Elbit Systems Reports Second Quarter Of 2015 Results

Backlog of orders at $6.3 billion; Revenues at $750 million; Net income of $45 million; EPS of $1.06

Aug 11, 2015, 03:10 ET from Elbit Systems Ltd.

HAIFA, Israel, Aug. 11, 2015 /PRNewswire/ -- Elbit Systems Ltd. (the "Company") (NASDAQ and TASE: ESLT), the international high technology company, reported today its consolidated results for the quarter ended June 30, 2015.

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: "We are pleased that the growth in our backlog over the last two years has led to our current positive revenue growth and that the past quarter saw growth both in revenue and in backlog. In addition, we see a continuation of solid performance in geographic regions with strong emerging defense requirements, that have been a strategic focus for us in recent years, particularly Asia-Pacific and Latin America, that together accounted for 39% of our revenues in the quarter.

We also continue to focus on adapting ourselves to market trends in order to meet future customer needs. Just after the close of the quarter, we completed the acquisition of the Cyber & Intelligence division of Nice Systems, and our recently established subsidiary Cyberbit is in the process of integrating the acquired operations into our organization. The acquisition is an important part of our strategy to enhance our cyber capabilities, a sector in which we see strong growth potential over the coming years."

Second quarter 2015 results:

Revenues in the second quarter of 2015 were $749.6 million, as compared to $702.6 million in the second quarter of 2014, a growth of 6.7% mainly due to growth in revenues of Land Systems to Asia Pacific.

Gross profit amounted to $219.3 million (29.2% of revenues) in the second quarter of 2015, as compared to $199.4 million (28.4% of revenues) in the second quarter of 2014. The non-GAAP gross profit in the second quarter of 2015 was $224.7 million (30.0% of revenues), as compared to $204.8 million (29.1% of revenues) in the second quarter of 2014. The increase in the gross profit rate was mainly due to the mix of programs sold in the quarter.

Research and development expenses, net were $57.5 million (7.7% of revenues) in the second quarter of 2015, as compared to $52.2 million (7.4% of revenues) in the second quarter of 2014.

Marketing and selling expenses, net were $60.6 million (8.1% of revenues) in the second quarter of 2015, as compared to $50.3 million (7.2% of revenues) in the second quarter of 2014. The increase in marketing and selling expenses in the second quarter of 2015 was mainly a result of marketing efforts in the U.S. and Asia-Pacific.

General and administrative expenses, net were $35.7 million (4.8% of revenues) in the second quarter of 2015, as compared to $34.3 million (4.9% of revenues) in the second quarter of 2014.

Operating income was $65.5 million (8.7% of revenues) in the second quarter of 2015, as compared to operating income of $62.6 million (8.9% of revenues) in the second quarter of 2014.  The non-GAAP operating income in the second quarter of 2015 was $75.4 million (10.1% of revenues), as compared to $73.1 million (10.4% of revenues) in the second quarter of 2014.

Financial expenses, net were $6.2 million in the second quarter of 2015, as compared to $8.3 million in the second quarter of 2014.

Taxes on income were $12.0 million (effective tax rate of 20.2%) in the second quarter of 2015, as compared to $9.9 million (effective tax rate of 18.1%) in the second quarter of 2014.  The effective tax rate is affected by the mix of the tax rates in the various jurisdictions in which the Company's entities generate taxable income.

Equity in net earnings (losses) of affiliated companies and partnerships was a net loss of $0.4 million in the second quarter of 2015, as compared to net earnings of $1.7 million in the second quarter of 2014.

Net income attributable to non-controlling interests was $1.7 million in the second quarter of  2015, as compared to $2.3 million in the second quarter of 2014.

Net income attributable to the Company's shareholders in the second quarter of  2015 was $45.3 million (6.0% of revenues), as compared to $43.9 million (6.2% of revenues) in the second quarter of 2014. The non-GAAP net income in the second quarter of 2015 was $53.5 million (7.1% of revenues), as compared to $52.6 million (7.5% of revenues) in the second quarter of 2014.

Diluted net earnings per share attributable to the Company's shareholders were $1.06 for the second quarter of 2015, as compared with diluted net earnings per share of $1.03 for the second quarter of 2014. The non-GAAP diluted earnings per share in the second quarter of 2015 were $1.25 as compared to $1.23 for the second quarter of 2014.

The Company's backlog of orders for the quarter ended June 30, 2015, totaled $6,305 million as compared to $6,174 million as of June 30, 2014. Approximately 69% of the current backlog is attributable to orders from outside Israel. Approximately 60% of the current backlog is scheduled to be performed during the second half of 2015 and 2016.

