UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934
For the Month of November 2006
_________________
Commission File Number:
000-28998
ELBIT SYSTEMS LTD.
(Translation of Registrant’s Name into English)
Advanced Technology Center, P.O.B. 539, Haifa 31053, Israel
(Address of Principal Corporate Offices)
Indicate by check mark whether the
registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
 |
Form 20-F |
 |
Form 40-F |
Indicate by check mark if the
registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule
101(b)(1):
Note: Regulation S-T Rule
101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to
provide an attached annual report to security holders.
Indicate by check mark if the
registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule
101(b)(7):
Note: Regulation S-T Rule
101(b)(7) only permits the submission in paper of a Form 6-K submitted to furnish a
report or other document that the registrant foreign private issuer must furnish and make
public under the laws of the jurisdiction in which the registrant is incorporated,
domiciled or legally organized (the registrant’s “home country”), or under
the rules of the home country exchange on which the registrant’s securities are
traded, as long as the report or other document is not a press release, is not required
to be and has not been distributed to the registrant’s security holders, and, if
discussing a material event, has already been the subject of a Form 6-K submission or
other Commission filing on EDGAR.
Indicate by check mark whether the
registrant by furnishing the information contained in this form is also thereby
furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934:
| |
Yes |
|
No |
If “Yes” is marked,
indicate below the file number assigned to the registrant in connection with Rule
12g3-2(b): 82-______________
Attached
hereto as Exhibit 1 and incorporated herein by reference is the Registrant’s press
release dated November 14, 2006.
Attached
hereto as Exhibit 2 and incorporated herein by reference is the Registrant’s
Management Report with respect to the results of operations of the Registrant for the
quarter ended September 30, 2006.
Attached
hereto as Exhibit 3 and incorporated herein by reference is the Registrant’s
consolidated unaudited financial statements for the quarter ended September 30, 2006.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| |
ELBIT SYSTEMS LTD.
(Registrant)
By: /s/ Ilan Pacholder
Name: Ilan Pacholder
Title: Corporate Secretary
|
Dated: November 15, 2006
EXHIBIT INDEX
Exhibit 1
ELBIT SYSTEMS REPORTS
THIRD QUARTER 2006 RESULTS
Record Revenues, Net
Profit and Backlog of Orders
Revenues Increased by
37.7% YoY to a Record $376.7 Million
Backlog of Orders
Continues to Increase and Reached a Record $3.78 Billion
Net Profit Increased
by 28.7% YoY to $18.7 Million and EPS Increased to $0.45
Haifa, Israel, November 14, 2006
– Elbit Systems Ltd. (the “Company”) (NASDAQ: ESLT), the international
defense company, today reported its consolidated results for the third quarter ended
September 30, 2006.
The Company’s backlog of
orders as of September 30, 2006 increased to $3,775 million, as compared to $
3,347 million at the end of 2005. Approximately 73% of the backlog relates to orders
outside of Israel. Approximately 46% of the Company’s backlog as of September 30,
2006 is scheduled to be performed over the last quarter of 2006 and during 2007.
Consolidated revenues for the
third quarter of 2006 increased by 37.7% to $376.7 million from $273.6 million in the
third quarter of 2005.
Gross profit for the third
quarter of 2006 increased by 30.5% to $96.1 million (25.5% of revenues), as
compared with gross profit of $73.7 million (26.9% of revenues) in the third quarter of
2005. The gross profit margin in the third quarter of 2006 was affected mainly by the
lower gross profit margin generated by Elisra, which has been consolidated in the
Company’s financial reports commencing December 2005.
Consolidated net income for the
third quarter of 2006 increased by 28.7% to $18.7 million (5% of revenues), as
compared with $14.6 million (5.3% of revenues) in the third quarter of 2005. Diluted
earnings per share for the third quarter of 2006 were $0.45, as compared with $0.35
for the third quarter of 2005. The Company’s net income in the third quarter
of 2005 included $1.2 million in one-time In-Process R&D expense related to
acquisitions made during that quarter.
Cash flow — During the
first nine months of 2006 the Company generated an operating cash flow of $150.9 million.
The President and CEO of Elbit
Systems, Joseph Ackerman, commented: “Our financial results continue to set new
records in revenues, net profit and backlog. We are pleased with the results reported
today, which demonstrate the success of our long-term focus on developing cutting edge
technologies and close working relationships with global defense industry leaders. This
strategy enabled us recently to win significant projects in the important areas of
Homeland Security and civil aviation, while our subsidiaries, including Elbit Systems of
America, Elop, Elisra and Cyclone have also generated important new contracts. We remain
committed to improving our profitability and increasing efficiency where needed within the
Group.”
The Board of Directors declared a
dividend of $0.15 per share for the third quarter of 2006. The dividend’s
record date is November 28, 2006, and the dividend will be paid on December 11, 2006, net
of taxes and levies, at the rate of 18.85%.
Conference Call
The Company will also be hosting a
conference today, Tuesday, November 14, 2006 at 10.30am EST. On the call, management will
review and discuss its third quarter 2006 results and will be available to answer
questions.
To participate, please call one of
the following teleconferencing numbers. Please begin placing your calls at least 10
minutes before the conference call commences. If you are unable to connect using the
toll-free numbers, please try the international dial-in number.
US Dial-in Numbers: 1
888 281 1167
UK Dial-in Number: 0
800 917 9141
ISRAEL Dial-in Number:
03 918 0610
INTERNATIONAL Dial-in
Number: +972 3 918 0610
At:
10:30am Eastern Time
7:30am Pacific Time
3:30pm London Time
5:30pm Israel Time
This call will 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 end of the call, investors will be able to dial a replay number to listen to the call.
The dial-in number is either: 1 877 332 1104 (US); 0 800 169 8104 (UK) or +972 3 925 5925
(Israel and International).
About Elbit Systems Ltd.
Elbit Systems Ltd. is an
international defense electronics company engaged in a wide range of defense-related
programs throughout the world. The Elbit Systems Group, which includes the company and its
subsidiaries, operates in the areas of aerospace, land and naval systems, command,
control, communications, computers, intelligence, surveillance and reconnaissance
(“C4ISR”), advanced electro-optic and space technologies, EW suites, airborne
warning systems, ELINT systems, data links and military communications systems and
equipment. The Group also focuses on the upgrading of existing military platforms and
developing new technologies for defense and homeland security applications.
| Company Contact: |
IR Contact: |
|
|
| Ilan Pacholder |
Ehud Helft / Kenny Green |
| V.P. Finance & Capital Markets |
| and Corporate Secretary |
| Elbit Systems Ltd |
GK International |
| Tel: +972-4 831-6632 |
Tel: 1-866-704-6710 |
| Fax: +972-4 831-6659 |
Fax: +972-3-607-4711 |
| E-mail: pacholder@elbit.co.il |
E-mail: Kenny@gk-biz.com |
| |
E-mail: Ehud@gk-biz.com |
STATEMENTS IN THIS PRESS
RELEASE WHICH ARE NOT HISTORICAL DATA ARE FORWARD-LOOKING STATEMENTS WHICH INVOLVE KNOWN
AND UNKNOWN RISKS, UNCERTAINTIES OR OTHER FACTORS NOT UNDER THE COMPANY’S
CONTROL, WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO
BE MATERIALLY DIFFERENT FROM THE RESULTS, PERFORMANCE OR OTHER EXPECTATIONS IMPLIED BY
THESE FORWARD-LOOKING STATEMENTS. THESE FACTORS INCLUDE, BUT ARE NOT LIMITED TO, THOSE
DETAILED IN THE COMPANY’S PERIODIC FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION.
(FINANCIAL TABLES TO
FOLLOW)
ELBIT SYSTEMS LTD.
CONSOLIDATED BALANCE SHEETS
(In thousand of US
Dollars)
|
September 30
2006
|
|
December 31
2005
|
|
|
Unaudited |
|
Audited |
|
| Assets |
|
|
|
|
|
|
|
|
| | | |
| Current Assets: | | |
| Cash and short term deposits | | |
| 69,172 |
|
| 94,629 |
|
| Trade receivable and others | | |
| 418,287 |
|
| 416,067 |
|
| Inventories, net of advances | | |
| 359,787 |
|
| 328,428 |
|
|
| |
| |
| Total current assets | | |
| 847,246 |
|
| 839,124 |
|
| | | |
| Affiliated Companies & other Investments | | |
| 236,418 |
|
| 201,339 |
|
| Long-term receivables & others | | |
| 172,607 |
|
| 154,650 |
|
| Fixed Assets, net | | |
| 288,832 |
|
| 284,997 |
|
| Other assets, net | | |
| 131,160 |
|
| 137,364 |
|
|
| |
| |
| | | |
| 1,676,263 |
|
| 1,617,474 |
|
|
| |
| |
| Liabilities and Shareholder's Equity | | |
| | | |
| Current liabilities | | |
| 720,120 |
|
| 612,168 |
|
| Long-term liabilities | | |
| 466,239 |
|
| 541,622 |
|
| Minority Interest | | |
| 11,495 |
|
| 12,907 |
|
| Shareholder's equity | | |
| 478,409 |
|
| 450,777 |
|
|
| |
| |
| | | |
| 1,676,263 |
|
| 1,617,474 |
|
|
| |
| |
ELBIT SYSTEMS LTD.
