Elbit Systems Reports First Quarter 2019 Results

HAIFA, Israel, May 28, 2019 /PRNewswire/ -- Elbit Systems Ltd. (NASDAQ: ESLT) (TASE: ESLT), (the "Company") the international high technology company, reported today its consolidated results for the quarter ended March 31, 2019.

In this release, the Company is providing US-GAAP results as well as additional non-GAAP financial data, which are intended to provide investors a more comprehensive understanding of the Company's business results and trends. Unless otherwise stated, all financial data presented is GAAP financial data.

Management Comment:

Bezhalel (Butzi) Machlis, President and CEO of Elbit Systems, commented: "The results of the first quarter of 2019 mark the first full quarter that includes the results of IMI. I am pleased with our results, especially the 25% growth in revenue with a well-diversified global presence in which our major geographic regions grew on an absolute basis. Our economies of scale enabled us to maintain a similar level of operating margins despite lower gross margins following the IMI acquisition. The significant increase in our backlog and the progress in the integration of IMI into the Company, support our long-term growth potential."

First quarter 2019 results:

Revenues in the first quarter of 2019 were $1,021.7 million, as compared to $818.5 million in the first quarter of 2018. The strong growth was mainly driven by the consolidation of IMI and Universal performance in the first quarter of 2019.

Non-GAAP ^(*) gross profit amounted to $283.4 million (27.7% of revenues) in the first quarter of  2019, as compared to $239.8 million (29.3% of revenues) in the first quarter of 2018. GAAP gross profit in the first quarter of 2019 was $277.6 million (27.2% of revenues), as compared to $235.4 million (28.8% of revenues) in the first quarter of 2018.

Research and development expenses, net were $77.4 million (7.6% of revenues) in the first quarter of 2019, as compared to $68.2 million (8.3% of revenues) in the first quarter of 2018.

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Marketing and selling expenses, net were $71.8 million (7% of revenues) in the first quarter of 2019, as compared to $68.2 million (8.3% of revenues) in the first quarter of 2018.

General and administrative expenses, net were $53.6 million (5.2% of revenues) in the first quarter of 2019, as compared to $35.7 million (4.4% of revenues) in the first quarter of 2018.

Other operating income, net was $1.2 million in the first quarter of 2019, due to a gain resulting from an investment and remeasurement of the Company in a subsidiary.

Non-GAAP^(*) operating income was $84.0 million (8.2% of revenues) in the first quarter of  2019, as compared to $69.4 million (8.5% of revenues) in the first quarter of  2018.  GAAP operating income in the first quarter of  2019 was $76.0 million (7.4% of revenues), as compared to $63.3 million (7.7% of revenues) in the first quarter of 2018.

Financial expenses, net were $13.9 million in the first quarter of 2019, as compared to $10.2 million in the first quarter of 2018. Financial expenses, net in the first quarter of 2019, include exchange rate differences of approximately $9.3 million related to the recognition of lease liabilities denominated in foreign currencies (mainly in New Israeli Shekels) as a result of the adoption of ASC 842, Leases, effective January 1, 2019.

Other (expenses) income, net were $3.4 million in the first quarter of 2019, mainly due to the non-service cost components of pension plans, in accordance with ASU 2017-07.

Taxes on income were $10.1 million (effective tax rate of 17.2%) in the first quarter of 2019, as compared to $6.4 million (effective tax rate of 12.0%) in the first quarter of 2018.

Equity in net earnings of affiliated companies and partnerships was $2.2 million (0.2% of revenues) in the first quarter of 2019, as compared to $3.1 million (0.4% of revenues) in the first quarter of 2018.

Net income attributable to non-controlling interests was $0.4 million in the first quarter of  2019, as compared to $0.2 million in the first quarter of 2018.

Non-GAAP^(*) net income attributable to the Company's shareholders in the first quarter of 2019 was $65.8 million (6.4% of revenues), as compared to $55.1 million (6.7% of revenues) in the first quarter of 2018. GAAP net income attributable to the Company's shareholders in the first quarter of 2019 was $50.5 million (4.9% of revenues), as compared to $49.6 million (6.1% of revenues) in the first quarter of 2018.

