Elbit Systems reports fourth quarter and full year 2009 results

Thursday, Mar 11, 2010

Elbit Systems Ltd., the international defense electronics company, today reported its consolidated results for the fourth quarter and full year ended December 31, 2009.

Fourth quarter 2009 results:

Revenues for the fourth quarter of 2009increased by 2.4% to $714.7 million, as compared to $697.9 million in the fourth quarter of 2008.

Gross profit for the fourth quarter of 2009increased by 5.3% to $212.0 million (29.7% of revenues), as compared to gross profit of $201.4 million (28.9% of revenues) in the fourth quarter of 2008.

Net research and development expenses for the fourth quarter of 2009were $61.8 million (8.7% of revenues), as compared to $63.9 million (9.2% of revenues) in the fourth quarter of 2008.

Marketing and selling expenses for the fourth quarter of 2009 were $59.4 million (8.3% of revenues), as compared to $41.9 million (6.0% of revenues) in the fourth quarter of 2008. The increased level of marketing and selling expenses in the quarter reflected increased efforts by the Company in pursuit of a wide range of business opportunities in various international markets.

General and administrative expenses for the fourth quarter of 2009were $32.5 million (4.5% of revenues), as compared to $32.4 million (4.6% of revenues) in the fourth quarter of 2008.

Net financial expenses for the fourth quarter of 2009were $7.4 million, as compared to $3.8 million in the fourth quarter of 2008.

Taxes on income for the fourth quarter of 2009were $0.4 million (effective tax rate of 0.8%), as compared to taxes on income of $26.3 million (effective tax rate of 17.7%) in the fourth quarter of 2008. The change in the effective tax rate was attributable mainly to the mix of the tax rates in the various tax jurisdictions in which the Company's entities generate taxable income, as well as tax adjustments from prior years in some of the Company's subsidiaries.

Equity in net earnings of affiliated companies and partnership for the fourth quarter of 2009decreased to $4.9 million (0.7% of revenues), as compared to $6.4 million (0.9% of revenues) in the fourth quarter of 2008. Net income attributable to non-controlling interests for the fourth quarter of 2009was $3.0 million, as compared to $23.3 million in the fourth quarter of 2008. The decrease in net income attributable to non-controlling interests was mainly a result of the Company's purchase during the second quarter of 2009 of the remaining 49% of Kinetics Ltd.'s shares. Subsequently, Kinetics became a wholly-owned subsidiary of Elbit Systems.

During the fourth quarter of 2008, the Company sold its holdings in Mediguide Inc., a non-core subsidiary in which the Company owned a 41.3% interest on a fully diluted basis, to St. Jude Medical. The Company recorded a net income of $74.4 million in the fourth quarter of 2008 from this sale. In addition, there was a one-time impairment charge of $10.5 million relating to Sandel Avionics, Inc., a U.S. company in which the Company invested $12.4 million in 2007. Thus the aggregate contribution to the 2008 fourth quarter’s results from these one-time effects was an additional $63.9 million to net profit.

Net income attributable to the Company's ordinary shareholders for the fourth quarter of 2009 was $53.7 million (7.5% of revenues), as compared with $105.3 million (15.1% of revenues) in the fourth quarter of 2008. Excluding the gain due to Mediguide's sale and the Sandel write-off mentioned above, net income for the fourth quarter of 2008 was $41.4 million.  

Diluted net earnings per share attributable to the Company's ordinary shareholders for the fourth quarter of 2009 were $1.24, as compared with $2.48 for the fourth quarter of 2008. Excluding the above-mentioned gain due to the Mediguide sale and the Sandel write-off, earnings attributable to the Company's ordinary shareholders was $0.98 per share for the fourth quarter of 2008.

Full year 2009 results:

Revenues for the year ended December 31, 2009increased by 7.4% to $2,832 million, as compared to $2,638 million in the year ended December 31, 2008. The growth in the Company's revenues was driven by an increase in sales in the Airborne Systems, Electro-optics and C4I Systems’ areas of operations.

Gross profit for the year ended December 31, 2009increased by 10.7% to $849.5 million (30.0% of revenues), as compared with gross profit of $767.4 million (29.1% of revenues) in the year ended December 31, 2008. The improved gross profit margin in 2009 was a result mainly of the mix of our programs, the Company’s focus on improving operating efficiencies and the strengthening of the U.S. dollar against the NIS.

Net research and development expenses for the year ended December 31, 2009were $216.8 million (7.7% of revenues), as compared to $185.0 million (7.0% of revenues) in the year ended December 31, 2008. The increased rate of R&D expenses in 2009 was primarily a result of accelerated development programs, related to technology and products in all areas of our operations, as well as increased engineering activities to support marketing efforts worldwide. 

