EX-99.1 2 a5400446ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 NAPCO Announces Third Quarter Results -Third Quarter EPS $0.06 vs. $0.07 Last Year- - Commercial Product Lines Grow, Residential Portion of Intrusion Line Hurt by Slower Housing Starts - - Stock Repurchase Plan of up to One Million Shares Continues - AMITYVILLE, N.Y.--(BUSINESS WIRE)--May 10, 2007--NAPCO Security Systems, Inc., (Nasdaq: NSSC), one of the world's leading suppliers of high performance electronic security equipment for over 30 years, today announced financial results for its third quarter ended March 31, 2007. Net sales for the three months ended March 31, 2007 was $15.6 million as compared to $17.1 million for the same quarter a year earlier, a decrease of 9%. Net income for the quarter was $1.1 million, or $0.06 per diluted share, compared to net income of $1.5 million, or $0.07 per diluted share, for the same year ago period. Net sales for the nine months ended March 31, 2007 was $45.7 million as compared to $48.5 million for the prior year period, a decrease of 6%. Net income for the nine months ended March 31, 2007 was $3.2 million or $0.16 per diluted share, as compared to $3.8 million or $0.18 per diluted share in the prior year period. Net sales for the three and nine months declined due to lower sales of intrusion products in the Company's European markets, domestic residential intrusion sales (which were due, in part, to a soft U.S. housing market) as partially offset by increases in the Company's commercial access control and door-locking products. The effect of reduced sales on Net income was partially offset by a tax benefit of approximately $400,000. Richard Soloway, Chairman and President, noted, "We have seen progress from the steps that we took earlier in the year to improve European sales in the near term, including the realignment of the European sales force in order to get better penetration. While European sales are below last year's level we are encouraged that they exceeded the second quarter amounts, which we believe is the beginning stages of an increased presence in these markets. The lower domestic residential intrusion alarm sales have been affected by the significant decline in housing starts and residential installations. While housing starts have had an affect on our residential sales, the impact has been significantly lessened because a large and growing portion of our sales are commercial, led by access control and door-locking products which we aggressively market in order to enhance our diversification and long-term profitability. In addition to the increased sales, these commercial products are sold at higher margins than the typical residential product. "While Gross Profit margin for the quarter was lower as a result of lower sales and less efficient use of overhead from reduced production levels, Gross Profit margin increased to 37.0% for the first nine months of fiscal 2007 from 36.2% for the same period last year. "The Company's inventory levels increased significantly during the first two quarters of fiscal 2007 and slightly again in the third quarter. As we have reported previously, we produced additional inventory for the following reasons: the level-loading of our manufacturing plant; the support of the introduction of the Company's new Freedom 64 code-less intrusion alarm system, the new Video Gateway product line and several other key new products and; to support internally projected higher sales in the first two quarters of fiscal 2007. The inventory increase has centered on core components and new products. During the third quarter, the Company initiated several steps in order to reduce inventory levels in the coming quarters." Mr. Soloway concluded, "We are extremely confident about our potential long-term growth. We are continuing our Stock Buyback Program of up to one million shares that we announced in March 2007. While the landscape of our industry is ever-changing and short term "speed bumps" certainly exist, our long-term growth prospects remain intact. By providing state-of-the-art, technologically advanced products to an ever expanding population of worldwide security dealers, strategically acquiring growing companies and adding product lines in burgeoning market segments, NAPCO can achieve its long-term objectives of greater sales and profits." About NAPCO Security Systems, Inc. NAPCO Security Systems, Inc. is one of the world's leading manufacturers of technologically advanced -electronic security equipment including intrusion and fire alarm systems, access control systems and electronic locking devices. The Company's products, including those of Alarm Lock and Continental Instruments, feature some of the most popular and best-selling control panels, sensors, locking devices and access control products. They are used in residential, commercial, institutional, industrial and governmental applications. NAPCO security products have earned a reputation for technical excellence, reliability and innovation, poising the Company for revenue growth in the rapidly expanding electronic security market, a market whose current size exceeds $30 billion. For additional information on NAPCO, please