SOURCE: Aladdin Knowledge Systems

October 16, 2008 07:13 ET

Aladdin Knowledge Systems Reports Record Third Quarter Revenues; Raises 2008 Annual Guidance

TEL AVIV, ISRAEL--(Marketwire - October 16, 2008) - Aladdin Knowledge Systems Ltd. (NASDAQ: ALDN), an information security leader specializing in authentication, software DRM and content security, today announced financial results for the third quarter of fiscal year 2008, ended September 30, 2008.

Non-GAAP Financial Highlights for the Third Quarter:

--  Record revenues of $31.7 million, up 22 percent year-over-year
--  Net income of $2.9 million, or $0.20 per share
--  Strong demand from organic business
--  Recent acquisitions position Aladdin as the leading software DRM and
    strong authentication provider
    

Yanki Margalit, Chairman and CEO of Aladdin Knowledge Systems, stated, "Our strong third quarter results demonstrate that the continued execution of our strategy creates long-term growth for the company and increased shareholder value. These record results, combined with the ongoing performance of our core business and our pipeline, raises our confidence and we have revised our annual guidance accordingly. During the third quarter we completed two significant acquisitions, SafeWord and Eutronsec, which had an immediate positive impact on our non-GAAP earnings, and have enhanced value for our customers and shareholders. Our Board and management team are committed to continuing to further strengthen our IT security offerings, contribute to our market share and sales and increase our global brand recognition."

Non-GAAP revenues for the third quarter of 2008 were a record $31.7 million, an increase of 22 percent from the $26.1 million reported for the same period in 2007. Software DRM revenues for the third quarter of 2008 were $15.7 million, slightly above the same period in 2007. Non-GAAP Enterprise Security revenues for the third quarter were a record $16.0 million, a 51 percent increase from the $10.6 million recorded in the same period in 2007. For the first time, revenues in the third quarter included the consolidation of the SafeWord business line and EutronSec, beginning September 2008. Total non-GAAP revenues included approximately $0.4 million of Non-GAAP adjusted revenues, from the Enterprise Security business unit.

Non-GAAP revenues for the first nine months of 2008 were $88.1 million, an increase of 15 percent from the $76.8 million recorded in the first nine months of 2007. Software DRM revenues for the first nine months of 2008 were $51.2 million, an increase of 4 percent from the $49.0 million reported in the same period in 2007. Non-GAAP Enterprise Security revenues for the first nine months of 2008 were $37.0 million, a 33 percent increase from the $27.8 million recorded in the same period in 2007.

Non-GAAP net income for the third quarter of 2008 was $2.9 million, or $0.21 per basic and $0.20 per diluted share, compared to third quarter of 2007 non-GAAP net income of $4.5 million, or $0.32 per basic and $0.31 per diluted share. Non-GAAP earnings per share excludes the impact of stock-based compensation expenses of approximately $0.7 million, fair value adjustment to acquired deferred revenues of approximately $0.4 million, amortization of intangibles related to the Company's acquisitions of approximately $0.6 million and approximately $1.9 million of non-recurring legal and other expenses related to the unsolicited acquisition proposal and request for a shareholders' meeting received by the Company during the third quarter.

For the first nine months of 2008, non-GAAP net income was $7.7 million, or $0.56 per basic and $0.54 per diluted share, compared with non-GAAP net income of $12.9 million, or $0.89 per basic share and $0.87 per diluted share for the first nine months of 2007. Non-GAAP net income for the first nine months of 2008 excludes the impact of stock-based compensation expenses of approximately $1.5 million, fair value adjustment to acquired deferred revenues of approximately $0.4 million, amortization of intangibles related to the Company's acquisitions of approximately $0.9 million and approximately $1.9 million of non-recurring legal and other expenses related to the unsolicited acquisition proposal and request for a shareholders' meeting.

Refer to the "Use of Non-GAAP Measures" section and accompanying financial table for a reconciliation of GAAP financial information to non-GAAP.

On a GAAP basis, third quarter revenues totaled $31.4 million. Software DRM revenues for the third quarter of 2008 were $15.7 million. Enterprise Security revenues for the third quarter were a record $15.6 million. Revenues for the first nine months of 2008 were $87.8 million. Software DRM revenues for the first nine months of 2008 were $51.2 million. Enterprise Security revenues for the first nine months of 2008 were $36.6 million.

