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Innovative Solutions & Support, Inc. Announces Fourth Quarter Fiscal 2013 Financial Results

  Innovative Solutions & Support, Inc. Announces Fourth Quarter Fiscal 2013
  Financial Results

         Fifth Consecutive Profitable Year on 28% Growth in Revenues

             Begins Fiscal 2014 with Over $90 million in Backlog

Business Wire

EXTON, Pa. -- December 4, 2013

Innovative Solutions & Support, Inc. (“IS&S”) (NASDAQ: ISSC) today announced
its financial results for the fourth quarter and fiscal year ended September
30, 2013.

Three Months Results

For the fourth quarter, the Company reported revenue of $8.0 million, a 16
percent increase compared to fourth quarter 2012 revenues of $6.9 million. The
Company reported fourth quarter 2013 net income of $155,000, or $0.01 per
diluted share, compared to net income of $2.8 million, or $0.17 per diluted
share, in the same quarter a year ago. Net income and earnings per share in
the fourth quarter of 2012 included a non-recurring $2.4 million, or $0.15 per
diluted share benefit from the reversal of an income tax valuation allowance.

Geoffrey Hedrick, Chairman and Chief Executive Officer of IS&S, said, “We have
been profitable every quarter this year and profitable for the fifth
consecutive year. Our investment in Engineering Development Contracts (EDCs)
and R&D in the quarter was $3.2 million, 34% higher than the same quarter last
year. For the fiscal year, we invested $10.9 million in EDCs and R&D, up 48%
from 2012, with our customers supporting a substantial portion of our new
product development. The proportion of EDC revenue in the fourth quarter was
higher than in any other quarter this year as progress continued on several
large programs. At the same time, we have maintained an agile organizational
structure and cost discipline."

Shahram Askarpour, President of IS&S, added, “The fourth quarter was another
quarter of which included new production orders for existing products and
continued progress on our various EDC’s. Importantly, several of these EDCs
are nearing completion. Once we receive certifications, these products will
enter into production, where we expect to generate higher margins.
Consequently, we are focused on assuring that we have the appropriate
resources to maintain a high level of productivity and efficiency to expedite
completion. In the fourth quarter, the demands for hardware to support our EDC
programs strained our production resources with a consequent slippage in
product deliveries. We are striving to balance our current substantial
investment in EDC programs with existing production to maintain current
profitability and to support our goal of meaningful revenue growth going
forward."

At September 30, 2013, the Company had $16.4 million of cash on hand, similar
to cash on hand of $16.6 million at June 30, 2013, although down from a year
ago as a result of a special cash dividend of $25 million paid to shareholders
in December 2012. Cash used in operating activities was $567,000 in the
quarter. The Company remains free of debt.

Orders were $8.2 million in the fourth quarter of fiscal 2013 and backlog was
$91.1 million at September 30, 2013, compared to a backlog of $90.9 million at
June 30, 2013. A substantial portion of the backlog relates to a contract with
Delta Airlines on which production deliveries are expected to begin mid 2014.
Importantly, backlog excludes potential future sole-source production orders
from products currently in development under the Company’s EDC programs,
including the Eclipse 550, the Pilatus PC-24, and the KC-46A, all of which we
expect to enter into extended production phases upon completion of
development.

Full Year Results

Revenues were $31.6 million for fiscal 2013, up 28 percent from $24.6 million
for fiscal 2012. For the year ended September 30, 2013, net income was $1.9
million or $0.11 per diluted share, compared to net income of $3.0 million or
$0.18 per diluted share, for the year ended September 30, 2012. A non
recurring legal charge reduced fiscal 2013 earnings by $657,000 (pre-tax), or
$0.03 per diluted share, whereas a non-recurring $2.4 million tax benefit, or
$0.15 per diluted share, from the reversal of an income tax valuation
allowance, increased net income. Cash used in operating activities was $2.2
million for fiscal 2013 compared to cash flow from operating activities of
$1.4 million for fiscal 2012. In fiscal 2013, cash was used primarily to fund
the Company’s EDC programs.

Mr. Hedrick stated, “Revenues were up 28 percent for the year from growth in
both our production and EDCs. Earnings before taxes also grew compared to a
year ago, excluding the effect on fiscal 2012 earnings of the non-recurring
tax benefit of $2.4 million.”

Business Outlook

For the fiscal year ending September 30, 2014, IS&S expects to increase sales,
operating income and net income from fiscal 2013. The Company expects fiscal
2014 to be its sixth consecutive profitable year, characterized by growing
production volume resulting from its engineering investments. IS&S’s continued
high investment in lower margin EDC programs and IR&D will continue to be
reflected in operating margins, even as profits increase. The Company will
provide additional commentary during its earnings conference call.

Mr. Hedrick continued, “In fiscal 2013, we were successful in growing revenues
on current products and investing in new products which will fuel future
revenue growth. During fiscal 2014, we anticipate that several of the EDC
programs will mature and enter into their more profitable production phases.
As programs enter into production, we expect to attract additional orders from
new customers as we receive certifications for these new products. To sustain
our momentum over the longer term, engineering spending will remain high as we
continue to invest in our future. In all, we are optimistic entering the new
fiscal year as we have a strong backlog with delivery schedules that should
reasonably assure another year of increased revenues and profit."

