ELBIT SYSTEMS LTD. Earnings Release
ELBIT SYSTEMS REPORTS
THIRD QUARTER 2021 RESULTS
Backlog of orders at $13.6 billion; Revenues of $1.36 billion; Non- GAAP net income of $103 million; GAAP net income of $92 million; Non-GAAP net EPS of $2.33; GAAP net EPS of $2.08
Haifa, Israel, November 23, 2021 - Elbit Systems Ltd. (the "Company") (NASDAQ and TASE: ESLT),
the international high technology company, reported today its consolidated results for the quarter ended September 30, 2021.
In this release, the Company is providing US-GAAP results as well as additional non-GAAP financial data, which are intended to provide investors a more comprehensive view of the Company's business results and trends. For a description of the Company's non-GAAP definitions see page 4 below, "Non-GAAP financial data". Unless otherwise stated, all financial data presented is US-GAAP financial data.
Management Comment:
Bezhalel (Butzi) Machlis, President and CEO of Elbit Systems, commented: "We are pleased with our third quarter results that demonstrated the successful execution of our strategy to build a diverse global footprint, which contributed to the 20% revenue growth, as well as successful implementation of efficiency measures that supported an improved operational performance. The third quarter results and sustained demand from our customers provide us with confidence in Elbit Systems' long term strategy and future prospects."
Third quarter 2021 results:
Revenues in the third quarter of 2021 were $1,363.6 million, as compared to $1,134.2 million in the third quarter of 2020. A major part of the growth was organic, in addition to the contribution of Sparton, which was acquired in the second quarter of 2021.
Non-GAAP(*) gross profit amounted to $370.7 million (27.2% of revenues) in the third quarter of 2021, as compared to $302.3 million (26.7% of revenues) in the third quarter of 2020. GAAP gross profit in the third quarter of 2021 was $363.2 million (26.6% of revenues), as compared to $237.4 million (20.9% of revenues) in the third quarter of 2020. The GAAP gross profit in the third quarter of 2020 was affected by non-cash expenses related to impairment of assets and inventory write-offs due to the impact of COVID-19, in the amount of approximately $60 million.
Research and development expenses, net were $101.5 million (7.4% of revenues) in the third quarter of 2021, as compared to $91.3 million (8.0% of revenues) in the third quarter of 2020.
* see page 4
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Earnings Release
Marketing and selling expenses, net were $84.1 million (6.2% of revenues) in the third quarter of 2021, as compared to $71.6 million (6.3% of revenues) in the third quarter of 2020.
General and administrative expenses, net were $67.3 million (4.9% of revenues) in the third quarter of 2021, as compared to $51.0 million (4.5% of revenues) in the third quarter of 2020.
Non-GAAP(*) operating income was $123.0 million (9.0% of revenues) in the third quarter of 2021, as compared to $93.1 million (8.2% of revenues) in the third quarter of 2020. GAAP operating income in the third quarter of 2021 was $110.3 million (8.1% of revenues), as compared to $23.5 million (2.1% of revenues) in the third quarter of 2020.
Financial expenses, net were $13.5 million in the third quarter of 2021, as compared to $9.7 million in the third quarter of 2020.
Other income, net were $0.3 million in the third quarter of 2021, as compared to other income, net of $0.5 million in the third quarter of 2020.
Taxes on income were $8.3 million in the third quarter of 2021, as compared to $2.2 million in the third quarter of 2020.
Equity in net earnings of affiliated companies and partnerships was $3.0 million in the third quarter of 2021, as compared to $4.9 million in the third quarter of 2020.
Non-GAAP(*) net income attributable to the Company's shareholders in the third quarter of 2021 was $103.1 million (7.6% of revenues), as compared to $72.7 million (6.4% of revenues) in the third quarter of 2020. GAAP net income attributable to the Company's shareholders in the third quarter of 2021 was $91.9 million (6.7% of revenues), as compared to $17.0 million (1.5% of revenues) in the third quarter of 2020.
Non-GAAP(*) diluted net earnings per share attributable to the Company's shareholders were $2.33 for the third quarter of 2021, as compared to $1.64 for the third quarter of 2020. GAAP diluted earnings per
share attributable to the Company's shareholders in the third quarter of 2021 were $2.08, as compared to $0.38 in the third quarter of 2020.
