Israel Aerospace Industries Financial Figures for Q1 2013

Israel Aerospace Industries Ltd. (“the Company”), Israel’s leading aerospace and defense company operating in the defense/security and commercial markets, announced today the publication of its consolidated financial statements for Q1 ended March 31, 2013.

Dov Baharav, Chairman of the Board: “I am encouraged by the continued improvement, which is reflected by the record high sales order backlog at USD 9.8 billion and by the Company’s ongoing profitability. However, the slowdown in the military market, which is due to worldwide and domestic military budget cuts, and the slowdown in the civil-aviation market, which is due to the global economic weakness, poses a multitude of challenges which the Company must face in the upcoming quarters.”

Joseph Weiss, Company President & CEO: “The increase in the Company’s cash balance this quarter and further growth of our order backlog provide a solid base for corporate growth. Company management has taken streamlining steps by cutting costs, providing early retirement to employees and by maintaining tight control over projects. Company management is also focused on cash flow. In this regard, we should note the successful debenture issuance earlier this quarter, which duly reflects investors’ trust and confidence in the Company.”

Sales for the Company in the first quarter of 2013 amounted to USD 849 million, compared to USD 893 million in the corresponding period last year. Export sales accounted for 79% of total sales, amounting to USD 673 million. Sales to the military market accounted for 72% of total sales.

Gross income in the first quarter of 2013 amounted to USD 122 million (14.4% of sales), compared to USD 138 million (15.4% of sales) in the corresponding period last year – an 11% decrease due to decline in operations of Bedek Aviation Group and due to the impact of the stronger NIS.

Operating income in the first quarter of 2013 amounted to USD 20 million (2.3% of sales), compared to USD 30 million (3.4% of sales) in the corresponding period last year. The decrease in income is due to lower gross margin.

R&D expenses in the first quarter of 2013 amounted to USD 29 million (3.5% of sales), compared to USD 39 million (4.3% of sales) in the corresponding period last year. The decreas in R&D expenses was due to non-utilization of R&D budgets during the current quarter, which is to be utilized in coming quarters.

Expenses with respect to early retirement of employees – in the first quarter of 2013, 60 employees took early retirement, at a cost of USD 13 million (1.5% of sales), similar to the cost of early retirement in the corresponding period last year, which amounted to USD 14 million (1.5% of sales). The employee early retirement program, which began in 2006 and is being implemented in stages, is part of the Company’s streamlining program.

Net financing expenses in the current quarter amounted to USD 5 million, compared to net financing revenues amounting to USD 32 million in the corresponding period last year. Expenses in the current quarter were primarily due to revaluation with respect to the stronger NIS. Revenues in the corresponding period last year were due to non-accounting hedging transactions. Unlike in the previous year, it is now Company policy to mostly enter into accounting hedging transactions only.

Net tax benefits in the current quarter amounted to USD 6 million, compared to net tax expenses amounting to USD 8 million in the corresponding period last year. The difference is due to recognition of deferred tax benefits in this quarter with respect to lower exchange rates.

Net income in the current quarter amounted to USD 19 million (2.2% of sales), compared to net income of USD 54 million (6.1% of sales) in the corresponding period last year.

The order backlog at the end of the current quarter amounted to USD 9.8 billion, compared to USD 9.7 billion at the end of 2012. This order backlog accounts for over two and a half years of operations. Of this order backlog, 82% is accounted for by sales to overseas customers. The order backlog consists of a range of products, widely diversified in geographic terms.

Cash flow from current operations amounted to USD 268 million, compared to USD 52 million in the corresponding period last year. The improved cash flow was primarily due to advance payments received and debt collected from customers.