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 August 2007
_________________
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 August 14, 2007.
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 June 30, 2007.
Attached
hereto as Exhibit 3 and incorporated herein by reference is the Registrant’s condensed
interim consolidated financial statements as of June 30, 2007.
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/ Yaniv Baram
Name: Yaniv Baram
Title: Corporate Secretary
|
Dated: August 15, 2007
EXHIBIT INDEX
| Exhibit No. |
Description |
1. |
Press release dated August 14, 2007 |
| 2. |
Management's Report |
| 3. |
Financial Statements |
Exhibit 1
ELBIT SYSTEMS REPORTS
SECOND QUARTER 2007 RESULTS
Backlog of orders at
record $4.2bn;
Revenues reached record
$468m, up 36% year-over-year;
Cash
flow of $130 million for first six months, up 24% year-over-year
Haifa, Israel, August 14, 2007
– Elbit Systems Ltd. (the “Company”) (NASDAQ: ESLT), the international
defense company, today reported its consolidated results for the second quarter ended June
30, 2007.
Completion of Acquisition of
Tadiran Communications. On April 26, 2007, the Company completed the acquisition of
the outstanding shares of Tadiran Communications Ltd. (“Tadiran”). Following the
acquisition, the Company fully consolidated the results of Tadiran. On July 12, 2007, the
Company reported that it anticipated the acquisition related expenses in the second
quarter to be within a range of $25 — 30 million. The Company recorded $27.1 million
in expenses in relation to the acquisition as follows: In-Process Research &
Development (“IPR&D”) write-off of $16.6 million recorded under operating
expenses, and restructuring expenses of $10.5 million recorded under cost of good sold.
Backlog of orders as of
June 30, 2007 reached a record $4,196 million, compared with $3,786 million as of
December 31, 2006. 73% of the backlog is for sales outside Israel, and approximately 61%
of the backlog is scheduled to be performed by the end of 2008. The majority of the
balance is scheduled to be performed in 2009 and 2010.
Consolidated revenues for the
second quarter of 2007 increased by 36% to $468.2 million, from $344.8 million in the
second quarter of 2006.
Reported gross profit for the
second quarter of 2007 increased by 30% to $116.5 million (24.9% of revenues), as
compared with gross profit of $89.6 million (26.0% of revenues) in the second quarter of
2006. Gross profit for the quarter included the $10.5 million restructuring charge
relating to the completed acquisition of Tadiran. Excluding this charge, gross profit in
the second quarter of 2007 increased by 42% to $127.0 million (27.1% of revenues).
Reported consolidated net loss for
the second quarter of 2007, including the $27.1 million ($24.4 million net) in
expenses recorded in relation with the completed acquisition of Tadiran, was $0.7
million, compared with a net income of $15.1 million (4.4% of revenues) in the second
quarter of 2006. Loss per diluted share for the second quarter of 2007 was $0.02, as
compared with earnings per diluted share of $0.36 for the second quarter of 2006.
Consolidated net income for the second quarter of 2007, excluding the IPR&D write-off
and restructuring expenses was $23.7 million, or $0.56 per diluted share.
Operating Cash flow generated
during the first six months of the year reached a record $129.7 million.
The President and CEO of Elbit
Systems, Joseph Ackerman, commented: “We are pleased to report another quarter of
growth that is highlighted by record backlog and cash flow. I would like to underline our
organic growth that amounted to more than 20% and made a substantial contribution to our
overall growth of 36% following the acquisition of Tadiran. We have found that Tadiran has
highly professional and talented employees, advanced technologies and a strong presence in
the worldwide market. We believe the combined company will quickly evolve into a world
leader in the areas of ground systems, communications and C4I. Together with our
integration of Tadiran, and based upon the Group’s highly qualified and dedicated
personnel, strong global presence, growing backlog, continued investment in R&D and
solid cash flow, we are confident of our continued success for the future”.
The Board of Directors declared a
dividend of $0.16 per share for the second quarter of 2007. The dividend’s
record date is August 28, 2007, and the dividend will be paid on September 10, 2007, net
of taxes and levies, at the rate of 16.6%.
Conference Call
The Company will also be hosting a
conference call today, August 14, 2007 at 8:30 am EDT. On the call, management will review
and discuss its second quarter 2007 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
800 994 4498
UK Dial-in Number: 0
800 032 3367
ISRAEL Dial-in Number:
03 918 0685
INTERNATIONAL Dial-in
Number: +972 3 918 0685
at:
8:30 am Eastern Time, 5:30 am Pacific Time, 1:30 pm UK Time, 3:30 pm 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 numbers are either:
1 888 254 7270 (US) ; 0 800 028 6837 (UK); or +972 3 925 5921 (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”), unmanned air vehicle (UAV) systems, advanced electro-optics,
electro-optic space systems, EW suites, airborne warning systems, ELINT systems, data
links and military communications systems and radios. The Group also focuses on the
upgrading of existing military platforms and developing new technologies for defense,
homeland security and commercial aviation applications.
Company Contact:
Joseph Gaspar, Corporate VP & CFO
Dalia Rosen, Director of Corporate Communications
Elbit Systems Ltd.
Tel: +972-4-8316663
Fax: +972-4-8316944
E-mail: gspr@elbit.co.il
daliarosen@elbit.co.il
|
IR Contact:
Ehud Helft / Kenny Green
G.K. Investor Relations
Tel: 1-646-201-0246
Fax: + 972-3-6074711
E-mail: info@gkir.com
|
STATEMENTS IN THIS PRESS
RELEASE WHICH ARE NOT HISTORICAL DATA ARE FORWARD-LOOKING STATEMENTS WHICH INVOLVE KNOWNAND
UNKNOWN RISKS, UNCERTAINTIES OR OTHER FACTORS NOT UNDER THE COMPANY’S CONTROL,
WHICH MAY CAUSE ACTUALRESULTS,
PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE
MATERIALLY DIFFERENT FROM THE RESULTS, PERFORMANCE OROTHER
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)
| |
June 30
2007
| |
December 31
2006
| |
| |
Unaudited | |
Audited | |
| Assets |
|
|
| |
|
| |
|
Current Assets: | | |
| Cash and short term deposits | | |
| 133,007 |
|
| 85,400 |
|
| Available for sale marketable securities | | |
| 210,259 |
|
| 2,106 |
|
| Trade receivable and others | | |
| 486,439 |
|
| 463,323 |
|
| Inventories, net of advances | | |
| 428,644 |
|
| 371,962 |
|
|
| |
| |
| Total current assets | | |
| 1,258,349 |
|
| 922,791 |
|
Affiliated Companies & other Investments | | |
| 60,397 |
|
| 235,723 |
|
| Long-term receivables & others | | |
| 262,523 |
|
| 190,963 |
|
| Fixed Assets, net | | |
| 326,483 |
|
| 294,628 |
|
| Other assets, net | | |
| 627,104 |
|
| 128,995 |
|
|
| |
| |
| | | |
| 2,534,856 |
|
| 1,773,100 |
|
|
| |
| |
| Liabilities and Shareholder's Equity | | |
Current liabilities | | |
| 1,092,151 |
|
| 810,885 |
|
| Long-term liabilities | | |
| 936,929 |
|
| 461,760 |
|
| Minority Interest | | |
| 8,586 |
|
| 6,871 |
|
| Shareholder's equity | | |
| 497,190 |
|
| 493,584 |
|
|
| |
| |
| | | |
| 2,534,856 |
|
| 1,773,100 |
|
|
| |
| |
ELBIT SYSTEMS LTD.
CONSOLIDATED STATEMENTS
OF INCOME
(In thousand of US Dollars, except for per share amounts)
| |
Six Months Ended
June 30 | |
Three Months Ended
June 30 | |
Year Ended
December 31 | |
| |
2007
| |
2006
| |
2007
| |
2006
| |
2006
| |
| |
Unaudited | |
Unaudited | |
(Audited) | |
Revenues |
|
|
| 871,758 |
|
| 679,185 |
|
| 468,158 |
|
| 344,815 |
|
| 1,523,243 |
|
| Cost of revenues | | |
| 641,266 |
|
| 502,067 |
|
| 341,204 |
|
| 255,237 |
|
| 1,149,768 |
|
| Restructurirng expenses | | |
| 10,482 |
|
| — |
|
| 10,482 |
|
| — |
|
| — |
|
|
| |
| |
| |
| |
| |
| Gross Profit | | |
| 220,010 |
|
| 177,118 |
|
| 116,472 |
|
| 89,578 |
|
| 373,475 |
|
|
| |
| |
| |
| |
| |
Research and development, net | | |
| 53,074 |
|
| 39,789 |
|
| 28,981 |
|
| 18,351 |
|
| 92,232 |
|
| Marketing and selling | | |
| 71,577 |
|
| 53,630 |
|
| 39,206 |
|
| 27,382 |
|
| 111,880 |
|
| General and administrative | | |
| 44,418 |
|
| 37,727 |
|
| 24,100 |
|
| 18,720 |
|
| 77,505 |
|
| IPR&D write-off | | |
| 16,560 |
|
| — |
|
| 16,560 |
|
| — |
|
| — |
|
|
| |
| |
| |
| |
| |
| Total operating expenses | | |
| 185,629 |
|
| 131,146 |
|
| 108,847 |
|
| 64,453 |
|
| 281,617 |
|
|
| |
| |
| |
| |
| |
Operating income | | |
| 34,381 |
|
| 45,972 |
|
| 7,625 |
|
| 25,125 |
|
| 91,858 |
|
Financial expenses, net | | |
| (7,962 |
) |
| (10,918 |
) |
| (5,034 |
) |
| (6,677 |
) |
| (21,456 |
) |
| Other income (expenses), net | | |
| 95 |
|
| 160 |
|
| (18 |
) |
| (748 |
) |
| 1,814 |
|
|
| |
| |
| |
| |
| |
| Income before income taxes | | |
| 26,514 |
|
| 35,214 |
|
| 2,573 |
|
| 17,700 |
|
| 72,216 |
|
| Taxes on income | | |
| 12,122 |
|
| 9,366 |
|
| 5,389 |
|
| 4,762 |
|
| 20,694 |
|
|
| |
| |
| |
| |
| |
| | | |
| 14,392 |
|
| 25,848 |
|
| (2,816 |
) |
| 12,938 |
|
| 51,522 |
|
| Equity in net earnings of affiliated companies and partnership | | |
| 5,773 |
|
| 3,614 |
|
| 2,373 |
|
| 1,347 |
|
| 14,743 |
|
| Minority rights | | |
| (1,757 |
) |
| 77 |
|
| (248 |
) |
| 786 |
|
| 5,977 |
|
|
| |
| |
| |
| |
| |
| Net income (loss) | | |
| 18,408 |
|
| 29,539 |
|
| (691 |
) |
| 15,071 |
|
| 72,242 |
|
|
| |
| |
| |
| |
| |
Earnings per share | | |
| Basic net earnings (loss) per share | | |
$ | 0.44 |
|
$ | 0.72 |
|
$ | (0.02 |
) |
$ | 0.37 |
|
$ | 1.75 |
|
|
| |
| |
| |
| |
| |
Diluted net earnings (loss) per share | | |
$ | 0.43 |
|
$ | 0.71 |
|
$ | (0.02 |
) |
$ | 0.36 |
|
$ | 1.72 |
|
|
| |
| |
| |
| |
| |
Exhibit 2
Elbit Systems Ltd.
