Elbit Systems Reports Revenues of $750M in Q2


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Elbit Systems Ltd., the international high technology company, reported today its consolidated results for the quarter ended June 30, 2015.

Management Comment:

Bezhalel (Butzi) Machlis, President and CEO of Elbit Systems, commented: "We are pleased that the growth in our backlog over the last two years has led to our current positive revenue growth and that the past quarter saw growth both in revenue and in backlog. In addition, we see a continuation of solid performance in geographic regions with strong emerging defense requirements, that have been a strategic focus for us in recent years, particularly Asia-Pacific and Latin America, that together accounted for 39% of our revenues in the quarter.

We also continue to focus on adapting ourselves to market trends in order to meet future customer needs. Just after the close of the quarter, we completed the acquisition of the Cyber & Intelligence division of Nice Systems, and our recently established subsidiary Cyberbit is in the process of integrating the acquired operations into our organization. The acquisition is an important part of our strategy to enhance our cyber capabilities, a sector in which we see strong growth potential over the coming years."

Second quarter 2015 results:

Revenues in the second quarter of 2015 were $749.6 million, as compared to $702.6 million in the second quarter of 2014, a growth of 6.7% mainly due to growth in revenues of Land Systems to Asia Pacific.

Gross profit amounted to $219.3 million (29.2% of revenues) in the second quarter of 2015, as compared to $199.4 million (28.4% of revenues) in the second quarter of 2014. The non-GAAP gross profit in the second quarter of 2015 was $224.7 million (30.0% of revenues), as compared to $204.8 million (29.1% of revenues) in the second quarter of 2014. The increase in the gross profit rate was mainly due to the mix of programs sold in the quarter.

Research and development expenses, net were $57.5 million (7.7% of revenues) in the second quarter of 2015, as compared to $52.2 million (7.4% of revenues) in the second quarter of 2014.

Marketing and selling expenses, net were $60.6 million (8.1% of revenues) in the second quarter of 2015, as compared to $50.3 million (7.2% of revenues) in the second quarter of 2014. The increase in marketing and selling expenses in the second quarter of 2015 was mainly a result of marketing efforts in the U.S. and Asia-Pacific.

General and administrative expenses, net were $35.7 million (4.8% of revenues) in the second quarter of 2015, as compared to $34.3 million (4.9% of revenues) in the second quarter of 2014.

Operating income was $65.5 million (8.7% of revenues) in the second quarter of 2015, as compared to operating income of $62.6 million (8.9% of revenues) in the second quarter of 2014.  The non-GAAP operating income in the second quarter of 2015 was $75.4 million (10.1% of revenues), as compared to $73.1 million (10.4% of revenues) in the second quarter of 2014.

Financial expenses, net were $6.2 million in the second quarter of 2015, as compared to $8.3 million in the second quarter of 2014.

Taxes on income were $12.0 million (effective tax rate of 20.2%) in the second quarter of 2015, as compared to $9.9 million (effective tax rate of 18.1%) in the second quarter of 2014.  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 (losses) of affiliated companies and partnerships was a net loss of $0.4 million in the second quarter of 2015, as compared to net earnings of $1.7 million in the second quarter of 2014.

Net income attributable to non-controlling interests was $1.7 million in the second quarter of  2015, as compared to $2.3 million in the second quarter of 2014.

Net income attributable to the Company's shareholders in the second quarter of  2015 was $45.3 million (6.0% of revenues), as compared to $43.9 million (6.2% of revenues) in the second quarter of 2014. The non-GAAP net income in the second quarter of 2015 was $53.5 million (7.1% of revenues), as compared to $52.6 million (7.5% of revenues) in the second quarter of 2014.

Diluted net earnings per share attributable to the Company's shareholders were $1.06 for the second quarter of 2015, as compared with diluted net earnings per share of $1.03 for the second quarter of 2014. The non-GAAP diluted earnings per share in the second quarter of 2015 were $1.25 as compared to $1.23 for the second quarter of 2014.

The Company's backlog of orders for the quarter ended June 30, 2015, totaled $6,305 million as compared to $6,174 million as of June 30, 2014. Approximately 69% of the current backlog is attributable to orders from outside Israel. Approximately 60% of the current backlog is scheduled to be performed during the second half of 2015 and 2016.

Operating cash flow for the six months ended June 30, 2015, was $116.5 million, as compared to $15.8 million in the six months ended June 30, 2014.

Recent Events:

On May 21, 2015, the Company announced that it signed an agreement to acquire NICE Systems Ltd.'s (NICE) Cyber and Intelligence division for a total amount of up to $157.9 million, subject to certain customary adjustments. Out of the total amount, $117.9 million will be paid in cash at the time of the closing, expected to take place in the third quarter of 2015, subject to certain closing conditions. An additional amount of up to $40 million will be paid as earn-out, based upon the future business performance of the acquired division's activities.

On July 1, 2015, the Company announced, further to its announcement of May 21, 2015 that it completed the acquisition of the NICE's Cyber and Intelligence division.

On July 2, 2015, the Company announced that its subsidiary, Elbit Systems Land and C4I Ltd. was awarded a contract from the Dutch Ministry of Defense, to supply advanced systems for the infantry soldiers in the Benelux countries - Netherlands, Belgium and Luxemburg. The contract, valued at approximately $150 million, will be performed over a five-year period. Elbit Systems will serve as the program prime contractor, and Thales Netherlands B.V will be its main sub-contractor. Other local companies will take part in the project, providing support and immediate response to the customer's needs.

On August 3, 2015, the Company announced that it recently was awarded two contracts for its MUSIC™ family of directed infra-red countermeasures airborne multi-spectral self-protection systems, representing expansion of the customer base in this strategic business area for Elbit Systems. The first contract is a follow-on contract from an Asian country, to supply its mini MUSIC systems for the customer's Blackhawk helicopter fleet. This is the second order awarded by this customer this year. An additional order, received from a NATO member European country, calls for the supply of C-MUSIC systems. Both contracts will be performed during 2015 and are in amounts that are not material to Elbit Systems.

On August 5, 2015, the Company announced that it was awarded an approximately $45 million contract from a European country for the supply of military communications systems. The contract will be performed over a two-year period.

Dividend:

The Board of Directors declared a dividend of $0.37 per share for the second quarter of 2015. The dividend's record date is August 21, 2015. The dividend will be paid from income generated as Preferred Income (as defined under Israeli tax laws), on September 7, 2015, net of taxes and levies, at the rate of 20%. 

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

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