Elbit Systems Reports Second Quarter 2011 Results
Backlog of Orders Increased to $5.65 Billion; Revenues at $692 Million; Net Income at $38.9 Million; Diluted Net Earnings Per Share at $0.90
HAIFA, Israel, August 16, 2011 /PRNewswire/ --
Elbit Systems Ltd. (the "Company") (NASDAQ and TASE: ESLT), the international defense electronics company, today reported its consolidated financial results for the second quarter ended June 30, 2011.
(Logo: http://www.newscom.com/cgi-bin/prnh/20080408/300441 )
In this release, the Company is providing its US-GAAP ("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:
Joseph Ackerman, President and CEO of Elbit Systems, commented: "We are encouraged by the continued growth in our backlog over the past five quarters, which is further highlighted by the Company's growth in revenues. The geographical diversity in our revenues attests to the success of our strategy to broaden our geographic diversity and continue to develop target markets, specifically in countries with growing defense budgets in Asian Pacific and Latin America, and that helps to compensate for the decline in other markets around the globe. These factors, in addition to the progress achieved in incorporating recently acquired companies, and the encouraging results of our R&D efforts, provide a solid basis for the continued growth of the Company."
Second quarter 2011 results:
Revenues were $691.6 million in the second quarter of 2011, as compared to $603.3 million in the second quarter of 2010. The leading contributors to the Company's revenues were the C4I systems and Airborne areas of operations.
Gross profit was $200.5 million (29.0% of revenues) in the second quarter of 2011, as compared to $183.6 million (30.4% of revenues)in the second quarter of 2010. The reduced gross profit rate was mainly a result of a mix of programs sold during the second quarter of 2011.
Research and development expenses, net were $55.4 million (8.0% of revenues) in the second quarter of 2011, as compared to 56.8 million (9.4% of revenues) in the second quarter of 2010.
Marketing and selling expenses were $57.4 million (8.3% of revenues) in the second quarter of 2011, as compared to $50.3 million (8.3% of revenues) in the second quarter of 2010.
General and administrative expenses were $35.1 million (5.1% of revenues) in the second quarter of 2011, as compared to $32.1 million (5.3% of revenues) in the second quarter of 2010.
Operating Income was $52.6 million (7.6% of revenues), compared to $49.1 million (8.1% of revenues) in the second quarter of 2010.
Financial expenses, net were $9.4 million in the second quarter of 2011, as compared to $1.0 million in the second quarter of 2010. Financial expenses were comparatively higher in the second quarter of 2011 due to currency hedging related expenses as well as due to higher expenses related to the increased net debt of the Company.
Taxes on income were $5.4 million (effective tax rate of 12.4%) in the second quarter of 2011, as compared to taxes on income of $6.5 million (effective tax rate of 13.5%) in the second quarter of 2010.
Other income, net in the second quarter of 2010 reflected a net gain of $4.8 million related to the revaluation of the previously held Azimuth Technologies Ltd. shares at the acquisition date due to its accounting treatment as a business combination achieved in stages.
Equity in net earnings of affiliated companies and partnerships was $2.4 million (0.3% of revenues) in the second quarter of 2011, as compared to $5.4 million (0.9% of revenues) in the second quarter of 2010.
Net income attributable to non-controlling interests was $1.5 million in the second quarter of 2011, as compared to $2.3 million in the second quarter of 2010.
Net income attributable to the Company's ordinary shareholders in the second quarter of 2011 amounted to $38.9 million (5.6% of revenues), as compared to $44.8 million (7.4% of revenues) forthe second quarter of 2010.
Diluted net earnings per share attributable to the Company's ordinary shareholders were $0.90 for the second quarter of 2011, as compared with $1.04 for thesecond quarter of 2010.
The Company's backlog of orders increased to $5,649 million as of June 30, 2011, as compared with $5,446 million as of December 31, 2010 and $5,358 million as of June 30, 2010. Approximately 78% of the backlog relates to orders outside of Israel. Approximately 62% of the Company's backlog as of June 30, 2011, is scheduled to be performed during the second half of 2011 and in 2012.