The Company's backlog of orders as of September 30, 2021 totaled $13.6 billion, similar to the backlog as of June 30, 2021. Approximately 72% of the current backlog is attributable to orders from outside Israel. Approximately 40% of the backlog is scheduled to be performed during the remainder of 2021 and 2022.
Cash flows provided by operating activities in the nine months ended September 30, 2021 were $157.0 million, as compared to $106.7 million for the nine months ended September 30, 2020.
Issuance of Notes. On July 7, 2021, the Company raised an aggregate amount of NIS 1.9 billion (approximately $575 million) from the issuance of three trances of notes. In the third quarter of 2021 the Company entered into swap transactions to convert the series B notes in the amount of NIS 1.5 billion (approximately $457 million) to USD with a fixed annual interest rate of 1.92%.
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Impact of the COVID-19 Pandemic on the Company:
The Coronavirus disease 2019 (COVID-19) was declared a pandemic by the World Health Organization in March 2020. COVID-19 has had significant negative impacts on the worldwide economy, resulting in disruptions to supply chains and financial markets, significant travel restrictions, facility closures and shelter-in place orders in various locations. Elbit Systems is closely monitoring the evolution of the COVID-19 pandemic and its impacts on the Company's employees, customers and suppliers, as well as on the global economy.
As we last reported on August 12, 2021, we have been taking a number of actions to protect the safety of our employees as well as maintain business continuity and secure our supply chain. We also reported on a number of activities where we are leveraging our technological capabilities to assist hospital staffs and other first responders protecting our communities from the impact of the pandemic. All of these actions remain ongoing.
We have implemented a series of cost control measures to help limit the financial impact of the pandemic on the Company, in parallel to the measures we are taking to maintain business continuity and deliveries to our customers. We also are working on efficiency initiatives with a number of our suppliers. We continue to evaluate our operations on an ongoing basis in order to adapt to the evolving business environment.
During 2020 and the first nine months of 2021 our defense activities, which account for most of our business, were not materially impacted by the pandemic, although some of our businesses experienced certain disruptions due to government directed safety measures, travel restrictions and supply chain delays.
We believe that as of September 30, 2021, Elbit Systems had a healthy balance sheet, adequate levels of cash and access to credit facilities that provide liquidity when necessary. We have given high priority to cash management and adequate cash reserves to run the business.
The extent of the impact of COVID-19 on the Company's performance depends on future developments including the duration and spread of the pandemic, the measures adopted by governments to limit the spread of the pandemic, including implementation of vaccinations, and resulting actions that may be taken by our customers and our supply chain, all of which contain uncertainties. As noted in our annual report on Form 20-F, the preparation of financial reports requires us to make judgments, assumptions and estimates that affect the amounts reported. For our financial results for the quarter ended September 30, 2021, we considered the economic impact of the COVID-19 pandemic on our critical and significant accounting estimates. The expected impact of the COVID-19 pandemic did not have a material effect on our judgments, assumptions and estimates reflected in the results. However, our future results may differ materially from our estimates. As events continue to evolve in connection with the COVID-19 pandemic, the estimates we use in future periods may change materially.
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* Non-GAAP financial data:
The following non-GAAP financial data is presented to enable investors to have additional information on the Company's business performance as well as a further basis for periodical comparisons and trends relating to the Company's financial results. The Company believes such data provides useful information to investors by facilitating more meaningful comparisons of the Company's financial results over time. Such non-GAAP information is used by the Company's management to make strategic decisions, forecast future results and evaluate the Company's current performance. However, investors are cautioned that, unlike financial measures prepared in accordance with GAAP, non-GAAP measures may not be comparable with the calculation of similar measures for other companies.
The non-GAAP financial data includes reconciliation adjustments regarding non-GAAP gross profit, operating income, net income and diluted EPS. In arriving at non-GAAP presentations, companies generally factor out items such as those that have a non-recurring impact on the income statements, various non-cash items including significant exchange rate differences, significant effects of retroactive tax legislation, changes in accounting guidance, financial transactions and other items not considered to be part of regular ongoing business, which, in management's judgment, are items that are considered to be outside of the review of core operating results.
In the Company's non-GAAP presentation, the Company made certain adjustments, as indicated in the table below.
These non-GAAP measures are not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations, as determined in accordance with GAAP, and that these measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP measures. Investors should consider non-GAAP financial measures in addition to, and not as replacements for or superior to, measures of financial performance prepared in accordance with GAAP.
