SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the Month of November 2005
-----------------------
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:
|X| 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 |X| 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 15, 2005.
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, 2005.
Attached hereto as Exhibit 3 and incorporated herein by reference is
the Registrant's consolidated audited financial statements for the quarter ended
September 30, 2005.
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, 2005
EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION
----------- -----------
1. Press release dated November 15, 2005.
2. Management report.
3. Financial statements.
EXHIBIT 1
[LOGO OF ELBIT SYSTEMS, LTD.]
ELBIT SYSTEMS REPORTS THIRD QUARTER 2005 RESULTS
------------------------------------------------
REVENUES INCREASED BY 22.3% TO A RECORD $273.6 MILLION
BACKLOG OF ORDERS REACHED A NEW RECORD OF $ 2.405 BILLION
EXCLUDING ONE-TIME IN-PROCESS R&D WRITE-OFF RELATED TO TADIRAN SHARE PURCHASE,
NET PROFIT AND EPS REACHED $15.8 MILLION AND $0.38, RESPECTIVELY
HAIFA, ISRAEL, NOVEMBER 15, 2005 - ELBIT SYSTEMS LTD. (THE "COMPANY") (NASDAQ:
ESLT), the international defense company, today reported its consolidated
results for the third quarter ended September 30, 2005.
THE COMPANY'S BACKLOG OF ORDERS AS OF SEPTEMBER 30, 2005 reached $2,405 million,
an 11.7% increase as compared to $2,154 million at the end of 2004.
Approximately 65% of the backlog relates to orders outside of Israel.
Approximately 50% of the Company's backlog as of September 30, 2005 is scheduled
to be performed over the last quarter of 2005 and during 2006.
CONSOLIDATED REVENUES FOR THE THIRD QUARTER OF 2005 increased by 22.3% to $273.6
million from $223.8 million in the third quarter of 2004.
GROSS PROFIT FOR THE THIRD QUARTER OF 2005 increased by 20.3% to $73.7 million
(26.9% of revenues), as compared with gross profit of $61.2 million (27.4% of
revenues) in the third quarter of 2004.
REPORTED CONSOLIDATED NET INCOME FOR THE THIRD QUARTER OF 2005 increased by 9.4%
to $14.6 million (5.3% of revenues), as compared with $13.3 million (5.9% of
revenues) in the third quarter of 2004. Reported diluted earnings per share for
the third quarter of 2005 were $0.35, as compared with $0.32 for the third
quarter of 2004.
Excluding the one-time in-process R&D write-off related to the share purchase of
Tadiran Communications Ltd. ("Tadiran"), the Company's net income for the third
quarter of 2005 was $15.8 million (or 5.8% of revenues) and the diluted EPS was
$0.38.
As previously reported, the Company's financial results for the third quarter of
2005 were affected by its acquisition of Tadiran shares from Koor Industries
Ltd. ("Koor"). As a result of the completion of the second stage of the
agreement to acquire Koor's holdings in Tadiran, which included the purchase of
an additional 5% of Tadiran's shares during the
[LOGO OF ELBIT SYSTEMS, LTD.]
third quarter of 2005, the Company recorded a $1.2 million write-off of
In-Process Research & Development in the third quarter of 2005. All the effects
of the Tadiran transaction are recorded as part of the Company's earnings from
affiliated companies in its income statement
During the first nine months of 2005 the Company produced an operating cash flow
of $96.4 million.
The President and CEO of Elbit Systems, Joseph Ackerman, commented: "We are
pleased to report the third quarter results, in which we reached the highest
quarterly revenues in our history. These results continue the trend of
profitable growth that we have demonstrated for many consecutive quarters. The
high backlog of orders does not include some large and important orders, such as
the UK Watchkeeper, the U.S. Marine Corps contract and other contracts that we
received following the end of the quarter. All of this provides us with a high
level of confidence in the continued growth of Elbit Systems going forward,
supported by our on going investments in R&D in order to maintain technological
leadership in our many business areas."
The Board of Directors declared a dividend of $0.14 per share for the third
quarter of 2005. The dividend's record date is November 29, 2005, and the
dividend will be paid on December 12, 2005, net of taxes and levies, at the rate
of 22.1%.
CONFERENCE CALL
The Company will be hosting a conference call today, Tuesday, November 15, at
10.00am EST. On the call, management will review and discuss the third quarter
2005 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 5 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: 1 866 860 9642
UK Dial-in Number: 0 800 917 5108
ISRAEL Dial-in Number: 03 918 0610
INTERNATIONAL Dial-in Number: +972 3 918 0610
At:
10:00am Eastern Standard Time
7:00am Pacific Standard Time
3:00pm Greenwich Mean Time
5:00pm Israel Time
[LOGO OF ELBIT SYSTEMS, LTD.]
This call will also be broadcast live on Elbit Systems' web-site at
HTTP://WWW.ELBITSYSTEMS.COM. An online replay will be available from 48 hours
after the call ends, and will be available online for 30 days.
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: 1 888 269 0005 (US) or +972 3 925 5945 (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, in the areas of
aerospace, ground and naval systems, command, control, communications,
computers, intelligence, surveillance and reconnaissance (C4ISR) and advanced
electro-optic technologies. The Company focuses on the upgrading of existing
military platforms and developing new technologies for defense applications. For
further information, please visit the Company web site at www.elbitsystems.com
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 December 31
2005 2004
--------- ---------
Unaudited (**)
ASSETS
Current Assets:
Cash and short term deposits 150,949 34,847
Trade receivable and others 288,632 *267,903
Inventories, net of advances 294,069 249,041
--------- ---------
Total current assets 733,650 551,791
Affiliated Companies & other Investments 150,618 *59,618
Long-term receivables & others 85,241 85,100
Fixed Assets, net 252,311 244,288
Other assets, net 93,403 95,987
--------- ---------
1,315,223 1,036,784
========= =========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities 454,611 378,450
Long-term liabilities 397,237 221,810
Minority Interest 3,915 4,340
Shareholder's equity 459,460 *432,184
--------- ---------
1,315,223 1,036,784
========= =========
* Restated due to the Tadiran share purchase transaction
** Derived from the Company's 2004 audited financial statements
ELBIT SYSTEMS LTD.
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(In thousand of US Dollars, except for per share amounts)
Nine Months Ended Three Months Ended Year Ended
September 30 September 30 December 31
2005 **2004 2005 **2004 2004
-------- -------- -------- -------- --------
Unaudited Unaudited (***)
Revenues 748,116 669,150 273,646 223,833 939,925
Cost of revenues 546,790 491,427 199,969 162,588 689,626
-------- -------- -------- -------- --------
Gross Profit 201,326 177,723 73,677 61,245 250,299
Research and development, net 53,443 43,570 20,482 16,543 66,846
Marketing and selling 54,695 50,722 20,309 15,562 69,912
General and administrative 38,262 34,957 12,838 12,226 47,832
-------- -------- -------- -------- --------
Total operating expenses 146,400 129,249 53,629 44,331 184,590
-------- -------- -------- -------- --------
Operating income 54,926 48,474 20,048 16,914 65,709
Financial expenses, net (6,273) (2,878) (3,076) (1,577) (5,852)
Other income, net (192) (61) (6) 23 770
-------- -------- -------- -------- --------
Income before income taxes 48,461 45,535 16,966 15,360 60,627
Taxes on income 12,289 11,712 4,246 3,933 15,219
-------- -------- -------- -------- --------
36,172 33,823 12,720 11,427 45,408
Company's share of partnerships and
affiliated Companies income, net 1,339 4,586 1,465 1,616 *6,645
Minority rights 652 459 379 271 (180)
-------- -------- -------- -------- --------
Net income 38,163 38,868 14,564 13,314 *51,873
======== ======== ======== ======== ========
Earnings per share
Basic net earnings per share $0.94 $0.98 $0.36 $0.33 *$1.30
======== ======== ======== ======== ========
Diluted net earnings per share $0.92 $0.95 $0.35 $0.32 *$1.26
======== ======== ======== ======== ========
* Restated due to the Tadiran share purchase transaction
** Restated due to the adoption of SFAS 123
*** Derived from the Company's 2004 audited financial statements
EXHIBIT 2
ELBIT SYSTEMS LTD.
