Elbit Systems Reports Second Quarter 2010 Results
HAIFA, Israel, August 17, 2010 /PRNewswire-FirstCall/ --
- Backlog of Orders Increased to $5.36 Billion;
- Revenues at $603.3 Million; Net Income at $44.8 Million;
- Diluted Net Earnings per Share at $1.04
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, 2010.
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Revenues in the second quarter of 2010 were $603.3 million, as compared to $728.3 million in the second quarter of 2009. The decrease in revenues during the second quarter of 2010 was mainly in the C4I systems areas of operations in Israel and in Europe.
Gross profit amounted to $183.6 million (30.4% of revenues) in the second quarter of 2010, as compared to $211.9 million (29.1% of revenues) in the second quarter of 2009, which change primarily resulted from the reduction in revenues. Despite the lower revenues, the Company's gross profit margin rate in the second quarter of 2010 improved by 1.3%, compared with the second quarter of 2009.
Research and development ("R&D") expenses, net were $56.9 million (9.4% of revenues) in the second quarter of 2010, as compared to $53.0 million (7.3% of revenues) in the second quarter of 2009. The higher level of R&D expenses in the second quarter of 2010 reflected increased efforts on development and adaptations to market requirements of the Company's products.
Marketing and selling expenses were $50.3 million (8.3% of revenues) in the second quarter of 2010, as compared to $67.5 million (9.3% of revenues) in the second quarter of 2009. The variance is attributed to quarterly fluctuations in pursuit of market opportunities.
General and administrative expenses were $32.1 million (5.3% of revenues) in the second quarter of 2010, as compared to $29.4 million (4.0% of revenues) in the second quarter of 2009.
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.
Financial expenses, net were $1.0 million in the second quarter of 2010, as compared to net financial income of $11.4 million in the second quarter of 2009. The high level of financial income in the second quarter of 2009 was mainly a result of hedging activities related to the change in the U.S. Dollar versus the Israeli Shekel.
Taxes on income were $6.5 million (effective tax rate of 13.5%) in the second quarter of 2010, as compared to taxes on income of $14.0 million (effective tax rate of 19.3%) in the second quarter of 2009. The change in the effective tax rate was attributable mainly to the mix of the tax rates in the various jurisdictions in which the Company's entities generate taxable income.
Equity in net earnings of affiliated companies and partnerships was $5.4 million (0.9% of revenues) in the second quarter of 2010, as compared to $3.4 million (0.5% of revenues) in the second quarter of 2009.
Net income attributable to non-controlling interests was $2.3 million in the second quarter of 2010, as compared to $2.5 million in the second quarter of 2009.
Net income attributable to the Company's ordinary shareholders in the second quarter of 2010 amounted to $44.8 million (7.4% of revenues), as compared to $59.7 million (8.2% of revenues) for the second quarter of 2009.
Diluted net earnings per share attributable to the Company's ordinary shareholders were $1.04 for the second quarter of 2010, as compared with $1.39 for the second quarter of 2009.
The Company's backlog of orders increased to $5,358 million as of June 30, 2010, as compared with $5,044 million as of December 31, 2009. Approximately 71% of the backlog relates to orders outside of Israel. Approximately 61% of the Company's backlog as of June 30, 2010, is scheduled to be performed during the second half of 2010 and in 2011.
Operating cash flow was $101.6 million in the first half of 2010, as compared to $93.6 million in the first half of 2009.
Issuance of Series A Notes:
On June 8, 2010, the Company announced that following the filing of a Shelf Offering Report dated June 6, 2010, and pursuant to its Shelf Prospectus dated May 18, 2010, the public offering in Israel of the Company's Series A Notes (the "Series A Notes") was concluded.
Based on the results of the concluded public offering, the Company issued, at par value, Series A Notes in the aggregate principal amount of NIS 1.1 billion (approximately $284 million), payable in 10 equal annual installments on June 30 of each of the years 2011 through 2020, bearing a fixed interest rate of 4.84% per annum, payable on June 30 and December 30 of each of the years 2010 through 2020 (the first interest payment will be made on December 30, 2010, and the last interest payment will be made on June 30, 2020). The Series A Notes (principal and interest) will not be linked to any currency or index.