Management’s Report
For The Quarter Ended June 30, 2007
| |
This
report should be read together with the unaudited financial statements for the quarter
ended June 30, 2007 of Elbit Systems Ltd. (“Elbit Systems” and together
with its subsidiaries, the “Company” or the “Group”), the
Company’s audited consolidated financial statements and related notes for the year
ended December 31, 2006, the Company’s management report for the year ended
December 31, 2006 and the Company’s Form 20-F for the year ended December 31,
2006, 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. |
| |
The
Group operates in the areas of aerospace, land and naval systems, command, control,
communications, computers, intelligence, surveillance and reconnaissance (“C(4)ISR”),
unmanned air vehicles, advanced electro-optic and space technologies, EW suites, airborne
warning systems, ELINT systems, data links, military communications systems and equipment
and radios. The Group also focuses on the upgrading of existing military platforms and
developing new technologies for defense, homeland security and commercial aviation
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. 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
| |
On
April 26, 2007, the Company completed the acquisition of 100% of the shares of Tadiran
Communications Ltd. (“Tadiran”). The financial statements include the
consolidation of Tadiran at the beginning of the month following the date of the
acquisition. The Company’s financial statements include an In-Process Research and
Development (“IPR&D”) write-off and restructuring costs in the second
quarter, due to the acquisition in the amount (net) of $24.4 million, which amounts to
$0.57 per share of the Company. |
| |
Net
loss in the second quarter of 2007 (including the $24.4 million in IPR&D write-off
and restructuring costs, net, amounting to $0.57 per share, mentioned above) was $0.7
million and a loss of $0.02 per share, as compared to net earnings $15.1 million (4.4% of
revenues) and $0.36 per share in the second quarter of 2006. |
| |
The
Company’s revenues increased by 36% and reached $468.2 million in the second quarter
of 2007, as compared to $344.8 million in the second quarter of 2006. |
| |
The
Company’s backlog increased by 10.8% and reached $4.2 billion as of June 30, 2007,
as compared to $3.8 billion as of December 31, 2006. |
| |
The
Company’s cash flow generated from operations in the six months ended June 30, 2007
was $129.7 million, as compared to $104.2 million in the six months ended June 30, 2006. |
| |
The
Board of Directors declared a dividend of $0.16 per share for the second quarter of 2007. |
| |
• |
|
On
May 29, 2007, the Company announced that its wholly-owned subsidiary Elbit Systems
Electro-Optics Elop Ltd. (“Elop”) was awarded several contracts valued at a
total of approximately $50 million to supply hand-held thermal imaging systems to the
Canadian and Israeli armed forces as well as for additional customers worldwide. |
| |
• |
|
On
June 5, 2007, the Company announced that Tallahassee Technologies Inc. (“Talla-Tech”),
an indirect wholly-owned U.S. subsidiary of Tadiran, received purchase orders from the
United States Marine Corps for rugged computers valued at approximately $18.5 million. |
| |
• |
|
On
June 7, 2007, the Company announced that its UK company with Thales UK – UAV
Tactical Systems Ltd. was awarded a contract in the amount of approximately $110 million
by Thales UK to provide an urgent Intelligence, Surveillance, Target Acquisition and
Reconnaissance support capability for the UK Armed Forces. The program will take place
over the next five years. |
| |
• |
|
On
June 18, 2007, the Company announced that it was awarded two contracts, in a total amount
of approximately $14 million to supply Aviator’s Night Vision Imaging
Systems/Head-Up Displays for helicopters of two NATO members’ countries. |
| |
• |
|
On
June 27, 2007, the Company reported that Kollsman, Inc., an Elbit Systems of American
company, announced receipt of an Indefinite Delivery/Indefinite Quantity (“ID/IQ”)
contract from the Naval Inventory Control Point-Philadelphia/Naval Supply Systems Command
for test, teardown, analysis and repair/modification of various Night Targeting Systems
Weapon Repairable Assemblies and Systems Repairable Assemblies in support of the AH-1 W
Marine Corps Helicopter. The total ID/IQ contract value may run as high as $97 million
over a five-year period. |
2
| |
• |
|
On
July 3, 2007, the Company announced that it was awarded a contract valued at
approximately $80 million to supply tactical computers and other command & control
systems to an Asian country. The contract will be performed over the next four years and
will include the supply of Enhanced Tactical Computers, advanced communication
controllers and additional command & control packages. |
| |
• |
|
On July
4, 2007, the Company announced it was advised that a claim was filed by certain minority
shareholders of ImageSat International N.V. (“ImageSat”). The claim was filled
in the United States District Court for the Southern District of New York against
ImageSat, Israel Aerospace Industries Ltd. (“IAI”), the Company and certain
current and former officers and directors of ImageSat. ImageSat’s largest
shareholder is IAI, holding approximately 46% of ImageSat’s issued share capital.
Elop holds approximately 14% (7% on a fully diluted basis) of ImageSat’s issued
share capital and is entitled to nominate one director to ImageSat’s board.ImageSat
is engaged in the operation of satellites and in providing satellite imagery. IAI has
manufactured and supplied ImageSat two satellites. Elop has manufactured the cameras for
those satellites, as IAI’s sub-contractor. The claim contains various allegations
that the defendants allegedly breached their fiduciary and/or contractual obligations to
the detriment of the plaintiffs, who are certain of ImageSat’s minority
shareholders. The claim alleges various causes of action and damages aggregating hundreds
of millions of dollars, not all of which are alleged against Elbit Systems and/or each of
the former or current ImageSat directors. Based on a preliminary analysis, the Company
believes it has good defenses to the claim. |
| |
• |
|
On
July 5, 2007, the Company announced that a wholly-owned subsidiary of Tadiran was awarded
a contract for the supply of Tadiran new generation, advanced, tactical communications
equipment and related services to a European customer. The contract, valued at $85
million, will be performed over the next five years. |
| |
• |
|
On
July 18, 2007, the Company announced that Elop was awarded a $37 million contract by a
foreign customer to supply electro-optical payloads for attack and utility helicopters.
