ELBIT SYSTEMS LTD.
(Registrant)
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By: /s/ Ronit Zmiri
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Name: Ronit Zmiri | |
Title: Corporate Secretary |
Exhibit No.
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Description
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1.
2.
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Proxy Statement
Proxy Card
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Very truly yours,
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MICHAEL FEDERMANN
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Chairman of the Board of Directors
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JOSEPH ACKERMAN
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President and Chief Executive Officer
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1.
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to re-elect the following seven members ("Directors") to the Company’s Board of Directors (the "Board") until the close of the next Shareholders’ Annual General Meeting: Messrs. M. Federmann, Arad, Asheri, D. Federmann, Ne’eman and Ninveh and Mrs. Baum; and
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2.
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to re-appoint Kost, Forer, Gabbay & Kasierer, a member of Ernst & Young Global, as the Company’s independent auditor for the fiscal year 2012 and until the close of the next Shareholders' Annual General Meeting.
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By Order of the Board of Directors,
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MICHAEL FEDERMANN
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Chairman of the Board of Directors
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JOSEPH ACKERMAN
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President and Chief Executive Officer
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(1)
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to re-elect seven members ("Directors") of the Company's board of directors (the "Board"), who are not "External Directors" as defined in the Israel Companies Law 5759 – 1999 (the "Companies Law"), to the Board; and
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(2)
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to re-appoint Kost, Forer, Gabbay & Kasierer, a member of Ernst & Young Global, as the Company's independent auditor for the fiscal year 2012 and until the close of next Shareholders' Annual General Meeting.
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Federmann Enterprises Ltd.
99 Hayarkon Street
Tel-Aviv, Israel(2)
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19,578,941 | 46.76 | % | |||||
Heris Aktiengesellschaft
c/o 99 Hayarkon Street
Tel-Aviv, Israel
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3,836,458 | (3) | 9.16 | % | ||||
All officers and directors
as a group (29 persons)
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185,561 | (4) | 0.44 | % |
(1)
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The total number of Shares excludes 1,408,921 Shares held by Elbit Systems as treasury shares.
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(2)
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Federmann Enterprises Ltd. ("FEL") owns Shares of Elbit Systems directly and indirectly through Heris Aktiengesellschaft ("Heris") which is controlled by FEL. FEL is controlled by Beit Federmann Ltd. ("BFL"). BFL is controlled by Beit Bella Ltd. ("BBL") and Beit Yekutiel Ltd. ("BYL"). Michael Federmann is the controlling shareholder of BBL and BYL. He is also the Chairman of Elbit Systems’ Board and the Chairman of the Board and the Chief Executive Officer of FEL. Therefore, Mr. Federmann controls, directly and indirectly, the vote of Shares owned by Heris and FEL.
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(3)
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The amount of Shares owned by Heris is included in the amount of shares held by FEL as set forth in footnote (2) above.
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(4)
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This amount does not include (i) any Shares that may be deemed to be beneficially owned by Michael Federmann as described in footnote (2) above and (ii) 300,771 Shares underlying options that are currently exercisable or that will become exercisable within 60 days of October 11, 2012. A portion of the underlying options are "phantom options" or "cashless" options that have been calculated based on Elbit Systems' October 11, 2012 closing Share price on TASE of $35.93.
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Name
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Age
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Director
since
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Michael Federmann (Chairman)
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69
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2000
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Moshe Arad
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78
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2005
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Avraham Asheri
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74
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2000
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Rina Baum
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67
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2001
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David Federmann
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37
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2007
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Yehoshua Gleitman (External Director)
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62
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2010
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Yigal Ne’eman
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70
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2004
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Dov Ninveh
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65
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2000
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Dalia Rabin (External Director)
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62
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2010
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(a)
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its Consolidated Financial Statements for the fiscal year ended December 31, 2011;
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(b)
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the dividend paid to shareholders;
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(c)
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the compensation paid to the Company's Directors; and
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(d)
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the compensation arrangement with the Company's independent auditor.
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By Order of the Board
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MICHAEL FEDERMANN
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Chairman of the Board of Directors
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JOSEPH ACKERMAN
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President and Chief Executive Officer
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Q:
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When and where is the Meeting?
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Q:
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What is the record date for the Meeting?
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Q:
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What are the items to be voted on at the Meeting?
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(1)
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To re-elect seven members ("Directors") of the Company's Board of Directors (the "Board"), who are not "External Directors" as defined in the Israeli Companies Law 5759 – 1999 (the "Companies Law"); and
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(2)
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To re-appoint Kost, Forer, Gabbay & Kasierer, a member of Ernst & Young Global, as the Company's independent auditor for the fiscal year 2012 and until the close of next Shareholders' Annual General Meeting.
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Q:
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Does the Company and its Board of Directors support the proposals to be voted on at the Meeting?
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Q:
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What voting majority is required to approve the proposals?
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(a)
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to re-elect, under Item 1 of the Proxy Statement, each of the individuals nominated to be a Director; and
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(b)
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to re-appoint, under Item 2 of the Proxy Statement, Kost, Forer, Gabbay & Kasierer as the Company's independent auditor for the fiscal year 2012 and until the close of the next Shareholders’ Annual General Meeting.
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Q:
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What other matters will be presented at the Meeting?
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•
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its Consolidated Financial Statements;
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•
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the dividend paid to shareholders;
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•
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the compensation paid to the Company's Directors; and
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•
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the compensation arrangement with the Company's independent auditor.
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Q:
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What do I need to do now?
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Q:
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What do I do if I want to change my vote?
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Q:
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If my shares are held in "street name" by my broker, a bank or other representative, will my representative vote my shares for me?
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Q:
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Who can help answer my questions?
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ELBIT SYSTEMS LTD. AND SUBSIDIARIES |
ELBIT SYSTEMS LTD. AND SUBSIDIARIES |
Page
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F - 2 - F - 3
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CONSOLIDATED FINANCIAL STATEMENTS:
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F - 4 - F - 5
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F - 6
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F - 7 - F - 8
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F - 9 - F - 10
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F - 11 - F - 62
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Kost Forer Gabbay & Kasierer
3 Aminadav St.
Tel-Aviv 67067, Israel
Tel: 972 (3)6232525
Fax: 972 (3)5622555
www.ey.com
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Tel Aviv, Israel
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March 13, 2012
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Kost Forer Gabbay & Kasierer