CONSOLIDATED STATEMENTS
OF INCOME
(In thousand of US
Dollars, except for per share amounts)
|
Nine Months Ended
September 30 |
|
Three Months Ended
September 30 |
|
Year Ended
December 31 |
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
2005
|
|
|
Unaudited |
|
Unaudited |
|
(Audited) |
|
| | | |
| Revenues |
|
|
|
1,055,855 |
|
|
748,116 |
|
|
376,670 |
|
|
273,646 |
|
|
1,069,876 |
|
| Cost of revenues | | |
| 782,605 |
|
| 546,790 |
|
| 280,538 |
|
| 199,969 |
|
| 786,616 |
|
| Restructurirng expenses | | |
| - |
|
| - |
|
| - |
|
| - |
|
| 3,488 |
|
|
| |
| |
| |
| |
| |
| Gross Profit | | |
| 273,250 |
|
| 201,326 |
|
| 96,132 |
|
| 73,677 |
|
| 279,772 |
|
|
| |
| |
| |
| |
| |
| Research and development, net | | |
| 64,363 |
|
| 53,443 |
|
| 24,574 |
|
| 20,482 |
|
| 71,903 |
|
| Marketing and selling | | |
| 81,027 |
|
| 54,695 |
|
| 27,397 |
|
| 20,309 |
|
| 78,648 |
|
| General and administrative | | |
| 57,454 |
|
| 38,262 |
|
| 19,727 |
|
| 12,838 |
|
| 54,417 |
|
| IPR&D write-off | | |
| - |
|
| - |
|
| - |
|
| - |
|
| 7,490 |
|
|
| |
| |
| |
| |
| |
| Total operating expenses | | |
| 202,844 |
|
| 146,400 |
|
| 71,698 |
|
| 53,629 |
|
| 212,458 |
|
|
| |
| |
| |
| |
| |
| Operating income | | |
| 70,406 |
|
| 54,926 |
|
| 24,434 |
|
| 20,048 |
|
| 67,314 |
|
| Financial expenses, net | | |
| (15,363 |
) |
| (6,273 |
) |
| (4,445 |
) |
| (3,076 |
) |
| (11,472 |
) |
| Other income, net | | |
| 391 |
|
| (192 |
) |
| 231 |
|
| (6 |
) |
| (5,326 |
) |
|
| |
| |
| |
| |
| |
| Income before income taxes | | |
| 55,434 |
|
| 48,461 |
|
| 20,220 |
|
| 16,966 |
|
| 50,516 |
|
| Taxes on income | | |
| 16,645 |
|
| 12,289 |
|
| 7,279 |
|
| 4,246 |
|
| 16,335 |
|
|
| |
| |
| |
| |
| |
| | | |
| 38,789 |
|
| 36,172 |
|
| 12,941 |
|
| 12,720 |
|
| 34,181 |
|
| Equity in net earnings (losses) of affiliated | | |
| companies and partnership | | |
| 8,189 |
|
| 1,339 |
|
| 4,575 |
|
| 1,465 |
|
| (1,636 |
) |
| Minority rights | | |
| 1,304 |
|
| 652 |
|
| 1,227 |
|
| 379 |
|
| (58 |
) |
|
| |
| |
| |
| |
| |
| Net income | | |
| 48,282 |
|
| 38,163 |
|
| 18,743 |
|
| 14,564 |
|
| 32,487 |
|
|
| |
| |
| |
| |
| |
| Earnings per share | | |
| Basic net earnings per share | | |
$ | 1.17 |
|
$ | 0.94 |
|
$ | 0.45 |
|
$ | 0.36 |
|
$ | 0.80 |
|
|
| |
| |
| |
| |
| |
| Diluted net earnings per share | | |
$ | 1.15 |
|
$ | 0.92 |
|
$ | 0.45 |
|
$ | 0.35 |
|
$ | 0.78 |
|
|
| |
| |
| |
| |
| |
Exhibit 2
Elbit Systems
Ltd.
Management’s Report
For The Three and
Nine-Month Period Ended September 30, 2006
This report should be read
together with the unaudited financial statements for the quarter ended September 30, 2006
of Elbit Systems Ltd. (“Elbit Systems” or the “Company”), the
Company’s audited consolidated financial statements and related notes for the year
ended December 31, 2005, the Company’s management report for the year ended December
31, 2005 and the Company’s Form 20-F for the year ended December 31, 2005, filed by
the Company with the U.S. Securities and Exchange Commission and with the Israeli
Securities Authority.
Forward looking statements with
respect to the Company’s business, financial condition and results of operations in
this document are subject to risks and uncertainties that could cause actual results to
differ materially from those contemplated in such forward looking statements, including,
but not limited to, product demand, pricing, market acceptance, changing economic
conditions, risks in product and technology development, the effect of the Company’s
accounting policies as well as certain other risk factors which are detailed from time to
time in the Company’s SEC filings.
| |
Elbit
Systems and its subsidiaries (the “Group”) operate in the areas of aerospace,
land and naval systems, command, control, communications, computers, intelligence,
surveillance and reconnaissance (“C(4)ISR”), advanced electro-optic and space
technologies, EW suites, airborne warning systems, ELINT systems, data links and military
communications systems and equipment. The Group also focuses on the upgrading of existing
military platforms and developing new technologies for defense and homeland security
applications. |
| |
The
Group provides support services for the platforms it upgrades as well as the systems and
products it supplies. In addition, the Group provides a wide range of logistic support
services, including operation of pilot training services for the Israeli Air Force on a
private financing initiative basis. Several of the Group’s companies also provide
advanced engineering and manufacturing services to various customers, utilizing their
significant manufacturing capabilities. The Group often cooperates with industries in
Israel and in various other countries. |
| |
The
Group tailors and adapts its technologies, integration skills, market knowledge and
battle-proven systems to each customer’s individual requirements in both existing
and new platforms. By upgrading existing platforms with advanced electronic and
electro-optic technologies, the Group provides customers with cost-effective solutions,
and its customers are able to improve their technological and operational capabilities
within limited defense budgets. |
| |
The
Group operates in a competitive environment for most of its projects, systems and
products. Competition is based on product and program performance, price, reputation,
reliability, maintenance costs and responsiveness to customer requirements. This includes
the ability to respond to rapid changes in technology. In addition, its competitive
position sometimes is affected by specific requirements in particular markets. |
1
| |
The
Company’s revenues increased by 37.7% and reached $376.7 million in the third
quarter of 2006, as compared to $273.6 million in the third quarter of 2005. |
| |
Net
earnings in the third quarter of 2006 were $18.7 million and the diluted earnings per
share were $0.45, as compared to $14.6 million and $0.35 in the third quarter of 2005, an
increase of 28.7%. |
| |
The
Company’s backlog as of September 30, 2006 reached $3.78 billion, as compared to
$3.35 billion as of December 31, 2005. |
| |
The
Company’s cash flow generated from operations in the nine-month period ended
September 30, 2006 was $150.9 million, as compared to $96.4 million in the nine-month
period ended September 30, 2005, an increase of 56%. |
| |
The
Board of Directors declared a dividend of $0.15 per share for the third quarter. |
| |
• |
|
On
September 17, 2006, the Company announced that Tadiram Electronic Systems Ltd. (“Tadiran
Systems”), a subsidiary of Elisra Electronic Systems Ltd. (“Elisra”), won
a contract valued at approximately $65 million for the supply of electronic warfare
systems to a European country. The systems will be supplied over the next two years. |
| |
• |
|
On
September 20, 2006, the Company announced that its subsidiary, Elbit Systems
Electro-Optics Elop Ltd. (“Elop”) was awarded a contract in the amount of
approximately $130 million to develop and manufacture electronic land systems for a
foreign customer. The project also includes logistic support for the systems and will be
performed over several years. |
| |
• |
|
On
September 21, 2006, the Company announced that the team led by the Boeing Company, in
which Kollsman, Inc. (“Kollsman”), an Elbit Systems of America company (“ESA”),
is a team member, was awarded the U.S. Secure Border Initiative Project (the “SBInet
Project”). The SBInet Project is designed to provide the U. S. Department of
Homeland Security with increased border security capabilities along more than 6,000 miles
of the United States’ borders. |
| |
• |
|
On
October 23, 2006, the Company announced that its subsidiary Cyclone Aviation Products
Ltd. (“Cyclone”) was awarded a contract by Boeing for structural components for
Boeing’s F-15 aircraft. The contract is valued at approximately $19 million and
deliveries are scheduled during 2008 and 2009. |
2
| |
The
Company’s backlog of orders as of September 30, 2006 reached $3,775 million, of which
73% was for orders outside Israel. The Company’s backlog as of December 31, 2005 was
$3,347 million, of which 72% was for orders outside Israel. |
| |
Approximately
46% of the Company’s backlog as of September 30, 2006 is scheduled to be performed in
the last quarter of 2006 and during 2007. The majority of the 54% of the Company’s
backlog balance is scheduled to be performed in 2008 and 2009. |
| D. |
|
Critical
Accounting Policies and Estimates |
| |
The
Company’s significant accounting policies are described in Note 2 to the audited
consolidated financial statements for the year ended December 31, 2005. See also the
Company’s management report for the year ended December 31, 2005 and the
Company’s Form 20-F for the year ended December 31, 2005, filed by the Company with
the U.S. Securities and Exchange Commission and with the Israeli Securities Authority. |
3
| E. |
|
Summary
of Financial Results |
| |
The
following table sets forth the reported consolidated statements of operations of the
Company for the three-month and nine-month periods ended September 30, 2006 and September
30, 2005. The financial statements of the Company include consolidation of Elisra’s
financial results, commencing December 1, 2005, therefore Elisra’s results are
