Elbit Systems Reports First Quarter of 2017 Results
HAIFA, Israel, May 16, 2017 /PRNewswire/ -- Elbit Systems Ltd. (NASDAQ: ESLT; TASE: ESLT), (the "Company") the international high technology company, reported today its consolidated results for the quarter ended March 31, 2017.
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 the continued growth in our revenue and backlog. In today's geopolitical environment, we are seeing a trend of larger defense spending in many of our target markets, especially in the electronic defense sphere. In the first quarter our investments in marketing and R&D rose somewhat in order to be able to capitalize on the increasing opportunities. We have been able to stay consistently ahead of the curve in anticipating defense and security trends and customer needs, both in terms of our product portfolio and our geographic spread. I believe this positions us well to continue on our long-term growth path."
First quarter 2017 results:
Revenues in the first quarter of 2017 were $749.2 million, as compared to $721.2 million in the first quarter of 2016.
Non-GAAP ((*)) gross profit amounted to $226.8 million (30.3% of revenues) in the first quarter of 2017, as compared to $220.1 million (30.5% of revenues) in the first quarter of 2016. GAAP gross profit in the first quarter of 2017 was $221.2 million (29.5% of revenues), as compared to $212.2 million (29.4% of revenues) in the first quarter of 2016.
Research and development expenses, net were $58.4 million (7.8% of revenues) in the first quarter of 2017, as compared to $56.0 million (7.8% of revenues) in the first quarter of 2016.
_____________
* see page 3
Marketing and selling expenses, net were $65.8 million (8.8% of revenues) in the first quarter of 2017, as compared to $61.0 million (8.5% of revenues) in the first quarter of 2016. The increase in marketing and selling expenses in the first quarter of 2017 was mainly related to the mix of countries and types of marketing activities for projects in which we invest our marketing efforts.
General and administrative expenses, net were $38.7 million (5.2% of revenues) in the first quarter of 2017, as compared to $38.9 million (5.4% of revenues) in the first quarter of 2016.
Non-GAAP((*)) operating income was $65.5 million (8.7% of revenues) in the first quarter of 2017, as compared to $66.9 million (9.3% of revenues) in the first quarter of 2016. GAAP operating income in the first quarter of 2017 was $58.2 million (7.8% of revenues), as compared to $63.3 million (8.8% of revenues) in the first quarter of 2016. The GAAP operating income in the first quarter of 2016 included a gain of $7.0 million related to the revaluation of an investment in an Israeli subsidiary that was deconsolidated in the quarter due to a third party investment.
Financial expenses, net were $8.6 million in the first quarter of 2017, as compared to $1.7 million in the first quarter of 2016. The lower financial expenses in the first quarter of 2016 were mainly a result of gain from various currencies exchange rate differences.
Taxes on income were $5.3 million (effective tax rate of 10.6%) in the first quarter of 2017, as compared to $12.7 million (effective tax rate of 19.4%) in the first quarter of 2016. The effective tax rate is affected by the mix of the tax rates in the various jurisdictions in which the Company's entities generate taxable income and the decrease of tax rates in Israel.
Equity in net earnings of affiliated companies and partnerships was $1.6 million (0.2% of revenues) in the first quarter of 2017, as compared to $0 in the first quarter of 2016.
Net income attributable to non-controlling interests was $0.3 million in the first quarter of 2017, as compared to $0.5 million in the first quarter of 2016.
Non-GAAP((*)) net income attributable to the Company's shareholders in the first quarter of 2017 was $51.7 million (6.9% of revenues), as compared to $51.2 million (7.1% of revenues) in the first quarter of 2016. GAAP net income in the first quarter of 2017 was $45.6 million (6.1% of revenues), as compared to $52.3 million (7.3% of revenues) in the first quarter of 2016. GAAP net income in the first quarter of 2016 included a gain of $7 million related to the revaluation of an investment and a capital gain of $3.9 million related to the sale of real estate.
Non-GAAP((*)) diluted net earnings per share attributable to the Company's shareholders were $1.21 for the first quarter of 2017, as compared to $1.20 for the first quarter of 2016. GAAP diluted earnings per share in the first quarter of 2017 were $1.07, as compared to $1.22 for the first quarter of 2016, which included earnings per share of $0.26 related to the gain from revaluation of an investment and sale of real estate.
