Elbit Systems Ltd. (the „Company”) (NASDAQ: ESLT, TASE: ESLT), the international defense electronics company, reported today its consolidated financial results for the third quarter ended September 30, 2013.
In this release, the Company is providing its usual US-GAAP results as well as additional non-GAAP financial data, which are intended to provide investors with a more comprehensive understanding of the Company’s business results and trends. Unless otherwise stated, all financial data presented is US- GAAP financial data.
Management Comment:
Bezhalel (Butzi) Machlis, President and CEO of Elbit Systems, commented: „The solid third quarter results reflect the year-over-year trend of improvements in revenue and profitability resulting from our ongoing focus on efficiency and on realizing the business-wide synergies of our global organization. In line with our decision to further enhance the effectiveness of our technological capabilities, we are placing increased efforts in R&D as well as in sales and marketing, in order to capitalize on the opportunities we are seeing.”
Machlis added: „We are encouraged by the global markets’ recognition of our innovative solutions, and we believe that, together with our efficiency measures, will maintain future growth.”
Third quarter 2013 results:
Revenues were $730.6 million in the third quarter of 2013, as compared to $677.5 million in the third quarter of 2012. The main contributors to the Company’s revenues were the Airborne and the C4ISR systems areas of operations.
Gross profit was $207.4 million (28.4% of revenues) in the third quarter of 2013, as compared to $191.5 million(28.3% of revenues) in the third quarter of 2012. The non-GAAP gross profit in the third quarter of 2013 was$212.9 million (29.1% of revenues), compared to $196.6 million (29.0% of revenues) in the third quarter of 2012.
Research and development expenses, net were $54.0 million (7.4% of revenues) in the third quarter of 2013, as compared to $50.7 million (7.5% of revenues) in the third quarter of 2012.
Marketing and selling expenses were $61.9 million (8.5% of revenues) in the third quarter of 2013, as compared to $59.0 million (8.7% of revenues) in the third quarter of 2012.
General and administrative expenses, net were $30.5 million (4.2% of revenues) in the third quarter of 2013, as compared to $32.7 million (4.8% of revenues) in the third quarter of 2012.
Operating income was $61.1 million (8.4% of revenues), as compared to $49.0 million (7.2% of revenues) in the third quarter of 2012. The non-GAAP operating income in the third quarter of 2013 was $72.3 million (9.9% of revenues), as compared to $61.0 million (9.0% of revenues) in the third quarter of 2012. The increase in the operating income was mainly due to cost savings and improved efficiency measures taken by the Company.
Financial expenses, net were $6.6 million in the third quarter of 2013, as compared to $5.5 million in the third quarter of 2012.
Taxes on income were $7.5 million (effective tax rate of 13.6%) in the third quarter of 2013, as compared to taxes on income of $4.9 million (effective tax rate of 11.2%) in the third quarter of 2012.
Equity in net earnings of affiliated companies and partnerships was $3.4 million (0.5% of revenues) in the third quarter of 2013, as compared to $1.0 million (0.2% of revenues) in the third quarter of 2012.
Net income attributable to non-controlling interests was $1.6 million in the third quarter of 2013, as compared to a net income of $0.4 million in the third quarter of 2012.
Net income attributable to the Company’s ordinary shareholders was $49.6 million (6.8% of revenues) in the third quarter of 2013, as compared to $39.5 million (5.8% of revenues) in the third quarter of 2012. The non-GAAP net income in the third quarter of 2013 was $55.8 million (7.7% of revenues), as compared to $49.4 million(7.3% of revenues) in the third quarter of 2012.
Diluted net earnings per share attributable to the Company’s ordinary shareholders were $1.17 for thethird quarter of 2013, as compared with $0.95 for the third quarter of 2012. The non-GAAP diluted net earnings per share in the third quarter of 2013 were $1.32, as compared to $1.18 in the third quarter of 2012.
The Company’s backlog of orders as of September 30, 2013 was $5,697 million, as compared with $5,804 million as of June 30, 2013 and $5,683 million as of December 31, 2012. Approximately 68% of the backlog relates to orders outside of Israel. Approximately 49% of the Company’s backlog as of September 30, 2013 is scheduled to be performed during the fourth quarter of 2013 and in 2014.