included in the September 30, 2006 results and are not included in the September 30, 2005
results. |
|
For the nine months ended
September 30
|
|
For the three months ended
September 30
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|
$
|
|
%
|
|
$
|
|
%
|
|
$
|
|
%
|
|
$
|
|
%
|
|
|
(In thousands of U.S. dollars except per share data) |
|
| | | |
| Total revenues |
|
|
| 1,055,855 |
|
| 100.0 |
|
| 748,116 |
|
| 100.0 |
|
| 376,670 |
|
| 100.0 |
|
| 273,646 |
|
| 100.0 |
|
| Cost of revenues | | |
| 782,605 |
|
| 74.1 |
|
| 546,790 |
|
| 73.1 |
|
| 280,538 |
|
| 74.5 |
|
| 199,969 |
|
| 73.1 |
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| Gross profit | | |
| 273,250 |
|
| 25.9 |
|
| 201,326 |
|
| 26.9 |
|
| 96,132 |
|
| 25.5 |
|
| 73,677 |
|
| 26.9 |
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| Research and development (R&D) expenses | | |
| 82,365 |
|
| 7.8 |
|
| 66,893 |
|
| 8.9 |
|
| 29,618 |
|
| 7.8 |
|
| 24,840 |
|
| 9.1 |
|
| Less - participation | | |
| (18,002 |
) |
| (1.7 |
) |
| (13,450 |
) |
| (1.8 |
) |
| (5,044 |
) |
| (1.3 |
) |
| (4,358 |
) |
| (1.6 |
) |
|
| |
| |
| |
| |
| |
| |
| |
| |
| R&D expenses, net | | |
| 64,363 |
|
| 6.1 |
|
| 53,443 |
|
| 7.1 |
|
| 24,574 |
|
| 6.5 |
|
| 20,482 |
|
| 7.5 |
|
| Marketing and selling expenses | | |
| 81,027 |
|
| 7.7 |
|
| 54,695 |
|
| 7.3 |
|
| 27,397 |
|
| 7.3 |
|
| 20,309 |
|
| 7.4 |
|
| General and administrative expenses | | |
| 57,454 |
|
| 5.4 |
|
| 38,262 |
|
| 5.2 |
|
| 19,727 |
|
| 5.2 |
|
| 12,838 |
|
| 4.7 |
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| | | |
| 202,844 |
|
| 19.2 |
|
| 146,400 |
|
| 19.6 |
|
| 71,698 |
|
| 19.0 |
|
| 53,629 |
|
| 19.6 |
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| Operating income | | |
| 70,406 |
|
| 6.7 |
|
| 54,926 |
|
| 7.3 |
|
| 24,434 |
|
| 6.5 |
|
| 20,048 |
|
| 7.3 |
|
| | | |
| Finance expenses, net | | |
| (15,363 |
) |
| (1.4 |
) |
| (6,273 |
) |
| (0.8 |
) |
| (4,445 |
) |
| (1.2 |
) |
| (3,076 |
) |
| (1.1 |
) |
| Other income (expenses), net | | |
| 391 |
|
| - |
|
| (192 |
) |
| - |
|
| 231 |
|
| 0.1 |
|
| (6 |
) |
| - |
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| Income before taxes on income | | |
| 55,434 |
|
| 5.3 |
|
| 48,461 |
|
| 6.5 |
|
| 20,220 |
|
| 5.4 |
|
| 16,966 |
|
| 6.2 |
|
| Taxes on income | | |
| 16,645 |
|
| 1.6 |
|
| 12,289 |
|
| 1.7 |
|
| 7,279 |
|
| 1.9 |
|
| 4,246 |
|
| 1.6 |
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| | | |
| 38,789 |
|
| 3.7 |
|
| 36,172 |
|
| 4.8 |
|
| 12,941 |
|
| 3.5 |
|
| 12,720 |
|
| 4.6 |
|
| | | |
| Minority interest in losses of subsidiaries | | |
| 1,304 |
|
| 0.1 |
|
| 652 |
|
| 0.1 |
|
| 1,227 |
|
| 0.3 |
|
| 379 |
|
| 0.1 |
|
| | | |
| Equity in net earnings of affiliated | | |
| companies and partnership | | |
| 8,189 |
|
| 0.8 |
|
| 1,339 |
|
| 0.2 |
|
| 4,575 |
|
| 1.2 |
|
| 1,465 |
|
| 0.6 |
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| Net earnings | | |
| 48,282 |
|
| 4.6 |
|
| 38,163 |
|
| 5.1 |
|
| 18,743 |
|
| 5.0 |
|
| 14,564 |
|
| 5.3 |
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| Diluted earnings per share |
|
|
|
1.15 |
|
|
|
|
|
0.92 |
|
| |
|
|
0.45 |
|
| |
|
|
0.35 |
|
|
| |
|
| |
|
| |
|
| |
|
4
| |
The
Company’s sales are primarily to governmental entities and prime contractors under
government defense programs. Accordingly, the level of the Company’s revenues is
subject to governmental budgetary constraints. |
| |
Three
Months Ended on September 30, 2006, Compared to Three Months Ended on September 30, 2005 |
| |
The
consolidated revenues increased by 37.7% from $273.6 million in the third quarter of 2005
to $376.7 million in the third quarter of 2006. |
| |
The
following table sets forth the Company’s revenue distribution by areas of operation: |
|
Three-Month Period ended
|
|
|
September 30, 2006
|
|
September 30, 2005
|
|
|
$ millions |
|
% |
|
$ millions |
|
% |
|
| Airborne systems |
|
|
|
138.3 |
|
|
36.7 |
|
|
114.9 |
|
| 42.0 |
|
| Land systems | | |
| 100.9 |
|
| 26.8 |
|
| 39.5 |
|
| 14.4 |
|
| C(4)ISR systems | | |
| 66.8 |
|
| 17.7 |
|
| 44.9 |
|
| 16.4 |
|
| Electro-optics | | |
| 39.5 |
|
| 10.5 |
|
| 54.4 |
|
| 19.9 |
|
| Other (mainly non-defense engineering and | | |
| production services) | | |
| 31.2 |
|
| 8.3 |
|
| 19.9 |
|
| 7.3 |
|
|
| |
| |
| |
| |
| Total | | |
| 376.7 |
|
| 100.0 |
|
| 273.6 |
|
| 100.0 |
|
|
| |
| |
| |
| |
| |
The
following table sets forth the Company’s distribution of revenues by geographic
regions: |
|
Three-Month Period ended
|
|
|
September 30, 2006
|
|
September 30, 2005
|
|
|
$ millions |
|
% |
|
$ millions |
|
% |
|
| Israel |
|
|
|
99.4 |
|
|
26.4 |
|
|
61.3 |
|
|
22.4 |
|
| United States | | |
| 169.9 |
|
| 45.1 |
|
| 114.5 |
|
| 41.8 |
|
| Europe | | |
| 50.3 |
|
| 13.3 |
|
| 31.1 |
|
| 11.4 |
|
| Other countries | | |
| 57.1 |
|
| 15.2 |
|
| 66.7 |
|
| 24.4 |
|
|
| |
| |
| |
| |
| Total | | |
| 376.7 |
|
| 100.0 |
|
| 273.6 |
|
| 100.0 |
|
|
| |
| |
| |
| |
| |
Nine
Months Ended on September 30, 2006, Compared to Nine Months Ended on September 30, 2005 |
| |
The
Company’s consolidated revenues increased by 41.1%, from $748.1 million in the first
nine months of 2005 to $1,055.9 million in the first nine months of 2006. |
| |
The
following table sets forth the Company’s revenue distribution by areas of operation: |
|
Nine-Month Period ended
|
|
|
September 30, 2006
|
|
September 30, 2005
|
|
|
$ millions |
|
% |
|
$ millions |
|
% |
|
| Airborne systems |
|
|
|
417.3 |
|
|
39.5 |
|
|
309.3 |
|
|
41.3 |
|
| Land systems | | |
| 199.7 |
|
| 18.9 |
|
| 98.7 |
|
| 13.2 |
|
| C(4)ISR systems | | |
| 218.3 |
|
| 20.7 |
|
| 133.0 |
|
| 17.8 |
|
| Electro-optics | | |
| 129.3 |
|
| 12.3 |
|
| 153.9 |
|
| 20.6 |
|
| Other (mainly non-defense engineering and | | |
| production services) | | |
| 91.3 |
|
| 8.6 |
|
| 53.2 |
|
| 7.1 |
|
|
| |
| |
| |
| |
| Total | | |
| 1,055.9 |
|
| 100.0 |
|
| 748.1 |
|
| 100.0 |
|
|
| |
| |
| |
| |
5
| |
The
following table sets forth the Company’s distribution of revenues by geographic
regions: |
|
Nine-Month Period ended
|
|
|
September 30, 2006
|
|
September 30, 2005
|
|
|
$ millions |
|
% |
|
$ millions |
|
% |
|
| Israel |
|
|
|
312.9 |
|
|
29.6 |
|
|
206.4 |
|
|
27.6 |
|
| United States | | |
| 399.9 |
|
| 37.9 |
|
| 291.9 |
|
| 39.0 |
|
| Europe | | |
| 158.7 |
|
| 15.0 |
|
| 65.7 |
|
| 8.8 |
|
| Other countries | | |
| 184.4 |
|
| 17.5 |
|
| 184.1 |
|
| 24.6 |
|
|
| |
| |
| |
| |
| Total | | |
| 1,055.9 |
|
| 100.0 |
|
| 748.1 |
|
| 100.0 |
|
|
| |
| |
| |
| |
| |
The
changes in revenues by areas of operation, other than standard quarterly fluctuations and
due to the inclusion of Elisra, were in revenues from customers for Land systems, which
were increased mainly as a result of sales related to systems supplied to the U.S. Marine
Corps. |
| |
The
changes in revenues by geographic distribution, other than standard quarterly
fluctuations, were in the revenues from customers in Europe, which were increased mainly
as a result of the Watchkeeper project in the United Kingdom. |
| |
The
Company’s gross profit represents the aggregate results of the Company’s
activities and projects, and is based on the mix of programs in which the Company is
engaged during the reported period. The decrease in the gross profit margin was mainly as
a result of the lower gross profit margin generated by Elisra. |
| |
Three
Months Ended on September 30, 2006, Compared to Three Months Ended on September 30, 2005 |
| |
The
Company’s gross profit in the quarter ended September 30, 2006 was $96.1 million as
compared to $73.7 million in the quarter ended September 30, 2005. The gross profit
margin in the third quarter of 2006 was 25.5% as compared to 26.9% in the same period
last year. |
| |
Nine
Months Ended on September 30, 2006, Compared to Nine Months Ended on September 30, 2005 |
| |
The
Company’s gross profit in the nine months ended September 30, 2006 was $273.3
million as compared to $201.3 million in the nine months ended September 30, 2005. The
gross profit margin in the nine months ended September 30, 2006 was 25.9% as compared to
26.9% in the corresponding period of the previous year. |
| |
Research
and Development (“R&D”) |
| |
The
Company continually invests in R&D in order to maintain and further advance its
technologies, in accordance with a long-term plan, based on its estimate of future market
needs. |
| |
The
Company’s R&D included programs which are partially funded by, third parties,
including the Israeli Ministry of Defense (“IMOD”), the Office of the Chief
Scientist (“OCS”) and bi-national and European Development funds. The R&D
was performed in all major areas of core technological activities of the Company and
mainly in the areas of advanced airborne systems, cutting edge electro-optics technology
and products for surveillance, aerial reconnaissance, lasers and space based sensors and
homeland security technologies and products. |
6
| |
Three
Months Ended on September 30, 2006, Compared to Three Months Ended on September 30, 2005 |
| |
Gross
R&D expenses in the quarter ended September 30, 2006 totaled $29.6 million (7.8% of
revenues), as compared to $24.8 million (9.1% of revenues) in the quarter ended September
30, 2005. |
| |
Net
R&D expenses (after deduction of third party participation) in the quarter ended
September 30, 2006 totaled $24.6 million (6.5% of revenues), as compared to $20.5 million
