Industry Press Releases

ELBIT SYSTEMS REPORTS THIRD QUARTER OF 2016 RESULTS

17 November 2016

Backlog of orders at $6.8 billion; Revenues at $780.8 million;

Non-GAAP net income of $62.5 million; GAAP net income of $63.4 million; Non-GAAP net EPS of $1.46; GAAP net EPS of $1.48

Haifa, Israel, November 17, 2016 Elbit Systems Ltd. (NASDAQ and TASE: ESLT), (the Company) the international high technology company, reported today its consolidated results for the quarter ended September 30, 2016.

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: We are pleased with our financial results for the quarter, demonstrating growth and an improvement in profit. Our year-over-year increase in backlog of over six percent supports our ongoing revenue growth, as we have demonstrated in the first three quarters of this year. Additionally, we recorded a gain, for the second time this year, from a commercial spin-off business. This is a result of our efforts to adapt some of our technologies for civilian applications, around which we build viable companies. We look forward to reaping the fruits of these initiatives over the coming years.

Third quarter 2016 results:

Revenues in the third quarter of 2016 were $780.8 million, as compared to $764.8 million in the third quarter of 2015.

Non-GAAP(*) gross profit amounted to $238.1 million (30.5% of revenues) in the third quarter of 2016, as compared to $233.5 million (30.5% of revenues) in the third quarter of 2015. GAAP gross profit in the third quarter of 2016 was $230.4 million (29.5% of revenues), as compared to $223.3 million (29.2% of revenues) in the third quarter of 2015.

Research and development expenses, net were $65.6 million (8.4% of revenues) in the third quarter of 2016, as compared to $61.0 million (8.0% of revenues) in the third quarter of 2015.

_

* see page 3

Marketing and selling expenses, net were $60.9 million (7.8% of revenues) in the third quarter of 2016, as compared to $60.6 million (7.9% of revenues) in the third quarter of 2015.

General and administrative expenses, net were $36.1 million (4.6% of revenues) in the third quarter of 2016, as compared to $36.4 million (4.8% of revenues) in the third quarter of 2015.

Other operating income, net in the third quarter of 2016 amounted to $10.5 million. The amount reflects a net gain related to valuation of shares in a newly established Israeli subsidiary due to a third party investment. The subsidiary, established in July 2016, is acting in the area of energy technology solutions for civilian transportation applications.

Non-GAAP(*) operating income was $77.9 million (10.0% of revenues) in the third quarter of 2016, as compared to $80.3 million (10.5% of revenues) in the third quarter of 2015. GAAP operating income in the third quarter of 2016 was $78.3 million (10.0% of revenues), as compared to $65.3 million (8.5% of revenues) in the third quarter of 2015.

Financial expenses, net were $7.3 million in the third quarter of 2016, as compared to $6.1 million in the third quarter of 2015.

Taxes on income were $8.9 million (effective tax rate of 12.5%) in the third quarter of 2016, as compared to $10.3 million (effective tax rate of 17.3%) in the third quarter of 2015. The lower effective tax rate in the third quarter of 2016 was mainly a result of prior years adjustments related to finalizing a tax assessment of a subsidiary. The tax rate was also affected by 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 $1.4 million in the third quarter of 2016, as compared to $1.7 million in the third quarter of 2015.

Net income attributable to non-controlling interests was $0.2 million in the third quarter of 2016, as compared to $1.0 million in the third quarter of 2015.

Non-GAAP(*) net income attributable to the Company's shareholders in the third quarter of 2016 was $62.5 million (8.0% of revenues), as compared to $62.3 million (8.1% of revenues) in the third quarter of 2015. GAAP net income in the third quarter of 2016 was $63.4 million (8.1% of revenues), as compared to $49.7 million (6.5% of revenues) in the third quarter of 2015.

Non-GAAP(*) diluted net earnings per share attributable to the Company's shareholders were $1.46 for the third quarter of 2016, as compared to $1.46 for the third quarter of 2015. GAAP diluted earnings per share in the third quarter of 2016 were $1.48, as compared to $1.16 for the third quarter of 2015.

The Companys backlog of orders as of September 30, 2016, totaled 6,836 million, as compared to 6,420 million as of September 30, 2015. Approximately 69% of the current backlog is attributable to orders from outside Israel. Approximately 48% of the current backlog is scheduled to be performed during 2016 and 2017.

Operating cash flow used in the nine months ended September 30, 2016 was $32.4 million, as compared to $255.7 million provided in the nine months ended September 30, 2015. The deficit in our operating cash flow in 2016 was mainly a result of delay in receipts of cash payments from customers. The Company does not see risk in receiving these payments.

