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Magal Security Systems Reports: Third Quarter 2012 Financial Results

November 29, 2012

YAHUD, Israel, November 29, 2012 /PRNewswire/ –

Magal S3 Ltd. (NASDAQ GMS: MAGS) today announced its financial results for the three
and nine month period ended September 30, 2012. Management will hold an investors’
conference call later today, at 9:00 a.m. Eastern Time and 4:00 p.m. Israel time, to
discuss the results.

THIRD QUARTER 2012 RESULTS SUMMARY

Revenues for the third quarter of 2012 were $23.5 million, a decrease of 15% compared
with revenues of $27.7 million in the third quarter of 2011. The third quarter of 2011 was
exceptional due to a particularly large project in Africa, that was delivered within a
short period of time. On a sequential basis, revenues in the third quarter of 2012
increased by 43% compared with $16.4 million in the second quarter of 2012.

Gross profit in the third quarter was $9.7 million, or 41.3% of revenues, a decrease
of 26% compared to gross profit of $13.1 million, or 47.2% of revenues, in the third
quarter of 2011. The higher gross profit in the third quarter of 2011 was due to the large
project in Africa. Gross profit in the third quarter of 2012 increased 34% compared to
gross profit of $7.2 million, or 44.1% of revenues in the second quarter of 2012. The
variance in the gross margin between quarters reflects changes between products and
projects in the revenue mix.

Operating profit in the third quarter was $1.7 million, or 7.3% of revenues, compared
to an operating profit of $5.6 million, or 20.4% of revenues, in the third quarter of 2011
and operating profit of $474 thousand, or 2.9% of revenues, in the second quarter of 2012.

Net income in the third quarter was $1.8 million, or $0.11 per share, compared with
net income of $7.1 million, or $0.61 per share, in the third quarter of 2011 and net
income of 938 thousand, or $0.06 per share in the second quarter of 2012.

Cash and short term deposits, net of current bank debt, as of September 30, 2012,
increased to $39.2 million, or $2.44 per share, compared with cash and short term
deposits, net of current bank debt, of $32.5 million, or $2.06 per share, on December 31,
2011.

MANAGEMENT COMMENT

Commenting on the results, Mr. Eitan Livneh, President and CEO of Magal said, “We have
shown continued sequential improvements in revenue throughout 2012 and have continued to
build our profitability throughout the year. While our results in the second half of last
year were exceptionally good due to the short delivery timeframe of the Africa Cup of
Nations project, we are now executing on a much improved business platform than in
previous years. We are very proud of our achievements and in the solid turnaround of our
business over the past two years.”

Continued Mr. Livneh, “During the quarter, we continued to progress on a strategic
basis which we believe assures our long-term future. We began offering cyber protection
solutions by teaming with other technology companies to deliver turnkey cyber security
solutions for critical sites in addition to the physical security we already provide. This
enables us to offer a fully integrated suite of protection for customers in both the
physical and online worlds. We have also continued to focus on cementing our presence in
various key strategic regions globally. As always, we continue to look for other adjacent
and synergistic markets that we can enter and bring significant value. With close to $40
million in net cash, our strong and growing cash levels provide us with greater
flexibility and we are in a strong position to capitalize on opportunities as they may
arise.”

INVESTORS’ CONFERENCE CALL INFORMATION:

The Company will host a conference call later today, November 29, 2012, at 9:00 a.m.
Eastern Time and 4:00 p.m. Israel time.

To participate, please call one of the following teleconferencing numbers:

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

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.

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 solutions and products for physical
and cyber security, safety and site management. Over the past 42 years, Magal S3 has
delivered tailor-made solutions and turnkey projects to hundreds of satisfied customers in
over 80 countries in some of the world’s most demanding locations.

Magal S3 offers holistic and integrated solutions for critical sites, managed by
Fortis4G – our 4th generation cutting edge Physical Security Information Management system
(PSIM). The solutions leverage our broadest portfolio of unique homegrown Perimeter
Intrusion Detection Systems (PIDS), advanced outdoors CCTV / IVA technology and holistic
Cyber Security solutions.

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.