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Reconciliation of GAAP to Non-GAAP (Unaudited) Supplemental Financial Data:
(US Dollars in millions, except for per share amounts)
Nine Months | Nine | Three | Three | |||||||||||
Months | Months | Months | Year Ended | |||||||||||
Ended | Ended | Ended | Ended | |||||||||||
September | September | September | September | December | ||||||||||
30, 2021 | 30, 2020 | 30, 2021 | 30, 2020 | 31, 2020 | ||||||||||
GAAP gross profit | $ | 983.7 | $ | 807.3 | $ | 363.2 | $ | 237.4 | $ | 1,165.1 | ||||
Adjustments: | ||||||||||||||
Amortization of purchased intangible | 19.8 | 17.5 | 7.5 | 5.5 | 22.7 | |||||||||
assets | ||||||||||||||
Covid-19 related expenses and write-offs | - | 56.0 | - | 56.0 | 56.0 | |||||||||
Impairment of long-lived assets | - | 3.4 | - | 3.4 | 3.4 | |||||||||
Non-GAAP gross profit | $ | 1,003.5 | $ | 884.2 | $ | 370.7 | $ | 302.3 | $ | 1,247.2 | ||||
Percent of revenues | 26.5% | 26.9% | 27.2% | 26.7% | 26.7% | |||||||||
GAAP operating income | $ | 311.2 | $ | 221.1 | $ | 110.3 | $ | 23.5 | $ | 325.7 | ||||
Adjustments: | ||||||||||||||
Amortization of purchased intangible | 34.3 | 30.2 | 12.7 | 9.6 | 39.4 | |||||||||
assets | ||||||||||||||
Covid-19 related expenses and write-offs | - | 56.6 | - | 56.6 | 56.6 | |||||||||
Impairment of long-lived assets | - | 3.4 | - | 3.4 | 3.4 | |||||||||
Capital gains | (14.7) | (35.0) | - | - | (35.0) | |||||||||
Non-GAAP operating income | $ | 330.8 | $ | 276.3 | $ | 123.0 | $ | 93.1 | $ | 390.1 | ||||
Percent of revenues | ||||||||||||||
8.7% | 8.4% | 9.0% | 8.2% | 8.4% | ||||||||||
GAAP net income attributable to | $ | 266.2 | $ | 169.8 | $ | 91.9 | $ | 17.0 | $ | 237.7 | ||||
Elbit Systems' shareholders | ||||||||||||||
Adjustments: | ||||||||||||||
Amortization of purchased intangible | 34.3 | 30.2 | 12.7 | 9.6 | 39.4 | |||||||||
assets | ||||||||||||||
Covid-19 related expenses and write-offs | - | 56.6 | - | 56.6 | 56.6 | |||||||||
Capital gains | (24.9) | (35.0) | - | - | (35.0) | |||||||||
Impairment of investments and long- | - | 7.8 | - | 3.4 | 7.9 | |||||||||
lived assets | ||||||||||||||
Revaluation of investments measured | (4.8) | (21.4) | (3.2) | (2.8) | (20.8) | |||||||||
under fair value method | ||||||||||||||
Non-operating foreign exchange losses | 3.4 | 5.6 | 3.4 | (1.2) | 33.4 | |||||||||
Tax effect and other tax items, net | (1.5) | (0.2) | (1.7) | (9.9) | (0.7) | |||||||||
Non-GAAP net income attributable to | $ | 272.7 | $ | 213.4 | $ | 103.1 | $ | 72.7 | $ | 318.5 | ||||
Elbit Systems' shareholders | ||||||||||||||
Percent of revenues | ||||||||||||||
7.2% | 6.5% | 7.6% | 6.4% | 6.8% | ||||||||||
GAAP diluted net EPS | $ | 6.01 | $ | 3.84 | $ | 2.08 | $ | 0.38 | $ | 5.38 | ||||
Adjustments, net | 0.15 | 0.99 | 0.25 | 1.26 | 1.82 | |||||||||
Non-GAAP diluted net EPS | $ | 6.16 | $ | 4.83 | $ | 2.33 | $ | 1.64 | $ | 7.20 | ||||
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Elbit Systems Ltd. published this content on 23 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 November 2021 06:18:04 UTC.