3 Aminadav St.
Tel-Aviv 67067, Israel
Tel: 972 (3)6232525
Fax: 972 (3)5622555
www.ey.com
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Tel Aviv, Israel
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March 13, 2012
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CONSOLIDATED BALANCE SHEETS
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U.S. dollars (In thousands)
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December 31,
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||||||||||||
Note
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2011
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2010
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||||||||||
CURRENT ASSETS:
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||||||||||||
Cash and cash equivalents
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$ | 202,577 | $ | 151,059 | ||||||||
Short-term bank deposits and marketable securities
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21,693 | 63,486 | ||||||||||
Trade and unbilled receivables, net
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(3) | 669,524 | 702,364 | |||||||||
Other receivables and prepaid expenses
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(4) | 180,024 | 166,124 | |||||||||
Inventories, net of customer advances
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(5) | 761,269 | 665,270 | |||||||||
Total current assets
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1,835,087 | 1,748,303 | ||||||||||
LONG-TERM INVESTMENTS AND RECEIVABLES:
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||||||||||||
Investments in affiliated companies, partnership and other companies
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(6) | 110,159 | 89,814 | |||||||||
Available-for-sale marketable securities
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(9) | - | 7,179 | |||||||||
Long-term trade and unbilled receivables
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(7) | 162,762 | 90,343 | |||||||||
Long-term bank deposits and other receivables
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(8) | 12,215 | 44,401 | |||||||||
Deferred income taxes, net
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(18F) | 36,130 | 29,892 | |||||||||
Severance pay fund
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(2R) | 283,477 | 302,351 | |||||||||
604,743 | 563,980 | |||||||||||
PROPERTY, PLANT AND EQUIPMENT, NET
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(10) | 517,608 | 503,851 | |||||||||
GOODWILL
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(11) | 499,326 | 486,046 | |||||||||
OTHER INTANGIBLE ASSETS, NET
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(11) | 263,746 | 313,593 | |||||||||
$ | 3,720,510 | $ | 3,615,773 |
CONSOLIDATED BALANCE SHEETS
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U.S. dollars (In thousands, except share data)
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December 31,
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||||||||||||
Note
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2011
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2010
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||||||||||
CURRENT LIABILITIES:
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||||||||||||
Short-term bank credit and loans
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(12) | $ | 2,998 | $ | 15,115 | |||||||
Current maturities of long-term loans and Series A Notes
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(15) | 127,627 | 43,093 | |||||||||
Trade payables
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316,264 | 360,736 | ||||||||||
Other payables and accrued expenses
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(13) | 743,866 | 648,121 | |||||||||
Customer advances in excess of costs incurred on contracts in progress
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(14) | 407,222 | 302,691 | |||||||||
Total current liabilities
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1,597,977 | 1,369,756 | ||||||||||
LONG-TERM LIABILITIES:
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||||||||||||
Long-term loans, net of current maturities
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(15) | 302,255 | 292,039 | |||||||||
Series A Notes, net of current maturities
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(16) | 235,319 | 273,357 | |||||||||
Employee benefit liabilities
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394,115 | 395,303 | ||||||||||
Deferred income taxes and tax liabilities, net
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(18F) | 48,467 | 55,936 | |||||||||
Customer advances in excess of costs incurred on contracts in progress
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(14) | 154,696 | 177,191 | |||||||||
Other long-term liabilities
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59,961 | 46,740 | ||||||||||
1,194,813 | 1,240,566 | |||||||||||
COMMITMENTS AND CONTINGENT LIABILITIES
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(20) | |||||||||||
EQUITY:
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(21) | |||||||||||
Elbit Systems Ltd. equity:
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||||||||||||
Share capital:
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||||||||||||
Ordinary shares of New Israeli Shekels ("NIS") 1 par value each;
Authorized – 80,000,000 shares as of
December 31, 2011 and 2010;
Issued 43,257,077 and 43,102,261shares as
of December 31, 2011 and 2010, respectively;
Outstanding 42,607,788 and 42,693,340 shares
as of December 31, 2011 and 2010, respectively
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12,093 | 12,050 | ||||||||||
Additional paid-in capital
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232,407 | 281,594 | ||||||||||
Treasury shares – 649,289 and 408,921 shares as of December 31, 2011 and 2010, respectively
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(14,422 | ) | (4,321 | ) | ||||||||
Accumulated other comprehensive loss
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(56,226 | ) | (18,460 | ) | ||||||||
Retained earnings
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724,485 | 695,830 | ||||||||||
Total Elbit Systems Ltd. equity
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898,337 | 966,693 | ||||||||||
Non-controlling interests
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29,383 | 38,758 | ||||||||||
927,720 | 1,005,451 | |||||||||||
Total liabilities and equity
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$ | 3,720,510 | $ | 3,615,773 |
CONSOLIDATED STATEMENTS OF INCOME
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U.S. dollars (In thousands, except share data)
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Year ended December 31,
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||||||||||||||||
Note
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2011
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2010
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2009
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|||||||||||||
Revenues
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(22) | $ | 2,817,465 | $ | 2,670,133 | $ | 2,832,437 | |||||||||
Cost of revenues
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2,085,451 | 1,872,263 | 1,982,954 | |||||||||||||
Gross profit
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732,014 | 797,870 | 849,483 | |||||||||||||
Operating expenses:
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||||||||||||||||
Research and development, net
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(23) | 241,092 | 234,131 | 216,752 | ||||||||||||
Marketing and selling
|
235,909 | 229,942 | 250,963 | |||||||||||||
General and administrative
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139,349 | 131,200 | 119,311 | |||||||||||||
Other operating income, net
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(1E(1)) | - | (4,756 | ) | - | |||||||||||
Total operating expenses
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616,350 | 590,517 | 587,026 | |||||||||||||
Operating income
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115,664 | 207,353 | 262,457 | |||||||||||||
Financial expenses, net
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(24) | (13,569 | ) | (21,251 | ) | (15,585 | ) | |||||||||
Other income, net
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(25) | 1,909 | 13,259 | 458 | ||||||||||||
Income before income taxes
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104,004 | 199,361 | 247,330 | |||||||||||||
Income taxes
|
(18D) | 13,624 | 24,037 | 38,109 | ||||||||||||
90,380 | 175,324 | 209,221 | ||||||||||||||
Equity in net earnings of affiliated companies and partnership
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(6B) | 15,377 | 18,796 | 19,292 | ||||||||||||
Income from continuing operations
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105,757 | 194,120 | 228,513 | |||||||||||||
Income (loss) from discontinued operations and impairment, net
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(1G) | (15,977 | ) | 921 | - | |||||||||||
Net income