On a GAAP basis, net loss for the third quarter of 2008 was $0.3 million, or $0.02 per basic and diluted share, compared to third quarter of 2007 GAAP net income of $4.3 million, or $0.31 per basic share and $0.30 per diluted share. GAAP net income for the third quarter of 2008 included $0.7 million for stock-based compensation expenses, compared to $0.1 million reported in the third quarter of 2007.

For the first nine months of 2008, GAAP net income was $3.5 million, or $0.25 per basic share and $0.24 per diluted share, compared with GAAP net income of $12.1 million, or $0.84 per basic and $0.82 per diluted share for the first nine months of 2007. Net income for the first nine months of 2008 included approximately $1.5 million for equity-based compensation expenses compared to $0.7 million in the first nine months of 2007.

Cash, cash equivalents and marketable securities totaled $8.8 million at September 30, 2008.

Quarterly Highlights

--  Completed the acquisition of the Secure SafeWord product line from
    Secure Computing Corporation for approximately $65 million in cash,
    including acquisition costs.
    
--  Completed the acquisition of EutronSec, a provider of software
    protection and authentication products, for approximately EUR 10.0 million
    in cash, including acquisition related expenses.
    
--  Signed a license agreement with Giesecke & Devrient (G&D), a
    technology leader in the field of smart cards and IT-security solutions.
    The agreement recognizes Aladdin's USB smartcard patents used in G&D's
    authentication products and grants G&D the rights to use the protected
    technology for its well-established StarSign e-Identity token solutions.
    
--  Durham Regional Police (DRP) in Ontario, Canada chose the Aladdin
    eToken two-factor authentication device to comply with Canadian Police
    Information Centre (CPIC) regulations. DRP's deployment follows numerous
    other Canadian police forces that also chose Aladdin eToken.
    
--  Dingli Communications, Inc., one of China's largest network
    engineering service providers, selected Aladdin HASP SRM to protect its
    software and increase licensing flexibility and enforcement.
    
--  China Finance Online Co. Limited, a leading Chinese online financial
    information and corporate data provider, will deploy Aladdin eToken PRO USB
    smartcard devices, thereby enabling secure customer access to its
    "StockStar" investment analysis tools and services.
    
--  Aladdin's eSafe was positioned in the visionaries' quadrant in
    Gartner's Magic Quadrant for Secure Web Gateway by Peter Firstbrook and
    Lawrence Orens, published September 11, 2008.
    

For further information on product highlights, please refer to the press room on the Company's Web site which can be found at http://www.aladdin.com/news/2008/index.aspx.

Future Business Outlook

Based on current business conditions and expectations, Aladdin management is again raising its Fiscal Year 2008 guidance, which was previously updated on September 4, 2008.

Aladdin now expects its 2008 non-GAAP revenues to be between $124 million and $134 million, compared to the previously projected non-GAAP range of $124 million to $132 million and as compared to the $105.9 million in revenues reported for fiscal year 2007. Non-GAAP revenues include any deferred revenue valuation adjustments. Aladdin expects GAAP revenues to be between $122 million and $132 million in fiscal year 2008.

Fiscal year 2008 non-GAAP diluted earnings per share are expected to increase to between $0.74 and $0.84 from between $0.67 and $0.77, as previously projected. The Company reported non-GAAP earnings per diluted share of $1.21 for fiscal year 2007, which excluded stock-based compensation expense, amortization of intangibles related to and the impact of the $2.0 million non-recurring up-front cost associated with production of video-based training.

Fiscal year 2008 GAAP diluted earnings per share is expected to increase to between $0.04 and $0.10 from a range of $0.00 to $0.05, as previously projected. The Company reported GAAP diluted earnings per share of $1.02 for fiscal year 2007.

The Company undertakes no obligation to update its estimates.

Earnings Teleconference

The Company will hold a teleconference today, October 16, 2008 at 9:00 a.m. Eastern Time / 3:00 p.m. Israel Time to discuss the quarterly results. To participate in the call, dial +1 (866) 345 5855 in North America, or +972 (3) 918 0609 internationally, approximately five minutes prior to the scheduled call start time. The call is being simultaneously Web cast and can be accessed on the Aladdin Web site at www.Aladdin.com/investor. Please visit the Web site at least 15 minutes prior to the scheduled call time to register for the Web cast and download any necessary audio software.

