ELBIT SYSTEMS REPORTS
THIRD QUARTER 2011 RESULTS
Backlog of orders increased to $5.7 billion;
Revenues at $664 million; Net income at $36.5 million;
Diluted net EPS at $0.85
Haifa, Israel, November 16, 2011 – Elbit Systems Ltd. (the "Company") (NASDAQ and TASE: ESLT)
, the international defense electronics company, today reported its consolidated financial results for the third quarter ended September 30, 2011.
In this release, the Company is providing its US-GAAP ("GAAP") results as well as additional non-GAAP financial data, which are intended to provide investors a more comprehensive understanding of the Company's business results and trends. Unless otherwise stated, all financial data presented is GAAP financial data.
Management Comment
:
Joseph Ackerman, President and CEO of Elbit Systems, commented: "The quarter's results represent continued year over year growth in backlog, as well as improvements in margins. These results are due, among other factors, to our success in harvesting the synergies from recent acquisitions and we expect to continue to take advantage of opportunities in cost rationalization, savings and avoidance of duplicating effects among our subsidiaries. Our geographical spread and our diversified activities enable us to adjust ourselves to changing trends in the global markets, and we are successfully growing in regions with expanding potential like South America and Asia-Pacific. During the quarter we reported a number of important orders, and our backlog continued its growth trend for the sixth consecutive quarter.”
Third quarter 2011 results
:
Revenues
in the third quarter of 2011 were $663.7 million, as compared to $649.9 million in the third quarter of 2010. The leading contributors to the Company's revenues were the C4ISR Systems and Airborne areas of operations.
Gross profit
amounted to $204.1 million (30.8% of revenues) in the third quarter of 2011, as compared to $197.9 million (30.5% of revenues)
in the third quarter of 2010. The improved gross profit rate was mainly a result of a mix of programs sold during the third quarter of 2011. The non-GAAP gross profit in the third quarter of 2011 was $211.6 million, (31.9% of revenues), compared to $203.5 million (31.3% of revenues) in the third quarter of 2010.
Research and development expenses, net
were $55.5 million (8.4% of revenues) in the third quarter of 2011, as compared to $56.1 million (8.6% of revenues) in the third quarter of 2010.
Marketing and selling expenses
were $58.4 million (8.8% of revenues) in the third quarter of 2011, as compared to $59.1 million (9.1% of revenues) in the third quarter of 2010.
General and administrative expenses
were $34.0 million (5.1% of revenues) in the third quarter of 2011, as compared to $30.2 million (4.7% of revenues) in the third quarter of 2010.
Operating income
was $56.2 million (8.5% of revenues), as compared to $52.4 million (8.1% of revenues) in the third quarter of 2010. The non-GAAP operating income in the third quarter of 2011 was $70.3 million (10.6% of revenues), as compared to $63.3 million (9.7% of revenues) in the third quarter of 2010.
Financial expenses, net
were $3.1 million in the third quarter of 2011, as compared to financial expenses, net, of $5.5 million in the third quarter of 2010. Financial expenses, net, were comparatively lower in the third quarter of 2011 due to income from currency hedging activities.
Taxes on income
were $9.8 million (effective tax rate of 18.2%) in the third quarter of 2011, as compared to taxes on income of $4.8 million (effective tax rate of 10.1%) in the third quarter of 2010. 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 $4.2 million (0.6% of revenues) in the third quarter of 2011, as compared to $3.9 million (0.6% of revenues) in the third quarter of 2010.
Loss from discontinued operations, net
in the third quarter of 2011 amounted to $15.2
million. The amount reflects a net loss related to an impairment of held-for-sale investments acquired during 2010, as part of the acquisition of the Mikal group of companies.
Net income attributable to non-controlling interests
was net income of $3.2 million in the third quarter of 2011, as compared to a net expense of $1.1 million in the third quarter of 2010. The net income attributable to the non-controlling interests includes a loss of $6.2 million, as a result of the non-controlling part of the loss from discontinued operations, as mentioned above.
