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
of the Securities Exchange Act of 1934
For the Month of August 2008
_______________________

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:

                      x  Form 20-F                                                         o  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): o
 

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): o
 

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:

 

o     Yes                                                        x  No

 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-______________

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       Attached hereto as Exhibit 1 and incorporated herein by reference is the Registrant’s press release dated August 12, 2008.

 

       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, 2008.

 

       Attached hereto as Exhibit 3 and incorporated herein by reference is the Registrant’s condensed interim consolidated financial statements for the quarter ended June 30, 2008.

     

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/  Ronit Zmiri                 Name:  Ronit Zmiri Title:     Corporate Secretary

Dated: August 13, 2008

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EXHIBIT INDEX

Exhibit No.	Description
1.	Press Release dated August 12, 2008
2.	Management Report
3.	Financial Statements

 

 

 

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ELBIT SYSTEMS REPORTS RECORD

SECOND QUARTER 2008 RESULTS

 

Continued Strong Growth with Record Backlog of Orders and Revenues;

Revenues Increased by 39.5% over Second Quarter Last Year to $653.2 Million;

Backlog of Orders over $5 Billion;

 

Haifa, Israel, August 12, 2008 – Elbit Systems Ltd. (the “Company”) (NASDAQ: ESLT, TASE: ESLT), the international defense company, today reported its consolidated results for the second quarter ended June 30, 2008.

 

The Company’s backlog of orders as of June 30, 2008 totaled $5,050 million, as compared with $4,922 million as of March 31, 2008. Approximately 71% of the backlog relates to orders outside of Israel. Approximately 63% of the Company’s backlog as of June 30, 2008, is scheduled to be performed during the second half of 2008 and during 2009.

 

As previously announced, during the second quarter the Company reported two events that in the aggregate had minimal total net effect on net profit. These were a one-time net after tax expense provision of $10 million, related to a court ruling against a U.S. subsidiary of the Company. The other was a significant contribution to net income, due to a high level of revenues generated from the short-term delivery contract revenues in the quarter.

 

In comparing financial results of the second quarter 2008 to the second quarter in 2007, the following should be noted. During the second quarter of 2007, the Company completed the acquisition of Tadiran Communications Ltd. Following the acquisition, the Company recorded in the second quarter of 2007 expenses of $27.1 million, comprised of $16.6 million in In-Process Research & Development write-off expenses recorded under operating expenses, and $10.5 million in restructuring expenses recorded under cost of goods sold.

 

Consolidated revenues for the second quarter of 2008 increased by 39.5% to $653.2 million, from $468.2 million in the second quarter of 2007.

 

Gross profit for the second quarter of 2008 increased by 55.4% to $197.4 million (30.2% of revenues), as compared with gross profit, excluding expenses related to the Tadiran acquisition, of $127.0 million (27.1% of revenues) in the second quarter of 2007.

 

 

 

 

Consolidated net income for the second quarter of 2008 increased by 31.3% to $31.2 million (4.8% of revenues), as compared with net income, excluding net expenses related to the Tadiran acquisition, of $23.7 million (5.1% of revenues) in the second quarter of 2007. Diluted earnings per share for thesecond quarter of 2008 were $0.73, as compared with $0.56, excluding expenses related to the Tadiran acquisition, for thesecond quarter of 2007.

 

Operating Cash flow during the first six months of 2008 was $129.8 million.

The President and CEO of Elbit Systems, Joseph Ackerman, commented: “I am pleased to report another quarter of strong growth with record financial results, and very significantly, our backlog grew and crossed the $5 billion milestone. While all parts of the business are performing in accordance with plans, our subsidiaries in particular performed well and were an important factor in our improved margins this quarter.”

Mr. Ackerman continued, “Company-wide, we continue to improve with sustained growth on both the top and bottom line, driven both by strong organic growth as well as the contribution through our acquisitions. Our goal of building our business into a world-class and globally diversified defense company is ever more becoming an actuality, and we remain confident of our continued success into the long-term future.”

