Kenny Green - GK Investor Relations Eitan Livneh - President and Chief Executive Officer Ilan Ovadia - Chief Financial Officer.

Simon Willis - Private Investor Michael Dissler - Private Investor Mike Hughes - SGS Capital Sam Rebotsky - SER Asset Management.

Ladies and gentlemen, thank you for standing by. Welcome to the Magal’s Fourth Quarter and Full Year 2014 Results Conference Call. All participants are at present in a listen-only mode. Following management’s formal presentation, instructions will be given for the question-and-answer session. As a reminder, this conference is being recorded.

You should have all received by now the company’s press release. If you have not received it, please contact Magal’s Investor Relations team at GK Investor Relations or view it in the news section of the company’s website, www.magal-s3.com. I’d now like to hand over the call to Mr. Kenny Green of GK Investor Relations. Mr.

Green, would you like to begin?.

I’d like to welcome all of you to Magal's fourth quarter and full year 2014 conference call. I'd like also to thank Magal's management for hosting this call. With us on the line today are Mr. Eitan Livneh, President and CEO, and Ilan Ovadia, CFO and Mr. Saar Koursh, incoming CEO.

Eitan will summarize the key highlights followed by Ilan who will review Magal’s financial performance for the quarter. We will then open the call for the question-and-answer session.

Before we start, I’d like to point out that this conference call may contain forward looking projections and other forward-looking statements regarding future events or the future performance of the company. These statements are only predictions and Magal cannot guarantee that they will in fact occur.

Magal does not assume any obligation to update that information.

Actual events or results may differ materially from those projected, including as a result of changing market trends, reduced demand, and the competitive nature of the security systems industry, as well as other risks identified in the documents filed by the company with the Securities and Exchange Commission.

And with that, I would like to hand the call over to Eitan. Eitan, please go ahead..

Thank you, Kenny. I'd like to welcome all of you and thank you for joining us today. We are very pleased with the results of the fourth quarter and the full year 2014. As we discussed earlier in the year, we expected the second half of the year to be stronger than the first, and this indeed turned out to be the case.

We reported [$48.8 million] revenue in the second half of the year versus $28.8 million in the first half of the year. In fact, the fourth quarter revenue level was the higher in the year, coming in at $27.3 million, more than doubled those of the fourth quarter of last year. This was due to an improvement in almost all our geographies.

It was also due in particular to the success of our fiber cells which are very much performing to expectation and activity we acquired in April, 2014. As well as strong top line growth in the second half of the year, we also show high level of profit because of a number of factors.

The contributing factor was our growth margin strength which was especially strong in the second half of the year primarily due to the project mix sold as well as the mix between product sold and project.

Another factor was the strengthening of the US dollar over the quarter versus Israeli shekel, Mexican peso and Canadian dollar, as Ilan will explain in a moment; this provided us with the high level of financial income.

In addition, the stronger dollar versus last year meant our local operating expenses in Israel, Mexico and Canada were reduced in US dollar terms. The one factor which is masking some of our profitable growth in our ongoing investment is the CyberSeal activity.

Apart from the goodwill impairment in the fourth quarter of $2.4 million, the business itself recorded a loss of $2.6 million, hence excluding CyberSeal, operating income from our old [ph] business activity would have been $5 million higher amounting to around $6.4 million or [8.2] of revenue.

However, I believe our investment in CyberSeal will more than pay for itself in the coming years. As the conversions between physical and logical security becomes even more important and a critical factor for the successfully protecting an area.

Because CyberSeal is introducing a new concept for many of our customers, we are educating the markets with regards to the importance of combining physical and logical security. This is meant it has taken us longer than the original anticipated to grow our product sales in this market.

We do believe that our effort along with the growing awareness for cyber threat to industrial control system, the security network itself and to the internet of things will yield improving results next year.

In the ASIS international show in Atlanta, Georgia in October, our Cyber Security Internet Switch Tungsten won security best product award as well as another one of our new product RoboGuard, our agile perimeters well into robot.

And in November, we participated in the third Homeland Security Israel event with CyberSeal imagine product won the prestigious second place for innovation from the Chief Scientist office in Israel. These tradeshows and the high profile that our product gained have led to tremendous customer interest in our new product.

And we believe the potential will led to increase sales in 2015. RoboGuard continue to gain increase interest and we are in an ongoing contact with airport, seaport, present military bases, nuclear power station and other sites protecting critical assets. And we are seeing strong interest from these types of customers.

We expect to see initial customer installation for RoboGuard in the coming few months. I'd like now to briefly summarize the performance in our various regions. In Latin America, and in particular Mexico, we are seeing solid improvement over last year projects, which has been delayed earlier this year and last are moving ahead and progressing.