The multi-year project also includes logistics support. The overall project has future
potential value estimated at more than $100 million. |
| |
• |
|
On July 25, 2007, the
Company announced that it was awarded contracts totaling $55 million
in Europe. In Slovenia, it signed a contract to supply overhead remote controlled weapon
stations and unmanned turrets as well as other electronic and electro-optical systems and
components for the Slovenian Armored Vehicle Program. The Company’s portion of the
Program is valued at approximately $40 million, with deliveries scheduled to take place
through 2011. In Romania, the Company was awarded a contract to supply unmanned turrets
and electro-optic systems valued at approximately $15 million, with deliveries scheduled
to be performed over the next three years. |
| |
• |
|
On
August 7, 2007, the Company announced that it was awarded three contracts valued in a
total amount of $163 million for the supply of tank and artillery systems upgrades for
customers in three Asian countries. The projects include upgrading of fire control and
command & control systems for tanks and artillery systems. The various programs
covered by the contracts are scheduled to be performed through 2009. |
3
| |
The
Company’s backlog of orders as of June 30, 2007 reached $4,196 million, of which 73%
were for orders outside of Israel. The Company’s backlog as of December 31, 2006 was
$3,786 million, of which 68% were for orders outside of Israel. The increase in the
backlog was driven by organic growth and the consolidation of Tadiran’s backlog. |
| |
Approximately
61% of the Company’s backlog as of June 30, 2007 is scheduled to be performed in the
following two quarters of 2007 and during 2008. The majority of the 39% balance is
scheduled to be performed in 2009 and 2010. |
| 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, 2006. See also the
Company’s management report for the year ended December 31, 2006. |
| |
The
Company and its subsidiaries are subject to examination by various tax authorities in
jurisdictions such as Israel, the United States and Europe. With respect to the Company
and its major subsidiaries, we have completed the examinations by the tax authorities for
tax years through 2000. Certain subsidiaries are under examination of the tax authorities
for the years 2001-2005. The Company does not expect any adverse affect will result from
their examination. |
| E. |
|
Elisra
Electronic Systems Ltd. (“Elisra”) |
| |
Further
to previous reports regarding adoption of an efficiency plan at Elisra, negotiations on
implementation of the plan with Elisra’s employees began during the second quarter
of 2007. The Company concluded that no event occurred in the second quarter of 2007 that
would require the Company to reflect impairment in connection with its recorded assets
related to Elisra. The Company will continue to monitor this matter. |
| |
• |
|
Tadiran
—On April 26, 2007, the Company completed its Cash Tender Offer (“the Offer”)
for the balance of the ordinary shares of Tadiran, which prior to the completion of the
Offer was a publicly traded company in Israel, held 42% by the Company. As a result,
Tadiran became a private, wholly-owned subsidiary of the Company. The total amount paid
by the Company for Tadiran’s shares relating to the Offer was approximately $383
million. The results of Tadiran are consolidated in the Company’s financial
statements commencing the beginning of the month after the date of acquisition. |
| |
The
table below summarizes the preliminary Purchase Price Allocation (“PPA”), for
the aggregate assets acquired, and liabilities assumed, in connection with the
acquisition of Tadiran’s shares as follows: |
4
|
Acquired share of
book value
in Tadiran
| |
Excess
cost
| |
Total
| |
Expected useful
lives of
excess cost
| |
|
(in thousands of U.S. dollars) |
|
| Working capital |
|
|
$ | 67,600 |
|
| (17,400 |
) |
$ | 50,200 |
|
Up to a quarter |
|
|
| Long-term assets and investments | | |
| 44,100 |
|
| 1,100 |
|
| 45,200 |
|
20 years | | |
| Long-term liabilities | | |
| (53,000 |
) |
| 800 |
|
| (52,200 |
) |
3 years | | |
| Brand name | | |
| 5,700 |
|
| 18,200 |
|
| 23,900 |
|
15 years | | |
| Customer relationships and backlog | | |
| - |
|
| 96,800 |
|
| 96,800 |
|
2-10 years | | |
| Technology | | |
| 2,700 |
|
| 40,800 |
|
| 43,500 |
|
10 years | | |
| IPR&D | | |
| - |
|
| 16,600 |
|
| 16,600 |
|
Immediate write-off | | |
| Deferred taxes | | |
| - |
|
| (35,100 |
) |
| (35,100 |
) |
| | |
| Goodwill | | |
| 32,800 |
|
| 161,300 |
|
| 194,100 |
|
Indefinite - subject to annual impairment test | | |
|
| |
| |
| |
| |
| | | |
$ | 99,900 |
|
$ | 283,100 |
|
$ | 383,000 |
|
| | |
|
| |
| |
| |
| |
| |
The
assets and liabilities recorded in connection with the PPA for the Tadiran acquisition
are based upon preliminary estimates of fair values for contracts in process,
inventories, estimated costs in excess of estimated contract value to complete contracts
in process in a loss position, contingent assets and liabilities, identifiable
intangibles, goodwill, property, plant and equipment and deferred income taxes. Actual
adjustment will be based on the final appraisals and other analysis of fair values, which
are in process. The Company expects to complete the PPA during 2007. The Company does not
expect the difference between the preliminary and final PPA for this business acquisition
to have a material impact on its results of operations or financial position. |
| |
• |
|
Ferranti
Technologies (Group) Limited (“FTL”) — On July 27, 2007, the Company
reported that it acquired the entire share capital of the UK company FTL for £15
million (approximately $31 million). FTL is an established supplier of engineering,
manufacturing and product support solutions to the Aerospace and Defence markets. FTL
designs and manufactures electronic, power and control solutions with emphasis on
reliable operation in harsh climatic and electromagnetic environments. FTL’s
comprehensive customer logistic support services cover: repair, overhaul, modification,
integrated logistic support and post design services. FTL was sold by The Fifth Causeway
Development Fund (advised by ABN AMRO Capital Ltd.) and by FTL’s management. The
results of FTL will be consolidated in the Company’s financial statement commencing
the date of acquisition. The Company is in the process of preparing a PPA related to the
acquisition. |
5
| G. |
|
Summary
of Financial Results |
| |
The
following table sets forth the consolidated statements of operations of the Company and
its subsidiaries for the three and six-month periods ended June 30, 2007 and June 30,
2006. The financial statements of the Company include consolidation of Tadiran’s
financial results, commencing the beginning of the month after the date of acquisition,
therefore Tadiran’s results are included in 2007 results and are not included in the
2006 results, which were prior to the date of the acquisition. |
| |
For the six months ended
June 30
|
For the three months ended
June 30
|
| |
2007
|
2006
|
2007
|
2006
|
| |
$
|
%
|
$
|
%
|
$
|
%
|
$
|
%
|
| |
(In thousands of U.S. dollars except per share data) |
Total revenues |
871,758 |
100.0 |
679,185 |
100.0 |
468,158 |
100.0 |
344,815 |
100.0 |
Cost of revenues |
641,266 |
73.6 |
502,067 |
73.9 |
341,204 |
72.9 |
255,237 |
74.0 |
Restructuring expenses |
10,482 |
1.2 |
- |
- |
10,482 |
2.2 |
- |
- |
|
|
|
|
|
|
|
|
|
Gross profit |
220,010 |
25.2 |
177,118 |
26.1 |
116,472 |
24.9 |
89,578 |
26.0 |
|
|
|
|
|
|
|
|
|
Research and development |
| (R&D) expenses |
66,207 |
7.6 |
52,747 |
7.8 |
36,508 |
7.8 |
24,169 |
7.0 |
Less - participation |
(13,133) |
(1.5) |
(12,958) |
(1.9) |
(7,527) |
(1.6) |
(5,818) |
(1.7) |
|
|
|
|
|
|
|
|
|
R&D expenses, net |
53,074 |
6.1 |
39,789 |
5.9 |
28,981 |
6.2 |
18,351 |
5.3 |
Marketing and selling expenses |
71,577 |
8.2 |
53,630 |
7.9 |
39,206 |
8.4 |
27,382 |
7.9 |
General and administrative expenses |
44,418 |
5.1 |
37,727 |
5.5 |
24,100 |
5.1 |
18,720 |
5.5 |
In-process R&D write-off |
16,560 |
1.9 |
- |
- |
16,560 |
3.5 |
- |
- |
|
|
|
|
|
|
|
|
|
| |
185,629 |
21.3 |
131,146 |
19.3 |
108,847 |
23.2 |
64,453 |
18.7 |
|
|
|
|
|
|
|
|
|
Operating income |
34,381 |
3.9 |
45,972 |
6.8 |
7,625 |
1.6 |
25,125 |
7.3 |
Finance expenses, net |
(7,962) |
(0.9) |
(10,918) |
(1.6) |
(5,034) |
(1.1) |
(6,677) |
(1.9) |
Other income (expenses), net |
95 |
0.0 |
160 |
- |
(18) |
0.0 |
(748) |
(0.2) |
|
|
|
|
|
|
|
|
|
Income before taxes on income |
26,514 |
3.0 |
35,214 |
5.2 |
2,573 |
0.5 |
17,700 |
5.2 |
Taxes on income |
12,122 |
1.4 |
9,366 |
1.4 |
5,389 |
1.2 |
4,762 |
1.4 |
|
|
|
|
|
|
|
|
|
|
14,392 |
1.6 |
25,848 |
3.8 |
(2,816) |
(0.6) |
12,938 |
3.8 |
Minority interest in losses of subsidiaries |
(1,757) |
(0.2) |
77 |
- |
(248) |
(0.1) |
786 |
0.2 |
Equity in net earnings of affiliated companies and partnership |
5,773 |
0.7 |
3,614 |
0.5 |
2,373 |
0.5 |
1,347 |
0.4 |
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
18,408 |
2.1 |
29,539 |
4.3 |
(691) |
0.1 |
15,071 |
4.4 |
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share |
0.43 |
|
0.71 |
|
(0.02) |
|
0.36 |
|
|
|
|
|
|
|
|
|
|
6
| |
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 June 30, 2007, Compared to Three Months Ended June 30, 2006 |
| |
The
consolidated revenues increased by 35.8% from $344.8 million in the second quarter of
2006 to $468.2 million in the second quarter of 2007. |
| |
The
following table sets forth the Company’s revenue distribution by areas of operation: |
| |
Three-Month Period ended
|
| |
June 30, 2007
|
June 30, 2006
|
| |
$ millions
|
%
|
$ millions
|
%
|
| Airborne systems |
161.1 |
34.4 |
140.4 |
40.7 |
| Land systems |
68.5 |
14.6 |
57.0 |
16.5 |
| C4ISR systems |
136.7 |
29.2 |
68.5 |
19.9 |
| Electro-optics |
65.2 |
13.9 |
45.7 |
13.3 |
| Other (mainly non-defense engineering and production services) |
36.7 |
7.9 |
33.2 |
9.6 |
|
|
|
|
|
| Total |
468.2 |
100.0 |
344.8 |
100.0 |
|
|
|
|
|
| |
The
changes in revenue distribution by areas of operation include the results of Tadiran in
the C4ISR category and additionally were the result of ordinary quarterly
fluctuations. |
| |
The
following table sets forth the Company’s distribution of revenues by geographical
regions: |
| |
Three-Month Period ended
|
| |
June 30, 2007
|
June 30, 2006
|
| |
$ millions
|
%
|
$ millions
|
%
|
| Israel |
77.0 |
16.5 |
119.3 |
34.6 |
| United States |
174.4 |
37.2 |
119.0 |
34.5 |
| Europe |
121.8 |
26.0 |
53.8 |
15.6 |
| Other countries |
95.0 |
20.3 |
52.7 |
15.3 |
|
|
|
|
|
| Total |
468.2 |
100.0 |
344.8 |
100.0 |
|
|
|
|
|
| |
The
changes in revenues by geographic distribution were the result of standard quarterly
fluctuations and were influenced by the consolidation of Tadiran’s results. |
| |
The
temporary reduction in revenues to Israeli customers was caused by a mix of various
programs, which were performed according to the contractual commitments, including the
programs of Tadiran. This reduction was compensated by increased revenues in Europe,
mainly by the Watchkeeper program in the United Kingdom. |
| |
Six
Months Ended June 30, 2007, Compared to Six Months Ended June 30, 2006 |
| |
The
Company’s consolidated revenues increased by 28.4%, from $679.2 million in the first