About Aladdin

Aladdin Knowledge Systems (NASDAQ: ALDN) is an information security leader with offices in 12 countries, a worldwide network of channel partners, and numerous awards for innovation. Aladdin eToken is the world's #1 USB-based authentication solution, offering identity and access management tools that protect sensitive data. Aladdin SafeWord two-factor authentication technology protects companies' important information assets and applications. Aladdin HASP SRM boosts growth for software developers and publishers through strong anti-piracy protection, IP protection, and secure licensing and product activation. Aladdin eSafe delivers real-time intelligent Web gateway security that helps protect data and networks, improves productivity, and enables compliance. Visit www.Aladdin.com.

Safe Harbor Statement

Certain information presented herein constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include general economic and business conditions, risks relating to our recent acquisition of Athena Smartcards, SafeWord and Eutronsec, including the failure to realize expected synergies, failure to effectively integrate these businesses into our business and increasing unexpected liabilities, the loss of market share, changes in the level of business or anticipated business from a large customer or customers, failure to achieve anticipated customer orders, changes in the competitive landscape, unexpected costs associated with one time corporate events and other factors over which the company has little or no control. For more information, please refer to the Company's filings with the Securities and Exchange Commission, which are available on the Commission's website at www.sec.gov.

©2008 Aladdin Knowledge Systems, Ltd. All rights reserved. HASP, eToken, eSafe, SafeWord, Eutronsec, Aladdin Knowledge Systems and the Aladdin logos are trademarks or registered trademarks of Aladdin Knowledge Systems, Ltd. All other product and brand names mentioned in this document are trademarks or registered trademarks of their respective owners.

                      Aladdin Knowledge Systems Ltd.
              Condensed Consolidated Statements of Operations
        (U.S. dollars, in thousands - except for per-share amount)
                                (Unaudited)


                                    Three month period   Nine month period
                                    ended September 30, ended September 30,
                                    ------------------  ------------------
                                      2008      2007      2008      2007
                                    --------  --------  --------  --------
Revenues:
Software Security (DRM)               15,743    15,498    51,150    48,986
Enterprise Security                   15,616    10,622    36,612    27,778
                                    --------  --------  --------  --------
Total revenues                        31,359    26,120    87,762    76,764
                                    --------  --------  --------  --------

Cost of revenues                       9,005     5,993    22,987    17,245
                                    --------  --------  --------  --------
Gross profit                          22,354    20,127    64,775    59,519
                                    --------  --------  --------  --------

Research & development                 6,928     4,866    19,872    14,040
Selling & marketing                   10,423     7,958    29,671    23,952
General & administrative               4,280     3,157    12,485     9,922
Non-recurring unsolicited proposal
 and EGM                               1,872         -     1,872         -
                                    --------  --------  --------  --------
Total operating expenses              23,503    15,981    63,900    47,914
                                    --------  --------  --------  --------

Operating income (loss)               (1,149)    4,146       875    11,605
Financial income, net                    289     1,114     1,287     3,161
Other income                               -        (9)      613         5
                                    --------  --------  --------  --------
Income (loss) before taxes              (860)    5,251     2,775    14,771

Taxes on income                           23       876       474     2,388
                                    --------  --------  --------  --------
Income (loss) before equity in loss
 of an affiliate and non-controlling
 interest                               (883)    4,375     2,301    12,383

Equity in loss of an affiliate             -       (42)      (68)     (303)
                                    --------  --------  --------  --------
Income (loss) before
 non-controlling interest               (883)    4,333     2,233    12,080
Non-controlling interest                 538         -     1,231         -
                                    --------  --------  --------  --------
Net income (loss)                       (345)    4,333     3,464    12,080
                                    ========  ========  ========  ========

Basic earnings per share               (0.02)     0.31      0.25      0.84
Diluted earnings per share             (0.02)     0.30      0.24      0.82

Weighted average number of shares
 outstanding for Basic EPS            13,905    14,022    13,884    14,398
Weighted average number of shares
 outstanding for Diluted EPS          14,148    14,442    14,253    14,787




                      Aladdin Knowledge Systems Ltd.
                  Condensed Consolidated Balance Sheets
                       (U.S. dollars, in thousands)
                                (Unaudited)


                                                 September 30, December 31,
                                                     2008          2007
                                                 ------------  ------------

Assets

Current assets:
Cash & cash equivalents                                 8,804        77,209
Marketable securities                                       -        13,127
Investment in other companies                           2,336         4,423
Trade receivables, net of allowance for doubtful
 accounts                                              24,542        16,918
Other accounts receivable                               8,135         7,061
Inventories                                            15,502         8,763