 

The Board of Directors declared a dividend of $0.20 per share for the second quarterof 2008. The dividend’s record date is August 26, 2008, and the dividend will be paid on September 8, 2008, net of taxes and levies, at the rate of 16.88%.

 

The Company will also be hosting a conference call on the same day, Tuesday, August 12, at 9am ET. On the call, management will review and discuss the results and will be available to answer questions.

 

To participate, please call one of the teleconferencing numbers that follow. 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: 1-866-345-5855

UK Dial-in Number: 0-800-404-8418

ISRAEL Dial-in Number: 03-918-0688

INTERNATIONAL Dial-in Number: +972-3-918-0688

at:

9am Eastern Time; 6am Pacific Time; 2pm UK time and 4pm 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: 1-877-332-1104 (US) or +972-3-925-5948 (Israel and International).

 

About Elbit Systems Ltd.

Elbit Systems Ltd. is an international defense electronics company engaged in a wide range of defense-related programs throughout the world. The 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 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 Company also focuses on the upgrading of existing military platforms and developing new technologies for defense, homeland security and commercial aviation applications.

 

 

This press release contains forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended) regarding Elbit Systems Ltd. and/or its subsidiaries (collectively the Company), to the extent such statements do not relate to historical or current fact. Forward Looking Statements are based on management’s expectations, estimates, projections and assumptions. Forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. These statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Therefore, actual future results, performance and trends may differ materially from these forward-looking statements due to a variety of factors, including, without limitation: scope and length of customer contracts; governmental regulations and approvals; changes in governmental budgeting priorities; general market, political and economic conditions in the countries in which the Company operates or sells, including Israel and the United States among others; differences in anticipated and actual program performance, including the ability to perform under long-term fixed-price contracts; and the outcome of legal and/or regulatory proceedings. The factors listed above are not all-inclusive, and further information is contained in Elbit Systems Ltd.’s latest annual report on Form 20-F, which is on file with the U.S. Securities and Exchange Commission. All forward-looking statements speak only as of the date of this release. The Company does not undertake to update its forward-looking statements.

 

(FINANCIAL TABLES TO FOLLOW)

 

 

ELBIT SYSTEMS LTD.

CONSOLIDATED BALANCE SHEETS

(In thousand of US Dollars)

 

 

 

 

 

ELBIT SYSTEMS LTD.

CONSOLIDATED STATEMENTS OF INCOME

(In thousand of US Dollars, except for per share amounts)

 

 

 

 

 

 

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EXHIBIT 2

 

 

Elbit Systems Ltd.

Management’s Report  

For The Quarter Ended June 30, 2008

 

This report should be read together with the unaudited financial statements for the quarter ended June 30, 2008 of Elbit Systems Ltd. (“Elbit Systems” and together with its subsidiaries, the “Company”), the Company’s audited consolidated financial statements and related notes for the year ended December 31, 2007, the Company’s management report for the year ended December 31, 2007 and the Company’s Form 20-F for the year ended December 31, 2007, 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, governmental authorizations, 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.

 

 

Business Description

 

The Company operates in the areas of aerospace, land and naval systems, command, control, communications, computers, intelligence, surveillance and reconnaissance (“C⁴ISR”), unmanned air vehicles (“UAVs”), advanced electro-optic and space technologies, electronic warfare (“EW”) suites, airborne warning systems, electronic intelligence (“ELINT”) systems, data links, military communications systems and equipment and radios. The Company also focuses on the upgrading of existing military platforms and developing new technologies for defense, homeland security and commercial aviation applications.

 

The Company provides support services for the platforms it upgrades as well as the systems and products it supplies. In addition, the Company offers a wide range of logistic support services as well as advanced engineering and manufacturing services to various customers, utilizing its significant logistic and manufacturing capabilities. The Company often cooperates with industries in Israel and in various other countries.

 

The Company 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 Company provides customers with cost-effective solutions, and its customers are able to improve their technological and operational capabilities within limited defense budgets.