six months of 2006 to $871.8 million in the first six months of 2007. |
7
| |
The
following table sets forth the Company’s revenue distribution by areas of operation: |
|
Six-Month Period ended
|
|
June 30, 2007
| |
June 30, 2006
| |
|
$ millions
| |
%
| |
$ millions
| |
%
| |
| Airborne systems |
|
312.8 |
|
35.9 |
|
279.1 |
|
41.1 |
|
| Land systems | |
150.0 |
|
17.2 |
|
98.8 |
|
14.6 |
|
| C4ISR systems | |
223.6 |
|
25.7 |
|
151.5 |
|
22.3 |
|
| Electro-optics | |
117.6 |
|
13.5 |
|
89.8 |
|
13.2 |
|
| Other (mainly non-defense engineering and production services) | |
67.8 |
|
7.7 |
|
60.0 |
|
8.8 |
|
|
| |
| |
| |
| |
| Total | |
871.8 |
|
100.0 |
|
679.2 |
|
100.0 |
|
|
| |
| |
| |
| |
| |
The
changes in revenues distribution by areas of operation include the results of Tadiran in
the C4ISR category. |
| |
The
following table sets forth the Company’s distribution of revenues by geographic
regions: |
|
Six-Month Period ended
|
|
June 30, 2007
| |
June 30, 2006
| |
|
$ millions
| |
%
| |
$ millions
| |
%
| |
| Israel |
|
176.9 |
|
20.3 |
|
213.5 |
|
31.4 |
|
| United States | |
320.2 |
|
36.7 |
|
230.0 |
|
33.9 |
|
| Europe | |
205.5 |
|
23.6 |
|
108.5 |
|
16.0 |
|
| Other countries | |
169.2 |
|
19.4 |
|
127.2 |
|
18.7 |
|
|
| |
| |
| |
| |
| Total | |
871.8 |
|
100.0 |
|
679.2 |
|
100.0 |
|
|
| |
| |
| |
| |
| |
The
changes in revenues by geographic distribution were influenced by the consolidation of
Tadiran’s results and by the second quarter revenue distribution as described above. |
| |
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 June 30, 2007, Compared to Three Months Ended June 30, 2006 |
| |
The
Company’s gross profit in the quarter ended June 30, 2007 was $116.5 million as
compared to $89.6 million in the quarter ended June 30, 2006. The gross profit includes
restructuring expenses of $10.5 million (which constitute 2.2% of revenues). As a result
of these expenses, the gross profit margin in the second quarter of 2007 decreased to
24.9% as compared to 26% in the same period last year. |
| |
Six Months Ended June 30, 2007, Compared to Six Months Ended June 30, 2006 |
| |
The
Company’s gross profit in the six months ended June 30, 2007 was $220.0 million as
compared to $177.1 million in the six months ended June 30, 2006. As a result of the
expenses mentioned above (which constitute 1.2% of revenues) , the gross profit margin in
the six months ended June 30, 2007 decreased to 25.2%, as compared to 26.1% in the
corresponding period of the previous year. |
8
| |
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,
radio communication equipment and homeland security technologies and products. |
| |
Three
Months Ended June 30, 2007, Compared to Three Months Ended June 30, 2006 |
| |
Gross
R&D expenses in the quarter ended June 30, 2007 totaled $36.5 million (7.8% of
revenues), as compared to $24.2 million (7.0% of revenues) in the quarter ended June 30,
2006. |
| |
Net
R&D expenses (after deduction of third party participation) in the quarter ended June
30, 2007 totaled $29 million (6.2% of revenues), as compared to $18.4 million (5.3% of
revenues) in the quarter ended June 30, 2006. |
| |
Six
Months Ended June 30, 2007, Compared to Six Months Ended June 30, 2006 |
| |
Gross
R&D expenses in the six months ended June 30, 2007 totaled $66.2 million (7.6% of
revenues), as compared to $52.7 million (7.8% of revenues) in the six months ended June
30, 2006. |
| |
Net
R&D expenses (after deduction of third party participation) in the six-month period
ended June 30, 2007 totaled $53.1 million (6.1% of revenues), as compared to $39.8
million (5.9% of revenues) in the six-month period ended June 30, 2006. |
| |
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 June 30, 2007, Compared to Three Months Ended June 30, 2006 |
| |
Marketing
and selling expenses in the quarter ended June 30, 2007 were $39.2 million (8.4% of
revenues), as compared to $27.4 million (7.9% of revenues) in the quarter ended June 30,
2006. |
| |
The
increase in the marketing and selling expenses was caused by the consolidation of Tadiran’s
expenses and increased marketing efforts in the quarter in various international markets.
These activities included extensive equipment demonstrations. |
| |
Six
Months Ended June 30, 2007, Compared to Six Months Ended June 30, 2006 |
| |
Marketing
and selling expenses in the six months ended June 30, 2007 were $71.6 million (8.2% of
revenues), as compared to $53.6 million (7.9% of revenues) in the six months ended June
30, 2006. |
9
| |
General
and Administrative (“G&A”) Expenses |
| |
Three
Months Ended June 30, 2007, Compared to Three Months Ended June 30, 2006 |
| |
G&A
expenses were $24.1 million (5.1% of revenues) in the quarter ended June 30, 2007, as
compared to $18.7 million (5.5% of revenues) in the quarter ended June 30, 2006. |
| |
Six
Months Ended June 30, 2007, Compared to Six Months Ended June 30, 2006 |
| |
G&A
expenses were $44.4 million (5.1% of revenues) in the six months ended June 30, 2007, as
compared to $37.7 million (5.5% of revenues) in the six months ended June 30, 2006. |
| |
Three
Months Ended June 30, 2007, Compared to Three Months Ended June 30, 2006 |
| |
The
Company’s operating income in the quarter ended June 30, 2007 was $7.6 million, as
compared to $25.1 million in the quarter ended June 30, 2006. The operating income was
affected by restructuring expenses and an IPR&D write-off of $27 million (which
constitute 5.8% of revenues). As a result, the operating income margin in the second
quarter of 2007 decreased to 1.6%, as compared to 7.3% in the second quarter of 2006. |
| |
Six
Months Ended June 30, 2007, Compared to Six Months Ended June 30, 2006 |
| |
The
Company’s operating income in the six months ended June 30, 2007 was $34.4 million,
as compared to $46.0 million in the six months ended June 30, 2006. As a result of the
expenses mentioned above (which constitute 3.1% of revenues), the operating income margin
in the six months ended June 30, 2007 decreased to 3.9%, as compared to 6.8% in the six
months ended June 30, 2006. |
| |
Three
Months Ended June 30, 2007, Compared to Three Months Ended June 30, 2006 |
| |
Net
finance expense in the quarter ended June 30, 2007 was $5.0 million, as compared to $6.7
million of finance expense in the quarter ended June 30, 2006. |
| |
Six
Months Ended June 30, 2007, Compared to Six Months Ended June 30, 2006 |
| |
Net
finance expense in the six months ended June 30, 2007 was $8 million, as compared to
$10.9 million of finance expense in the six months ended June 30, 2006. |
| |
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. The increase in the
weighted average tax rates in the second quarter of 2007 is mainly due to the IPR&D
write-off related to the acquisition of the Tadiran shares not being deductible for tax
purposes. |
10
| |
Three
Months Ended June 30, 2007, Compared to Three Months Ended June 30, 2006 |
| |
Provision
for taxes in the quarter ended June 30, 2007 was $5.4 million, as compared to a provision
for taxes of $4.8 million in the quarter ended June 30, 2006. |
| |
Six
Months Ended June 30, 2007, Compared to Six Months Ended June 30, 2006 |
| |
Provision
for taxes in the six months ended June 30, 2007 was $12.1 million, as compared to a
provision for taxes of $9.4 million in the six months ended June 30, 2006. |
| |
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. The Company’s share in Tadiran’s earnings
was included until the date of acquisition. |
| |
Three
Months Ended June 30, 2007, Compared to Three Months Ended June 30, 2006 |
| |
The
Company’s share in earnings of affiliated entities and partnership in the second
quarter of 2007 was $2.3 million, as compared to net expense of $1.3 million in the
second quarter of 2006, which included $2.2 million of IPR&D write-off. |
| |
Six
Months Ended June 30, 2007, Compared to Six Months Ended June 30, 2006 |
| |
In
the six months ended June 30, 2007 the Company’s share in earnings of affiliated
companies and partnership was $5.8 million, as compared to net expense of $3.6 million in
the six months ended June 30, 2006, which included $2.2 million of IPR&D write-off. |
| |
Net Earnings and Diluted Earnings Per Share (“EPS”) |
| |
Three
Months Ended June 30, 2007, Compared to Three Months Ended June 30, 2006 |
| |
The
2007 second quarter results included $24.4 million of net IPR&D and restructuring
expenses ($0.57 per share). As a result, the second quarter of 2007 showed a loss of $0.7
million and $0.02 per share, as compared to net earnings of $15.1 million (4.4% of
revenues) and $0.36 per share in the second quarter of 2006, which included $2.2 million
of IPR&D write-off ($0.05 per share). |
| |
The
number of shares used for computation of diluted EPS in the quarter ended June 30, 2007
was 42,629 thousand shares, as compared to 41,808 thousand shares in the quarter ended
June 30, 2006. |
| |
Six Months Ended June 30, 2007, Compared to Six Months Ended June 30, 2006 |
| |
Net
earnings in the six months ended June 30, 2007 (including the $24.4 million IPR&D
write-off and restructuring expenses, net, representing $0.57 per share) were $18.4
million and $0.43 per share, as compared to $29.5 million ($0.71 per share) in the six
months ended June 30, 2006, which included $2.2 million of IPR&D write-off ($0.05 per
share) |
11
| |
The
number of shares used for computation of diluted EPS in the six months ended June 30,
2007 was 42,402 thousand shares, as compared to 41,772 thousand shares in the six months
ended June 30, 2006. |
| H. |
|
Liquidity
and Capital Resources |
| |
The
Company’s net cash flow generated from operating activities in the quarter ended
June 30, 2007 was $129.7 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 quarter ended June 30, 2007 was $369
million, which was used mainly for the acquisition of the Tadiran shares. |
| |
Net
cash flow from financing activities in the quarter ended June 30, 2007 was $266.9
million, resulting mainly from long-term loans received. |
| |
On
June 30, 2007, the Company had total borrowings in the amount of $432.9 million,
including $396.7 million in long-term loans, and $828.6 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 June 30, 2007, the Company had a cash
balance amounting to $112.2 million. In addition, the Company’s balance of available
for sale marketable securities as of June 30, 2007 was $210.3 million, mainly due to the
consolidation of Tadiran. |
| |
As
of June 30, 2007, the Company had working capital of $166.2 million, and its current
ratio was 1.15. |
| I. |
|
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 NIS. The Company may enter from time to time into forward contracts related to NIS,
based on market conditions. |
| |
On
June 30, 2007, the Company’s liquid assets were comprised of bank deposits and short
and long-term bonds. The Company’s deposits and loans are based on variable interest
rates, and their value as of June 30, 2007 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 June 30, 2007, the Company had
exposure due to liabilities denominated in NIS of $116 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, and as indicated above, impacted the Company’s expenses
for the second quarter of 2007. |
12
| |
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 June 30, 2007 by forward contracts.
