Magal Security Systems Reports Fourth Quarter 2008 and Year-End 2008 Financial Results

YAHUD, Israel, July 13  /PRNewswire-FirstCall/ -- Magal Security Systems Ltd. (NASDAQ GMS: MAGS, TASE: MAGS) today announced its consolidated financial results for the three and twelve months periods ended December 31, 2008. Management will hold an investors' conference call later today, at 10am ET Time, 5pm Israel time, to discuss the results.

FOURTH QUARTER 2008 RESULTS

Revenues for the fourth quarter of 2008 totaled US$29.9 million, an increase of 29.1% over the fourth quarter of 2007.

Gross profit for the fourth quarter of 2008 decreased by 22.8% compared with the fourth quarter of 2007, reaching US$6.4 million, or 21.5% of revenues. Gross margin for the quarter was negatively impacted by inventory write off of US$ 2.0 million, compared with US$646,000 in 2007 following the cancellation of a project in Latin America and the write off of certain products and equipment in the Company's North American R&D and manufacturing activities. Gross margin was also impacted by the relatively low gross margin generated by the Company's European system integration subsidiary, consolidated as of September 2007.

Operating loss for the fourth quarter of 2008 was US$21.4 million, compared with operating income of US$763,000 in the fourth quarter of 2007. The quarterly operating loss is attributable to the increase in cost of revenues, impairment of goodwill and other intangible assets amounting to US$12.9 million as well as one-time post employment and termination benefits expenses of US$2.1 million. The impairment charges were primarily attributable to the European system integration subsidiary (acquired in September 2007) and the reduction in the fair value of our U.S. subsidiary.

Net loss in the fourth quarter of 2008, was US$24.0 million, compared with net income of US$2.9 million in the fourth quarter of 2007. Loss per share for the fourth quarter of 2008 was US$2.31, compared with diluted earnings per share of US$0.28 in the same period last year.

FULL YEAR 2008 RESULTS

Revenues for the year ended December 31, 2008 was US$70.4 million, a 2.8% decrease compared with the previous year. The decrease is primarily attributable to the lower revenues generated by our Latin American subsidiary and a reduction in revenues in the United States.

Gross profit for the year decreased by 26.7% to US$21.2 million, or 30.1% of revenues, compared with US$28.9 million, or 39.9% of revenues, in 2007. This decrease is mainly attributable to the afore-mentioned inventory write offs of US$2.0 million in 2008, the contribution of our European subsidiary as indicated above, the 12.8% appreciation of the Israeli Shekel ("NIS") during 2008 against the U.S. dollar which increased the U.S. dollar value of the Company's NIS denominated expenses as well as a loss provision attributable to two strategic projects.

Operating loss for 2008 was US$28.6 million, compared with operating income of US$2.7 million in 2007. The operating loss was primarily attributable to the one-time impairment of goodwill and other intangible asset charges of US$12.9 million and one-time post employment and termination benefits expenses of US$2.6 million, the majority of which were recorded in the fourth quarter of 2008.

Net loss for 2008 was US$32.6 million compared with net income of US$1.9 million in 2007. Net Loss per share for the year ended December 31, 2008 was US$3.14, compared with diluted earnings per share of US$0.18 in the year 2007.

Commenting on the results, Mr. Yaacov Perry, the Chairman of the Board of Directors of the Company, said: "Magal, a leading international provider of security, safety, site management and intelligence analysis, has undergone deep refocusing measures in recent months,. which were undertaken with a view to better equip the company to continue to grow and expand and meeting the evolving market demands through its premier portfolio. Looking ahead, Magal is now entering the next stage of its development, and I wish the incoming CEO, Eitan Livneh, the best of success in taking the company to the next echelon of growth and success."

INVESTORS' CONFERENCE CALL INFORMATION:

The Company will host a conference call on July 13, 2009 at 10:00am 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. Please begin placing your calls at least 10 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: 1-888-668-9141
  Israel Dial-in Number: 03-918-0610
  UK Dial-in Number: 0-800-917-5108
  International Dial-in Number: [phone]

  at: 10:00am Eastern Time; 3:00pm UK Time; 5:00pm Israel Time




A replay of the call will be available from the day after the call. The link to the replay will be accessible from Magal's website at: http://www.magal-ssl.com/.