                                                 ------------  ------------
Total current assets                                   59,319       127,501
                                                 ------------  ------------

Severance pay fund                                      5,154         3,853

Fixed assets, net                                       8,323         6,501

Other long-term assets, net                           109,634        12,195

                                                 ------------  ------------
Total Assets                                          182,430       150,050
                                                 ============  ============


Liabilities and Shareholders' Equity

Current liabilities:
Trade payables                                         10,280         8,236
Deferred revenues                                      10,963         6,635
Other current liabilities                              15,794         8,583

                                                 ------------  ------------
Total current liabilities                              37,037        23,454
                                                 ------------  ------------

Accrued severance pay                                   6,887         4,802

Other long-term liabilities                             8,908         2,564

Non-controlling interest                                5,174             -

Shareholders' Equity                                  124,424       119,230

                                                 ------------  ------------
Total Liabilities and Shareholders' Equity            182,430       150,050
                                                 ============  ============




                      Aladdin Knowledge Systems Ltd.
              Condensed Consolidated Statement of Cash Flows
                       (U.S. dollars, in thousands)
                                (Unaudited)


                                          Three month        Nine month
                                          period ended      period ended
                                          September 30,     September 30,
                                        ----------------  ----------------
                                          2008     2007     2008     2007
                                        -------  -------  -------  -------
Cash flow from operating activities:

Net income (loss)                          (345)   4,333    3,464   12,080
Adjustment to reconcile net income to
 net cash provided by operating
 activities:
Depreciation and amortization             1,600      887    2,865    2,536

Increase in trade and other
 receivables, net                        (5,280)    (920)  (4,095)  (3,012)
Increase in inventory                      (519)    (394)  (2,803)    (777)

Increase in trade payables and accrued
 liabilities                              3,565    2,368    3,364    2,896
Other adjustments                           176      164     (838)   1,253
Net cash provided by (used in)
 operating activities                      (803)   6,458    1,957   14,971

Cash flow from investing activities:

Purchase of property and equipment, net  (1,229)    (862)  (2,371)  (2,660)
Investment in available-for-sale
 marketable securities                        -   (8,909)       -  (43,265)
Proceeds from sale of
 available-for-sale marketable
 securities                               3,548   36,909   13,109   72,119
Investment in other companies           (80,305)       -  (80,305)    (495)
Investment in other assets                  (30)       -     (266)       -
Proceeds from return on investment in
 other companies                              -        -    2,701        -
Net cash provided by (used in)
 investing activities                   (78,016)  27,120  (67,132)  25,710
Cash flow from financing activities:

Proceeds from exercise of options           159       81      344      479
Loan Payments                            (2,857)       -   (3,107)       -
Purchase of treasury shares                   -  (10,003)       -  (19,986)
Net cash provided by (used in)
 financing activities                    (2,698)  (9,922)  (2,763) (19,507)

Effect of exchange rate on cash and
 cash equivalents                          (613)    (224)    (467)    (215)
Increase (decrease) in cash and cash
 equivalents                            (82,130)  23,432  (68,405)  20,959

Cash and cash equivalents at the
 beginning of the period                 90,934   37,259   77,209   39,734
Cash and cash equivalents at the end of
 the period                               8,804   60,691    8,804   60,693



                      Aladdin Knowledge Systems Ltd.
                    Supplementary Financial Information
         Reconciliation of GAAP Financial Information to Non-GAAP
        (U.S. dollars, in thousands - except for per-share amount)
                                (Unaudited)



                                      Quarter ended September 30
                            ----------------------------------------------
                                      SFAS     Amorti-
                                      123R     zation
                             GAAP    adjust-    and     Non-GAAP  Non-GAAP
                             2008     ments    other      2008      2007
                            ------  --------  --------  --------- --------
                                   (Unaudited)
Revenues:
Software Security (DRM)     15,743                         15,743   15,498
Enterprise Security         15,616                (384)    16,000   10,622
                            ------  --------  --------  --------- --------
Total Revenues              31,359                (384)    31,743   26,120
                            ------  --------  --------  --------- --------

Cost of revenues             9,005        31                8,974    5,993
                            ------  --------  --------  --------- --------
Gross profit                22,354       (31)     (384)    22,769   20,127
                            ------  --------  --------  --------- --------