------------------
MANAGEMENT'S REPORT
-------------------
FOR THE THREE AND NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2005
------------------------------------------------------------
THIS REPORT SHOULD BE READ TOGETHER WITH THE UNAUDITED FINANCIAL
STATEMENTS OF ELBIT SYSTEMS LTD. ("ELBIT SYSTEMS" OR THE "COMPANY") AND
TOGETHER WITH ITS SUBSIDIARIES (THE "GROUP") FOR THE QUARTER ENDED
SEPTEMBER 30, 2005, THE COMPANY'S AUDITED CONSOLIDATED FINANCIAL
STATEMENTS AND RELATED NOTES FOR THE YEAR ENDED DECEMBER 31, 2004, THE
COMPANY'S MANAGEMENT REPORT FOR THE YEAR ENDED DECEMBER 31, 2004 AND
THE COMPANY'S FORM 20-F FOR THE YEAR ENDED DECEMBER 31, 2004, 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 FILINGS WITH THE U.S. SECURITIES AND EXCHANGE
COMMISSION.
A. EXECUTIVE OVERVIEW
------------------
BUSINESS DESCRIPTION
--------------------
Elbit Systems and its subsidiaries (the "Group") operate in the area of
upgrading existing airborne, ground and naval defense platforms and are
engaged in projects involving the design, development, manufacture and
integration of advanced integrated defense systems, electronic systems,
electro-optic systems and products and software intensive programs and
products for the defense and homeland security sectors. In addition,
the Company provides support services for such platforms, systems and
products.
The Group is engaged in leading projects in Israel and worldwide, in
areas such as air, ground and naval Command, Control, Communication,
Computers, Intelligence, Surveillance and Reconnaissance ("C(4)ISR")
systems, digital maps, night vision systems, pilot helmet mounted
systems, display and data processing systems, unmanned air vehicles
("UAVs"), computerized simulators, communication systems, thermal
imaging products, laser products, optical systems for space
applications, airborne reconnaissance systems, optic communication
systems and products, systems for Homeland Defense products,
surveillance products and systems and electric drive systems.
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.
1
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.
FINANCIAL HIGHLIGHTS
--------------------
The Company's revenues increased by 22.3% and reached $273.6 million in
the third quarter of 2005, as compared to $223.8 million in the third
quarter of 2004.
Net earnings in the third quarter of 2005 were $14.6 million and the
diluted earnings per share were $0.35, as compared to $13.3 million and
$0.32 in the third quarter of 2004. Excluding the In Process Research
and Development ("IPR&D") write-off of approximately $1.2 million
related to the acquisition of approximately 5% Tadiran Communications
Ltd.'s shares in the third quarter of 2005, net earnings in the quarter
ended September 30, 2005 were $15.8 million, and the diluted EPS was
$0.38.
The Company's backlog as of September 30, 2005 reached $2.41 billion,
as compared to $2.15 billion as of December 31, 2004.
The Company's cash flow generated from operations in the nine-month
period ended September 30, 2005 was $96.4 million, as compared to $85.4
million in the nine-month period ended September 30, 2004.
The Board of Directors declared a dividend of $0.14 per share for the
third quarter.
B. RECENT EVENTS
-------------
o On August 23, 2005, the Company's Extraordinary General
Meeting of Shareholders passed a resolution approving and
ratifying the agreements entered into by the Company on July
6, 2005 regarding the purchase from Koor Industries Ltd.
("Koor") of Koor's ordinary shares in Elisra Electronic
Systems Ltd. ("Elisra"), as well as ratifying the amendment
agreement entered into on July 6, 2005 by the Company and Koor
amending the original share transfer deed and shareholders
agreements entered into on December 27, 2004 regarding the
Company's purchase of Koor's ordinary shares in Tadiran
Communications Ltd. ("Tadiran").
o On August 25, 2005, the Company completed the second stage of
the transaction to purchase shares of Tadiran from Koor, and
purchased from Koor, in this stage, approximately 5% of the
share equity of Tadiran. In addition to the shares previously
purchased by the Company in the transaction's first stage and
on the stock market, the Company currently owns approximately
26% of Tadiran's shares.
The results of the third quarter of 2005 include a write-off
of IPR&D in the amount of approximately $1.2 million related
to the Tadiran shares acquired in the third quarter of 2005,
and further effects on the Company's financial results are
expected to occur in the event of additional purchases of
Tadiran shares either from Koor in accordance with the
amendments to the agreements with Koor, announced on July 6,
2005 or on the stock market, as well as the purchase of Koor's
shares in Elisra, subject to receipt of the required
approvals. The effect on the Company's financial results of
future purchases of shares of Tadiran as well as the
anticipated purchase of shares in Elisra will be reported
following completion of the respective purchases.
2
o On September 1, 2005, the Company announced, further to its
announcement dated April 18, 2005, the entering into effect of
the contract to supply the Turkish Army with UAV systems,
signed in May 2005 by IUP, an equally-owned partnership
between the Company and Israel Aircraft Industries Ltd.
("IAI"). IUP will act as the major subcontractor to the TUSAS
Aerospace Industry for this program and will deliver the UAV
systems to the Turkish MOD over a three-year period. IUP's
contract is valued at $150 million and will be divided equally
between the Company and IAI.
o On October 6, 2005, the Company reported that its wholly-owned
subsidiary EFW Inc. ("EFW") was awarded a $57 million
framework contract by the US Government to supply ANVIS/HUD
systems for U.S. Army utility helicopters and other DOD
rotary-wing platforms. Under this contract, which will cover
up to a five-year period, the Army may place purchase orders
with EFW for ANVIS/HUD systems from time to time for up to the
aggregate amount of the contract.
o On October 28, 2005, the Company reported that its joint
venture company with Thales UK, UAV Tactical Systems Limited
("U-TacS"), was awarded by Thales UK over $500 million in
orders to be performed over an eight-year period. U-TacS'
financial statements will be consolidated within the Company's
financial reports. This order is part of the WATCHKEEPER
program for which the UK Ministry of Defense and Thales UK
signed a (pound)700 million contract in August 2005. U-TacS
will execute significant portions of the WATCHKEEPER Program
for Thales UK, the WATCHKEEPER prime contractor. The majority
of U-TacS' activity will be executed in the UK with a
significant amount of its work sub-contracted to small and
medium sized enterprises across the UK. Elbit Systems is
U-TacS' largest subcontractor with approximately one-third of
this contract's value. U-TacS is expected to employ, during
the initial stages, dozens of workers, most of whom will be
recruited locally. U-TacS is currently in the process of
establishing its facilities in the UK city of Leicester. In
addition to executing the WATCHKEEPER Program, Elbit Systems
and Thales have agreed to jointly market tactical UAV projects
in other countries worldwide.
o On November 1, 2005, the Company's subsidiary jointly owned
with Rockwell Collins, Vision Systems International, LLC
("VSI"), a leader in advanced Helmet Mounted Display
technology, announced the receipt of several new contracts
with a total potential value of more than $100 million. The
Boeing Company awarded VSI a contract for the delivery of more
than 500 additional Joint Helmet Mounted Cueing Systems
("JHMCS"). VSI also received direct contracts from the United
States Navy and Air Force for spares and test equipment in
support of the JHMCS program.
o On November 6, 2005, the Company reported that EFW was awarded
a contract from the U.S. Marine Corps Systems Command in
response to a compelling and urgent need for an operational
capability. The program requires EFW's team to develop,
design, integrate, test, produce and install equipment into a
variety of USMC vehicles. The value of this order is
approximately $70M and is expected to be completed in 2006.
o During the first week of November 2005, a wholly-owned
subsidiary of the Company, received notice from a customer
informing it that unless certain deficiencies identified by
the customer in an airborne system are remedied within a short
time period, the customer intends to terminate the contract.
The amount of the contract is approximately $35 million. The
Company is engaged in clarifications with the customer in
order to address the customer's concerns in a satisfactory
manner. The Company believes that the potential outcome
relating to the notice received will not have a material
adverse effect on the Company's financial statements.
