Magal Reports Second Quarter 2008 Revenues of $25 Million Representing a 78% Year-Over-Year...

Magal Reports Second Quarter 2008 Revenues of $25 Million Representing a 78%
Year-Over-Year Increase
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: info@gkir.com
E-mail: lian@magal-ssl.com

SOURCE Magal Security Systems Ltd

Contacts: Company Investor Relations, Magal Security Systems, Ltd, Lian
Goldstein, CFO, Tel: +972-3-5391444, Fax: +972-3-5366245, E-mail:
lian@magal-ssl.com GK Investor Relations, Ehud Helft/Kenny Green, Tel:
+1-646-201-9246, E-mail: info@gkir.com