 

The Company operates in a competitive environment for most of its projects, systems and products. Competition is based on product and program performance, price, reputation, reliability, maintenance costs and responsiveness to customer requirements. This includes the ability to respond to rapid changes in technology. In addition, its competitive position sometimes is affected by specific requirements in particular markets.

 

 

Financial Highlights

 

The Company’s revenues increased by 39.5% and reached $653.2 million in the second quarter of 2008, as compared to $468.2 million in the second quarter of 2007.

 

The Company’s backlog increased by 9.2% and reached $5.05 billion as of June 30, 2008, as compared to $4.62 billion as of December 31, 2007.

 

Net earnings in the second quarter of 2008 were $31.2 million (4.8% of revenues) and diluted EPS was $0.73, as compared to a $0.7 million net loss in the second quarter of 2007, which included $24.4 million In-Process Research & Development (“IPR&D”) and restructuring costs net related to the acquisition of Tadiran Communications Ltd. (“Tadiran”) in 2007.

 

The Company’s cash flow generated from operations in the six months ended June 30, 2008 was $129.8 million, as compared to $129.7 million in the six months ended June 30, 2007.

 

The Board of Directors declared a dividend of $0.20 per share for the second quarter of 2008.

 

 

 

 

 

 

 

 

 

 

 

The Company’s backlog of orders as of June 30, 2008 reached $5,050 million, of which 71% were for orders outside of Israel. The Company’s backlog as of December 31, 2007 was $4,624 million, of which 70% were for orders outside of Israel.

 

Approximately 63% of the Company’s backlog as of June 30, 2008 is scheduled to be performed in the following two quarters of 2008 and during 2009. The majority of the 37% balance is scheduled to be performed in 2010 and 2011.

 

 

The Company’s significant accounting policies are described in Note 2 to the audited consolidated financial statements for the year ended December 31, 2007. See also the Company’s management report for the year ended December 31, 2007.

 

In the first quarter of 2008, the Company adopted Statement of Financial Accounting Standards (FAS) 157, Fair Value Measurements, which defines fair value, establishes a market based framework or hierarchy for measuring fair value and expands disclosures about fair value measurements. FAS 157 is applicable whenever another accounting pronouncement requires or permits assets and liabilities to be measured at fair value, but does not require any new fair value measurements. The FAS 157 requirements for certain non-financial assets and liabilities have been deferred until the first quarter of 2009 in accordance with Financial Accounting Standards Board (FASB) Staff Position (FSP) 157-2. The adoption of FAS 157 did not have a material impact on the Company’s results of operations, financial position or cash flows.

 

The fair-value hierarchy established in FAS 157 prioritizes the inputs used in valuation techniques into three levels as follows:

 

 

 

 

The amount of assets and liabilities subject to the provision of SFAS 157 at June 30, 2008 includes mainly $17.9 million of marketable securities and liabilities related to derivative financial instruments of $19.8 million. The Company determined the fair values of the marketable securities using Level 3 methodology. Changes in the fair value of those securities, during the period, were recorded as follows: unrealized gains of $0.5 million considered to be temporary were reflected in other comprehensive income, and unrealized loss of $3.4 million that is considered to be other-than-temporary was charged to the statement of income as finance expenses. The fair value of the derivative financial instruments was determined using Level 2 methodology.

 

 

 

 

 

 

 

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, 2008 and June 30, 2007. The financial statements of the Company in the six-month period ended June 30, 2008 include consolidation of 100% of Tadiran’s financial results. In the first four months of 2007, 42% of Tadiran’s results is included as equity in net earnings of affiliates companies and partnership, net of amortization. Commencing May 1, 2007, the results of Tadiran were consolidated in the Company’s results.

 

 

 

 

Revenues

 

The Company’s sales are primarily to governmental entities and prime contractors under government defense programs. Accordingly, the level of the Company’s revenues is subject to governmental budgetary constraints.

