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Elbit Systems Reports Third Quarter 2018 Results
[November 20, 2018]

Elbit Systems Reports Third Quarter 2018 Results


HAIFA, Israel, Nov. 20, 2018 /PRNewswire/ -- Elbit Systems Ltd. (NASDAQ: ESLT) and (TASE: ESLT), (the "Company") the international high technology company, reported today its consolidated results for the quarter ended September 30, 2018.

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 reported a solid level of revenue in the quarter, growing by 12% over last year to almost $900 million. At the same time, we were able to show growth in backlog. This demonstrates that our business remains strong, in line with our strategy of consistently expanding our addressable markets through internal development of defense related products and solutions, as well as acquisitions of synergistic businesses."

Third quarter 2018 results:

Revenues in the third quarter of 2018 were $895.2 million, as compared to $800.7 million in the third quarter of 2017.

Non-GAAP (*) gross profit amounted to $260.7 million (29.1% of revenues) in the third quarter of 2018, as compared to $256.3 million (32.0% of revenues) in the third quarter of 2017. GAAP gross profit in the third quarter of 2018 was $255.9 million (28.6% of revenues), as compared to $251.0 million (31.3% of revenues) in the third quarter of 2017.

Research and development expenses, net were $69.6 million (7.8% of revenues) in the third quarter of 2018, as compared to $67.1 million (8.4% of revenues) in the third quarter of 2017.

Marketing and selling expenses, net were $69.4 million (7.8% of revenues) in the third quarter of 2018, as compared to $66.9 million (8.4% of revenues) in the third quarter of 2017.

General and administrative expenses, net were $37.8 million (4.2% of revenues) in the third quarter of 2018, as compared to $34.8 million (4.3% of revenues) in the third quarter of 2017.

Non-GAAP(*) operating income was $85.7 million (9.6% of revenues) in the third quarter of 2018, as compared to $89.2 million (11.1% of revenues) in the third quarter of 2017. GAAP operating income in the third quarter of 2018 was $79.1 million (8.8% of revenues), as compared to $82.2 million (10.3% of revenues) in the third quarter of 2017.

Financial expenses, net were $8.1 million in the third quarter of 2018, as compared to $9.3 million in the third quarter of 2017.

Taxes on income were $8.9 million (effective tax rate of 12.6%) in the third quarter of 2018, as compared to $14.6 million (effective tax rate of 20.0%) in the third quarter of 2017. 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.

Equity in net earnings of affiliated companies and partnerships was $2.7 million (0.3% of revenues) in the third quarter of 2018, as compared to $3.5 million (0.4% of revenues) in the third quarter of 2017.

Net income attributable to non-controlling interests was $0.7 million in the third quarter of 2018, as compared to $0.3 million in the third quarter of 2017.

Non-GAAP(*) net income attributable to the Company's shareholders in the third quarter of 2018 was $69.8 million (7.8% of revenues), as compared to $67.3 million (8.4% of revenues) in the third quarter of 2017. GAAP net income attributable to the Company's shareholders in the third quarter of 2018 was $64.1 million (7.2% of revenues), as compared to $61.5 million (7.7% of revenues) in the third quarter of 2017.

Non-GAAP(*) diluted net earnings per share attributable to the Company's shareholders were $1.63 for the third quarter of 2018, as compared to $1.57 for the third quarter of 2017. GAAP diluted earnings per share in the third quarter of 2018 were $1.50, as compared to $1.44 for the third quarter of 2017.

The Company's backlog of orders for the quarter ended September 30, 2018 totaled $8,108 million as compared to $7,641 million as of September 30, 2017. Approximately 72% of the current backlog is attributable to orders from outside Israel. Approximately 45% of the current backlog is scheduled to be performed during 2018 and 2019.

Operating cash flow used in the nine months ended September 30, 2018 was $20.3 million, as compared to $140.0 million used in the nine months ended September 30, 2017.

Accounting policies update:

The Company adopted the new revenue recognition accounting standard ASC 606, effective January 1, 2018, using the modified retrospective approach. Financial results for reporting periods during 2018 are presented in compliance with ASC 606. Historical financial results for the reporting periods prior to 2018 are presented in conformity with amounts previously disclosed under the prior revenue recognition standard, ASC 605. The adoption of ASC 606 primarily impacts the Company's contracts where revenue is recognized using the percentage of completion units of delivery method, which under ASC 606 can be recognized over time because control is transfered continuously to the customer over the performance period for contracts recognized over time. As a result, the adoption of ASC 606 influenced part of the revenue growth in 2018.

