and
prepaid 6,935 5,753 expenses Deferred income taxes 2,479 1,936
Inventories 16,884 23,785 Total current assets 82,232 92,191 Long
term investments and receivables: Long-term trade receivables 2,076
2,019 Long-term loans 919 808 Long-term bank deposits 1,834 1,846
Escrow deposit 992 4,442 Severance pay fund 2,853 2,765 Total
long-term investments and 8,674 11,880 receivables PROPERTY AND
EQUIPMENT, NET 8,987 8,429 DEFERRED INCOME TAXES 2,220 763 OTHER
INTANGIABLE ASSETS, NET 5,277 7,040 GOODWILL 12,847 5,610 ASSETS
ATRIBUTED TO DISCONTINUED 60 244 OPERATION Total assets 120,297
126,157 CURRENT LIABILITIES: Short-term bank credit 15,183 16,434
Current maturities of long-term bank 4,303 4,303 debt Trade
payables 4,192 7,344 Other accounts payable, accrued 16,966 22,584
expenses and customer advances Total current liabilities 40,644
50,665 LONG-TERM LIABILITIES: Long-term bank debt 2,695 3,095
Deferred income taxes 4,029 2,097 Accrued severance pay 4,135 3,873
Total long-term liabilities 10,859 9,065 LIABILITIES ATRIBUTED TO
DISCONTINUED 246 849 OPERATION SHAREHOLDERS' EQUITY 68,548 65,578
TOTAL LIABILITIES AND SHAREHOLDERS' 120,297 126,157 EQUITY Total
bank debt to total 0.32 0.36 capitalization Current ratio 2.02 1.82
Contacts: Company Investor Relations Magal Security Systems, Ltd GK
Investor Relations Lian Goldstein, CFO Ehud Helft/Kenny Green Tel:
+972-3-5391444 Tel: +1-646-201-9246 Fax: +972-3-5366245 E-mail:
E-mail: DATASOURCE: Magal Security Systems Ltd CONTACT: Contacts:
Company Investor Relations, Magal Security Systems, Ltd, Lian
Goldstein, CFO, Tel: +972-3-5391444, Fax: +972-3-5366245, E-mail:
GK Investor Relations, Ehud Helft/Kenny Green, Tel:
+1-646-201-9246, E-mail:
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