The Company's backlog of orders for the quarter ended March 31, 2017 totaled $7,067 million, as compared to $6,775 million as of March 31, 2016. Approximately 70% of the current backlog is attributable to orders from outside Israel. Approximately 64% of the current backlog is scheduled to be performed during 2017 and 2018.
Operating cash flow used in the quarter ended March 31, 2017 was $51.3 million, as compared to $24.5 million provided in the quarter ended March 31, 2016.
___________
* 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)
Three Months Ended Year Ended
March 31, December 31,
2017 2016 2016
---- ---- ----
GAAP gross profit $221.2 $212.2 $959.6
Adjustments:
------------
Amortization of
purchased
intangible assets 5.6 7.9 31.2
Non-GAAP gross
profit $226.8 $220.1 $990.8
====== ====== ======
Percent of revenues 30.3% 30.5% 30.4%
GAAP operating
income $58.2 $63.3 $299.0
Adjustments:
------------
Amortization of
purchased
intangible assets 7.3 10.6 41.2
Gain from changes in
holdings - (7.0) (17.6)
Non-GAAP operating
income $65.5 $66.9 $322.6
===== ===== ======
Percent of revenues 8.7% 9.3% 9.9%
GAAP net income
attributable to
Elbit Systems'
shareholders $45.6 $52.3 $236.9
Adjustments:
------------
Amortization of
purchased
intangible assets 7.3 10.6 41.2
Capital Gain - (3.9) (3.9)
Impairment of
investments - - 2.5
Gain from changes in
holdings - (7.0) (16.4)
Related tax benefits (1.2) (0.8) (6.1)
---- ----
Non-GAAP net
income attributable
to Elbit Systems'
shareholders $51.7 $51.2 $254.2
===== ===== ======
Percent of revenues 6.9% 7.1% 7.8%
GAAP diluted net EPS $1.07 $1.22 $5.54
Adjustments, net 0.14 (0.02) 0.41
Non-GAAP diluted
net EPS $1.21 $1.20 $5.95
===== ===== =====
Recent Events:
On March 22, 2017, the Company announced that it was awarded an approximately $100 million contract by the Israeli Ministry of Defense (IMOD) for the supply of advanced radio systems. According to the contract, the Company will manufacture and provide hundreds of radio systems over the course of five years. In addition, the Company is expected to receive an additional order to provide repair and maintenance services for 15 years. The Company will expand its manufacturing and maintenance site in Arad to include 100 employees, making it a center of excellence for manufacturing and maintenance of advanced radio systems for the Israel Defense Forces.
On March 29, 2017, the Company announced that it was awarded an approximately $82 million contract to provide an Asia-Pacific country with a comprehensive electro-optic airborne solution, Condor 2, for use in intelligence, surveillance, target acquisition and reconnaissance (ISTAR) missions. The contract, which is a follow-on order from the same customer, will be performed over a four-year period by Elbit Systems' ISTAR Division. This Elbit Systems program is being performed in cooperation with ELTA Systems Ltd., who is supplying additional content to the same customer.
On April 2, 2017, the Company announced that its subsidiary, Elbit Systems of America LLC., was awarded an Indefinite Delivery/Indefinite Quantity contract of approximately $50 million by the U.S. Navy to provide the Helmet Display and Tracker System with the Continuously Computed Impact Point (CCIP) algorithm for the MH-60S. The work will be performed in Fort Worth Texas, and completed by June 2021. An initial order of approximately $14.2 million was received.
On May 8, 2017, the Company announced that it was awarded a contract to provide the IMOD with dozens of satellite-on-the-move systems. The contract is in an amount that is not material to the Company and will be performed over a two-year period.
On May 10, 2017, the Company announced that it was awarded a contract from the Brazilian Marine Corps for the supply of advanced C4ISR, electronic warfare, radio and communication systems. The contract, in an amount of approximately $40 million, will be performed over a two-year period.
Dividend:
The Board of Directors declared a dividend of $0.44 per share for the first quarter of 2017. The dividend's record date is May 26, 2017. The dividend will be paid from income generated as Preferred Income (as defined under Israel tax laws), on June 6, 2017, net of taxes and levies, at the rate of 20%.