 

Three Months Ended June 30, 2008, Compared to Three Months Ended June 30, 2007

 

The consolidated revenues increased by 39.5% from $468.2 million in the second quarter of 2007 to $653.2 million in the second quarter of 2008.

 

The following table sets forth the Company’s revenue distribution by areas of operation:

 

 

 

The changes in revenue distribution by areas of operation were the result of quarterly fluctuations and the inclusion of Tadiran in the C⁴ISR area of operation. The increase in the Land systems area of operations is mainly related to growth in deliveries of products to the U.S. Government.

 

The following table sets forth the Company’s distribution of revenues by geographical regions:

 

 

 

The changes in revenues by geographic distribution were the result of standard quarterly fluctuations and increased revenues to certain customers as mentioned above.

 

Six Months Ended June 30, 2008, Compared to Six Months Ended June 30, 2007

 

The Company’s consolidated revenues increased by 45.6%, from $871.8 million in the first six months of 2007 to $1,269.2 million in the first six months of 2008.

 

 

 

 

The following table sets forth the Company’s revenue distribution by areas of operation:

 

 

The changes in revenue distribution by areas of operation were the result of ordinary quarterly fluctuations and the inclusion of Tadiran in the C⁴ISR area of operation. The increase in the Land systems area of operations is mainly related to growth in deliveries of products to the U.S. Government.

 

 

 

The changes in revenues by geographic distribution were the result of ordinary quarterly fluctuations and revenues to customers as mentioned above.

 

Gross Profit

 

The Company’s gross profit represents the aggregate results of the Company’s activities and projects, and is based on the mix of programs in which the Company is engaged during the reported period.

 

Three Months Ended June 30, 2008, Compared to Three Months Ended June 30, 2007

 

Gross profit in the quarter ended June 30, 2008 was $197.4 million as compared to $116.5 million in the quarter ended June 30, 2007. The gross profit, in the second quarter of 2007, included restructuring expenses of $10.5 million (which constituted 2.2% of revenues). As a result of these expenses, the gross profit margin in the second quarter of 2007 decreased to 24.9%, compared to a gross profit margin of 30.2% in the second quarter of 2008. The increase in the gross profit margin in the second quarter of 2008 was mainly as a result of higher level of profit margins in short-term delivery contracts and the mix of the projects sold.

 

 

 

 

 

Six Months Ended June 30, 2008, Compared to Six Months Ended June 30, 2007

 

Gross profit in the six months ended June 30, 2008 was $365.8 million as compared to $220.0 million in the six months ended June 30, 2007. As a result of the expenses mentioned above (which constituted 1.2% of revenues), the gross profit margin in the six months ended June 30, 2007 decreased to 25.2%, compared to a gross profit margin of 28.8% in the six period ended June 30, 2008.

 

 

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, communications, electronic warfare (EW) and homeland security technologies and products.

 

Three Months Ended June 30, 2008, Compared to Three Months Ended June 30, 2007

 

Gross R&D expenses in the quarter ended June 30, 2008 totaled $46.6 million (7.1% of revenues), as compared to $36.5 million (7.8% of revenues) in the quarter ended June 30, 2007.

 

Net R&D expenses (after deduction of third party participation) in the quarter ended June 30, 2008 totaled $38.1 million (5.8% of revenues), as compared to $29 million (6.2% of revenues) in the quarter ended June 30, 2007.

 

Six Months Ended June 30, 2008, Compared to Six Months Ended June 30, 2007

 

Gross R&D expenses in the six months ended June 30, 2008 totaled $92.5 million (7.3% of revenues), as compared to $66.2 million (7.6% of revenues) in the six months ended June 30, 2007.

 

Net R&D expenses (after deduction of third party participation) in the six-month period ended June 30, 2008 totaled $76.1 million (6.0% of revenues), as compared to $53.1 million (6.1% of revenues) in the six-month period ended June 30, 2007.

 

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, 2008, Compared to Three Months Ended June 30, 2007

 

Marketing and selling expenses in the quarter ended June 30, 2008 were $53.6 million (8.2% of revenues), as compared to $39.2 million (8.4% of revenues) in the quarter ended June 30, 2007.