Net income attributable to the Company's ordinary shareholders
in the third quarter of 2011 amounted to $36.5 million (5.5% of revenues), as compared to $45.3 million (7.0% of revenues) for
the third quarter of 2010. Excluding the loss related to impairment of assets held-for-sale, the net income in the third quarter of 2011 was $45.5 million (6.9% of revenues). The non-GAAP net income in the third quarter of 2011 was $56.4 million (8.5% of revenues), as compared to $54.1 million (8.3% of revenues) in the third quarter of 2010.
Diluted net earnings per share
attributable to the Company’s
ordinary shareholders
were $0.85 for the
third quarter of 2011, as compared with $1.05 for the
third quarter of 2010. Excluding the loss related to impairment of assets held-for-sale, the diluted net earnings per share in the third quarter of 2011 was $1.06. The non-GAAP diluted net earnings per share in the third quarter of 2011 was $1.31, as compared to $1.25 in the third quarter of 2010.
The Company’s backlog of orders
increased to $5,691 million
as of September 30, 2011, as compared with $5,446 million as of December 31, 2010 and $5,381 million as of September 30, 2010. Approximately 75% of the backlog relates to orders outside of Israel. Approximately 52% of the Company's backlog as of September 30, 2011, is scheduled to be performed during the last quarter of 2011 and in 2012.
Operating cash flow
was $11.2 million
in the first nine months of 2011, as compared to $73.6 million
in the first nine months of 2010. The reduction in operating cash flow was mainly a result of an increased inventory balance .
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: (1) amortization of purchased intangible assets, (2) significant reorganization, restructuring and other related expenses, (3) impairment of investments, including impairment of auction rate securities, (4) gain from changes in holdings, including revaluation of the previously held shares at the acquisition date when a business combination is achieved in stages (step-up) and (5) the income tax effects of the foregoing.
These non-GAAP measures are not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations, as determined in accordance with GAAP, and that these measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP measures. Investors should consider non-GAAP financial measures in addition to, and not as replacements for or superior to, measures of financial performance prepared in accordance with GAAP.
Reconciliation of GAAP to Non-GAAP (Unaudited) Supplemental Financial Data
:
(US Dollars in millions)
|
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Nine Months Ended
September 30
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Three Months Ended
September 30
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Year Ended
December 31
|
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2011
|
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2010
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2011
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2010
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|
2010
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
GAAP gross profit
|
|
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590.3
|
|
|
|
566.0
|
|
|
|
204.1
|
|
|
|
197.9
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|
|
|
797.9
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|
Adjustments
:
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|
|
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|
|
|
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Amortization of purchased intangible assets
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23.0
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14.6
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|
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7.5
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|
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5.6
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|
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25.0
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Reorganization, restructuring and other
related expenses
(1)
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-
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-
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-
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-
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12.8
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Non-GAAP gross profit
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613.3
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580.6
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211.6
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203.5
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835.7
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Percent of revenues
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31.0%
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31.0%
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31.9%
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31.3%
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31.3%
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GAAP operating income
|
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149.8
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150.7
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56.2
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52.4
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207.4
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Adjustments
:
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|
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|
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|
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|
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Amortization of intangible assets
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42.7
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32.5
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14.1
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10.9
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47.7
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Reorganization, restructuring and other
related expenses
(1)
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-
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-
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-
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-
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16.4
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Impairment of investments
(2)
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-
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0.7
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-
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-
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1.3
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Gain from changes in holdings
(3)
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-
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(4.8)
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-
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-
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(4.8)
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Non-GAAP operating income
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192.5
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179.1
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70.3
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63.3
