EX-99.1 2 a08-20531_1ex99d1.htm EX-99.1

Exhibit 99.1

 

Innovative Solutions & Support, Inc. Announces Financial Results for the Third Quarter Ended June 30, 2008

 

Company Achieving Significant Progress on Strategic Initiatives and Diversification of Customer Base

 

EXTON, Pa.—(BUSINESS WIRE) - Innovative Solutions & Support, Inc. (NASDAQ:ISSC) today announced results for the third quarter and nine months ended June 30, 2008.

 

Results for the third quarter show continued progress against the Company’s long term objectives with revenues rising on a sequential basis for the second consecutive quarter and gross margins continuing to expand.

 

For the third quarter of fiscal 2008, the Company reported revenues of $8.8 million, up 50 percent from the third quarter of fiscal 2007 and also up sequentially from revenues of $6.8 million in the second quarter of fiscal 2008.  Revenues in the third quarter of fiscal 2008 quarter include $4.9 million in Flat Panel Display product shipments, $2.3 million of Air Data product shipments, and nearly $1.6 million of engineering modification and development revenues.

 

Gross margins in the third quarter of fiscal 2008 rose to 47.8%, up on a year-over-year basis from 37.7% in last year’s third quarter and also up sequentially from 44.4% in the second quarter of fiscal 2008.

 

For the quarter ended June 30, 2008, the Company reported a net loss of $(4.3) million, or ($0.25) per fully diluted share, compared to a net loss of $(1.35) million or $(0.08) per fully diluted share in the third quarter a year ago.  On a sequential basis, results improved from the loss of ($7.1) million or ($0.42) per fully diluted share reported for the second quarter of the current fiscal year.  The third quarter loss includes a $2.5 million non-cash

 


 

impairment charge related to acquired engineering software which is no longer part of the Company’s product offering.  Legal expenses related to the Company’s intellectual property dispute were $0.5 million and $1.7 million before taxes, for the third quarter of fiscal 2008 and 2007, respectively.

 

Total backlog at June 30, 2008 was $71.4 million.

 

Update on Strategic Initiatives

 

Among the many notable accomplishments in the quarter:

 

·                  FedEx – The first B767 aircraft with IS&S Displays is in service and is being used to train ground and ramp personnel; additional Flat Panel Displays are now being shipped to support their aircraft modification schedule.

 

·                  American Airlines has commenced initial flight testing of aircraft with IS&S Cockpit Flat Panel Displays, a critical achievement in the ramp of the production schedule.

 

·                  The high level of in-service performance and reliability on the increasing number of aircraft flying with an IS&S FPD system is driving interest from a broadening assortment of business, commercial and military markets.

 

·                  Software release 1.5 for the Eclipse E500 was delivered on time, enabling EAC to expand flight management and planning capabilities of the aircraft.

 

·                  Coast Guard C130 aircraft using IS&S Engine Information Display Systems have been placed into service.

 

·                  Cessna presently has IS&S Flat Panel Display Development Units undergoing ground testing.

 

·                  The United States District Court for the Western District of Tennessee has awarded the Company damages, interest and fees aggregating more than $23 million in the intellectual property dispute.  The Company’s financial statements do not yet recognize this award.

 

Year-To-Date Results

 

Revenues for the first nine months of fiscal 2008 were $20.3 million, compared to revenues of $13.2 million in the nine months ended June 30, 2007. The Company incurred

 


 

a net loss of $(15.5) million, or $(0.92) per diluted share, for the first nine months of fiscal 2008 compared to a net loss of $(4.8) million, or $(0.29) per fully diluted share in the nine months ended June 30, 2007.  For the nine months ended June 30, 2008, the Company recorded income tax expenses of $1.1 million, which included a valuation allowance on the net deferred tax assets carried on its balance sheet of $6.0 million during the first nine months of fiscal 2008, in contrast to a $3.5 million tax benefit recorded in the comparable year earlier period.

 

Please refer to the accompanying schedules highlighting the Company’s Statement of Operations and Balance Sheet.

 

The company will host a conference call tomorrow morning, July 31, 2008 at 10:00 am local time (EDT) to discuss these results as well as our business outlook. Please call 888-562-3654 to participate. The conference call ID# is: 54818128. Also, our web site (www.innovative-ss.com) will carry the conference call live and have it available for subsequent listening for a period of 30 days.

 

About Innovative Solutions & Support, Inc.

 

Headquartered in Exton, PA. Innovative Solutions & Support, Inc. (www.innovative-ss.com) is a systems integrator engaged in the design, manufacture and marketing of Flat Panel Display Systems, Air Data equipment, Flight Information Computers, Engine and Fuel Measurement and Control Computers, and advanced monitoring systems that measure and display critical flight information. This includes data relative to aircraft separation, airspeed and altitude as well as fuel and instrument measurements.

