ESLT Elbit Systems Ltd

HAIFA, Israel, Nov. 13, 2014 /PRNewswire/ -- Elbit Systems Ltd. (the "Company") (NASDAQ and TASE: ESLT), the international defense electronics company, reported today its consolidated results for the quarter ended September 30, 2014.

In this release, the Company is providing US-GAAP results as well as additional non-GAAP financial data, which are intended to provide investors a more comprehensive understanding of the Company's business results and trends. Unless otherwise stated, all financial data presented is GAAP financial data.

Management Comment:

Bezhalel (Butzi) Machlis, President and CEO of Elbit Systems, commented: "As we previously disclosed, our third quarter profit was affected by increased financial expenses. However, as reflected by our operating income, the ongoing business performance continued to show stability in the quarter. We are encouraged by the continued growth in the backlog and by the increase in revenue in Latin America and Asia-Pacific in the quarter."

Third quarter of 2014 results:

Revenues in the third quarter of 2014 were $722.7 million, as compared to $730.6 million in the third quarter of 2013.

Gross profit amounted to $203.0 million (28.1% of revenues) in the third quarter of 2014, as compared to $207.4 million (28.4% of revenues) in the third quarter of 2013. The non-GAAP gross profit in the third quarter of 2014 was $208.4 million (28.8% of revenues), as compared to $212.9 million (29.1% of revenues) in the third quarter of 2013. The decrease in the gross profit rate was mainly due to the mix of programs sold in the quarter.

Research and development expenses, net, were $55.8 million (7.7% of revenues) in the third quarter of 2014, as compared to $54.0 million (7.4% of revenues) in the third quarter of 2013.

Marketing and selling expenses were $51.8 million (7.2% of revenues) in the third quarter of 2014, as compared to $61.9 million (8.5% of revenues) in the third quarter of 2013. The decrease was mainly a result of lower expenses related to the mix of marketing activities in the quarter.

General and administrative expenses were $35.3 million (4.9% of revenues) in the third quarter of 2014, as compared to $30.5 million (4.2% of revenues) in the third quarter of 2013.

Operating income was $60.1 million (8.3% of revenues) in the third quarter of 2014, as compared to operating income of $61.1 million (8.4% of revenues) in the third quarter of 2013.  The non-GAAP operating income in the third quarter of 2014 was $70.8 million (9.8% of revenues), as compared to $72.3 million (9.9% of revenues) in the third quarter of 2013.

Financial expenses, net, were $23.4 million in the third quarter of 2014, as compared to $6.6 million in the third quarter of 2013. As mentioned in the Company's announcement on October 20, 2014, the increase in the financial expenses in the third quarter of 2014 resulted primarily from the accelerated depreciation of the New Israeli Shekel related to the Company's U.S. Dollar derivative activities as well as the impact of exchange rate differences on balance sheet items.

Taxes on income were $0.1 million (effective tax rate of 0.3%) in the third quarter of 2014, as compared to $7.5 million (effective tax rate of 13.6%) in the third quarter of 2013. The decrease in the effective tax rate was mainly as a result of settlements of tax audits, including adjustments for prior years, in some of the Company's subsidiaries in Israel and 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 $1.0 million (0.1% of revenues) in the third quarter of 2014, as compared to $3.4 million (0.5% of revenues) in the third quarter of 2013.

Net income attributable to non-controlling interests was $2.9 million in the third quarter of 2014, as compared to $1.6 million in the third quarter of 2013.

Net income attributable to the Company's shareholders in the third quarter of 2014 was $35.0 million (4.8% of revenues), as compared to $49.6 million (6.8% of revenues) in the third quarter of 2013. The non-GAAP net income in the third quarter of 2014 was $43.9 million (6.1% of revenues), as compared to $55.8 million (7.6% of revenues) in the third quarter of 2013. The decrease in net income was due mainly to the increased financial expenses described above.

Diluted net earnings per share attributable to the Company's shareholders were $0.82 for the third quarter of 2014, as compared with diluted net earnings per share of $1.17 for the third quarter of 2013. The non-GAAP diluted earnings per share in the third quarter of 2014 were $1.03, as compared with diluted net earnings per share of $1.32 for the third quarter of 2013.

The Company's backlog of orders as of September 30, 2014 totaled $6,229 million, as compared to $5,697 million as of September 30, 2013. Approximately 72% of the current backlog is attributable to orders from outside Israel. Approximately 49% of the current backlog is scheduled to be performed during the fourth quarter of 2014 and 2015.

Operating cash flow used in the first nine months of 2014 was $0.2 million, as compared to cash flow provided by operating activities of $24.1 million in the first nine months of 2013. The Company's cash flow was negatively affected mainly by the delay in payments from the Israeli Ministry of Defense. The Company does not foresee a risk in the collection of these payments.

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.

Recent Events:

On August 13, 2014 the Company announced that it was awarded an $80 million contract to supply a Latin American country with Command, Control, Computer & Communications (C4I) systems.