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$ | 89,780 | $ | 195,041 | $ | 228,513 | ||||||||||
Less: net loss (income) attributable to non-controlling interests
|
508 | (11,543 | ) | (13,566 | ) | |||||||||||
Net income attributable to Elbit Systems Ltd.'s shareholders
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$ | 90,288 | $ | 183,498 | $ | 214,947 | ||||||||||
Earnings per share attributable to Elbit Systems Ltd.'s ordinary shareholders:
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(21) | |||||||||||||||
Basic net earnings (losses) per share:
|
||||||||||||||||
Continuing operations
|
2.33 | 4.29 | 5.08 | |||||||||||||
Discontinued operations
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(0.22 | ) | 0.01 | - | ||||||||||||
Total
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$ | 2.11 | $ | 4.30 | $ | 5.08 | ||||||||||
Diluted net earnings (losses) per share:
|
||||||||||||||||
Continuing operations
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2.31 | 4.24 | 5.00 | |||||||||||||
Discontinued operations
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(0.22 | ) | 0.01 | - | ||||||||||||
Total
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$ | 2.09 | $ | 4.25 | $ | 5.00 | ||||||||||
Weighted average number of shares used in computation of basic earnings per share
|
42,764 | 42,645 | 42,305 | |||||||||||||
Weighted average number of shares used in computation of diluted earnings per share
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43,131 | 43,217 | 42,983 | |||||||||||||
Amounts attributable to Elbit Systems Ltd.'s common shareholders
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||||||||||||||||
Income from continuing operations, net of income taxes
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$ | 99,778 | $ | 182,951 | $ | 214,947 | ||||||||||
Discontinued operations, net of income taxes
|
(9,490 | ) | 547 | - | ||||||||||||
Net income attributable to Elbit Systems Ltd.'s shareholders
|
$ | 90,288 | $ | 183,498 | $ | 214,947 |
STATEMENTS OF CHANGES IN EQUITY
|
U.S. dollars (In thousands, except share data)
|
Number of
outstanding
shares
|
Share
capital
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Additional
paid-in
capital
|
Accumulated
other
comprehensive
income (loss)
|
Retained
earnings
|
Treasury
shares
|
Non-
controlling
interest
|
Total
equity
|
Total
comprehensive
income
|
||||||||||||||||||||||||||||
Balance as of January 1, 2009
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42,079,452 | $ | 11,892 | $ | 300,227 | $ | (13,573 | ) | $ | 429,608 | $ | (4,321 | ) | $ | 76,475 | $ | 800,308 | |||||||||||||||||||
Exercise of options
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451,443 | 114 | 9,757 | - | - | - | - | 9,871 | ||||||||||||||||||||||||||||
Stock-based compensation
|
- | - | 5,134 | - | - | - | - | 5,134 | ||||||||||||||||||||||||||||
Dividends paid
|
- | - | - | - | (76,172 | ) | - | - | (76,172 | ) | ||||||||||||||||||||||||||
Purchase of subsidiary shares from non- controlling interest
|
- | - | (42,991 | ) | - | - | - | (67,259 | ) | (110,250 | ) | |||||||||||||||||||||||||
Other comprehensive income, net of tax:
|
||||||||||||||||||||||||||||||||||||
Unrealized loss on derivative instruments, net of $749 tax income
|
- | - | - | (11,381 | ) | - | - | (97 | ) | (11,478 | ) | $ | (11,478 | ) | ||||||||||||||||||||||
Foreign currency translation differences
|
- | - | - | 1,367 | - | - | 1,517 | 2,884 | 2,884 | |||||||||||||||||||||||||||
Unrealized pension income, net of $1,473 tax expense
|
- | - | - | 1,910 | - | - | - | 1,910 | 1,910 | |||||||||||||||||||||||||||
Unrealized income on available for sale securities, net of $1,103 tax expense
|
- | - | - | 6,350 | - | - | 124 | 6,474 | 6,474 | |||||||||||||||||||||||||||
Cumulative effect from adoption of FSP 115-2 (codified in ASC 320-10, Investments –Debt and Equity Securities), net of $1,772 tax expense
|
- | - | - | (7,086 | ) | 7,086 | - | - | - | - | ||||||||||||||||||||||||||
Net income attributable to non- controlling interests
|
- | - | - | - | - | - | 13,566 | 13,566 | 13,566 | |||||||||||||||||||||||||||
Net income attributable to Elbit Systems Ltd. shareholders
|
- | - | - | - | 214,947 | - | - | 214,947 | 214,947 | |||||||||||||||||||||||||||
Total comprehensive income
|
$ | 228,303 | ||||||||||||||||||||||||||||||||||
Balance as of December 31, 2009
|
42,530,895 | $ | 12,006 | $ | 272,127 | $ | (22,413 | ) | $ | 575,469 | $ | (4,321 | ) | $ | 24,326 | $ | 857,194 | |||||||||||||||||||
Exercise of options
|
162,445 | 44 | 3,546 | - | - | - | - | 3,590 | ||||||||||||||||||||||||||||
Stock-based compensation
|
- | - | 5,211 | - | - | - | - | 5,211 | ||||||||||||||||||||||||||||
Tax benefit in respect of options exercised
|
- | - | 710 | - | - | - | - | 710 | ||||||||||||||||||||||||||||
Dividends paid
|
- | - | - | - | (63,137 | ) | - | - | (63,137 | ) | ||||||||||||||||||||||||||
Fair value of non-controlling interests related to the acquisition of ITL
|
- | - | - | - | - | - | 4,298 | 4,298 | ||||||||||||||||||||||||||||
Other comprehensive income, net of tax:
|
||||||||||||||||||||||||||||||||||||
Unrealized gain on derivative instruments, net of $308 tax expense
|
- | - | - | 6,668 | - | - | 119 | 6,787 | $ | 6,787 | ||||||||||||||||||||||||||
Foreign currency translation differences
|
- | - | - | 2,991 | - | - | (1,154 | ) | 1,837 | 1,837 | ||||||||||||||||||||||||||
Unrealized pension loss, net of $1,119 tax income
|
- | - | - | (2,781 | ) | - | - | - | (2,781 | ) | (2,781 | ) | ||||||||||||||||||||||||
Unrealized loss on available for sale securities, net of $990 tax income
|
- | - | - | (2,925 | ) | - | - | - | (2,925 | ) | (2,925 | ) | ||||||||||||||||||||||||
Net income attributable to non- controlling interests
|
- | - | - | - | - | - | 11,543 | 11,543 | 11,543 | |||||||||||||||||||||||||||
Net income attributable to non-controlling interest from discontinued operation
|
- | - | - | - | - | - | (374 | ) | (374 | ) | (374 | ) | ||||||||||||||||||||||||
Net income attributable to Elbit Systems Ltd. shareholders
|
- | - | - | - | 183,498 | - | - | 183,498 | 183,498 | |||||||||||||||||||||||||||
Total comprehensive income
|
$ | 197,585 | ||||||||||||||||||||||||||||||||||
Balance as of December 31, 2010
|
42,693,340 | $ | 12,050 | $ | 281,594 | $ | (18,460 | ) | $ | 695,830 | $ | (4,321 | ) | $ | 38,758 | $ | 1,005,451 |
STATEMENTS OF CHANGES IN EQUITY (CONT.)
|
U.S. dollars (In thousands, except share data)
|
Number of
outstanding
shares
|
Share
capital
|
Additional
paid-in
capital
|
Accumulated
other
comprehensive
income (loss)
|
Retained
earnings
|
Treasury
shares
|
Non-
controlling
interest
|
Total
equity
|
Total
comprehensive
income
|
||||||||||||||||||||||||||||
Balance as of January 1, 2011
|
42,693,340 | $ | 12,050 | $ | 281,594 | $ | (18,460 | ) | $ | 695,830 | $ | (4,321 | ) | $ | 38,758 | $ | 1,005,451 | |||||||||||||||||||
Exercise of options
|
154,816 | 43 | 3,790 | - | - | - | - | 3,833 | ||||||||||||||||||||||||||||
Stock-based compensation
|
- | - | 1,996 | - | - | - | - | 1,996 | ||||||||||||||||||||||||||||
Tax benefit in respect of options exercised
|
- | - | 169 | - | - | - | - | 169 | ||||||||||||||||||||||||||||
Dividends paid
|
- | - | - | - | (61,633 | ) | - | - | (61,633 | ) | ||||||||||||||||||||||||||
Purchase of treasury shares
|
(240,368 | ) | - | - | - | (10,101 | ) | - | (10,101 | ) | ||||||||||||||||||||||||||
Purchase of subsidiaries shares from non-controlling interest, net
|
- | - | (55,142 | ) | - | - | - | (15,858 | ) | (71,000 | ) | |||||||||||||||||||||||||
Other comprehensive income, net of tax:
|
||||||||||||||||||||||||||||||||||||
Unrealized loss on derivative instruments, net of $740 tax income
|
- | - | - | (20,025 | ) | - | - | - | (20,025 | ) | (20,025 | ) | ||||||||||||||||||||||||
Foreign currency translation differences
|
- | - | - | (5,597 | ) | - | - | 504 | (5,093 | ) | (5,093 | ) | ||||||||||||||||||||||||
Unrealized pension loss, net of $9,910 tax income
|
- | - | - | (15,807 | ) | - | - | - | (15,807 | ) | (15,807 | ) | ||||||||||||||||||||||||
Realized loss on available for sale securities, net of $250 tax expanse
|
- | - | - | 3,663 | - | - | - | 3,663 | 3,663 | |||||||||||||||||||||||||||
Net income attributable to non- controlling interests
|
- | - | - | - | - | - | (508 | ) | (508 | ) | (508 | ) | ||||||||||||||||||||||||
Net loss attributable to non-controlling interest from discontinued operation
|
- | - | - | - | - | - | 6,487 | 6,487 | 6,487 | |||||||||||||||||||||||||||
Net income attributable to Elbit Systems Ltd. shareholders
|
- | - | - | - | 90,288 | - | - | 90,288 | 90,288 | |||||||||||||||||||||||||||
Total comprehensive income
|
$ | 59,005 | ||||||||||||||||||||||||||||||||||
Balance as of December 31, 2011
|
42,607,788 | $ | 12,093 | $ | 232,407 | $ | (56,226 | ) | $ | 724,485 | $ | (14,422 | ) | $ | 29,383 | $ | 927,720 |
Accumulated other comprehensive loss, net of taxes
|
Year ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
Accumulated gains (losses) on derivative instruments
|
$ | (10,114 | ) | $ | 9,911 | $ | 3,243 | |||||
Accumulated foreign currency translation differences
|
(7,161 | ) | (1,564 | ) | (4,555 | ) | ||||||
