Elbit Systems Reports First Quarter Of 2014 Results Backlog of orders at record $6.1 billion; Revenues at $683 million; Net income of $48 million; EPS of $1.13 PR Newswire HAIFA, Israel, May 13, 2014 HAIFA, Israel, May 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 March 31, 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: "I am pleased to report a positive start to 2014, highlighted by solid growth in our backlog, surpassing the $6 billion milestone for the first time, and strong cash flow. The results of the quarter underscore the strength of our business base. In particular, the growth in backlog, including recent contract awards in the Asia-Pacific and Latin America regions, is an indication of stability and has the potential to support revenue growth over the coming years." First quarter 2014 results: Revenues in the first quarter of 2014 were $682.6 million, as compared to $680.2 million in the first quarter of 2013. Gross profit amounted to $193.2 million (28.3% of revenues) in the first quarter of 2014, as compared to $192.7 million (28.3% of revenues) in the first quarter of 2013. The non-GAAP gross profit in the first quarter of 2014 was $198.6 million (29.1% of revenues), as compared to $198.3 million (29.2% of revenues) in the first quarter of 2013. Research and development expenses, net were $48.9 million (7.2% of revenues) in the first quarter of 2014, as compared to $51.0 million (7.5% of revenues) in the first quarter of 2013. The lower net expenses in the quarter is a result primarily of higher research and development income from the Office of the Chief Scientist and the Israeli Ministry of Defense. Marketing and selling expenses were $55.0 million (8.1% of revenues) in the first quarter of 2014, as compared to $55.8 million (8.2% of revenues) in the first quarter of 2013. General and administrative expenses were $35.3 million (5.2% of revenues) in the first quarter of 2014, as compared to $32.2 million (4.7% of revenues) in the first quarter of 2013. The increase in general and administrative expenses in the first quarter of 2014 was mainly a result of higher expenses related to the Company's phantom option retention plan. Other income, net in the first quarter of 2014 amounted to $6.0 million. The amount reflects a net gain related to the revaluation of the previously held investment in Pearls of Wisdom Ltd.'s shares at the acquisition date due to its accounting treatment as a business combination achieved in stages. As a result of this acquisition the Company increased its holdings in Pearls of Wisdom from 49% to 90%. Operating income was $59.9 million (8.8% of revenues) in the first quarter of 2014, as compared to operating income of $53.7 million (7.9% of revenues) in the first quarter of 2013. The non-GAAP operating income in the first quarter of 2014 was $65.0 million (9.5% of revenues), as compared to $65.3 million (9.6% of revenues) in the first quarter of 2013. Financial expenses, net were $4.7 million in the first quarter of 2014, as compared to $7.9 million in the first quarter of 2013. The higher level of financial expenses in the first quarter of 2013 was mainly related to exchange rate differences. Taxes on income were $6.2 million (effective tax rate of 11.2%) in the first quarter of 2014, as compared to $4.6 million (effective tax rate of 10.1%) in the first quarter of 2013. Equity in net earnings of affiliated companies and partnerships was $1.1 million (0.2% of revenues) in the first quarter of 2014, as compared to $1.7 million (0.2% of revenues) in the first quarter of 2013. Net income attributable to non-controlling interests was $2.0 million in the first quarter of 2014, as compared to $1.1 million in the first quarter of 2013. Net income attributable to the Company's shareholders in the first quarter of 2014 was $48.2 million (7.1% of revenues), as compared to $41.4 million (6.1% of revenues) in the first quarter of 2013. The non-GAAP net income in the first quarter of 2014 was $51.9 million (7.6% of revenues), as compared to $51.1 million (7.5% of revenues) in the first quarter of 2013. Diluted net earnings per share attributable to the Company's shareholders were $1.13 for the first