Elbit Systems Reports Second Quarter of 2016 Results

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Elbit Systems Ltd. the international high technology company, reported today its consolidated results for the quarter ended June 30, 2016.

Management Comment:

Bezhalel (Butzi) Machlis, Elbit Systems' President and CEO, commented: "We are encouraged by our second quarter financial results, demonstrating a strong, growing and diverse business. Our positive performance is built on our steady growth in backlog, which continued to increase in the quarter, enhancing visibility into revenues over the long term. Our sales are distributed across many regions and across a broad spectrum of products and technologies. This year in particular, we have seen strong performance in Europe and Israel. Our diversified market presence and portfolio has enabled us to continue to grow in an evolving global defense and homeland security environment. In recent months we have launched a number of new systems and solutions for which our customers worldwide have expressed interest. Based on our backlog of orders and market position, we have the potential to continue this trend for the foreseeable future."

Second quarter 2016 results:

Revenues in the second quarter of 2016 were $804.5 million, as compared to $749.6 million in the second quarter of 2015.

Non-GAAP^(*) gross profit amounted to $244.0 million (30.3% of revenues) in the second quarter of 2016, as compared to $224.7 million (30.0% of revenues) in the second quarter of 2015. GAAP gross profit in the second quarter of 2016 was $236.1 million (29.4% of revenues), as compared to $219.3 million (29.2% of revenues) in the second quarter of 2015.

Research and development expenses, net were $67.2 million (8.4% of revenues) in the second quarter of 2016, as compared to $57.5 million (7.7% of revenues) in the second quarter of 2015.

Marketing and selling expenses, net were $60.3 million (7.5% of revenues) in the second quarter of 2016, as compared to $60.6 million (8.1% of revenues) in the second quarter of 2015.

General and administrative expenses, net were $38.7 million (4.8% of revenues) in the second quarter of 2016, as compared to $35.7 million (4.8% of revenues) in the second quarter of 2015.

Non-GAAP^(*) operating income was $80.5 million (10.0% of revenues) in the second quarter of 2016, as compared to $75.4 million (10.1% of revenues) in the second quarter of 2015.  GAAP operating income in the second quarter of 2016 was $69.9 million (8.7% of revenues), as compared to $65.5 million (8.7% of revenues) in the second quarter of 2015.

Financial expenses, net were $5.5 million in the second quarter of 2016, as compared to $6.2 million in the second quarter of 2015.

Taxes on income were $14.3 million (effective tax rate of 22.2%) in the second quarter of 2016, as compared to $12.0 million (effective tax rate of 20.2%) in the second quarter of 2015.  The effective tax rate is affected by the mix of the tax rates in the various jurisdictions in which the Company's entities generate taxable income.

Equity in net earnings (loss) of affiliated companies and partnerships was $4.4 million in the second quarter of 2016, as compared to a net loss of $0.4 million in the second quarter of 2015. The relatively higher amount in the second quarter of 2016 reflects a gain from a Company affiliate in the UK that began operations in 2016.

Net income attributable to non-controlling interests was $0.5 million in the second quarter of 2016, as compared to $1.7 million in the second quarter of 2015.

Non-GAAP^(*) net income attributable to the Company's shareholders in the second quarter of 2016 was $62.9 million (7.8% of revenues), as compared to $53.5 million (7.1% of revenues) in the second quarter of 2015. GAAP net income in the second quarter of 2016 was $54.1 million (6.7% of revenues), as compared to $45.3 million (6.0% of revenues) in the second quarter of 2015.

Non-GAAP^(*) diluted net earnings per share attributable to the Company's shareholders were $1.47 for the second quarter of 2016, as compared to $1.25 for the second quarter of 2015. GAAP diluted earnings per share in the second quarter of 2016 were $1.27, as compared to $1.06 for the second quarter of 2015.

The Company's backlog of orders for the quarter ended June 30, 2016, totaled $6,818 million, as compared to $6,305 million as of June 30, 2015. Approximately 66% of the current backlog is attributable to orders from outside Israel. Approximately 59% of the current backlog is scheduled to be performed during 2016 and 2017.

Operating cash flow used in the six months ended June 30, 2016 was $15.1 million, as compared to $116.5 million provided in the six months ended June 30, 2015.

About Elbit Systems

Elbit Systems Ltd. is an international high technology company engaged in a wide range of defense, homeland security and commercial programs throughout the world. The Company, which includes Elbit Systems and its subsidiaries, operates in the areas of aerospace, land and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance ("C4ISR"), unmanned aircraft systems, advanced electro-optics, electro-optic space systems, EW suites, signal intelligence systems, data links and communications systems, radios and cyber-based systems. The Company also focuses on the upgrading of existing platforms, developing new technologies for defense, homeland security and commercial applications and providing a range of support services, including training and simulation systems.