3
C. BACKLOG OF ORDERS
-----------------
The Company's backlog of orders as of September 30, 2005 reached $2,405
million, of which 65% was for orders outside Israel. The Company's
backlog as of December 31, 2004 was $2,154 million, of which 66% was
for orders outside Israel.
Approximately 50% of the Company's backlog as of September 30, 2005 is
scheduled to be performed in the last quarter of 2005 and during 2006.
The majority of the 50% of the Company's backlog balance is scheduled
to be performed in 2007 and 2008.
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, 2004. See also the Company's management report for the
year ended December 31, 2004.
E. STOCK-BASED COMPENSATION
------------------------
Effective January 1, 2004, the Company adopted the fair value
recognition provision of SFAS No. 123. Following the adoption of SFAS
No. 123, the financial results are no longer materially affected by the
impact of changes in the Company's share price on employee stock-based
compensation.
As a result of the adoption of SFAS No. 123 from January 1, 2004, the
statement of income and diluted net earnings per share of the first
three quarters of 2004 were restated for purposes of comparison, as
follows:
Q1/04 Q2/04 Q3/04 1-9/04
----- ----- ----- ------
Net income as previously reported in 2004 $ 12,727 $ 11,311 $ 13,707 $ 37,746
========== ========== ========== ==========
Restated net income (according to SFAS No. 123) $ 12,252 $ 13,302 $ 13,314 $ 38,868
========== ========== ========== ==========
Diluted net earnings per share as reported in 2004 $ 0.31 $ 0.28 $ 0.33 $ 0.92
========== ========== ========== ==========
Restated diluted net earnings per share (according to SFAS No. 123) $ 0.30 $ 0.33 $ 0.32 $ 0.95
========== ========== ========== ==========
4
F. SUMMARY OF FINANCIAL RESULTS
The following table sets forth the reported consolidated statements of
income of the Company for the three and nine-month periods ended
September 30, 2005 and September 30, 2004. The results of the three and
nine-month periods of 2004 and of the first quarter of 2005 reflect
restatements regarding the Tadiran share acquisition and the
stock-based compensation (see above).
For the nine months ended For the three months ended
September 30 September 30
------------ ------------
2005 2004 2005 2004
---------------- ----------------- ----------------- ----------------
$ % $ % $ % $ %
(In thousands of U.S. dollars except per share data)
Total revenues 748,116 100.0 669,150 100.0 273,646 100.0 223,833 100.0
Cost of revenues 546,790 73.1 491,427 73.4 199,969 73.1 162,588 72.6
------- ---- ------- ---- ------- ---- ------- ----
Gross profit 201,326 26.9 177,723 26.6 73,677 26.9 61,245 27.4
------- ---- ------- ---- ------- ---- ------- ----
Research and development
(R&D) expenses 66,893 8.9 53,998 8.1 24,840 9.1 21,301 9.5
Less - participation (13,450) (1.8) (10,428) (1.6) (4,358) (1.6) (4,758) (2.1)
------- ---- ------- ---- ------- ---- ------- ----
R&D expenses, net 53,443 7.1 43,570 6.5 20,482 7.5 16,543 7.4
Marketing and selling expenses 54,695 7.3 50,722 7.6 20,309 7.4 15,562 7.0
General and administrative expenses 38,262 5.1 34,957 5.2 12,838 4.7 12,226 5.5
------- ---- ------- ---- ------- ---- ------- ----
146,400 19.6 129,249 19.3 53,629 19.6 44,331 19.8
------- ---- ------- ---- ------- ---- ------- ----
Operating income 54,926 7.3 48,474 7.2 20,048 7.3 16,914 7.6
Finance expenses, net (6,273) (0.8) (2,878) (0.4) (3,076) (1.1) (1,577) (0.7)
Other expenses, net (192) - (61) - (6) - 23 0.0
------- ---- ------- ---- ------- ---- ------- ----
Income before taxes on income 48,461 6.5 45,535 6.8 16,966 6.2 15,360 6.9
Taxes on income 12,289 1.7 11,712 1.7 4,246 1.6 3,933 1.8
------- ---- ------- ---- ------- ---- ------- ----
36,172 4.8 33,823 5.1 12,720 4.6 11,427 5.1
Minority interest in losses (gains)
of subsidiaries 652 0.1 459 0.1 379 0.1 271 0.1
Equity in net earnings of affiliated
companies and partnership 1,339 0.2 4,586 0.7 1,465 0.5 1,616 0.7
------- ---- ------- ---- ------- ---- ------- ----
Net earnings 38,163 5.1 38,868 5.8 14,564 5.3 13,314 5.9
====== === ====== === ====== === ====== ===
Diluted earnings per share 0.92 0.95 0.35 0.32
==== ==== ==== ====
5
REVENUES
--------
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, 2005, Compared to Three Months
Ended on September 30, 2004
-----------------------------------------------------------------------
The consolidated revenues increased by 22.3% from $223.8 million in the
third quarter of 2004 to $273.6 million in the third quarter of 2005.
The following table sets forth the Company's revenue distribution by
areas of operation:
Three-Month Period ended
------------------------
September 30, 2005 September 30, 2004
------------------ ------------------
$ millions % $ millions %
---------- - ---------- -
Airborne systems 114.9 42.0 91.8 41.0
Land systems 39.5 14.4 39.2 17.6
C(4)ISR systems 44.9 16.4 36.2 16.2
Electro-optics 54.4 19.9 42.2 18.8
Other (mainly non-defense engineering and
production services) 19.9 7.3 14.4 6.4
----- ----- ----- -----
Total 273.6 100.0 223.8 100.0
===== ===== ===== =====
The following table sets forth the Company's distribution of revenues
by geographic regions:
Three-Month Period ended
------------------------
September 30, 2005 September 30, 2004
------------------ ------------------
$ millions % $ millions %
---------- - ---------- -
Israel 61.3 22.4 52.9 23.7
United States 114.5 41.8 91.4 40.9
Europe 31.1 11.4 29.2 13.0
Other countries 66.7 24.4 50.3 22.4
---- ---- ---- ----
Total 273.6 100.0 223.8 100.0
===== ===== ===== =====
Nine Months Ended on September 30, 2005, Compared to Nine Months Ended
on September 30, 2004
-----------------------------------------------------------------------
The Company's consolidated revenues increased by 11.8%, from $669.2
million in the first nine months of 2004 to $748.1 million in the first
nine months of 2005.
The following table sets forth the Company's revenue distribution by
areas of operation:
Nine-Month Period ended
-----------------------
September 30, 2005 September 30, 2004
------------------ ------------------
$ millions % $ millions %
---------- - ---------- -
Airborne systems 309.3 41.3 270.5 40.4
Land systems 98.7 13.2 139.8 20.9
C(4)ISR systems 133.1 17.8 93.6 14.0
Electro-optics 153.8 20.6 127.1 19.0
Other (mainly non-defense engineering and
production services) 53.2 7.1 38.2 5.7
----- ------ ------ -----
Total 748.1 100.0 669.2 100.0
===== ====== ====== =====
6
The following table sets forth the Company's distribution of revenues
by geographic regions:
Nine-Month Period ended
-----------------------
September 30, 2005 September 30, 2004
------------------ ------------------
$ millions % $ millions %
---------- - ---------- -
Israel 206.3 27.6 163.4 24.4
United States 291.9 39.0 258.2 38.6
Europe 65.7 8.8 94.9 14.2
Other countries 184.2 24.6 152.7 22.8
----- ---- ----- ----
Total 748.1 100.0 669.2 100.0
===== ===== ===== =====
The changes in revenues by geographic distribution, other than standard
quarterly fluctuations, were in the revenues from customers in Europe,
which decreased mainly as a result of the temporary reduction in the
land systems area of operations, while revenues in all other
geographical regions increased.
GROSS PROFIT
------------
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.