 

 

 

 

 

Six Months Ended June 30, 2008, Compared to Six Months Ended June 30, 2007

 

Marketing and selling expenses in the six months ended June 30, 2008 were $103.3 million (8.1% of revenues), as compared to $71.6 million (8.2% of revenues) in the six months ended June 30, 2007.

 

General and Administrative (“G&A”) Expenses  

 

Three Months Ended June 30, 2008, Compared to Three Months Ended June 30, 2007

 

G&A expenses were $45.7 million (7.0% of revenues) in the quarter ended June 30, 2008, as compared to $24.1 million (5.1% of revenues) in the quarter ended June 30, 2007. The increase in G&A expenses was mainly as a result of the court ruling against the Company’s U.S. subsidiary mentioned above.

 

Six Months Ended June 30, 2008, Compared to Six Months Ended June 30, 2007

 

G&A expenses were $77.8 million (6.1% of revenues) in the six months ended June 30, 2008, as compared to $44.4 million (5.1% of revenues) in the six months ended June 30, 2007.

 

Operating Income

 

Three Months Ended June 30, 2008, Compared to Three Months Ended June 30, 2007

 

The Company’s operating income in the quarter ended June 30, 2008 was $60 million, as compared to $7.6 million in the quarter ended June 30, 2007. The operating income in 2007 was affected by restructuring expenses and an IPR&D write-off of $27 million (which constituted 5.8% of revenues). As a result, the operating income margin in the second quarter of 2007 decreased to 1.6%, as compared to an operating margin of 9.2% in the second quarter of 2008. The higher level of operating margins in 2008 was a result of improved gross margins, mainly due to the higher level of short-term delivery contracts and mix of projects performed in the second quarter of 2008.

 

Six Months Ended June 30, 2008, Compared to Six Months Ended June 30, 2007

 

The Company’s operating income in the six months ended June 30, 2008 was $108.5 million, as compared to $34.4 million in the six months ended June 30, 2007. As a result of the expenses mentioned above (which constituted 3.1% of revenues), the operating income margin in the six months ended June 30, 2007 decreased to 3.9%, as compared to 8.5% in the six months ended June 30, 2008.

 

Finance Expenses (Net)

 

Three Months Ended June 30, 2008, Compared to Three Months Ended June 30, 2007

 

Net finance expenses in the quarter ended June 30, 2008 were $12.4 million, as compared to $5.0 million in the quarter ended June 30, 2007. The net finance expenses in 2008 include the impact of a write-off relating to Auction Rate Securities in the amount of $1.6 million and the effect of the revaluation of the New Israeli Shekel (“NIS”), which affected the Company’s activities and balances in NIS. As a result, the finance expenses margin in the second quarter of 2008 increased to 1.9%, as compared to 1.1% in the second quarter of 2007.

 

 

 

 

Six Months Ended June 30, 2008, Compared to Six Months Ended June 30, 2007

 

Net finance expenses in the six months ended June 30, 2008 was $17 million, as compared to $8 million in the six months ended June 30, 2007. The net finance expenses in 2008 include the impact of a write-off relating to Auction Rate Securities in the amount of $3.4 million and the effect of the revaluation of the NIS.

 

Taxes on Income

 

The Company’s tax rate represents a weighted average of the tax rates to which the various Company entities 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 Company entities generating the taxable income operate. The increase in the weight average tax rates in the second quarter of 2007 was mainly due to the IPR&D write-off related to the acquisition of the Tadiran shares not being deductible for tax purposes.

 

Three Months Ended June 30, 2008, Compared to Three Months Ended June 30, 2007

 

Provision for taxes in the quarter ended June 30, 2008 was $3.8 million (effective tax rate of 7.9%), as compared to a provision for taxes of $5.4 million (effective tax rate, excluding the IPR&D write-off, of 28.2%) in the quarter ended June 30, 2007.

