’09 First quarter results of Israeli IAI

Data released by Israel Aerospace Industries

* Company backlog grew from over $1 billion at the beginning of the year to a record high of over $8 billion

* Record in new contracts during the quarter – over $2 billion

* In the first quarter of 2009, sales reached $775 million, compared to $1,014 million in the same quarter in 2008, a decrease of 24%

* Profit from activity before employee retirement expenses in the first quarter of 2009 reached $54 million, compared to $60 million in the first quarter of 2008, a decrease of 10%

* Positive cash flow from current activities stands at $312 million

* The company released a shelf prospectus on 19.5.09

* S&P raised IAI’s international rating to BBB/NEGATIVE and S&P Maalot validated the company’s local bonds rating of AA/STABLE

Israel Aerospace Industries’ (IAI) backlog as of 31.3.09 reached $8.1 billion, which represents 2.3 years worth of sales. The positive cash flow from current activities, as of the end of the quarter, stood at $312 million, an increase of approximately $190 million compared to the end of the previous quarter.

Company profit before employee retirement expenses reached $54 million, compared to $60 million in the first quarter of 2008. Early employee retirement expenses reached approximately $16 million during the first quarter of 2009.

At the Board of Directors meeting in which the 2009 first quarter financial statements were approved, Yair Shamir, Chairman of the Board, said: “Despite the worldwide financial crisis, Israel Aerospace Industries’ sales in the first quarter of the year reached $775 million. 79% of the company’s sales are to foreign customers. Civilian market sales were affected by the global financial crisis, and decreased from 39% of total sales in the first quarter of 2008, to 26% of total sales in the first quarter of 2009. The company has many strengths, which help it brave the unstable world economy, including financial solidity, a geographically diverse customer population, and a wide variety of products to offer. We hope to be able to seize any business opportunities that may arise as a result of the current situation.”

IAI’s President and CEO, Itzhak Nissan, said: “The company earned a profit from its activity of $54 million this quarter, before expenses for early employee retirement. The profit was achieved despite the financial crisis, which affected civilian market sales. The company was able to earn this profit was a result of its advance restructuring ahead of the crisis. Company management has taken action to increase production efficiency in order to minimize costs and continue to realize our objectives. Outside advisor expenses and overtime hours were cut, and efficiency was increased in acquisitions and in supplier management. Changes were implemented in the pricing process, in risk management, in project review, and in the chain of responsibility on all company management levels. These changes are evident in the gross profit of this period (17%, compared with 13% in the same period last year). In light of the predicted continuation of the global crisis in the civilian aerospace market, the company will proceed with and further intensify its moves towards greater efficiency. As such, marketing will focus more on the defense sector.

In the first quarter of 2009, IAI received new orders worth $2.2 billion, including a significant contract for the sale of weapons for air defense.

The company also continues to implement its globalization policy. IAI’s Board of Directors approved the creation of a joint venture with the Brazilian corporation Synergy, which is active in several Latin American countries.

The company has produced many advanced technologies, and finances the development of new products made at IAI.”

IAI’s Chief Financial Officer (CFO) Menashe Sagiv, said: “The positive cash flow from current activities, which is integral to the financial strength of the company, reached a total of $312 million, an increase of approximately $190 million. Financial expenditures during the quarter totaled $10 million, and were affected by the decrease in the currency exchange rate and the devaluation of the shekel in relation to the US dollar. The devaluation of the shekel affected the results of shekel currency protection transactions, as they took place when the exchange rate was low. The company continues to defend itself against currency exposure and other risks.

The devaluation of the shekel also meant fewer deferred tax assets, and therefore affected the company’s income tax, which amounted to $13 million. The company has a current ratio of 1.12, which is indicative of IAI’s financial strength, compared to similar companies in Israel and around the world.

The company released a shelf prospectus on 19.5.09. Prior to that release, the local rating of the company’s ‘A’ bonds was renewed by S&P Maalot, which again ranked IAI at AA/STABLE. As a result, the company’s S&P international rating increased to BBB/NEGATIVE.”