IAI Reports Record-High Order Backlog in Q1 2018
“The first quarter of 2018 saw the continuation of the momentum of signing new deals, which was reflected in the continued growth in the Company's order backlog to the highest scope ever: about USD 12 billion,” said CEO Yossi Weiss
IsraelDefense
| 31/05/2018
Photo: Gilad Kavalerchik
Israel Aerospace Industries (IAI), Israel's largest national military and civilian security defense company, issues its consolidated financial statements for the three months ended March 31, 2018.
The Company reports an all-time record growth in order backlog of approximately USD 12 billion with an increase of 5.5% in sales to USD 883 million. Net income in the quarter amounted to USD 11 million and the operating income to USD 34 million. The Company's cash balances totaled approximately USD 1.6 billion, and positive cash flows from operating activities of USD 190 million.
“The first quarter of 2018 saw the continuation of the momentum of signing new deals, which was reflected in the continued growth in the Company's order backlog to the highest scope ever: about USD 12 billion,” said Yossi Weiss, IAI’s CEO. “This is a huge contribution to reinforcing the Company's position in the frontline of the global defense and aerospace industries. The tremendous growth in order backlog is naturally expected to lead to a significant increase in sales volumes in the coming years, whose yields are already expressed in this quarter.
“The growth trend in the various markets in which IAI operates, with emphasis on North America, Europe, and Southeast Asia, endures and we are continuing to develop and offer our customers the most advanced solutions tailored to their specific needs in the face of changing global threats. The Company is exercising intensive efforts in the US market in order to enhance its market share and adapt its operating structure to changes in the US-Israel aid agreement.”
Main Results in Q1 2018
The Company's sales in Q1 2018 amounted to USD 883 million compared with USD 837 million in Q1 2017, an increase of 5.5%.
The increase in sales in Q1 2018 compared to the corresponding quarter of last year is mostly a result of the increased revenues of the Bedek Aviation Group – mainly from aircraft conversion – and of the Systems Missiles & Space Group – mainly in the Air and Missile Defense Division, partly offset by the decrease in the revenues of the Military Aircraft Group and the Civilian Aircraft Group.
Sales for export in Q1 2018 accounted for 72% of sales (28% to Israel) compared with 74% (26% to Israel) in Q1 2017.
Sales to the military market in Q1 2018 accounted for 72% of sales (28% to the civilian market) compared with 73% (27% to the civilian market) in Q1 2017.
Gross profit in Q1 2018 amounted to USD 144 million (16.3% of sales) compared with USD 140 million (16.7% of sales) in Q1 2017.
Research and development expenses in Q1 2018 totaled approximately USD 43 million (about 4.9% of sales) compared with approximately USD 36 million in Q1 2017 (4.3% of sales). The increase reflects the growth in the Company's R&D investments as part of the implementation of the growth plan.
Marketing, general and administrative expenses in Q1 2018 totaled approximately USD 67 million (about 7.6% of sales) compared with approximately USD 60 million in Q1 2017 (7.2% of sales). The increase is mainly attributable to the increase in the allowance for doubtful accounts.
Expenses from early retirement of employees in Q1 2018 were immaterial, similarly to the corresponding quarter of last year. The expenses in respect of the growth plan, including the early retirement of some 800 employees in the context of the agreement signed with the Workers' Committee in 2016, were not reflected in the financial statements as they had been recognized in full as a provision on the date of signing the agreement.
Operating income in Q1 2018 amounted to USD 34 million (3.8% of sales) compared with USD 44 million in Q1 2017 (5.3% of sales). This decrease can be explained by the increase in R&D expenses and in general and administrative expenses compared with the corresponding quarter of last year.
EBITDA in Q1 2018 amounted to USD 75 million compared with USD 72 million in Q1 2017.
Net financial expenses in Q1 2018 amounted to approximately USD 17 million compared with USD 7 million in Q1 2017. The increase in net financial expenses compared to the corresponding quarter of last year is mainly a result of exchange rate valuation losses due to the erosion of NIS asset balances and the ineffective portion of foreign exchange hedges in view of the appreciation of the USD exchange rate in relation to the NIS by about 1.4% in the first quarter of 2018 as opposed to a depreciation of 5.5% in the corresponding quarter of last year.