About Magal Security Systems Ltd.:

Magal S3i is a leading international solution provider, in the business of Security,

Safety, Site Management and Intelligence analysis. Based on 35 years of experience and interaction with customers, the company has developed a unique set of solutions and products optimized for perimeter, outdoor and general security applications. Magal S3i's turnkey solutions are typically integrated and managed by single sophisticated modular command and control software, supported by expert systems for real-time decision support. Magal S3i's broad portfolio of critical infrastructure and site protection management technologies includes a variety of smart barriers and fences, fence mounted detectors, virtual gates, buried and concealed detection systems as well as a sophisticated protection package for sub-surface intrusion. A world innovator in the development of CCTV, IVA and motion detection technology for outdoor operation, Magal S3i has successfully installed customized solutions and products in more than 75 countries worldwide.

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$)

                        Year Ended December       Quarter Ended December
                                31,                         31,
                      2008      2007      %      2008      2007       %
                                       change                      change

  Revenues          70,355    72,375    (2.8)   29,894    23,155    29.1

  Cost of
   revenues         49,205    43,510    13.1    23,476    14,837    58.2

  Gross profit      21,150    28,865   (26.7)    6,418     8,318   (22.8)

  Operating
   expenses:
  Research and
   development,
   net               6,195     5,764     7.5     1,418     1,879   (24.5)
  Selling and
   marketing        17,179    12,930    32.9     6,952     3,399   104.5
  General and
   administrative   10,888     6,561    66.0     4,378     2,333    87.7
  Impairment of
   goodwill and
   other
   intangible
   assets           12,887         -            12,887         -
  Post
   employment and
   termination
   benefits          2,582       904   185.6     2,144       (56)

  Total
   operating
   expenses         49,731    26,159    90.1    27,779     7,555   267.7

  Operating
   income (loss)   (28,581)    2,706           (21,361)      763
  Financial
   expenses, net     2,006     2,137    (6.1)      224       710   (68.5)

  Income (loss)
   from
   continuing
   operations
   before income
   taxes           (30,587)      569           (21,585)       53
  Income tax
   (tax benefit)     1,618       373   333.8     2,395      (804)

  Net Income
   from
   continuing
   operations      (32,205)      196           (23,980)      857
  Net Income
   (loss) from
   discontinued
   operations         (397)    1,686               (46)    2,022
  Net income
   (loss)          (32,602)    1,882           (24,026)    2,879

  Basic net
   earnings per
   share from
   continuing
   operations       $(3.11)     $0.02           $(2.31)    $0.08
  Basic net
   earnings
   (loss) per
   share from
   discontinued
   operations       $(0.03)     $0.16           $(0.00)    $0.20
  Basic net
   earnings
   (loss) per
   share            $(3.14)     $0.18           $(2.31)    $0.28

  Weighted average number of shares
  outstanding used in computing
   basic net
   earnings per
   share (in
   thousands)       10,397     10,395           10,397    10,397

  Diluted net earnings
   per share from
   continuing
   operations       $(3.11)     $0.02           $(2.31)    $0.08
  Diluted net loss per
   share from
   discontinued
   operations       $(0.03)     $0.16           $(0.00)    $0.20
  Diluted net earnings
   (loss) per share $(3.14)     $0.18           $(2.31)    $0.28
  Weighted average
   number of shares
   outstanding
   used in computing
   diluted net
   earnings per
   share (in
   thousands)       10,397     10,431           10,397    10,398


                 CONDENSED CONSOLIDATED QUARTERLY STATEMENTS
                                OF INCOME

           (All numbers except EPS expressed in thousands of US$)

                                                       2008
                                         Mar.      Jun.      Sept.    Dec.
                                         31,        30,       30,     31,
                                                   (In thousands