(7.5% of revenues) in the quarter ended September 30, 2005. |
| |
Nine
Months Ended on September 30, 2006, Compared to Nine Months Ended on September 30, 2005 |
| |
Gross
R&D expenses in the nine months ended September 30, 2006 totaled $82.4 million (7.8%
of revenues), as compared to $66.9 million (8.9% of revenues) in the nine months ended
September 30, 2005. |
| |
Net
R&D expenses (after deduction of third party participation) in the nine-month period
ended September 30, 2006 totaled $64.4 million (6.1% of revenues), as compared to $53.4
million (7.1% of revenues) in the nine-month period ended September 30, 2005. |
| |
Marketing
and Selling Expenses |
| |
The
Company maintains its activities in developing new markets and pursues at any given time
various business opportunities according to the Company’s plan. |
| |
Three
Months Ended on September 30, 2006, Compared to Three Months Ended on September 30, 2005 |
| |
Marketing
and selling expenses in the quarter ended September 30, 2006 were $27.4 million (7.3% of
revenues), as compared to $20.3 million (7.4% of revenues) in the quarter ended September
30, 2005. |
| |
Nine
Months Ended on September 30, 2006, Compared to Nine Months Ended on September 30, 2005 |
| |
Marketing
and selling expenses in the nine months ended September 30, 2006 were $81.0 million (7.7%
of revenues), as compared to $54.7 million (7.3% of revenues) in the nine months ended
September 30, 2005. |
| |
General
and Administrative (“G&A”) Expenses |
| |
Three
Months Ended on September 30, 2006, Compared to Three Months Ended on September 30, 2005 |
| |
G&A
expenses were $19.7 million (5.2% of revenues) in the quarter ended September 30, 2006,
as compared to $12.8 million (4.7% of revenues) in the quarter ended September 30, 2005. |
| |
Nine
Months Ended on September 30, 2006, Compared to Nine Months Ended on September 30, 2005 |
| |
G&A
expenses were $57.5 million (5.4% of revenues) in the nine months ended September 30,
2006, as compared to $38.3 million (5.1% of revenues) in the nine months ended September
30, 2005. |
7
| |
The
increase in the net finance expense resulted mainly from a higher level of long-term
loans and an increase in market interest rates. |
| |
Three
Months Ended on September 30, 2006, Compared to Three Months Ended on September 30, 2005 |
| |
Net
finance expense in the quarter ended September 30, 2006 was $4.4 million, as compared to
$3.1 million of finance expense in the quarter ended September 30, 2005. |
| |
Nine
Months Ended on September 30, 2006, Compared to Nine Months Ended on September 30, 2005 |
| |
Net
finance expense in the six months ended September 30, 2006 was $15.4 million, as compared
to $6.3 million of finance expense in the nine months ended September 30, 2005. |
| |
The
Company’s tax rate represents a weighted average of the tax rates to which the
various companies in the Group are subject. The change in the effective tax rate is
attributable mainly to the mix of the tax rates in the various tax jurisdictions in which
the Group’s companies generating the taxable income operate. |
| |
Three
Months Ended on September 30, 2006, Compared to Three Months Ended on September 30, 2005 |
| |
Provision
for taxes in the quarter ended September 30, 2006 was $7.3 million (effective tax
rate of 36%), as compared to a provision for taxes of $4.2 million (effective tax rate of
25.0%) in the quarter ended September
30, 2005. |
| |
The
increase in the tax rate was mainly as a result of the appreciation of the NIS, which
increased the effective Israeli taxable income. |
| |
Nine
Months Ended on September 30, 2006, Compared to Nine Months Ended on September 30, 2005 |
| |
Provision
for taxes in the nine months ended September 30, 2006 was $16.7 million (effective tax
rate of 30%), as compared to a provision for taxes of $12.3 million (effective tax rate
of 25.4%) in the nine months ended September 30, 2005. |
| |
Company’s
Share in Earnings of Affiliated Entities |
| |
The
companies and partnerships, in which the Company holds 50% or less in shares or voting
rights and are therefore not consolidated in its financial statements, operate in
complementary areas to the Company’s core business activities, including
electro-optics, airborne systems and communications. |
8
| |
Three
Months Ended on September 30, 2006, Compared to Three Months Ended on September 30, 2005 |
| |
In
the third quarter of 2006 the Company had net income of $4.6 million from its share in
earnings of affiliated companies and partnership, as compared to net income of $1.5
million in the third quarter of 2005. |
| |
The
Company’s share in earnings of affiliated entities in the three months ended
September 30, 2005, included an IPR&D write-off of $1.2 million related to the
acquisition of Tadiran Communication Ltd.‘s (“Tadiran”) shares in 2005. |
| |
Nine
Months Ended on September 30, 2006, Compared to Nine Months Ended on September 30, 2005 |
| |
In
the nine months ended September 30, 2006 the Company had net income of $8.2 million from
its share in earnings of affiliated companies and partnership, as compared to net income
of $1.3 million in the nine months ended September 30, 2005. |
| |
The
Company’s share in earnings of affiliated entities includes IPR&D write-offs of
$2.2 million, related to the acquisition of Tadiran’s and Sandel’s shares in
the second quarter of 2006. The Company’s share in earnings of affiliated entities
in 2005 includes a $5.3 million IPR&D write-off related to the acquisition of Tadiran’s
shares in 2005. |
| |
Net
Earnings and Earnings Per Share (“EPS”) |
| |
Three
Months Ended on September 30, 2006, Compared to Three Months Ended on September 30, 2005 |
| |
Net
earnings in the quarter ended September 30, 2006 were $18.7 million (5.0% of revenues),
as compared to reported net earnings of $14.6 million (5.3% of revenues) in the quarter
ended September 30, 2005. Diluted EPS in the quarter ended September 30, 2006 was $0.45,
as compared to $0.35 in the quarter ended September 30, 2005. |
| |
The
number of shares used for computation of diluted EPS in the quarter ended September 30,
2006 was 41,913 thousand shares, as compared to 41,614 thousand shares in the quarter
ended September 30, 2005. |
| |
Net
earnings in the three months ended September 30, 2005, included an IPR&D write-off of
$1.2 million related to the acquisition of Tadiran’s shares in 2005. |
| |
Nine
Months Ended on September 30, 2006, Compared to Nine Months Ended on September 30, 2005 |
| |
Net
earnings in the nine months ended September 30, 2006 were $48.3 million (4.6% of
revenues), as compared to net earnings of $38.2 million (5.1% of revenues) in the nine
months ended September 30, 2005. Diluted EPS in the nine months ended September 30, 2006
was $1.15, as compared to $0.92 in the nine months ended September 30, 2005. |
| |
The
number of shares used for computation of diluted EPS in the nine months ended September
30, 2006 was 41,819 thousand shares, as compared to 41,616 thousand shares in the nine
months ended September 30, 2005. |
| |
Net
earnings in 2006 include $2.2 million in IPR&D write-offs related to the acquisitions
of Tadiran’s and Sandel’s shares in the second quarter of 2006. Net earnings in
2005 included a $5.3 million IPR&D write-off related to the acquisition of Tadiran’s
shares in 2005. |
9
| F. |
|
Liquidity
and Capital Resources |
| |
The
Company’s net cash flow generated from operating activities in the nine months ended
September 30, 2006 was $150.9 million, resulting mainly from net income and advances
received from customers. The cash inflows were partially offset, mainly by an increase in
inventories. |
| |
Net
cash flow used for investment activities in the nine months ended September 30, 2006 was
$73.2 million, which was used mainly for acquisition of Tadiran’s and Sandel shares
in the second quarter of 2006 and purchase of various assets and equipment. |
| |
Net
cash flow used for financing activities in the nine months ended September 30, 2006 was
$103.7 million, which was mainly for repayment of long-term loans. |
| |
On
September 30, 2006, the Company had total borrowings in the amount of $171.8 million,
including $136.1 million in long-term loan, and $704.7 million in guarantees issued on
its behalf by banks, mainly in respect of advance payment and performance guarantees
provided in the regular course of business. On September 30, 2006, the Company had a cash
balance amounting to $67.8 million. |
| |
As
of September 30, 2006, the Company had working capital of $127.2 million, and its current
ratio was 1.18. |
| G. |
|
Derivatives
and Hedges |
| |
Market
risks relating to the Company’s operations result primarily from changes in interest
rates and exchange rates. The Company typically uses financial instruments to limit its
exposure to those changes. The Company also typically enters into forward contracts in
connection with transactions that are denominated in currencies other than U.S. dollars
and New Israeli Shekels (“NIS”). The Company may enter from time to time into
forward contracts related to NIS, based on market conditions. |
| |
On
September 30, 2006, the Company’s liquid assets were comprised of bank deposits, and
it had no investments in liquid equity securities that were subject to market
