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NAPCO (NSSC) Reports Results for Quarter Ended December 31, 2010

Feb. 14, 2011 (Business Wire) — NAPCO Security Technologies, Inc., (NASDAQ:NSSC), one of the world’s leading suppliers of high performance electronic security equipment for over 40 years, today announced financial results for its second quarter ended December 31, 2010.

Highlights:

Net sales for the second quarter increased 6% to $17,608,000, from $16,641,000 a year ago. For the six months, net sales increased 6% to $32,935,000, from $31,106,000 a year ago.

Adjusted EBITDA* for the second quarter increased 146% to $1,147,000 as compared to $467,000 for the same period a year ago. For the six months ended December 31, 2010, Adjusted EBITDA* increased 1,306% to $1,265,000 from $90,000 for the same period a year ago (see table attached).

Net income for the second quarter increased $1,069,000 or 117.2% to $157,000 or $0.01 per share as compared to the net loss of ($912,000) and ($0.05) for the same period a year ago. Net income for the six months increased $1,753,000 or 64% to $(977,000) or $(.05) per share as compared to $(2,730,000) and $(.14) for the same period a year ago. Per share results are based on 19,096,000 fully diluted weighted average shares for the three and six months ended December 31, 2010 and 2009.

Cash generated by operating activities was approximately $1.0 million for the three months ended December 31, 2010 and $1.2 million for the six months ended December 31, 2010.

Debt, net of cash, has been reduced by $12.5 million from $35.9 million to $23.4 million since acquiring Marks USA in August of 2008. $.8 million of this reduction occurred in the second quarter of fiscal 2011.

Gross Profit for the three months ended December 31, 2010 was $4,690,000, an increase of 17% compared to $3,992,000 for same period a year ago. Gross Profit for the six months ended December 31, 2010 was $8,113,000, an increase of 11% compared to $7,331,000 for same period a year ago.

Selling, general and administrative expenses for the three months ended December 31, 2010 decreased by 6% to $4,159,000 as compared to $4,402,000 for the same quarter a year ago. Selling, general and administrative expenses for the six months ended December 31, 2010 decreased by 9% to $8,299,000 as compared to $9,094,000 for the same period a year ago.

Operating income for the three months ended December 31, 2010 increased by $941,000 to $531,000 as compared to $(410,000) for the same quarter a year ago. Operating income for the six months ended December 31, 2010 improved by $1,577,000 to $(186,000) as compared to $(1,763,000) for the same period a year ago.

Richard Soloway, Chairman and President, stated, “Since concluding the extended negotiations on our restructured debt agreement in October, we have turned our full focus on sales growth, new products and continued expense reductions. As a result, our second quarter saw increases in sales, gross profit and net income as compared to the second quarter a year ago. In addition, selling, general and administrative and interest expenses in the second quarter were reduced by $429,000 as compared to the same three months last year.”

Mr. Soloway added “Our second quarter saw the introduction by Marks USA of BHMA certified, Grade 1 door closers and Grade 1 and 2 exit devices. These two critical product areas, combined with Marks’ legendary Grade 1 and 2 mortise locksets, provide the Company with a formidable “triple play” of products when specifying new construction projects or selling to contract hardware dealers. This triad of key product areas positions Marks powerfully in providing its customers with a “one supplier” marketing approach.”

Mr. Soloway continued “Initial orders for our new NAPCO Commercial ™ product line have been very promising. The product line provides intrusion and fire alarm dealers with the most advanced, integrated line of 8 to 255 point addressable, analog, commercial, wired or wireless, fire, intrusion, or combination fire/intrusion control panels, in its category. The national rollout is providing incremental interest and applications to NAPCO in the form of banks, hospitals, office buildings, retail outlets and other commercial venues. NAPCO Commercial has provided the Company with a strong entry in the robust, high margin, commercial fire/intrusion/life safety market segment.”

“Our Company’s line of service-driven, recurring revenue generating products continues to grow nicely in sales volume. The introduction of our wireless iSee Video™ product line has made it easier than ever for dealers to install video capabilities in residential and business applications and reap service revenues generated by providing an interactive viewing service, from their cell phones, iTablets or personal computers, to their consumers.”

“Two major product initiatives will be launched in early summer. First, our 2-way, uploading/downloading, next generation of Starlink™ Wireless, GSM Communicators will provide dealers with the ability to do away with the need for traditional phone lines to communicate alarms. Next, NAPCO will launch its new iBridge™ Online Remote Services, suite of products. This product line will provide consumers with the ability to view video cameras and recordings, control thermostats and appliances, operate lighting and interact with their alarm systems, remotely from any cell phone, iTablet, personal computer or any other product that provides online, internet communications. The product will use an advanced 7-inch, wireless iTablet to interact locally with the system. Both of these product introductions will be oriented toward delivering recurring revenue income streams for the Company.”

Mr. Soloway concluded, “We are pleased that our recent efforts have begun to generate both higher sales and higher profitability. As we continue these efforts, we are hopeful that they will result in further improvements in all areas. We believe this, combined with our large network of security dealers who install our extensive and technologically advanced line of products, puts us in a much healthier position as economic conditions improve and market demand increases. We are confident that our restructured operations will allow us to grow stronger as the world markets rebound from the economic crisis of the past few years.”

NAPCO will host a conference call for the investment community today, 2/14/2011, at 11:00 AM EST. Interested parties may participate in the call by dialing (877) 407-8291; international callers dial (201) 689-8345 about 5 – 10 minutes prior to 11:00 AM EST. The conference call will also be available on replay starting at 3:00 PM EST on February 14, 2011 and ending on February 28, 2011. For the replay, please dial (877) 660-6853 (replay account #332, replay conference #366270). The access number for the replay for international callers is (201) 612-7415 (replay account #332, replay conference #366270).

