Elbit Systems Reports Second Quarter 2012 Results
Backlog of orders increased to $5.47 billion; Revenues at $676 million; Net income at $38 million; Diluted net earnings per share at $0.90
HAIFA, Israel, August 14, 2012 /PRNewswire/ --
Elbit Systems Ltd. (the "Company") (NASDAQ: ESLT, TASE: ESLT), the international defense electronics company, reported today its consolidated financial results for the second quarter ended June 30, 2012.
In this release, the Company is providing its usual US-GAAP results as well as additional non-GAAP financial data, which are intended to provide investors with 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: "In the second quarter we saw a continued focus on improving our internal efficiencies, which enabled us to lower our G&A expenses during the quarter. Our second quarter continues the trend of increased revenues from the Latin American and Asia-Pacific markets, which made up over a third of our revenues in the quarter. In fact, over half of our revenues are coming from regions whose defense budgets are continuing to grow, including Israel. I believe that our focus on these regions will enable us to continue to grow, even against the background of tightening budgets in Europe and the United States."
Ackerman added, "Yesterday our Board of Directors accepted my request to step down after 16 years as President and CEO, effective at the end of March 2013. After that, I plan to continue to contribute to the Company as may be requested, including as Vice Chairman of the Board. I am pleased that the Board has approved as my successor Bezhalel (Butzi) Machlis, who currently is an Executive Vice President of the Company and General Manager of Elbit Systems Land and C4I Division. I am confident that the Company will be well positioned to meet future challenges and achieve future growth under Butzi's leadership."
Second quarter 2012 results:
Revenues were $676.4 million in the second quarter of 2012, as compared to $691.6 million in the second quarter of 2011. The main contributors to the Company's revenues were the C4I and Airborne systems areas of operations.
Gross profit was $189.6 million (28.0% of revenues) in the second quarter of 2012, as compared to $200.5 million (29.0% of revenues) in the second quarter of 2011. The non-GAAP gross profit in the second quarter of 2012 was $194.8 million (28.8% of revenues), compared to $208.4 million (30.1% of revenues) in the second quarter of 2011.
Research and development expenses, net were $55.6 million (8.2% of revenues) in the second quarter of 2012, as compared to 55.4 million (8.0% of revenues) in the second quarter of 2011.
Marketing and selling expenses were $59.9 million (8.9% of revenues) in the second quarter of 2012, as compared to $57.4 million (8.3% of revenues) in the second quarter of 2011.
General and administrative expenses were $32.0 million (4.7% of revenues) in the second quarter of 2012, as compared to $35.1 million (5.1% of revenues) in the second quarter of 2011. This continues the trend of reduction in G&A expenses we have experienced over several quarters, partially due to cost cutting and efficiency measures.
Operating Income was $42.1 million (6.2% of revenues), compared to $52.6 million (7.6% of revenues) in the second quarter of 2011. The non-GAAP operating income in the second quarter of 2012 was $54.1 million (8.0% of revenues), as compared to $67.0 million (9.7% of revenues) in the second quarter of 2011.
Financial expenses, net were $2.3 million in the second quarter of 2012, as compared to $9.4 million in the second quarter of 2011. Financial expenses in the second quarter of 2012 were comparatively low due to currency hedging activities.
Taxes on income were $2.8 million (effective tax rate of 7.1%) in the second quarter of 2012, as compared to taxes on income of $5.4 million (effective tax rate of 12.5%) in the second quarter of 2011. The lower effective tax rate in the quarter was attributable mainly to adjustments related to tax positions taken during prior periods and 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 $3.8 million (0.6% of revenues) in the second quarter of 2012, as compared to $2.7 million (0.4% of revenues) in the second quarter of 2011.
Net income attributable to non-controlling interests was $1.2 million in the second quarter of 2012, as compared to $1.6 million in the second quarter of 2011.
Net income, attributable to the Company's ordinary shareholders, was $38.3 million (5.7% of revenues) in the second quarter of 2012, as compared to $38.9 million (5.6% of revenues) for the second quarter of 2011. The non-GAAP net income in the second quarter of 2012 was $48.2 million (7.1% of revenues), as compared to $50.5 million (7.3% of revenues) in the second quarter of 2011.
Diluted net earnings per shareattributable to the Company'sordinary shareholders were $0.90 for the second quarter of 2012, as compared with $0.90 for the second quarter of 2011. The non-GAAP earnings per share in the second quarter of 2012 were $1.14, as compared to $1.16 in the second quarter of 2011.
The Company's backlog of orders as of June 30, 2012 was $5,465, as compared with $5,450 million as of March 31, 2012 and $5,528 million as of December 31, 2011. Approximately 76% of the backlog relates to orders outside of Israel. Approximately 73% of the Company's backlog as of June 30, 2012 is scheduled to be performed, during the second half of 2012 and in 2013.