quarter of 2014, as compared with diluted net earnings per share of $0.98 for the first quarter of 2013. The non-GAAP diluted earnings per share in the first quarter of 2014 were $1.22, same as for the first quarter of 2013. The Company's backlog of orders for the quarter ended March31, 2014 totaled $6,064 million, as compared to $5,777 million as of March31, 2013. Approximately 72% of the current backlog is attributable to orders from outside Israel. Approximately 66% of the current backlog is scheduled to be performed during 2014 and 2015. Operating cash flow for the quarter ended March31, 2014 was $80.8 million, as compared to $13.8 million in the quarter ended March31, 2013. 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) Three Months Ended Year Ended March 31, December 31, 2014 2013 2013 GAAP gross profit 193.2 192.7 824.8 Adjustments: Amortization of purchased intangible assets 5.4 5.6 22.2 Impairment of long-lived assets — — 0.9 Non-GAAP gross profit 198.6 198.3 847.9 Percent of revenues 29.1 % 29.2 % 29.0 % GAAP operating income 59.9 53.7 239.4 Adjustments: Amortization of purchased intangible assets 11.1 11.6 45.9 Impairment of long-lived assets — — 0.9 Legal settlements — — (7.6) Gain from changes in holdings (6.0) — — Non-GAAP operating income 65.0 65.3 278.6 Percent of revenues 9.5 % 9.6 % 9.5 % GAAP net income attributable to Elbit 48.2 41.4 183.4 Systems' shareholders Adjustments: Amortization of purchased intangible assets 11.1 11.6 45.9 Impairment of long-lived assets — — 0.9 Legal settlements — — (7.6) Gain from changes in holdings (6.0) — (0.9) Adjustment of loss (gain) from discontinued — 0.2 (0.8) operations, net Related tax benefits (1.4) (2.1) (10.1) Non-GAAP net income attributable to Elbit 51.9 51.1 210.8 Systems' shareholders Percent of revenues 7.6 % 7.5 % 7.2 % Non-GAAP diluted net EPS 1.22 1.22 4.99 Recent Events: On March 20, 2014, the Company announced that it was awarded a contract by a customer in the Asia-Pacific region to perform a tank upgrade program. The contract, valued at approximately $290 million, will be performed over a three-year period. On March 26, 2014, the Company announced that it was awarded a contract by the Brazilian Air Force ("FAB") for the supply of a Hermes™ 900 Unmanned Aircraft System ("UAS"). The Hermes 900, which will be equipped with a new and advanced intelligence gathering system considered as a breakthrough operational solution, will be operated by FAB in combined missions with the Hermes 450 fleet, already in operational use. Both UAS will carry safety and security missions in the 2014 FIFA World Cup Games. The contract is in an amount that is not material to Elbit Systems, and the Hermes 900 will be supplied within two months. On March 30, 2014, the Company announced that it was awarded an approximately $163 million contract from a European country for the supply of defense electronic systems for ground applications. The contract will be performed over a three-year period. On April 8, 2014, the Company announced that it was awarded a contract in the Latin American region, in an amount of approximately $100 million, for the supply of a homeland security solution. On April 23, 2014, the Company announced that it was awarded an approximately $123 million contract from a European country for the supply of defense electronic systems for airborne applications. The contract will be performed over a four-year period. Dividend: The Board of Directors declared a dividend of $0.32 per share for the first quarter of 2014. The dividend's record date is May 27, 2014. The dividend will be paid from income generated as Preferred Income, on June 9, 2014, net of taxes and levies, at the rate of 20%. Conference Call: The Company will be hosting a conference call today, Tuesday, May 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: 1 888 326 9310 (US) or +972 3 925 5900 (Israel and International). About Elbit Systems Elbit Systems Ltd. is an international defense electronics company engaged in a wide range of programs throughout the world. The Company, which includes Elbit Systems and its subsidiaries, operates in the areas of aerospace, land and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance ("C4ISR"), unmanned aircraft systems ("UAS"), advanced electro-optics, electro-optic space systems, EW suites, 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.comor follow us on Twitter. Attachments: Consolidated balance sheet Consolidated statements of income Consolidated statements of cash flow Consolidated revenue distribution by areas of operation and by geographical regions Company Contact: IR Contact: Joseph Gaspar, Executive VP & CFO Tel: +972-4-8316663 Ehud Helft email@example.com Kenny Green Dalia Rosen, VP, Head of Corporate Communications GK Investor Relations Tel: +972-4-8316784 Tel: 1-646-201-9246 firstname.lastname@example.org email@example.com Elbit Systems Ltd. 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. ELBIT SYSTEMS LTD. CONSOLIDATED BALANCE SHEETS (In thousands of US Dollars) March 31, December 31, 2014 2013 Unaudited Audited Assets Current assets: Cash and cash equivalents $ 189,531 $ 193,737 Short-term bank deposits and marketable securities 53,080 71,625 Trade and unbilled receivables, net 800,094 823,245 Other receivables and prepaid expenses 162,017 151,367 Inventories, net of customers advances 788,668 756,032 Total current assets 1,993,390 1,996,006 Investments in affiliated companies and 130,513 131,362 partnerships Long-term trade and unbilled receivables 213,428 242,576 Long-term bank deposits and other receivables 56,818 52,983 Deferred income taxes, net 35,747 35,695 Severance pay fund 314,097 323,388 750,603 786,004 Property, plant and equipment, net 473,346 481,408 Goodwill and other intangible assets, net 673,364 669,750 Total assets $ 3,890,703 $ 3,933,168 Liabilities and Equity Current maturities of long-term loans and Series A $ 63,753 $ 63,111 Notes Trade payables 319,290 301,480 Other payables and accrued expenses 721,930 720,544 Customer advances in excess of costs incurred on 355,333 349,998 contracts in progress 1,460,306 1,435,133 Long-term loans, net of current maturities 130,190 224,209 Series A Notes, net of current maturities 381,638 377,812 Employee benefit liabilities 398,319 407,855 Deferred income taxes and tax liabilities, net 73,500 73,502 Customer advances in excess of costs incurred on 155,012 164,854 contracts in progress Other long-term liabilities 60,450 55,634 1,199,109 1,303,866 Elbit Systems Ltd.'s equity 1,210,410 1,177,012 Non-controlling interests 20,878 17,157 Total equity 1,231,288 1,194,169 Total liabilities and equity $ 3,890,703 $ 3,933,168 ELBIT SYSTEMS LTD. CONSOLIDATED STATEMENTS OF INCOME (In thousands of US Dollars, except for share and per share amount) Three Months Ended Year Ended March 31, December 31, 2014 2013 2013 Unaudited Audited Revenues $ 682,613 $ 680,188 $ 2,925,151 Cost of revenues 489,415 487,479 2,100,304 Gross profit 193,198 192,709 824,847 Operating expenses: Research and development, net 48,942 51,049 220,482 Marketing and selling 54,978 55,754 235,466 General and administrative 35,314 32,167 129,507 Other income, net (5,951) — — 133,283 138,970 585,455 Operating income 59,915 53,739 239,392 Financial expenses, net (4,662) (7,922) (37,310) Other income (loss), net 34 (9) 937 Income before income taxes 55,287 45,808 203,019 Taxes on income (6,186) (4,604) (25,313) 49,101 41,204 177,706 Equity in net earnings of affiliated 1,097 1,692 13,032 companies and partnerships Income from continuing operations 50,198 42,896 190,738 Income (loss) from discontinued — (341) 681 operations, net Net income 50,198 42,555 191,419 Less: net income attributable to (2,045) (1,148) (8,002) non-controlling interests Net income attributable to Elbit Systems $ 48,153 $ 41,407 $ 183,417 Ltd.'s shareholders Earnings per share attributable to Elbit Systems Ltd.'s shareholders: Basic net earnings per share Continuing operations $ 1.13 $ 0.99 $ 4.34 Discontinued operations — 0.00 0.01 Total $ 1.13 $ 0.99 $ 4.35 Diluted net earnings per share Continuing operations $ 1.13 $ 0.98 $ 4.33 Discontinued operations — 0.00 0.01 Total $ 1.13 $ 0.98 $ 4.34 Weighted average number of shares used in computation of basic earnings per 42,614 41,906 42,139 share (in thousands) Weighted average number of shares used in computation of diluted earnings per 