Conference Call:
The Company will be hosting a conference call today, Tuesday, May 16, 2017 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
Canada Dial-in Numbers: +1-866-485-2399
UK Dial-in Number: 0-00-917-5108
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 and Canada) or +972 3 925 5904 (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 airborne, 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 and radios. The Company also focuses on the upgrading of existing 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 regionsThis 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)
March 31, December 31,
2017 2016
---- ----
Unaudited Audited
--------- -------
Assets
------
Current assets:
Cash and
cash
equivalents $136,245 $222,810
Short-term
bank
deposits
and
marketable
securities 29,966 22,252
Trade and
unbilled
receivables,
net 1,276,807 1,232,591
Other
receivables
and prepaid
expenses 163,228 102,979
Inventories,
net of
customers
advances 891,603 840,266
Total
current
assets 2,497,849 2,420,898
--------- ---------
Investments
in
affiliated
companies
and
partnerships 180,781 180,962
Long-term
trade and
unbilled
receivables 183,967 189,688
Long-term
bank
deposits
and other
receivables 32,648 15,917
Deferred
income
taxes, net 78,990 79,639
Severance
pay fund 278,390 264,253
754,776 730,459
------- -------
Property,
plant and
equipment,
net 485,451 474,109
------- -------
Goodwill and
other
intangible
assets, net 722,809 726,398
------- -------
Total assets $4,460,885 $4,351,864
========== ==========
Liabilities and Equity
----------------------
Short-term
bank credit
and loans $39,764 $5,027
Current
maturities
of long-
term loans
and Series
A Notes 210,592 228,956
Trade
payables 473,847 514,106
Other
payables
and accrued
expenses 845,945 828,716
Customer
advances in
excess of
costs
incurred on
contracts
in progress 384,063 347,393
1,954,211 1,924,198
--------- ---------
Long-term
loans, net
of current
maturities 503 475
Series A
Notes, net
of current
maturities 181,693 171,066
Employee
benefit
liabilities 392,694 376,115
Deferred
income
taxes and
tax
liabilities,
net 60,900 60,098
Customer
advances in
excess of
costs
incurred on
contracts
in progress 181,814 174,529
Other long-
term
liabilities 79,052 78,142
896,656 860,425
------- -------
Elbit
Systems
Ltd.'s
equity 1,602,217 1,559,840
Non-
controlling
interests 7,801 7,401
Total equity 1,610,018 1,567,241
--------- ---------
Total
liabilities
and equity $4,460,885 $4,351,864
========== ==========
ELBIT SYSTEMS LTD.
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(In thousands of US Dollars, except for share and per share amount)
Three Months Ended Year Ended
December 31,
March 31,
2017 2016 2016
---- ---- ----
Unaudited Audited
Revenues $749,188 $721,211 $3,260,219
Cost of revenues 528,037 508,971 2,300,636
------- ------- ---------
Gross profit 221,151 212,240 959,583
------- ------- -------
Operating expenses:
-------------------
Research and
development, net 58,437 56,047 255,792
Marketing and
selling, net 65,778 60,997 271,037
General and
administrative, net 38,723 38,944 151,353
Other operating
income, net - (7,032) (17,575)
---
Total operating
expenses 162,938 148,956 660,607
Operating income 58,213 63,284 298,976
------ ------ -------
Financial expenses,
net (8,645) (1,721) (23,742)
Other income, net 32 3,896 3,967
Income before income
taxes 49,600 65,459 279,201
------ ------ -------
Taxes on income (5,251) (12,670) (45,617)
44,349 52,789 233,584
------ ------ -------
Equity in net
earnings of
affiliated
companies and
partnerships 1,595 20 5,224
----- --- -----
Net income $45,944 $52,809 $238,808
Less: net income
attributable to
non-controlling
interests (304) (488) (1,899)
---- ---- ------
Net income
attributable to
Elbit Systems
Ltd.'s shareholders $45,640 $52,321 $236,909
======= ======= ========
Earnings per share attributable to Elbit Systems Ltd.'s shareholders:
---------------------------------------------------------------------
Basic net earnings
per share $1.07 $1.22 $5.54
===== ===== =====
Diluted net earnings
per share $1.07 $1.22 $5.54
===== ===== =====
Weighted average number of shares (in
thousands)
-------------------------------------
Shares used in
computation of
basic earnings per
share 42,748 42,734 42,742
====== ====== ======
Shares used in
computation of
diluted earnings
per share 42,751 42,748 42,752
====== ====== ======