Accumulated unrealized losses on available for sale securities
|
(1,553 | ) | (5,216 | ) | (2,291 | ) | ||||||
Unrealized pension losses
|
(37,398 | ) | (21,591 | ) | (18,810 | ) | ||||||
Accumulated other comprehensive loss
|
$ | (56,226 | ) | $ | (18,460 | ) | $ | (22,413 | ) |
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
U.S. dollars (In thousands)
|
Year ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||
Net income
|
$ | 89,780 | $ | 195,041 | $ | 228,513 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||||||
Depreciation and amortization
|
150,618 | 132,141 | 123,473 | |||||||||
Write-off impairment and discontinued operations, net
|
15,977 | 1,284 | 3,017 | |||||||||
Stock-based compensation
|
1,996 | 5,211 | 5,134 | |||||||||
Amortization of Series A Notes discount and related issuance costs
|
422 | (258 | ) | - | ||||||||
Deferred income taxes and reserve, net
|
(8,777 | ) | (28,162 | ) | 7,606 | |||||||
Gain on sale of property, plant and equipment
|
(1,645 | ) | (1,426 | ) | (723 | ) | ||||||
Loss (gain) on sale of investment
|
2,189 | (19,151 | ) | (2,734 | ) | |||||||
Equity in net earnings of affiliated companies and partnership, net of dividend received(*)
|
(270 | ) | (8,791 | ) | (1,824 | ) | ||||||
Changes in operating assets and liabilities, net of amounts acquired:
|
||||||||||||
Increase in short and long-term trade receivables, and prepaid expenses
|
(65,062 | ) | (84,708 | ) | (136,224 | ) | ||||||
Decrease (increase) in inventories, net
|
(95,363 | ) | (49,724 | ) | 75,431 | |||||||
Increase in trade payables, other payables and accrued expenses
|
17,225 | 76,807 | 20,223 | |||||||||
Severance, pension and termination indemnities, net
|
1,879 | 4,160 | (16,773 | ) | ||||||||
Increase (decrease) in advances received from customers | 81,946 | (36,396 | ) | (95,397 | ) | |||||||
Net cash provided by operating activities | 190,915 | 186,028 | 209,722 |
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||
Purchase of property, plant and equipment
|
(121,977 | ) | (138,644 | ) | (107,893 | ) | ||||||
Acquisitions of subsidiaries and business operations (Schedule A)
|
(12,173 | ) | (229,556 | ) | (48,234 | ) | ||||||
Investments in affiliated companies and other companies
|
(13,555 | ) | (4,956 | ) | (19,415 | ) | ||||||
Proceeds from sale of property, plant and equipment
|
15,059 | 10,667 | 9,055 | |||||||||
Proceeds from sale of investments
|
329 | 27,941 | 33,026 | |||||||||
Investment in long-term deposits
|
(609 | ) | (14,484 | ) | (24,004 | ) | ||||||
Proceeds from sale of long-term deposits
|
40,396 | 30,240 | 12,994 | |||||||||
Investment in short-term deposits and available for sale securities
|
(88,842 | ) | (189,345 | ) | (152,457 | ) | ||||||
Proceeds from sale of short-term deposits and available for sale securities
|
126,306 | 252,550 | 99,625 | |||||||||
Net cash used in investing activities
|
(55,066 | ) | (255,587 | ) | (197,303 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
Proceeds from exercise of options
|
3,833 | 3,590 | 9,871 | |||||||||
Purchase of non-controlling interests
|
(71,000 | ) | - | (110,250 | ) | |||||||
Repayment of long-term bank loans
|
(73,666 | ) | (488,657 | ) | (148,652 | ) | ||||||
Proceeds from long-term bank loans
|
172,303 | 387,692 | 256,354 | |||||||||
Proceeds from issuance of Series A Notes
|
- | 283,213 | - | |||||||||
Series A Notes issuance costs
|
- | (2,530 | ) | - | ||||||||
Purchase of treasury shares
|
(10,101 | ) | - | - | ||||||||
Repayment of Series A Notes and convertible debentures
|
(29,998 | ) | - | - | ||||||||
Purchase of convertible debentures of a subsidiary
|
(2,121 | ) | - | - | ||||||||
Dividends paid
|
(61,633 | ) | (63,137 | ) | (76,172 | ) | ||||||
Tax benefit in respect of options exercised
|
169 | 710 | - | |||||||||
Change in short-term bank credit and loans, net
|
(12,117 | ) | (40,972 | ) | (7,531 | ) | ||||||
Net cash provided by (used in) financing activities
|
(84,331 | ) | 79,909 | (76,380 | ) | |||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
51,518 | 10,350 | (63,961 | ) | ||||||||
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR
|
151,059 | 140,709 | 204,670 | |||||||||
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR
|
$ | 202,577 | $ | 151,059 | $ | 140,709 | ||||||
(*) Dividend received from affiliated companies and partnerships
|
$ | 15,107 | $ | 10,925 | $ | 17,468 |
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT.)
|
U.S. dollars (In thousands)
|
Year ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
SUPPLEMENTAL CASH FLOW ACTIVITIES:
|
||||||||||||
Cash paid during the year for:
|
||||||||||||
Income taxes
|
$ | 18,955 | $ | 60,759 | $ | 47,946 | ||||||
Interest
|
$ | 10,258 | $ | 13,524 | $ | 11,665 | ||||||
SCHEDULE A:
|
||||||||||||
Acquisitions of subsidiaries and business operations (*)
|
||||||||||||
Estimated net fair value of assets acquired and liabilities assumed at the date of acquisition was as follows:
|
||||||||||||
Working capital (deficit), net (excluding cash and cash equivalents)
|
$ | 306 | $ | (57,937 | ) | $ | (3,979 | ) | ||||
Property, plant and equipment
|
1,938 | 56,233 | 1,303 | |||||||||
Other long-term assets
|
- | 16,008 | 855 | |||||||||
Goodwill and other intangible assets
|
17,993 | 261,910 | 51,427 | |||||||||
Deferred income taxes
|
(1,171 | ) | (15,515 | ) | - | |||||||
Long-term liabilities
|
(6,893 | ) | (26,845 | ) | (1,372 | ) | ||||||
Non-controlling interest
|
- | (4,298 | ) | - | ||||||||
$ | 12,173 | $ | 229,556 | $ | 48,234 |
(*)
|
See Notes 1(D), 1(E) and 1(F)
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
U.S. dollars (In thousands)
|
Note 1 -
|
GENERAL
|
|
A.
|
Elbit Systems Ltd. (“Elbit Systems”) is an Israeli corporation, 45.75% owned by the Federmann Group. Elbit Systems’ shares are traded on the Nasdaq National Market in the United States (“Nasdaq”) and on the Tel Aviv Stock Exchange (“TASE”). Elbit Systems and its subsidiaries (collectively the “Company”) are engaged mainly in the field of defense electronics, homeland security and commercial aviation. Elbit Systems’ principal wholly-owned subsidiaries are the Elbit Systems of America, LLC (“ESA”) companies, Elbit Systems Electro-Optics Industries Elop Ltd. (“Elop”), Elbit Systems Land and C4I Ltd. (“ESLC”) and Elbit Systems EW and SIGINT – Elisra Ltd. (“Elisra”) (formerly known as Elisra Electronic Systems Ltd.).
|
|
B.
|
A majority of the Company’s revenues are derived from direct or indirect sales to governments or to governmental agencies. As a result, a substantial portion of the Company’s sales is subject to the special risks associated with sales to governments or to governmental agencies. These risks include, among others, the dependency on the resources allocated by governments to defense programs, changes in governmental priorities, changes in governmental registration, changes in governmental regulations and changes in governmental approvals regarding export licenses required for the Company’s products and for its suppliers. As for major customers, refer to Note 22(C).
|
|
C.
|
In December 2011, the Israeli Government, due to political considerations, did not renew the Company's export authorization to complete performance under an approximately $90,000 contract to supply systems to a foreign customer. As a result of the cessation of the program, and in accordance with our legal advisors opinion, the Company recorded in its results of operations an expense of approximately $72,800 ($62,000 net of taxes), which was included in cost of goods sold.
|
|
D.
|
During 2011, the Company completed the following acquisitions and investments:
|
|
(1)
|
On February 9, 2011, the Company completed its cash tender offer (the "Tender Offer") to purchase all of the ordinary shares of ITL Optronics Ltd. ("ITL"), which prior to the completion of the offer was a publicly traded company in Israel, held 87.85% by the Company. As a result, ITL became a private wholly-owned subsidiary. The total amount paid for the ITL shares, related to the offer, was approximately $5,900 (approximately $3.4 per share). As this was an equity transaction between the Company and ITL's non-controlling shareholders, the Company reduced its shareholders' equity for the excess cost over book value related to the minority interest in ITL.
|
|
(2)
|
On March 30, 2011, the Company acquired the remaining 30% of the shares of Elisra Electronic Systems Ltd. ("Elisra") held by Elta Systems Ltd. (“Elta”) for $67,500. Following the acquisition, Elisra became a wholly-owned subsidiary of the Company. As this was an equity transaction between the Company and Elisra's non-controlling shareholders, the Company reduced its shareholders' equity for the excess cost over book value related to the minority interest in Elisra. Subsequently, Elisra changed its name to Elbit Systems EW and SIGINT - Elisra Ltd.
|
|
(3)
|
On April 1, 2011, the Company acquired all of the shares of Elite Automotive Systems Ltd. ("Elite") for a purchase price of approximately $8,200.
|
|
(4)
|
On June 30, 2011, the Company completed the acquisition of C4 Security Ltd. ("C4") for a purchase price of approximately $10,900, of which approximately $6,900 is contingent consideration related to the occurrence of future events.
