Koor Industries Reports Consolidated Results for the First Quarter 2007

TEL AVIV, Israel, May 14 /PRNewswire-FirstCall/ -- Koor Industries Ltd. , (the "Company", "Koor") a leading Israeli holding company, reported today its consolidated financial results for the three months ended March 31, 2007.

Net income for the first quarter 2007 totaled NIS 124 million ($29.8 million), or $1.77 per ordinary share and $0.35 per American Depositary Share ("ADS"). Net income for the first quarter last year totaled NIS 102 million ($24.5 million), or $1.47 per ordinary share and $0.29 per ADS, and included the net impact of the initial implementation of Israel accounting standard no. 22 (treatment of financial instruments) which contributed NIS 39 million ($9.4 million) to Koor's quarterly net income.

The strong net income for the first quarter 2007 followed the substantial increase in the net profit of Makhteshim Agan Industries and ECI Telecom, as well as the return to profitability of Telrad Networks following the restructuring measures implemented in 2006. Net income for the quarter includes NIS 33 million ($7.9 million) in capital gains following the sale of Koor's holding in Scopus Video Networks, and the receipt of the second installment of the cash due on the sale of Koor's entire holding in Elbit Systems.

Raanan Cohen, Chief Executive Officer of Koor Industries commented on the results, "I am very pleased with our results this quarter. We generated net income of NIS 124 million following the strong profitability of our major holdings and the capital gains following our divestiture activities. Makhteshim Agan is taking advantage of strong market opportunities, while progressing with its restructuring process. ECI Telecom showed increased profitability and generated additional value and income following the IPO of Veraz Networks."

Mr. Cohen added "After the end of the quarter, we successfully raised NIS 640 million ($154 million) from local institutional investors, with a view of continuing to invest in our major holdings and other potential opportunities."

As of March 31, 2007, loans from banks and institutional investors of Koor, and its wholly owned subsidiaries, aggregated approximately NIS 2.37 billion ($570 million). Cash, cash equivalents and short term deposits of the Company, and its wholly owned subsidiaries, as of March 31, 2007, aggregated to approximately NIS 0.89 billion ($214 million). The net debt of the Company, and its wholly owned subsidiaries, as of March 31, 2007, resulting from the above, was approximately NIS 1.48 billion ($356 million). The cash balance does not include NIS 320 million ($77 million) of additional proceeds expected to be received in 2007 and 2008 under agreements signed in 2006.

Main Events in the First Quarter 2007 Sale of Scopus Video Networks

On January 11, 2007, Koor completed the sale of its entire 22.7% shareholding in Scopus Video Networks to Optibase Ltd. for NIS 67.6 million ($16 million). As a result of the sale Koor recorded a capital gain of NIS 23 million ($5.6 million) in the first quarter of 2007.

Sale of Elbit Systems

At the end of 2006, Koor completed the sale of its entire shareholding in Elbit Systems for a total consideration of NIS 414 million ($99 million), payable in several installments. In the first quarter Koor received a payment in an amount of NIS 60 million ($14 million) and recorded a capital gain of NIS 9.9 million ($2.4 million). The last payment, in an amount of $44.2 million is due in the third quarter of 2007.

Transactions and Events Subsequent to the End of the First Quarter 2007 Sale of Sheraton Moriah Hotel Chain

On April 26, 2007 Koor completed the sale of its entire 56.5% shareholding in Sheraton Moriah Israel Ltd. to Azorim Tourism Ltd., a company in which Azorim Development and Construction Co. Ltd. ("Azorim") owns 75% and Boymelgreen Capital Ltd owns 25%, for a total consideration of approximately $24 million. The first installment in the amount of $6.3 million was received on December 21, 2006; the second installment, in the amount of $8.6 million, was received at the closing. The remaining amount of approx. $9.1 million, guaranteed by Azorim, is due by March 27, 2008. As a result of the transaction, Koor currently estimates that it will record a capital gain of approximately NIS 14 million in the second quarter of 2007.

Agreement to Sell 5% of Knafaim, and an Option to Sell Balance of the Holding

On May 8, 2007, Koor signed an agreement to sell 4.96% of Knafaim Holdings Ltd. ("Knafaim") to Ms. Tamar Borovich. The shares will be sold at a price per share of $10.47, for a total consideration of approximately $7.4 million. $1.5 million was paid upon signing and the remainder will be paid upon the closing of the transaction. The closing is expected to take place by the end of the third quarter of 2007, and is subject to receipt of the approval of Israel's anti-trust commissioner. Koor currently estimates that following the closing of the transaction it will record a capital gain of NIS 7 million. Ms. Borovich also has a Call option to acquire all, or part, of the balance of Koor's shareholding in Knafaim, representing approx. a further 4.2% of Knafaim's share capital under predefined terms. If Ms. Borovich does not exercise the option to purchase the balance of shares, Koor has a Put option to sell, all or part, the balance of its shares to Ms. Borovich.

