Company Still Posts Profit, Thanks To Legal Settlement

Innovative Solutions & Support announced this week its financial results for the fourth quarter and year ended September 30... and while the news was mostly positive, the woes of one client in particular strained the company's resources in 2008.

Net sales for the fourth quarter of 2008 were $10.2 million, up 100% from $5.1 million in the fourth quarter of the previous year. The Company reported fourth quarter 2008 net income of $7.6 million, or $0.45 per fully diluted share, which includes the receipt of a $17 million legal settlement, compared to a fourth quarter 2007 net loss of $4.0 million.

IS&S states fourth quarter 2008 results also include approximately $6 million in charges associated with the suspension of production on a "large, general aviation OEM contract" -- referring to struggling planemaker Eclipse Aviation, for which IS&S is the primary partner on the Avio NG avionics suite.

"This has been a transitional period for ISSC with the successful production ramp on a number of our contracts offset by the untimely suspension of a large, general aviation OEM contract," said Geoffrey Hedrick, IS&S Chairman and Chief Executive Officer. "Results in the fourth quarter reflect the financial impact of the actions we undertook based upon our assessment of the current risks associated with this customer."

IS&S was signed in March 2007 to handle systems integration for Eclipse's Avio NG avionics package, one month after Eclipse terminated its prior agreement with Avidyne. The new suite was initially comprised of IS&S displays, with systems from Chelton Flight Systems, Garmin International, Honeywell, and PS Engineering, Inc.

As ANN has reported, Eclipse is on the ropes as it desperately fights to secure needed funding to stay in business. The company was only able to meet last week's payroll thanks to a last-minute bridge loan. 

According to the company, the $6 million aggregate charge represents a $4.1 million increase in the allowance for "doubtful" accounts, and a $1.9 million increase in reserve for "obsolete inventory"... code words for the distinct possibility Eclipse will fold, leaving IS&S with a large unpaid bill and a number of proprietary Avio NG units that can't be fitted to any other aircraft.

IS&S' core business is the supply of flat-panel display screens to manufacturers of business and commercial aircraft. 

FMI: www.innovative-ss.com