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Elbit Systems Ltd.
Advanced Technology Center
P.O.B 539, Haifa 31053
Israel

Tel: 972-4-8316663
Fax: 972-4-8316944
 

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November 17, 2016 at 4:40 AM EST

Elbit Systems Reports Third Quarter of 2016 Results

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, Nov 17, 2016 /PRNewswire/ --

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 Company's 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 Gunner's 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 world's 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 dividend's 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


2015


Unaudited


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


2015


Unaudited


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


2015


Unaudited


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


 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/elbit-systems-reports-third-quarter-of-2016-results-300364992.html

SOURCE Elbit Systems Ltd

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