_

* see page 3

* 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:

(US Dollars in millions)

Nine months ended September 30, Three months ended September 30, Year Ended

December 31,2016 2015 2016 2015 2015

GAAP gross profit 678.7 643.7 230.4 223.3 897.1

Adjustments:

Amortization of purchased intangible assets 23.5 20.8 7.7 10.2 29.9

Non-GAAP gross profit 702.2 664.5 238.1 233.5 927.0

Percent of revenues 30.4 % 29.9 % 30.5 % 30.5 % 29.8 %

GAAP operating income 211.5 190.6 78.3 65.3 268.6

Adjustments:

Amortization of purchased intangible assets 31.3 34.5 10.1 15.0 48.1

Gain from changes in holdings (17.6 ) (10.5 )

Non-GAAP operating income 225.2 225.1 77.9 80.3 316.7

Percent of revenues 9.8 % 10.1 % 10.0 % 10.5 % 10.2 %

GAAP net income attributable to Elbit Systems shareholders 169.8 139.5 63.4 49.7 202.5

Adjustments:

Amortization of purchased intangible assets 31.3 34.5 10.1 15.0 48.1

Capital gain (3.9 )

Gain from changes in holdings (16.4 ) (9.3 )

Related tax benefits (4.4 ) (5.8 ) (1.7 ) (2.4 ) (8.2 )

Non-GAAP net income attributable to Elbit Systems' shareholders 176.4 168.2 62.5 62.3 242.4

Percent of revenues 7.6 % 7.6 % 8.0 % 8.1 % 7.8 %

GAAP diluted net EPS 3.97 3.27 1.48 1.16 4.74

Adjustments, net 0.16 0.67 (0.02 ) 0.30 0.93

Non-GAAP diluted net EPS 4.13 3.94 1.46 1.46 5.67

Recent Events:

On September 11, 2016, the Company announced that it was awarded a contract valued at over $90 million from an Asia-Pacific country for the supply of SPECTROTM XR advanced electro-optic systems. The contract will be performed over a four-year period.

On October 5, 2016, the Company announced that its subsidiary in the U.S., Elbit Systems of America, LLC, received a $7.3 million contract to supply the Bradley Fighting Vehicle Gunners Hand Station to the United States Army. The Defense Logistics Agency sole-source contract will be performed during a two-year period, with work being completed in Fort Worth, Texas.

On November 6, 2016, the Company announced that its subsidiary, CYBERBIT Ltd., was awarded a contract to supply its CYBERBIT Range platform to the Cyber Security Training Range of Maryland, LLC, the first hands-on cyber-security training center for IT and SCADA security professionals in the U.S.

On November 16, 2016, the Company announced that Samsung SDS Co. Ltd., a subsidiary of the Samsung group and a global leading IT services company, selected Cyberbit Ltd., the company protecting some of the worlds most sensitive organizations against cyber threats, to protect customers against attacks on industrial control systems.

Dividend:

The Board of Directors declared a dividend of $0.4 per share for the third quarter of 2016. The dividends record date is November 27, 2016. The dividend will be paid from income generated as Preferred Income (as defined under Israeli tax laws) on December 5, 2016, net of taxes and levies, at the rate of 20%.

Conference Call:

The Company will be hosting a conference call today, Thursday, November 17, 2016 at 10:00 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

Canada Dial-in Numbers: 1-888-604-5839

UK Dial-in Number: 0-800-917-5108

ISRAEL Dial-in Number: 03-918-0610

INTERNATIONAL Dial-in Number: +972-3-918-0610

at 10:00am Eastern Time; 7:00am Pacific Time; 3:00pm UK Time; 5:00pm 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:

1 888 295 2634 (US) or +972 3 925 5900 (Israel and International).

About Elbit Systems

Elbit Systems Ltd. is an international high technology company engaged in a wide range of defense, homeland security and commercial 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, advanced electro-optics, electro-optic space systems, EW suites, signal intelligence systems, data links and communications systems, radios and cyber-based systems. The Company also focuses on the upgrading of existing platforms, developing new technologies for defense, homeland security and commercial applications and providing a range of support services, including training and simulation systems.

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 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

GK Investor Relations

Tel: 1-646-201-9246

elbitsystems@gkir.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 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, estoppel 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.

(FINANCIAL TABLES TO FOLLOW)

ELBIT SYSTEMS LTD.