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268.0
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Percent of revenues
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9.7%
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9.6%
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10.6%
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9.7%
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10.0%
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GAAP net income attributable to Elbit Systems’ shareholders
|
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103.3
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139.8
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36.5
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45.3
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183.5
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Adjustments
:
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|
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|
|
|
|
|
|
|
|
|
|
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Amortization of intangible assets
|
|
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42.8
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|
|
|
32.5
|
|
|
|
14.1
|
|
|
|
10.9
|
|
|
|
47.7
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|
Reorganization, restructuring and other
related expenses
(1)
|
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|
-
|
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|
|
-
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|
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|
-
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-
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16.4
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Impairment of investments
(2)
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0.5
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0.7
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-
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-
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1.3
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Gain from changes in holdings
(3)
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-
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(17.6
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)
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-
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-
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(17.6)
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Adjustment of loss (gain) from discontinued operations, net
(4)
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9.3
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-
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9.0
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-
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(0.5)
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Related tax benefits
|
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(9.9)
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(4.2)
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(3.2)
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(2.1)
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(8.9)
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Non-GAAP net income attributable to
Elbit Systems’ shareholders
|
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146.0
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151.2
|
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56.4
|
|
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54.1
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221.9
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Percent of revenues
|
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7.4%
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8.1%
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8.5%
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8.3%
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8.3%
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Non-GAAP diluted net EPS
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3.38
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3.50
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1.31
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1.25
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5.13
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(1)
|
Adjustment of reorganization, restructuring, and other related expenses in 2010, are mainly due to write-off of inventories in the amount of approximately $13 million related to the acquisition of Soltam and ITL.
|
(2)
|
Adjustment of impairment in available for sale marketable securities (ARS and CDO) during 2011 and an impairment of ICI shares in 2010.
|
(3)
|
Adjustment of gain in the amount of $12.8 million from the sale of Mediguide shares, and adjustment of net gain in the amount of $4.8 million, related to revaluation of previously held investment, due to accounting treatment as business combination achieved in stages during 2010.
|
(4)
|
Adjustment of loss from discontinued operations, net of tax and minority interests related to impairment of held-for sale investments acquired during 2010, as part of the acquisition of the Mikal group of companies.
|
Recent Events
:
On August 17, 2011, the Company announced that it was awarded contracts by several customers in Asia to supply many dozens of observation systems for maritime patrol aircraft, vessels and observation towers. The total value of these new contracts is approximately $20 million, to be supplied over three years.
On September 6, 2011, the Company announced that its U.S. subsidiary, Elbit Systems of America, LLC was awarded a contract to supply Boeing Military Aircraft with the CV-22 Color Helmet Mounted Display (HMD) for the Air Force Special Operations Command (AFSOC). Work will be performed in Fort Worth, Texas.
On September 8, 2011, the Company’s Brazilian subsidiary AEL Sistemas S.A. ("AEL"), signed several related agreements with Embraer Defesa e Segurança S.A. to establish a joint company, Harpia Sistemas S.A in which Embraer Defesa owns 51% and AEL owns the remaining 49%. The new company, based in Brasilia, will be engaged in the areas of unmanned aircraft systems, avionics systems and simulators, as well as contractor logistics support in these areas, initially for the Brazilian market. In addition, pursuant to the agreements, Embraer Defesa acquired a 25% interest in AEL.
On September 18, 2011, the Company announced that it was awarded a contract by the Israeli Ministry of Defense in the amount of approximately $40 million to supply Cardom systems to the Israeli Defense Forces. Manufactured by Elbit Systems’ subsidiary Soltam Systems Ltd., Cardom systems were initially supplied to the IDF in 2007 and are considered among the most advanced of their kind in the world. The systems are to be supplied over a period of four years.
On September 21, 2011, the Company announced that its subsidiary Elbit Security Systems Ltd. was awarded an Israel Ports Development & Assets Company Ltd. contract for the supply and installation of a perimeter security system. The system is for the protection of the Haifa port, including the chemicals terminal, as well as the Kishon port and the "Shavit" fishermen dock. The contract, which includes various security systems, is in an amount that is not material to Elbit Systems.
On September 26, 2011, the Company announced that its Board of Directors authorized the repurchase of up to 1 million of its ordinary shares over the next 12 months.