  Revenues                            $13,735   $11,319   $15,407  $29,894
  Cost of revenues                      8,900     5,897    10,932   23,476
  Gross profit                          4,835     5,422     4,475    6,418
  Operating expenses:
  Research and development, net         1,625     1,529     1,623    1,418
  Selling and marketing, net            3,142     3,432     3,653    6,952
  General and administrative            2,095     2,467     1,948    4,378
  Impairment of goodwill and other
   intangible assets                        -         -         -   12,887
  Post employment and termination
   benefits                               438         -         -    2,144
  Total operating expenses              7,300     7,428     7,224   27,779
  Operating income (loss)              (2,465)   (2,006)   (2,749) (21,361)
  Financial expenses, net                 984       415       383      224
  Income (loss) before income taxes    (3,449)   (2,421)   (3,132) (21,585)
  Income taxes (tax benefit)             (661)     (374)      258    2,395
  Income (loss) from continuing
  operations                           (2,788)   (2,047)   (3,390) (23,980)
  Loss from discontinued operations,
  net                                    (248)      (61)      (42)     (46)
  Net income (loss)                    (3,036)   (2,108)   (3,432) (24,026)




Management decided to change the accounting method applied to certain projects to the completed-contracts method and to revise the results of operations previously reported for the first three quarters of 2008.

                    CONDENSED CONSOLIDATED BALANCE SHEETS

                 (All numbers expressed in thousands of US$)

                                                 December 31,  December 31,
                                                     2008          2007
  CURRENT ASSETS:
  Cash and cash equivalents                         $ 16,835       $ 9,205
  Marketable securities                                1,000         9,464
  Short term bank deposits                             1,228        11,220
  Restricted deposit                                   3,223             -
  Trade receivables                                   15,800        26,775
  Unbilled accounts receivable                         5,055         4,053
  Other accounts receivable and prepaid expenses       5,214         5,753
  Deferred income taxes                                  714         1,936
  Inventories                                         12,728        23,785
  Cost incurred on long term contracts                 7,646             -
  Total current assets                                69,443        92,191

  Long term investments and receivables:
  Long-term trade receivables                          1,839         2,019
  Long-term loans                                        519           808
  Long-term bank deposits                              1,826         1,846
  Escrow deposit                                         860         4,442
  Severance pay fund                                   2,763         2,765
  Total long-term investments and receivables          7,807        11,880

  PROPERTY AND EQUIPMENT, NET                          8,441         8,429

  OTHER ASSETS, NET                                    2,925         7,803

  GOODWILL                                             1,874         5,610

  ASSETS ATRIBUTED TO DISCONTINUED OPERATION              47           244

  Total assets                                       $90,537      $126,157

  CURRENT LIABILITIES:
  Short-term bank credit                            $ 23,182      $ 16,434
  Current maturities of long-term bank debt              813         4,303
  Trade payables                                      13,145         7,344
  Customer advances                                    1,735        11,703
  Other accounts payable and accrued expenses         14,189       10,,881
  Total current liabilities                           53,064        50,665

  LONG-TERM LIABILITIES:
  Long-term bank debt                                  2,282         3,095
  Deferred income taxes                                  482         2,097
  Accrued severance pay                                3,823         3,873
  Total long-term liabilities                          6,587         9,065

  LIABILITIES ATRIBUTED TO DISCONTINUED OPERATION        168           849

  SHAREHOLDERS' EQUITY                                30,718        65,578

  TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY         $90,537      $126,157



  For more information:

  Magal Security Systems Ltd.
  Zev Morgenstern, CFO
  Tel: [phone]
  E-mail: .

  Web: http://www.magal-ssl.com/

  GK Investor Relations
  Ehud Helft/Kenny Green
  Tel: (US) [phone]
  Int'l dial: [phone]
  E-mail: .


DATASOURCE: Magal Security Systems Ltd



CONTACT:  For more information: Magal Security Systems Ltd., Zev

Morgenstern, CFO, Tel: [phone], E-mail: . Web:

http://www.magal-ssl.com/. GK Investor Relations: Ehud Helft/Kenny Green, Tel:

(US) [phone], Int'l dial: [phone], E-mail: .

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