On June 30, 2007, the Company had forward contracts for the sale and purchase of such
foreign currencies totaling $321.4 million ($144.3 million in Euro, $170.1 million in GBP
and $7 million in other currencies). The financial derivative activities in the second
quarter of 2007 resulted in an unrealized net loss of approximately $11.7 million, which
was recorded as other comprehensive income. |
| |
On
June 30, 2007, the Company had options for hedging future cash flow denominated in NIS in
the amount of $260 million. The fair market value of the options as of June 30, 2007 was
an unrealized loss of approximately $1.5 million. |
| |
On
June 30, 2007, the Company also had forward contracts for hedging future cash flow
denominated in NIS in the amount of $17 million. The fair market value of the contracts
as of June 30, 2007 was an unrealized loss of approximately $1.0 million. |
| |
The
Board of Directors declared on August 13, 2007 a dividend of $0.16 per share. |
* * * * *
Exhibit 3
ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
AS OF JUNE 30, 2007
(Unaudited)
(In thousands of U.S. dollars)
ELBIT SYSTEMS LTD. AND
ITS SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
AS OF JUNE 30, 2007
(Unaudited)
(In thousands of U.S. dollars)
C O N T E N T S
# # # # #
1
|
June 30,
2007
| |
December 31,
2006
| |
|
(Unaudited)
| |
(Audited)
| |
| CURRENT ASSETS: |
|
|
|
|
|
| Cash and cash equivalents | |
$ 112,198 |
|
$ 84,564 |
|
| Short-term bank deposits | |
20,809 |
|
836 |
|
| Available for sale marketable securities | |
210,259 |
|
2,106 |
|
| Trade receivables, (net of allowance for doubtful accounts in the amount of $4,118 and $3,390 | |
| as of June 30, 2007 and December 31, 2006, respectively) | |
379,771 |
|
384,487 |
|
| Other receivables and prepaid expenses | |
106,668 |
|
78,836 |
|
| Inventories, net of advances | |
428,644 |
|
371,962 |
|
|
| |
| |
| Total current assets | |
1,258,349 |
|
922,791 |
|
|
| |
| |
| |
| INVESTMENTS AND LONG-TERM RECEIVABLES: | |
| Investments in affiliated companies and a partnership | |
60,397 |
|
235,723 |
|
| Compensation receivable in respect of fire damages, net | |
15,530 |
|
15,530 |
|
| Long-term bank deposits and trade receivables | |
21,323 |
|
6,030 |
|
| Deferred income taxes | |
17,205 |
|
8,783 |
|
| Severance pay fund | |
208,465 |
|
160,620 |
|
|
| |
| |
| | |
322,920 |
|
426,686 |
|
|
| |
| |
| |
| PROPERTY, PLANT AND EQUIPMENT, NET | |
326,483 |
|
294,628 |
|
|
| |
| |
| |
| |
| INTANGIBLE ASSETS: | |
| Goodwill | |
319,189 |
|
58,401 |
|
| Other intangible assets, net | |
307,915 |
|
70,594 |
|
|
| |
| |
| | |
627,104 |
|
128,995 |
|
|
| |
| |
| | |
$2,534,856 |
|
$1,773,100 |
|
|
| |
| |
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) |
|
|
June 30,
2007
| |
December 31,
2006
| |
| |
(Unaudited)
| |
(Audited)
|
| CURRENT LIABILITIES: |
|
|
|
|
|
| Short-term bank credit and loans | |
$ 19,131 |
|
$ 17,802 |
|
| Current maturities of long-term loans | |
17,052 |
|
10,199 |
|
| Trade payables | |
185,787 |
|
158,361 |
|
| Other payables and accrued expenses | |
426,963 |
|
274,799 |
|
| Customers advances and amounts in excess of | |
| | | |
| costs incurred on contracts in progress | |
443,218 |
|
349,724 |
|
|
| |
| |
| Total current liabilities | |
1,092,151 |
|
810,885 |
|
|
| |
| |
| |
| LONG-TERM LIABILITIES: | |
| Long-term loans | |
396,720 |
|
125,266 |
|
| Advances from customers | |
178,662 |
|
126,769 |
|
| Deferred income taxes and tax reserve | |
94,572 |
|
20,658 |
|
| Accrued termination liability | |
266,975 |
|
189,067 |
|
|
| |
| |
| | |
936,929 |
|
461,760 |
|
|
| |
| |
| |
| |
| MINORITY INTERESTS | |
8,586 |
|
6,871 |
|
|
| |
| |
| SHAREHOLDERS' EQUITY: | |
| Share capital | |
| | | |
| Ordinary shares of New Israeli Shekels (NIS) 1 par value; | |
| | | |
| Authorized - 80,000,000 shares as of June 30, 2007 | |
| | | |
| and December 31, 2006; | |
| | | |
| Issued - 42,451,010 and 42,425,595 shares as of June 30, 2007 and December 31, 2006, respectively; | |
| | | |
| Outstanding - 42,042,089 and 42,016,674 shares as of June 30, 2007 and December 31, 2006, respectively | |
11,882 |
|
11,876 |
|
| Additional paid-in capital | |
291,532 |
|
289,026 |
|
| Accumulated other comprehensive loss | |
(16,162 |
) |
(16,746 |
) |
| Retained earnings | |
214,259 |
|
213,749 |
|
| Treasury shares - 408,921 shares as of June 30, 2007 and | |
| | | |
| December 31, 2006 | |
(4,321 |
) |
(4,321 |
) |
|
| |
| |
| | |
497,190 |
|
493,584 |
|
|
| |
| |
| | |
$ 2,534,856 |
|
$ 1,773,100 |
|
|
| |
| |
The accompanying
notes are an integral part of the consolidated financial statements.
3
|
Six months ended
June 30,
| |
Three months ended
June 30,
| |
Year ended
December 31,
| |
|
2007
| |
2006
| |
2007
| |
2006
| |
2006
| |
|
(Unaudited)
| |
(Unaudited)
| |
(Audited)
| |
| Revenues |
|
$ 871,758 |
|
$ 679,185 |
|
$ 468,158 |
|
$ 344,815 |
|
$ 1,523,243 |
|
| Cost of revenues | |
641,266 |
|
502,067 |
|
341,204 |
|
255,237 |
|
1,149,768 |
|
| Restructuring expenses | |
10,482 |
|
- |
|
10,482 |
|
- |
|
- |
|
|
| |
| |
| |
| |
| |
| Gross profit | |
220,010 |
|
177,118 |
|
116,472 |
|
89,578 |
|
373,475 |
|
|
| |
| |
| |
| |
| |
| |
| Research and development costs, net | |
53,074 |
|
39,789 |
|
28,981 |
|
18,351 |
|
92,232 |
|
| Marketing and selling expenses | |
71,577 |
|
53,630 |
|
39,206 |
|
27,382 |
|
111,880 |
|
| General and administrative expenses | |
44,418 |
|
37,727 |
|
24,100 |
|
18,720 |
|
77,505 |
|
| In-process research and development write-off | |
16,560 |
|
- |
|
16,560 |
|
- |
|
- |
|
|
| |
| |
| |
| |
| |
| | |
185,629 |
|
131,146 |
|
108,847 |
|
64,453 |
|
281,617 |
|
|
| |
| |
| |
| |
| |
| |
| Operating income | |
34,381 |
|
45,972 |
|
7,625 |
|
25,125 |
|
91,858 |
|
Financial expenses, net | |
(7,962 |
) |
(10,918 |
) |
(5,034 |
) |
(6,677 |
) |
(21,456 |
) |
| Other income (expenses), net | |
95 |
|
160 |
|
(18 |
) |
(748 |
) |
1,814 |
|
|
| |
| |
| |
| |
| |
| Income before taxes on income | |
26,514 |
|
35,214 |
|
2,573 |
|
17,700 |
|
72,216 |
|
| Taxes on income | |
12,122 |
|
9,366 |
|
5,389 |
|
4,762 |
|
20,694 |
|
|
| |
| |
| |
| |
| |
| | |
14,392 |
|
25,848 |
|
(2,816 |
) |
12,938 |
|
51,522 |
|
| Equity in net earnings of affiliated companies | |
| and partnership | |
5,773 |
|
3,614 |
|
2,373 |
|
1,347 |
|
14,743 |
|
| Minority interests in losses (earnings) | |
| | | | | | | | | | |
| of subsidiaries | |
(1,757 |
) |
77 |
|
(248 |
) |
786 |
|
5,977 |
|
|
| |
| |
| |
| |
| |
| Net income | |
$ 18,408 |
|
$ 29,539 |
|
$ (691 |
) |
$ 15,071 |
|
$ 72,242 |
|
|
| |
| |
| |
| |
| |
| |
| Earnings per share | |
| Basic net earnings (loss) per share | |
$ 0.44 |
|
$ 0.72 |
|
$ (0.02 |
) |
$ 0.37 |
|
$ 1.75 |
|
|
| |
| |
| |
| |
| |
| |
| Diluted net earnings (loss) per share | |
$ 0.43 |
|
$ 0.71 |
|
$ (0.02 |
) |
$ 0.36 |
|
$ 1.72 |
|
|
| |
| |
| |
| |
| |
| |
| Number of shares used in computation of | |
| | | | | | | | | | |
| basic net earnings per share | |
42,029 |
|
41,067 |
|
42,034 |
|
41,125 |
|
41,340 |
|
|
| |
| |
| |
| |
| |
| |
| Number of shares used in computation of | |
| diluted net earnings per share | |
42,402 |
|
41,772 |
|
42,629 |
|
41,808 |
|
41,880 |
|
|
| |
| |
| |
| |
| |
The accompanying
notes are an integral part of the consolidated financial statements.