Non-GAAP^(*) diluted net earnings per share attributable to the Company's shareholders were $1.54 for the first quarter of 2019, as compared to $1.29 for the first quarter of 2018. GAAP diluted earnings per share in the first quarter of 2019 were $1.18, as compared to $1.16 for the first quarter of 2018.

The Company's backlog of orders as of March 31, 2019 totaled $9,658 million as compared to $8,046 million as of March 31, 2018. Approximately 59% of the current backlog is attributable to orders from outside Israel. Approximately 61% of the current backlog is scheduled to be performed during 2019 and 2020.

Operating cash flow generated in the three months ended March 31, 2019 was $46.5 million, as compared to $147.9 million used in the three months ended March 31, 2018.

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Adoption of New Accounting Standard:

The Company adopted Accounting Standards Update (ASU) 2016-02, Leases (ASC 842), effective January 1, 2019, using a modified retrospective transition method. Consequently, periods prior to January 1, 2019 are not restated for the adoption of ASU 2016-02.

Leases (ASC 842), as amended, requires lessees to recognize a Right of Use ("ROU") asset and lease liability on the balance sheet for most lease arrangements and expands disclosures about leasing arrangements for both lessees and lessors, among other items. We adopted ASU 2016-02 using the optional transition method whereby we applied the new lease requirements under ASU 2016-02 through a cumulative-effect adjustment.

We recognized approximately $370 million of ROU operating lease assets and lease liabilities as a result of adopting this standard. As part of our adoption, we elected all of the available practical expedients with the exception of the practical expedient permitting the use of hindsight when determining the lease term and assessing impairment of ROU assets. The adoption of the standard increased our financial expenses in the first quarter of 2019, in the amount of $9.3 million as a result of exchange rate differences on lease liabilities denominated in foreign currencies (mainly NIS). The comparative periods have not been restated for the adoption of ASU 2016-02.

* Non-GAAP financial data:

The following non-GAAP financial data is presented to enable investors to have additional information on the Company's business performance as well as a further basis for periodical comparisons and trends relating to the Company's financial results. The Company believes such data provides useful information to investors by facilitating more meaningful comparisons of the Company's financial results over time. Such non-GAAP information is used by the Company's management to make strategic decisions, forecast future results and evaluate the Company's current performance. However, investors are cautioned that, unlike financial measures prepared in accordance with GAAP, non-GAAP measures may not be comparable with the calculation of similar measures for other companies.

The non-GAAP financial data includes reconciliation adjustments regarding non-GAAP gross profit, operating income, net income and diluted EPS. In arriving at non-GAAP presentations, the Company factors out items such as those that have a non-recurring impact on the income statements, various non-cash items, including significant exchange rate differences, significant effects of retroactive tax legislation and changes in accounting guidance and other items, which in management's judgment, are items that are considered to be outside of the review of core operating results.

In the Company's non-GAAP presentation, the Company made certain adjustments, as indicated in the table below.

These non-GAAP measures are not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations, as determined in accordance with GAAP, and that these measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP measures. Investors should consider non-GAAP financial measures in addition to, and not as replacements for or superior to, measures of financial performance prepared in accordance with GAAP.

Recent Events:

On March 27, 2019, the Company announced that it was awarded an approximately $125 million (approximately NIS 460 million) contract from the Israeli Ministry of Defense to supply fully automatic self-propelled howitzer gun systems to the Israeli Defense Forces. The contract, which also includes the supply of training simulators, will be performed over a 12-year period.

On April 5, 2019, the Company announced that its U.S. subsidiary, Elbit Systems of America, LLC, signed a definitive agreement with Harris Corporation ("Harris") for the acquisition of Harris' Night Vision business for a purchase price of $350 million. The transaction is conditioned on completion of Harris' proposed merger with L3 Technologies, Inc, as well as customary closing conditions, including receipt of regulatory approvals.

On April 9, 2019, the Company announced that it obtained the commitment of several institutional investors in Israel to purchase 1,408,921 ordinary shares of the Company, par value 1.0 New Israeli Shekel ("NIS") per share (the "Offered Shares"), at a purchase price per Offered Share of approximately NIS 472 (approximately $132 million), for gross proceeds of approximately NIS 665 million (approximately $186 million). The Offered Shares were held by the Company as treasury shares.