The cumulative effects of the transition to ASC 606 on January 1, 2018, resulted in the following main adjustments: a $0.1 million increase in retained earnings, a decrease in inventories of approximately $81.9 million, an increase in contract assets (unbilled receivables) of approximately $78.8 million and a net decrease in customer advances and other contract liabilities and deferred tax assets in the aggregate amount of approximately $3.2 million.

According to ASC 606, customer advances are no longer deducted from inventories. Accordingly, on January 1, 2018, the open balances of inventories net and customer advances were grossed up in the amount of approximately $87 million.

* 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,


2018


2017


2018


2017


2017











GAAP gross profit

$

741.3


$

714.5


$

255.9


$

251.0


$

997.9

Adjustments:










Amortization of purchased intangible assets

14.0


16.9


4.8


5.3


22.2

Non-GAAP gross profit

$

755.3


$

731.4


$

260.7


$

256.3


$

1,020.1

Percent of revenues

29.0%


30.9%


29.1%


32.0%


30.2%





















GAAP operating income

$

254.2


$

215.7


$

79.1


$

82.2


$

319.3

Adjustments:










Amortization of purchased intangible assets

19.4


21.7


6.6


7.0


28.6

Gain from changes in holdings

(45.4)





Non-GAAP operating income

$

228.2


$

237.4


$

85.7


$

89.2


$

347.9

Percent of revenues

8.8%


10.0%


9.6%


11.1%


10.3%





















GAAP net income attributable to Elbit Systems' shareholders

$

205.6


$

169.7


$

64.1


$

61.5


$

239.1

Adjustments:










Amortization of purchased  intangible assets

19.4


21.7


6.6


7.0


28.6

Fair value adjustment of investment

5.1





Gain from changes in holdings

(45.4)





Related tax benefits

(2.5)


(3.6)


(0.9)


(1.2)


6.2

Non-GAAP  net income attributable to Elbit Systems' shareholders

$

182.2


$

187.8


$

69.8


$

67.3


$

273.9

Percent of revenues

7.0%


7.9%


7.8%


8.4%


8.1%





















GAAP diluted net EPS

$

4.81


$

3.97


$

1.50


$

1.44


$

5.59

Adjustments, net

(0.55)


0.42


0.13


0.13


0.81

Non-GAAP diluted net EPS

$

4.26


$

4.39


$

1.63


$

1.57


$

6.41



 

Recent Events:

On September 20, 2018 the Company announced that it was awarded an approximately $173 million contract to provide Naval Remote Controlled Weapon Stations to the Navy and Coast Guard of an Asia-Pacific country. The contract will be performed over a five-year period.

On October 2, 2018, the Company announced that its subsidiary, Elbit Systems UK Ltd. was awarded an initial contract of approximately £10 million (approximately $13 million) and a potential maximum value of approximately £40 million, from the UK Ministry of Defence to provide the MORPHEUS Battlefield Management Application. The initial contract will be performed over a three-year period.

On November 14, 2018, the Company announced that it was awarded an approximately $167 million contract from an Asia-Pacific country to supply a comprehensive aerial Intelligence, Surveillance, Target Acquisition and Reconnaissance (ISTAR) solution. The contract will be performed over a 20-month period.

Dividend:

The Board of Directors declared a dividend of $0.44 per share for the third quarter of 2018. The dividend's record date is December 7, 2018. The dividend will be paid from income generated as Preferred Income (as defined under Israel tax laws), on December 24, 2018, net of taxes and levies, at the rate of 20%.

Conference Call:

The Company will be hosting a conference call on Tuesday, November 20, 2018 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: 1-888-604-5839

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

ISRAEL Dial-in Number: 03-918-0610

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

at: 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:

1-888-782-4291 (US and Canada) or +972-3-925-5927 (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.