Net tax expenses: In Q1 2018, the Company recorded net tax expenses of approximately USD 7 million compared with net tax income of approximately USD 9 million in the corresponding quarter of last year. The change in tax expenses arises from the initial adoption of legislative amendments effective from 2018 and thereafter which allow the Company to calculate its taxable income for tax purposes in USD (its functional currency), which significantly mitigates the sensitivity of tax expenses to changes in the USD-NIS exchange rate.
Net income in Q1 2018 totaled USD 11 million (1.2% of sales) compared with net income of USD 46 million in Q1 2017 (5.5% of sales). The decrease in net income mainly arises from the decrease in operating income and the increase in financial expenses and in tax expenses, as explained above.
The order backlog at the end of Q1 2018 amounted to USD 12 billion compared to USD 11.2 billion at the end of 2017. 76% of the order backlog is held for sale to foreign customers with wide geographical dispersion. The order backlog is comprised of a wide variety of products and secures 3.2 years of operation.
Positive cash flows from operating activities in Q1 2018 amounted to USD 190 million compared with positive cash flows from operating activities of USD 139 million in Q1 2017. The positive cash flows from operating activities mainly derive from changes in the Company's working capital items.
Material Events in Q1 2018
On January 1, 2018, the Company repaid to holders of debentures (series C) the third installment (of four installments) of the debenture principal in a total of approximately USD 87 million.
Withdrawal of the majority of Spacecom's claim against the Company for the loss of Amos 6 Satellite: In the context of an arbitration proceeding regarding Spacecom's claims for compensation for alleged damages and expenses incurred to it in a total of approximately USD 138 million as a result of the loss of Amos 6 Satellite, the Company received Spacecom's notice in May 2018 whereby the latter is asking to withdraw the claim for compensation for damages and retain the limited amount of compensation prescribed in the contract at USD 10 million only.
“The first quarter of 2018 saw the continuation of the momentum of signing new deals, which was reflected in the continued growth in the Company's order backlog to the highest scope ever: about USD 12 billion,” said CEO Yossi Weiss
Photo: Gilad Kavalerchik
Israel Aerospace Industries (IAI), Israel's largest national military and civilian security defense company, issues its consolidated financial statements for the three months ended March 31, 2018.
The Company reports an all-time record growth in order backlog of approximately USD 12 billion with an increase of 5.5% in sales to USD 883 million. Net income in the quarter amounted to USD 11 million and the operating income to USD 34 million. The Company's cash balances totaled approximately USD 1.6 billion, and positive cash flows from operating activities of USD 190 million.
“The first quarter of 2018 saw the continuation of the momentum of signing new deals, which was reflected in the continued growth in the Company's order backlog to the highest scope ever: about USD 12 billion,” said Yossi Weiss, IAI’s CEO. “This is a huge contribution to reinforcing the Company's position in the frontline of the global defense and aerospace industries. The tremendous growth in order backlog is naturally expected to lead to a significant increase in sales volumes in the coming years, whose yields are already expressed in this quarter.
“The growth trend in the various markets in which IAI operates, with emphasis on North America, Europe, and Southeast Asia, endures and we are continuing to develop and offer our customers the most advanced solutions tailored to their specific needs in the face of changing global threats. The Company is exercising intensive efforts in the US market in order to enhance its market share and adapt its operating structure to changes in the US-Israel aid agreement.”
Main Results in Q1 2018
The Company's sales in Q1 2018 amounted to USD 883 million compared with USD 837 million in Q1 2017, an increase of 5.5%.
The increase in sales in Q1 2018 compared to the corresponding quarter of last year is mostly a result of the increased revenues of the Bedek Aviation Group – mainly from aircraft conversion – and of the Systems Missiles & Space Group – mainly in the Air and Missile Defense Division, partly offset by the decrease in the revenues of the Military Aircraft Group and the Civilian Aircraft Group.