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands, except per share data)
|
Note 1 - GENERAL (Cont.)
|
|
(5)
|
During 2011, the Company invested approximately $8,100 in Netcity Telecom S.A. ("Netcity"), in addition to an investment of $2,700 in 2010. Following this investment, the Company holds 40% of Netcity's shares (See Note 6(B)(4)).
|
|
(6)
|
During September 2011, the Company established a joint company, Harpia Sistemas S.A. ("Harpia"), in which Embraer Defesa Seguranca S.A. Partficipacoes ("Embraer") owns 51% and the Company's Brazilian subsidiary AEL Sistemas S.A. ("AEL") owns the remaining 49%. Harpia will be engaged in the areas of unmanned aircraft systems, avionics systems and simulations systems. In addition, in September 2011, Embraer acquired a 25% interest in AEL for consideration of approximately $3,400. The Company has a call option and Embraer has a put option with respect to Embraer's shares in AEL at the purchase price that could be exercised starting five years after Embraer's investment in AEL. As a result, Embraer's investment is included in other long-term liabilities.
|
|
(7)
|
In November 2011, the Company's U.S. subsidiary, ESA, acquired the 50% ownership interest of UAS Dynamics LLC. ("UAS Dynamics"), held by General Dynamics Armament and Tactical Products. Following the acquisition, UAS Dynamics became a wholly-owned subsidiary of ESA.
|
|
E.
|
During 2010, the Company completed the following acquisitions and investments:
|
|
(1)
|
On May 11, 2010, the Company's subsidiary, Elbit Security Systems Ltd. ("Elsec"), completed the acquisition of the balance of shares (81%) in Azimuth Technologies Ltd. ("Azimuth"), an Israeli based company, pursuant to the merger agreement signed by Azimuth and Elsec in January 2010. In November 2008, the Company purchased 19% of Azimuth shares. The aggregate purchase price for the 81% balance of Azimuth's shares was approximately $50,000, comprised of $41,500 in cash, and the remeasurement of its previously held 19% equity interest in Azimuth at its acquisition date fair value, using the quoted share price of Azimuth on Tel-Aviv Stock Exchange, to $8,500, and recognized gain of approximately $4,756 net of acquisition related expenses in the amount of approximately $1,600, included in "Other income, net" as part of operating results. The acquisition was accounted for using the purchase method as a business combination achieved in stages.
|
|
(2)
|
On October 14, 2010, the Company's subsidiaries Kinetics Ltd. ("Kinetics") and Elsec completed the acquisition of all the shares of Soltam Systems Ltd. ("Soltam"), Saymar Ltd. ("Saymar") and ITL Optronics Ltd. ("ITL"), that were held by Mikal Ltd. ("Mikal") and its subsidiaries. In these transactions, Kinetics and Elsec acquired a 100% interest in Soltam and Saymar, and an 87.85% interest in ITL for a total consideration of approximately $80,500, of which $10,200 is contingent consideration on the occurrence of future events. Simultaneously, with the completion of the acquisition, Kinetics sold its holding in Mikal (approximately 19%).
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands, except per share data)
|
Note 1 - GENERAL (Cont.)
|
Fair value
|
Expected useful lives
|
||||
Working capital, net
|
$ | (59,650 | ) | ||
Long-term assets and investments
|
8,166 | ||||
Property, plant and equipment
|
50,750 | ||||
Long-term liabilities
|
(44,948 | ) | |||
Technology
|
17,300 |
10 years
|
|||
IPR&D
|
8,900 |
10 years
|
|||
Customer relationships and backlog
|
11,400 |
5-10 years
|
|||
Trade name
|
3,100 |
8 years
|
|||
Licenses
|
1,020 |
7 years
|
|||
Non-competition
|
700 |
4 years
|
|||
Non-controlling interest
|
(4,592 | ) | |||
Deferred taxes
|
(5,866 | ) | |||
Goodwill
|
94,292 | ||||
$ | 80,572 |
|
(3)
|
On December 1, 2010, the Company completed the acquisition of Ares Aerospacial e Defesa S.A ("Ares") and Periscopio Equipamentos Optronicos S.A ("Periscopio") for a purchase price of approximately $38,000. Revenues and earnings from the acquisition date through December 31, 2010, were immaterial to the consolidated results of the Company. The Company allocated the acquired assets and liabilities assumed based on a PPA performed by an independent advisor.
|
|
(4)
|
On December 15, 2010, the Company's U.S. subsidiary ESA acquired all the shares of M7 Aerospace LP ("M7 Aerospace") for a purchase price of approximately $85,000.
|
Fair Value
|
Expected useful lives
|
||||
Working capital
|
$ | 30,959 | |||
Long-term assets and investments
|
17 | ||||
Property, plant and equipment
|
2,654 | ||||
Long-term liabilities
|
(1,925 | ) | |||
Technology
|
13,800 |
15 years
|
|||
Customer relationships and backlog
|
7,100 |
5 years
|
|||
Brand name
|
1,900 |
2 years
|
|||
Goodwill
|
29,911 | ||||
$ | 84,416 |
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands, except per share data)
|
Note 1 - GENERAL (Cont.)
|
|
F.
|
During 2009, the Company completed the following acquisitions and investments:
|
|
(1)
|
On February 24, 2009, the Company's subsidiary ESLC acquired all of the shares of Shiron Satellite Communications (1996) Ltd. ("Shiron"), for a purchase price of approximately $16,000.
|
|
(2)
|
On April 7, 2009, the Company completed the purchase of the additional shares of its previously 51%-owned subsidiary Kinetics Ltd. ("Kinetics"). Elbit Systems purchased the remaining 49% of the shares from Kinetics' non-controlling shareholders for a purchase price of $110,250. As this was an equity transaction between the parent and Kinetics' non-controlling shareholders, the Company reduced its shareholders' equity for the excess costs over book value related to minority interest in Kinetics (which amounted to approximately $43,000), as required in accordance with ASC 810, "Consolidation".
|
|
(3)
|
On June 15, 2009, the Company signed an agreement with Mikal Ltd. ("Mikal") and its shareholders. The transaction provided for two stages. In the initial stage, the Company loaned to Mikal $18,000. On September 14, 2009, after receiving authorization from the Israeli Antitrust Authority, the loan was converted to ordinary shares. See Note 1(E)(2).
|
|
(4)
|
On November 19, 2009, the Company completed the acquisition of the assets and business of BVR Systems (1998) Ltd. ("BVR") for a purchase price of approximately $35,000.
|
|
G.
|
DISCONTINUED OPERATIONS
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
Note 2 -
|
SIGNIFICANT ACCOUNTING POLICIES
|
|
A.
|
USE OF ESTIMATES
|
|
B.
|
ADOPTION OF NEW ACCOUNTING POLICIES
|
|
C.
|
FUNCTIONAL CURRENCY
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
|
D.
|
PRINCIPLES OF CONSOLIDATION
|
|
E.
|
BUSINESS COMBINATIONS
|
|
F.
|
CASH AND CASH EQUIVALENTS
|
|
G.
|
SHORT-TERM BANK DEPOSITS
|
|
H.
|
AVAILABLE-FOR-SALE MARKETABLE SECURITIES
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
|
H.
|
AVAILABLE-FOR-SALE MARKETABLE SECURITIES (Cont.)
|
|
I.
|
INVENTORIES
|
|
·
|
Raw materials using the average or FIFO cost method.
|
|
·
|
Work in progress:
|
|
·
|
Costs incurred on long-term contracts in progress include direct labor, material, subcontractors, other direct costs and an allocation of overheads, which represent recoverable costs incurred for production, allocable operating overhead cost and, where appropriate, research and development costs (See Note 2(V)).
|
|
·
|
Labor overhead is generally included on a basis of updated hourly rates and is allocated to each project according to the amount of hours expended. Material overhead is generally allocated to each project based on the value of direct material that is charged to the project.
|
|
J.
|
INVESTMENT IN AFFILIATED COMPANIES, A PARTNERSHIP AND OTHER COMPANIES
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
|
J.
|
INVESTMENT IN AFFILIATED COMPANIES, A PARTNERSHIP AND OTHER COMPANIES (Cont.)
|
|
K.
|
VARIABLE INTEREST ENTITIES
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
|
L.
|
LONG-TERM RECEIVABLES
|
|
M.
|
LONG-TERM BANK DEPOSITS
|
|
N.
|
PROPERTY, PLANT AND EQUIPMENT
|
%
|
||
Buildings and leasehold improvements (*)
|
2-20
|
|
Instruments, machinery and equipment
|
3-33
|
|
Office furniture and other
|
4-33
|
|
Motor vehicles
|
12-33
|
(Mainly 15%)
|
(*)
|
Prepayments for operating lease and leasehold improvements are amortized generally over the term of the lease or the useful life of the assets, whichever is shorter.
|
|
O.
|
OTHER INTANGIBLE ASSETS
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
|
P.
|
IMPAIRMENT OF LONG-LIVED ASSETS
|
|
Q.
|
GOODWILL IMPAIRMENT
|
|
R.
|
SEVERANCE PAY
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
|
R.
|
SEVERANCE PAY (Cont.)
|
|
S.
|
PENSION AND OTHER POSTRETIREMENT BENEFITS
|
|
T.
|
REVENUE RECOGNITION
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
|
T.
|
REVENUE RECOGNITION (Cont.)