On October 12, 2014 the Company announced that its wholly-owned U.S. subsidiary, Elbit Systems of America, LLC, ("Elbit Systems of America"), was awarded an approximately $12.7 million contract to provide Apache Aviator Integrated Helmets (AAIH) to the United States Army. Work will be performed over a two-year period at Elbit Systems of America's facility in Fort Worth, Texas.

On October 20, 2014 the Company announced that, based upon an initial review of the elements comprising the Company's third quarter 2014 results, the Company anticipates an extraordinary level of finance expenses for the quarter. This increase in financial expenses resulted primarily from the accelerated depreciation of the New Israeli Shekel related to the Company's U.S. dollar derivative activities, as well as the impact of exchange rate differences on balance sheet items. The Company estimates that the impact of the above on the financial expenses for the quarter will be in the range of $15 to $20 million, and accordingly will have a corresponding adverse impact on the quarter's net profit.

On October 22, 2014 the Company announced that it was awarded contracts from an Asian country in a total amount of approximately $85 million. Most of the amount is for an F-5 aircraft avionics upgrade program, and the balance is for the supply of electro-optic and communications systems. The contracts will be performed over a three-year period.

On October 29, 2014 the Company announced that Midroog Ltd., an Israeli rating agency ("Midroog"), reaffirmed Midroog's "Aa1" rating (on a local scale), with a stable outlook, of the Series "A" Notes issued by the Company in 2010 and in 2012.

On October 29, 2014 the Company announced that it was awarded a contract by Rheinmetall Canada Inc. to provide ELSAT 2100 Satellite-on-the-Move (SOTM) systems for use by the Canadian Armed Forces. The contract value, which is in an amount that is not material to Elbit Systems, will be performed over an 18-month period.

On November 11, 2014  the Company announced that its wholly-owned U.S. subsidiary, Elbit Systems of America, was awarded a five-year, firm-fixed price contract valued at approximately $29 million by the United States Air Force (USAF) for logistics support of the USAF's F-16 head-up display (HUD) electric module assemblies.

Dividend:

The Board of Directors declared a dividend of $0.32 per share for the third quarter of 2014. The dividend's record date is November 25, 2014. The dividend will be paid from income generated as Preferred Income (as defined under Israeli tax laws), on December 8, 2014, net of taxes and levies, at the rate of 20%. 

Conference Call:

The Company will be hosting a conference call today, Thursday, November 13, 2014 at 9:00 a.m. Eastern Time. On the call, management will review and discuss the results and will be available to answer questions.

To participate, please call one of the teleconferencing numbers that follow. If you are unable to connect using the toll-free numbers, please try the international dial-in number.

US Dial-in Numbers: 1 888 668 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: 9:00 am Eastern Time; 6:00 am Pacific Time; 2:00 pm UK Time; 4:00 pm Israel Time

This call will also be broadcast live on Elbit Systems' web-site at http://www.elbitsystems.com. An online replay will be available from 24 hours after the call ends.

Alternatively, for two days following the call, investors will be able to dial a replay number to listen to the call. The dial-in numbers are:

1 866 276 1485 (US) or +972 3 925 5918 (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, signal intelligence ("SIGINT") systems, data links and 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, including training and simulation systems.

For additional information, visit: www.elbitsystems.com or follow us on Twitter.

Attachments:
Consolidated balance sheets
Consolidated statements of income
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 1943, as amended) regarding Elbit Systems Ltd. and/or its subsidiaries (collectively the Company), to the extent such statements do not relate to historical or current fact. Forward-looking statements are based on management's expectations, estimates, projections and assumptions. Forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. These statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Therefore, actual future results, performance and trends may differ materially from these forward-looking statements due to a variety of factors, including, without limitation: scope and length of customer contracts; governmental regulations and approvals; changes in governmental budgeting priorities; general market, political and economic conditions in the countries in which the Company operates or sells, including Israel and the United States among others; differences in anticipated and actual program performance, including the ability to perform under long-term fixed-price contracts; and the outcome of legal and/or regulatory proceedings. The factors listed above are not all-inclusive, and further information is contained in Elbit Systems Ltd.'s latest annual report on Form 20-F, which is on file with the U.S. Securities and Exchange Commission. All forward-looking statements speak only as of the date of this release. The Company does not undertake to update its forward-looking statements.

Elbit Systems Ltd., its logo, brand, product, service and process names appearing in this Press Release are the trademarks or service marks of Elbit Systems Ltd. or its affiliated companies.  All other brand, product, service and process names appearing are the trademarks of their respective holders.  Reference to or use of a product, service or process other than those of Elbit Systems Ltd. does not imply recommendation, approval, affiliation or sponsorship of that product, service or process by Elbit Systems Ltd. Nothing contained herein shall be construed as conferring by implication, estoppal or otherwise any license or right under any patent, copyright, trademark or other intellectual property right of Elbit Systems Ltd. or any third party, except as expressly granted herein.

SOURCE Elbit Systems Ltd.