Operating cash flow for the six months ended June 30, 2015, was $116.5 million, as compared to $15.8 million in the six months ended June 30, 2014.

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, 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, 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.   

Reconciliation of GAAP to Non-GAAP (Unaudited) Supplemental Financial Data:

(US Dollars in millions)



Six Months Ended
June 30,


Three Months Ended
 June 30,


Year Ended
December 31,


2015


2014


2015


2014


2014











GAAP gross profit

420.4


392.6


219.3


199.4


825.1

Adjustments:










Amortization of purchased intangible assets

10.6


10.8


5.4


5.4


21.7

Non-GAAP  gross profit

431.0


403.4


224.7


204.8


846.8

Percent of revenues

29.6 %


29.1 %


30.0 %


29.1 %


28.6 %











GAAP operating income

125.3


122.5


65.5


62.6


246.9

Adjustments:










Amortization of  purchased intangible assets

19.6


21.7


9.9


10.5


43.0

Gain from changes in holdings


(6.0)




(6.0)

Non-GAAP operating income

144.9


138.2


75.4


73.1


283.9

Percent of revenues

10.0 %


10.0 %


10.1 %


10.4 %


9.6 %











GAAP net income attributable to Elbit
Systems' shareholders

89.9


92.0


45.3


43.9


171.0

Adjustments:










Amortization of purchased  intangible assets

19.6


21.7


9.9


10.5


43.0

Gain from changes in holdings


(6.0)




(6.0)

Related tax benefits

(3.3)


(3.2)


(1.7)


(1.8)


(6.9)

Non-GAAP  net income attributable to
Elbit Systems' shareholders

106.2


104.5


53.5


52.6


201.1

Percent of revenues

7.3 %


7.5 %


7.1 %


7.5 %


6.8 %











Non-GAAP diluted net EPS

2.48


2.45


1.25


1.23


4.71

Recent Events:

On May 21, 2015, the Company announced that it signed an agreement to acquire NICE Systems Ltd.'s (NICE) Cyber and Intelligence division for a total amount of up to $157.9 million, subject to certain customary adjustments. Out of the total amount, $117.9 million will be paid in cash at the time of the closing, expected to take place in the third quarter of 2015, subject to certain closing conditions. An additional amount of up to $40 million will be paid as earn-out, based upon the future business performance of the acquired division's activities.

On July 1, 2015, the Company announced, further to its announcement of May 21, 2015 that it completed the acquisition of the NICE's Cyber and Intelligence division.

On July 2, 2015, the Company announced that its subsidiary, Elbit Systems Land and C4I Ltd. was awarded a contract from the Dutch Ministry of Defense, to supply advanced systems for the infantry soldiers in the Benelux countries - Netherlands, Belgium and Luxemburg. The contract, valued at approximately $150 million, will be performed over a five-year period. Elbit Systems will serve as the program prime contractor, and Thales Netherlands B.V will be its main sub-contractor. Other local companies will take part in the project, providing support and immediate response to the customer's needs.

On August 3, 2015, the Company announced that it recently was awarded two contracts for its MUSIC™ family of directed infra-red countermeasures airborne multi-spectral self-protection systems, representing expansion of the customer base in this strategic business area for Elbit Systems. The first contract is a follow-on contract from an Asian country, to supply its mini MUSIC systems for the customer's Blackhawk helicopter fleet. This is the second order awarded by this customer this year. An additional order, received from a NATO member European country, calls for the supply of C-MUSIC systems. Both contracts will be performed during 2015 and are in amounts that are not material to Elbit Systems.

On August 5, 2015, the Company announced that it was awarded an approximately $45 million contract from a European country for the supply of military communications systems. The contract will be performed over a two-year period.

Dividend:

The Board of Directors declared a dividend of $0.37 per share for the second quarter of 2015. The dividend's record date is August 21, 2015. The dividend will be paid from income generated as Preferred Income (as defined under Israeli tax laws), on September 7, 2015, net of taxes and levies, at the rate of 20%. 

Conference Call:

The Company will be hosting a conference call today, Tuesday, August 11, 2015 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
UK Dial-in Number: 0 800 917 9141
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 42941 (US) 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 aerospace, 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 cyber-based systems. The Company also focuses on the upgrading of existing platforms, developing new technologies for defense, homeland security and commercial applications and providing a range of support services, including training and simulation systems. For additional information, visit: www.elbitsystems.com

Attachments:

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

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

dalia.rosen@elbitsystems.com

IR Contact:

 

Ehud Helft

Kenny Green

GK Investor Relations

Tel: 1-646-201-9246

elbitsystems@gkir.com

 

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.

 

 

ELBIT SYSTEMS LTD.