CONSOLIDATED BALANCE SHEETS

(In thousands of US Dollars)September 30, December 31,2016 2015Unaudited Audited

Assets

Current assets:

Cash and cash equivalents $ 162,231 $ 299,322

Short-term bank deposits and marketable securities 25,712 33,102

Trade and unbilled receivables, net 1,207,952 941,913

Other receivables and prepaid expenses 180,479 171,359

Inventories, net of customers advances 892,288 837,111

Total current assets 2,468,662 2,282,807

Investments in affiliated companies and partnerships 181,850 129,758

Long-term trade and unbilled receivables 145,772 152,463

Long-term bank deposits and other receivables 22,444 15,765

Deferred income taxes, net 41,612 52,619

Severance pay fund 276,173 270,151 667,851 620,756

Property, plant and equipment, net 481,452 449,759

Goodwill and other intangible assets, net 738,175 770,276

Total assets $ 4,356,140 $ 4,123,598

Liabilities and Equity

Short-term bank credit and loans $ 149,062 $

Current maturities of long-term loans and Series A Notes 232,826 113,359

Trade payables 403,594 347,366

Other payables and accrued expenses 819,114 739,867

Customer advances in excess of costs incurred on contracts in progress 345,477 437,202 1,950,073 1,637,794

Long-term loans, net of current maturities 486 165,971

Series A Notes, net of current maturities 179,006 226,758

Employee benefit liabilities 385,994 381,641

Deferred income taxes and tax liabilities, net 41,914 44,738

Customer advances in excess of costs incurred on contracts in progress 184,079 167,601

Other long-term liabilities 76,876 99,668 868,355 1,086,377

Elbit Systems Ltd.'s equity 1,530,666 1,391,374

Non-controlling interests 7,046 8,053

Total equity 1,537,712 1,399,427

Total liabilities and equity $ 4,356,140 $ 4,123,598

ELBIT SYSTEMS LTD.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands of US Dollars, except for share and per share amount)Nine months ended September 30, Three months ended September 30, Year Ended

December 31,2016 2015 2016 2015 2015Unaudited Unaudited Audited

Revenues $ 2,306,497 $ 2,221,001 $ 780,776 $ 764,775 $ 3,107,581

Cost of revenues 1,627,748 1,577,269 550,403 541,491 2,210,528

Gross profit 678,749 643,732 230,373 223,284 897,053

Operating expenses:

Research and development, net 188,814 174,121 65,578 61,004 243,416

Marketing and selling, net 182,252 172,503 60,926 60,606 239,366

General and administrative, net 113,754 106,508 36,138 36,411 145,693

Other operating income, net (17,575 ) (10,543 )

Total operating expenses 467,245 453,132 152,099 158,021 628,475

Operating income 211,504 190,600 78,274 65,263 268,578

Financial expenses, net (14,495 ) (17,919 ) (7,303 ) (6,054 ) (20,240 )

Other income , net 3,942 69 32 (8 ) 216

Income before income taxes 200,951 172,750 71,003 59,201 248,554

Taxes on income (35,812 ) (30,882 ) (8,856 ) (10,257 ) (46,235 )165,139 141,868 62,147 48,944 202,319

Equity in net earnings of affiliated companies and partnerships 5,855 1,199 1,426 1,690 4,542

Net income $ 170,994 $ 143,067 $ 63,573 $ 50,634 $ 206,861

Less: net income attributable to non-controlling interests (1,197 ) (3,542 ) (195 ) (968 ) (4,352)

Net income attributable to Elbit Systems Ltd.'s shareholders $ 169,797 $ 139,525 $ 63,378 $ 49,666 $ 202,509

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

Basic net earnings per share $ 3.97 $ 3.27 $ 1.48 $ 1.16 $ 4.74

Diluted net earnings per share $ 3.97 $ 3.27 $ 1.48 $ 1.16 $ 4.74

Weighted average number of shares (in thousands)

Shares used in computation of basic earnings per share 42,741 42,703 42,745 42,720 42,711

Shares used in computation of diluted earnings per share 42,751 42,726 42,753 42,740 42,733

ELBIT SYSTEMS LTD.

CONSOLIDATED STATEMENTS OF CASH FLOW

(In thousands of US Dollars)Nine months ended September 30, Year Ended

December 31,2016 2015 2015Unaudited Audited

CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 170,994 $ 143,067 $ 206,861

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

Depreciation and amortization 89,186 90,618 122,354

Stock-based compensation 58 113 139

Amortization of Series A Notes premium and related issuance costs, net (69 ) (69 ) (92 )

Deferred income taxes and reserve, net 15,210 5,739 15,928

Loss (gain) on sale of property, plant and equipment (3,777 ) 1,329 1,742

Loss (gain) on sale and revaluation of investments (16,752 ) (165 ) 33

Equity in net earnings (loss) of affiliated companies and partnerships, net of dividend received (*) (5,855 ) 21,501 19,999

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

Decrease (increase) in short and long-term trade receivables and prepaid expenses (268,833 ) 68,520 31,860