Research & development       6,928       288       190      6,450    4,782
Selling & marketing         10,423       254       440      9,729    7,813
General & administrative     4,280       140                4,140    3,231
Non-recurring unsolicited
 proposal and EGM            1,872         -     1,872          -        -
                            ------  --------  --------  --------- --------
Total operating expenses    23,503       682     2,502     20,319   15,826
                            ------  --------  --------  --------- --------

Operating income (loss)     (1,149)     (713)   (2,886)     2,450    4,301
Financial income, net          289                            289    1,114
Other (expense) income           -                              -       (9)
                            ------  --------  --------  --------- --------
Income (loss) before taxes    (860)     (713)   (2,886)     2,739    5,406
                            ------  --------  --------  --------- --------
Taxes on income                 23                (389)       412      876
                            ------  --------  --------  --------- --------
Income (loss) before equity
 in loss of an affiliate      (883)     (713)   (2,497)     2,327    4,530
Equity in loss of an
 affiliate                       -                              -      (42)
                            ------  --------  --------  --------- --------
Income (loss) before
 non-controlling interest     (883)     (713)   (2,497)     2,327    4,488
Non-controlling interest       538                            538        -
                            ------  --------  --------  --------- --------
Net income (loss)             (345)     (713)   (2,497)     2,865    4,488
                            ------  --------  --------  --------- --------
Basic earnings per share     (0.02)                          0.21     0.32
                            ------  --------  --------  --------- --------
Diluted earnings per share   (0.02)                          0.20     0.31
                            ------  --------  --------  --------- --------
Weighted average number of
 shares outstanding for
 Basic EPS                  13,905                         13,905   14,022
                            ------  --------  --------  --------- --------
Weighted average number of
 shares outstanding for
 Diluted EPS                14,148                         14,148   14,442
                            ------  --------  --------  --------- --------




                      Aladdin Knowledge Systems Ltd.
                    Supplementary Financial Information
         Reconciliation of GAAP Financial Information to Non-GAAP
        (U.S. dollars, in thousands - except for per-share amount)
                                (Unaudited)


                                 Nine month period ended September 30
                            ----------------------------------------------
                                      SFAS     Amorti-
                                      123R     zation
                             GAAP    adjust-    and     Non-GAAP  Non-GAAP
                             2008     ments    other     2008      2007
                            ------  --------  --------  --------- --------
                                   (Unaudited)
Revenues:
Software Security (DRM)     51,150                        51,150    48,986
Enterprise Security         36,612                (384)   36,996    27,778
                            ------  --------  --------  --------  --------
Total Revenues              87,762                (384)   88,146    76,764
                            ------  --------  --------  --------  --------

Cost of revenues            22,987        69              22,918    17,245
                            ------  --------  --------  --------  --------
Gross profit                64,775       (69)     (384)   65,228    59,519
                            ------  --------  --------  --------  --------

Research & development      19,872       564       337    18,971    13,721
Selling & marketing         29,671       551       568    28,552    23,518
General & administrative    12,485       314              12,171     9,873
Non-recurring unsolicited
 proposal and EGM            1,872               1,872         -         -
                            ------  --------  --------  --------  --------
Total operating expenses    63,900     1,429     2,777    59,694    47,112
                            ------  --------  --------  --------  --------

Operating income               875    (1,498)   (3,161)    5,534    12,407
Financial income, net        1,287                         1,287     3,161
Other income                   613                           613         5
                            ------  --------  --------  --------  --------
Income before taxes          2,775    (1,498)   (3,161)    7,434    15,573
Taxes on income                474                (389)      863     2,388
                            ------  --------  --------  --------  --------
Income before equity in
 loss of an affiliate        2,301    (1,498)   (2,772)    6,571    13,185
Equity in loss of an
 affiliate                     (68)                          (68)     (303)
                            ------  --------  --------  --------  --------
Income (loss) before
 non-controlling interest    2,233    (1,498)   (2,772)    6,503    12,882
Non-controlling interest     1,231                         1,231         -
                            ------  --------  --------  --------  --------
Net income                   3,464    (1,498)   (2,772)    7,734    12,882
                            ------  --------  --------  --------  --------
Basic earnings per share      0.25                          0.56      0.89
                            ------  --------  --------  --------  --------
Diluted earnings per share    0.24                          0.54      0.87
                            ------  --------  --------  --------  --------
Weighted average number of
 shares outstanding for
 Basic EPS                  13,884                        13,884    14,398
                            ------  --------  --------  --------  --------
Weighted average number of
 shares outstanding for
 Diluted EPS                14,253                        14,253    14,787
                            ------  --------  --------  --------  --------