MAGAL S3 LTD.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

                                 Nine Months                      Three Months
                             Ended September 30,               Ended September 30,
                                                 %                             %
                             2012        2011 change       2012        2011  change
        Revenue           $55,470     $54,860    1.1    $23,490     $27,660  (15.1)
        Cost of
        revenue            32,085      30,805    4.2     13,797      14,608    (5.6)
        Gross profit       23,385      24,055   (2.8)     9,693      13,052   (25.7)
        Operating
        expenses:
        Research and
        development,
        net                 3,113       2,918    6.7      1,043       1,000     4.3
        Selling and
        marketing          12,575      12,382    1.6      4,581       5,645   (18.8)
        General and
        administrative      5,366       6,251  (14.2)     2,347       3,073   (23.6)
        Other income            -      (2,310)                -      (2,310)
        Total
        operating
        expenses           21,054      19,241    9.4      7,971       7,408     7.6
        Operating
        income              2,331       4,814             1,722       5,644
        Financial
        income, net           480         829                38       1,227
        Income before
        income taxes        2,811       5,643             1,760       6,871
        Income tax
        expense
        (benefit)              44          55               (23)       (199)
        Net income          2,767       5,588             1,783       7,070
        Basic net
        earnings per
        share               $0.17       $0.52             $0.11       $0.61
        Diluted net
        earnings per
        share               $0.17       $0.52             $0.11       $0.61
        Weighted
        average number
        of shares used
        in computing
        basic net
        earnings per
        share          15,974,044  10,794,696        16,053,490  11,579,325
        Weighted
        average number
        of shares used
        in computing
        basic net
        earnings per
        share          16,012,647  10,794,696        16,066,440  11,579,325

                           Nine Months ended              Three Months ended
                             September 30,                   September 30,
                             2012        2011                2012      2011
                                %           %                 %         %
        Gross margin         42.2        43.8              41.3      47.2
        Research and
        development,
        net as a % of
        revenues              5.6         5.3               4.4       3.6
        Selling and
        marketing as a
        % of revenues        22.7        22.6              19.5      20.4
        General and
        administrative
        as a % of
        revenues              9.7        11.4              10.0      11.1
        Operating
        margin                4.2         8.8               7.3      20.4
        Net margin            5.0        10.2               7.6      25.6

MAGAL S3 LTD.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(All numbers expressed in thousands of US$)


                                                   September 30,   December 31,
                                                           2012           2011
        CURRENT ASSETS:
        Cash and cash equivalents                       $38,154        $32,622
        Short-term bank deposit                           3,779          3,005
        Restricted deposit                                2,453          2,299
        Trade receivables, net                           12,089         13,230
        Unbilled accounts receivable                      2,819          4,855
        Other accounts receivable and prepaid expenses    4,025          5,438
        Deferred income taxes                               546            508
        Inventories                                       9,827          9,664
        Total current assets                             73,692         71,621
        Long term investments and receivables:
        Long-term trade receivables                       1,158          1,423
        Long-term deposits and restricted bank
        deposits                                              6          2,202
        Severance pay fund                                2,071          2,121
        Total long-term investments and receivables       3,235          5,746
        PROPERTY AND EQUIPMENT, NET                       6,668          6,460
        OTHER INTANGIABLE ASSETS, NET                       176            190
        GOODWILL                                          2,000          1,970
        Total assets                                    $85,771        $85,987
        CURRENT LIABILITIES:
        Short-term bank credit                           $5,115         $5,357
        Current maturities of long-term bank debt            32             33
        Trade payables                                    7,155          6,724
        Customer advances                                 4,827          5,877
        Other accounts payable and accrued expenses      10,157         13,137
        Total current liabilities                        27,286         31,128
        LONG-TERM LIABILITIES:
        Long-term bank debt                                  40             38
        Deferred income taxes                               205            205
        Accrued severance pay                             3,083          3,605
        Total long-term liabilities                       3,328          3,848
        SHAREHOLDERS' EQUITY
        Ordinary shares of NIS 1 par value -
        Authorized: 39,748,000 shares at
        September 30, 2012 and December 31, 2011;
        Issued and outstanding: 16,053,490 shares at
        September 30, 2012
        and 15,819,822 shares at December 31, 2011        4,877          4,813
        Additional paid-in capital                       65,999         64,920
        Accumulated other comprehensive income            5,383          4,486
        Foreign currency translation adjustments
        (Company's stand alone
        financial statements)                               (58)           603
        Accumulated deficit                             (21,044)       (23,811)
        TOTAL SHAREHOLDERS' EQUITY                       55,157         51,011
        TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY      $85,771        $85,987

        For more information:

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

        CCG Investor Relations
        Ehud Helft/Kenny Green
        Tel: (US) +1-646-201-9246
        E-mail: magal@ccgisrael.com

SOURCE Magal Security Systems Ltd


Source: PR Newswire