CONSOLIDATED BALANCE SHEETS

(In thousands of US Dollars)



June 30,


December 31,


2015


2014


Unaudited


Audited

Assets




Current assets:




Cash and cash equivalents

$

152,488


$

200,407

Short-term bank deposits and marketable securities

65,014


105,519

Trade and unbilled receivables, net

893,705


928,757

Other receivables and prepaid expenses

161,772


145,562

Inventories, net of customers advances

877,553


868,799

Total current assets

2,150,532


2,249,044





Investments in affiliated companies and partnerships

107,133


125,433

Long-term trade and unbilled receivables

185,066


212,725

Long-term bank deposits and other receivables

26,509


18,081

Deferred income taxes, net

67,577


60,224

Severance pay fund

284,280


276,707


670,565


693,170





Property, plant and equipment, net

446,163


441,535

Goodwill and other intangible assets, net

637,590


637,532

Total assets

$

3,904,850


$

4,021,281









Liabilities and Equity




Short-term bank credit and loans

$

259


$

557

Current maturities of long-term loans and Series A Notes

115,569


81,958

Trade payables

360,173


369,659

Other payables and accrued expenses

705,738


758,760

Customer advances in excess of costs incurred on contracts in progress

337,925


413,223


1,519,664


1,624,157





Long-term loans, net of current maturities

153,508


220,716

Series A Notes, net of current maturities

236,647


293,923

Employee benefit liabilities

402,796


396,639

Deferred income taxes and tax liabilities, net

77,511


68,435

Customer advances in excess of costs incurred on contracts in progress

121,741


120,299

Other long-term liabilities

69,982


58,217


1,062,185


1,158,229





Elbit Systems Ltd.'s equity

1,312,650


1,226,667

Non-controlling interests

10,351


12,228

Total equity

1,323,001


1,238,895

Total liabilities and equity

$

3,904,850


$

4,021,281

 

 

ELBIT SYSTEMS LTD.


CONSOLIDATED STATEMENTS OF INCOME


(In thousands of US Dollars, except for share and per share amount)





Six Months Ended

June 30,


Three Months Ended
 June 30,


Year Ended
December 31,



2015


2014


2015


2014


2014



Unaudited


Unaudited


Audited


Revenues

$

1,456,226



$

1,385,260



$

749,603



$

702,647



$

2,958,248


Cost of revenues

1,035,778



992,706



530,351



503,291



2,133,151


Gross profit

420,448



392,554



219,252



199,356



825,097













Operating expenses:











Research and development, net

113,117



101,161



57,505



52,219



228,011


Marketing and selling, net

111,897



105,261



60,569



50,283



216,537


General and administrative, net

70,097



69,583



35,685



34,270



139,634


Other income, net



(5,951)







(5,951)



295,111



270,054



153,759



136,772



578,231


Operating income

125,337



122,500



65,493



62,584



246,866













Financial expenses, net

(11,865)



(12,933)



(6,192)



(8,270)



(47,498)


Other income, net

77



122



10



88



120


Income before income taxes

113,549



109,689



59,311



54,402



199,488













Taxes on income

(20,625)



(16,045)



(11,976)



(9,859)



(25,624)



92,924



93,644



47,335



44,543



173,864













Equity in net earnings (loss) of affiliated
companies and partnerships

(491)



2,751



(363)



1,654



5,549


Net income

$

92,433



$

96,395



$

46,972



$

46,197



$

179,413


Less: net income attributable to non-
controlling interests

(2,574)



(4,360)



(1,678)



(2,315)



(8,433)


Net income attributable to Elbit Systems
Ltd.'s shareholders

$

89,859



$

92,035



$

45,294



$

43,882



$

170,980



































Earnings per share attributable to Elbit Systems Ltd.'s shareholders:






Basic net earnings per share

$

2.10



$

2.16



$

1.06



$

1.03



$

4.01


Diluted net earnings per share

$

2.10



$

2.16



$

1.06



$

1.03



$

4.01
























Weighted average number of shares (in thousands)









Shares used in computation of basic earnings
per share

42,698



42,636



42,706



42,658



42,654


Shares used in computation of diluted earnings
per share

42,724



42,661



42,734



42,682



42,677


 

ELBIT SYSTEMS LTD.