4
|
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, 2006 |
|
40,966,624 |
|
$11,636 |
|
$278,679 |
|
$(1,340 |
) |
$ 166,123 |
|
$(4,321 |
) |
$ 450,777 |
|
|
|
| Exercise of options | |
1,050,050 |
|
240 |
|
8,008 |
|
- |
|
- |
|
- |
|
8,248 |
|
|
|
| Tax benefit in respect of options exercised | |
- |
|
- |
|
2,144 |
|
- |
|
- |
|
- |
|
2,144 |
|
|
|
| Stock based compensation | |
- |
|
- |
|
195 |
|
- |
|
- |
|
- |
|
195 |
|
| Dividends declared | |
- |
|
- |
|
- |
|
- |
|
(24,616 |
) |
- |
|
(24,616 |
) | | | | |
| Other comprehensive income (loss), net of tax: | |
| Unrealized loss on derivative instruments | |
- |
|
- |
|
- |
|
(15,642 |
) |
- |
|
- |
|
(15,642 |
) |
$(15,642 |
) |
| Foreign currency translation differences | |
- |
|
- |
|
- |
|
2,034 |
|
- |
|
- |
|
2,034 |
|
2,034 |
|
| Increase in additional minimum pension liability | |
| per FAS 87 | |
- |
|
- |
|
- |
|
2,603 |
|
- |
|
- |
|
2,603 |
|
2,603 |
|
| Adjustment for adoption of FAS 158 for the pension
| |
| | | | | | | | | | | |
| | | | | | |
| plans as of December 31, 2006 | |
- |
|
- |
|
- |
|
(4,341 |
) |
- |
|
- |
|
(4,341 |
) |
- |
|
| Adjustment for adoption of FAS 158 for the | |
| post medical plan as of December 31, 2006 | |
- |
|
- |
|
- |
|
(252 |
) |
- |
|
- |
|
(252 |
) |
- |
|
| Unrealized gain on available for sale securities | |
- |
|
- |
|
- |
|
192 |
|
- |
|
- |
|
192 |
|
192 |
|
| Net income | |
- |
|
- |
|
- |
|
- |
|
72,242 |
|
- |
|
72,242 |
|
72,242 |
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| Total comprehensive income | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ 61,429 |
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| Balance as of December 31, 2006 | |
42,016,674 |
|
$11,876 |
|
$289,026 |
|
$(16,746 |
) |
$ 213,749 |
|
$(4,321 |
) |
$ 493,584 |
|
|
|
| Exercise of options | |
25,415 |
|
6 |
|
281 |
|
- |
|
- |
|
- |
|
287 |
|
|
|
| Tax benefit in respect of options exercised | |
- |
|
- |
|
64 |
|
- |
|
- |
|
- |
|
64 |
|
|
|
| Stock based compensation | |
- |
|
- |
|
2,161 |
|
- |
|
- |
|
- |
|
2,161 |
|
|
|
| Dividends paid | |
- |
|
- |
|
- |
|
- |
|
(13,052 |
) |
- |
|
(13,052 |
) |
|
|
| Cumulative impact of change in accounting for | |
| uncertainties in income taxes (FIN 48) | |
- |
|
- |
|
- |
|
- |
|
(4,846 |
) |
- |
|
(4,846 |
) |
|
|
| Other comprehensive income (loss), net of tax: | |
| Unrealized losses on derivative instruments | |
- |
|
- |
|
- |
|
(2,081 |
) |
- |
|
- |
|
(2,081 |
) |
(2,081 |
) |
| Foreign currency translation differences | |
- |
|
- |
|
- |
|
1,025 |
|
- |
|
- |
|
1,025 |
|
1,025 |
|
| Adjustment for adoption of FAS 158 for the | |
| post medical plan as of December 31, 2006 | |
- |
|
- |
|
- |
|
1,163 |
|
- |
|
- |
|
1,163 |
|
1,163 |
|
| Unrealized gain on available for sale securities | |
- |
|
- |
|
- |
|
477 |
|
- |
|
- |
|
477 |
|
477 |
|
| Net income | |
- |
|
- |
|
- |
|
- |
|
18,408 |
|
- |
|
18,408 |
|
18,408 |
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| Total comprehensive income | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ 18,992 |
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| Balance as of June 30, 2007 (Unaudited) | |
42,042,089 |
|
$11,882 |
|
$291,532 |
|
$(16,162 |
) |
$ 214,259 |
|
$(4,321 |
) |
$ 497,190 |
|
|
|
|
| |
| |
| |
| |
| |
| |
| |
| |
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 and 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 April 1, 2006 (Unaudited) |
|
41,042,692 |
|
$11,653 |
|
$279,039 |
|
$(3,081 |
) |
$ 174,773 |
|
$(4,321 |
) |
$ 458,063 |
|
|
|
| Exercise of options | |
174,094 |
|
17 |
|
1,425 |
|
- |
|
- |
|
- |
|
1,442 |
|
|
|
| Tax benefit in respect of options exercised | |
- |
|
- |
|
218 |
|
- |
|
- |
|
- |
|
218 |
|
|
|
| Dividends paid | |
- |
|
- |
|
- |
|
- |
|
(5,983 |
) |
- |
|
(5,983 |
) |
|
|
| Other comprehensive income (loss): | |
| Unrealized gains on derivative instruments | |
- |
|
- |
|
- |
|
(5,840 |
) |
- |
|
- |
|
(5,840 |
) |
$(5,840 |
) |
| Foreign currency translation differences | |
- |
|
- |
|
- |
|
5 |
|
- |
|
- |
|
5 |
|
5 |
|
| Net income | |
- |
|
- |
|
- |
|
- |
|
15,071 |
|
- |
|
15,071 |
|
15,071 |
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| Total comprehensive income | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$9,236 |
|
|
|
|
|
|
|
|
|
| |
| Balance as of June 30, 2006 (Unaudited) | |
41,216,786 |
|
$11,670 |
|
$280,682 |
|
$(8,916 |
) |
$ 183,861 |
|
$(4,321 |
) |
$ 462,976 |
|
|
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| Balance as of April 1, 2007 (Unaudited) | |
42,027,211 |
|
$11,878 |
|
$290,206 |
|
$(17,704 |
) |
$ 221,264 |
|
$(4,321 |
) |
$ 501,323 |
|
|
|
| Exercise of options | |
14,878 |
|
4 |
|
121 |
|
- |
|
- |
|
- |
|
125 |
|
|
|
| Tax benefit in respect of options exercised | |
- |
|
- |
|
37 |
|
- |
|
- |
|
- |
|
37 |
|
|
|
| Stock based compensation, net of tax | |
- |
|
- |
|
1,168 |
|
- |
|
- |
|
- |
|
1,168 |
|
|
|
| Dividends paid | |
- |
|
- |
|
- |
|
- |
|
(6,314 |
) |
- |
|
(6,314 |
) |
|
|
| Other comprehensive income (loss), net of tax: | |
| Unrealized loss on derivative instruments | |
- |
|
- |
|
- |
|
$ (1,164 |
) |
- |
|
- |
|
(1,164 |
) |
$ (1,164 |
) |
| Foreign currency translation differences | |
- |
|
- |
|
- |
|
1,117 |
|
- |
|
- |
|
1,117 |
|
1,117 |
|
| Adjustment for adoption of FAS 158 for the | |
| post medical plan as of December 31, 2006 | |
- |
|
- |
|
- |
|
1,163 |
|
- |
|
- |
|
1,163 |
|
1,163 |
|
| Unrealized gain on available for sale securities | |
- |
|
- |
|
- |
|
426 |
|
- |
|
- |
|
426 |
|
426 |
|
| Net loss | |
- |
|
- |
|
- |
|
- |
|
(691 |
) |
- |
|
(691 |
) |
(691 |
) |
|
| |
| |
| |
| |
| |
| |
| |
| |
| Total comprehensive income | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$851 |
|
|
|
|
|
|
|
|
|
| |
| Balance as of June 30, 2007 (Unaudited) | |
42,042,089 |
|
$11,882 |
|
$291,532 |
|
$(16,162 |
) |
$ 214,259 |
|
$(4,321 |
) |
$ 497,190 |
|
|
|
|
| |
| |
| |
| |
| |
| |
| |
| |
The accompanying
notes are an integral part of the consolidated financial statements.