Three Months Ended on September 30, 2005, Compared to Three Months
Ended on September 30, 2004
-----------------------------------------------------------------------
The Company's gross profit in the quarter ended September 30, 2005 was
$73.7 million as compared to $61.2 million in the quarter ended
September 30, 2004. The gross profit margin in the third quarter of
2005 was 26.9% as compared to 27.4% in the same period last year. The
difference in the gross profit was as a result of the mix of programs
generating revenues in the applicable periods, which included in the
third quarter of 2004 certain programs with a relatively higher gross
profit.
Nine Months Ended on September 30, 2005, Compared to Nine Months Ended
on September 30, 2004
-----------------------------------------------------------------------
The Company's gross profit in the nine months ended September 30, 2005
was $201.3 million as compared to $177.7 million in the nine months
ended September 30, 2004. The gross profit margin in the nine months
ended September 30, 2005 was 26.9% as compared to 26.6% in the
corresponding period of the previous year. The difference in the gross
profit was the result of the mix of programs generating revenues in the
applicable periods.
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 activities in the reported period were in accordance
with its strategic plans. Some of these activities are coordinated
with, and partially funded by, third parties, including the Israeli
Ministry of Defense ("IMOD") and the Office of the Chief Scientist
("OCS"). These programs were mainly in the areas of advanced airborne
systems, cutting edge electro-optics technology and products for
surveillance, aerial reconnaissance, lasers and space based sensors.
Further to the trend that began in the fourth quarter of 2004, the
Company increased its R&D efforts, mainly in the areas of airborne,
land and electro-optics systems, for the development of advanced
technologies and products to meet expected market requirements.
7
Three Months Ended on September 30, 2005, Compared to Three Months
Ended on September 30, 2004
-----------------------------------------------------------------------
Gross R&D expenses in the quarter ended September 30, 2005 totaled
$24.8 million (9.1% of revenues), as compared to $21.3 million (9.5% of
revenues) in the quarter ended September 30, 2004.
Net R&D expenses (after deduction of third party participation,
including the IMOD and the OCS) in the quarter ended September 30, 2005
totaled $20.5 million (7.5% of revenues), as compared to $16.5 million
(7.4% of revenues) in the quarter ended September 30, 2004.
Nine Months Ended on September 30, 2005, Compared to Nine Months Ended
on September 30, 2004
-----------------------------------------------------------------------
Gross R&D expenses in the nine months ended September 30, 2005 totaled
$66.9 million (8.9% of revenues), as compared to $54.0 million (8.1% of
revenues) in the nine months ended September 30, 2004.
Net R&D expenses (after deduction of third party participation,
including the IMOD and the OCS) in the nine-month period ended
September 30, 2005 totaled $53.4 million (7.1% of revenues), as
compared to $43.6 million (6.5% of revenues) in the nine-month period
ended September 30, 2004.
MARKETING AND SELLING EXPENSES
------------------------------
The Company maintains its activities in developing new markets and
pursues various business opportunities according to the Company's plan.
Three Months Ended on September 30, 2005, Compared to Three Months
Ended on September 30, 2004
-----------------------------------------------------------------------
Marketing and selling expenses in the quarter ended September 30, 2005
were $20.3 million (7.4% of revenues), as compared to $15.6 million
(7.0% of revenues) in the quarter ended September 30, 2004.
Nine Months Ended on September 30, 2005, Compared to Nine Months Ended
on September 30, 2004
-----------------------------------------------------------------------
Marketing and selling expenses in the nine months ended September 30,
2005 were $54.7 million (7.3% of revenues), as compared to $50.7
million (7.6% of revenues) in the nine months ended September 30, 2004.
GENERAL AND ADMINISTRATIVE ("G&A") EXPENSES
-------------------------------------------
Three Months Ended on September 30, 2005, Compared to Three Months
Ended on September 30, 2004
-----------------------------------------------------------------------
G&A expenses were $12.8 million (4.7% of revenues) in the quarter ended
September 30, 2005, as compared to $12.2 million (5.5% of revenues) in
the quarter ended September 30, 2004.
Nine Months Ended on September 30, 2005, Compared to Nine Months Ended
on September 30, 2004
-----------------------------------------------------------------------
G&A expenses were $38.3 million (5.1% of revenues) in the nine months
ended September 30, 2005, as compared to $35.0 million (5.2% of
revenues) in the nine months ended September 30, 2004.
FINANCE EXPENSE (NET)
---------------------
The increase in the net finance expense resulted mainly from a higher
level of long-term loans, currency exchange rate differences and an
increase in market interest rates.
8
Three Months Ended on September 30, 2005, Compared to Three Months
Ended on September 30, 2004
-----------------------------------------------------------------------
Net finance expense in the quarter ended September 30, 2005 was $3.1
million, as compared to $1.6 million of finance expense in the quarter
ended September 30, 2004.
Nine Months Ended on September 30, 2005, Compared to Nine Months Ended
on September 30, 2004
-----------------------------------------------------------------------
Net finance expense in the six months ended September 30, 2005 was $6.3
million, as compared to $2.9 million of finance expense in the nine
months ended September 30, 2004.
TAXES ON INCOME
---------------
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 and the recent decrease in the
tax rate in Israel.
Three Months Ended on September 30, 2005, Compared to Three Months
Ended on September 30, 2004
-----------------------------------------------------------------------
Provision for taxes in the quarter ended September 30, 2005 was $4.2
million (effective tax rate of 25.0%), as compared to a provision for
taxes of $3.9 million (effective tax rate of 25.6%) in the quarter
ended September 30, 2004.
Nine Months Ended on September 30, 2005, Compared to Nine Months Ended
on September 30, 2004
-----------------------------------------------------------------------
Provision for taxes in the nine months ended September 30, 2005 was
$12.3 million (effective tax rate of 25.4%), as compared to a provision
for taxes of $11.7 million (effective tax rate of 25.7%) in the nine
months ended September 30, 2004.
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 and airborne
systems. This includes the Company's share in the earnings of Tadiran
and reflects the impact of the corresponding purchase price allocation
adjustments described above.
Three Months Ended on September 30, 2005, Compared to Three Months
Ended on September 30, 2004
-----------------------------------------------------------------------
In the third quarter of 2005 the Company had net income of $1.5 million
from its share in earnings of affiliated companies and partnership, as
compared to net income of $1.6 million in the third quarter of 2004.
Nine Months Ended on September 30, 2005, Compared to Nine Months Ended
on September 30, 2004
-----------------------------------------------------------------------
In the nine months ended September 30, 2005 the Company had net income
of $1.3 million from its share in earnings of affiliated companies and
partnership, as compared to net income of $4.6 million in the nine
months ended September 30, 2004. The decrease was mainly as a result of
the IPR&D write-off related to Tadiran.
9
NET EARNINGS AND EARNINGS PER SHARE ("EPS")
-------------------------------------------
Three Months Ended on September 30, 2005, Compared to Three Months
Ended on September 30, 2004
-----------------------------------------------------------------------
Net earnings in the quarter ended September 30, 2005 were $14.6 million
(5.3% of revenues), as compared to reported net earnings of $13.3
million (5.9% of revenues) in the quarter ended September 30, 2004.
Diluted EPS in the quarter ended September 30, 2005 was $0.35, as
compared to $0.32 in the quarter ended September 30, 2004.
Excluding the IPR&D write-off related to Tadiran (included in "Equity
in net earnings of affiliated companies and partnerships"), which
amounted to approximately $1.2 million, net earnings in the quarter
ended September 30, 2005 were $15.8 million (5.8% of revenues), and the
diluted EPS was $0.38.
The number of shares used for computation of diluted EPS in the quarter
ended September 30, 2005 was 41,614 thousand shares, as compared to
41,161 thousand shares in the quarter ended September 30, 2004.
Nine Months Ended on September 30, 2005, Compared to Nine Months Ended
on September 30, 2004
-----------------------------------------------------------------------
Net earnings in the nine months ended September 30, 2005 were $38.2
million (5.1% of revenues), as compared to net earnings of $38.9
million (5.8% of revenues) in the nine months ended September 30, 2004.
Diluted EPS in the nine months ended September 30, 2005 was $0.92, as
compared to $0.95 per share in the nine months ended September 30,
2004.