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
|
T.
|
REVENUE RECOGNITION (Cont.)
|
|
U.
|
WARRANTY
|
2011
|
2010
|
|||||||
Balance, at January 1
|
$ | 164,778 | $ | 126,783 | ||||
Warranties issued during the year
|
62,771 | 69,213 | ||||||
Warranties related to acquisitions
|
- | 19,015 | ||||||
Reduction due to warranties forfeited or paid during the year
|
(63,381 | ) | (50,233 | ) | ||||
Balance, at December 31
|
$ | 164,168 | $ | 164,778 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
|
V.
|
RESEARCH AND DEVELOPMENT COSTS
|
|
W.
|
INCOME TAXES
|
|
X.
|
CONCENTRATION OF CREDIT RISKS
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
|
X.
|
CONCENTRATION OF CREDIT RISKS (Cont.)
|
|
Y.
|
DERIVATIVE FINANCIAL INSTRUMENTS
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
|
Z.
|
STOCK-BASED COMPENSATION
|
2011
|
2010
|
2009
|
||||||||||
Divided yield
|
2.23 | % | 2.20 | % | 2.31 | % | ||||||
Expected volatility
|
31.59 | % | 31.92 | % | 39.37 | % | ||||||
Risk-free interest rate
|
2.01 | % | 1.56 | % | 2.43 | % | ||||||
Expected life
|
4 years
|
4 years
|
4 years
|
|||||||||
Forfeiture rate
|
0.56 | % | 0.56 | % | 0.56 | % | ||||||
Suboptimal factor
|
1.75 | 1.75 | 1.75 |
|
AA.
|
FAIR VALUE OF FINANCIAL INSTRUMENTS
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
|
AA.
|
FAIR VALUE OF FINANCIAL INSTRUMENTS (Cont.)
|
Fair value measurement at
December 31, 2010 using
|
||||||||||||
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||||
Description of Assets
|
||||||||||||
Debt securities:
|
||||||||||||
Government bonds
|
$ | 824 | $ | - | $ | - | ||||||
ARS and CDOs
|
- | - | 7,179 | |||||||||
Foreign currency derivatives and option contracts
|
- | 19,100 | - | |||||||||
Cross currency interest rate swap
|
- | 20,377 | - | |||||||||
Liabilities
|
||||||||||||
Foreign currency derivative and option contracts
|
- | (8,219 | ) | (51 | ) | |||||||
Total
|
$ | 824 | $ | 31,258 | $ | 7,128 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands, except share data)
|
|
AA.
|
FAIR VALUE OF FINANCIAL INSTRUMENTS (Cont.)
|
Fair value measurement at
December 31, 2011 using
|
||||||||||||
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||||
Description of Assets
|
||||||||||||
Debt securities:
|
||||||||||||
Government bonds
|
$ | 2,271 | $ | - | $ | - | ||||||
Foreign currency derivative and option contracts
|
- | 14,755 | - | |||||||||
Cross currency interest rate swap
|
- | 8,877 | - | |||||||||
Liabilities
|
||||||||||||
Foreign currency derivative and option contracts
|
- | (25,954 | ) | - | ||||||||
Total
|
$ | 2,271 | $ | (2,322 | ) | $ | - |
(Level 3)
|
||||
Balance at December 31, 2010
|
$ | 7,128 | ||
Net change in fair value included in other comprehensive income
|
(3,663 | ) | ||
Other-then-temporary impairment recognized in earnings
|
(3,465 | ) | ||
Balance at December 31, 2011
|
$ | - |
|
AB.
|
BASIC AND DILUTED NET EARNINGS PER SHARE
|
|
AC.
|
TREASURY SHARES
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
|
AD.
|
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
|
|
(1)
|
In May 2011, the Financial Accounting Standards Board (FASB) issued ASU 2011-04, "Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS", which is effective for annual reporting periods beginning after December 15, 2011. This guidance amends certain accounting and disclosure requirements related to fair value measurements. Additional disclosure requirements in the update include: (1) for Level 3 fair value measurements, quantitative information about unobservable inputs used, a description of the valuation processes used by the entity and a qualitative discussion about the sensitivity of the measurements to changes in the unobservable inputs; (2) for an entity’s use of a non-financial asset that is different from the asset’s highest and best use, the reason for the difference; (3) for financial instruments not measured at fair value but for which disclosure of fair value is required, the fair value hierarchy level in which the fair value measurements were determined; and (4) the disclosure of all transfers between Level 1 and Level 2 of the fair value hierarchy. The Company adopted ASU 2011-04 on January 1, 2012. The Company is currently evaluating ASU 2011-04 and has not yet determined the impact that adoption will have on its 2012 consolidated financial statements.
|
|
(2)
|
In June 2011, the FASB issued ASU 2011-05, "Comprehensive Income (Topic 220): Presentation of Comprehensive Income", which is effective for annual reporting periods beginning after December 15, 2011. Accordingly, the Company adopted ASU 2011-05 on January 1, 2012. This guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in shareholders’ equity. The adoption of ASU 2011-05 is not expected to have a material impact on the Company's financial position or results of operations.
|
|
(3)
|
In December 2010, the FASB issued ASU 2011-08, "Testing Goodwill for Impairment". ASU 2011-08 gives companies the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If a company concludes that this is the case, it must perform the two-step test. Otherwise, a company may skip the two-step test. ASU 2011-08 is effective for fiscal years beginning after December 15, 2011. The adoption of ASU 2011-08 is not expected to have a material impact on the Company's financial position or results of operations.
|
|
AE.
|
RECLASSIFICATIONS
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
December 31,
|
||||||||
2011
|
2010
|
|||||||
Receivables (1)
|
$ | 456,479 | $ | 505,441 | ||||
Unbilled receivables
|
219,906 | 208,138 | ||||||
Less – allowance for doubtful accounts
|
(6,861 | ) | (11,215 | ) | ||||
$ | 669,524 | $ | 702,364 | |||||
(1)Includes affiliated companies
|
$ | 20,030 | $ | 19,308 |
December 31,
|
||||||||
2011
|
2010
|
|||||||
Deferred income taxes, net
|
$ | 35,263 | $ | 29,263 | ||||
Prepaid expenses
|
37,504 | 36,564 | ||||||
Government institutions
|
72,266 | 40,154 | ||||||
Derivative instruments
|
20,520 | 28,571 | ||||||
Held for sale investment (*)
|
1,748 | 14,727 | ||||||
Other
|
12,723 | 16,845 | ||||||
$ | 180,024 | $ | 166,124 |
(*)
|
See Note 1(G).
|
December 31,
|
||||||||
2011
|
2010
|
|||||||
Cost incurred on long-term contracts in progress
|
$ | 866,325 | $ | 763,791 | ||||
Raw materials
|
110,528 | 82,236 | ||||||
Advances to suppliers and subcontractors
|
47,168 | 50,839 | ||||||
1,024,021 | 896,866 | |||||||
Less -
|
||||||||
Cost incurred on contracts in progress deducted from customer advances
|
38,048 | 55,957 | ||||||
Advances received from customers (*)
|
150,195 | 101,231 | ||||||
Provision for losses on long-term contracts
|
74,509 | 74,408 | ||||||
$ | 761,269 | $ | 665,270 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
Note 6 -
|
INVESTMENTS IN AFFILIATED COMPANIES, PARTNERSHIP AND OTHER COMPANIES
|
|
A.