Conference Call

The Company will be hosting a conference call December 5, 2013 at 10:00 AM EST
to discuss these results and its business outlook. Please use the following
dial in number to register your name and company affiliation for the
conference call: 877-883-0383 and enter the PIN Number 2374158. The call will
also be carried live on the Investor Relations page of the Company web site at
www.innovative-ss.com.

About Innovative Solutions & Support, Inc.

Headquartered in Exton, Pa., Innovative Solutions & Support, Inc.
(www.innovative-ss.com) is a systems integrator that designs and manufactures
flight guidance and cockpit display systems for Original Equipment
Manufacturers (OEM’s) and retrofit applications. The company supplies
integrated Flight Management Systems (FMS) and advanced GPS receivers for
precision low carbon footprint navigation.

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.
Consolidated Balance Sheets
(unaudited)
                                                               
                                             September 30,     September 30,
                                              2013            2012        
ASSETS
Current Assets
Cash and cash equivalents                    $ 16,386,207      $ 42,977,501
Accounts receivable, net                       4,489,434         3,978,512
Unbilled receivables                           6,539,442         1,595,436
Inventories                                    4,377,513         3,801,547
Deferred income taxes                          2,002,679         1,588,162
Prepaid expenses and other current assets     642,210         436,208     
                                                               
Total current assets                           34,437,485        54,377,366
                                                               
Property and equipment, net                    7,320,495         7,214,378
Non-current deferred income taxes              650,998           846,887
Other assets                                  221,533         158,600     
                                                               
Total Assets                                 $ 42,630,511     $ 62,597,231  
                                                               
LIABILITIES AND SHAREHOLDERS' EQUITY
                                                               
Current Liabilities
Accounts payable                             $ 2,372,137       $ 1,139,464
Accrued expenses                               3,672,909         2,723,812
Deferred revenue                              447,525         1,426,552   
                                                               
Total current liabilities                      6,492,571         5,289,828
                                                               
Non-current deferred income taxes              132,202           128,998
Other liabilities                             11,491          98,002      
                                                               
Total Liabilities                             6,636,264       5,516,828   
                                                               
Commitments and contingencies                  -                 -
                                                               
Shareholders' Equity
                                                               
Preferred Stock, 10,000,000 shares
authorized, $.001 par value, of which
200,000 shares are authorized as Class A       -                 -
Convertible stock. No shares issued and
outstanding at September 30, 2013 and 2012
                                                               
Common stock, $.001 par value: 75,000,000
shares authorized, 18,632,328 and              18,632            18,329
18,329,314 issued at September 30, 2013
and 2012, respectively
                                                               
Additional paid-in capital                     49,880,571        47,845,732
Retained earnings                              6,484,634         29,605,236
Treasury stock, at cost, 1,756,807 and
1,756,632 shares at September 30, 2013 and    (20,389,590 )    (20,388,894 )
2012, respectively
                                                               
Total Shareholders' Equity                    35,994,247      57,080,403  
                                                               
Total Liabilities and Shareholders' Equity   $ 42,630,511     $ 62,597,231  

                                                             
Innovative Solutions and Support, Inc.
Consolidated Statement of Operations
(unaudited)
                                                                  
                 Three months ended                Twelve months ended
                 September 30,                     September 30,
                  2013           2012           2013          2012       
                                                                  
Sales            $ 8,037,345      $ 6,928,026      $ 31,567,307   $ 24,578,198
                                                                  
Cost of Sales     5,849,877      4,259,701      18,942,737    14,067,933 
                                                                  
Gross Profit       2,187,468        2,668,325        12,624,570     10,510,265
                                                                  
Operating
expenses:
Research and       362,758          560,741          2,578,034      2,693,554
development
Selling,
general and       1,778,173      1,734,578      8,119,071     7,400,199  
administrative
Total
operating          2,140,931        2,295,318        10,697,105     10,093,753
expenses
                                                                  
Operating          46,537           373,007          1,927,465      416,512
income
                                                                  
Interest           8,892            38,521           41,174         101,012
income
Interest           -                (61        )     -              (598       )
expense
Other income      8,389          6,489          38,120        65,005     
                                                                  
Income before      63,818           417,955          2,006,759      581,931
income taxes
                                                                  
Income tax
(benefit)         (90,909    )    (2,355,174 )    119,842       (2,397,063 )
expense
                                                                  
Net income       $ 154,727       $ 2,773,129     $ 1,886,917    $ 2,978,994  
                                                                  
Net income per
Common Share
Basic            $ 0.01          $ 0.17          $ 0.11         $ 0.18       
Diluted          $ 0.01          $ 0.17          $ 0.11         $ 0.18       
                                                                  
Cash dividend    $ -             $ -             $ 1.50         $ -          
per share
                                                                  
Weighted
Average Shares
Outstanding
Basic              16,836,359       16,581,819       16,753,068     16,641,895
Diluted            17,051,863       16,581,819       16,855,854     16,641,900

Contact:

Innovative Solutions & Support, Inc.
Ron Albrecht, Chief Financial Officer
610-646-0350
 
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