Decrease (Increase) in inventories, net (59,561 ) 3,975 39,801

Increase (decrease) in trade payables, other payables and accrued expenses 120,931 (44,532 ) (74,280 )

Severance, pension and termination indemnities, net 1,332 (3,399 ) (799 )

Increase (decrease) in advances received from customers (75,248 ) (31,010 ) 71,282

Net cash provided by (used in) operating activities (32,384 ) 255,687 434,828

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment and other assets (99,936 ) (69,881 ) (99,175 )

Acquisition of subsidiaries and business operations (141,436 ) (141,436 )

Investments in affiliated companies and other companies (19,277 ) (10,116 ) (23,852 )

Deconsolidation of subsidiary (1,538 )

Proceeds from sale of property, plant and equipment 12,514 9,381 11,563

Investment in long-term deposits (109 ) (127 ) (396 )

Proceeds from sale of long-term deposits 661 324 721

Investment in short-term deposits and marketable securities (24,530 ) (53,649 ) (57,175 )

Proceeds from sale of short-term deposits and marketable securities 32,146 115,402 128,187

Net cash used in investing activities (100,069 ) (150,102 ) (181,563 )

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from exercise of options 488 1,410 1,616

Repayment of long-term loans (48,250 ) (215,502 ) (226,635 )

Proceeds from long-term loans 184,050 196,550

Repayment of Series A Notes (54,602 ) (55,532 ) (55,532 )

Dividends paid (**) (51,336 ) (50,250 ) (69,792 )

Change in short-term bank credit and loans, net 149,062 316 (557 )

Net cash used in financing activities (4,638 ) (135,508 ) (154,350 )

Net increase (decrease) in cash and cash equivalents (137,091 ) (29,923 ) 98,915

Cash and cash equivalents at the beginning of the year 299,322 200,407 200,407

Cash and cash equivalents at the end of the period $ 162,231 $ 170,484 $ 299,322

* Dividend received from affiliated companies and partnerships $ $ 22,700 $ 24,541 ** Dividends paid in 2015 include dividends to minority shareholders in a subsidiary.

ELBIT SYSTEMS LTD.

DISTRIBUTION OF REVENUES

Consolidated Revenues by Areas of Operation:

Nine months ended September 30, Three months ended September 30,2016 2015 2016 2015$ millions % $ millions % $ millions % $ millions %

Airborne systems 900.0 39.0 888.4 40.0 305.3 39.1 286.8 37.5

Land systems 258.0 11.2 437.6 19.7 31.8 4.1 169.9 22.2

C4ISR systems 891.3 38.6 674.4 30.4 363.0 46.5 238.3 31.2

Electro-optic systems 181.2 7.9 150.8 6.8 57.9 7.4 54.9 7.2

Other (mainly non-defense engineering and production services) 76.0 3.3 69.8 3.1 22.8 2.9 14.9 1.9

Total 2,306.5 100.0 2,221.0 100.0 780.8 100.0 764.8 100.0

Consolidated Revenues by Geographical Regions:

Nine months ended September 30, Three months ended September 30,2016 2015 2016 2015$ millions % $ millions % $ millions % $ millions %

Israel 506.7 22.0 438.3 19.7 183.4 23.5 153.7 20.1

North America 596.0 25.8 619.0 27.9 199.7 25.6 212.3 27.8

Europe 422.4 18.3 313.2 14.1 161.5 20.7 113.9 14.9

Asia-Pacific 595.1 25.8 606.8 27.3 176.3 22.6 217.0 28.4

Latin America 151.4 6.6 222.3 10.0 54.7 7.0 60.8 7.9

Other countries 34.9 1.5 21.4 1.0 5.2 0.6 7.1 0.9

Total 2,306.5 100.0 2,221.0 100.0 780.8 100.0 764.8 100.0

This Press Release originates from a third party not associated with IHS Janes. Any comments, opinions and discussions by any third parties are not the views of IHS Janes and as such IHS Janes cannot accept responsibility or liability for the content of this Press Release. IHS Janes grants no rights to reproduce or use this content in any manner whatsoever. For more information on how your company can become part of this service please e-mail PressReleasesService@ihsjanes.com.



(3667 words)

RELEVANT PROFILE LISTINGS

  • Mk 20 Electro-Optical Sensor System (EOSS)

    Type Naval Fire-Control System (FCS). Development In 2005, following a competitive procurement process, Kollmorgen Electro-Optical (acquired by L-3 Communications in February 2012 and now operating as L-3 KEO) was chosen to provide the US Navy (USN) with an EOSS as part of the CG-47

ADVERTISEMENT

Industry Links

IHS Jane's is not responsible for the content within or linking from Industry Links pages.
ADVERTISEMENT
ADVERTISEMENT