About NAPCO Security Technologies, Inc.

NAPCO Security Technologies, Inc. is one of the world’s leading manufacturers of technologically advanced electronic security equipment including intrusion and fire alarm systems, access control and door locking systems. The Company consists of NAPCO plus three wholly-owned subsidiaries: Alarm Lock, Continental Instruments, and Marks USA. The products are installed by security professionals worldwide in commercial, industrial, institutional, residential and government applications. NAPCO products have earned a reputation for technical excellence, reliability and innovation, poising the Company for growth in the rapidly expanding electronic security market, a multi-billion dollar market.

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 TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS December 31, 2010 June 30, 2010
(unaudited) (audited)
(In thousands except share data)
CURRENT ASSETS
Cash and cash equivalents $ 2,777 $ 5,522
Accounts receivable, net of reserves 13,736 17,740
Inventories 18,726 17,370
Prepaid expenses and other current assets 776 947
Income tax receivable 1,207 785
Deferred income taxes 448 448
Total Current Assets 37,670 42,812
Inventories – non-current, net 5,787 6,712
Deferred income taxes 1,672 1,842
Property, plant and equipment, net 7,863 8,106
Intangible assets, net 13,293 13,870
Other assets 295 326
TOTAL ASSETS $ 66,580 $ 73,668
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 2,679 $
Loan payable 29,849
Accounts payable 3,562 5,320
Accrued expenses 1,973 2,242
Accrued salaries and wages 1,452 1,899
Total Current Liabilities 9,666 39,310
Long-term debt, net of current maturities 23,491
Accrued income taxes 121 116
Total Liabilities 33,278 39,426
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Common Stock, par value $0.01 per share; 40,000,000 shares authorized; 20,095,713 shares issued; 19,095,713 shares outstanding 201 201
Additional paid-in capital 14,043 14,006
Retained earnings 24,673 25,650
38,917 39,857
Less: Treasury Stock, at cost (1,000,000 shares) (5,615 ) (5,615 )
TOTAL STOCKHOLDERS’ EQUITY 33,302 34,242
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 66,580 $ 73,668
NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three months ended December 31, Six months ended December 31,
2010 2009 2010 2009
(In thousands, except share and per share data)
Net sales $ 17,608 $ 16,641 $ 32,935 $ 31,106
Cost of sales 12,918 12,649 24,822 23,775
Gross Profit 4,690 3,992 8,113 7,331
Selling, general, and administrative expenses 4,159 4,402 8,299 9,094
Operating Income (Loss) 531 (410 ) (186 ) (1,763 )
Other expense:
Interest expense, net 411 597 1,005 1,168
Other, net 14 (34 ) 28 (20 )
425 563 1,033 1,148
Income (Loss) before Benefit for Income Taxes 106 (973 ) (1,219 ) (2,911 )
Benefit for income taxes (51 ) (61 ) (242 ) (181 )
Net Income (Loss) $ 157 $ (912 ) $ (977 ) $ (2,730 )
Income (Loss) per share:
Basic $ 0.01 $ (0.05 ) $ (0.05 ) $ (0.14 )
Diluted $ 0.01 $ (0.05 ) $ (0.05 ) $ (0.14 )
Weighted average number of shares outstanding:
Basic 19,096,000 19,096,000 19,096,000 19,096,000
Diluted 19,096,000 19,096,000 19,096,000 19,096,000
NAPCO SECURITY TECHNOLOGIES, INC.
NON-GAAP MEASURES OF PERFORMANCE* (Unaudited)
(in thousands)
3 months ended December 31, 6 months ended December 31,
2010 2009 2010 2009
Net Income (Loss) (GAAP) $ 157 $ (912 ) $ (977 ) $ (2,730 )
Add back (benefit) provision for income taxes (51 ) (61 ) (242 ) (181 )
Add back interest and other expense 425 563 1,033 1,148
Operating Income (Loss) (GAAP) 531 (410 ) (186 ) (1,763 )
Adjustments for non-GAAP measures of performance:
Add back amortization of acquisition-related intangibles 288 335 576 670
Add back stock-based compensation expense 15 63 38 132
Add back costs relating to Marks acquisition and consolidation 216 238
Add back costs associated with waivers and amendments to credit facilities 34 155 69 168
Adjusted non-GAAP Operating Income (Loss) 868 143 713 (555 )
Add back depreciation 279 324 552 645
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) $ 1,147 $ 467 $ 1,265 $ 90

* Non-GAAP Information. Certain non-GAAP measures are included in this press release, including EBITDA, non-GAAP operating income and Adjusted EBITDA. We define EBITDA as GAAP net income (loss) plus income tax expense (benefit), net interest expense and depreciation and amortization expense. Non-GAAP operating income does not include impairment of goodwill, amortization of intangibles, restructuring charges, stock-based compensation expense and other infrequent or unusual charges. These non-GAAP measures are provided to enhance the user’s overall understanding of our financial performance. By excluding these charges our non-GAAP results provide information to management and investors that is useful in assessing NAPCO’s core operating performance and in comparing our results of operations on a consistent basis from period to period. The presentation of this information is not meant to be a substitute for the corresponding financial measures prepared in accordance with generally accepted accounting principles. Investors are encouraged to review the reconciliation of GAAP to non-GAAP financial measures included in the above.

NAPCO Security Technologies, Inc.

Richard L. Soloway, CEO

or

Kevin S. Buchel, Senior VP

631-842-9400 ext. 120

or

Wolfe Axelrod Weinberger Assoc. LLC

Donald Weinberger

or

Diana Bittner (Media)

212-370-4500; 212-370-4505 fax

don@wolfeaxelrod.com

Monday, February 14th, 2011 Uncategorized
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