Operating cash flow was $24.1 million during the first nine months of 2013, as compared to $61.0 million in the first nine months of 2012.
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: | |||||||||
| (U.S. Dollars in millions) | |||||||||
| Nine Months Ended
September 30 |
Three Months Ended
September 30 |
Year Ended
December 31 |
|||||||
| 2013 | 2012 | 2013 | 2012 | 2012 | |||||
| GAAP gross profit | 603.3 | 576.8 | 207.4 | 191.4 | 815.9 | ||||
| Adjustments: | |||||||||
| Amortization of intangible assets | 16.4 | 15.6 | 5.5 | 5.2 | 24.2 | ||||
| Non-GAAP gross profit | 619.7 | 592.4 | 212.9 | 196.6 | 840.1 | ||||
| Percent of revenues | 29.3% | 29.0% | 29.1% | 29.0% | 29.1% | ||||
| GAAP operating income | 181.5 | 132.8 | 61.1 | 49.0 | 203.1 | ||||
| Adjustments: | |||||||||
| Amortization of intangible assets
Legal settlement, net |
34.2
(7.6) |
36.2
– |
11.2
– |
12.0
– |
49.2
– |
||||
| Non-GAAP operating income | 208.1 | 169.0 | 72.3 | 61.0 | 252.3 | ||||
| Percent of revenues | 9.8% | 8.3% | 9.9% | 9.0% | 8.7% | ||||
| GAAP net income attributable to Elbit Systems’ shareholders |
140.6 |
110.7 |
49.6 |
39.5 |
167.9 |
||||
| Adjustments: | |||||||||
| Amortization of intangible assets | 34.2 | 36.2 | 11.2 | 12.0 | 49.2 | ||||
| Legal settlement, net | (7.6) | – | – | – | – | ||||
| Gain from changes in holdings | (0.9) | (2.3) | (0.9) | – | (2.3) | ||||
| Adjustment of loss (gain) from discontinued operations, net |
(0.8) |
0.3 |
– |
0.1 |
0.4 |
||||
| Related tax benefits | (8.1) | (6.5) | (4.1) | (2.2) | (8.9) | ||||
| Non-GAAP net income attributable to Elbit Systems’ shareholders |
157.4 |
138.4 |
55.8 |
49.4 |
206.3 |
||||
| Percent of revenues | 7.4% | 6.8% | 7.7% | 7.3% | 7.1% | ||||
| Non-GAAP diluted net EPS | 3.73 | 3.26 | 1.32 | 1.18 | 4.88 | ||||
Recent Events:
On September 25, 2013 the Company announced that its subsidiary in the U.S., Elbit Systems of America, LLC. was awarded a $44.8 million Indefinite Delivery/Indefinite Quantity contract to be performed over the next five years for the ongoing depot level service and support of the AH-1W Super Cobra helicopter’s Night Targeting System (NTS).
On October 6, 2013 the Company announced that its wholly-owned subsidiary, Elbit Systems Electro-optics – Elop Ltd., was awarded a follow-on contract to supply its advanced Digital CoMPASS® electro-optical payload systems to an Asia-Pacific air force to be installed onboard helicopters. The contract will be performed over a three-year period.
On October 16, 2013 the Company announced that it was awarded a follow-on contract to supply advanced Helmet Mounted Display (HMD) systems for the Republic of Korea Army’s SURION helicopter. The contract will be performed over a four-year period.
Dividend:
The Board of Directors declared a dividend of $0.30 per share for the third quarter of 2013. The dividend’s record date is November 26, 2013, and the dividend will be paid on December 9, 2013. The dividend will be distributed from preferred enterprise profits (as defined in the Israeli tax law) net of taxes and levies of 15%.
Conference Call:
The Company will also be hosting a conference call later today, November 14, 2013 at 9:00am 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 9:00am Eastern Time; 6:00am Pacific Time; 2:00pm UK Time; 4:00pm 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:
1 888 782 4291 (US) or +972 3 925 5921 (Israel and International).
Source / Author: Elbit Systems