Sales for export in Q1 2018 accounted for 72% of sales (28% to Israel) compared with 74% (26% to Israel) in Q1 2017.
Sales to the military market in Q1 2018 accounted for 72% of sales (28% to the civilian market) compared with 73% (27% to the civilian market) in Q1 2017.
Gross profit in Q1 2018 amounted to USD 144 million (16.3% of sales) compared with USD 140 million (16.7% of sales) in Q1 2017.
Research and development expenses in Q1 2018 totaled approximately USD 43 million (about 4.9% of sales) compared with approximately USD 36 million in Q1 2017 (4.3% of sales). The increase reflects the growth in the Company's R&D investments as part of the implementation of the growth plan.
Marketing, general and administrative expenses in Q1 2018 totaled approximately USD 67 million (about 7.6% of sales) compared with approximately USD 60 million in Q1 2017 (7.2% of sales). The increase is mainly attributable to the increase in the allowance for doubtful accounts.
Expenses from early retirement of employees in Q1 2018 were immaterial, similarly to the corresponding quarter of last year. The expenses in respect of the growth plan, including the early retirement of some 800 employees in the context of the agreement signed with the Workers' Committee in 2016, were not reflected in the financial statements as they had been recognized in full as a provision on the date of signing the agreement.
Operating income in Q1 2018 amounted to USD 34 million (3.8% of sales) compared with USD 44 million in Q1 2017 (5.3% of sales). This decrease can be explained by the increase in R&D expenses and in general and administrative expenses compared with the corresponding quarter of last year.
EBITDA in Q1 2018 amounted to USD 75 million compared with USD 72 million in Q1 2017.
Net financial expenses in Q1 2018 amounted to approximately USD 17 million compared with USD 7 million in Q1 2017. The increase in net financial expenses compared to the corresponding quarter of last year is mainly a result of exchange rate valuation losses due to the erosion of NIS asset balances and the ineffective portion of foreign exchange hedges in view of the appreciation of the USD exchange rate in relation to the NIS by about 1.4% in the first quarter of 2018 as opposed to a depreciation of 5.5% in the corresponding quarter of last year.
Net tax expenses: In Q1 2018, the Company recorded net tax expenses of approximately USD 7 million compared with net tax income of approximately USD 9 million in the corresponding quarter of last year. The change in tax expenses arises from the initial adoption of legislative amendments effective from 2018 and thereafter which allow the Company to calculate its taxable income for tax purposes in USD (its functional currency), which significantly mitigates the sensitivity of tax expenses to changes in the USD-NIS exchange rate.
Net income in Q1 2018 totaled USD 11 million (1.2% of sales) compared with net income of USD 46 million in Q1 2017 (5.5% of sales). The decrease in net income mainly arises from the decrease in operating income and the increase in financial expenses and in tax expenses, as explained above.
The order backlog at the end of Q1 2018 amounted to USD 12 billion compared to USD 11.2 billion at the end of 2017. 76% of the order backlog is held for sale to foreign customers with wide geographical dispersion. The order backlog is comprised of a wide variety of products and secures 3.2 years of operation.
Positive cash flows from operating activities in Q1 2018 amounted to USD 190 million compared with positive cash flows from operating activities of USD 139 million in Q1 2017. The positive cash flows from operating activities mainly derive from changes in the Company's working capital items.
Material Events in Q1 2018
On January 1, 2018, the Company repaid to holders of debentures (series C) the third installment (of four installments) of the debenture principal in a total of approximately USD 87 million.
Withdrawal of the majority of Spacecom's claim against the Company for the loss of Amos 6 Satellite: In the context of an arbitration proceeding regarding Spacecom's claims for compensation for alleged damages and expenses incurred to it in a total of approximately USD 138 million as a result of the loss of Amos 6 Satellite, the Company received Spacecom's notice in May 2018 whereby the latter is asking to withdraw the claim for compensation for damages and retain the limited amount of compensation prescribed in the contract at USD 10 million only.