CONSOLIDATED STATEMENTS OF CASH FLOW

(In thousands of US Dollars)



Six Months Ended
 June 30,


Year Ended
December 31,


2015


2014


2014


Unaudited


Audited

CASH FLOWS FROM OPERATING ACTIVITIES






Net income

$

92,433



$

96,395



$

179,413


Adjustments to reconcile net income to net cash provided by operating activities:






Depreciation and amortization

56,296



62,605



122,408


Stock-based compensation

88



184



322


Amortization of Series A Notes premium and related issuance costs, net

(46)



(46)



(91)


Deferred income taxes and reserve, net

7,653



(1,054)



(47,456)


Loss (gain) on sale of property, plant and equipment

939



(1,259)



(3,266)


Gain on sale of investment

(195)



(5,879)



(4,957)


Equity in net earnings of affiliated companies and partnerships, net of dividend
received (*)

21,991



7,247



7,449


Changes in operating assets and liabilities, net of amounts acquired:






Decrease (increase) in short and long-term trade receivables, and prepaid expenses

39,856



(83,440)



(67,177)


Increase in inventories, net

(5,064)



(64,941)



(112,747)


Increase (decrease) in trade payables, other payables and accrued expenses

(24,211)



(5,211)



81,687


Severance, pension and termination indemnities, net

623



(1,587)



6,282


Increase (decrease) in advances received from customers

(73,856)



12,745



15,970


Net cash provided by operating activities

116,507



15,759



177,837


CASH FLOWS FROM INVESTING ACTIVITIES






Purchase of property, plant and equipment and other assets

(50,102)



(26,988)



(71,211)


Acquisition of subsidiaries and business operations

(24,386)



787



787


Investments in affiliated companies and other companies



(3,536)



(4,620)


Proceeds from sale of property, plant and equipment

7,130



7,817



24,969


Proceeds from sale of investments



110



110


Investment in long-term deposits

(43)



(403)



(796)


Proceeds from sale of long-term deposits

119



602



790


Investment in short-term deposits and marketable securities

(40,328)



(69,109)



(89,521)


Proceeds from sale of short-term deposits and marketable securities

80,441



40,427



59,374


Net cash used in investing activities

(27,169)



(50,293)



(80,118)


CASH FLOWS FROM FINANCING ACTIVITIES






Proceeds from exercise of options

997



3,005



3,542


Repayment of long-term loans

(126,002)



(95,000)



(345,839)


Proceeds from long-term loans

78,000



196,500



376,500


Repayment of Series A Notes

(55,532)



(55,532)



(55,532)


Dividends paid(**)

(34,422)



(34,732)



(68,277)


Change in short-term bank credit and loans, net

(298)



398



557


Net cash provided by (used in) financing activities

(137,257)



14,639



(89,049)


 Net increase (decrease) in cash and cash equivalents

(47,919)



(19,895)



8,670


Cash and cash equivalents at the beginning of the year

200,407



191,737



191,737


Cash and cash equivalents at the end of the period

$

152,488



$

171,842



$

200,407


* Dividend received from affiliated companies and partnerships

$

21,500



$

9,998



$

12,998


** Dividends paid to the Company's shareholders and minority shareholders in a subsidiary.

 

ELBIT SYSTEMS LTD.

DISTRIBUTION OF REVENUES


Consolidated Revenues by Areas of Operation:



Six Months Ended June 30,


Three Months Ended June 30,


2015


2014


2015


2014


$ millions


%


$ millions


%


$ millions


%


$ millions


%

Airborne systems

601.6


41.3


579.1


41.8


316.2


42.2


289.1


41.1

Land systems

267.7


18.4


123.4


8.9


137.5


18.3


65.1


9.3

C4ISR systems

436.1


29.9


511.1


36.9


216.2


28.8


260.9


37.1

Electro-optic systems

95.9


6.6


125.3


9.0


49.2


6.6


59.7


8.5

Other (mainly non-
defense engineering
and production
services)

54.9


3.8


46.4


3.4


30.5


4.1


27.9


4.0

Total

1,456.2


100.0


1,385.3


100.0


749.6


100.0


702.7


100.0


Consolidated Revenues by Geographical Regions:



Six Months Ended June 30,


Three Months Ended June 30,


2015


2014


2015


2014


$ millions


%


$ millions


%


$ millions


%


$ millions


%

Israel

284.7


19.5


331.6


23.9


148.9


19.8


168.6


24.0

North America

406.7


27.9


410.4


29.7


203.8


27.2


215.6


30.7

Europe

199.3


13.7


204.5


14.8


97.4


13.0


96.8


13.8

Asia-Pacific

389.8


26.8


235.4


17.0


214.8


28.7


117.9


16.8

Latin America

161.4


11.1


171.0


12.3


73.8


9.8


101.7


14.5

Other countries

14.3


1.0


32.4


2.3


10.9


1.5


2.1


0.2

Total

1,456.2


100.0


1,385.3


100.0


749.6


100.0


702.7


100.0

















































 

SOURCE Elbit Systems Ltd.



RELATED LINKS

http://www.elbitsystems.com
http://www.elbitsystems.com