NAPCO Announces Record First Quarter Sales and Strong Profitability

Company sees seventh consecutive quarter of year-over-year growth in sales and earnings

NAPCO Security Systems, 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, 2005.

Net sales for the first quarter ended September 30, 2005 increased 6% to $14.2 million from $13.4 million reported for the same quarter a year earlier. The net income for the quarter increased 59% to $815,000 or $0.09 per share, compared to net income of $513,000, or $0.06 per share, for the same year ago period.

Results were paced by sales increases from our line of NAPCO intrusion and fire alarm systems for businesses and homes and Continental Instruments' higher margin line of access control products for buildings of all sizes. Alarm Lock's suite of industrial electronic locking devices continues to show vitality. Altogether, the favorable sales results once again demonstrate the customers' strong acceptance of the NAPCO Group's product line. Gross margins rose to 36% in the current quarter compared to 32% in the year earlier period. R&D expenditures, always a strong Company focus, were $1.1 million in the quarter, which represents 8% of sales.


Of the many new products coming out of NAPCO's R&D efforts, several are particularly exciting:

NAPCO's Freedom 8, a patented, code-free alarm system has surpassed all previous milestones, with regard to distributor pre-orders. This unique security system, available this fall, is the most user-friendly alarm on the market because it works unobtrusively as consumers lock and unlock their doors. This easy-to-use, intuitive system dramatically reduces a user's learning curve and virtually eliminates accidental alarms. The NAPCO Freedom 8 is highly anticipated by the security marketplace and is viewed as a breakthrough product at industry trade shows, distributor conferences and preliminary customer presentations as an important way for the security industry to capture more of the approximately 80% of all residences which do not have a monitored security system.

Another well-regarded product, NAPCO's Internet video product, the VIP Video Gateway, continues to garner market share in the burgeoning Remote Video Monitoring Category. The product enables any home or business owner to look-in on their premises from any PC or internet-ready cell phone. Consumers can look in on their children or pets and business owners on their employees, either "live" or from an archived selection of previously recorded, specified events. NAPCO's Internet video product also provides dealers with a new source of monthly, recurring service revenue.

Chosen as one of the Editors' top products at the American Society of Industrial Security Annual Trade Show, NAPCO's NetLink provides TCP/IP communication of alarm signals over the Internet. NetLink enables any conventional security system to report alarms over the Internet, versus conventional telephone lines.

Continental Instruments Access Products now includes the super fast processing Super Two intelligent access controller. One of the most successful new product introductions in Continental history, this 2-door access panel supports up to 20,000 ID badges, expansive memory and provides for ultra-quick communications and remote downloading of programming by dealers.

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