Excluding the IPR&D write-off related to Tadiran, which amounted to
approximately $5.3 million, net earnings in the nine months ended
September 30, 2005 were $43.4 million (5.8% of revenues), and the
diluted EPS was $1.04.
The number of shares used for computation of diluted EPS in the nine
months ended September 30, 2005 was 41,616 thousand shares, as compared
to 40,924 thousand shares in the nine months ended September 30, 2004.
G. LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company's net cash flow generated from operating activities in the
nine months ended September 30, 2005 was $96.4 million, resulting
mainly from net income and advances received from customers. The cash
inflows were partially offset, mainly by an increase in inventories and
by payments of trade payables.
Net cash flow used for investment activities in the nine months ended
September 30, 2005 was $136.8 million, which was used mainly for
acquisition of Tadiran's shares and for procurement of various assets
and equipment.
Net cash flow from financing activities in the nine months ended
September 30, 2005 was $156.3 million, which was mainly from receipt of
long-term loans.
On September 30, 2005, the Company had total borrowings in the amount
of $263.1 million, including $253.6 million in long-term loans, and
$453 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, 2005, the Company had a
cash balance amounting to $150.1 million.
10
The Company and some of its subsidiaries operate with loan and credit
agreements that contain certain covenants. Such covenants include
requirements for shareholders' equity, current ratio, operating profit
margin, tangible net worth, EBITDA, interest coverage ratio and total
leverage. As of September 30, 2005, the Company and its subsidiaries
are in full compliance with all such covenants.
As of September 30, 2005, the Company had working capital of $279
million, and its current ratio was 1.61. The Company's ratio of equity
to total assets was 35%.
H. 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, 2005, 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 the Tadiran shares
acquired as mentioned above. The Company's deposits and loans are based
on variable 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,
2005, the Company had exposure due to liabilities denominated in NIS of
$78 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, 2005 by forward contracts and options. On September 30,
2005, the Company had forward contracts for the sale and purchase of
such foreign currencies totaling $221 million ($16 million in Euro,
$199 million in GBP and $6 million in other currencies). The financial
derivative activities in this quarter resulted in an unrealized net
gain of approximately $2.9 million, which was recorded as other
comprehensive income.
I. APPOINTMENT OF A DIRECTOR
-------------------------
On August 25, 2005, the Company reported that Mr. Israel (Izzy) Tapoohi
was appointed as a director to the Company's Board.
J. DIVIDENDS
---------
The Board of Directors declared on November 14, 2005 a dividend of
$0.14 per share.
* * * * *
11
EXHIBIT 3
ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2005
(Unaudited)
(In thousands of U.S. dollars)
ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2005
(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 - 15
# # # # # #
ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
------------------------------------------------------------------------------------------------------------------------------------
U.S. dollars (in thousands)
SEPTEMBER 30, DECEMBER 31,
2005 2004
---------- ----------
(UNAUDITED) (**)
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents $ 150,063 $ 34,109
Short-term bank deposits 886 738
Trade receivables, (net of allowance for doubtful accounts
in the amount of $3,451 and $3,064 as of September 30, 2005 and
December 31, 2004, respectively) 231,928 214,816
Other receivables and prepaid expenses 56,704 *53,087
Inventories, net of advances 294,069 249,041
---------- ----------
Total current assets 733,650 551,791
---------- ----------
INVESTMENTS AND LONG-TERM RECEIVABLES:
Investments in affiliated companies and a partnership 138,873 *47,873
Investments in other companies 11,745 11,745
Long-term bank deposits and trade receivables 2,341 2,102
Severance pay fund 82,900 82,998
---------- ----------
235,859 144,718
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, NET 252,311 244,288
---------- ----------
INTANGIBLE ASSETS:
Goodwill 34,057 33,706
Other intangible assets, net 59,346 62,281
---------- ----------
93,403 95,987
---------- ----------
$1,315,223 $1,036,784
========== ==========
* Restated (See Note 1B)
** Derived from the Company's 2004 audited financial statements
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, DECEMBER 31,
2005 2004
----------- -----------
(UNAUDITED) (**)
----------- -----------
CURRENT LIABILITIES:
Short-term bank credit and loans $ 9,471 $ 8,592
Current maturities of long-term loans 3,284 1,656
Trade payables 128,728 118,391
Other payables and accrued expenses 161,704 169,702
Customers advances and amounts in excess of
costs incurred on contracts in progress 151,424 80,109
----------- -----------
Total current liabilities 454,611 378,450
----------- -----------
LONG-TERM LIABILITIES:
Long-term loans 253,637 86,234
Advances from customers 26,896 10,320
Deferred income taxes 24,475 24,516
Accrued termination liability 92,229 100,740
----------- -----------
397,237 221,810
----------- -----------
MINORITY INTERESTS 3,915 4,340
----------- -----------
SHAREHOLDERS' EQUITY:
Share capital
Ordinary shares of New Israeli Shekels (NIS) 1 par value;
Authorized 80,000,000 shares as of September 30, 2005 and
December 31, 2004;
Issued - 41,227,091 and 40,969,947 shares as of September 30,
2005 and December 31, 2004, respectively;
Outstanding - 40,818,170 and 40,561,026 shares as of
September 30, 2005 and December 31, 2004, respectively 11,604 11,548
Additional paid-in capital 277,137 274,432
Accumulated other comprehensive loss (2,522) *(4,742)
Retained earnings 177,562 *155,267
Treasury shares - 408,921 shares as of September 30,
2005 and December 31, 2004 (4,321) (4,321)
----------- -----------
459,460 *432,184
----------- -----------
$ 1,315,223 $ 1,036,784
=========== ===========
* Restated (See Note 1B)
** Derived from the Company's 2004 audited financial statements
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 THREE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
----------------------- ----------------------- ---------
2005 **2004 2005 **2004 2004
--------- --------- --------- --------- ---------
(UNAUDITED) (UNAUDITED) (***)
--------- --------- --------- --------- ---------
Revenues $ 748,116 $ 669,150 $ 273,646 $ 223,833 $ 939,925
Cost of revenues 546,790 491,427 199,969 162,588 689,626
--------- --------- --------- --------- ---------
Gross profit 201,326 177,723 73,677 61,245 250,299
--------- --------- --------- --------- ---------
Research and development costs, net 53,443 43,570 20,482 16,543 66,846
Marketing and selling expenses 54,695 50,722 20,309 15,562 69,912
General and administrative expenses 38,262 34,957 12,838 12,226 47,832
--------- --------- --------- --------- ---------
146,400 129,249 53,629 44,331 184,590
--------- --------- --------- --------- ---------
Operating income 54,926 48,474 20,048 16,914 65,709
Financial expenses, net (6,273) (2,878) (3,076) (1,577) (5,852)
Other income (expenses), net (192) (61) (6) 23 770
--------- --------- --------- --------- ---------
Income before taxes on income 48,461 45,535 16,966 15,360 60,627
Taxes on income 12,289 11,712 4,246 3,933 15,219
--------- --------- --------- --------- ---------
36,172 33,823 12,720 11,427 45,408
Equity in net earnings of affiliated
companies and partnership 1,339 4,586 1,465 1,616 *6,645
Minority interests in losses (earnings)
of subsidiaries 652 459 379 271 (180)
--------- --------- --------- --------- ---------
Net income $ 38,163 $ 38,868 $ 14,564 $ 13,314 *$51,873
========= ========= ========= ========= =========
Earnings per share
Basic net earnings per share $ 0.94 $ 0.98 $ 0.36 $ 0.33 *$1.30
========= ========= ========= ========= =========
Diluted net earnings per share $ 0.92 $ 0.95 $ 0.35 $ 0.32 *$1.26
========= ========= ========= ========= =========
Number of shares used in computation of
basic net earnings per share 40,709 39,822 40,775 40,060 39,952