|
Investments in affiliated companies:
|
December 31,
|
||||||||
2011
|
2010
|
|||||||
Companies accounted for under the equity method
|
$ | 105,914 | $ | 86,069 | ||||
Companies accounted for on a cost basis
|
4,245 | 3,745 | ||||||
$ | 110,159 | $ | 89,814 |
|
B.
|
Investments in companies accounted for under the equity method:
|
December 31,
|
||||||||
2011
|
2010
|
|||||||
SCD (1)
|
$ | 63,854 | $ | 58,815 | ||||
VSI (2)
|
8,154 | 4,181 | ||||||
Opgal (3)
|
14,626 | 13,000 | ||||||
Netcity (4)
|
10,418 | 2,697 | ||||||
Other
|
8,862 | 7,376 | ||||||
$ | 105,914 | $ | 86,069 |
|
(1)
|
Semi Conductor Devices (“SCD”) is an Israeli partnership, held 50% by the Company and 50% by Rafael Advanced Defense Systems Ltd. (“Rafael”). SCD is engaged in the development and production of various thermal detectors and laser diodes. SCD is jointly controlled and therefore is not consolidated in the Company’s financial statements.
|
|
(2)
|
Vision Systems International LLC (“VSI”) based in San Jose, is a California limited liability company that is held 50% by ESA and 50% by a subsidiary of Rockwell Collins Inc. VSI operates in the area of helmet mounted display systems for fixed-wing military aircraft. VSI is jointly controlled and therefore is not consolidated in the Company’s financial statements.
|
|
(3)
|
Opgal Optronics Industries Ltd. (“Opgal”) is an Israeli company owned 50.1% by the Company and 49.9% by a subsidiary of Rafael. Opgal focuses mainly on commercial applications of thermal imaging and electro-optic technologies. The Company jointly controls Opgal with Rafael, and therefore Opgal is not consolidated in the Company’s financial statements.
|
|
(4)
|
Netcity is a Romanian company held 40% by the Company. During 2011, the Company invested in Netcity approximately $8,100, in addition to $2,700 that were invested in 2010. Netcity is a constructor of fiber-telecommunication networks in Romania.
|
|
(5)
|
Equity in net earnings of affiliated companies is as follows:
|
Year ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
SCD
|
$ | 5,807 | $ | 11,470 | $ | 12,603 | ||||||
VSI
|
8,454 | 6,265 | 4,942 | |||||||||
Other
|
1,116 | 1,061 | 1,747 | |||||||||
$ | 15,377 | $ | 18,796 | $ | 19,292 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
Note 6 -
|
INVESTMENTS IN AFFILIATED COMPANIES, PARTNERSHIP AND OTHER COMPANIES (Cont.)
|
|
B.
|
Investments in companies accounted for under the equity method (Cont.)
|
|
(6)
|
The summarized aggregate financial information of companies accounted for under the equity method is as follows:
|
December 31,
|
||||||||
2011
|
2010
|
|||||||
Current assets
|
$ | 272,274 | $ | 278,141 | ||||
Non-current assets
|
67,151 | 69,507 | ||||||
Total assets
|
$ | 339,425 | $ | 347,648 | ||||
Current liabilities
|
$ | 158,548 | $ | 186,555 | ||||
Non-current liabilities
|
24,809 | 34,688 | ||||||
Shareholders’ equity
|
156,068 | 126,405 | ||||||
$ | 339,425 | $ | 347,648 |
Year ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
Revenues
|
$ | 402,438 | $ | 476,286 | $ | 361,283 | ||||||
Gross profit
|
$ | 117,222 | $ | 137,228 | $ | 110,699 | ||||||
Net income
|
$ | 38,131 | $ | 36,728 | $ | 31,489 |
|
(7)
|
See Note 20(E) for guarantees.
|
December 31,
|
||||||||
2011
|
2010
|
|||||||
Receivables
|
$ | 5,303 | $ | 16,211 | ||||
Unbilled receivables
|
157,459 | 74,132 | ||||||
$ | 162,762 | $ | 90,343 |
December 31,
|
||||||||
2011
|
2010
|
|||||||
Restricted deposits with banks (1)
|
$ | 2,271 | $ | 25,032 | ||||
Hedging receivables related to Series A Notes (See Note 16)
|
3,112 | 10,907 | ||||||
Deposit with banks and other long-term receivables (2)
|
6,832 | 8,462 | ||||||
$ | 12,215 | $ | 44,401 |
|
(1)
|
Restricted deposits in respect of an issued bank guarantee. |
|
(2)
|
Includes long-term balances of non-qualified deferred compensation plan structured under Section 409A in the amount of $5,427 and $5,604 as of December 31, 2011 and 2010, respectively (See Note 17).
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
December 31,
|
||||||||
2011
|
2010
|
|||||||
Cost (1):
|
||||||||
Land, buildings and leasehold improvements (2)
|
$ | 361,246 | $ | 351,748 | ||||
Instruments, machinery and equipment (3)
|
629,290 | 583,535 | ||||||
Office furniture and other
|
76,939 | 72,995 | ||||||
Motor vehicles and airplanes
|
131,106 | 104,551 | ||||||
1,198,581 | 1,112,829 | |||||||
Accumulated depreciation
|
(680,973 | ) | (608,978 | ) | ||||
Depreciated cost
|
$ | 517,608 | $ | 503,851 |
|
(1)
|
Net of investment grants received (mainly for instruments, machinery and equipment) in the amounts of $29,367 and $29,084 as of December 31, 2011 and 2010, respectively.
|
|
(2)
|
Set forth below is additional information regarding the real estate owned or leased by the Company (in square feet):
|
Israel (a)
|
U.S. (b)
|
Other
Countries (c)
|
||||||||||
Owned
|
2,193,000 | 713,000 | 1,063,000 | |||||||||
Leased
|
2,024,000 | 618,000 | 300,000 |
|
(a)
|
Includes offices, development and engineering facilities, manufacturing facilities, maintenance facilities, hangar facilities and a landing strip in various locations in Israel used by Elbit Systems' Israeli subsidiaries.
|
|
(b)
|
Includes offices, development and engineering facilities, manufacturing facilities and maintenance facilities of Elbit Systems of America primarily in Texas, New Hampshire, Florida, Alabama and Virginia.
|
|
(c)
|
Includes offices, design and engineering facilities and manufacturing facilities, mainly in Europe, Brazil, Australia and Asia.
|
|
(3)
|
Includes equipment produced by the Company for its own use in the aggregate amount of $173,649 and $167,248 as of December 31, 2011 and 2010, respectively.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
|
A.
|
Composition:
|
Weighted average
|
||||||||||||
useful lives
|
December 31,
|
|||||||||||
Identifiable intangible assets
|
2011
|
2010
|
||||||||||
Original cost:
|
||||||||||||
Technology (1)
|
12 | $ | 254,668 | $ | 248,868 | |||||||
Customer relations (2)
|
6 | 201,346 | 200,336 | |||||||||
Trade marks and other (3)
|
14 | 64,872 | 64,442 | |||||||||
520,886 | 513,646 | |||||||||||
Accumulated amortization:
|
||||||||||||
Technology
|
120,988 | 98,814 | ||||||||||
Customer relations
|
115,284 | 86,166 | ||||||||||
Trademarks and other
|
20,868 | 15,073 | ||||||||||
257,140 | 200,053 | |||||||||||
Amortized cost
|
$ | 263,746 | $ | 313,593 |
|
(1)
|
The technology acquired consists of the following major items:
|
|
(2)
|
Includes mainly customer relations resulting from the acquisition of Tadiran ($137,300) and FTL ($9,000) in 2007.
|
|
(3)
|
Includes trademarks in the amount of $8,000 acquired in the merger with Elop in 2000, and an amount of $33,200 that was allocated to trademarks resulting mainly from the acquisition of Tadiran in 2005 – 2007.
|
|
B.
|
Amortization expenses amounted to $56,952, $47,729 and $42,601 for the years ended December 31, 2011, 2010 and 2009, respectively.
|
|
C.
|
The estimated aggregate amortization expense for each of the five succeeding fiscal years:
|
2012
|
$ | 49,620 | ||
2013
|
46,117 | |||
2014
|
43,688 | |||
2015
|
37,099 | |||
2016
|
28,043 | |||
2017 and after
|
59,181 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
|
D.