The Series A Notes contain standard terms and conditions and are unsecured, non convertible and do not restrict the Company's ability to issue additional notes of any class or distribute dividends in the future. The Series A Notes are listed for trading on the Tel Aviv Stock Exchange.
On May 13, 2010, Midroog Ltd., an Israeli rating agency, announced that it assigned its "Aa1" rating (local scale) to unsecured notes to be issued by the Company, which include the Series A Notes.
The Series A Notes will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in the United States or to U.S. Persons (as defined in Regulation "S" promulgated under the Securities Act) without registration under the Securities Act or an exemption from the registration requirements of the Securities Act.
Recent Events:
On June 20, 2010, the Company announced that it was awarded a contract to supply a Latin American Army with Command, Control, Computer & Communications (C4I) systems and Electronic Warfare (EW) systems, valued at approximately $130 million. The project, to be performed over the next three years, is a part of the Army's extensive modernization program and is designated for all echelons, from the maneuvering forces up to the command headquarters. The new, unified communications network will facilitate a real-time common operational picture of the battlefield providing the Land Forces with enhanced operational performance and situational awareness, as well as improved force protection and prevention of "friendly fire".
On August 5, 2010, the Company announced, further to its announcements of July 15, 2010 and July 29, 2010, that the requirements were not met for implementing the tender offer ("Tender Offer") by its wholly-owned subsidiary, Elbit Security Systems Ltd., to acquire the ordinary shares of I.T.L Optronics Ltd. held by the public and therefore the Tender Offer was not implemented.
Management Comment:
The President and CEO of Elbit Systems, Joseph Ackerman, commented: "Over the past two years we have spent close to a billion dollars on R&D and business development on a gross basis, a very significant amount for any company. We believe that these investments represent a valuable asset which provides the foundation for our long-term growth and leadership in the defense electronics industry, despite the current challenges we face in the area of revenue growth."
Mr. Ackerman continued, "During the quarter, we completed a successful bond issuance in the Israeli market, amounting to approximately $284 million. These funds will support our M&A activities and our working capital needs, including our continued investment in R&D, which are a key part of our long-term strategy of complementary growth by adding synergistic companies to the Elbit Systems family."
Mr. Ackerman concluded, "We are encouraged by the renewed increase in our backlog over the past two quarters, which provides us with a foundation for future growth. Elbit Systems remains well positioned strategically, operationally and financially, and the long-term prospects for the company remain promising."
Dividend:
The Board of Directors declared a dividend of $0.36 per share for the second quarter of 2010. The dividend's record date is August 31, 2010, and the dividend will be paid on September 13, 2010, net of taxes and levies, at the rate of 17.92%.