Bond Issuance

On May 9, 2007 Koor raised approx. NIS 640 million ($154 million) through a private offering of investment grade debentures ("Offering") to institutional investors in Israel at an effective interest rate of 4.05% linked to the Israeli Consumer Price Index ("CPI"). The debentures were rated A+/Stable by Maalot - The Israel Securities Rating Company Ltd. ("Maalot"), a Standard & Poors affiliation. The terms of the debentures offered were identical to the terms of the Series H debentures offered by the Company to the public in Israel pursuant to the prospectus dated August 13, 2006.

Results of Key Holdings*

Makhteshim-Agan Industries (39.2% voting end-Q1 2007, TASE: MAIN, recorded according to equity method)

Revenues for the first quarter of 2007 increased 13% totaling $559.3 million, compared to $493.9 million for the same period in 2006. The revenue increase stemmed mainly from mild climate conditions in Europe, which brought about early, high level, demand for crop protection products; the strengthening of the Euro, which increased the dollar value of revenues; and increased demand for agricultural produce such as corn, sugar cane and soy, drawing increased derivative demand for Makhteshim Agan's products.

Makhteshim Agan's net income for the quarter increased 15% totaling $66.6 million, compared to $57.7 million in the first quarter of 2006.

ECI Telecom (28.0%, NASDAQ: ECIL, recorded according to equity method)

Revenues for the first quarter totaled $155.1 million compared to $162.0 million in the first quarter of 2006. Net income for the quarter totaled $18.7 million, compared to $3.1 million in the first quarter last year. Net income for the quarter included a $12.5 million tax benefit recorded in connection with the initial public offering of Veraz Networks. Pro-forma, non GAAP net income for the first quarter of 2007 reached $9.7 million, up 37% compared with pro forma, non GAAP net income of $7.1 million in the first quarter of 2006.

ECI's pro-forma, non-GAAP, net income differs this quarter from results reported under U.S. GAAP due to adjustments made for the following items: The amortization of acquired intangible assets; the impact of share-based compensation and a tax benefit recorded in connection with the initial public offering of Veraz Networks. A full reconciliation is available in ECI Telecom's earnings' release for the first quarter 2007.

Telrad Networks (61%, recorded according to equity method)

Revenues for the first quarter of 2007 totaled NIS 62.7 million ($15.1 million), compared to NIS 109.0 million ($26.2 million) for the first quarter in 2006. Net income for the quarter totaled NIS 3.0 million ($0.7 million), a substantial improvement compared to a net loss of NIS 1.8 million ($0.4 million) for the first quarter in 2006.

Telrad's improved financial performance follows comprehensive reorganization and restructuring measures implemented throughout 2006. These included the substantial downsizing of its unionized workforce, the sale of its manufacturing facility, and the relocation of all operations to a single facility. Telrad now has a much more flexible expense structure.

- Koor Industries and its Key Holdings' results are presented as published, and except for ECI Telecom, which prepares its financial statements in accordance with US GAAP, and prepares an Israel GAAP reconciliation for Koor, the results are prepared in accordance with the Israeli GAAP. Differences may occur during consolidation given accounting principles and currency translation differences.

- The results of the companies reporting in New Israeli Shekels (NIS) were converted to US$ using the NIS\$ conversion rate as at March 31, 2007 of NIS 4.155.

Conference call details: Date: May 15, 2007 Time: 11:00 am EDT (4:00 pm UK, 6:00 pm Israel) To participate in the live call please dial one of the following numbers: United States: 1-888-642-5032 UK: 0-800-917-5108 Canada: 1-888-604-5839 Israel: 03-918-0650 International: [phone] Replay no. (until May 17): 1-888-782-4291 (US), 1-866-500-4964 (Canada), 0-800-028-6837 (UK), [phone] or on Koor's website under 'Investor Relations' - http://www.koor.com/. About Koor

Koor Industries is a leading Israeli holding company, focusing on high-growth, internationally-oriented, Israeli companies. Koor actively invests in agrochemicals through Makhteshim Agan Industries; in telecommunications through its holdings in ECI Telecom, ECTel and Telrad Networks; and in venture capital through Koor Corporate Venture Capital. Koor's ADSs (American Depositary Shares) are traded on the New York Stock Exchange and Koor's Ordinary Shares are traded on the Tel Aviv Stock Exchange .

