NAPCO Reports Results for Quarter Ended September 30, 2011

Management to Host Conference Call Today at 11AM ET

AMITYVILLE, N.Y.--(BUSINESS WIRE)--NAPCO Security Technologies, 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 first quarter ended September 30, 2011.

Highlights:

Net sales for the first quarter increased 6% to $16,203,000, from $15,327,000 for the same period a year ago.

Adjusted EBITDA* for the first quarter increased $283,000 or 240% to $401,000 as compared to $118,000 for the same period a year ago (see table attached).

Net income for the first quarter increased $967,000 or 85% to ($167,000) or ($0.01) per share as compared to ($1,134,000) or ($0.06) per share for the same period a year ago. Per share results are based on 19,096,000 fully diluted weighted average shares for the three months ended September 30, 2011.

Cash generated by operating activities was approximately $0.8 million for the three months ended September 30, 2011 as compared to $0.2 million for the same period a year ago.

Debt, net of cash, has been reduced by $16.0 million from $35.9 million to $19.9 million since acquiring Marks USA in August of 2008, $0.9 million of which occurred in the first quarter.

Gross Profit for the three months ended September 30, 2011 was $4,156,000, an increase of 21% compared to $3,423,000 for same period a year ago.

Selling, general and administrative expenses for the three months ended September 30, 2011 increased by 4% to $4,298,000 as compared to $4,140,000 for the same quarter a year ago.

Operating income for the three months ended September 30, 2011 increased by $575,000 to $(142,000) as compared to $(717,000) for the same quarter a year ago.

Richard Soloway, Chairman and President, stated, “Our first quarter saw the positive trends from fiscal 2011 continue, including increases in sales, gross profit and net income as compared to the first quarter a year ago. Historically, our quarters get stronger as the fiscal year progresses. We continue to work on reducing our debt levels, as well as interest expense, which decreased by $290,000 in the first quarter as compared to the same three months last year. The increase in selling, general and administrative expenses for the three months was due primarily to tradeshow expenses that occurred in the quarter ended September 30, 2011. In the prior fiscal year, these tradeshow expenses occurred in the quarter ended December 31, 2010.”

“The initiatives that the Company began implementing in fiscal 2010 have resulted in increased sales levels, higher operating efficiencies and improved profitability. In addition, we received an overwhelmingly enthusiastic reception to the debut of our Fusion™ integrated commercial platform, at last week’s International Security Conference Trade Show. This innovative concept in security fuses intrusion, fire, access control and wireless locking systems all into a singular, easily installed, programmed and monitored industrial platform. Our integrators and dealers will be able to work with the most cost-effective, labor-saving and complete commercial product option available on the market today.”

“Also, the demand for our new, cost-effective, Starlink™ Wireless GSM Communicator has been nothing less than stellar. With the accelerating decline in the use of traditional phone lines, this product will enable our dealers to provide a reliable communication path for alarm signals, as well as remotely trouble-shoot and program their customers’ alarm systems. Additionally, this will provide an incremental recurring income stream to both NAPCO and our dealers.”

Mr. Soloway added, “Our other powerful entry into the recurring revenue generating sector, unveiled at ISC East, is our new iBridge™ Remote Services product. This product gives homeowners the ability to monitor and control their alarm system, video cameras, thermostat and lighting from any smart phone or computer, from anywhere, at anytime. An additional iBridge option includes a wireless, 7-inch touch-screen control center, for in-home operation of those systems.”

“Marks USA also introduced its new Locdown™ battery powered, wirelessly controlled line of locks at ISC East. This product enables schools, college campuses and other public facilities to cost-effectively retrofit their existing locking hardware with remote controlled versions. These locks can then be instantaneously locked down in the event of an emergency, at the master controller level or by the use of individual, hand-held key fobs.”

Mr. Soloway concluded, “With these exciting new products and our restructured and streamlined operations I see our Company as optimally aligned to continue these positive trends and to further take advantage of our position as a technological leader in the security industry as economic conditions improve.”

Conference Call Details

NAPCO will host a conference call for the investment community today, 11/7/2011, at 11:00 AM ET. Interested parties may participate in the call by dialing [phone]; international callers dial [phone] about 5 – 10 minutes prior to 11:00 AM ET. The conference call will also be available on replay starting at 1:00 PM ET on November 7, 2011 and ending on November 21, 2011. For the replay, please dial [phone] (replay account #332, replay conference #382625). The access number for the replay for international callers is [phone] (replay account #332, replay conference #382625).

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	September 30, 2011			June 30, 2011
	(unaudited)			(audited)
	(In thousands except share data)
CURRENT ASSETS
Cash and cash equivalents	$	2,972			$	3,077
Accounts receivable, net of reserves		15,178				17,640
Inventories		22,096				19,986
Prepaid expenses and other current assets		676				950
Income tax receivable		368				0
Deferred income taxes		544				528
Total Current Assets		41,834				42,181
Inventories - non-current, net		4,155				4,201
Deferred income taxes		2,031				2,083
Property, plant and equipment, net		7,519				7,741
Intangible assets, net		12,050				12,316
Other assets		288				273
TOTAL ASSETS	$	67,877			$	68,795
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt	$	12,172	*		$	3,572
Accounts payable		5,892				4,649
Accrued expenses		2,118				2,553
Income tax payable		--				437
Accrued salaries and wages		1,537				1,785
Total Current Liabilities		21,719				12,996
Long-term debt, net of current maturities		10,712				20,205
Accrued income taxes		177				165
Total Liabilities		32,608				33,366
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		14,079				14,072
Retained earnings		26,604				26,771
		40,884				41,044
Less: Treasury Stock, at cost (1,000,000 shares)		(5,615	)			(5,615	)
TOTAL STOCKHOLDERS' EQUITY		35,269				35,429
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	67,877			$	68,795

* Our existing revolving line of credit expires in August 2012. Accordingly, we have classified its balance as a current liability as of September 30, 2011. We plan to refinance or extend this line prior to its expiration date.

NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
	Three months ended September 30,
	2011			2010
	(In thousands, except share and per share data)
Net sales	$	16,203		$	15,327
Cost of sales		12,047			11,904
Gross Profit		4,156			3,423
Selling, general, and administrative expenses		4,298			4,140
Operating Loss		(142	)		(717	)
Other expense:
Interest expense, net		304			594
Other, net		14			14
		318			608
Loss before Benefit for Income Taxes		(460	)		(1,325	)
Benefit for income taxes		293			191
Net Loss	$	(167	)	$	(1,134	)
Loss per share:
Basic	$	(0.01	)	$	(0.06	)
Diluted	$	(0.01	)	$	(0.06	)
Weighted average number of shares outstanding:
Basic		19,096,000			19,096,000
Diluted		19,096,000			19,096,000

NAPCO SECURITY TECHNOLOGIES, INC.
NON-GAAP MEASURES OF PERFORMANCE* (Unaudited)
(in thousands)
	3 months ended September 30,
	2011			2010
Net loss (GAAP)	$	(167	)	$	(1,134	)
Less benefit for income taxes		(293	)		(191	)
Add back interest and other expense		318			608
Operating loss (GAAP)		(142	)		(717	)
Adjustments for non-GAAP measures of performance:
Add back amortization of acquisition-related intangibles		266			288
Add back stock-based compensation expense		7			23
Add back costs relating to Marks acquisition and consolidation		--			216
Add back costs associated with waivers and amendments to credit facilities		--			35
Adjusted non-GAAP operating income (loss)		131			(155	)
Add back depreciation		270			273
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization)	$	401		$	118

* 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.