-6-
|
Six months ended
June 30,
| |
Year ended
December 31,
| |
|
|
2007
| |
2006
| |
2006
| |
|
(Unaudited)
| |
(Audited)
| |
| |
| CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
| Net income | |
$ 18,408 |
|
$ 29,539 |
|
$ 72,242 |
|
| Adjustments to reconcile net income to net cash provided by | |
| operating activities: | |
| Depreciation and amortization | |
38,470 |
|
28,130 |
|
58,500 |
|
| Purchased in- process R&D | |
16,560 |
|
- |
|
- |
|
| Stock based compensation | |
2,161 |
|
- |
|
195 |
|
| Deferred income taxes | |
(24,075 |
) |
(3,515 |
) |
(4,659 |
) |
| Accrued severance pay, net | |
(1,300 |
) |
(3,283 |
) |
(5,197 |
) |
| Gain on sale of property and equipment | |
(499 |
) |
(1,160 |
) |
(2,351 |
) |
| Minority interests in earnings (losses) of subsidiaries | |
1,757 |
|
(77 |
) |
(5,977 |
) |
| Equity in net losses (earnings) of affiliated companies and partnership, | |
| net of dividend received (*) | |
3,040 |
|
2,533 |
|
(1,696 |
) |
| Changes in operating assets and liabilities: | |
| Decrease (increase) in short and long-term receivables and |
| | | | | | | |
| prepaid expenses | |
15,585 |
|
(14,819 |
) |
(58,793 |
) |
| Increase in inventories | |
(46,368 |
) |
(45,706 |
) |
(69,974 |
) |
| Increase in trade payables, other payables and accrued expenses | |
44,070 |
|
50,647 |
|
75,869 |
|
| Increase in advances received from customers | |
61,868 |
|
61,948 |
|
142,844 |
|
| Other adjustments | |
- |
|
(16 |
) |
(35 |
) |
|
| |
| |
| |
| Net cash provided by operating activities | |
129,677 |
|
104,221 |
|
200,968 |
|
|
| |
| |
| |
| |
| CASH FLOWS FROM INVESTING ACTIVITIES | |
| Purchase of property, plant and equipment | |
(44,742 |
) |
(26,314 |
) |
(64,809 |
) |
| Acquisition of a subsidiary (Schedule A) | |
(322,765 |
) |
- |
|
- |
|
| Investments in affiliated companies | |
(293 |
) |
(30,950 |
) |
(31,930 |
) |
| Proceeds from sale of property, plant and equipment | |
2,883 |
|
3,020 |
|
5,705 |
|
| Proceeds from sale of investment | |
- |
|
- |
|
5,000 |
|
| Investment in long-term bank deposits | |
(270 |
) |
(261 |
) |
(880 |
) |
| Proceeds from sale of long-term bank deposits | |
1,983 |
|
168 |
|
780 |
|
| Short-term bank deposits, net | |
(5,756 |
) |
(1,158 |
) |
(862 |
) |
|
| |
| |
| |
| Net cash used in investing activities | |
(368,960 |
) |
(55,495 |
) |
(86,996 |
) |
|
| |
| |
| |
| |
| CASH FLOWS FROM FINANCING ACTIVITIES | |
| Proceeds from exercise of options | |
287 |
|
1,897 |
|
8,248 |
|
| Repayment of long-term bank loans | |
(118,183 |
) |
(101,962 |
) |
(188,723 |
) |
| Receipt of long-term bank loans | |
403,778 |
|
102,853 |
|
85,053 |
|
| Dividends paid | |
(13,052 |
) |
(11,801 |
) |
(24,322 |
) |
| Tax benefit in respect of options exercised | |
64 |
|
140 |
|
2,144 |
|
| Change in short-term bank credit and loans, net | |
(5,977 |
) |
(15,791 |
) |
(5,695 |
) |
|
| |
| |
| |
| Net cash provided by (used in) financing activities | |
266,917 |
|
(24,664 |
) |
(123,295 |
) |
|
| |
| |
| |
| |
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | |
27,634 |
|
24,062 |
|
(9,323 |
) |
| CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD | |
84,564 |
|
93,887 |
|
93,887 |
|
|
| |
| |
| |
| CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD | |
$ 112,198 |
|
$ 117,949 |
|
$ 84,564 |
|
|
| |
| |
| |
| * Dividend received | |
$ 8,556 |
|
$ 6,147 |
|
$ 13,047 |
|
|
| |
| |
| |
| |
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) |
|
|
Six months ended
June 30,
| |
Year ended
December 31,
| |
|
|
2007
| |
2006
| |
2006
| |
|
(Unaudited)
| |
(Audited)
| |
| |
| SUPPLEMENTARY CASH FLOW |
|
|
| |
|
| |
|
| |
|
| ACTIVITIES: | | |
| | |
| Cash paid during the period for: | | |
| | |
| Income taxes | | |
$ | 6,791 |
|
$ | 11,523 |
|
$ | 15,955 |
|
|
| |
| |
| |
| Interest | | |
$ | 6,218 |
|
$ | 8,694 |
|
$ | 14,311 |
|
|
| |
| |
| |
| | |
| SCHEDULE A: |
|
| | | | | | | | | | | |
| Subsidiary acquired (Tadiran - see Note 1B) | | |
| | |
| Estimated net fair value of assets acquired and liabilities |
|
| | | | | | | | | | | |
| assumed at the date of acquisition was as follows: |
|
| | | | | | | | | | | |
| | |
| Working capital, net (excluding cash and cash equivalents) | | |
$ | 36,085 |
|
$ | - |
|
| - |
|
| Property, plant and equipment | | |
| 17,954 |
|
| - |
|
| - |
|
| Other long-term assets | | |
| 63,063 |
|
| - |
|
| - |
|
| Goodwill and other intangible assets | | |
| 507,243 |
|
| - |
|
| - |
|
| In-process R&D | | |
| 16,560 |
|
| - |
|
| - |
|
| Deferred income taxes | | |
| (67,360 |
) |
| - |
|
| - |
|
| Long-term liabilities | | |
| (76,910 |
) |
| - |
|
| - |
|
| Equity investment in Tadiran | | |
| (173,870 |
) |
| - |
|
| - |
|
|
| |
| |
| |
| | | |
$ | 322,765 |
|
$ | - |
|
$ | - |
|
|
| |
| |
| |
| | |
The accompanying notes
are an integral part of the consolidated financial statements.
-8-
Note 1 - GENERAL
| |
A. |
|
The
accompanying financial statements have been prepared in a condensed format
as of June 30, 2007, and for the three and six 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. |
| |
These
statements should be read in conjunction with the Company’s annual financial
statements and accompanying notes as of December 31, 2006. |
| |
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, 2006 in order to conform to the current year’s
presentation. |
| |
Operating
results for the six months ended June 30, 2007 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2007. |
| |
B. |
|
On
April 26, 2007, the Company completed its Cash Tender Offer (“the
Offer”) for the balance of the ordinary shares of Tadiran
Communications Ltd. (“Tadiran”), which prior to the
completion of the Offer was a publicly traded company in Israel, held
42% by the Company and recorded the investment as an equity investee.
As a result, Tadiran became a private, wholly-owned subsidiary of the
Company. The total amount paid by the Company for the Tadiran shares
relating to the Offer was approximately $383 million. The results of
Tadiran are consolidated in the Company’s financial statements
commencing the beginning of the month after the date of completion of
the Offer. |
| |
The
table below summarizes the Preliminary Purchase Price Allocation (“PPA”), for
the aggregate assets acquired, and liabilities assumed, in connection with the
acquisition of the Tadiran shares as follows: |
|
Acquired share of
book value
in Tadiran
| |
Excess
cost
| |
Total
| |
Expected useful
lives of
excess cost
| |
|
(in thousands of U.S. dollars) |
| Working capital |
|
|
$ | 67,600 |
|
| (17,400 |
) |
$ | 50,200 |
|
Up to a quarter |
|
|
| Long-term assets and investments | | |
| 44,100 |
|
| 1,100 |
|
| 45,200 |
|
20 years | | |
| Long-term liabilities | | |
| (53,000 |
) |
| 800 |
|
| (52,200 |
) |
3 years | | |
| Brand name | | |
| 5,700 |
|
| 18,200 |
|
| 23,900 |
|
15 years | | |
| Customer relationships and backlog | | |
| - |
|
| 96,800 |
|
| 96,800 |
|
2-10 years | | |
| Technology | | |
| 2,700 |
|
| 40,800 |
|
| 43,500 |
|
10 years | | |
| IPR&D | | |
| - |
|
| 16,600 |
|
| 16,600 |
|
Immediate write-off | | |
| Deferred taxes | | |
| - |
|
| (35,100 |
) |
| (35,100 |
) |
| | |
| Goodwill | | |
| 32,800 |
|
| 161,300 |
|
| 194,100 |
|
Indefinite - subject to | | |
| | | |
|
|
|
|
|
|
|
|
|
annual impairment test | | |
| | | |
$ | 99,900 |
|
$ | 283,100 |
|
$ | 383,000 |
|
| | |
|
| |
| |
| |
| |
-9-
|
|
| ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
U.S. dollars (in thousands) |
|
Note 1 - GENERAL
(Cont.)