In Europe, we see a recovery and growth after a few years of scold budget there. In fact, we recently reported $2.1 million project protecting the Port of Tauranga in Spain, which we believe could lead to a further business in the region. With regard to Africa, the continent continues to provide us with the good level of business.

And 2014 was strong overall while during 2012 and 2013, we completed some major project in the region, the new project received in the past few months albeit smaller scale and diversified between different customer and different country. And we are continued to deliver from these. In addition, we are competing in the number of tenders.

Last year we announced a $6.4 million turnkey contract with the Kenya Airport Authority, and we expect to complete the project later this year. This is a classic example of a country in which we've successfully deliver a number of security project for critical nation asset which has subsequently led to significant further business.

Our North American subsidiaries are also performing well. Due in part to growth in sales in the US and Canada as well as due to a strong level of sales from our cyber activity. Our new counter fence mounted ranging product the FlexZone was launched in May, 2014 and so far sold excellent technical performance.

We already see sales with increasing growth rate. In Israel, business increased strongly in 2014 and we recently reported a number of short term Homeland security project. We expect that the tender of the southern border fence will be launched soon. On a personal note, this is my last result conference call with Magal.

I would like to take this opportunity to thank you investors in the company, some of you who might I have known for many years, I'd also like to thank my team, both management and employees worldwide and my Board for team work and support over the many years. I will be leaving the post of CEO in May after which Saar Koursh will take over.

Saar joined Magal a few weeks ago and I am working with him closely to ensure smooth transition in the coming week. Saar joined Magal following 12 years at Elbit Systems, a leading international defense electronic company where he was responsible for the activity in Brazil.

I am handing over reins to a strong pair of hand, will continue to work of growing Magal over the coming years and I do wish him much luck in his position. In summary, Magal has delivered a strong 2014, strong growth in revenue and improved profitability. I will now hand the call over to Ilan for the financial review.

Ilan?.

Thanks, Eitan. Revenues for the fourth quarter of 2014 increased 110% to $27.3 million from $13 million for the fourth quarter of 2013 and increased 27% from $21.5 million in the third quarter of 2014.

Sales by geography in the quarter were as follows; North America 23%; Israel 25%; Africa 19%; Europe 16%; South and Latin America, 8% and the rest of the world amounted to 10%. Full year 2014 revenue was $77.5 million, an increase of 51% year-over-year compared with the $61.5 million reported in 2013.

Gross profit in the quarter was $13 million, or 47.5% of the revenue, an increase of 189% compared to the gross profit of $4.5 million, or 34.5% of revenues, in the fourth quarter of 2013. The high level of growth margin in the fourth quarter of this year was the function of the revenue mix in a particular the high revenue level this quarter.

For the gross profit was $34.5 million, also 44% of revenues compared with $20.5 million, or 39.7% of revenues in 2013. Our long line operating expenses in the quarter amounted to $8.8 million in the quarter.

We also reported an impairment of goodwill and other intangible assets related to the acquisition of our CyberSeal activity in 2013, amounting to $2.4 million. Although operating expenses in the fourth quarter of 2013 was $6.9 million.

For the operating expenses were $33 million including the $2.4 million impairment of goodwill and other intangible assets compared with $25 million in 2013? Operating income in the quarter was $1.7 million, excluding the impairment; operating income was $4.1 million. This is compared to an operating loss of $2.4 million in the fourth quarter of 2013.

Financial income in the quarter amounted to $0.9 million, compared with the financial income of $0.1 million in the fourth quarter of 2013.

It is important to note that Magal cash debt position [ph] is in US dollar and Israel shekel and Canadian dollar, however while Magal exported -- in US dollar, Magal's functional currency in Israel is Israeli shekel and in Canada is Canadian dollar and because of this caused appreciation of the US dollar, this is Magal's functional currency this led to increase financial income.

For the year, financial income amounted to $2 million of total income of $4.1 million last year. Net income in the quarter was $2.9 million, or 0.18% a share, excluding the impairment, net income was $5.3 million, or $0.33 a share. This is compared with the net loss of $2.4 million, or $0.15 per share, in the fourth quarter of 2013.

For the year, we reported a net income of $3.4 million, or $0.1 per share, excluding the impairment; we reported the net income of $5.8 million, or $0.36 a share. This is compared to a net loss of $4.5 million, or $0.28 per share last year.

Cash, short term deposits and restricted deposits, net of bank debt as of September 31, 2014 were $28 million, or $1.73 per share compared with the cash and bank deposit, net of bank debt of $36.3 million, or $2.25 per share on December 31, 2013.

The decrease in cash net earned was primarily due to acquisition of fiber activity in April and increased investment in working capital. That concludes my remarks. We would be happy to take your questions now.

Operator?.