fluctuations, except for its shareholdings in Tadiran. The Company’s deposits and
loans are based on variable interest rates, and their value as of September 30, 2006 was
therefore not exposed to changes in interest rates. Should interest rates either increase
or decrease, such change may affect the Company’s results of operations due to
changes in the cost of the liabilities and the return on the assets that are based on
variable rates. |
| |
The
Company’s functional currency is the U.S. dollar. On September 30, 2006, the Company
had exposure due to liabilities denominated in NIS of $95 million in excess of its NIS
denominated assets. These liabilities represent mostly wages and trade payables. The
amount of the Company’s exposure to the changes in the NIS-U.S. dollar exchange rate
varies from time to time. |
| |
Most
of the Company’s assets and liabilities which are denominated in currencies other
than the NIS and the U.S. dollar were covered as of September 30, 2006 by forward
contracts and options. On September 30, 2006, the Company had forward contracts for the
sale and purchase of such foreign currencies totaling $323.9 million ($135.6 million in
Euro, $180.5 million in GBP and $7.8 million in other currencies). The financial
derivative activities in this quarter resulted in an unrealized net loss of approximately
$7.2 million, which was recorded as other comprehensive loss. |
| |
On
September 30, 2006, the Company had options for hedging future cash flow denominated in
NIS in the amount of $2 million. The fair market value of the options as of September 30,
2006 was not material. |
10
| |
The
Board of Directors declared on November 13, 2006 a dividend of $0.15 per share. |
* * * *
11
Exhibit 3
ELBIT SYSTEMS LTD. AND
ITS SUBSIDIARIES
CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30,
2006
(Unaudited)
(In thousands of U.S. dollars)
ELBIT SYSTEMS LTD. AND
ITS SUBSIDIARIES
CONDENSED INTERIM
CONSOLIDATED
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30,
2006
(Unaudited)
(In thousands of U.S. dollars)
C O N T E N T S
|
P a g e
|
| CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS |
|
| |
|
| Consolidated Balance Sheets |
2 - 3 |
| |
|
| Consolidated Statements of Income |
4 |
| |
|
| Consolidated Statements of Changes in Shareholders' Equity |
5 -7 |
| |
|
| Consolidated Statements of Cash Flows |
8 - 9 |
| |
|
| Notes to the Consolidated Financial Statements |
10 - 13 |
# # # # #
1
| |
ELBIT
SYSTEMS LTD. AND ITS SUBSIDIARIES |
| CONSOLIDATED BALANCE
SHEETS |
|
|
|
|
|
| U.S. dollars
(in thousands) |
|
|
|
September 30,
2006
|
|
December 31,
2005
|
|
|
(Unaudited)
|
|
(Audited)
|
|
| CURRENT ASSETS: |
|
|
| |
|
| |
|
| Cash and cash equivalents | | |
$ | 67,838 |
|
$ | 93,887 |
|
| Short-term bank deposits | | |
| 1,334 |
|
| 742 |
|
| Trading securities | | |
| 2,335 |
|
| 2,282 |
|
| Trade receivables, (net of allowance for doubtful | | |
| |
|
| accounts in the amount of $3,652 and $3,221 as of | | |
| |
|
| |
|
| September 30, 2006 and December 31, 2005, respectively) | | |
| 341,597 |
|
| 346,689 |
|
| Other receivables and prepaid expenses | | |
| 74,355 |
|
| 67,096 |
|
| Inventories, net of advances | | |
| 359,787 |
|
| 328,428 |
|
|
| |
| |
| Total current assets | | |
| 847,246 |
|
| 839,124 |
|
|
| |
| |
| INVESTMENTS AND LONG-TERM RECEIVABLES: | | |
| Investments in affiliated companies and a partnership | | |
| 230,073 |
|
| 194,994 |
|
| Investments in other companies | | |
| 6,345 |
|
| 6,345 |
|
| Compensation receivable in respect of fire damages, net | | |
| 15,530 |
|
| 15,530 |
|
| Long-term bank deposits and trade receivables | | |
| 3,775 |
|
| 2,457 |
|
| Severance pay fund | | |
| 153,302 |
|
| 136,663 |
|
|
| |
| |
| | | |
| 409,025 |
|
| 355,989 |
|
|
| |
| |
| PROPERTY, PLANT AND EQUIPMENT, NET | | |
| 288,832 |
|
| 284,997 |
|
|
| |
| |
| INTANGIBLE ASSETS: | | |
| Goodwill | | |
| 58,593 |
|
| 58,593 |
|
| Other intangible assets, net | | |
| 72,567 |
|
| 78,771 |
|
|
| |
| |
| | | |
| 131,160 |
|
| 137,364 |
|
|
| |
| |
| | | |
$ | 1,676,263 |
|
$ | 1,617,474 |
|
|
| |
| |
The accompanying
notes are an integral part of the consolidated financial statements.
2
| |
ELBIT
SYSTEMS LTD. AND ITS SUBSIDIARIES |
| CONSOLIDATED BALANCE
SHEETS |
|
|
|
|
|
| U.S. dollars (in thousands, except share data) |
|
|
|
September 30,
2006
|
|
December 31,
2005
|
|
|
(Unaudited)
|
|
(Audited)
|
|
| CURRENT LIABILITIES: |
|
|
| |
|
| |
|
| Short-term bank credit and loans | | |
$ | 23,079 |
|
$ | 30,296 |
|
| Current maturities of long-term loans | | |
| 12,675 |
|
| 7,355 |
|
| Trade payables | | |
| 137,933 |
|
| 120,260 |
|
| Other payables and accrued expenses | | |
| 251,413 |
|
| 216,539 |
|
| Customers advances and amounts in excess of | | |
| costs incurred on contracts in progress | | |
| 295,020 |
|
| 237,718 |
|
|
| |
| |
| Total current liabilities | | |
| 720,120 |
|
| 612,168 |
|
|
| |
| |
| LONG-TERM LIABILITIES: | | |
| Long-term loans | | |
| 136,064 |
|
| 224,982 |
|
| Advances from customers | | |
| 130,852 |
|
| 122,263 |
|
| Deferred income taxes | | |
| 23,176 |
|
| 26,060 |
|
| Accrued termination liability | | |
| 176,147 |
|
| 168,317 |
|
|
| |
| |
| | | |
| 466,239 |
|
| 541,622 |
|
|
| |
| |
| MINORITY INTERESTS | | |
| 11,495 |
|
| 12,907 |
|
|
| |
| |
| SHAREHOLDERS' EQUITY: | | |
| Share capital | | |
| Ordinary shares of New Israeli Shekels (NIS) 1 par value; | | |
| Authorized 80,000,000 shares as of September 30, 2006 and December 31, | | |
| 2005; | | |
| Issued 42,029,023 and 41,375,545 shares as of September 30, 2006 and | | |
| December 31, 2005, respectively; | | |
| Outstanding 41,620,102 and 40,966,624 shares as of September 30, 2006 | | |
| and December 31, 2005, respectively | | |
| 11,784 |
|
| 11,636 |
|
| Additional paid-in capital | | |
| 284,695 |
|
| 278,679 |
|
| Accumulated other comprehensive loss | | |
| (10,113 |
) |
| (1,340 |
) |
| Retained earnings | | |
| 196,364 |
|
| 166,123 |
|
| Treasury shares - 408,921 shares as of September 30, | | |
| 2006 and December 31, 2005 | | |
| (4,321 |
) |
| (4,321 |
) |
|
| |
| |
| | | |
| 478,409 |
|
| 450,777 |
|
|
| |
| |
| | | |
$ | 1,676,263 |
|
$ | 1,617,474 |
|
|
| |
| |
The accompanying
notes are an integral part of the consolidated financial statements.
3
| |
ELBIT
SYSTEMS LTD. AND ITS SUBSIDIARIES |
| CONSOLIDATED STATEMENTS
OF INCOME |
|
|
|
|
|
| U.S. dollars (in thousands, except share and per share data) |
|
|
|
Nine months ended
September 30,
|
|
Three months ended
September 30,
|
|
Year ended
December 31,
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
2005
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Audited)
|
|
| Revenues |
|
|
$ | 1,055,855 |
|
$ | 748,116 |
|
$ | 376,670 |
|
$ | 273,646 |
|
$ | 1,069,876 |
|
| Cost of revenues | | |
| 782,605 |
|
| 546,790 |
|
| 280,538 |
|
| 199,969 |
|
| 786,616 |
|
| Restructuring expenses | | |
| - |
|
| - |
|
| - |
|
| - |
|
| 3,488 |
|
|
| |
| |
| |
| |
| |
| Gross profit | | |
| 273,250 |
|
| 201,326 |
|
| 96,132 |
|
| 73,677 |
|
| 279,772 |
|
|
| |
| |
| |
| |
| |
| Research and development costs, net | | |
| 64,363 |
|
| 53,443 |
|
| 24,574 |
|
| 20,482 |
|
| 71,903 |
|
| Marketing and selling expenses | | |
| 81,027 |
|
| 54,695 |
|
| 27,397 |
|
| 20,309 |
|
| 78,648 |
|
| General and administrative expenses | | |
| 57,454 |
|
| 38,262 |
|
| 19,727 |
|
| 12,838 |
|
| 54,417 |
|
| In-process research and development write-off | | |
| - |
|
| - |
|
| - |
|
| - |
|
| 7,490 |
|
|
| |
| |
| |
| |
| |
| | | |
| 202,844 |
|
| 146,400 |
|
| 71,698 |
|
| 53,629 |
|
| 212,458 |
|
|
| |
| |
| |
| |
| |
| Operating income | | |
| 70,406 |
|
| 54,926 |
|
| 24,434 |
|
| 20,048 |
|
| 67,314 |
|
| | | |
| Financial expenses, net | | |
| (15,363 |
) |
| (6,273 |
) |
| (4,445 |
) |
| (3,076 |
) |
| (11,472 |
) |
| Other income (expenses), net | | |
| 391 |
|
| (192 |
) |
| 231 |
|
| (6 |
) |
| (5,326 |
) |
|
| |
| |
| |
| |
| |
| Income before taxes on income | | |
| 55,434 |
|
| 48,461 |
|
| 20,220 |
|
| 16,966 |
|
| 50,516 |
|
| Taxes on income | | |
| 16,645 |
|
| 12,289 |
|
| 7,279 |
|
| 4,246 |
|
| 16,335 |
|
|
| |
| |
| |
| |
| |
| | | |
| 38,789 |
|
| 36,172 |
|
| 12,941 |
|
| 12,720 |
|
| 34,181 |
|
| Equity in net earnings of affiliated | | |
| companies and partnership | | |
| 8,189 |
|
| 1,339 |
|
| 4,575 |
|
| 1,465 |
|
| (1,636 |
) |
| Minority interests in losses (earnings) | | |
| of subsidiaries | | |
| 1,304 |
|
| 652 |
|
| 1,227 |
|
| 379 |
|
| (58 |
) |
|
| |
| |
| |
| |
| |
| Net income | | |
$ | 48,282 |
|
$ | 38,163 |
|
$ | 18,743 |
|
$ | 14,564 |
|
$ | 32,487 |
|
|
| |
| |
| |
| |
| |
| Earnings per share | | |
| Basic net earnings per share | | |
$ | 1.17 |
|
$ | 0.94 |
|
$ | 0.45 |
|
$ | 0.36 |
|
$ | 0.80 |
|
|
| |
| |
| |
| |
| |
| Diluted net earnings per share | | |
$ | 1.15 |
|
$ | 0.92 |
|
$ | 0.45 |
|
$ | 0.35 |
|
$ | 0.78 |
|
|
| |
| |
| |
| |
| |
| Number of shares used in computation of | | |
| basic net earnings per share | | |
| 41,165 |
|
| 40,709 |
|
| 41,360 |
|
| 40,775 |
|
| 40,750 |
|
|
| |
| |
| |
| |
| |
| Number of shares used in computation of | | |
| Diluted net earnings per share | | |
| 41,819 |
|
| 41,616 |
|
| 41,913 |
|
| 41,614 |
|
| 41,623 |
|
|
| |
| |
| |
| |
| |
The accompanying
notes are an integral part of the consolidated financial statements.