On April 11, 2019, the Company announced that it was awarded an approximately $30 million contract to supply STYLET, a precise Guided Mortar Munition to a country in Asia-Pacific. The contract will be performed over a two-year period.

On May 26, 2019, the Company announced that it was awarded a $127 million contract to supply vehicular tactical radio systems to the Army of a country in South Asia. The contract will be performed over a three-year period.

Dividend:

The Board of Directors declared a dividend of $0.44 per share for the first quarter of 2019. The dividend's record date is June 7, 2019. The dividend will be paid from income generated as Preferred Income (as defined under Israel tax laws), on June 24, 2019, net of taxes and levies, at the rate of 20%.

Conference Call:

The Company will be hosting a conference call on Tuesday, May 28, 2019 at 9:00 a.m. Eastern Time. On the call, management will review and discuss the results and will be available to answer questions.

To participate, please call one of the teleconferencing numbers that follow. If you are unable to connect using the toll-free numbers, please try the international dial-in number.

US Dial-in Numbers: 1-888-407-2553

Canada Dial-in Numbers: 1-888-604-5839

UK Dial-in Number: 0-800-917-5108

ISRAEL Dial-in Number: 03-918-0610

INTERNATIONAL Dial-in Number:  +972-3-918-0610

at: 9:00 am Eastern Time; 6:00 am Pacific Time; 2:00 pm UK Time; 4:00 pm Israel Time

This call will also be broadcast live on Elbit Systems' web-site at http://www.elbitsystems.com. An online replay will be available from 24 hours after the call ends.

Alternatively, for two days following the call, investors will be able to dial a replay number to listen to the call. The dial-in numbers are:

1-888-782-4291 (US and Canada) or +972-3-925-5925 (Israel and International).

About Elbit Systems

Elbit Systems Ltd. is an international high technology company engaged in a wide range of defense, homeland security and commercial programs throughout the world. The Company, which includes Elbit Systems and its subsidiaries, operates in the areas of airborne, land and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance ("C4ISR"), unmanned aircraft systems, advanced electro-optics, electro-optic space systems, EW suites, signal intelligence systems, data links and communications systems, radios and munitions. The Company also focuses on the upgrading of existing platforms, developing new technologies for defense, homeland security and commercial aviation applications and providing a range of support services, including training and simulation systems.

For additional information, visit: www.elbitsystems.com or follow us on Twitter.

Attachments:

Consolidated balance sheets
Consolidated statements of income
Consolidated statements of cash flow
Consolidated revenue distribution by areas of operation and by geographical regions

This press release contains forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1943, as amended) regarding Elbit Systems Ltd. and/or its subsidiaries (collectively the Company), to the extent such statements do not relate to historical or current fact. Forward-looking statements are based on management's expectations, estimates, projections and assumptions. Forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. These statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Therefore, actual future results, performance and trends may differ materially from these forward-looking statements due to a variety of factors, including, without limitation: scope and length of customer contracts; governmental regulations and approvals; changes in governmental budgeting priorities; general market, political and economic conditions in the countries in which the Company operates or sells, including Israel and the United States among others; differences in anticipated and actual program performance, including the ability to perform under long-term fixed-price contracts; and the outcome of legal and/or regulatory proceedings. The factors listed above are not all-inclusive, and further information is contained in Elbit Systems Ltd.'s latest annual report on Form 20-F, which is on file with the U.S. Securities and Exchange Commission. All forward-looking statements speak only as of the date of this release. The Company does not undertake to update its forward-looking statements.

Elbit Systems Ltd., its logo, brand, product, service and process names appearing in this Press Release are the trademarks or service marks of Elbit Systems Ltd. or its affiliated companies.  All other brand, product, service and process names appearing are the trademarks of their respective holders.  Reference to or use of a product, service or process other than those of Elbit Systems Ltd. does not imply recommendation, approval, affiliation or sponsorship of that product, service or process by Elbit Systems Ltd. Nothing contained herein shall be construed as conferring by implication, estoppel or otherwise any license or right under any patent, copyright, trademark or other intellectual property right of Elbit Systems Ltd. or any third party, except as expressly granted herein.

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SOURCE Elbit Systems Ltd