[Operator Instructions] The first question is from Simon Willis. Please go ahead. .

Let me congratulate, I have been a long-term shareholder, let me congratulate the past management team and the CEO for job well done. And welcome the new team in and seemingly we are positioned to move forward. I have two questions.

Can you state what the backlog is presently?.

We usually do not prefer to the specific number but I can tell you that the backlog is improving in the last two months. .

Thank you. My second question is -- and it is the comments that I have made, realizing the goal is an acquisition mode and has done very well with their acquisition.

Again, would on a personal basis like to ask the new CEO and management team to contact John McCain of Maise [ph] and I am sure you heard of a company and they see the purpose for -- and I know that you use this in your new fencing apparatus but this company in my opinion would be an excellent acquisition for Magal and it would be a win-win for all of the shareholders.

This is a 50 year old company with no debt and profitable with a tax loss carry forward of about $50 million which would fit rightly with Magal.

Can I have some assurance that the two companies -- because I am shareholder of both, can I have some assurance that there will be some dialogue or that you would get in touch with this gentleman Macane the CEO or have him call you?.

I would comment as a following. As part of the process of changing the major shareholder and changing CEO, I am sure that the company will review its strategy and at the right time they will communicate with the potential company among them the one you have mentioned. Thank you very much. .

[Operator Instructions] The next question from Michael Dissler. Please go ahead. .

Good morning, gentlemen. How are you all? I would be remiss if I did not thank you for your diligent together. Mr. Livneh, as you know I am long-term shareholder and I have been holding long before you became CEO. I wish you to thank you for job well done. That's number one. Mr. Koursh, welcome to the team.

I just want to -- I need not remind you since I was up your -- of course you are VJ in bio [ph] I know you do a lot of work in Brazil. My concern for Magal has always been stepping fast force in Brazil without substantial local knowledge which you bring to the table. So welcome aboard and thank you.

And lastly happy pass over to all and I wish you well in your future endeavor Eitan..

Thank you very much. As I mentioned in my report, I am sure that the new CEO will continue and succeed and growing the company. And thank you for your words. .

The next question is from Mike Hughes of SGS Capital. Please go ahead. .

Good morning or good afternoon your time.

Just a sequential step up in revenue from the September quarter was impressive, are we kind of new revenue level here around the $27 million level given the backlog you stated were improving or was this kind of one time stuff that hit in the fourth quarter?.

In general in many of our activities we enjoy higher revenue in this third and fourth quarter as seasonal activity, you know that in the last four months in the United States the weather was terrible and outdoor activities were down almost to zero. So that's the nature of our business.

But in general we have had project that we won during the first part of the year and the execution took us long into the year to the third and fourth quarter. And those core project that we have had as the Kenya airport authority in Nairobi was executed partially in 2014, part will go to 2015.

And definitely this new project that we have booked in the last two months and those that we will continue to book I hope in the coming quarters will be performed along the lines. So if you follow about our performance in the past years it is not one time kind of revenue. .

Okay.

And then did I hear you correctly on a cyber business, I think you indicated a $2.6 million operating loss, is that in a quarter or for the year?.

That's for the year. .

Okay.

What was the number for the fourth quarter excluding the write down?.

What is the specific number for the fourth quarter on CyberSeal? We will find out and let you know in a minute. .

Okay. And then last question. Can you just speak to the -- I think you mentioned an opportunity in Israel southern border front.

How larger opportunity is that for you?.

We are as I reported in the past; we are part of test that was done by the Ministry of Defense. We passed the test successfully and once that the Ministry of Defense would come out with tender for the southern border after the pilot, we will participate. .

Okay.

And any idea on the timing on that?.

I have no idea but we assume that that will come out in this year or during 2015, whether it will happen in second quarter or the third quarter we don't know. .

Okay.

And did you have that cyber loss compare for the fourth quarter?.

Not yet. We will look for that and maybe you can contact us independently not by this call..

The next question is from Sam Rebotsky of SER Asset Management. Please go ahead..

Yes. Good morning, good afternoon to Eitan and the team. Good, it is a wonderful to go out in this fourth quarter. It is a phenomenal quarter.

Now tell me do we repeat this quarter going forward?.

That's a magic question. .

What's the magic answer?.

Yes. But seriously I believe that Magal is growing. So if Magal is growing I believe that the future will show better performance but still remains to be seen.

We are selling products, we acquire fiber Technology Company which helped us to grow the business in the product part, and we are doing well in booking projects and this will help to make business and to grow the business. Whether this number will be same in the next year fourth quarter or this year 2014 full quarter, it is too early to say.

And I agree that it is a great quarter to move forward and I hope and wish Magal will be leadership of Saar Koursh will achieve better than that..