42,639 42,057 42,295 share (in thousands) Amounts attributable to Elbit Systems Ltd.'s shareholders Income from continuing operations, net $ 48,153 $ 41,610 $ 182,598 of income tax Discontinued operations, net of income — (203) 819 tax Net income attributable to Elbit Systems $ 48,153 $ 41,407 $ 183,417 Ltd.'s shareholders ELBIT SYSTEMS LTD. CONSOLIDATED STATEMENTS OF CASH FLOW (In thousands of US Dollars) Three Months Ended Year Ended March 31, December 31, 2014 2013 2013 Unaudited Audited CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 50,198 $ 42,555 $ 191,419 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 32,015 32,831 129,348 Write-off of impairment and discontinued — 341 254 operations, net Stock-based compensation 92 190 440 Amortization of Series A Notes premium (23) (23) (92) and related issuance costs, net Deferred income taxes and reserve, net 847 (1,042) 221 Gain on sale of property, plant and (735) (121) (147) equipment Loss (gain) on sale of investment (5,811) 179 873 Equity in net loss (earnings) of affiliated companies and partnerships, 403 (1,602) 468 net of dividend received (*) Changes in operating assets and liabilities, net of amounts acquired: Decrease (increase) in short and long-term trade receivables, and prepaid 42,782 (70,008) (108,337) expenses Increase in inventories, net (32,617) (20,746) (4,785) Increase in trade payables, other 916 13,145 55,935 payables and accrued expenses Severance, pension and termination (86) 1,232 (3,595) indemnities, net Increase (decrease) in advances received (7,207) 16,873 (95,027) from customers Net cash provided by operating activities 80,774 13,804 166,975 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (13,916) (15,611) (63,019) and other assets Acquisition of subsidiaries and business 787 — — operations Investments in affiliated companies and (3,312) (3,298) (6,222) other companies Proceeds from sale of property, plant and 3,095 1,596 3,755 equipment Proceeds from sale of investments — — 3,550 Investment in long-term deposits (288) (373) (2,076) Proceeds from sale of long-term deposits 224 86 795 Investment in short-term deposits and (7,328) (10,712) (50,975) marketable securities Proceeds from sale of short-term deposits 28,068 1,779 42,899 and marketable securities Net cash provided by (used in) investing 7,330 (26,533) (71,293) activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from exercise of options 2,690 1,817 18,364 Repayment of long-term loans (95,000) (21,879) (230,532) Proceeds from long-term loans — 10,050 242,247 Repayment of Series A Notes — — (55,535) Dividends paid — — (75,549) Change in short-term bank credit and — (132) (181) loans, net Net cash used in financing activities (92,310) (10,144) (101,186) NET DECREASE IN CASH AND CASH EQUIVALENTS (4,206) (22,873) (5,504) Cash and cash equivalents at the 193,737 199,241 199,241 beginning of the year Cash and cash equivalents at the end of $ 189,531 $ 176,368 $ 193,737 the period * Dividend received from affiliated $ 1,500 $ 90 $ 13,500 companies and partnerships ELBIT SYSTEMS LTD. DISTRIBUTION OF REVENUES Consolidated Revenues by Areas of Operation: Three Months Ended Year Ended March 31, December 31, 2014 2013 2013 $ millions % $ millions % $ millions % Airborne systems 290.0 42.5 283.2 41.6 1,133.1 38.8 Land systems 58.3 8.5 56.4 8.3 309.3 10.6 C4ISR systems 250.1 36.6 240.2 35.3 1,071.4 36.6 Electro-optic 65.6 9.6 81.0 11.9 313.9 10.7 systems Other (mainly non-defense engineering and 18.6 2.8 19.4 2.9 97.5 3.3 production services) Total 682.6 100.0 680.2 100.0 2,925.2 100.0 Consolidated Revenues by Geographical Regions: Three Months Ended Year Ended March 31, December 31, 2014 2013 2013 $ millions % $ millions % $ millions % Israel 163.0 23.9 138.6 20.4 705.7 24.1 North America 194.8 28.5 219.1 32.2 860.7 29.4 Europe 107.7 15.8 120.1 17.7 546.7 18.7 Latin America 69.3 10.2 65.5 9.6 283.0 9.7 Asia-Pacific 117.4 17.2 129.8 19.1 448.1 15.3 Other countries 30.4 4.4 7.1 1.0 81.0 2.8 Total 682.6 100.0 680.2 100.0 2,925.2 100.0 SOURCE Elbit Systems Ltd. Website: http://www.elbitsystems.com
Elbit Systems Reports First Quarter Of 2014 Results
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