Magal Security Systems Reports Fourth Quarter 2010 and Year-End 2010 Financial Results

YAHUD, Israel, April 11, 2011 /PRNewswire-FirstCall/ -- Magal S3 Ltd. (NASDAQ GMS: MAGS, TASE: MAGS) today announced its financial results for the three and twelve month periods ended December 31, 2010. Management will hold an investors' conference call later today, at 10am Eastern Time and 5pm Israel time, to discuss the results.

FOURTH QUARTER 2010 RESULTS SUMMARY

Revenues for the fourth quarter of 2010 totaled $15.1 million, an increase of 1% compared to the $15.0 million reported in the fourth quarter of 2009, and an increase of 13% compared to the $13.4 million reported in the prior quarter.

Gross profit for the fourth quarter of 2010 was $5.5 million, or 36.6% of revenues. This is compared to a gross profit of $6.2 million, or 41.7% of revenues as reported for the fourth quarter of 2009. The change in gross margin between quarters is due to the change in the sales mix between the quarters.

Operating loss for the fourth quarter of 2010 was reduced to $562,000 compared with an operating loss of $1.0 million reported in the fourth quarter of 2009.

Financing expenses in the quarter amounted to $405,000 compared to $503,000 in the fourth quarter of 2009. Financing expenses in the quarter were due to the interest accumulated on the bridge loan received from the Company's principal shareholder as well as due to changes in the exchange rates of the Israel shekel and Canadian Dollar against the US Dollar.

Taxes on income in the quarter were $556,000 compared with tax expenses of $1 million in the fourth quarter of 2009. The relatively high tax expense in the quarter compared with prior quarters was due the fact that some of the Company's subsidiaries achieved profitable operations in the fourth quarter of 2010. In the fourth quarter of 2009, the Company's tax expense rate was relatively high due to valuation allowances recorded with respect to carry forward tax losses of one of our subsidiaries.

Net loss for the fourth quarter of 2010, was $1.5 million, compared with net income of US$1.7 million in the fourth quarter of 2009, which included income from discontinued operations of US$4.3 million following the sale of a European subsidiary.

Net loss per share in the fourth quarter of 2010 was $0.14, compared with net income per diluted share of $0.16 in the same period last year.

FULL YEAR 2010 RESULTS SUMMARY

Revenues for the year ended December 31, 2010 were US$49.7 million, an 8.8% decrease compared with the previous year. Gross profit for the year was US$18.3 million, representing 36.8% of revenues, compared with US$21.1 million, representing 38.7% of revenues in 2009. Operating loss for 2010 was US$4.7 million, compared with an operating loss of US$2.9 million in 2009.

Net loss for 2010 was US$6.2 million compared with a net loss of US$1.1 million in 2009. Net loss per share for the year ended December 31, 2010 was US$0.60, compared with a net loss per share of US$0.11 in 2009.

As of December 31, 2010, the Company's backlog was $50.2 million, compared with $17.8 million on December 31, 2009.

MANAGEMENT COMMENT

Commenting on the results, Mr. Eitan Livneh, President and CEO of Magal, said, "The continued sequential improvement in some of our quarterly metrics, particularly revenue, point to the fact that we are moving in the right direction. The fourth quarter and the first few months of 2011 have been very eventful for Magal as we won a number of contracts in various emerging markets, particularly Asia, South America and Africa, and we expect to see the revenues and results from these wins in the coming quarters."

Continued Mr. Livneh, "Most important was the year-end $21 million contract we obtained to supply and integrate a security system for the port of Mobassa in Kenya, a highly prestigious project which will be partially financed by the World Bank. We can also point to other recent wins including a security system for another seaport in West Africa, perimeter security systems in an airport and nuclear power stations in various countries in Asia, protection of a federal crisis bunker in South America, and protection of homeland security and other critical sites in Israel. We continue to compete for additional tenders in these regions where we have already substantially proven our capabilities, and we believe that the fruits of our efforts and success will become more apparent as we move into the second half of 2011 and beyond."

INVESTORS' CONFERENCE CALL INFORMATION:

The Company will host a conference call later today, April 11, 2011, at 10:00am Eastern Time.

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: 1-888-668-9141 ; Israel: 03-918-0609 ; UK: 0-800-917-5108 ; Intl.: +972-3-918-0609

A replay of the call will be available from the day after the call for three months. The link to the replay will be accessible from Magal's website at: http://www.magal-s3.com.

About Magal S3

Magal S3 is a leading international provider of security, safety and site management solutions and products (NASDAQ: MAGS).

Over the past 40 years, Magal S3 has delivered tailor-made solutions to hundreds of satisfied customers in over 80 countries.

Magal S3 offers a broad portfolio of unique products used to protect sensitive installations in some of the world's most demanding locations and harshest climates. This portfolio covers the following three categories:

- Perimeter Intrusion Detection Systems (PIDS) - a variety of smart barriers and fences, fence mounted detectors, virtual gates, buried and concealed detection systems

- Close Circuit TV (CCTV) - a comprehensive management platform with a leading Intelligent Video Analysis (IVA) and Video Motion Detection (VMD) engine

- Physical Security Information Management (PSIM) - a proprietary site management system that enhances command, control and decision making during both routine operations and crisis situations

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.

