Elbit Systems Reports Third Quarter 2013 Results

Backlog of orders at $5.7 billion;
Revenues at $731 million; Net income at $49.6 million;
Diluted net earnings per share at $1.17

PR Newswire

HAIFA, Israel, Nov. 14, 2013 /PRNewswire/ -- Elbit Systems Ltd. (the "Company") (NASDAQ: ESLT, TASE: ESLT), the international defense electronics company, reported today its consolidated financial results for the third quarter ended September 30, 2013.

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 US- GAAP financial data.

Management Comment:

Bezhalel (Butzi) Machlis, President and CEO of Elbit Systems, commented: "The solid third quarter results reflect the year-over-year trend of improvements in revenue and profitability resulting from our ongoing focus on efficiency and on realizing the business-wide synergies of our global organization. In line with our decision to further enhance the effectiveness of our technological capabilities, we are placing increased efforts in R&D as well as in sales and marketing, in order to capitalize on the opportunities we are seeing."

Machlis added: "We are encouraged by the global markets' recognition of our innovative solutions, and we believe that, together with our efficiency measures, will maintain future growth."

Third quarter 2013 results:

Revenues were $730.6 million in the third quarter of 2013, as compared to $677.5 million in the third quarter of 2012. The main contributors to the Company's revenues were the Airborne and the C4ISR systems areas of operations.  

Gross profit was $207.4 million (28.4% of revenues) in the third quarter of 2013, as compared to $191.5 million (28.3% of revenues) in the third quarter of 2012. The non-GAAP gross profit in the third quarter of 2013 was $212.9 million (29.1% of revenues), compared to $196.6 million (29.0% of revenues) in the third quarter of 2012.

Research and development expenses, net were $54.0 million (7.4% of revenues) in the third quarter of 2013, as compared to $50.7 million (7.5% of revenues) in the third quarter of 2012.

Marketing and selling expenses were $61.9 million (8.5% of revenues) in the third quarter of 2013, as compared to $59.0 million (8.7% of revenues) in the third quarter of 2012.  

General and administrative expenses, net were $30.5 million (4.2% of revenues) in the third quarter of 2013, as compared to $32.7 million (4.8% of revenues) in the third quarter of 2012.

Operating income was $61.1 million (8.4% of revenues), as compared to $49.0 million (7.2% of revenues) in the third quarter of 2012. The non-GAAP operating income in the third quarter of 2013 was $72.3 million (9.9% of revenues), as compared to $61.0 million (9.0% of revenues) in the third quarter of 2012. The increase in the operating income was mainly due to cost savings and improved efficiency measures taken by the Company.

Financial expenses, net were $6.6 million in the third quarter of 2013, as compared to $5.5 million in the third quarter of 2012.

Taxes on income were $7.5 million (effective tax rate of 13.6%) in the third quarter of 2013, as compared to taxes on income of $4.9 million (effective tax rate of 11.2%) in the third quarter of 2012.

Equity in net earnings of affiliated companies and partnerships was $3.4 million (0.5% of revenues) in the third quarter of 2013, as compared to $1.0 million (0.2% of revenues) in the third quarter of 2012.

Net income attributable to non-controlling interests was $1.6 million in the third quarter of 2013, as compared to a net income of $0.4 million in the third quarter of 2012.

Net income attributable to the Company's ordinary shareholders was $49.6 million (6.8% of revenues) in the third quarter of 2013, as compared to $39.5 million (5.8% of revenues) in the third quarter of 2012. The non-GAAP net income in the third quarter of 2013 was $55.8 million (7.7% of revenues), as compared to $49.4 million (7.3% of revenues) in the third quarter of 2012.

Diluted net earnings per share attributable to the Company's ordinary shareholders were $1.17 for the third quarter of 2013, as compared with $0.95 for the third quarter of 2012. The non-GAAP diluted net earnings per share in the third quarter of 2013 were $1.32, as compared to $1.18 in the third quarter of 2012.

The Company's backlog of orders as of September 30, 2013 was $5,697 million, as compared with $5,804 million as of June 30, 2013 and $5,683 million as of December 31, 2012. Approximately 68% of the backlog relates to orders outside of Israel. Approximately 49% of the Company's backlog as of September 30, 2013 is scheduled to be performed during the fourth quarter of 2013 and in 2014.

Operating cash flow was $24.1 million during the first nine months of 2013, as compared to $61.0 million in the first nine months of 2012.