Marketing and selling expenses for the year ended December 31, 2009were $251 million (8.9% of revenues), as compared to $198.3 million (7.5% of revenues) in the year ended December 31, 2008. The increase in 2009 is mainly due to enhanced marketing efforts in existing markets, such as the United States and Brazil, as well as development of markets relatively new to us such as Australia and certain European countries.General and administrative (“G&A”) expenses for the year ended December 31, 2009were $119.3 million 4.2% of revenues), as compared to $134.2 million (5.1% of revenues) in the year ended December 31, 2008. The decrease in the total dollar amount in G&A expenses in 2009 compared to 2008 was due in part to costs incurred in 2008 related to the settlement agreement relating to the lawsuit between IS&S and Kollsman. In general, the Company reduced its G&A expenses due to efficient management of expenses as well as the strengthening of the U.S. dollar against NIS in 2009 compared to 2008.

Net financial expenses for the year ended December 31, 2009were $15.6 million, as compared to $36.8 million in the year ended December 31, 2008. The net finance expenses in 2008 included the impact of the other-than-temporary decline in the value of our auction rate securities in the amount of $18.7 million. Our net financing expenses in 2009 were also positively impacted by lower interest rates in the market.

Taxes on income for the year ended December 31, 2009were $38.1 million (effective tax rate of 15.4%), as compared to taxes on income of $54.4 million (effective tax rate of 17.7%) in the year ended December 31, 2008. The change in the effective tax rate was attributable mainly to the mix of the tax rates in the various tax jurisdictions in which the Company's entities generate taxable income, as well as tax adjustments from prior years’ in some of the Company's subsidiaries.

Equity in net earnings of affiliated companies and partnership for the year ended December 31, 2009increased to $19.3 million (0.7% of revenues), as compared to $14.4 million (0.5% of revenues) in the year ended December 31, 2008. This was a result of both growth in revenues and operational improvements in those entities.

Net income attributable to non-controlling interests for the year ended December 31, 2009was $13.6 million, as compared to $62.4 million in the year ended December 31, 2008. The decrease in net income attributable to non-controlling interests was mainly a result of the Company's purchase of the remaining 49% of Kinetics Ltd.'s shares during the second quarter of 2009, subsequently making Kinetics a wholly-owned subsidiary.

Net income attributable to the Company's ordinary shareholders for the year ended December 31, 2009increased by 5.3% to $214.9 million (7.6% of revenues), as compared with $204.2 million (7.7% of revenues) in the year ended December 31, 2008. Net income in 2008 included a net gain of $63.9 million related to Mediguide and Sandel, as mentioned above.

Diluted net earnings per share attributable to the Company's ordinary shareholders for the year ended December 31, 2009were $5.00, as compared with $4.78 for theyear ended December 31, 2008, an increase of 4.6%. Excluding the above-mentioned gain due to the Mediguide sale and the Sandel write-off, earnings attributable to the Company's ordinary shareholders were $3.28 per share in 2008.

The Company’s backlog of orders for the year ended December 31, 2009totaled $5,044 million, as compared with $5,030 million as of December 31, 2008. Approximately 65% of the current backlog is due to orders from outside Israel. Approximately 72% of the current backlog is scheduled to be performed during 2010 and 2011.

Operating cash flow for the year ended December 31, 2009was $209.7 million, as compared to $209.4 million in the year ended December 31, 2008.

Management Comment:

“2009 caps another good year for Elbit Systems,” commented Mr. Joseph Ackerman, President and CEO of Elbit Systems. “This was a year of building on our internal competencies while acquiring complementary technologies and broadening our offerings to the defense market. We grew our revenues level, while generating continued strong profitability and cash flow, despite a tough year for the world economy.”

Mr. Ackerman continued, “Over the past few years, our R&D efforts and investments were based on our analysis of the direction of the global defense industry. Our read has so far proven us correct and we invested in areas which have become relevant in today’s market environment. In particular, we correctly foresaw the shift of defense budgets into unmanned vehicles and systems as well as the digitization of the battlefield, and have built up significant competitive assets in these areas. We continued to broaden our product range, our operations and customer base are becoming even more global, and we are continually enhancing our foundation as one of the leaders in the defense electronics industry. Looking ahead, we believe that Elbit Systems is well positioned strategically, operationally, and financially for the coming years.”

Dividend:

The Board of Directors declared a dividend of $0.36 per share for the fourth quarter of 2009. The dividend’s record date is March 31, 2010, and the dividend will be paid on April 12, 2010, net of taxes and levies, at the rate of 16.03%. 

Conference Call      

The Company will host a conference call today, Wednesday, March 10, 2010, at 10:00am EST. On the call, management will review and discuss the Company's fourth quarter and year end 2009 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: 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:

1 888 326 9310 (US) or +972 3 925 5925 (Israel and International).

About Elbit Systems

Elbit Systems Ltd. is an international defense electronics company engaged in a wide range of 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 ("UAS"), advanced electro-optics, electro-optic space systems, EW suites, airborne warning systems, ELINT systems, data links and military communications systems and radios. The Company also focuses on the upgrading of existing military platforms, developing new technologies for defense, homeland security and commercial aviation applications and providing a range of support services. For additional information, visit: www.elbitsystems.com.

Source: Elbit