Okay, me too. Now let's see as far as the backlog, you don't talk about backlog.

You indicated we are improving the orders, can we say that the orders are as good as they were in the September period so that this first quarter would be good or how do we compare the end of September to the end of December?.

The new booking is in a higher level. The question of how the revenue will become it depends on the implementation of those projects that has to do with each and everyone by itself. It is a slow process, project takes time.

The fact that we collect an order, we got an order yesterday for example or last week or last month, the implementation will take time, so the revenue will come in months not in weeks. .

Okay. Now the CyberSeal.

Have you sort of gotten educated substantially on understanding their business and what you need to sort of get significant orders? Or could you sort of comment on any type of orders on the CyberSeal and what the education process is to sort of deliver those orders?.

First of all, we are learning along the line since we acquire-- that time it was Websilicon, we changed the name into CyberSeal we develop new product this two product line I mentioned earlier in my report that got the award.

No doubt, it will appreciated by the market, the market is not yet, the regulation is not yet there, and we have to educate the market. So it is again need some patient some time before we see revenue. We believe that 2015 will be better year for CyberSeal compared with 2014..

Are we able to say that we expect to be profitable for CyberSeal in 2015?.

Hopefully we will but still remains to be seen..

Okay. Let me talk about the balance sheet. The balance sheet ended with the shareholders equity [$55 million 957], at the end of the September quarter we had [$55 million, 720] that's like a less than 300,000 entries in the stockholders equity.

You wrote down the CyberSeal but you are more profitable, could you sort of address the adjustments between the September and December balance sheet that account for the lack of increase as per the earnings et cetera?.

Basically it is a matter of accounting practice.

You are right that in the third quarter, in the fourth quarter we had a higher profit than it shows in the equity, when you look at it such, however, the accounting policy also take into consideration, foreign currency translation adjustment and as you know our reporting currency is used dollar while our operating currency is different in each location but we are active, so there is an impact of the change in those currencies compared to the dollar and that affect the equity.

.

Okay. So it is basically the currency adjustments. All right, well look hopefully we could get some big orders and Saar could sort of continue the earnings that we had currently. Good luck, gentlemen. .

A follow up question from Simon Willis. Please go ahead..

Yes.

Just look at the technical on the stock value, I see the stock trading at $5.74 and if it is on back of the envelop, work on the company and where it should trade, do you have any idea why the street is giving you such a low value relative to your stock price at $5.77 when you have such great year, you have a $1.77 in cash, you have limited debt, you are in the hot sector of the security sector in this environment and I know that you have the 40% ownership and have 90% institutional ownership.

To me back of the envelop this stock order trade at least $8 to $12 instead of this $5.80. I know it is at $6.18 a couple of times seems to back off and it just sort of blows my mind that it is trading at a such low price considering what management has done to make this such a great company.

Do you plan to do any PR or RR work now that you are so successful to enhance shareholder value?.

First of all, we are talking to investors all along the year. I did it myself. Second, we are in this part of the conference call, we do not consider ourselves expert on the market that you are investing, maybe you have some better answers or maybe some of you, but generally speaking we are really --.

I have been doing this 40 years and obviously you are in the below 45% where you all trade, as I said doing numbers on the company and what said and what happened you over trade anywhere from $8 to $12 a share. .

I would love to see the share grows up right to $12 but I hope that the PR relation with the market will improve in the future. And hope that this will happen. We are doing our best with these and I am sure Mr. Koursh will do the same in order to improve performance to bring higher revenue and higher profit. But beyond the market is beyond our control..

I understand that. But performance is not and you have done performance and stockholder advanced value normally follows performance. So I look for the stock price to follow your good performance. .

Another follow up question from Sam Rebotsky of SER Asset Management. Please go ahead. .

Eitan, consistent performance on a regular basis such predictable, clearly will indicate -- it will get into the prices of stock, what price it will trade, depend on the psychology and the judgment et cetera of various investors. But really if you can deliver consistent performance, there is no doubt the stock will follow.

So Saar good luck again and CyberSeal sort of hopefully can contribute. Good luck..

There are no further questions at this time. Before I ask Mr. Livneh to go ahead with his closing statement, I'd like to remind participants that a replay of this call will be available in three hours on Magal's website. Mr.

Livneh, would you like to make your concluding statements?.

Thank you, operator. On behalf of the management of Magal, I would like to thank you for your continuing interest, long-term support for our business. If you have questions, please feel free to call my IR team's contact details are in the press release. Saar Koursh will host the call next quarter.

And I look forward to following his progress over the coming years. I bid you all farewell. Have a good day. [Foreign language].

Thank you. This concludes Magal Security Systems' fourth quarter 2014 results conference call. Thank you for your participation. You may go ahead and disconnect..