 

Part of the tax rates decrease in the second quarter of 2008 was a result of lower level of profits generated in the U.S., in which the tax rates are higher. The lower profit was caused from the expenses related to the court ruling (see above).

 

Six Months Ended June 30, 2008, Compared to Six Months Ended June 30, 2007

 

Provision for taxes in the six months ended June 30, 2008 was $11.7 million (effective tax rate of 12.2%), as compared to a provision for taxes of $12.1 million (effective tax rate, excluding the IPR&D write-off, of 28.1%) in the six months ended June 30, 2007.

 

Minority Interest in Gains of Subsidiaries

 

The minority interest represents the minority part in gain/loss of subsidiaries, in which the Company holds less then 100%. The increase in 2008 is a result of higher level of sales and profit in those subsidiaries.

 

Three Months Ended June 30, 2008, Compared to Three Months Ended June 30, 2007

 

Minority interest in gain of subsidiaries in the quarter ended June 30, 2008 was $16.2 million, as compared to $0.3 million in the quarter ended June 30, 2007.

 

Six Months Ended June 30, 2008, Compared to Six Months Ended June 30, 2007

 

Minority interest in gain of subsidiaries in the quarter ended June 30, 2008 was $26.7 million, as compared to $1.8 million in the quarter ended June 30, 2007.

 

 

 

 

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.

 

Three Months Ended June 30, 2008, Compared to Three Months Ended June 30, 2007

 

In the second quarter of 2008, the Company had net income of $3.4 million from its share in earnings of affiliated entities and partnership, as compared to $2.4 million in the second quarter of 2007.

 

Six Months Ended June 30, 2008, Compared to Six Months Ended June 30, 2007

 

In the six months ended June 30, 2008 the Company’s share in earnings of affiliated companies and partnership was $5.9 million, as compared to $5.8 million in the six months ended June 30, 2007.

 

Net Earnings and Diluted Earnings Per Share (“EPS”)

 

Three Months Ended June 30, 2008, Compared to Three Months Ended June 30, 2007

 

Net earnings in the quarter ended June 30, 2008 were $31.2 million (4.8% of revenues), and the diluted EPS was $0.73.

 

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.

 

The number of shares used for computation of diluted EPS in the quarter ended June 30, 2008 was 42,868 thousand shares, as compared to 42,629 thousand shares in the quarter ended June 30, 2007.

 

Six Months Ended June 30, 2008, Compared to Six Months Ended June 30, 2007

 

Net earnings in the six months ended June 30, 2008 were $63.3 million (5.0% of revenues), as compared to net earnings of $18.4 million, including the $24.4 million IPR&D write-off and restructuring expenses, net, representing $0.57 per share (2.1% of revenues) in the six months ended June 30, 2007. Diluted EPS in the six months ended June 30, 2008 was $1.48, as compared to $0.43 in the six months ended June 30, 2007.

 

The number of shares used for computation of diluted EPS in the six months ended June 30, 2008 was 42,872 thousand shares, as compared to 42,402 thousand shares in the six months ended June 30, 2007.

 

 

The Company’s net cash flow generated from operating activities in the six months ended June 30, 2008 was $129.8 million, resulting mainly from net income and an increase in trade and other payables. The cash inflows were partially offset, mainly by an increase in inventories.

 

 

 

 

Net cash flow used for investment activities in the six months ended June 30, 2008 was $91.7 million, which was used mainly for procurement of various assets and equipment and investments in short and long-term bank deposits.

 

Net cash flow used for financing activities in the six months ended June 30, 2008 was $5.8 million, which was used mainly for dividend payment.

 

On June 30, 2008, the Company had total borrowings in the amount of $470.2 million, including $463.5 million in long-term loans, and $942.2 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, 2008, the Company had a cash balance amounting to $395.1 million.

 

As of June 30, 2008, the Company had working capital of $274.7 million, and its current ratio was 1.21.