Operating cash flow was $56.2 million during the first half of 2012, as compared to $23.3 million in the first half of 2011.
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 the following adjustments, in each or some of the applicable periods: (1) added back amortization of purchased intangible assets, (2) added back significant reorganization, restructuring and other related expenses, (3) added back impairment of investments, including impairment of auction rate securities, (4) subtracted 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), (5) added back impairment loss from discontinued operations, (6) excluded the impact of the cessation of a program with a foreign customer and (7) excluded 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
Ended Ended Year Ended
June 30 June 30 December 31
2012 2011 2012 2011 2011
GAAP gross profit 385.4 386.2 189.6 200.5 732.0
Adjustments:
Amortization of purchased
intangible assets 10.4 15.5 5.2 7.9 30.9
Cessation of program
[(*)] - - - - 72.8
Non-GAAP gross profit 395.8 401.7 194.8 208.4 835.7
Percent of revenues 28.9% 30.6% 28.8% 30.1% 29.7%
GAAP operating income 83.8 93.6 42.1 52.6 115.7
Adjustments:
Amortization of
intangible assets 24.2 28.4 12.0 14.4 57.3
Cessation of program
[(*)] - - - - 72.8
Non-GAAP operating income 108.0 121.9 54.1 67.0 245.8
Percent of revenues 7.9% 9.3% 8.0% 9.7% 8.7%
GAAP net income
attributable to Elbit
Systems' shareholders 71.1 66.8 38.3 38.9 90.3
Adjustments:
Amortization of
intangible assets 24.2 28.4 12.0 14.4 57.3
Cessation of program
[(*)] - - 72.8
Impairment of investments - 0.5 - 0.5 0.5
Gain from changes in
holdings (2.3) - - - -
Loss from discontinued
operations 0.2 0.3 0.1 0.1 9.4
Related tax benefits (4.3) (6.7) (2.2) (3.4) (23.7)
Non-GAAP net income
attributable to
Elbit Systems'
shareholders 88.9 89.3 48.2 50.5 206.6
Percent of revenues 6.5% 6.8% 7.1% 7.3% 7.3%
Non-GAAP diluted net EPS 2.09 2.06 1.14 1.16 4.79
(*) Adjustment of expenses related to cessation of program, which resulted in write-off of inventories and other related costs.
Recent Events:
On May 22, 2012, the Company announced that it was awarded an approximately $160 million contract by a European customer to supply Unmanned Aircraft Systems (UAS). The systems will be supplied over the next two years.
On May 30, 2012, the Company announced that it was awarded a follow-on contract by the Israel Ministry of Defense Procurement Administration, valued at approximately $30 million, to integrate the F-15 array into the Mission Training Center Elbit Systems is establishing for the Israeli Air Force. The contract will be performed over fifteen years.
On June 13, 2012, the Company announced that its wholly-owned Israeli subsidiary Elbit Systems - Cyclone Ltd. was awarded an approximately $80 million contract for the supply of structural components to The Boeing Company. The contract will be performed over seven years.
On June 24, 2012, the Company announced that it was awarded a contract valued at $62 million to upgrade Korean Air Force C-130 transport aircraft. Under the contract, the C-130 aircraft will be installed with various types of advanced electronic systems. In addition, Elbit Systems will convert the existing analog cockpit to a "Glass-Cockpit" using Elbit Systems' cutting-edge digital flight displays.
On August 5, 2012, the Company announced that it was awarded a contract valued at tens of millions of dollars, to supply a Latin American customer with a mixed fleet of Hermes® 900 and Hermes® 450 UAS. The contract will be performed over the next two years.
On August 13, 2012, the Company announced that the Board of Directors accepted the request of the Company's President and CEO, Joseph Ackerman, to retire effective March 31, 2013, and the Board approved as his successor Bezhalel (Butzi) Machlis, currently Executive Vice President and General Manager of Elbit Systems Land and C4I Division.
Dividend:
The Board of Directors declared a dividend of $0.30 per share for the second quarter of 2012. The dividend's record date is August 28, 2012, and the dividend will be paid on September 10, 2012, net of taxes and levies, at the rate of 25%.
Conference Call:
The Company will also be hosting a conference call later today, August 14, 2012 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 +972-3-925-5900 (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.
ELBIT SYSTEMS LTD.
