Elron Electronic Industries Reports 2Q 2009 Results and Pact for the Sale of Its Holding in Netvision

Aug 23, 2009 (Close-Up Media via COMTEX) -- ELRN | Quote | Chart | News | PowerRating -- Elron Electronic Industries has reported financial results for the second quarter and first half of 2009.

In a release on August 19, Elron reports its net loss attributable to shareholders in the second quarter amounted to $4.1 million, a substantial improvement from the $16.8 million net loss in the second quarter of 2008, and the $9.8 million net loss in the first quarter of 2009.

Second quarter results included a gain, net of noncontrolling interest, in the amount of $4.4 million resulting from the sale of substantially all of the assets of Elron's group company, 3DV Systems Ltd. (3DV"), to a third party during the second quarter of 2009.

Second quarter results also included $7.4 million of losses recorded with respect to Elron's group companies, as compared with $14.5 million in the second quarter of 2008, of which impairment charges recorded in respect of Elron's investments in certain of its group companies amounted to $1.3 million and $2.6 million, respectively.

Elron's non-consolidated G&A costs in the second quarter of 2009 amounted to approximately $1.1 million, compared with approximately $2.2 million in the first quarter of 2009, and approximately $2.6 million in the second quarter of 2008. The significant decrease was mainly due to the implementation of the Services Agreement with Discount Investment Corp. Ltd. (DIC"), which was approved by the shareholders of the Company on April 22.

Elron's net loss attributable to shareholders in the first half of 2009 amounted to $14 million, a substantial improvement from the $29.9 million net loss in the comparable period last year. Results for the first half of 2009 include the gain resulting from 3DV's sale of assets, offset by losses recorded with respect to Elron's group companies in the amount of $15 million, compared with $25.6 million in the first half of 2008, of which impairment charges recorded in respect of Elron's investments in certain of its group companies amounted to approximately $2.1 million and approximately $2.7 million, respectively.

Elron's non-consolidated G&A costs in the first half of 2009 amounted to approximately $3.3 million, compared with approximately $5.3 million in the first half of 2008.

The decrease in losses recorded with respect to Elron's group companies resulted mainly from the adoption of SFAS 160, "Noncontrolling Interests in Consolidated Financial Statements" (FAS 160") as reported in the first quarter of 2009, which affected Elron's accounting for allocation of losses to noncontrolling shareholders in its subsidiaries, reducing Elron's share in losses of its consolidated companies.

Notable Developments Subsequent To The Second Quarter Of 2009

Sale Of Elron's Holdings In Netvision:

Further to Elron's previous announcements on May 20, July 5, and August 16, Elron on August 19 entered into a definitive agreement with DIC and Clal Industries and Investments Ltd. (CII), according to which DIC and CII agreed to acquire from Elron its approximately 15 percent holding in NetVision Ltd. (NetVision"), a provider of communication services in Israel, at a price per share of NIS 49.6 (currently equal to approximately $13.0), and for an aggregate consideration of approximately NIS 228.7 million (currently equal to approximately $60 million), taking into account an adjustment for dividends recently announced by NetVision, which will be received by Elron. The agreement was approved by Elron's Audit Committee and the Board of Directors. All figures in US Dollars stated above and below have been translated for convenience purposes at the representative rate of exchange prevailing on August 18, according to which $1.00 equaled NIS 3.824.

DIC and CII are both majority-owned subsidiaries of IDB Development Ltd. DIC and CII currently hold approximately 31 percent and approximately 24 percent, respectively, of NetVision's outstanding ordinary shares. DIC holds approximately 49 percent of Elron's outstanding ordinary shares.

The purchase price was determined in negotiation between the parties based on a valuation received from an independent appraiser which was jointly appointed by Elron, DIC and Clal, and further supported by a fairness opinion of an independent party, which was retained by Elron for such purpose, which concluded that the purchase price is fair and reasonable, from a financial point of view, to Elron's public shareholders.

The completion of the transaction is subject to obtaining shareholder approval of each of Elron, DIC and CII and applicable regulatory approvals. Additional details regarding the transaction will be included in a proxy statement to be published by Elron in connection with its shareholders meeting for the purpose of obtaining its approval.

Upon the completion of the transaction, Elron expects to record a gain, currently estimated at up to approximately $30 million. This estimated gain is based on NetVision's shareholders' equity as of June 30, and the current US Dollar/New Israeli Shekel exchange rate, and is subject to the effects of changes in NetVision's shareholders' equity and the US Dollar/New Israeli Shekel exchange rate until the completion date of the transaction.

There is no assurance of the occurrence or timing of the transaction, the Company noted.

Medingo Receives FDA Clearance To Market Its Insulin Micropump In The United States:

On July 29, Elron announced that Medingo Ltd. (Medingo") received clearance from the U.S. Food and Drug Administration (FDA"), to market its Solo MicroPump Insulin Delivery System in the United States. Medingo introduced the Solo MicroPump at the American Association of Diabetes Educators Meeting which took place in Atlanta, Georgia, at the beginning of August 2009. Medingo is currently considering alternatives for its go-to-market strategy and product launch timing, and plans to initiate a limited user experience program in a certain territories in early 2010.

Liquidity, Investments & Shareholders' Equity:

As of June 30, Elron's non-consolidated cash balance amounted to approximately $9.1 million compared with $4.0 million at December 31, 2008. As of June 30, Elron's long-term loans, not including loans of its subsidiaries, amounted to $45.4 million. This includes $9.0 million of loans received during the first half of 2009 from DIC.

During the first half of 2009 Elron and RDC - Rafael Development Corp., its subsidiary, invested an amount of approximately $15 million in its group companies.

During the first half of 2009 Elron received dividends from Given Imaging Ltd. and NetVision in the aggregate amount of approximately $7.1 million.

Shareholders' equity attributable to shareholders at June 30, was approximately $158.8 million, which represented approximately 63 percent of Elron's total assets, compared with approximately $173.8 million, which represented approximately 68 percent of Elron's total assets, at December 31, 2008.

Elron Electronic Industries, a member of the IDB Holding group, is a high-technology holding company traded in the Nasdaq and in the Tel-Aviv Stock Exchange. Elron's group companies currently comprise a diverse range of publicly-traded and privately held companies primarily in the fields of medical devices, information & communications technology, clean technology and semiconductors.

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