ELBIT SYSTEMS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOW
------------------------------------
(In thousands of US dollars)
Three Months Ended Year Ended
March 31, December 31,
2017 2016 2016
---- ---- ----
Unaudited Audited
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $45,944 $52,809 $238,808
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and
amortization 27,716 29,241 122,888
Write-off of impairment
and discontinued
operations, net - - 86
Stock-based compensation 11 25 70
Amortization of Series A
Notes premium and
related issuance costs,
net (23) (23) (92)
Deferred income taxes and
reserve, net 894 6,241 2,683
Gain on sale of property,
plant and equipment (1,859) (3,788) (3,347)
Loss (gain) on sale and
revaluation of
investments 20 (7,019) (16,734)
Equity in net earnings of
affiliated companies and
partnerships, net of
dividend received (*) (800) (20) (1,728)
Changes in operating assets and
liabilities, net of amounts acquired:
Increase in short and
long-term trade
receivables and prepaid
expenses (95,280) (91,043) (297,439)
Increase in inventories,
net (51,336) (24,762) (8,040)
Increase (decrease) in
trade payables, other
payables and accrued
expenses (23,999) 112,344 253,413
Severance, pension and
termination indemnities,
net 3,476 3,445 315
Increase (decrease) in
advances received from
customers 43,954 (52,989) (82,881)
Net cash provided by
(used in) operating
activities (51,282) 24,461 208,002
------- ------ -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property,
plant and equipment and
other assets (31,554) (21,671) (124,221)
Advance payment on
acquisition account (6,586) - -
Acquisition of
subsidiaries and
business operations (2,579) - -
Investments in affiliated
companies and other
companies (173) (14,490) (19,277)
Deconsolidation of
subsidiary - (1,538) (1,538)
Proceeds from sale of
property, plant and
equipment 2,725 8,134 15,745
Investment in long-term
deposits (446) (23) (417)
Proceeds from sale of
long-term deposits 133 88 894
Investment in short-term
deposits and marketable
securities (22,268) (19,982) (25,622)
Proceeds from sale of
short-term deposits and
marketable securities 14,542 14,760 36,619
------ ------
Net cash used in
investing activities (46,206) (34,722) (117,817)
------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of
options 55 419 505
Repayment of long-term
loans (23,869) (23,869) (48,250)
Repayment of Series A
Notes - - (55,532)
Dividends paid - - (68,447)
Change in short-term
bank credit and loans,
net 34,737 3 5,027
------ ---
Net cash provided by
(used in) financing
activities 10,923 (23,447) (166,697)
------ ------- --------
Net decrease in cash and
cash equivalents (86,565) (33,708) (76,512)
Cash and cash equivalents
at the beginning of the
year 222,810 299,322 299,322
------- -------
Cash and cash equivalents
at the end of the period $136,245 $265,614 $222,810
======== ======== ========
* Dividend received from
affiliated companies and
partnerships $795 $ - $3,496
==== === === ======
ELBIT SYSTEMS LTD.
DISTRIBUTION OF REVENUES
Consolidated Revenues by Areas of Operation:
--------------------------------------------
Three Months Ended Year Ended
March 31, December 31,
------------
2017 2016 2016
$ millions % $ millions % $ millions %
---------- --- ---------- --- ---------- ---
Airborne
systems 290.3 38.7 283.9 39.4 1,242.3 38.1
C4ISR systems 279.0 37.2 221.4 30.7 1,220.9 37.4
Land systems 79.0 10.5 138.5 19.2 408.0 12.5
Electro-optic
systems 76.4 10.2 53.4 7.4 276.0 8.5
Other (mainly
non-defense
engineering
and production
services) 24.5 3.4 24.0 3.3 113.0 3.5
---- --- ---- --- ----- ---
Total 749.2 100.0 721.2 100.0 3,260.2 100.0
===== ===== ===== ===== ======= =====
Consolidated Revenues by Geographical Regions:
----------------------------------------------
Three Months Ended Year Ended
March 31, December 31,
------------
2017 2016 2016
$ millions % $ millions % $ millions %
---------- --- ---------- --- ---------- ---
Israel 167.4 22.3 143.1 19.8 709.5 21.8
North
America 192.9 25.8 178.1 24.7 825.7 25.3
Europe 161.8 21.6 114.3 15.8 640.8 19.7
Asia-
Pacific 166.2 22.2 212.7 29.5 801.6 24.6
Latin
America 34.4 4.6 63.1 8.8 212.8 6.5
Other
countries 26.5 3.5 9.9 1.4 69.8 2.1
---- --- --- ---- ---
Total 749.2 100.0 721.2 100.0 3,260.2 100.0
===== ===== ===== ===== ======= =====
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
---
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SOURCE Elbit Systems Ltd.