========= ========= ========= ========= =========
Number of shares used in computation of
Diluted net earnings per share 41,616 40,924 41,614 41,161 41,041
========= ========= ========= ========= =========
* Restated (See Notes 1B)
** Restated (See Note 3)
*** Derived from the Company's 2004 audited financial statements
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)
ACCUMULATED
NUMBER OF ADDITIONAL OTHER
OUTSTANDING SHARE PAID-IN COMPREHENSIVE
SHARES CAPITAL CAPITAL INCOME (LOSS)
------------ ------------- ------------- ----------------
BALANCE AS OF JANUARY 1, 2004 39,337,204 $ 11,273 $ 259,033 $ (3,992)
Exercise of options 1,223,822 275 10,985 -
Cumulative effect of first time adoption
of the fair value based method for stock
based compensation expenses (152)
Tax benefit in respect of options exercised - - 1,179 -
Stock based compensation - - 3,387 -
Dividends paid - - - -
Other comprehensive income (loss):
Unrealized gains on derivative
instruments - - - (299)
Foreign currency translation differences - - - 450
Minimum pension liability - - - (901)
Net income - - - -
------------ ------------- ------------- ----------------
Total comprehensive income
BALANCE AS OF DECEMBER 31, 2004 40,561,026 11,548 274,432 (4,742)
Exercise of options 257,144 56 2,128 -
Tax benefit in respect of options exercised - - 477 -
Stock based compensation - - 100 -
Dividends paid - - - -
Other comprehensive income (loss):
Unrealized gains on derivative
instruments - - - 2,959
Foreign currency translation differences - - - (739)
Net income - - - -
------------ ------------- ------------- ----------------
Total comprehensive income
BALANCE AS OF SEPTEMBER 30, 2005
(UNAUDITED) 40,818,170 $ 11,604 $ 277,137 $ (2,522)
============ ============= ============= ================
TOTAL TOTAL
RETAINED TREASURY SHAREHOLDERS' COMPREHENSIVE
EARNINGS SHARES EQUITY INCOME (LOSS)
------------ ------------ --------------- -----------------
BALANCE AS OF JANUARY 1, 2004 $ 190,086 $ (4,321) $ 452,079
Exercise of options - - 11,260
Cumulative effect of first time adoption
of the fair value based method for stock
based compensation expenses (152)
Tax benefit in respect of options exercised - - 1,179
Stock based compensation - - 3,387
Dividends paid (86,692) - (86,692)
Other comprehensive income (loss):
Unrealized gains on derivative
instruments - - (299) $ (299)
Foreign currency translation differences - - 450 450
Minimum pension liability - - (901) (901)
Net income 51,873 - 51,873 51,873
------------ ------------ --------------- -----------------
Total comprehensive income $ 51,123
=================
BALANCE AS OF DECEMBER 31, 2004 155,267 (4,321) 432,184
Exercise of options - - 2,184
Tax benefit in respect of options exercised - - 477
Stock based compensation - - 100
Dividends paid (15,868) - (15,868)
Other comprehensive income (loss):
Unrealized gains on derivative
instruments - - 2,959 $ 2,959
Foreign currency translation differences - - (739) (739)
Net income 38,163 - 38,163 38,163
------------ ------------ --------------- -----------------
Total comprehensive income $ 40,383
=================
BALANCE AS OF SEPTEMBER 30, 2005
(UNAUDITED) $ 177,562 $ (4,321) $ 459,460
============ ============ ===============
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)
ACCUMULATED
NUMBER OF ADDITIONAL OTHER
OUTSTANDING SHARE PAID-IN COMPREHENSIVE
SHARES CAPITAL CAPITAL INCOME (LOSS)
------------ ------------- ------------- ----------------
BALANCE AS OF JANUARY 1, 2004 39,337,204 $ 11,273 $ 259,033 $ (3,992)
Exercise of options 915,367 204 8,365 -
Tax benefit in respect of options exercised - - 805 -
Stock based compensation - - 2,772 -
Dividends paid - - - -
Other comprehensive income (loss):
Unrealized gains on derivative instruments - - - 292
Foreign currency translation differences - - - (17)
Net income - - - -
---------- ----------- ----------- -----------
Total comprehensive income
BALANCE AS OF SEPTEMBER 30, 2004
(UNAUDITED) 40,252,571 $ 11,477 $ 270,975 $ (3,717)
========== =========== =========== ===========
BALANCE AS OF JULY 1, 2005
(UNAUDITED) 40,745,711 $ 11,590 $ 276,461 $ (5,064)
Exercise of options 72,459 14 583 -
Tax benefit in respect of options
exercised - - (7) -
Stock based compensation - - 100 -
Dividends paid - - - -
Other comprehensive income (loss):
Unrealized gains on derivative
instruments - - - 2,666
Foreign currency translation differences - - - (124)
Net income - - - -
---------- ----------- ----------- -----------
Total comprehensive income
BALANCE AS OF SEPTEMBER 30, 2005
(UNAUDITED) 40,818,170 $ 11,604 $ 277,137 $ (2,522)
========== =========== =========== ===========
TOTAL TOTAL
RETAINED TREASURY SHAREHOLDERS' COMPREHENSIVE
EARNINGS SHARES EQUITY INCOME (LOSS)
------------ ------------ --------------- -----------------
BALANCE AS OF JANUARY 1, 2004 $ 190,086 $ (4,321) $ 452,079
Exercise of options 8,569
Tax benefit in respect of options exercised - - 805
Stock based compensation - - 2,772
Dividends paid (81,956) - (81,956)
Other comprehensive income (loss):
Unrealized gains on derivative instruments - - 292 $ 292
Foreign currency translation differences - - (17) (17)
Net income 38,868 - 38,868 38,868
----------- ----------- ----------- -----------
Total comprehensive income $ 39,143
===========
BALANCE AS OF SEPTEMBER 30, 2004 (UNAUDITED) $ 146,998 $ (4,321) $ 421,412
=========== =========== ===========
BALANCE AS OF JULY 1, 2005
(UNAUDITED) $ 168,307 $ (4,321) $ 445,973
Exercise of options - - 597
Tax benefit in respect of options
exercised - - (7)
Stock based compensation - - 100
Dividends paid (5,309) - (5,309)
Other comprehensive income (loss):
Unrealized gains on derivative
instruments - - 2,666 $ 2,666
Foreign currency translation differences - - (124) (124)
Net income 14,564 - 14,564 14,564
----------- ----------- ----------- -----------
Total comprehensive income $ 17,106
===========
BALANCE AS OF SEPTEMBER 30, 2005
(UNAUDITED) $ 177,562 $ (4,321) $ 459,460
=========== =========== ===========
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)
ACCUMULATED
NUMBER OF ADDITIONAL OTHER
OUTSTANDING SHARE PAID-IN COMPREHENSIVE
SHARES CAPITAL CAPITAL INCOME (LOSS)
------------ ------------- ------------- ----------------
BALANCE AS OF JULY 1, 2004
(UNAUDITED) 39,928,451 $ 11,405 $ 267,153 $ (3,584)
Exercise of options 324,120 72 2,781 -
Tax benefit in respect of options exercised - - 114 -
Amortization of deferred stock - -
compensation - - 927
Dividend paid - - - -
Other comprehensive income (loss):
Unrealized losses on derivative
instruments - - - (136)
Foreign currency translation differences - - - 3
Net income - - - -
----------- ----------- ----------- -----------
Total comprehensive income
BALANCE AS OF SEPTEMBER 30, 2004
(UNAUDITED) 40,252,571 $ 11,477 $ 270,975 $ (3,717)
========== =========== =========== ===========
TOTAL TOTAL
RETAINED TREASURY SHAREHOLDERS' COMPREHENSIVE
EARNINGS SHARES EQUITY INCOME (LOSS)
------------ ------------ --------------- -----------------
BALANCE AS OF JULY 1, 2004
(UNAUDITED) $ 206,944 $ (4,321) $ 477,597
Exercise of options - - 2,853
Tax benefit in respect of options exercised - - 114
Amortization of deferred stock
compensation 927
Dividend paid (73,260) - (73,260)
Other comprehensive income (loss):
Unrealized losses on derivative
instruments - - (136) $ (136)
Foreign currency translation differences - - 3 3
Net income 13,314 - 13,314 13,314
----------- ----------- ----------- -----------
Total comprehensive income $ 13,181
===========
BALANCE AS OF SEPTEMBER 30, 2004
(UNAUDITED) $ 146,998 $ (4,321) $ 421,412
=========== =========== ===========
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 YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
--------- --------- ---------
2005 2004 2004
--------- --------- ---------
----------------------- ---------
(UNAUDITED) (***)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $38,163 $38,868 **$51,873
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 37,772 31,494 42,261
Stock based compensation 100 2,772 3,387
Deferred income taxes (602) 1,784 153
Accrued severance pay, net (8,536) (2,709) (2,304)
Loss (gain) on sale of property and equipment (400) 25 143
Tax benefit in respect of options exercised 477 805 1,179
Minority interests in earnings (losses) of subsidiaries (652) (458) 180
Equity in net losses (earnings) of affiliated companies and