The Company will also be hosting a conference call later today, Tuesday August 17, 2010 at 09:00a.m. Eastern Time. On the call, management will review and discuss the second quarter 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 for 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, SIGINT 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,
2010 2009
Unaudited Audited
Assets
Current assets:
Cash and cash equivalents $ 243,781 $ 140,709
Short-term bank deposits 107,146 115,924
Available for sale marketable securities 16,721 23,639
Trade receivables, net 604,238 659,524
Other receivables and pre-paid expenses 149,447 115,856
Inventories, net of customer advances 617,602 569,848
Total current assets 1,738,935 1,625,500
Investment in affiliated companies, partnership 95,162 88,759
and other companies
Available for sale marketable securities 7,250 12,941
Long-term bank deposits and other receivables 51,115 36,338
Deferred income taxes, net 13,181 7,992
Severance pay fund 263,692 274,136
430,400 420,166
Property, plant and equipment, net 428,601 404,675
Goodwill and other intangible assets, net 624,302 603,336
Total assets $ 3,222,238 $ 3,053,677
Liabilities and Shareholders' Equity
Current maturities of long-term loans and Series $ 36,857 $ 2,663
A Notes
Trade payables 294,283 299,238
Other payables and accrued expenses 546,228 552,806
Customer advances in excess of costs incurred on 381,120 367,137
contracts in progress
Total current liabilities 1,258,488 1,221,844
Long-term loans, net of current maturities 192,657 386,534
Series A Notes 247,559 -
Accrued termination liability 342,023 351,278
Deferred income taxes and tax liabilities, net 59,172 59,602
Customer advances in excess of costs incurred on 138,662 142,566
contracts in progress
Other long-term liabilities 50,665 34,659
1,030,738 974,639
Elbit Systems Ltd.'s shareholders' equity 904,495 832,868
Non-controlling interests 28,517 24,326
Total shareholders' equity 933,012 857,194
Total liabilities and shareholders' equity $ 3,222,238 $ 3,053,677
ELBIT SYSTEMS LTD.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of US Dollars, except for share and per share amounts)
Six Months Ended Three Months Year
Ended Ended
June 30 June 30 December
31
2010 2009 2010 2009 2009
Unaudited Audited
Revenues $ $ $ $ $
1,221,478 1,385,221 603,277 728,289 2,832,437
Cost of revenues 853,372 965,084 419,716 516,420 1,982,954
Gross profit 368,106 420,137 183,561 211,869 849,483
Operating expenses:
Research and
development, net 109,511 98,888 56,846 53,008 216,752
Marketing and selling 104,931 124,465 50,336 67,549 250,963
General and administrative 60,141 58,286 32,056 29,398 119,311
Other income, net (4,756) - (4,756) - -
Total operating expenses 269,827 281,639 134,482 149,955 587,026
Operating income 98,279 138,498 49,079 61,914 262,457
Financial income (expenses), (4,137) (7,602) (1,002) 11,437 (15,585)
net
Other income (expenses), net 13,089 (646) 108 (551) 458
Income before taxes on 107,231 130,250 48,185 72,800 247,330
income
Taxes on income 16,816 26,248 6,489 14,036 38,109
90,415 104,002 41,696 58,764 209,221
Equity in net earnings of
affiliated companies
and partnership 9,301 8,193 5,389 3,417 19,292
Consolidated net income $99,716 $112,195 $47,085 $62,181 $228,513
Less: net income
attributable to
non-controlling interests (5,155) (9,221) (2,306) (2,461) (13,566)
Net income attributable to
Elbit Systems Ltd.'s
shareholders $94,561 $102,974 $44,779 $59,720 $214,947
Earnings per
share
attributable to
Elbit Systems
Ltd.'s ordinary
shareholders:
Basic net
earnings per
share $ 2.22 $ 2.44 $ 1.05 $ 1.42 $ 5.08
Diluted net
earnings per
share $ 2.19 $ 2.41 $ 1.04 $ 1.39 $ 5.00
Weighted average
number of shares
used in
computation of
basic earnings
per share 42,611 42,149 42,645 42,200 42,305
Weighted average
number of shares
used in
computation of
diluted earnings
per share 43,257 42,729 43,234 42,924 42,983
ELBIT SYSTEMS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands of US Dollars)
Six Months Ended Year
Ended
June 30, December
31,
2010 2009 2009