    ** Financial Tables to Follow **

                                  MAGAL S3 LTD.
                   UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
                                  OF INCOME

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


                          Year Ended                 Three months
                          December 31,             Ended December 31,
                       2010     2009     %        2010    2009      %
                                      change                      change

    Revenue         $49,699  $54,518   (8.8)   $15,133  $14,966    1.1

    Cost of revenue  31,400   33,404   (6.0)     9,587    8,726    9.9

    Gross profit     18,299   21,114  (13.3)     5,546    6,240  (11.1)

    Operating
    expenses:
    Research and
    development,
    net               4,105    5,059  (18.8)     1,041    1,508  (31.0)

    Selling and
    marketing        11,261   10,820    4.1      3,355    3,757  (10.7)

    General and
    administrative    7,593    8,100   (6.3)     1,712    2,007  (14.7)

    Total operating
    expenses         22,959   23,979   (4.3)     6,108    7,272  (16.0)

    Operating loss   (4,660)  (2,865)             (562)  (1,031)

    Financial
    expense, net       (967)  (1,568) (38.4)      (405)    (503) (19.5)


    Loss from
    continuing
    operations
    before income
    taxes            (5,627)  (4,433)             (967)  (1,535)

    Income tax         (602)    (864) (30.03)     (556)  (1,013) (45.1)

    Net loss from
    continuing
    operations       (6,229)  (5,297)           (1,523)  (2,547)

    Loss on
    discontinued
    operations, net       -    4,216                 -    4,313

    Net loss         (6,229)  (1,081)           (1,523)   1,766

    Less: net
    income (loss)
    attributable to
    non-controlling
    interest             24      (54)               43      (54)

    Loss
    attributable to
    Magal
    shareholders     (6,205)  (1,135)           (1,480)   1,712

    Basic and
    diluted loss
    per share from
    continuing
    operations       $(0.60)  $(0.52)           $(0.14)  $(0.25)

    Basic and
    diluted loss
    per share from
    discontinued
    operations, net     $--    $0.41                 $-   $0.41

    Basic and
    diluted net
    loss per share   $(0.60)  $(0.11)            $(0.14)  $0.16



                  Twelve Months Ended Dec.       Three months Ended
                         31,                          Dec. 31,
                    2010        2009              2010       2009
                     %            %                %          %

    Gross margin    36.8        38.7              36.6      41.7

    Research and
    development,
    net as a % of
    revenues         8.3         9.3               6.9      10.1

    Selling and
    marketing as a
    % of revenues   22.7        19.8              22.2      25.1

    General and
    administrative
    as a % of
    revenues        15.3        14.9              11.3      13.4

    Operating
    margin          (9.4)       (5.3)             (3.7)     (6.9)

    Net margin
    before
    discontinued
    operation      (12.5)       (9.7)            (10.1)    (17.0)


    Gain on
    discontinued
    operation as a
    % of revenues      -         7.7                 -      28.8

    Net margin
    after
    discontinued
    operation      (12.5)       (2.1)             (9.8)     11.4




                                  MAGAL S3 LTD.
                  UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

                   (All numbers expressed in thousands of US$)



                                                December 31,  December 31,
                                                    2010          2009
    CURRENT ASSETS:
    Cash and cash equivalents                    $ 16,596      $ 11,869
    Short term bank deposits                            -         1,807
    Restricted deposit                              2,692           172
    Trade receivables                              15,106        12,328
    Unbilled accounts receivable                    2,927         5,892
    Other accounts receivable and prepaid
    expenses                                        2,417         1,401
    Deferred income taxes                             474           272
    Inventories                                    10,340        10,912
    Total current assets                           50,552        44,653

    Long term investments and receivables:
    Long-term trade receivables                     1,568         1,753
    Long-term loans                                     -           200
    Long-term bank deposits                         2,196            40
    Severance pay fund                              2,148         2,476
    Total long-term investments and receivables     5,912         4,469

    PROPERTY AND EQUIPMENT, NET                     6,794         9,178

    OTHER INTANGIABLE ASSETS, NET                     213           269

    GOODWILL                                        2,026         2,053

    ASSETS ATTRIBUTED TO DISCONTINUED OPERATION         -            28

    Total assets                                  $65,497       $60,650

    CURRENT LIABILITIES:
    Short-term bank credit                         $9,327       $ 8,234
    Current maturities of long-term bank debt         503         1,824
    Trade payables                                  3,937         4,018

    Customer advanced                               2,428         2,330
    Other accounts payable, accrued expenses and    7,745         7,601
    customer advances
    Total current liabilities                      23,940        24,007

    LONG-TERM LIABILITIES:
    Long-term bank debt                                50           548
    Major Share holder loan                         9,907

    Deferred income                                   190           179
    Accrued severance pay                           3,394         3,562
    Total long-term liabilities                    13,541         4,289

    LIABILITIES ATTRIBUTED TO DISCONTINUED              -            45
    OPERATION

    SHAREHOLDERS' EQUITY                           28,016        32,309

    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY    $65,497       $60,650
    Total bank debt to total                         0.35          0.33
    capitalization
    Current ratio                                    2.11          1.85



    For more information:

    Magal S3 Ltd.
    Eitan Livneh, CEO
    Tel: +972-3-539-1421
    Assistant: Ms. Elisheva Almog
    E-mail: [email protected]
    Web: http://www.magal-s3.com

    CCG Investor Relations
    Ehud Helft/Kenny Green
    Tel: (US) +1-646-201-9246
    Int'l dial: +972-3-607-4717
    E-mail: [email protected]

SOURCE Magal Security Systems Ltd