Forward looking statements in this release involve a number of risks and uncertainties including, but not limited to, international market conditions, domestic political factors, technological developments, ability to finance operations, and other factors which are detailed in the Company's SEC filings.

Financial Tables Follow Condensed Consolidated Interim Statements of Income for the Year ended Three months ended March December 31 31 2007 (i) 2006 (ii) 2006 Unaudited Audited NIS thousands Revenues and earnings Revenue from sales and 53,618 77,099 270,452 services Group's equity in the operating results of investee companies, net 112,880 64,311 (37,555) Other income, net 33,610 4,502 99,492 200,108 145,912 332,389 Costs and losses Cost of sales and services 41,025 54,449 210,097 Selling and marketing expenses 11,683 12,605 47,315 General and administrative expenses 12,983 15,718 87,514 Financing expenses, net 8,136 13,910 97,480 73,827 96,682 442,406 Earnings before income tax 126,281 49,230 (110,017) Income tax 485 40 (4,671) 126,766 49,270 (114,688) Minority interest in consolidated companies' results, net 336 (1,969) (2,430) Net earnings (loss) from continuing operations 127,102 47,301 (117,118) Net earnings (loss) from discontinued operations (3,323) (7,991) 13,918 Cumulative effect as of the beginning of the year of change in accounting method - 62,552 62,552 Net earnings (loss) for the period 123,779 101,862 (40,648) NIS NIS NIS Basic earnings (loss) per ordinary share: From continuing operations 7.544 2.757 (6.623) From discontinued operations (0.201) (0.492) 0.849 From cumulative effect of change in accounting method - 3.852 3.815 Net (loss) earnings for the period 7.343 6.117 (1.959) Diluted earnings (loss) per ordinary share: From continuing operations 7.440 2.698 (7.161) From discontinued operations (0.200) (0.481) 0.849 From cumulative effect of change in accounting method - 3.768 3.815 Net earnings (loss) for the period 7.240 5.985 (2.497) Condensed Consolidated Balance Sheet as at March 31 December 31 2007 (i) 2006 (ii) 2006 Unaudited Audited NIS thousands Assets Current assets Cash and cash equivalents 488,086 48,636 241,586 Short-term deposits and investments 564,538 722,920 695,931 Trade receivables 43,191 53,384 33,010 Other receivables 28,807 53,976 64,521 Inventories 68,351 87,575 62,319 1,192,973 966,491 1,097,367 Investments and long-term receivables Investments in affiliates 3,377,654 2,803,935 3,322,177 Other investments and receivables 165,331 535,611 179,488 3,542,985 3,339,546 3,501,665 Investment property 108,280 (*) 81,016 (*) 80,080 Fixed assets, net 8,764 (*) 10,497 (*) 9,528 Intangible assets, deferred tax assets and deferred expenses 3,760 16,538 546 Assets relating to discontinued operations 808,349 1,090,153 814,645 5,665,111 5,504,241 5,503,831 (*) Reclassified. Condensed Consolidated Balance Sheet as at March 31 December 31 2007 (i) 2006 (ii) 2006 Unaudited Audited NIS thousands Liabilities and shareholders' equity Current liabilities Credit from banks and others 33,240 239,601 33,800 Trade payables 47,777 51,349 40,473 Other payables 183,004 149,542 161,228 Customer advances 3,303 1,544 1,779 267,324 442,036 237,280 Long-term liabilities Long-term bank loans 1,328,760 1,004,415 1,299,174 Other long-term loans 13,867 53,545 47,467 Debentures 988,030 392,383 988,482 Deferred taxes 715 93 34 Liability for employee severance benefits, net 2,068 40 2,137 2,333,440 1,450,476 2,337,294 Liabilities relating to discontinued operations 742,826 994,938 737,721 Minority interest 2,054 1,560 2,348 Shareholders' equity 2,319,467 2,615,231 2,189,188 5,665,111 5,504,241 5,503,831 (i) Reclassified with respect to discontinued operations (see Note 6(2) and Note 6(3) in Koor Industries Consolidated Financial Statements for Q1 2007 (Unaudited)). (ii) Reclassified with respect to discontinued operations (see Note 6(3) in Koor Industries Consolidated Financial Statements for Q1 2007 (Unaudited)). Company contact Oren Hillinger Finance Director Koor Industries Ltd. Tel: [phone] Fax: [phone] Contacts Ehud Helft / Kenny Green GK Investor Relations Tel: [phone] - 6710 Fax: [phone] - [e-mail]