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:

(U.S. Dollars in millions)




Nine Months Ended

September 30


Three Months Ended

September 30


Year Ended

December 31


2013


2012


2013


2012


2012











GAAP gross profit

603.3


576.8


207.4


191.4


815.9

Adjustments:










Amortization of  intangible assets

16.4


15.6


5.5


5.2


24.2

Non-GAAP gross profit

619.7


592.4


212.9


196.6


840.1

Percent of revenues

29.3%


29.0%


29.1%


29.0%


29.1%











GAAP operating income

181.5


132.8


61.1


49.0


203.1

Adjustments:










Amortization of intangible assets

Legal settlement, net

34.2

(7.6)


36.2

-


11.2

-


12.0

-


49.2

-

Non-GAAP operating income

208.1


169.0


72.3


61.0


252.3

Percent of revenues

9.8%


8.3%


9.9%


9.0%


8.7%











GAAP net income  attributable to Elbit Systems' shareholders

 

140.6


 

110.7


 

49.6


 

39.5


 

167.9

Adjustments:










Amortization of intangible assets

34.2


36.2


11.2


12.0


49.2

Legal settlement, net

(7.6)


-


-


-


-

Gain from changes in holdings

(0.9)


(2.3)


(0.9)


-


(2.3)

Adjustment of loss (gain) from discontinued operations, net

 

(0.8)


 

0.3


 

-


 

0.1


 

0.4

Related tax benefits

(8.1)


(6.5)


(4.1)


(2.2)


(8.9)

Non-GAAP net income attributable to
Elbit Systems' shareholders

 

157.4


 

138.4


 

55.8


 

49.4


 

206.3











Percent of revenues

7.4%


6.8%


7.7%


7.3%


7.1%











Non-GAAP diluted net EPS

3.73


3.26


1.32


1.18


4.88

 

Recent Events:

On September 25, 2013 the Company announced that its subsidiary in the U.S., Elbit Systems of America, LLC. was awarded a $44.8 million Indefinite Delivery/Indefinite Quantity contract to be performed over the next five years for the ongoing depot level service and support of the AH-1W Super Cobra helicopter's Night Targeting System (NTS).

On October 6, 2013 the Company announced that its wholly-owned subsidiary, Elbit Systems Electro-optics - Elop Ltd., was awarded a follow-on contract to supply its advanced Digital CoMPASS® electro-optical payload systems to an Asia-Pacific air force to be installed onboard helicopters. The contract will be performed over a three-year period.

On October 16, 2013 the Company announced that it was awarded a follow-on contract to supply advanced Helmet Mounted Display (HMD) systems for the Republic of Korea Army's SURION helicopter. The contract will be performed over a four-year period.

Dividend:

The Board of Directors declared a dividend of $0.30 per share for the third quarter of 2013. The dividend's record date is November 26, 2013, and the dividend will be paid on December 9, 2013. The dividend will be distributed from preferred enterprise profits (as defined in the Israeli tax law) net of taxes and levies of 15%.

Conference Call:

The Company will also be hosting a conference call later today, November 14, 2013 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:

1 888 782 4291 (US) or +972 3 925 5921 (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: www.elbitsystems.com.

Attachments:

Consolidated balance sheets
Consolidated statements of income
Consolidated statements of cash flow
Consolidated revenue distribution by areas of operations 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

Elbit Systems Ltd.



IR Contact:

 

Ehud Helft

Kenny Green

CCG Investor Relations

Tel: 1-646-201-9246

elbitsystems@ccgisrael.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 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 U.S. Dollars)




September 30,


December 31,


2013


2012


Unaudited


Audited

Assets








Current assets:




Cash and cash equivalents

148,333


199,241

Short-term bank deposits

Available-for-sale marketable securities

17,266

49,971


15,444

50,111

Trade and unbilled receivables, net

873,644


688,129

Other receivables and prepaid expenses

172,574


180,103

Inventories, net of customers advances

782,038


751,247

Total current assets

2,043,826


1,884,275





Investments in affiliated companies, partnerships and other companies

135,227


126,482

Long-term trade and unbilled receivables

250,755


229,687

Long-term bank deposits and other receivables

43,932


19,269

Deferred income taxes, net

31,446


31,465

Severance pay fund

317,327


302,680


778,687


709,583





Property, plant and equipment, net

488,958


501,286

Goodwill and other intangible assets, net

681,154


715,561

Total assets

3,992,625


3,810,705





Liabilities and Equity








Short-term bank credits and loans

121


181

Current maturities of long-term loans and Series A Notes

61,684


90,056

Trade payables

304,822


260,975

Other payables and accrued expenses

700,602


704,450

Customer advances in excess of costs incurred on contracts in progress

401,780


453,382


1,469,009


1,509,044





Long-term loans, net of current maturities

283,275


173,745

Series A Notes, net of current maturities

369,285


408,610

Employee benefit liabilities

423,513


407,661

Deferred income taxes and tax liabilities, net

57,723


48,787

Customer advances in excess of costs incurred on contracts in progress

180,980


156,497

Other long-term liabilities

57,716


55,735


1,372,492


1,251,035





Elbit Systems Ltd.'s equity

1,121,172


1,017,115

Non-controlling interests

29,952


33,511

Total equity

1,151,124


1,050,626

Total liabilities and equity

3,992,625


3,810,705

 

ELBIT SYSTEMS LTD.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands of U.S. Dollars, except for share and per share amounts)



Nine Months Ended

September 30

Three Months Ended

September 30

Year Ended

December 31


2013

2012

2013

2012

2012


Unaudited

Audited

Revenues

2,113,694

2,044,690

730,631

677,470

2,888,607

Cost of revenues

1,510,393

1,467,863

523,187

486,023

2,072,742

  Gross profit

603,301

576,827

207,444

191,447

815,865







Operating expenses:






  Research and development, net

156,555

165,114

54,012

50,703

233,387

  Marketing and selling

174,755

180,325

61,906

59,044

241,911

  General and administrative, net

90,449

98,580

30,468

32,677

137,517


421,759

444,019

146,386

142,424

612,815







  Operating income 

181,542

132,808

61,058

49,023

203,050







Financial expenses, net

(27,274)

(15,524)

(6,634)

(5,456)

(26,086)

Other income, net

925

76

881

260

78

  Income before income taxes

155,193

117,360

55,305

43,827

177,042

Taxes on income

17,199

14,203

7,532

4,890

17,099


137,994

103,157

47,773

38,937

159,943







Equity in net earnings of affiliated companies and partnerships

7,567

8,866

3,393

1,049

11,160

  Income from continuing operations

145,561

112,023

51,166

39,986

171,103

Income (loss) from discontinued operations, net

681

(519)

-

(93)

(616)

  Net income

146,242

111,504

51,166

39,893

170,487







Less: net income attributable to non-controlling interests

(5,690)

(835)

(1,577)

(369)

(2,608)

  Net income attributable to Elbit Systems Ltd.'s shareholders

140,552

110,669

49,589

39,524

167,879







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






  Basic net earnings per share






    Continuing operations

3.32

2.63

1.18

0.95

3.99

    Discontinued operations

0.02

(0.01)

-

(0.00)

(0.01)

    Total

3.34

2.62

1.18

0.95

3.98

  Diluted net earnings per share






    Continuing operations

3.31

2.62

1.17

0.95

3.98

    Discontinued operations

0.02

(0.01)

-

(0.00)

(0.01)

    Total

3.33

2.61

1.17

0.95

3.97

Weighted average number of shares used in

  computation of basic earnings per share

 

42,044

 

42,296

 

42,178

 

41,693

 

42,190

Weighted average number of shares used in

  computation of diluted earnings per share

 

42,213

 

42,374

 

42,348

 

41,693

 

42,277







Amounts attributable to Elbit Systems Ltd.'s shareholders






  Income from continuing operations, net of income tax

139,733

110,977

49,589

39,579

168,245

  Discontinued operations, net of  income tax

819

(308)

-

(55)

(366)

Net income attributable to Elbit Systems Ltd.'s shareholders

140,552

110,669

49,589

39,524

167,879

 

ELBIT SYSTEMS LTD.