                      Aladdin Knowledge Systems Ltd.
                    Supplementary Financial Information
      Reconciliation of 2007 GAAP Financial Information to Non-GAAP
        (U.S. dollars, in thousands - except for per-share amount)
                                (Unaudited)


                                          Quarter ended September 30
                                    --------------------------------------
                                               SFAS
                                               123R
                                      GAAP    adjust-   Amorti-   Non-GAAP
                                      2007     ments    zation      2007
                                    --------  --------  --------  --------
                                            (Unaudited)
Revenues:
Software Security (DRM)               15,498                        15,498
Enterprise Security                   10,622                        10,622
                                    --------  --------  --------  --------
Total Revenues                        26,120                        26,120
                                    --------  --------  --------  --------
Cost of revenues                       5,993                         5,993
                                    --------  --------  --------  --------
Gross profit                          20,127                        20,127
                                    --------  --------  --------  --------

Research & development                 4,866        84               4,782
Selling & marketing                    7,958       104        41     7,813
General & administrative               3,157       (74)              3,231
                                    --------  --------  --------  --------
Total operating expenses              15,981       114        41    15,826
                                    --------  --------  --------  --------
Operating income                       4,416      (114)      (41)    4,301
Financial income, net                  1,114                         1,114
Other income                              (9)                           (9)

                                    --------  --------  --------  --------
Income before taxes                    5,251      (114)      (41)    5,406
                                    --------  --------  --------  --------
Taxes on income                          876                           876
                                    --------  --------  --------  --------

Income before equity in loss of an
 affiliate                             4,375      (114)      (41)    4,530
Equity in loss of an affiliate             -                           (42)
Income before non-controlling
 interest                              4,375      (114)      (41)    4,488
Non-controlling interest                 (42)                            -
                                    --------  --------  --------  --------
Net income                             4,333      (114)      (41)    4,488
                                    --------  --------  --------  --------
Basic earnings per share                0.31                          0.32
                                    --------  --------  --------  --------
Diluted earnings per share              0.30                          0.31
                                    --------  --------  --------  --------
Weighted average number of shares
 outstanding for Basic EPS            14,022                        14,022
                                    --------  --------  --------  --------
Weighted average number of shares
 outstanding for Diluted EPS          14,442                        14,442
                                    --------  --------  --------  --------



                                     Nine month period ended September 30
                                    --------------------------------------
                                                SFAS
                                                123R
                                      GAAP    adjust-   Amorti-   Non-GAAP
                                      2007     ments    zation      2007
                                    --------  --------  --------  --------
Revenues:
Software Security (DRM)               48,986                        48,986
Enterprise Security                   27,778                        27,778
                                    --------  --------  --------  --------
Total Revenues                        76,764                        76,764
                                    --------  --------  --------  --------
Cost of revenues                      17,245                        17,245
                                    --------  --------  --------  --------
Gross profit                          59,519                        59,519
                                    --------  --------  --------  --------

Research & development                14,952       319              13,721
Selling & marketing                   23,952       311       123    23,518
General & administrative               9,922        49               9,873
                                    --------  --------  --------  --------
Total operating expenses              47,914       679       123    47,212
                                    --------  --------  --------  --------
Operating income                      11,605      (679)     (123)   12,407
Financial income, net                  3,161                         3,161
Other income                               5                             5

                                    --------  --------  --------  --------
Income before taxes                   14,771      (679)     (123)   15,373
                                    --------  --------  --------  --------
Taxes on income                        2,388                         2,388
                                    --------  --------  --------  --------

Income before equity in loss of an
 affiliate                            12,383      (679)     (123)   13,185
Equity in loss of an affiliate          (303)                         (303)
Income before non-controlling
 interest                             12,080      (679)     (123)   12,882
Non-controlling interest                   -                             -
                                    --------  --------  --------  --------
Net income                            12,080      (679)     (123)   12,882
                                    --------  --------  --------  --------
Basic earnings per share                0.84                          0.89
                                    --------  --------  --------  --------
Diluted earnings per share              0.82                          0.87
                                    --------  --------  --------  --------
Weighted average number of shares
 outstanding for Basic EPS            14,398                        14,398
                                    --------  --------  --------  --------
Weighted average number of shares
 outstanding for Diluted EPS          14,787                        14,787
                                    --------  --------  --------  --------

Contact Information