visit the Company's Web site at www.napcosecurity.com. This press release contains forward-looking statements that involve numerous risks and uncertainties. Actual results, performance or achievements could differ materially from those anticipated in such forward-looking statements as a result of certain factors, including those set forth in the Company's filings with the Securities and Exchange Commission. Napco Security Systems, Inc and Subsidiaries Condensed Consolidated Statements of Income (Unaudited) Three Months Ended March 31, --------------------------------- 2007 2006 -------------------- ------------ (in thousands, except share and per share data) Net sales $ 15,566 $ 17,085 Cost of sales 10,072 10,729 -------------------- ------------ Gross Profit 5,494 6,356 Selling, general and administrative expenses 4,226 4,032 -------------------- ------------ Operating Income 1,268 2,324 -------------------- ------------ Interest expense, net 168 68 Other expenses, net 4 4 -------------------- ------------ Other expenses 172 72 -------------------- ------------ Income Before Minority Interest and Provision for Income Taxes 1,096 2,252 Minority interest in net loss (income) of subsidiary, net 41 (2) -------------------- ------------ Income Before Provision for Income Taxes 1,137 2,250 Provision for income taxes 5 775 -------------------- ------------ Net Income $ 1,132 $ 1,475 ==================== ============ Earnings per share *: Basic $ 0.06 $ 0.07 ==================== ============ Diluted $ 0.06 $ 0.07 ==================== ============ Weighted average number of shares outstanding *: Basic 20,078,996 19,868,077 ==================== ============ Diluted 20,576,505 20,711,439 ==================== ============ * The 3:2 stock split declared in May 2006 has been retroactively reflected in all 2006 share and per share data. Napco Security Systems, Inc and Subsidiaries Condensed Consolidated Statements of Income (Unaudited) Nine Months Ended March 31, ------------------------- 2007 2006 ------------ ------------ (in thousands, except share and per share data) Net sales $ 45,672 $ 48,488 Cost of sales 28,794 30,958 ------------ ------------ Gross Profit 16,878 17,530 Selling, general and administrative expenses 12,205 11,690 ------------ ------------ Operating Income 4,673 5,840 ------------ ------------ Interest expense, net 377 166 Other expenses, net 13 10 ------------ ------------ Other expenses 390 176 ------------ ------------ Income Before Minority Interest and Provision for Income Taxes 4,283 5,664 Minority interest in net loss of subsidiary, net 95 113 ------------ ------------ Income Before Provision for Income Taxes 4,378 5,777 Provision for income taxes 1,150 2,004 ------------ ------------ Net Income $ 3,228 $ 3,773 ============ ============ Earnings per share *: Basic $ 0.16 $ 0.19 ============ ============ Diluted $ 0.16 $ 0.18 ============ ============ Weighted average number of shares outstanding *: Basic 20,021,196 19,730,146 ============ ============ Diluted 20,673,139 20,581,389 ============ ============ * The 3:2 stock split declared in May 2006 has been retroactively reflected in all 2006 share and per share data. Napco Security Systems, Inc and Subsidiaries Condensed Consolidated Balance Sheets March 31, June 30, ASSETS 2007 (unaudited) 2006 ------------------------------------ -------------------- ----------- (in thousands, except share data) Current Assets: Cash and cash equivalents $ 1,202 $ 2,738 Accounts receivable, less allowance for doubtful accounts 22,343 25,153 Inventories, net 31,784 22,666 Prepaid expenses and other current assets 796 755 Deferred income taxes 1,735 1,531 -------------------- ----------- Total current assets 57,860 52,843 Property, plant and equipment, net 8,967 9,038 Goodwill 9,686 9,686 Other assets 303 155 -------------------- ----------- Total Assets $ 76,816 $ 71,722 ==================== =========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current Liabilities: Accounts payable $ 5,602 $ 6,060 Accrued expenses 1,303 1,372 Accrued salaries and wages 2,092 2,586 Accrued income taxes 1,087 1,877 -------------------- ----------- Total current liabilities 10,084 11,895 Long-term debt 9,200 4,700 Accrued income taxes 1,836 2,243 Deferred income taxes 1,911 1,887 Minority interest in subsidiary 147 147 -------------------- ----------- Total liabilities 23,178 20,872 -------------------- ----------- Stockholders' Equity: Common stock, par value $.01 per share; 40,000,000 shares authorized, 20,090,313 and 19,950,453 shares issued and 19,910,713 and 19,950,453 shares outstanding, respectively 201 200 Additional paid-in capital 13,071 12,568 Retained earnings 41,310 38,082 Less: Treasury Stock, at cost (179,600 shares) (944) - -------------------- ----------- Total stockholders' equity 53,638 50,850 -------------------- ----------- Total Liabilities and Stockholders' Equity $ 76,816 $ 71,722 ==================== =========== CONTACT: NAPCO Security Systems, Inc. Richard Soloway, President, 631-842-9400 ext. 120 Kevin S. Buchel, Senior VP, 631-842-9400 ext. 120 Or Wolfe Axelrod Weinberger Assoc. LLC Donald Weinberger, 212-370-4500 Fax: 212-370-4505 E-mail: don@wolfeaxelrod.com