Operating cash flow was $23.3 million during the first half of 2011, as compared to $101.6 million in the first half of 2010. The reduction in operating cash flow was mainly a result of reduced net profit, increased inventories and increased trade receivables.
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 our 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 below includes reconciliation adjustments regarding non-GAAP gross profit, operating income, net income and diluted EPS. In arriving at non-GAAP presentations, companies generally factor out items such as those that have a non-recurring impact on the income statements, various non-cash items, 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 below, the Company made the following adjustments: (1) amortization of purchased intangible assets, (2) significant reorganization, restructuring and other related expenses, (3) impairment of investments, including impairment of auction rate securities, (4) gain from changes in holdings, including revaluation of the previously held shares at the acquisition date when a business combination is achieved in stages (step-up) and (5) the income tax effects of the foregoing.
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.
Reconciliation of GAAP to Non-GAAP (Unaudited) Supplemental Financial Data:
(US Dollars in millions)
Six Months Three Months Year
Ended Ended Ended
December
June 30 June 30 31
2011 2010 2011 2010 2010
GAAP gross profit 386.2 368.1 200.5 183.6 797.9
Adjustments:
Amortization of purchased
intangible assets 15.5 9.0 7.9 4.7 25.0
Reorganization,
restructuring and other
related expenses(1) - - - - 12.8
Non-GAAP gross profit 401.7 377.1 208.4 188.3 835.7
Percent of revenues 30.6% 30.9% 30.1% 31.2% 31.3%
GAAP operating income 93.6 98.3 52.6 49.1 207.4
Adjustments:
Amortization of
intangible assets 28.4 21.5 14.4 11.0 47.7
Reorganization,
restructuring and other
related expenses(1) - - - - 16.4
Impairment of
investments(2) - 0.7 - 0.7 1.3
Gain from changes in
holdings(3) - (4.8) - (4.8) (4.8)
Non-GAAP operating income 121.9 115.7 67.0 56.0 268.0
Percent of revenues 9.3% 9.5% 9.7% 9.3% 10.0%
GAAP net income
attributable to Elbit
Systems' shareholders 66.8 94.6 38.9 44.8 183.5
Adjustments:
Amortization of
intangible assets 28.4 21.5 14.4 11.0 47.7
Reorganization,
restructuring and other
related expenses(1) - - - - 16.4
Impairment of
investments(2) 0.5 0.7 0.5 0.7 1.3
Gain from changes in
holdings(3) - (17.6) - (4.8) (17.6)
Related tax benefits (6.7) (2.4) (3.4) (3.0) (8.9)
Non-GAAP net income
attributable to
Elbit Systems'
shareholders 89.0 96.8 50.4 48.7 222.4
Percent of revenues 6.8% 7.9% 7.3% 8.1% 8.3%
Non-GAAP diluted net EPS 2.06 2.24 1.16 1.13 5.14
- Adjustment of reorganization, restructuring and other related expenses in 2010, were mainly due to write-off of inventories in the amount of approximately $13 million related to the acquisitions of Soltam and ITL.
- Adjustment of impairment in 2011 was due to investments in ARS and CDO marketable secutrities and during 2010 due to impairment of ICI intangible assets.
- Adjustment of gain from changes in holdings in 2010 included income of $12.8 million before tax from the sale of Mediguide shares and a gain of $4.8 million from a "step-up" in an investment in 2010.
Recent Events:
On May 17, 2011, the Company announced that it was awarded a contract valued at $32.7 million to supply an Asian army with advanced training systems for its armor and infantry forces. The project will be performed over the next three years.
On May 18, 2011, the Company announced that it was awarded a contract to supply an Asian country with dozens of CoMPASS[TM] (Compact Multi Purpose Advanced Stabilized System) payloads for maritime patrol aircraft. The Asian country, which operates one of the largest maritime patrol fleets in the world, has selected the CoMPASS[TM] payload as a solution to protect its coastlines. The contract, valued at approximately $20 million, is scheduled to be completed within two years.
