IAI: Increase in Backlog

IAI's financial statements for the year 2013 shows record sales of USD 3.6 billion in 2013, representing a 9% growth compared to 2012

Joseph Weiss, IAI President & CEO

Israel Aerospace Industries announced its consolidated financial statements for the year ended December 31, 2013. IAI's record sales coupled by an increase in gross profit and in order backlog against the slowdown in the activities of the Bedek Aviation division and the conversion of passenger aircraft to cargo configurations.

Rafi Maor, IAI Chairman of the Board said: "IAI is marking a year of meaningful achievements in challenging and complex markets. The cutbacks in defense budgets in Israel and worldwide and the pressures experienced in global markets, combined with the low U.S. dollar exchange rate, continue to present challenges for us, particularly as an export-oriented company with about 80% of sales to foreign markets. The persistent decline in the U.S. dollar exchange rate in 2013 and in early 2014 has affected, and is expected to continue to affect, the Company's competitiveness. We also continue to face a slowdown in the company's commercial industry.

"Although 2014 will be a challenging year in terms of general macroeconomics, and in aspects relating to our particular operations, we conclude 2013 with a large increase in sales and with an impressive order backlog equivalent to 2.8 years of operation. This backlog consists of quality strategic contracts that form a solid basis for the company's continued growth. During 2013, the Company raised debentures totaling NIS 1.2 billion, reflecting the investors' trust and confidence in the company."

Joseph Weiss, President & CEO said: "Despite the business challenges the company faced in 2013 and continues to face in 2014, including the ongoing defense budget cuts in Israel and some of our target countries, IAI is demonstrating a robust balance sheet and an increase in cash flows from operating activities. The figures attest to the Company's financial stability and preparedness for dealing with these challenges and for harvesting the business opportunities that will follow.

"We keep working on expanding and establishing our presence and activities in target markets, especially in South East Asia and in South America, with particular emphasis on all matters relating to acquisitions and global cooperation.

"2013 represents an important landmark in positioning the company at the forefront of Israel's technology. At the beginning of 2014, we conducted another successful test in the Arrow 3 system. During 2013 we successfully launched the Amos 4 satellite, and persuade the development of Amos 6 and of several observation satellites. IAI also continues to be at the forefront of Israel's multi-layered defense systems, with its leadership in radar systems which are part of the "Arrow 2" and "Arrow 3," David's Sling", and "Iron Dome."

IAI's sales in 2013 amounted to USD 3,642 million compared to USD 3,338 million last year, a 9% increase. The increase in sales in 2013 arises from the increase in the activities of all of the Company's divisions, excluding the Bedek Aviation division, and particularly the Commercial Aircraft division, the Military Aircraft division and the Systems Missiles and Space division. This increase was offset by a sharp decrease in sales of the Bedek Aviation division (mainly in the field of aircraft conversions).

Sales for export in 2013 accounted for 73% of sales (27% to Israel) compared with 76% in 2012 (24% to Israel). The increase in sales to the local market is mostly attributed to recognizing revenues from the launch of the Amos 4 satellite and its transfer to the client.

Sales to the military market in 2013 accounted for 73% of sales (27% to the commercial market) compared with 74% in 2012 (26% to the commercial market). The increase in sales to the commercial market arises from the increase in the activities of the Commercial Aircraft division and the launch and delivery of the Amos 4 satellite.

Gross profit in 2013 amounted to USD 522 million (14.3% of sales) compared with USD 508 million (15.2% of sales) in 2012. The increase in gross profit resulted from the growth in sales in all of the Company's divisions and the transition of the Commercial Aircraft division to gross profit, partly offset by the transition to gross loss in the Bedek Aviation division as a result of stagnation in the aircraft conversion activity.

The decrease in the gross profit margin is a result of the devaluation of the U.S. dollar exchange rate in relation to the NIS, the transition to gross loss in the Bedek Aviation division and the recognition of revenues from development projects in early performance stage using the zero profit method.

Research and development expenses in 2013 totaled USD 180 million (4.9% of sales) compared with USD 156 million in 2012 (4.7% of sales), a growth of 15% arising from the Company's increased in-house R&D budgets.

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