Israel Aerospace Industries declares 3rd Qtr results

Israel Aerospace Industries’ (IAI) company sales for the third quarter of 2009 reached $678 million, compared to $877 million for the third quarter of 2008, a 23 percent decrease. Sales for the first 9 months of 2009 (the “Reported Period”) totaled $2.1 billion, compared to $2.8 billion for the same period in 2008. The decrease is attributed to the crisis in the global civil aviation market.

Gross profit for the third quarter of 2009 reached $86 million (13 percent of sales), compared to $117 million (13 percent of sales) for the third quarter of 2008. Gross profit for the Reported Period reached $312 million (15 percent of sales), compared to $390 million (14 percent of sales) for the same period of 2008. The increase in the rate of gross profit is attributable to vigorous implementation of operational streamlining in all Company activities.

R&D expenses for the third quarter of 2009 reached $29 million (4 percent of sales), compared to $26 million (3 percent of sales) for the third quarter of 2008. The 10 percent increase in the rate of R&D expenses reflects the significance of investment in new and innovative products and in advanced technologies to secure the future of the Company. Investments in R&D for the Reported Period totaled $85 million.

Marketing, general & administrative expenses for the third quarter of 2009 reached $47 million, compared to $48 million for the third quarter of 2008. Such Expenses for the Reported Period totaled $139 million, compared to $146 million for the same period in 2008. The 5 percent decrease in expenses is attributable to streamlining and cost saving measures.

Employee retirement expenses for the Reported Period totaled $28 million, compared to $41 million for the same period of 2008, within the framework of a reorganization plan.

Net financial income for the third quarter of 2009 reached $15 million, compared to $3 million for the third quarter of 2008. Net financial income for the Reported Period totaled $17 million, and is mainly attributable to currency protection transactions and to income from securities.

Pre-tax income for the third quarter of 2009 grew by 8 percent to $26 million (4 percent of sales), compared to $24 million (3 percent of sales) for the third quarter of 2008.

Income taxes for the third quarter of 2009 totaled $10 million. Income taxes for the Reported Period totaled $24 million, compared to $4 million for the same period in 2008. The $12 million growth in income taxes is attributable to the economic streamlining law, incorporating an amendment to the income tax ordinance, which decreased the company’s tax assets.

Net income for the third quarter of 2009 reached $16 million, similar to the net profit for the third quarter of 2008. Net income for the Reported Period totaled $53 million.

Backlog as of September 30, 2009, grew from $7.1 billion as of December 31, 2008 to a record high of $ 8.1 billion. The net $1 billion increase in backlog is attributable to substantial transactions in the military market.

Cash flow from operating activities for the reported Period totaled $186 million, compared to $164 million for the same period of 2008. The improvement in cash flow reflects the company’s robust financial position.

During the third quarter of 2009 IAI conducted several successful international demonstrations of “Heron” Unmanned Aerial Vehicle (UAV),among others for the Spanish Air Force and the immigration police in the Canary Islands, the Federal Police in Brazil, El Salvador, and others. IAI also participated in a large number of international exhibitions, where it exhibited a variety of new products and technologies. The Company’s participation in the third Latrun conference should be noted, where IAI unveiled the “Jumper”, an autonomous artillery for the ground forces. At the conference, IAI also demonstrated for the first time the “Mosquito” micro-UAV. .

In October 2009 IAI launched the new G-250 business jet. The aircraft’s first flight is scheduled for later this year.

With the publication of the financial statements of IAI for the third quarter of 2009, Chairman of the Board Yair Shamir stated, “The global economic crisis affected the Company’s activity in the civil market. The depth of the crisis is reflected in a 50% decrease in sales to this market, compared to the same quarter of 2008. A certain recovery is apparent in the market, reflected in a growth of some 24 percent in civil sales compared to the second quarter of 2009. It should be noted that the civil market is characterized by a high local added value, providing employment for a large number of households, thus enhancing IAI’s contribution to the Israeli economy. Some 17,000 employees are directly engaged by the Company.” Shamir added, “The company’s shareholders equity is $ 697 million, after payment of dividend to the State of Israel in the sum of $ 90 million in recent years.”

IAI’s President and CEO, Itzhak Nissan, said, “The Company’s backlog reached a record high of $ 8.1 billion. During the first nine months of the year IAI received new orders amounting to approx. $ 3.7 billion.

Approximately 78 percent of the company’s sales are intended for export to numerous customers over a wide geographic deployment and a diverse basket of products. Despite the economic crisis, the Company succeeded in maintaining its scope of sales in the military market and even achieved growth. The company’s management is looking to the future and is investing resources in the development of new and innovative products using advanced technologies. IAI is further looking into various business opportunities to penetrate the area of wind energy, which has technological synergy with IAI’s civil aviation activities”. Nissan further stated that “In spite of the crisis in civil aviation, there is an 8 percent increase in pre-tax income for the quarter”.

CFO Menashe Sagiv referred to an event that occurred following the date of the financial statements, “On November 4, 2009 the Company successfully issued Series B Notes to a value of NIS 450 million on the Tel Aviv Stock Exchange The issued Notes were denominated in Shekels and unlinked, bearing interest at a rate of 4.95 percent. Demand for the Notes issued was four times greater than the scope of the issuance, indicating the trust which the public places in the Company. In anticipation of such issuance, IAI’s Series B Notes were rated AA/Stable by Maalot S&P.”