partnership, net of dividend received (*) 6,706 3,065 **1,505
Changes in operating assets and liabilities:
Decrease (increase) in short and long-term receivables and
prepaid expenses (17,070) 20,759 (16,871)
Decrease (increase) in inventories (59,474) (24,222) 2,932
Increase in trade payables, other payables and accrued expenses (2,118) 9,882 20,522
Increase (decrease) in advances received from customers 101,959 7,125 (18,535)
Settlement of royalties with the Office of the Chief Scientist - (3,714) (3,714)
Other adjustments 117 (112) (1,228)
--------- --------- ---------
Net cash provided by operating activities 96,442 85,364 81,483
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (41,437) (32,614) (53,008)
Acquisition of subsidiaries and businesses (Schedule A) (318) (2,315) (2,315)
Investments in affiliated companies and subsidiaries (99,024) (559) (18,391)
Proceeds from sale of property, plant and equipment 1,381 1,741 2,560
Proceeds from sale of investment 3,100 - -
Investment in long-term bank deposits (551) (1,203) (1,203)
Proceeds from sale of long-term bank deposits 963 1,508 1,507
Grant of long-term loans (790) - -
Short-term bank deposits, net (148) 36 (48)
--------- --------- ---------
Net cash used in investing activities (136,824) (33,406) (70,898)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of options 2,184 8,569 11,260
Repayment of long-term bank loans (51,712) (15,687) (35,826)
Receipt of long-term bank loans 220,400 21,410 58,410
Dividends paid (15,868) (81,956) (86,692)
Change in short-term bank credit and loans, net 1,332 (827) 216
--------- --------- ---------
Net cash provided by (used in) financing activities 156,336 (68,491) (52,632)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 115,954 (16,533) (42,047)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
PERIOD 34,109 76,156 76,156
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $150,063 $59,623 $34,109
========= ========= =========
$8,045 $7,650 $8,150
========= ========= =========
(*) Dividend received
(**) Restated (See Notes 1B and 3)
(***) Derived from the Company's 2004 audited financial statements
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 YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
---------------------------- ----------------
2005 2004 2004
---- ---- ----
(UNAUDITED) (*)
---------------------------- ----------------
SUPPLEMENTARY CASH FLOWS
ACTIVITIES:
Cash paid during the period for:
Income taxes $ 17,640 $ 9,015 $ 13,305
======== ======== ========
Interest $ 5,812 $ 1,460 $ 3,122
======== ======== ========
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) $ (707) $ (707)
Property, plant and equipment - (10) (10)
Goodwill, customer contracts and other intangible assets (1,514) (1,598) (1,598)
Long-term liabilities - mainly advances from customers 4,477 - -
-------- -------- --------
$ (318) $ (2,315) $ (2,315)
======== ======== ========
* Derived from the Company's 2004 audited financial statements
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)
NOTE 1 - GENERAL
A. The accompanying unaudited interim consolidated financial
statements have been prepared in a condensed format as of
September 30, 2005, and for the three and nine 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 6 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, 2004, included in the Form 20-F for the
year ended December 31, 2004.
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 the balance sheet as of December 31, 2004 in order to
conform to the current period presentation.
Comparative data in the condensed interim financial statements
for the three and nine months ended September 30, 2004, for
the year ended December 31, 2004 and for the six months ended
June 30, 2005 have been restated (see Notes 1B and 3).
Operating results for the three and nine months ended
September 30, 2005, are not necessarily indicative of the
results that may be expected for the year ending December 31,
2005.
B. On December 27, 2004, the Company reached an agreement with
Koor Industries Ltd. ("Koor") to purchase all of Koor's
holdings in Tadiran Communications Ltd. ("Tadiran"), which
represented approximately a 32% interest in Tadiran, at a
price of $37 per share. This purchase was to be made
concurrently with Koor's purchase a portion of the Company's
shares from Federmann Enterprises Ltd. ("Federmann"). Tadiran
is an Israeli company, whose shares are traded on the Tel Aviv
Stock Exchange. The purchase of the interest in Tadiran was to
have been made in two stages, subject to the terms agreed upon
between the parties.
On July 6, 2005, the Company reported that it signed an
agreement with Koor to acquire all of Koor's 70% holdings in
Elisra Electronics Systems Ltd. ("Elisra"), an Israeli
company, in consideration for $70 million in cash. The parties
also agreed on an additional contingent consideration as a
result of future insurance proceeds relating to the fire at
Elisra's plant in 2001. As part of the transaction, Koor
purchased Dekolink Wireless Ltd. from Elisra at an agreed upon
price. Dekolink Wireless Ltd. is a start-up company engaged in
the cellular networks area that is wholly-owned by Elisra. The
acquisition agreement relating to Elisra is subject to receipt
of the Company's shareholders approval, which was received in
August 2005, as well as approvals from governmental
authorities, including the Israel Antitrust Authority.
-10-
ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
--------------------------------------------------------------------------------
U. S. dollars (In thousands, except per share data)
NOTE 1 - GENERAL (CONT.)
Concurrently with signing of the agreement to acquire Koor's
holdings in Elisra, as indicated above, the Company and Koor
agreed to amend their agreements regarding the Company's
purchase of Tadiran shares held by Koor. Pursuant to the
amendment, the Company accelerated the acquisition from Koor
of approximately 5% of Tadiran's outstanding shares, out of a
total of 18.2% of Tadiran outstanding shares that the Company
agreed to acquire as part of the second stage of the
aforementioned agreement. Upon completion of the acquisition
of the 5% interest in Tadiran, which occurred on August 25,
2005, the Company and Koor have equal representation on
Tadiran's board of directors. Following this purchase, the
Company currently holds approximately 26% of Tadiran's shares.
The price paid and remaining to be paid by the Company to Koor
for the Tadiran shares is the price agreed upon in the
original agreement with Koor signed on December 27, 2004.
The agreement for acquiring Koor's holdings in Elisra and the
amendments regarding the acquisition of Koor's shares in
Tadiran, were signed following the approval of the
transactions by the Company's Audit Committee and Board of
Directors, who obtained a fairness opinion from an independent
appraiser regarding the consideration to be paid for the
Elisra shares.
Upon completion of the Elisra transaction, the Company will
complete the purchase of Koor's remaining shares in Tadiran -
approximately 13% - reaching a total of approximately a 39%
interest in Tadiran based on the Company's current
shareholdings.
The results of the third quarter of 2005 include a write-off
of In Process Research and Development ("IPR&D") which amounts
to approximately $1.2 million related to the shares acquired
in the third quarter of 2005.
Further effects on the Company's financial results are
expected to occur in the event of the consummation of the
additional purchases of Tadiran shares from Koor in accordance
with the above mentioned amendments to the agreements with
Koor, as well as the purchase of Koor's shares in Elisra ,
subject to receipt of the required approvals. The effect on
the Company's financial results of future purchases of shares
of Tadiran as well as the anticipated purchase of shares in
Elisra will be reported following completion of the respective
purchases.
The excess of the amount paid for the Tadiran shares acquired
until the end of the second quarter of 2005 over their book
value is approximately $62 million. Based on a purchase price
allocation analysis ("PPA") performed by an independent
advisor, this excess was attributed as follows:
-11-
ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
--------------------------------------------------------------------------------
U. S. dollars (In thousands)
NOTE 1 - GENERAL (CONT.)