 

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,


2018


2017


Unaudited


Audited

Assets




Current assets:




Cash and cash equivalents

$

152,229


$

156,074

Short-term bank deposits and marketable securities

3,030


16,497

Trade and unbilled receivables, net

1,505,599


1,406,563

Other receivables and prepaid expenses

139,405


128,946

Inventories, net

1,069,005


902,954

Total current assets

2,869,268


2,611,034





Investments in affiliated companies and partnerships

217,882


172,338

Long-term trade and unbilled receivables

305,594


295,396

Long-term bank deposits and other receivables

28,883


38,082

Deferred income taxes, net

43,717


51,358

Severance pay fund

286,099


298,590


882,175


855,764





Property, plant and equipment, net

514,431


495,716

Goodwill and other intangible assets, net

806,846


752,403

Total assets

$

5,072,720


$

4,714,917









Liabilities and Equity




Short-term bank credit and loans

$

111,530


$

133,750

Current maturities of long-term loans and Series A Notes

63,114


67,556

Trade payables

524,375


633,689

Other payables and accrued expenses

790,692


835,394

Customer advances

572,200


418,560


2,061,911


2,088,949





Long-term loans, net of current maturities

459,800


119,514

Series A Notes, net of current maturities

59,522


124,865

Employee benefit liabilities

391,274


413,117

Deferred income taxes and tax liabilities, net

66,956


68,159

Customer advances

116,269


133,649

Other long-term liabilities

43,218


48,692


1,137,039


907,996





Elbit Systems Ltd.'s equity

1,863,445


1,708,310

Non-controlling interests

10,325


9,662

Total equity

1,873,770


1,717,972

Total liabilities and equity

$

5,072,720


$

4,714,917


 

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,


2018


2017


2018


2017


2017


Unaudited


Unaudited


Audited

Revenues

$

2,605,844


$

2,368,221


$

895,150


$

800,734


$

3,377,825

Cost of revenues

1,864,515


1,653,762


639,231


549,753


2,379,905

Gross profit

741,329


714,459


255,919


250,981


997,920











Operating expenses:










Research and development, net

214,366


192,598


69,626


67,092


265,060

Marketing and selling, net

207,559


199,003


69,442


66,934


280,246

General and administrative, net

110,582


107,160


37,797


34,791


133,314

Other operating income, net

(45,367)





Total operating expenses

487,140


498,761


176,865


168,817


678,620

Operating income

254,189


215,698


79,054


82,164


319,300











Financial expenses, net

(29,142)


(24,810)


(8,145)


(9,333)


(34,502)

Other (expenses) income, net

(5,063)


37


25


5


48

Income before income taxes

219,984


190,925


70,934


72,836


284,846











Taxes on income

(22,542)


(30,151)


(8,904)


(14,579)


(55,585)


197,442


160,774


62,030


58,257


229,261











Equity in net earnings of affiliated companies and partnerships

9,140


9,918


2,695


3,500


11,361

Net income

$

206,582


$

170,692


$

64,725


$

61,757


$

240,622

Less: net income attributable to non-controlling interests

(969)


(996)


(670)


(280)


(1,513)

Net income attributable to Elbit Systems Ltd.'s shareholders

$

205,613


$

169,696


$

64,055


$

61,477


$

239,109






























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





Basic net earnings per share

$

4.81


$

3.97


$

1.50


$

1.44


$

5.59

Diluted net earnings per share

$

4.81


$

3.97


$

1.50


$

1.44


$

5.59





















Weighted average number of shares (in thousands)









Shares used in computation of basic earnings per share

42,753


42,749


42,753


42,751


42,750

Shares used in computation of diluted earnings per share

42,755


42,753


42,755


42,753


42,753


 

ELBIT SYSTEMS LTD.

 

CONSOLIDATED STATEMENTS OF CASH FLOW

(In thousands of US dollars)

 


Nine Months Ended
 September 30,


Year Ended
December 31,


2018


2017


2017


Unaudited


Audited

CASH FLOWS FROM OPERATING ACTIVITIES






Net income

$

206,582


$

170,692


$

240,622

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






Depreciation and amortization

84,974


84,884


114,017

Adjustment to fair value investment

5,114



Stock-based compensation

347


13


13

Amortization of Series A Notes premium and related issuance costs, net

(69)


(69)


(92)

Deferred income taxes and reserve, net

6,601


6,920


28,774

Gain on sale of property, plant and equipment

(30)


(2,101)


(2,440)

Loss (gain) on sale and revaluation of investments

(42,868)


635


1,358

Equity in net earnings of affiliated companies and partnerships, net of dividend received (*)

(221)


(6,560)


(1,987)

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






Increase in short and long-term trade receivables and prepaid expenses

(38,460)


(272,320)


(315,236)

Increase in inventories, net

(131,635)


(82,674)


(59,699)

Increase (decrease) in trade payables, other payables and accrued expenses

(157,024)


(57,985)