4
| |
ELBIT
SYSTEMS LTD. AND ITS SUBSIDIARIES |
| CONSOLIDATED STATEMENTS
OF CHANGES IN SHAREHOLDERS’ EQUITY |
|
|
|
|
|
| U.S. dollars (in thousands, except share data) |
|
|
|
Number of
outstanding
shares
|
|
Share
capital
|
|
Additional
paid-in
capital
|
|
Accumulated
other
comprehensive
loss
|
|
Retained
earnings
|
|
Treasury
shares
|
|
Total
shareholders'
equity
|
|
Total
comprehensive
income
|
|
| Balance as of January 1, 2005 (Audited) |
|
|
| 40,561,026 |
|
$ | 11,548 |
|
$ | 274,432 |
|
$ | (4,742 |
) |
$ | 155,267 |
|
$ | (4,321 |
) |
$ | 432,184 |
|
| |
|
| Exercise of options | | |
| 405,598 |
|
| 88 |
|
| 3,423 |
|
| - |
|
| - |
|
| - |
|
| 3,511 |
|
| Tax benefit in respect of options exercised | | |
| - |
|
| - |
|
| 652 |
|
| - |
|
| - |
|
| - |
|
| 652 |
|
| Stock based compensation | | |
| - |
|
| - |
|
| 172 |
|
| - |
|
| - |
|
| - |
|
| 172 |
|
| Dividends paid | | |
| - |
|
| - |
|
| - |
|
| - |
|
| (21,631 |
) |
| - |
|
| (21,631 |
) |
| Other comprehensive income (loss) net of tax: | | |
| Unrealized gains on derivative instruments | | |
| - |
|
| - |
|
| - |
|
| 6,412 |
|
| - |
|
| - |
|
| 6,412 |
|
$ | 6,412 |
|
| Foreign currency translation differences | | |
| - |
|
| - |
|
| - |
|
| (924 |
) |
| - |
|
| - |
|
| (924 |
) |
| (924 |
) |
| Minimum pension liability adjustment | | |
| - |
|
| - |
|
| - |
|
| (2,086 |
) |
| - |
|
| - |
|
| (2,086 |
) |
| (2,086 |
) |
| Net income | | |
| - |
|
| - |
|
| - |
|
| - |
|
| 32,487 |
|
| - |
|
| 32,487 |
|
| 32,487 |
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| |
|
$ | 35,889 |
|
|
|
|
|
|
|
|
|
| |
| | |
| Balance as of December 31, 2005 (Audited) | | |
| 40,966,624 |
|
$ | 11,636 |
|
$ | 278,679 |
|
$ | (1,340 |
) |
$ | 166,123 |
|
$ | (4,321 |
) |
$ | 450,777 |
|
| Exercise of options | | |
| 653,478 |
|
| 148 |
|
| 4,974 |
|
| - |
|
| - |
|
| - |
|
| 5,122 |
|
| Tax benefit in respect of options exercised | | |
| - |
|
| - |
|
| 1,042 |
|
| - |
|
| - |
|
| - |
|
| 1,042 |
|
| Dividends paid | | |
| - |
|
| - |
|
| - |
|
| - |
|
| (18,041 |
) |
| - |
|
| (18,041 |
) |
| Other comprehensive income (loss), net of tax: | | |
| Unrealized losses on derivative instruments | | |
| - |
|
| - |
|
| - |
|
| (9,692 |
) |
| - |
|
| - |
|
| (9,692 |
) |
| (9,692 |
) |
| Foreign currency translation differences | | |
| - |
|
| - |
|
| - |
|
| 796 |
|
| - |
|
| - |
|
| 796 |
|
| 796 |
|
| Unrealized gain from securities | | |
| - |
|
| - |
|
| - |
|
| 123 |
|
| - |
|
| - |
|
| 123 |
|
| 123 |
|
| Net income | | |
| - |
|
| - |
|
| - |
|
| - |
|
| 48,282 |
|
| - |
|
| 48,282 |
|
| 48,282 |
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| |
|
$ | 39,509 |
|
|
|
|
|
|
|
|
|
| |
| Balance as of September 30, 2006 (Unaudited) |
|
|
|
41,620,102 |
|
$ |
11,784 |
|
$ |
284,695 |
|
$ |
(10,113 |
) |
$ |
196,364 |
|
$ |
(4,321 |
) |
$ |
478,409 |
|
|
| |
| |
| |
| |
| |
| |
| |
|
The accompanying
notes are an integral part of the consolidated financial statements.
5
| |
ELBIT
SYSTEMS LTD. AND ITS SUBSIDIARIES |
| CONSOLIDATED STATEMENTS
OF CHANGES IN SHAREHOLDERS’ EQUITY |
|
|
|
|
|
| U.S. dollars (in thousands, except share data) |
|
|
|
Number of
outstanding
shares
|
|
Share
capital
|
|
Additional
paid-in
capital
|
|
Accumulated
other
comprehensive
loss
|
|
Retained
earnings
|
|
Treasury
shares
|
|
Total
shareholders'
equity
|
|
Total
comprehensive
income
|
|
| Balance as of January 1, 2005 (Audited) |
|
|
| 40,561,026 |
|
$ | 11,548 |
|
$ | 274,432 |
|
$ | (4,742 |
) |
$ | 155,267 |
|
$ | (4,321 |
) |
$ | 432,184 |
|
| |
|
| Exercise of options | | |
| 257,144 |
|
| 56 |
|
| 2,128 |
|
| - |
|
| - |
|
| - |
|
| 2,184 |
|
| Tax benefit in respect of options exercised | | |
| - |
|
| - |
|
| 477 |
|
| - |
|
| - |
|
| - |
|
| 477 |
|
| Stock based compensation | | |
| - |
|
| - |
|
| 100 |
|
| - |
|
| - |
|
| - |
|
| 100 |
|
| Dividends paid | | |
| - |
|
| - |
|
| - |
|
| - |
|
| (15,868 |
) |
| - |
|
| (15,868 |
) |
| Other comprehensive income (loss): | | |
| Unrealized gains on derivative | | |
| instruments | | |
| - |
|
| - |
|
| - |
|
| 2,959 |
|
| - |
|
| - |
|
| 2,959 |
|
$ | 2,959 |
|
| Foreign currency translation differences | | |
| - |
|
| - |
|
| - |
|
| (739 |
) |
| - |
|
| - |
|
| (739 |
) |
| (739 |
) |
| Net income | | |
| - |
|
| - |
|
| - |
|
| - |
|
| 38,163 |
|
| - |
|
| 38,163 |
|
| 38,163 |
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| Total comprehensive income | | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
$ | 40,383 |
|
|
|
|
|
|
|
|
|
| |
| Balance as of September 30, 2005 (Unaudited)
| |
|
|
40,818,170 |
|
$ |
11,604 |
|
$ |
277,137 |
|
$ |
(2,522 |
) |
$ |
177,562 |
|
$ |
(4,321 |
) |
$ |
459,460 |
|
|
| |
| |
| |
| |
| |
| |
| |
|
| Balance as of July 1, 2006 (Unaudited) | | |
| 41,216,786 |
|
$ | 11,670 |
|
$ | 280,682 |
|
$ | (8,916 |
) |
$ | 183,861 |
|
$ | (4,321 |
) |
$ | 462,976 |
|
| Exercise of options | | |
| 403,316 |
|
| 114 |
|
| 3,111 |
|
| - |
|
| - |
|
| - |
|
| 3,225 |
|
| Tax benefit in respect of options exercised | | |
| - |
|
| - |
|
| 902 |
|
| - |
|
| - |
|
| - |
|
| 902 |
|
| Dividends paid | | |
| - |
|
| - |
|
| - |
|
| - |
|
| (6,240 |
) |
| - |
|
| (6,240 |
) |
| Other comprehensive income (loss): | | |
| Unrealized gains on derivative | | |
| instruments | | |
| - |
|
| - |
|
| - |
|
| (2,064 |
) |
| - |
|
| - |
|
| (2,064 |
) |
$ | (2,064 |
) |
| Foreign currency translation differences | | |
| - |
|
| - |
|
| - |
|
| 744 |
|
| - |
|
| - |
|
| 744 |
|
| 744 |
|
| Unrealized gain from securities | | |
| - |
|
| - |
|
| - |
|
| 123 |
|
| - |
|
| - |
|
| 123 |
|
| 123 |
|
| Net income | | |
| - |
|
| - |
|
| - |
|
| - |
|
| 18,743 |
|
| - |
|
| 18,743 |
|
| 18,743 |
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| Total comprehensive income |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
$ | 17,546 |
|
|
|
|
|
|
|
|
|
| |
| Balance as of September 30, 2006 (Unaudited) | | |
| 41,620,102 |
|
$ | 11,784 |
|
$ | 284,695 |
|
$ | (10,113 |
) |
$ | 196,364 |
|
$ | (4,321 |
) |
$ | 478,409 |
|
|
| |
| |
| |
| |
| |
| |
| |
|
The accompanying
notes are an integral part of the consolidated financial statements.
