The year end numbers will have numerous write downs.
MAGAL SECURITY SYSTEMS ANNOUNCES THAT IT EXPECTS TO INCUR NON-CASH WRITE-OFFS AND ESTABLISH RESERVES FOR TERMINATION EXPENSES YAHUD, ISRAEL, March 13, 2009 -- Magal Security Systems Ltd. (NASDAQ GMS: MAGS, TASE: MAGS) today announced that it expects to incur up to approximately $21.5 million in non-cash charges and reserves in its fourth quarter 2008 results, which will primarily reduce the value of certain non-tangible assets on its balance sheet. Among the expected charges is an approximate $4 million reduction in a deferred tax asset. Taking into account developments in global markets over the past few months and the shrinkage of budgets manifested by reduced product demand, management believes that a write-down will be necessary. As the market situation improves, the company may be able to use this deferred tax asset based on expected profit levels. The Company believes that it will be required to record a goodwill impairment charge with respect to a goodwill asset of $12.5 million established in connection with the acquisition of a company in Europe. The recorded backlog for the European company is lower than expected and it is not clear if its operations will be able to recover to a level where its value will justify the goodwill figure. These factors triggered the need for an impairment analysis of the goodwill, which is expected to be completed in the next few months. In addition to the above non-tangible asset charges is an approximate $2.5 million reserve to be recorded on the Company’s balance sheet for future termination costs associated with the departure of the Company's former CEO as well as other executives. Management believes that an approximate $1.5 million provision for slow moving inventory will be required, resulting from the consolidation of inventory from different subsidiaries as well as identifying slow moving products that may not be sellable due to the global economic contraction, including in the markets in which the Company operates. Management also believes that as a result of the effects of the global economic slowdown on some of its customers and business partners, it will need to increase its reserves for doubtful accounts by approximately $1 million. The Company expects to publish its fourth quarter 2008 financial results as well as its 2008 audited annual results, together with the filing of its annual report on Form 20-F with the Securities and Exchange Commission, in June 2009. The publication and filing will be followed by a conference call with investors. The timing of the conference call will be announced separately.