| |
The
assets and liabilities recorded in connection with the PPA for the Tadiran acquisition
are based upon preliminary estimates of fair values for contracts in process,
inventories, estimated costs in excess of estimated contract value to complete contracts
in process in a loss position, contingent assets and liabilities, identifiable
intangibles, goodwill, property, plant and equipment and deferred income taxes. Actual
adjustment will be based on the final appraisals and other analysis of fair values, which
are in process. The Company expects to complete the PPA during 2007. The Company does not
expect the difference between the preliminary and final PPA for this business acquisition
to have a material impact on its results of operations or financial position. |
| |
Following
the acquisition of the Tadiran shares in the second quarter of 2007, the Company
identified and wrote-off duplicated inventories and equipment and accrued termination
costs in a total amount of $10,482, which was recorded as restructuring costs in the cost
of revenues. |
| |
The
following unaudited proforma data is based on historical financial statements of the
Company and Tadiran and is provided for comparative purposes only. The proforma
information does not purport to be indicative of the results that actually would have
occurred had the purchase of the shares been consummated prior to the beginning of the
reported periods. |
| |
The
proforma information reflects the results of the Company’s operations assuming that
Tadiran’s results were included in the Company’s consolidated results prior to
each of the reported periods and under the following assumptions: |
| |
|
(1) |
|
Intangible
assets (customer relationships, backlog, brand name and technology)
arising from the acquisition of the Tadiran shares of approximately
$228,000, net of related deferred taxes of approximately $57,000, is
amortized over a period of 2-15 years. |
| |
|
(2) |
|
Excess
of cost over equity purchased allocated to real estate assets of
approximately $1,800, net of related deferred taxes of approximately $450,
is amortized over a period of 20 years. |
| |
|
(3) |
|
The
cost attributed to purchase IPR&D projects, in the amount of
approximately $16,560, has been charged to operations immediately as
a non-recurring item and is not included in the proforma consolidated
results. |
| |
|
(4) |
|
Intercompany
balances and transactions, if any, have been eliminated. |
|
Three months
ended
June 30,
| |
Six months
ended
June 30,
| |
|
2006
| |
2007
| |
2007
| |
2006
| |
| Proforma sales |
|
|
$ | 491,640 |
|
$ | 407,383 |
|
$ | 957,802 |
|
$ | 811,176 |
|
| Proforma income | | |
$ | 15,864 |
|
$ | 14,500 |
|
$ | 37,460 |
|
$ | 32,823 |
|
| Proforma earnings per share |
|
| | | | | | | | | | | | | |
| Basic | | |
$ | 0.38 |
|
$ | 0.35 |
|
$ | 0.89 |
|
$ | 0.80 |
|
| Diluted | | |
$ | 0.37 |
|
$ | 0.35 |
|
$ | 0.88 |
|
$ | 0.79 |
|
-10-
|
|
| 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, except for the adoption of FASB
Statement No. 48, “Accounting for Uncertainty in Income Taxes
– an Interpretation of FASB Statement No. 109” (“FIN
48”). |
| |
The
Company adopted the provisions of FIN 48 on January 1, 2007. FIN 48 clarifies the
accounting for uncertainty in income taxes by prescribing a minimum recognition threshold
for a tax position taken or expected to be taken in a tax return that is required to be
met before being recognized in the financial statements. FIN 48 also provides guidance on
de-recognition, measurement, classification, interest and penalties, accounting in
interim periods, disclosure and transition. As of January 1, 2007, our unrecognized tax
benefit (“tax contingencies”) totaled $18,750. As a result of the
implementation of FIN 48, our tax contingencies increased by $4,846, which were recorded
as a reduction to retained earnings. We do not expect a significant increase or decrease
in unrecognized tax benefits over the next 12 months. |
| |
We
record interest related to our tax contingencies as income tax expense. Our January 1,
2007 tax contingencies include $2,450 of interest. |
| |
The
Company and its subsidiaries are subject to examination by various tax authorities in
jurisdictions such as Israel, the United States and Europe. With respect to the Company
and its major subsidiaries, we have completed the examinations by the tax authorities for
tax years through 2000. Certain subsidiaries are under examination of the tax authorities
for the years 2001-2005. The Company does not expect any adverse affect will result from
their examination. |
| |
B. |
|
Other
new pronouncements issued but not effective as of June 30, 2007 are not
expected to have a significant effect on the Company’s
consolidated financial position or results of operations, with the
possible exception of the following, which are currently being
evaluated by management: |
| |
|
(1) |
|
In
February 2007, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 159, “The Fair Value Option for Financial Assets and
Financial Liabilities — Including an Amendment of FASB Statement No.
115” (“SFAS 159”). SFAS 159 permits entities to choose to
measure eligible items at fair value at specific election dates and report
unrealized gains and losses on items for which the fair value option has
been elected in earnings at each subsequent reporting date. SFAS No. 159
is effective for the Company beginning January 1, 2008. Management is
currently evaluating the effect that adoption of this statement will have
on the Company’s consolidated financial position and results of
operations when it becomes effective in 2008. |
| |
|
(2) |
|
In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurement”,
which defines fair value, establishes a framework for consistently
measuring fair value under GAAP, and expands disclosures about fair value
measurement. SFAS No. 157 is effective for the Company beginning January
1, 2008, and the provisions of SFAS No. 157 will be applied prospectively
as of that date. Management is currently evaluating the effect that
adoption of this statement will have on the Company’s consolidated
financial position and results of operations when it becomes effective in
2008. |
| |
C. |
|
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. |
-11-
|
|
| ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
U.S. dollars (in thousands) |
|
Note 3 - INVENTORIES, NET OF ADVANCES
|
June 30,
2007
| |
December 31,
2006
| |
|
(Unaudited)
| |
(Audited)
|
| Cost of long-term contracts in progress |
|
|
$ | 454,625 |
|
$ | 373,045 |
|
| Raw materials | | |
| 104,859 |
|
| 90,075 |
|
| Advances to suppliers and subcontractors | | |
| 45,060 |
|
| 41,037 |
|
|
| |
| |
| | | |
| 604,544 |
|
| 504,157 |
|
| | |
| Less - Cost incurred on contracts in progress
| |
|
| | | | | | | |
| deducted from customer advances | | |
| 90,943 |
|
| 49,455 |
|
|
| |
| |
| | | |
| 513,601 |
|
| 454,702 |
|
| | |
| Less -Advances received from customers | | |
| 76,465 |
|
| 77,246 |
|
| Provision for losses | | |
| 8,492 |
|
| 5,494 |
|
|
| |
| |
| | | |
$ | 428,644 |
|
$ | 371,962 |
|
|
| |
| |
Note 4 - STOCK OPTION PLAN
| |
In
January 2007, the Company’s shareholders approved the Company’s 2007 Option
Plan (the “Plan”) to employees of the Company and certain subsidiaries. The
options include: (i) Regular Options — up to 1,250,000 options exercisable into
1,250,000 shares of the Company in consideration for the exercise price, all or any
portion of which may be granted as Incentive Stock Options (“Regular Options”)
and (ii) Cashless Options — up to 1,250,000 options, which entitle the participant
to exercise options for an amount reflecting only the benefit factor (“Cashless
Options”). Each of the participants is granted an equal amount of Regular Options
and Cashless Options. The exercise price for Israeli participants is the average closing
price of the Company’s share during 30 trading days preceeding the options grant
date. The exercise price of options granted to a non-Israeli participant residing in the
United States is the fair market value of the share on the date the options are granted. |
| |
According
to the Plan, the options granted on a certain date (the “Commencement Date”)
will become vested and exercisable in accordance with the following vesting schedule: |
| |
|
(1) |
|
Fifty
percent (50%) of the options will be vested and exercisable from the
second anniversary of the Commencement Date; |
| |
|
(2) |
|
An
additional twenty-five percent (25%) of the options will be vested and
exercisable from the third anniversary of the Commencement Date; and |
| |
|
(3) |
|
The
remaining twenty-five (25%) of the options will be vested and exercisable
from the fourth anniversary of the Commencement Date. |
| |
The
options expire five years from the grant date. |
| |
The
Company grants options to Israeli participants in accordance with the provisions of
Section 102 of the Israel Tax Ordinance related to the Capital Gains Tax Track. |
-12-
|
|
| ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
U.S. dollars (in thousands) |
|
Note 4 - STOCK
OPTION PLAN (Cont.)
| |
A
summary of the Company’s share option activity under the Plan and its previous stock
option plan from 2000 is as follows: |
|
Six months ended | |
Year ended December 31, | |
|
June 30, 2007
| |
2006
| |
2005
| |
|
Number of options
| |
Weighted
average
exercise
price
| |
Number of
options
| |
Weighted
average
exercise
price
| |
Number of
options
| |
Weighted
average
exercise
price
| |
| Outstanding - |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| beginning of the year | | |
| 167,460 |
|
$ | 15.70 |
|
| 1,602,752 |
|
$ | 12.83 |
|
| 2,130,257 |
|
$ | 12.60 |
|
| Granted | | |
| 2,381,300 |
|
| 33.27 |
|
| - |
|
| - |
|
| 22,000 |
|
| 19.36 |
|
| Exercised | | |
| (32,374 |
) |
| 16.28 |
|
| (1,366,809 |
) |
| 12.40 |
|
| (549,505 |
) |
| 12.38 |
|
| Forfeited | | |
| (58,300 |
) |
| 33.10 |
|
| (68,483 |
) |
| 12.55 |
|
| - |
|
| - |
|
|
| |
| |
| |
| |
| |
| |
| Outstanding - | | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| end of the period | | |
| 2,458,086 |
|
$ | 32.30 |
|
| 167,460 |
|
$ | 16.45 |
|
| 1,602,752 |
|
$ | 12.83 |
|
|
| |
| |
| |
| |
| |
| |
| Options exercisable at | | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| the end of the period | | |
| 64,711 |
|
$ | 15.65 |
|
| 75,085 |
|
$ | 15.70 |
|
| 1,470,752 |
|
$ | 12.47 |
|
|
| |
| |
| |
| |
| |
| |
| |
Aggregate
intrinsic value of outstanding options as of June 30, 2007, related to the above
mentioned option plans amounts to $25,500. The aggregate intrinsic value represents the
total intrinsic value (the difference between the Company’s closing stock price on
the last trading day of the second quarter of 2007 and the exercise price, multiplied by
the number of in-the-money options) that would have been received by the option holders
had all option holders exercised their options on June 30, 2007. This amount changes
based on the fair market value of the Company’s stock. |
| |
Compensation
expenses, related to the above mentioned option plans, net amounting to $2,161 were
recorded in the six months ended June 30, 2007. The expenses were recorded based on SFAS
No. 123(R) and SAB 107. As of June 30, 2007, there was approximately $18,000 of total
unrecognized compensation cost related to share-based compensation arrangements granted
under the Plan. That cost is expected to be recognized over a weighted-average period of
four years. |
Note 5 - COMMITMENTS AND CONTINGENT LIABILITIES
| |
On
July 4, 2007, the Company announced it was advised that a claim was filed by certain
minority shareholders of ImageSat International N.V. (“ImageSat”). The claim
was filled in the United States District Court for the Southern District of New York
against ImageSat, Israel Aerospace Industries Ltd. (“IAI”), the Company and
certain current and former officers and directors of ImageSat. ImageSat’s largest
shareholder is IAI, holding approximately 46% of ImageSat’s issued share capital.
Elbit Systems Electro-Optics Elop Ltd. (“Elop”) holds approximately 14% (7% on
a fully diluted basis) of ImageSat’s issued share capital and is entitled to
nominate one director to ImageSat’s board. ImageSat is engaged in the operation of
satellites and in providing satellite imagery. IAI has manufactured and supplied ImageSat
two satellites. Elop has manufactured the cameras for those satellites, as IAI’s
sub-contractor. The claim contains various allegations that the defendants allegedly
breached their fiduciary and/or contractual obligations to the detriment of the
plaintiffs, who are certain of ImageSat’s minority shareholders. The claim alleges
various causes of action and damages aggregating hundreds of millions of dollars, not all
of which are alleged against Elbit Systems and/or each of the former or current ImageSat
directors. Based on a preliminary analysis, the Company believes it has good defenses to
the claim. |
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