CONSOLIDATED BALANCE SHEETS
(In thousands of US Dollars)
June 30, December 31,
2012 2011
Unaudited Audited
Assets
Current assets:
Cash and cash equivalents $ 328,449 $ 202,577
Short-term bank deposits 20,736 21,693
Trade and unbilled receivables, net 645,342 669,524
Other receivables and prepaid expenses 144,653 180,024
Inventories, net of customers advances 807,683 761,269
Total current assets 1,946,863 1,835,087
Investments in affiliated companies, partnership
and other companies 117,511 110,159
Long-term trade and unbilled receivables 175,851 162,762
Long-term bank deposits and other receivables 9,249 12,215
Deferred income taxes, net 38,409 36,130
Severance pay fund 280,276 283,477
621,296 604,743
Property, plant and equipment, net 509,136 517,608
Goodwill and other intangible assets, net 739,346 763,072
Total assets $ 3,816,641 $ 3,720,510
Liabilities and Equity
Short-term bank credit and loans $ 163 $ 2,998
Current maturities of long-term loans and Series
A Notes 187,178 127,627
Trade payables 253,489 316,264
Other payables and accrued expenses 721,729 743,866
Customer advances in excess of costs incurred on
contracts in progress 439,367 407,222
1,601,926 1,597,977
Long-term loans, net of current maturities 226,943 302,255
Series A Notes, net of current maturities 384,817 235,319
Employee benefit liabilities 385,988 394,115
Deferred income taxes and tax liabilities, net 58,621 48,467
Customer advances in excess of costs incurred on
contracts in progress 131,487 154,696
Other long-term liabilities 71,335 59,961
1,259,191 1,194,813
Elbit Systems Ltd.'s equity 925,658 898,337
Non-controlling interests 29,866 29,383
Total equity 955,524 927,720
Total liabilities and equity $ 3,816,641 $ 3,720,510
ELBIT SYSTEMS LTD.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of US Dollars, except for share and per share amounts)
Year
Three Months Ended
Six Months Ended Ended December
June 30 June 30 31
2012 2011 2012 2011 2011
Unaudited Audited
Revenues 1,367,220 1,311,890 676,432 691,632 2,817,465
Cost of revenues 981,840 925,710 486,803 491,097 2,085,451
Gross profit 385,380 386,180 189,629 200,535 732,014
Operating expenses:
Research and development,
net 114,411 109,603 55,645 55,389 241,092
Marketing and selling 121,281 112,428 59,920 57,441 235,909
General and administrative 65,903 70,595 31,962 35,085 139,349
301,595 292,626 147,527 147,915 616,350
Operating income 83,785 93,554 42,102 52,620 115,664
Financial expenses, net (10,068) (20,012) (2,252) (9,350) (13,569)
Other income, net (183) 374 (1,114) 180 1,909
Income before income taxes 73,534 73,916 38,736 43,450 104,004
Taxes on income 9,315 10,719 2,755 5,419 (13,624)
64,219 63,197 35,981 38,031 90,380
Equity in net earnings of
affiliated companies and
partnership 7,818 6,601 3,779 2,719 15,377
Income from continuing
operations 72,037 69,798 39,760 40,750 105,757
Loss from discontinued
operations, net (427) (450) (271) (228) (15,977)
Net income 71,610 69,348 39,489 40,522 89,780
Less: net income
attributable to
non-controlling interests (465) (2,524) (1,226) (1,627) 508
Net income attributable to
Elbit Systems Ltd.'s
shareholders 71,145 66,824 38,263 38,895 90,288
Earnings per share
attributable to Elbit
Systems Ltd.'s ordinary
shareholders:
Basic net earnings per share
Continuing operations 1.68 1.57 0.91 0.91 2.33
Discontinued operations 0.01 (0.01) (0.01) 0.01 (0.22)
Total 1.68 1.56 0.90 0.91 2.11
Diluted net earnings per
share
Continuing operations 1.68 1.55 0.91 0.90 2.31
Discontinued operations (0.01) 0.01 (0.01) 0.01 (0.22)
Total 1.67 1.55 0.90 0.90 2.09
Weighted average number of
shares used in
computation of basic
earnings per share 42,420 42,756 42,351 42,780 42,764
Weighted average number of
shares used in
computation of diluted
earnings per share 42,538 43,232 42,412 43,248 43,131
Amounts attributable to
Elbit Systems Ltd.'s common
shareholders
Income from continuing
operations, net of income
tax 71,399 67,091 38,424 39,030 99,778
Discontinued operations, net
of income tax (254) (267) (161) (135) (9,490)
Net income attributable to
Elbit Systems Ltd.'s
shareholders 71,145 66,824 38,263 38,895 90,288
ELBIT SYSTEMS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands of US Dollars)
Year
Six Months Ended Ended