On May 24, 2011, the Company announced that it was awarded a contract valued at approximately $18.6 million to upgrade the Romanian Air Forces' C-130 transport aircraft. According to the agreement, the C-130 aircraft will be installed with various types of advanced electronic systems, including those produced by Elbit Systems' wholly owned subsidiary - Elisra Electronic Systems Ltd. ("Elisra").
On June 19, 2011, the Company announced that its subsidiary Elisra, was awarded a contract valued at approximately €5 million to supply hundreds of units of its AN/PRC-684 Personal Locator Beacon (formerly SPLB) to the French Ministry of Defense, equipping the French Air Force, Army, Navy and DGA (Direction generale de l'armement). The project will be performed within 24 months.
On June 22, 2011, the Company announced that it was awarded a contract valued in excess of $15 million by Elettronica S.p.A to participate in a program to supply the ELT/572 DIRCM (Directed Infra-Red Countermeasures) system for installation on various platforms of the Italian Air Force, including the C130J, C27J and AW101. The contract will be performed over the next three years.
On July 25, 2011, the Company announced that it was awarded a $40 million order by the Israel Ministry of Defense for the follow-on Digital Army Program (DAP). The total value of this phase of the program is approximately $300 million and the additional orders are due to be received subsequently. The program will be performed over several years.
Dividend:
The Board of Directors declared a dividend of $0.36 per share for the second quarter of 2011. The dividend's record date is August 30, 2011, and the dividend will be paid on September 12, 2011, net of taxes and levies, at the rate of 20%.
Conference Call:
The Company will also be hosting a conference call later today, August 16, 2011 at 9:00am 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: 1 888 668 9141
UK Dial-in Number: 0 800 917 5108
ISRAEL Dial-in Number: 03 918 0609
INTERNATIONAL Dial-in Number: +972 3 918 0609
at 9:00am Eastern Time; 6:00am Pacific Time; 2:00pm UK Time; 4:00pm 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:
1 888 326 9310 (US) or +972 3 925 5901 (Israel and International).
About Elbit Systems:
Elbit Systems Ltd. is an international defense electronics company engaged in a wide range of programs throughout the world. The Company, which includes Elbit Systems and its subsidiaries, operates in the areas of aerospace, land and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance ("C4ISR"), unmanned aircraft systems ("UAS"), advanced electro-optics, electro-optic space systems, EW suites, airborne warning systems, ELINT systems, data links and military communications systems and radios. The Company also focuses on the upgrading of existing military platforms, developing new technologies for defense, homeland security and commercial aviation applications and providing a range of support services.
For additional information, visit: http://www.elbitsystems.com.
Attachments:
Consolidated balance sheet
Consolidated statements of income
Condensed 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 1934, 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.
(FINANCIAL TABLES TO FOLLOW)
ELBIT SYSTEMS LTD.