6
| |
ELBIT
SYSTEMS LTD. AND ITS SUBSIDIARIES |
| CONSOLIDATED STATEMENTS
OF CHANGES IN SHAREHOLDERS’ EQUITY |
|
|
|
|
|
| U.S. dollars (in thousands, except share data) |
|
|
|
Number of
outstanding
shares
|
|
Share
capital
|
|
Additional
paid-in
capital
|
|
Accumulated
other
comprehensive
loss
|
|
Retained
earnings
|
|
Treasury
shares
|
|
Total
shareholders'
equity
|
|
Total
comprehensive
income
|
|
| Balance as of July 1, 2005 (Unaudited) |
|
|
| 40,745,711 |
|
$ | 11,590 |
|
$ | 276,461 |
|
$ | (5,064 |
) |
$ | 168,307 |
|
$ | (4,321 |
) |
$ | 445,973 |
|
| |
|
| Exercise of options | | |
| 72,459 |
|
| 14 |
|
| 583 |
|
| - |
|
| - |
|
| - |
|
| 597 |
|
| Tax benefit in respect of options | | |
| exercised | | |
| - |
|
| - |
|
| (7 |
) |
| - |
|
| - |
|
| - |
|
| (7 |
) |
| Stock based compensation | | |
| - |
|
| - |
|
| 100 |
|
| - |
|
| - |
|
| - |
|
| 100 |
|
| |
|
| Dividends paid | | |
| - |
|
| - |
|
| - |
|
| - |
|
| (5,309 |
) |
| - |
|
| (5,309 |
) |
| Other comprehensive income (loss): | | |
| Unrealized gains on derivative | | |
| instruments | | |
| - |
|
| - |
|
| - |
|
| 2,666 |
|
| - |
|
| - |
|
| 2,666 |
|
$ | 2,666 |
|
| Foreign currency translation differences | | |
| - |
|
| - |
|
| - |
|
| (124 |
) |
| - |
|
| - |
|
| (124 |
) |
| (124 |
) |
| Net income | | |
| - |
|
| - |
|
| - |
|
| - |
|
| 14,564 |
|
| - |
|
| 14,564 |
|
| 14,564 |
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| Total comprehensive income |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
$ | 17,106 |
|
|
|
|
|
|
|
|
|
| |
| Balance as of September 30, 2005 (Unaudited) | | |
| 40,818,170 |
|
$ | 11,604 |
|
$ | 277,137 |
|
$ | (2,522 |
) |
$ | 177,562 |
|
$ | (4,321 |
) |
$ | 459,460 |
|
| |
|
|
| |
| |
| |
| |
| |
| |
| |
|
The accompanying
notes are an integral part of the consolidated financial statements.
7
| |
ELBIT
SYSTEMS LTD. AND ITS SUBSIDIARIES |
| CONSOLIDATED STATEMENTS
OF CASH FLOWS |
|
|
|
|
|
| U.S. dollars (in thousands) |
|
|
|
Nine months ended
September 30,
|
|
Year ended
December 31,
|
|
|
2006
|
|
2005
|
|
2005
|
|
|
(Unaudited)
|
|
(Audited)
|
|
| CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
| |
|
| |
|
| |
|
| Net income | | |
$ | 48,282 |
|
$ | 38,163 |
|
$ | 32,487 |
|
| Adjustments to reconcile net income to net cash provided by | | |
| operating activities: | | |
| Depreciation and amortization | | |
| 43,831 |
|
| 37,772 |
|
| 57,718 |
|
| Purchased in process R&D | | |
| - |
|
| - |
|
| 7,490 |
|
| Stock based compensation | | |
| - |
|
| 100 |
|
| 172 |
|
| Deferred income taxes | | |
| (1,630 |
) |
| (602 |
) |
| 6,551 |
|
| Accrued severance pay, net | | |
| (8,809 |
) |
| (8,536 |
) |
| (6,707 |
) |
| Gain on sale of property and equipment | | |
| (1,242 |
) |
| (400 |
) |
| (731 |
) |
| Tax benefit in respect of options exercised | | |
| 1,042 |
|
| 477 |
|
| 652 |
|
| Minority interests in earnings (losses) of subsidiaries | | |
| (1,304 |
) |
| (652 |
) |
| 58 |
|
| Equity in net losses (earnings) of affiliated companies and | | |
| partnership, | | |
| (1,042 |
) |
| 6,706 |
|
| 13,805 |
|
| net of dividend received (*) | | |
| Changes in operating assets and liabilities: | | |
| Increase in short-term and long-term receivables and prepaid expenses | | |
| (6,318 |
) |
| (17,070 |
) |
| (43,420 |
) |
| Increase in inventories | | |
| (59,779 |
) |
| (59,474 |
) |
| (43,679 |
) |
| Increase (decrease) in trade payables, other payables and accrued | | |
| 43,665 |
|
| (2,118 |
) |
| (37,859 |
) |
| expenses | | |
| Increase in advances received from customers | | |
| 94,311 |
|
| 101,959 |
|
| 202,450 |
|
| Settlement of royalties with the Office of the Chief Scientist | | |
| - |
|
| - |
|
| (1,371 |
) |
| Other adjustments | | |
| (75 |
) |
| 117 |
|
| - |
|
|
| |
| |
| |
| Net cash provided by operating activities | | |
| 150,932 |
|
| 96,442 |
|
| 187,616 |
|
|
| |
| |
| |
| CASH FLOWS FROM INVESTING ACTIVITIES | | |
| Purchase of property, plant and equipment | | |
| (44,277 |
) |
| (41,437 |
) |
| (58,735 |
) |
| Acquisition of subsidiaries and businesses (Schedule A) | | |
| - |
|
| (318 |
) |
| (28,331 |
) |
| Investments in affiliated companies | | |
| (31,232 |
) |
| (99,024 |
) |
| (160,861 |
) |
| Proceeds from sale of property, plant and equipment | | |
| 4,057 |
|
| 1,381 |
|
| 2,712 |
|
| Proceeds from sale of investment | | |
| - |
|
| 3,100 |
|
| 3,100 |
|
| Investment in long-term bank deposits | | |
| (710 |
) |
| (551 |
) |
| (1,089 |
) |
| Proceeds from sale of long-term bank deposits | | |
| 695 |
|
| 963 |
|
| 1,501 |
|
| Grant of long-term loans | | |
| - |
|
| (790 |
) |
| - |
|
| Short-term bank deposits, net | | |
| (1,781 |
) |
| (148 |
) |
| (4 |
) |
|
| |
| |
| |
| Net cash used in investing activities | | |
| (73,248 |
) |
| (136,824 |
) |
| (241,707 |
) |
|
| |
| |
| |
| CASH FLOWS FROM FINANCING ACTIVITIES | | |
| Proceeds from exercise of options | | |
| 5,122 |
|
| 2,184 |
|
| 3,511 |
|
| Repayment of long-term bank loans | | |
| (286,961 |
) |
| (51,712 |
) |
| (85,035 |
) |
| Receipt of long-term bank loans | | |
| 203,853 |
|
| 220,400 |
|
| 216,500 |
|
| Dividends paid | | |
| (18,041 |
) |
| (15,868 |
) |
| (21,631 |
) |
| Change in short-term bank credit and loans, net | | |
| (7,706 |
) |
| 1,332 |
|
| 524 |
|
|
| |
| |
| |
| Net cash provided by (used in) financing activities | | |
| (103,733 |
) |
| 156,336 |
|
| 113,869 |
|
|
| |
| |
| |
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | | |
| (26,049 |
) |
| 115,954 |
|
| 59,778 |
|
| CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE | | |
| PERIOD | | |
| 93,887 |
|
| 34,109 |
|
| 34,109 |
|
|
| |
| |
| |
| CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD | | |
$ | 67,838 |
|
$ | 150,063 |
|
$ | 93,887 |
|
|
| |
| |
| |
| (*) Dividend received | | |
$ | 7,147 |
|
$ | 8,045 |
|
$ | 12,169 |
|
|
| |
| |
| |
The accompanying
notes are an integral part of the consolidated financial statements.
8
| |
ELBIT
SYSTEMS LTD. AND ITS SUBSIDIARIES |
| CONSOLIDATED STATEMENTS
OF CASH FLOWS |
|
|
|
|
|
| U.S. dollars (in thousands) |
|
|
|
Nine months ended
September 30,
|
|
Year ended
December 31,
|
|
|
2006
|
|
2005
|
|
2005
|
|
|
(Unaudited)
|
|
(Audited)
|
|
| SUPPLEMENTARY CASH FLOWS |
|
|
| |
|
| |
|
| |
|
| ACTIVITIES: | | |
| Cash paid during the period for: | | |
| Income taxes | | |
$ | 14,709 |
|
$ | 17,640 |
|
$ | 21,475 |
|
|
| |
| |
| |
| Interest | | |
$ | 14,199 |
|
$ | 5,812 |
|
$ | 13,151 |
|
|
| |
| |
| |
| SCHEDULE A: | | |
| Subsidiaries and businesses acquired | | |
| Estimated net fair value of assets acquired and liabilities | | |
| assumed at the date of acquisition: | | |
| | |
| Working capital, net (excluding cash and cash equivalents) |
|
|
$ |
- |
|
$ | (3,281 |
) |
$ | 39,273 |
|
| Property, plant and equipment | | |
| - |
|
| - |
|
| (28,875 |
) |
| Other long-term assets | | |
| - |
|
|
|
|
|
(74,363 |
) |
| Goodwill, customer contracts and other intangible assets | | |
| - |
|
| (1,514 |
) |
| (53,291 |
) |
| In-process R&D | | |
| - |
|
|
|
|
|
(7,490 |
) |
| Deferred income taxes | | |
| - |
|
|
|
|
|
5,404 |
|
| Long-term liabilities - mainly advances from customers | | |
| - |
|
| 4,477 |
|
| 82,730 |
|
| Minority interest | | |
|
- |
|
| - |
|
| 8,281 |
|
|
| |
| |
| |
| |
|
|
$ | - |
|
$ | (318 |
) |
$ | (28,331 |
) |
|
| |
| |
| |
The accompanying
notes are an integral part of the consolidated financial statements.
9
ELBIT SYSTEMS LTD. AND
ITS SUBSIDIARIES
| NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED |
|
|
|
|
|
| U.S. dollars (in thousands) |
|
|
| |
|
A. |
|
The
accompanying financial statements have been prepared in a condensed format
as of September 30, 2006, and for the nine and three months then ended, in
accordance with generally accepted accounting principles in the United
States )U.S. GAAP( relating to the preparation of financial statements for
interim periods. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with U.S.