CONSOLIDATED STATEMENTS OF CASH FLOW

(In thousands of U.S. Dollars)



Nine Months Ended


Year Ended


September 30,


December 31,


2013


2012


2012


Unaudited


Audited

CASH FLOWS FROM OPERATING ACTIVITIES






Net income

146,242


111,504


170,487

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






Depreciation and amortization

96,571


103,300


138,796

 Discontinued operations, net

(681)


519


616

Stock-based compensation

1,096


494


3,326

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

(69)


1,215


153

Deferred income taxes and reserve, net

1,545


5,485


6,579

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

(133)


(556)


1,197

Gain on sale of investment

(425)


(994)


(829)

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

(2,067)


(2,454)


(1,602)

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






Increase in short and long-term trade receivables and prepaid expenses

(195,656)


(17,442)


(91,988)

Decrease (increase) in inventories, net

(30,791)


(21,716)


10,022

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

32,407


(105,834)


(75,724)

Severance, pension and termination indemnities, net

3,184


(12,176)


(10,612)

Increase (decrease) in advances received from customers

(27,118)


(296)


47,962

Net cash provided by operating activities

24,105


61,049


198,383







CASH FLOWS FROM INVESTING ACTIVITIES






Purchase of property, plant and equipment

(54,987)


(59,753)


(81,637)

Investments in affiliated companies and other companies

(5,046)


(507)


(4,241)

Proceeds from sale of property, plant and equipment

4,264


6,106


7,335

Proceeds from sale of investments

2,000


705


705

Investment in long-term deposits

Proceeds from sale of long-term deposits

(1,171)

246


(318)

502


     (779)

2,849

Investment in short-term deposits and available-for-sale securities

Proceeds from sale of short-term deposits and available-for-sale securities

(33,050)

30,543


(336,360)

287,352


 (340,899)

299,029

Net cash used in investing activities

(57,201)


(102,273)


(117,638)







CASH FLOWS FROM FINANCING ACTIVITIES






Proceeds from exercise of options

11,159


739


1,352

Repayment of long-term loans

(143,547)


(195,624)


(319,601)

Proceeds from long-term loans

217,100


53,038


122,038

Proceeds from issuance of Series A Notes

-


246,000


246,973

Series A Notes issuance costs

Purchase of treasury shares

-

-


-

(26,006)


(2,035)

(26,006)

Repayment of Series A Notes

(55,535)


(53,530)


(53,530)

Dividends paid (**)

(46,928)


(38,043)


(50,616)

Tax benefit in respect of options exercised

Change in short-term bank credit and loan, net

-

(61)


-

(2,998)


161

 (2,817)

Net cash used in financing activities

(17,811)


(16,424)


(84,081)







NET DECREASE IN CASH AND CASH EQUIVALENTS

(50,908)


(57,648)


(3,336)

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD

199,241


202,577


202,577

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD

148,333


144,929


199,241

* Dividend received from affiliated companies and partnerships

5,500


6,412


9,558








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

  

ELBIT SYSTEMS LTD.

DISTRIBUTION OF REVENUES


CONSOLIDATED REVENUES BY AREAS OF OPERATION:





Nine Months Ended

Three Months Ended


September 30

September 30


2013

2012

2013

2012


$ millions

%

$ millions

%

$ millions

%

$ millions

%

Airborne systems

849.3

40.2

793.5

38.8

287.2

39.3

267.9

39.5

Land vehicles systems

195.4

9.2

264.3

12.9

75.5

10.3

105.5

15.6

C4ISR systems       

771.8

36.5

676.7

33.1

273.4

37.4

197.8

29.2

Electro-optic systems

227.4

10.8

211.5

10.4

67.9

9.3

66.8

9.9

Other (mainly non-defense

engineering and production services)

 

 

69.8

 

 

3.3

 

 

98.7

 

 

4.8

 

 

26.6

 

 

3.7

 

 

39.5

 

 

5.8

Total

2,113.7

100

2,044.7

100

730.6

100

677.5

100










CONSOLIDATED REVENUES BY GEOGRAPHICAL REGIONS:



Nine Months Ended

Three Months Ended


September 30

September 30


2013

2012

2013

2012


$ millions

%

$ millions

%

$ millions

%

$ millions

%

Israel

470.6

22.3

355.9

17.4

181.7

24.9

104.1

15.4

North America        

630.9

29.8

663.5

32.5

217.0

29.7

236.0

34.8

Europe

Asia Pacific

Latin America         

397.9

357.5

210.9

18.8

16.9

10.0

368.1

423.4

175.9

18.0

20.7

8.6

127.3

97.0

78.3

17.4

13.3

10.7

127.7

133.3

55.5

18.9

19.7

8.2

Other countries

45.9

2.2

57.9

2.8

29.3

4.0

20.9

3.0

Total

2,113.7

100

2,044.7

100

730.6

100

677.5

100

 

                                                                      

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