CONSOLIDATED BALANCE SHEETS
(In thousands of US Dollars)
June 30 December 31
2011 2010
Unaudited Audited
Assets
Current assets:
Cash and cash equivalents $ 68,830 $ 151,059
Short-term bank deposits and trading marketable
securities 32,353 63,486
Trade and unbilled receivables, net 743,246 702,364
Other receivables and prepaid expenses 196,843 166,124
Inventories, net of customers advances 738,872 665,270
Total current assets 1,780,144 1,748,303
Investment in affiliated companies,
partnership and other companies 92,586 88,116
Available for sale marketable securities 6,130 7,179
Long-term trade and unbilled receivables 108,832 90,343
Long-term bank deposits and other receivables 45,715 44,401
Deferred income taxes, net 28,686 29,892
Severance pay fund 319,355 302,351
601,304 562,282
Property, plant and equipment, net 529,050 503,851
Goodwill and other intangible assets, net 791,327 796,664
Total assets $ 3,701,825 $ 3,611,100
Liabilities and Shareholders' Equity
Short-term bank credit and loans $ 36,223 $ 15,115
Current maturities of long-term loans and Series A
Notes 41,098 43,093
Trade payables 322,381 360,736
Other payables and accrued expenses 663,609 645,146
Customer advances in excess of costs incurred on
contracts in progress 395,320 302,691
1,458,631 1,366,781
Long-term loans, net of current maturities 354,862 292,039
Series A Notes and convertible debentures, net of
current maturities 247,019 273,357
Accrued termination liabilities 418,661 395,303
Deferred income taxes and tax liabilities, net 52,864 55,936
Customer advances in excess of costs incurred on
contracts in progress 144,266 177,191
Other long-term liabilities 55,224 45,042
1,272,896 1,238,868
Elbit Systems Ltd.'s shareholders' equity 943,281 966,693
Non-controlling interests 27,017 38,758
Total shareholders' equity 970,298 1,005,451
Total liabilities and shareholders' equity $ 3,701,825 $ 3,611,100
ELBIT SYSTEMS LTD.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of US Dollars, except for share and per share amounts)
Six Months Three Months Year
Ended Ended Ended
December
June 30 June 30 31
2011 2010 2011 2010 2010
Unaudited Audited
Revenues 1,311,890 1,221,478 691,632 603,277 2,670,133
Cost of revenues 925,710 853,372 491,097 419,716 1,872,263
Gross profit 386,180 368,106 200,535 183,561 797,870
Operating expenses:
Research and development,
net 109,603 109,511 55,389 56,846 234,131
Marketing and selling 112,428 104,931 57,441 50,336 229,942
General and
administrative 70,595 60,141 35,085 32,056 131,200
Other income, net - (4,756) - (4,756) (4,756)
292,626 269,827 147,915 134,482 590,517
Operating income 93,554 98,279 52,620 49,079 207,353
Financial expenses, net (20,012) (4,137) (9,350) (1,002) (21,251)
Other income, net 374 13,089 180 108 13,259
Income before taxes on
income 73,916 107,231 43,450 48,185 199,361
Income taxes 10,719 16,816 5,419 6,489 24,037
63,197 90,415 38,031 41,696 175,324
Equity in net earnings of
affiliated companies
and partnership 6,151 9,301 2,400 5,389 19,343
Net income 69,348 99,716 40,431 47,085 194,667
Less: net income
attributable to
non-controlling interests (2,524) (5,155) (1,536) (2,306) (11,169)
Net income attributable to
Elbit Systems Ltd.'s
shareholders 66,824 94,561 38,895 44,779 183,498
Earnings per share
attributable to Elbit
Systems Ltd.'s ordinary
shareholders:
Basic net earnings
per share 1.56 2.22 0.91 1.05 4.30
Diluted net earnings per
share 1.55 2.19 0.90 1.04 4.25
Weighted average number of
shares used in
computation of basic
earnings per share 42,756 42,611 42,780 42,645 42,645
Weighted average number
of shares used in
computation of diluted
earnings per share 43,232 43,257 43,248 43,234 43,217
ELBIT SYSTEMS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands of US Dollars)
Six Months Ended Year Ended
June 30, December 31
2011 2010 2010
Unaudited Audited
CASH FLOWS FROM OPERATING ACTIVITIES
Net income 69,348 99,716 194,667
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 74,632 60,988 132,141
Write-off impairment 520 717 1,284
Stock based compensation 599 2,604 5,211