December
June 30, 31,
2012 2011 2011
Unaudited Audited
CASH FLOWS FROM OPERATING ACTIVITIES
Net income 71,611 69,348 89,780
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 68,816 74,632 150,618
Write-off impairment and discontinued
operations, net 408 520 15,977
Stock based compensation 364 599 1,996
Amortization of Series A Notes
discount and related issuance costs 422 247 422
Deferred income taxes and reserve, net 4,410 (7,426) (8,777)
Loss (gain) on sale of property, plant
and equipment 41 (690) (1,645)
Loss (gain) on sale of investment (791) - 2,189
Equity in net loss (earnings) of
affiliated companies and partnership,
net of dividend received(*) (2,852) 7,956 (270)
Changes in operating assets and
liabilities, net of amounts acquired:
Decrease (increase) in short and
long-term trade receivables, and
prepaid expenses 41,959 (87,410) (65,062)
Increase in inventories, net (46,414) (72,966) (95,363)
Increase (decrease) in trade payables,
other payables and accrued expenses (85,774) (20,493) 17,225
Severance, pension and termination
indemnities, net (4,930) 5,464 1,879
Increase in advances received from
customers 8,936 53,533 81,946
Net cash provided by operating
activities 56,205 23,314 190,915
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and
equipment (39,154) (73,444) (121,977)
Acquisition of subsidiaries and
business operations - (12,173) (12,173)
Investments in affiliated companies
and other companies (500) (6,919) (13,555)
Proceeds from sale of property, plant
and equipment 2,218 4,983 15,059
Proceeds from sale of investments 705 - 329
Investment in long-term deposits (244) (589) (609)
Proceeds from sale of long-term
deposits 430 3,600 40,396
Investment in short-term deposits and
available for sale securities (285,356) (85,486) (88,842)
Proceeds from sale of short-term
deposits and available for sale
securities 286,324 115,706 126,306
Net cash used in investing activities (35,577) (54,322) (55,066)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of options 803 2,514 3,833
Purchase of non-controlling interests - (71,000) (71,000)
Repayment of long-term loans (223,026) (65,085) (73,666)
Proceeds from long-term loans 125,290 126,410 172,303
Proceeds from issuance of Series A
Notes 243,954 - -
Purchase of treasury shares (13,231) - (10,101)
Repayment of Series A Notes and
convertible debentures - (32.211) (29,998)
Purchase of convertible debentures of
a subsidiary - (2.121) (2,121)
Dividends paid (25,446) (30,836) (61,633)
Tax benefit in respect of options
exercised - - 169
Change in short-term bank credit and
loans, net (3,099) 21,108 (12,117)
Net cash provided by (used in)
financing activities 105,245 (51.221) (84,331)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 125,873 (82,229) 51,518
CASH AND CASH EQUIVALENTS AT THE
BEGINNING OF THE YEAR 202,577 151,059 151,059
CASH AND CASH EQUIVALENTS AT THE END
OF THE YEAR 328,450 68,830 202,577
* Dividend received from affiliated
companies and partnership 4,539 14,107 15,107
ELBIT SYSTEMS LTD.
DISTRIBUTION OF REVENUES
CONSOLIDATED REVENUE BY AREAS OF OPERATION:
Six Months Ended Three Months Ended
June 30 June 30
2012 2011 2012 2011
$ $ $ $
millions % millions % millions % millions %
Airborne
systems 525.6 38.4 459.6 35.0 244.1 36.1 209.7 30.3
Land systems 158.8 11.6 183.2 14.0 67.2 9.9 99.8 14.4
C4ISR systems 478.9 35.0 469.3 35.8 260.1 38.4 275.6 39.8
Electro-optics 144.7 10.6 137.1 10.5 76.2 11.3 72.3 10.5
Other (mainly
non-defense
engineering
and production
services) 59.2 4.4 62.7 4.7 28.8 4.3 34.2 5.0
Total 1,367.2 100.0 1,311.9 100.0 676.4 100.0 691.6 100.0
CONSOLIDATED REVENUES BY GEOGRAPHICAL REGIONS:
Six Months Ended Three Months Ended
June 30 June 30
2012 2011 2012 2011
$ $ $ $
millions % millions % millions % millions %
Israel 250.5 18.3 356.0 27.1 110.7 16.4 185.9 26.9
United States 413.1 30.2 427.1 32.6 199.8 29.5 218.0 31.5
Europe 241.5 17.7 241.0 18.4 127.4 18.8 129.8 18.8
Other
countries 462.1 33.8 287.8 21.9 238.5 35.3 157.9 22.8
Total 1,367.2 100.0 1,311.9 100.0 676.4 100.0 691.6 100.0
Company Contact:
Joseph Gaspar, Executive VP & CFO
Tel: +972-4-8316663
[email protected]
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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