 

 

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, 2008, the Company’s liquid assets were comprised of bank deposits, and it had no investments in liquid equity securities that were subject to market fluctuations, except for Auction Rate Securities (see Finance Expense (Net) above). The Company’s deposits and loans are based on variable interest rates, and their value as of June 30, 2008 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, 2008, the Company had exposure due to liabilities denominated in NIS of $222.7 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 impacted the Company’s finance expenses for the second quarter of 2008.

 

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, 2008 by forward contracts. On June 30, 2008, the Company had forward contracts covering $219.3 million in Euro, $158.8 million in GBP and $4.5 million in other currencies.

 

 

The Board of Directors declared on August 11, 2008 a dividend of $0.20 per share.

 

* * * * *

 

 

 

 

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EXHIBIT 3

 

 

 

ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

 

AS OF JUNE 30, 2008

(Unaudited)

(In thousands of U.S. dollars)

 

 

 

ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES

 

CONDENSED INTERIM CONSOLIDATED

FINANCIAL STATEMENTS

 

AS OF JUNE 30, 2008

(Unaudited)

(In thousands of U.S. dollars)

 

 

 

 

C O N T E N T S

 

 

 

 

 

# # # # # #

 

 

 

 

ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

U.S. dollars (in thousands)

 

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

U.S. dollars (in thousands)

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

 

ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

U.S. dollars (in thousands, except share and per share data)

 

 

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

U.S. dollars (in thousands, except share and share data)

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

U.S. dollars (in thousands, except share and share data)

 

 

 

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars (in thousands)

 

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD			362,802			84,564			84,564
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD		$	395,090		$	112,198		$	362,802
* Dividend received		$	6,947		$	8,556		$	12,383

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)

 

 

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES

 

 

The accompanying financial statements have been prepared in a condensed format as of June 30, 2008, and for the three and six months then ended in accordance with United States generally accepted accounting principles “)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, 2007.

 

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, 2007 in order to conform to the current year’s presentation.

 

Operating results for the six and three months ended June 30, 2008, are not necessarily indicative of the results that may be expected for the year ending December 31, 2008.

 

 

 

In March 2008, the FASB issued SFAS 161, Disclosures about Derivative Instruments and Hedging Activities (SFAS 161). SFAS 161 is an amendment of SFAS 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133). To address concerns that the existing disclosure requirements of SFAS 133 do not provide adequate information, SFAS 161 requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. SFAS 161 will be effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company is currently evaluating the future impacts and disclosures resulting from SFAS 161.

 

 

 

ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES

 

 

 

Note 4 – FAIR VALUE MEASUREMENTS

 

In the first quarter of 2008, the Company adopted Statement of Financial Accounting Standards (FAS) 157, Fair Value Measurements, which defines fair value, establishes a market based framework or hierarchy for measuring fair value and expands disclosures about fair value measurements. FAS 157 is applicable whenever another accounting pronouncement requires or permits assets and liabilities to be measured at fair value, but does not require any new fair value measurements. The FAS 157 requirements for certain non-financial assets and liabilities have been deferred until the first quarter of 2009 in accordancewith Financial Accounting Standards Board (FASB) Staff Position (FSP) 157-2. The adoption of FAS 157 did not have a material impact on our results of operations, financial position or cash flows.

 

The fair value hierarchy established in FAS 157 prioritizes the inputs used in valuation techniques into threelevels as follows:

 

The amount of assets and liabilities subject to the provision of SFAS 157 at June 30, 2008,includes mainly $17,921 of marketable securities and liabilities related to derivative financial instruments of $19,838. The Company determined the fair values of the marketable securities using Level 3 methodology. Changes in the fair value of thosesecurities during the period were recorded as follows: unrealized gains of $456 considered to be temporary were reflected in other comprehensive income, and unrealized losses of $3,433 that are considered to be other-than-temporary were charged to statement of income as finance expenses. The fair value of the derivative financial instruments was determined using Level 2 methodology.

 

 

 

 

ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES

 

Note 5 – COMMITMENTS AND CONTINGENT LIABILITIES

 

 

 

 

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