$M Expected useful lives
-- ---------------------
In Process R&D ("IPR&D") 5.0 immediate write-off
Inventory 1.5 up to a quarter
Other tangible assets and liabilities 0.5 5 years
Brand name 4.0 15 years
Customer base and backlog 20.0 2-12 years
Technology 12.0 10 years
Goodwill 19.0 indefinite - subject to annual impairment test
------
62.0
======
As a result of the acquisition in the second quarter of 2005,
the Company is able to exercise significant influence in
Tadiran. In accordance with APB 18, "The Equity Method of
Accounting for Investments in Common Stock", the Company's
interest in Tadiran, which was previously accounted for as
available-for-sale securities, is accounted retroactively
under the equity method of accounting ("step-by-step
acquisition"). Implementing the step-by-step acquisition
method resulted in a restatement of the Company's financial
statements for all prior periods, in which the Company's
investment in Tadiran was accounted for as available-for-sale
securities.
The following are the effects of the restatement:
(1) Consolidated balance sheet
December 31, 2004
-------------------------------------------
As Effect of As
reported restatement restated
-------- ----------- --------
Other receivables and prepaid expenses $ 52,335 $ 752 $ 53,087
Investment in affiliated companies and partnership 33,124 14,749 47,873
Available for sale securities 18,017 (18,017) -
Accumulated other comprehensive loss (3,346) (1,396) (4,742)
Retained earnings 156,387 (1,120) 155,267
Total shareholders' equity $434,700 $ (2,516) $432,184
(2) Consolidated statement of income
Year ended December 31, 2004
-------------------------------------------
As Effect of As
reported restatement Restated
-------- ----------- --------
Equity in net earnings of affiliated companies
and partnership $ 7,765 $ (1,120) $ 6,645
Net income 52,993 (1,120) 51,873
Basic net earnings per share 1.33 (0.03) 1.30
Diluted net earnings per share 1.29 (0.03) 1.26
-12-
ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
--------------------------------------------------------------------------------
U. S. dollars (In thousands)
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.
B. The accompanying financial statements have been prepared in
U.S. dollars since 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 is the U.S. dollar.
NOTE 3 - STOCK-BASED COMPENSATION
As mentioned in Note 2X to the Company's annual financial statements,
effective January 1, 2004, the Company adopted the fair value
recognition provisions of SFAS 123. Under the modified prospective
method selected by the Company under the provisions of SFAS No. 148,
the fair value recognition provisions are applied from January 1, 2004
to all employee awards granted, modified or settled subsequent to
January 1, 2004, and to previously granted awards that were not fully
vested on the date of adoption. The aforementioned decision to adopt
the fair value recognition provisions of SFAS 123 took place in
December 2004. SFAS 123 fair value recognition provisions were adopted
effective January 1, 2004 and the results of the first three quarters
of 2004 were restated accordingly. The restatement reflects the change
in stock-based compensation expense calculated under the intrinsic
value based method as compared to the expense calculated under the fair
value based method.
The following is the effect of the restatement of stock-based
compensation expense on the financial statements for the three and nine
months ended September 30, 2004:
Three months ended September 30, 2004
----------------------------------------------
As Effect of As
reported restatement restated
-------- ----------- --------
Gross profit $ 61,514 $ (269) $ 61,245
Operating income 17,405 (491) 16,914
Net income 13,707 (393) 13,314
Basic net earnings per share 0.34 (0.01) 0.33
Diluted net earnings per share 0.33 (0.01) 0.32
Nine months ended September 30, 2004
----------------------------------------------
As Effect of As
reported restatement restated
-------- ----------- --------
Gross profit $ 176,952 $ 771 $177,723
Operating income 47,074 1,400 48,474
Net income 37,746 1,122 38,868
Basic net earnings per share 0.95 0.03 0.98
Diluted net earnings per share 0.92 0.03 0.95
-13-
ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
--------------------------------------------------------------------------------
U. S. dollars (In thousands, except per share data)
NOTE 4 - INVENTORIES, NET OF ADVANCES
SEPTEMBER 30, DECEMBER 31,
------------- ------------
2005 2004
(UNAUDITED) (*)
------------- ------------
Cost of long-term contracts in progress $ 304,999 $ 254,009
Raw materials 78,801 71,813
Advances to suppliers and subcontractors 26,878 21,164
--------- ---------
410,678 346,986
Less - Cost incurred on contracts in progress
deducted from customer advances 32,016 14,533
--------- ---------
378,662 332,453
Less - Advances received from customers 78,079 75,776
Provision for losses 6,514 7,636
--------- ---------
$ 294,069 $ 249,041
========= =========
* Derived from the Company's 2004 audited financial statements
NOTE 5 - RECENTLY ISSUED ACCOUNTING STANDARDS
A. In March 2005, the SEC released SEC Staff Accounting Bulletin
No. 107, "Share-Based Payment" ("SAB 107"). SAB 107 provides
the SEC staff's position regarding the application of
Statement 123R and contains interpretive guidance related to
the interaction between Statement 123R and certain SEC rules
and regulations and also provides the SEC staff's views
regarding the valuation of share-based payment arrangements
for public companies. SAB 107 highlights the importance of
disclosures made related to the accounting for share-based
payment transactions. The Company is currently reviewing the
effect of SAB 107; however, it does not believe that SAB 107
will have a material impact on its financial position, results
of operations or cash flows.
B. In May 2005, the FASB issued Statement of Financial Accounting
Standard No. 154 ("FAS 154"), "Accounting Changes and Error
Corrections" - a replacement of APB No. 20, Accounting
Changes" and FAS No. 3, "Reporting Accounting Changes in
Interim Financial Statements". FAS 154 provide guidance on the
accounting for and reporting of accounting changes and error
corrections. APB Opinion 20 previously required that most
voluntary changes in accounting principle be recognized by
including in net income of the period of the change the
cumulative effect of changing to the new accounting principle.
FAS 154 requires retrospective application to prior periods'
financial statements of a voluntary change in accounting
principle unless it is impracticable to do so. FAS 154 is
effective for accounting changes and corrections of errors
made in fiscal years beginning after December 15, 2005. The
Company estimates that the adoption of FAS 154 will not have a
significant impact on its results of operations, financial
condition and cash flows.
-14-
ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
--------------------------------------------------------------------------------
U. S. dollars (In thousands)
NOTE 5 - RECENTLY ISSUED ACCOUNTING STANDARDS (CONT.)
C. FASB Statements No. 123 (revised 2004), "Share-based Payment"
(FASB 123(R)) (See Note 2AA(3)) to the Company's annual
financial statements for 2004, was to have been effective as
of the beginning of the first interim or annual reporting
period that commences after June 15, 2005 (July 1, 2005 for
the Company); however, on April 14, 2005, the United States
Securities and Exchange Commission ("SEC") delayed
effectiveness of FAS 123(R) for companies with fiscal years
ending December 31 (such as the Company) to January 1, 2006.
NOTE 6 - RECONCILIATION TO ISRAELI GAAP
As described in Note 1, the Company prepares its financial statements
in accordance with U.S. GAAP. See Note 26 to the 2004 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.
A. Effect on net income
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED
---------------------------- DECEMBER 31,
2005 2004 2004
---- ---- ----
(UNAUDITED) (*)
---------------------------- -------------
Net income as reported according to
U.S. GAAP $ 38,163 $ 38,868 $ 51,873
Adjustments to Israeli GAAP (4,336) (1,765) 662
------ ------- ---------
Net income according to Israeli GAAP 33,827 $37,103 $ 52,535
====== ======= =========
B. Effect on shareholders' equity
AS PER
AS REPORTED ADJUSTMENTS ISRAELI GAAP
----------- ----------- ------------
AS OF SEPTEMBER 30, 2005 (UNAUDITED)
Shareholders' equity $ 459,360 $(17,043) $ 442,317
========= ======== =========
AS OF DECEMBER 31, 2004 (*)
Shareholders' equity $ 432,184 $(12,004) $ 420,180
========= ======== =========
* Derived from the Company's 2004 audited financial statements
# # # # # #
-15-