(Unaudited) (Audited)
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 99,716 $ 112,195 $ 228,513
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 60,988 63,196 123,473
Write-off impairment 717 - 3,017
Stock based compensation 2,604 2,563 5,134
Amortization of Series A Notes 25 - -
discount and deferred financing
costs
Deferred income taxes and (9,029) (4,321) 7,606
reserve
Severance, pension and (212) (8,900) (16,773)
termination indemnities, net
Gain on sale of property, plant (698) 208 (723)
and equipment
Gain on sale of investments (18,713) - (2,734)
Equity in net earnings of (929) (1,630) (1,824)
affiliated companies and
partnership, net of dividend
received(*)
Change in operating assets and
liabilities:
Decrease (increase) in short and (3,980) 17,103 (136,224)
long-term trade receivables, and
prepaid expenses
Decrease (increase) in (44,993) 10,672 75,431
inventories, net
Decrease in trade payables, 6,163 4,046 20,223
other payables and accrued
expenses
Increase (decrease) in advances 9,968 (101,543) (95,397)
received from customers
Net cash provided by operating 101,627 93,589 209,722
activities
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of property, plant and (67,484) (47,065) (107,893)
equipment
Acquisition of subsidiaries and (34,566) (13,783) (48,234)
business operations
Investments in affiliated (59) (18,575) (19,415)
companies and other companies
Proceeds from sale of property, 5,139 4,238 9,055
plant and equipment
Proceeds from sale of 12,751 - 33,026
investments
Investment in available for 6,718 3,351 (11,010)
sales debt-securities and
long-term deposits, net
Investment in short-term 16,016 (44,867) (52,832)
deposits, net
Net cash used in investing (61,485) (116,701) (197,303)
activities
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from exercise of 2,908 5,692 9,871
options
Purchase of non-controlling - (110,250) (110,250)
interests
Repayment of long-term bank (243,525) (20,113) (148,652)
loans
Proceeds from issuance of Series 283,213 - -
A Notes, net
Deferred financing costs related (2,163) - -
to issuance of Senior A Notes
Receipt of long-term bank loans 55,000 170,167 256,354
Dividends paid (32,503) (45,839) (76,172)
Change in short-term bank credit - (6,854) (7,531)
and loans, net
Net cash provided by (used in) 62,930 (7,197) (76,380)
financing activities
NET INCREASE (DECREASE) IN CASH 103,072 (30,309) (63,961)
AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT THE 140,709 204,670 204,670
BEGINNING OF THE PERIOD
CASH AND CASH EQUIVALENTS AT THE $ 243,781 $ 174,361 $ 140,709
END OF THE PERIOD
* Dividend received $ 8,372 $ 7,324 $ 17,468
ELBIT SYSTEMS LTD.
DISTRIBUTION OF REVENUES
CONSOLIDATED REVENUE BY AREAS OF OPERATION:
Six Months Ended Three Months Ended
June 30 June 30
2010 2009 2010 2009
$ % $ % $ % $ %
millions millions millions millions
Airborne
systems 358.1 29.3 346.5 25.0 178.3 29.6 173.7 23.8
Land systems 218.6 17.9 252.2 18.2 103.9 17.2 110.3 15.2
C4ISR systems 407.3 33.3 530.1 38.3 200.8 33.3 300.0 41.2
Electro-optics 168.2 13.8 190.4 13.7 86.5 14.3 107.7 14.8
Other (mainly
non-defense
engineering
and production
services) 69.3 5.7 66.0 4.8 33.8 5.6 36.6 5.0
Total 1,221.5 100.0 1,385.2 100.0 603.3 100.0 728.3 100.0
CONSOLIDATED REVENUES BY GEOGRAPHICAL REGIONS:
Six Months Ended Three Months Ended
June 30 June 30
2010 2009 2010 2009
$ % $ % $ % $ %
millions millions millions millions
Israel 276.3 22.6 300.8 21.7 133.5 22.1 176.3 24.2
United States 401.8 32.9 393.5 28.4 214.1 35.5 182.7 25.1
Europe 273.8 22.4 349.6 25.3 117.6 19.5 187.4 25.7
Other
countries 269.6 22.1 341.3 24.6 138.1 22.9 181.9 25.0
Total 1,221.5 100.0 1,385.2 100.0 603.3 100.0 728.3 100.0
Company Contact:
Joseph Gaspar, Executive VP & CFO,
Dalia Rosen, Head of Corporate Communications,
Elbit Systems Ltd.,
Tel: +972-4-831-6663 / Fax: +972-4-831-6944,
E-mail: [email protected] ,
[email protected] ;
IR Contact:
Ehud Helft,
Kenny Green,
CCG Investor Relations,
Tel: +1-646-201-9246,
E-mail: [email protected] .
SOURCE Elbit Systems Ltd
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