 

Certain matters contained herein that are not descriptions of historical facts are “forward-looking” (as such term is defined in the Private Securities Litigation Reform Act of 1995). Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, those discussed in filings made by the Company with the Securities and Exchange Commission. Many of the factors that will determine the Company’s future results are beyond the ability of management to control or predict. Readers should not place undue reliance on forward-looking statements,

 


 

which reflects management’s views only as of the date hereof. The Company undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

 


 

 Innovative Solutions and Support, Inc.

Condensed Consolidated Balance Sheet

(unaudited)

 

 

 

June 30, 2008

 

September 30, 2007

 

ASSETS

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

Cash and cash equivalents

 

$

41,070,896

 

$

49,151,078

 

Accounts receivable

 

4,963,603

 

6,248,606

 

Inventories

 

10,953,948

 

9,363,795

 

Deferred income taxes

 

46,343

 

899,895

 

Prepaid expenses and other current assets

 

1,274,872

 

6,208,804

 

Total current assets

 

58,309,662

 

71,872,178

 

 

 

 

 

 

 

Property and equipment, net

 

9,185,813

 

9,377,337

 

 

 

 

 

 

 

Other assets

 

505,780

 

3,336,270

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

68,001,255

 

$

84,585,785

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

Current portion of capitalized lease obligation

 

$

9,908

 

$

9,908

 

Accounts payable

 

2,941,848

 

4,077,789

 

Accrued expenses

 

3,107,057

 

4,670,832

 

Deferred revenue

 

489,750

 

660,415

 

Total current liabilities

 

6,548,563

 

9,418,944

 

 

 

 

 

 

 

Note payable

 

4,335,000

 

4,335,000

 

Long term portion of capitalized lease obligation

 

40,170

 

47,542

 

Deferred revenue

 

2,949

 

50,520

 

Deferred income taxes

 

46,343

 

—

 

Other liabilities

 

223,893

 

—

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY:

 

 

 

 

 

Common stock

 

18,174

 

18,161

 

Additional paid-in capital

 

45,619,362

 

44,607,993

 

Retained earnings

 

29,310,407

 

44,194,053

 

Treasury stock

 

(18,143,606

)

(18,086,428

)

Total shareholders’ equity

 

56,804,337

 

70,733,779

 

 

 

 

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

68,001,255

 

$

84,585,785

 

 


 

Innovative Solutions and Support, Inc.

Condensed Consolidated Statement of Operations

(unaudited)

 

 

 

Three Months

 

Three Months

 

Nine Months

 

Nine Months

 

 

 

Ended

 

Ended

 

Ended

 

Ended

 

 

 

June 30

 

June 30

 

June 30

 

June 30

 

 

 

2008

 

2007

 

2008

 

2007

 

Net sales:

 

 

 

 

 

 

 

 

 

Product

 

$

7,178,212

 

$

3,981,660

 

$

17,290,973

 

$

10,316,479

 

Engineering - Modification & Development

 

1,573,097

 

1,862,745

 

3,020,343

 

2,911,872

 

Total net sales

 

8,751,309

 

5,844,405

 

20,311,316

 

13,228,351

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

 

 

 

 

 

 

 

Product

 

3,850,657

 

1,985,572

 

10,331,738

 

6,027,327

 

Engineering - Modification & Development

 

717,646

 

1,653,663

 

1,686,285

 

2,663,881

 

Total cost of sales

 

4,568,303

 

3,639,235

 

12,018,023

 

8,691,208

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

4,183,006

 

2,205,170

 

8,293,293

 

4,537,143

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

 

3,221,698

 

1,107,385

 

7,738,942

 

3,912,480

 

Selling, general and administrative

 

3,282,183

 

4,192,013

 

13,952,535

 

11,124,795

 

Asset impairment

 

2,475,000

 

—

 

2,475,000

 

—

 

Total operating expenses

 

8,978,881

 

5,299,398

 

24,166,477

 

15,037,275

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

(4,795,875

)

(3,094,228

)

(15,873,184

)

(10,500,132

)

 

 

 

 

 

 

 

 

 

 

Interest income - net

 

251,015

 

728,454

 

1,193,036

 

2,234,718

 

Other income (expense)

 

—

 

—

 

300,000

 

—

 

Loss before income taxes

 

(4,544,860

)

(2,365,774

)

(14,380,148

)

(8,265,414

)

 

 

 

 

 

 

 

 

 

 

Income tax expense (benefit)

 

(255,989

)

(1,014,917

)

1,090,821

 

(3,456,967

)

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(4,288,871

)

$

(1,350,857

)

$

(15,470,969

)

$

(4,808,447

)

 

 

 

 

 

 

 

 

 

 

Net loss per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.25

)

$

(0.08

)

$

(0.92

)

$

(0.29

)

Diluted

 

$

(0.25

)

$

(0.08

)

$

(0.92

)

$

(0.29

)

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

16,893,499

 

16,881,900

 

16,897,313

 

16,857,164

 

Diluted

 

16,893,499

 

16,881,900

 

16,897,313

 

16,857,164