63,273

Severance, pension and termination indemnities, net

(7,357)


(554)


2,003

Increase in advances received from customers

53,790


19,134


30,287

Net cash provided by (used in) operating activities

(20,256)


(139,985)


100,893

CASH FLOWS FROM INVESTING ACTIVITIES






Purchase of property, plant and equipment and other assets

(66,664)


(78,136)


(107,880)

Acquisition of subsidiaries and business operations

(127,569)


(25,440)


(25,440)

Investments in affiliated companies and other companies

(7,181)


(1,078)


(4,964)

Deconsolidation of subsidiary

(2,873)



Proceeds from sale of property, plant and equipment

1,380


4,932


6,270

Proceeds from sale of investments


12,067


12,067

Investment in long-term deposits

(120)


(717)


(1,396)

Proceeds from sale of long-term deposits

81


175


176

Investment in short-term deposits and marketable securities

(5,132)


(23,746)


(40,893)

Proceeds from sale of short-term deposits and marketable securities

18,314


28,139


46,491

Net cash used in investing activities

(189,764)


(83,804)


(115,569)

CASH FLOWS FROM FINANCING ACTIVITIES






Proceeds from exercise of options

48


119


119

Repayment of long-term loans

(39)


(166,879)


(167,425)

Proceeds from long-term loans

340,397


118,615


118,623

Repayment of Series A Notes

(55,532)


(55,532)


(55,532)

Dividends paid

(56,479)


(56,475)


(75,300)

Change in short-term bank credit and loans, net

(22,220)


285,186


127,455

Net cash (used in) provided by financing activities

206,175


125,034


(52,060)







Net decrease in cash and cash equivalents

(3,845)


(98,755)


(66,736)

Cash and cash equivalents at the beginning of the year

156,074


222,810


222,810

Cash and cash equivalents at the end of the period

$

152,229


$

124,055


$

156,074







* Dividend received from affiliated companies and partnerships

$

8,919


$

3,358


$

9,374


 

ELBIT SYSTEMS LTD.

 

DISTRIBUTION OF REVENUES

 

Consolidated Revenues by Areas of Operation:



Nine Months Ended September 30,


Three Months Ended September 30,


2018


2017


2018


2017


$ millions


%


$ millions


%


$ millions


%


$ millions


%

Airborne systems

1,033.4


39.7


897.2


37.9


355.1


39.7


304.3


38.0

C4ISR systems

855.1


32.8


814.1


34.4


292.0


32.6


268.8


33.6

Land systems

409.7


15.7


337.2


14.2


153.2


17.1


126.5


15.8

Electro-optic systems

231.5


8.9


252.4


10.7


76.7


8.6


82.8


10.3

Other (mainly non-defense engineering and production services)

76.1


2.9


67.3


2.8


18.1


2.0


18.3


2.3

Total

2,605.8


100.0


2,368.2


100.0


895.1


100.0


800.7


100.0

 

Consolidated Revenues by Geographical Regions:


Nine Months Ended September 30,


Three Months Ended September 30,


2018


2017


2018


2017


$ millions


%


$ millions


%


$ millions


%


$ millions


%

Israel

512.8


19.7


509.3


21.5


160.8


18.0


174.3


21.8

North America

691.3


26.5


591.4


25.0


230.2


25.7


189.6


23.7

Europe

487.2


18.7


528.5


22.3


171.5


19.2


163.6


20.4

Asia-Pacific

588.3


22.6


510.5


21.6


224.3


25.1


181.6


22.7

Latin America

151.4


5.8


149.3


6.3


60.4


6.7


56.3


7.0

Other countries

174.8


6.7


79.2


3.3


47.9


5.3


35.3


4.4

Total

2,605.8


100.0


2,368.2


100.0


895.1


100.0


800.7


100.0

 

Company Contact:

 

Joseph Gaspar, Executive VP & CFO

Tel:  +972-772946663

j.gaspar@elbitsystems.com 

David Vaaknin, VP, Head of Corporate Communications

Tel: +972-772946691

david.vaaknin@elbitsystems.com

Elbit Systems Ltd.

IR Contact:

 

Ehud Helft

Kenny Green

GK Investor Relations

Tel: 1-646-201-9246

elbitsystems@gkir.com

 

 

 

 

Cision View original content:http://www.prnewswire.com/news-releases/elbit-systems-reports-third-quarter-2018-results-300753553.html

SOURCE Elbit Systems Ltd.


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