Amortization of Series A Notes
discounts and related issuance costs 247 25 168
Deferred income taxes and reserve,
net (7,426) (9,029) (28,162)
Gain on sale of property, plant and
equipment (690) (698) (2,600)
Gain on sale of investment - (18,713) (19,151)
Equity in net earnings of affiliated
companies and partnership, net of
dividend received(*) 7,956 (929) (8,418)
Change in operating assets and
liabilities:
Increase in short and long-term
trade receivables, and prepaid
expenses (87,410) (3,980) (84,708)
Increase in inventories, net (72,966) (44,993) (49,724)
Increase (decrease) in trade
payables, other payables and accrued
expenses (20,493) 6,163 76,383
Severance, pension and termination
indemnities, net 5,464 (212) 4,160
Increase (decrease) in advances
received from customers 53,533 9,968 (36,396)
Net cash provided by operating
activities 23,314 101,627 184,854
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and
equipment (73,444) (67,484) (138,644)
Acquisitions of subsidiaries and
business operations (Schedule A) (12,173) (34,566) (229,556)
Investments in affiliated companies
and other companies (6,919) (59) (4,956)
Proceed from sale of property, plant
and equipment 4,983 5,139 11,841
Proceed from sale of investments - 12,751 27,941
Investment in long-term deposits (589) (8,302) (14,484)
Proceeds from sale of long-term
deposits 3,600 15,020 30,240
Investment in short-term deposits
and available for sale securities (85,486) (48,248) (189,345)
Proceeds from sale of short-term
deposits and available for sale
securities 115,706 64,264 252,550
Net cash used in investing
activities (54,322) (61,485) (254,413)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of options 2,514 2,908 3,590
Purchase of non-controlling
interests (71,000) - -
Repayment of long-term bank loans (65,085) (243,525) (488,657)
Proceeds from long-term bank loans 126,410 55,000 387,692
Proceeds from issuance of Series A
Notes - 283,213 283,213
Series A Notes issuance costs - (2,163) (2,530)
Dividends paid (30,836) (32,503) (63,137)
Tax benefit in respect of options
exercised - - 710
Repayment of Series A Notes (32,211) - -
Purchase of convertible debentures (2,121) - -
Change in short-term bank credit and
loans, net 21,108 - (40,972)
Net cash provided by (used in)
financing activities (51,221) 62,930 79,909
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (82,229) 103,072 10,350
CASH AND CASH EQUIVALENTS AT THE
BEGINNING OF THE PERIOD 151,059 140,709 140,709
CASH AND CASH EQUIVALENTS AT THE END
OF THE PERIOD 68,830 243,781 151,059
* Dividend received from affiliated
companies and partnership 14,107 8,372 10,925
ELBIT SYSTEMS LTD.
DISTRIBUTION OF REVENUES
CONSOLIDATED REVENUE BY AREAS OF OPERATION:
Six Months Ended Three Months Ended
June 30 June 30
2011 2010 2011 2010
$ $ $ $
millions % millions % millions % millions %
Airborne
systems 459.6 35.0 358.1 29.3 209.7 30.3 178.3 29.6
Land systems 183.2 14.0 218.6 17.9 99.8 14.4 103.9 17.2
C4ISR systems 469.3 35.8 407.3 33.3 275.6 39.8 200.8 33.3
Electro-optics 137.1 10.5 168.2 13.8 72.3 10.5 86.5 14.3
Other (mainly
non-defense
engineering
and production
services) 62.7 4.7 69.3 5.7 34.2 5.0 33.8 5.6
Total 1,311.9 100.0 1,221.5 100.0 691.6 100.0 603.3 100.0
CONSOLIDATED REVENUES BY GEOGRAPHICAL REGIONS:
Six Months Ended Three Months Ended
June 30 June 30
2011 2010 2011 2010
$ $ $ $
millions % millions % millions % millions %
Israel 356.0 27.1 276.3 22.6 185.9 26.9 133.5 22.1
United States 427.1 32.6 401.8 32.9 218.0 31.5 214.1 35.5
Europe 241.0 18.4 273.8 22.4 129.8 18.8 117.6 19.5
Other
countries 287.8 21.9 269.6 22.1 157.9 22.8 138.1 22.9
Total 1,311.9 100.0 1,221.5 100.0 691.6 100.0 603.3 100.0
Company Contact:
Joseph Gaspar, Executive VP & CFO
Tel: +972-4-8316663
j.gaspar@elbitsystems.com
Dalia Rosen , VP, Head of Corporate Communications
Tel: +972-4-8316784
[email protected]
Elbit Systems Ltd.
IR Contact:
Ehud Helft
Kenny Green
CCG Investor Relations
Tel: +1-646-201-9246
[email protected]
SOURCE Elbit Systems Ltd
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