GAAP but which are not required for interim reporting purposes, have been
condensed or omitted. See Note 4 for the reconciliation from U.S. GAAP to
accounting principles generally accepted in Israel (Israeli GAAP). |
| |
These
statements should be read in conjunction with the Company’s annual financial
statements and accompanying notes as of December 31, 2005. |
| |
The
interim financial statements reflect all adjustments, which are, in the opinion of
management, necessary for a fair presentation. All such adjustments were of a normal
recurring nature. Reclassifications have been made to comparative data in order to
conform to the current year’s presentation. |
| |
Operating
results for the nine and three months ended September 30, 2006, are not necessarily
indicative of the results that may be expected for the year ending December 31, 2006. |
| |
|
B. |
|
On
May 31, 2006, the Company’s U.S. subsidiary Kollsman, Inc. (“Kollsman”)
acquired a 20% interest in Sandel Avionics, Inc. (“Sandel”) in
consideration for $12.5 million (represented by a $10.5 million cash
payment, a $1 million subscription and payment of a bridge loan and a $1
million holdback to be paid within 12 months). Sandel, based in Vista,
California, produces specialized integrated display systems and other
products for the commercial aviation market. |
| |
Kollsman
has an option to buy the remaining 80% interest in Sandel for a period of 30 months after
the initial investment. During the option period, Kollsman has the right to
representation on the Sandel board of directors, as well as several specific minority
rights. In addition, Kollsman and Sandel have formed an alliance to cooperate on product
development and marketing. |
| |
The
excess of the amount paid for Sandel shares acquired over their book value (excess cost)
is approximately $13,200. Based on purchase price allocation analysis (“PPA”)
performed by an independent advisor, this excess was attributed as follows: |
|
Book Value
in Sandel |
|
Excess
Cost |
|
Total |
|
Expected useful lives |
|
| Working capital |
|
|
$ | 700 |
|
| - |
|
$ | 700 |
|
|
|
|
| Fixed and other assets | | |
| 700 |
|
| - |
|
| 700 |
|
| Long-term debt | | |
| (2,100 |
) |
| - |
|
| (2,100 |
) |
| In-Process R&D ("IPR&D") | | |
| - |
|
| 1,200 |
|
| 1,200 |
|
immediate write-off | | |
| Technology and customers base | | |
| - |
|
| 3,200 |
|
| 3,200 |
|
7 years | | |
| Deferred taxes | | |
| - |
|
| (1,300 |
) |
| (1,300 |
) |
7 years | | |
| Goodwill | | |
| - |
|
| 10,100 |
|
| 10,100 |
|
indefinite-subject to annual impairment test | | |
|
| |
| |
| |
|
| |
|
|
$ |
(700 |
) |
$ |
13,200 |
|
$ |
12,500 |
|
|
| |
| |
| |
|
10
ELBIT SYSTEMS LTD. AND
ITS SUBSIDIARIES
| NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED |
|
|
|
|
|
| U.S. dollars (In thousands, except per share data) |
|
|
| |
|
C. |
|
On
June 5, 2006, the Company acquired 4.37% of Tadiran Communication Ltd.‘s
(“Tadiran”) outstanding shares in consideration for
approximately $18.3 million (of which $13.5 million was paid on the
acquisition date and the balance was paid in July 2006). Following the
acquisition, the Company holds approximately 43% of Tadiran’s shares. |
| |
The
excess of the amount paid for Tadiran shares acquired over their book value (excess cost)
is approximately $ 11,900. Based on purchase price allocation analysis (“PPA”)
performed by an independent advisor, this excess was attributed as follows: |
|
Book Value
in Tadiran |
|
Excess
Cost |
|
Total |
|
Expected useful lives |
|
| Working capital |
|
|
$ | 2,400 |
|
| - |
|
$ | 2,400 |
|
|
|
|
| Long-term investments and receivables | | |
| 700 |
|
| - |
|
| 700 |
|
| Property, plant and equipment, net | | |
| 700 |
|
| - |
|
| 700 |
|
| Other assets, net | | |
| 3,100 |
|
| 100 |
|
| 3,200 |
|
5 years | | |
| Long-term liabilities | | |
| (1,700 |
) |
| - |
|
| (1,700 |
) |
| Inventory | | |
| 1,200 |
|
| 300 |
|
| 1,500 |
|
Up to a quarter | | |
| Customer base and backlog | | |
| - |
|
| 4,000 |
|
| 4,000 |
|
2-12 years | | |
| Technology | | |
| - |
|
| 2,400 |
|
| 2,400 |
|
10 years | | |
| Brand name | | |
| - |
|
| 800 |
|
| 800 |
|
15 years | | |
| IPR&D | | |
| - |
|
| 1,000 |
|
| 1,000 |
|
immediate write-off | | |
| Goodwill | | |
| - |
|
| 3,300 |
|
| 3,300 |
|
indefinite-subject to annual impairment test | | |
|
| |
| |
| |
|
| |
|
|
$ |
6,400 |
|
$ |
11,900 |
|
$ |
18,300 |
|
|
| |
| |
| |
|
| Note 2 — |
SIGNIFICANT ACCOUNTING POLICIES |
| |
|
A. |
|
The
significant accounting policies followed in the preparation of these
statements are identical to those applied in preparation of the latest
annual financial statements, except for the adoption of FASB Statement No.
123 (revised 2004), “Share-Based Payments” (“Statement
123(R)”) as follows: |
| |
Through
December 31, 2005, the Company adopted the fair value based method of recording stock
options for all employee stock option grants consistent with SFAS No. 123, “Accounting
for Stock-Based Compensation” (SFAS No. 123”). Effective January 1, 2006, the
Company adopted the provisions of Statement 123(R), using the modified prospective
method. The adoption of Statement 123(R) did not have a material effect on the Company’s
financial position and results of operations. |
| |
|
B. |
|
In
July 2006, the FASB issued FASB Interpretation No. 48 “Accounting for
Uncertainty in Income Taxes an Interpretation of FASB Statement No. 109” (“FIN
48”). FIN 48 clarifies the accounting for income taxes by prescribing
the minimum recognition threshold a tax position is required to meet
before being recognized in the financial statements. |
11
ELBIT SYSTEMS LTD. AND
ITS SUBSIDIARIES
| NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED |
|
|
|
|
|
| U.S. dollars (In thousands, except per share data) |
|
|
| Note 2 — |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
| |
FIN
48 utilizes a two-step approach for evaluating tax positions. Recognition (step one)
occurs when an enterprise concludes that a tax position, based solely on its technical
merits, is more-likely-than-not to be sustained upon examination. Measurement (step two)
is only addressed if step one has been satisfied (i.e., the position is
more-likely-than-not to be sustained). Under step two, the tax benefit is measured as the
largest amount of benefit, determined on a cumulative probability basis that is
more-likely-than-not to be realized upon ultimate settlement. |
| |
FIN
48 applies to all tax positions related to income taxes subject to the Financial
Accounting Standard Board Statement No. 109, “Accounting for income taxes”(“FAS
109”). This includes tax positions considered to be “routine” as well as
those with a high degree of uncertainty. FIN 48 has expanded disclosure requirements,
which include a tabular roll forward of the beginning and ending aggregate unrecognized
tax benefits as well as specific detail related to tax uncertainties for which it is
reasonably possible the amount of unrecognized tax benefit will significantly increase or
decrease within twelve months. These disclosures are required at each annual reporting
period unless a significant change occurs in an interim period. FIN 48 is effective for
fiscal years beginning after December 15, 2006. The cumulative effect of applying FIN 48
will be reported as an adjustment to the opening balance of retained earnings. |
| |
The
Company is currently evaluating the effect of the adoption of FIN 48 on its financial
statements. |
| |
|
C. |
|
The
accompanying financial statements have been prepared in U.S. dollars since
the U.S. dollar is the functional currency of the primary economic
environment in which the operations of the Group (which includes Elbit
Systems Ltd. and its subsidiaries) are conducted. |
| Note 3 — |
INVENTORIES, NET OF ADVANCES |
|
September 30,
2006
|
|
December 31,
2005
|
|
|
(Unaudited)
|
|
(Audited)
|
|
| Cost of long-term contracts in progress |
|
|
$ | 358,669 |
|
$ | 311,800 |
|
| Raw materials | | |
| 91,111 |
|
| 84,343 |
|
| Advances to suppliers and subcontractors | | |
| 46,342 |
|
| 40,095 |
|
|
| |
| |
| | | |
| 496,122 |
|
| 436,238 |
|
| Less - Cost incurred on contracts in progress | | |
| deducted from customer advances | | |
| 38,979 |
|
| 16,178 |
|
|
| |
| |
| | | |
| 457,143 |
|
| 420,060 |
|
| Less - Advances received from customers | | |
| 89,702 |
|
| 84,083 |
|
| Provision for losses | | |
| 7,654 |
|
| 7,549 |
|
|
| |
| |
| | | |
$ | 359,787 |
|
$ | 328,428 |
|
|
| |
| |
12
ELBIT SYSTEMS LTD. AND
ITS SUBSIDIARIES
| NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED |
|
|
|
|
|
| U.S. dollars (In thousands, except per share data) |
|
|
| Note 4 — |
RECONCILIATION TO ISRAELI GAAP |
| |
As
described in Note 1, the Company prepares its financial statements in accordance with
U.S. GAAP. See Note 23 to the 2005 annual financial statements for a description of the
differences between U.S. GAAP and Israeli GAAP in respect to the Company. The effects of
the differences between U.S. GAAP and Israeli GAAP on the Company’s financial
statements are detailed below. |
|
Nine months ended
September 30,
|
|
Year ended
December 31,
|
|
|
2006
|
|
2005
|
|
2005
|
|
|
(Unaudited)
|
|
(Audited)
|
|
| Net income as reported according to U.S. GAAP |
|
|
$ | 48,282 |
|
$ | 38,163 |
|
$ | 32,487 |
|
| Adjustments to Israeli GAAP | | |
| 3,471 |
|
| (4,336 |
) |
| (9,637 |
) |
|
| |
| |
| |
| Net income according to Israeli GAAP | | |
$ | 51,753 |
|
$ | 33,827 |
|
$ | 22,850 |
|
|
| |
| |
| |
| |
|
B. |
|
Effect
on shareholders’ equity |
|
As reported
|
|
Adjustments
|
|
As per
Israeli GAAP
|
|
| As of September 30, 2006 (Unaudited) |
|
|
| |
|
| |
|
| |
|
| Shareholders' equity | | |
$ | 478,409 |
|
| (16,279 |
) |
$ | 462,130 |
|
|
| |
| |
| |
| As of December 31, 2005 | | |
| Shareholders' equity | | |
$ | 450,777 |
|
| (19,279 |
) |
$ | 431,498 |
|
|
| |
| |
| |
13