On September 28, 2011, the Company announced that it was awarded a contract by the Israeli Ministry of Defense to supply, upgrade and provide maintenance under the Israeli Defense Forces' communications equipment project. The project is valued at approximately $280 million, of which approximately half is designated for the supply of new communication systems over the next five years, and the balance is to be applied to the upgrade and maintenance of existing systems over a twenty-year period.
On October 10, 2011, the Company announced that its subsidiary in the U.S., Elbit Systems of America, LLC., was awarded a five-year, $23 million Indefinite Delivery/Indefinite Quantity (IDIQ) National Maintenance Contract by the US Army Communications-Electronics Command (CECOM), for depot level repair services on Elbit Systems of America’s Aviator's Night Vision Imaging System Head Up Display (HUD) System (ANVIS/HUD
®
).
On October 17, 2011, the Company announced it was awarded a $15 million contract to supply an Asian National Government Agency with the Wise Intelligence Technology (WiT) system. The system will be supplied within 18 months.
On October 26, 2011, the Company announced that its Brazilian subsidiary, AEL, was awarded by a subsidiary of EMBRAER S.A., EMBRAER Defense and Security, development contracts to provide three additional systems, valued at $25 million for the new KC-390 military transport and refuel jet: Self-Protection Suite (SPS), Directional Infrared Countermeasures (DIRCM) and pilot orientation Head-Up Display (HUD). This selection is in addition to the earlier selection of AEL as the provider of the mission computer for the new jet.
On October 31, 2011, the Company announced that it won a contract to supply mortars to the Spanish Army, a projected valued at $8.5 million and to implement over a 12 month period. The Spanish Army's decision to equip its forces with mortars provided by Elbit Systems was made after a series of successful tests in both Spain and in Israel. Elbit Systems will be the lead contractor for the project, which will include the installation of CARDOM autonomous recoil 81mm mortars mounted on the back of VAMTAC 4x4 vehicles produced in Spain by UROVESA and with the participation of local industries.
Dividend
:
The Board of Directors declared a dividend of $0.36 per share for the third quarter
of 2011. The dividend’s record date is November 29, 2011, and the dividend will be paid on December 12, 2011, net of taxes and levies, at the rate of 20%.
Conference Call
:
The Company will also be hosting a conference call later today, November 16, 2011 at 9:00am Eastern Time. On the call, management will review and discuss the results and will be available to answer questions.
To participate, please call one of the teleconferencing numbers that follow. If you are unable to connect using the toll-free numbers, please try the international dial-in number.
US Dial-in Numbers: 1 888 668 9141
UK Dial-in Number: 0 800 917 5108
ISRAEL Dial-in Number: 03 918 0609
INTERNATIONAL Dial-in Number: +972 3 918 0609
at 9:00am Eastern Time;6:00am Pacific Time;2:00pm UK Time;4:00pm Israel Time
This call will also be broadcast live on Elbit Systems’ web -site at
http://www.elbitsystems.co
m
. An online replay will be available from 24 hours after the call ends.
Alternatively, for two days following the call, investors will be able to dial a replay number to listen to the call. The dial-in numbers are:
1 888 326 9310 (US) or +972 3 925 5901 (Israel and International)
About Elbit Systems
:
Elbit Systems Ltd. is an international defense electronics company engaged in a wide range of programs throughout the world. The Company, which includes Elbit Systems and its subsidiaries, operates in the areas of aerospace, land and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance ("C4ISR"), unmanned aircraft systems ("UAS"), advanced electro-optics, electro-optic space systems, EW suites, airborne warning systems, ELINT systems, data links and military communications systems and radios. The Company also focuses on the upgrading of existing military platforms, developing new technologies for defense, homeland security and commercial aviation applications and providing a range of support services.
For additional information, visit:
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
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.
(FINANCIAL TABLES TO FOLLOW)
ELBIT SYSTEMS LTD.
CONSOLIDATED BALANCE SHEETS
(In thousands of US Dollars)