|
Changes in goodwill, during 2011 are as follows:
|
2011
|
||||
Balance, at January 1, (1)
|
$ | 486,046 | ||
Adjustment in respect of previous acquisitions (2)
|
994 | |||
Net translation differences (3)
|
(725 | ) | ||
Goodwill acquired during the year:
|
||||
Elite
|
5,384 | |||
C4 Security
|
7,627 | |||
Balance, at December 31,
|
$ | 499,326 |
|
(1)
|
Including an adjustment of approximately $3000 related to a 2010 acquisition.
|
|
(2)
|
In 2011, the Company adjusted provisions related to an acquisition made during 2010.
|
|
(3)
|
Foreign currency translation differences resulting from goodwill allocated to reporting units, whose functional currency has been determined to be other than the U.S. dollar.
|
|
December 31,
|
|||||||||||
Interest %
|
2011
|
2010
|
||||||||||
Short-term loans
|
2.5-7.45 % | $ | 158 | $ | 10,537 | |||||||
Short-term bank credit
|
0-6.23 % | 2,840 | 4,578 | |||||||||
$ | 2,998 | $ | 15,115 | |||||||||
Weighted average interest rate
|
2.40 % |
December 31,
|
||||||||
2011
|
2010
|
|||||||
Payroll and related expenses
|
$ | 143,805 | $ | 141,965 | ||||
Provision for vacation pay
|
43,401 | 44,876 | ||||||
Provision for income tax, net of advances
|
26,858 | 12,292 | ||||||
Other income tax liabilities
|
36,707 | 28,095 | ||||||
Value added tax (“VAT”) payable
|
15,202 | 7,295 | ||||||
Provisions for royalties
|
31,549 | 32,217 | ||||||
Provision for warranty
|
164,168 | 164,778 | ||||||
Derivative instruments
|
25,954 | 8,366 | ||||||
Provision for losses on long-term contracts(1)
|
109,171 | 61,663 | ||||||
Other (2)
|
147,051 | 146,574 | ||||||
$ | 743,866 | $ | 648,121 |
|
(1)
|
Includes a provision of $43,900 related to the cessation of a program with a foreign customer (See Note 1(C)).
|
|
(2)
|
Other, primarily includes provisions for estimated future costs in respect of (1) penalties and the probable loss from claims (legal or unasserted) in the ordinary course of business (e.g., damages caused by the items sold and claims as to the specific products ordered), and (2) unbilled services of service providers.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
Note 14 -
|
CUSTOMER ADVANCES IN EXCESS OF COSTS INCURRED ON CONTRACTS IN PROGRESS
|
December 31,
|
||||||||
2011
|
2010
|
|||||||
Advances received
|
$ | 750,161 | $ | 637,070 | ||||
Less -
|
||||||||
Advances presented under long-term liabilities
|
154,696 | 177,191 | ||||||
Advances deducted from inventories
|
150,195 | 101,231 | ||||||
445,270 | 358,648 | |||||||
Less -
|
||||||||
Costs incurred on contracts in progress (See Note 5)
|
38,048 | 55,957 | ||||||
$ | 407,222 | $ | 302,691 |
Years of
|
December 31,
|
||||||||||||||
Currency
|
Interest %
|
maturity
|
2011
|
2010
|
|||||||||||
Long-term bank loans(*)
|
U.S. dollars
|
Libor +
1.25-3.20%
|
mainly 2-3
|
$ | 369,564 | $ | 276,702 | ||||||||
Other
|
Libor + 1.65-4%
|
mainly 1-3
|
30,144 | 20,694 | |||||||||||
Other long-term loans
|
NIS
|
Prime + 1.5%
|
3 | - | 2,873 | ||||||||||
Other
|
Libor + 1.7-4%
|
mainly 1-3
|
562 | 1,289 | |||||||||||
400,270 | 301,558 | ||||||||||||||
Less: current maturities
|
98,015 | 9,519 | |||||||||||||
$ | 302,255 | $ | 292,039 |
2012 – current maturities
|
$ | 98,015 | ||
2013
|
199,561 | |||
2014
|
92,871 | |||
2015
|
9,481 | |||
2016
|
229 | |||
2017 and after
|
113 | |||
$ | 400,270 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
December 31, 2011
|
||||
Series A Notes
|
$ | 259,094 | ||
Less – Current maturities
|
(29,612 | ) | ||
Carrying amount adjustments on Series A Notes(*)
|
7,412 | |||
Discount on Series A Notes
|
(1,575 | ) | ||
$ | 235,319 |
|
(*) As a result of fair value hedge accounting, described below, and in Notes 2(Y) and 2(AA). The carrying value of the Series A Notes is adjusted for changes in the interest rates.
|
December 31, 2011
|
||||
2012 (current maturities)
|
$ | 29,612 | ||
2013
|
29,612 | |||
2014
|
29,612 | |||
2015
|
29,612 | |||
2016
|
29,612 | |||
2017 and after
|
111,034 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
Note 17 -
|
BENEFIT PLANS AND OBLIGATIONS FOR TERMINATION INDEMNITY
|
|
a)
|
ESA has three defined benefit pension plans (the “Plans”) which cover the employees of ESA's subsidiaries EFW and Kollsman. Monthly benefits are based on years of benefit service and annual compensation. Annual contributions to the Plans are determined using the unit credit actuarial cost method and are equal to or exceed the minimum required by law. Pension fund assets of the Plans are invested primarily in stock, bonds and cash through a financial institution, as the investment manager of the Plans’ assets. Pension expense is allocated between cost of sales and general and administrative expenses, depending on the responsibilities of the employee. The measurement date for the EFW and Kollsman benefit obligation is December 31.
|
b)
|
Telefunken Radio Communication Systems GmbH & Co. (“Telefunken”), a wholly-owned German subsidiary, has mainly one defined benefit pension plan (the “P3-plan”) which covers all employees. The P3-plan provides for yearly cash balance credits equal to a percentage of a participant’s compensation, which accumulate together with the respective interest credits on the employee’s cash balance accounts. In case of an insured event (retirement, death or disability) the benefits can be paid as a lump sum, in installments or as a life-long annuity. The P3-plan is an unfunded plan.
|
|
c)
|
A wholly-owned European subsidiary in Belgium has a defined benefit pension plan, which is divided into two categories:
|
|
1)
|
Normal retirement benefit plan, with eligibility at age 65. The lump sum is based on employee contributions of 2% of the final pensionable salary up to a certain breakpoint, plus 6% exceeding the breakpoint at a maximum of 5% of pensionable salary, and the employer contributions, with a maximum of 40 years. The vested benefit is equal to the retirement benefit calculated with the pensionable salary and pensionable service observed at the date of leaving service.
|
|
2)
|
Pre-retirement death benefit to employees.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
December 31,
|
||||||||
Changes in benefit obligation:
|
2011
|
2010
|
||||||
Benefit obligation at beginning of year
|
$ | 119,983 | $ | 103,134 | ||||
Service cost
|
8,058 | 7,031 | ||||||
Interest cost
|
6,362 | 5,858 | ||||||
Exchange rate differences
|
(508 | ) | (1,023 | ) | ||||
Actuarial losses
|
21,459 | 7,374 | ||||||
Benefits paid
|
(2,257 | ) | (2,391 | ) | ||||
Benefit obligation at end of year
|
$ | 153,097 | $ | 119,983 | ||||
Changes in the Plans 'Assets:
|
||||||||
Fair value of Plans' assets at beginning of year
|
69,493 | 62,790 | ||||||
Actual return on Plans' assets (net of expenses)
|
(785 | ) | 6,326 | |||||
Employer contribution
|
15,266 | 2,679 | ||||||
Benefits paid
|
(2,194 | ) | (2,302 | ) | ||||
Fair value of Plans' assets at end of year
|
$ | 81,780 | $ | 69,493 | ||||
Accrued benefit cost, end of year:
|
||||||||
Funded status
|
(71,317 | ) | (50,490 | ) | ||||
Unrecognized net actuarial loss
|
60,650 | 34,972 | ||||||
Unrecognized prior service cost
|
584 | 680 | ||||||
$ | (10,083 | ) | $ | (14,838 | ) | |||
Amount recognized in the statement of financial position:
|
||||||||
Accrued benefit liability, current
|
(85 | ) | (39 | ) | ||||
Accrued benefit liability, non-current
|
(71,232 | ) | (50,451 | ) | ||||
Accumulated other comprehensive income, pre-tax
|
61,234 | 35,652 | ||||||
Net amount recognized
|
$ | (10,083 | ) | $ | (14,838 | ) |
Year ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
Components of the Plans' net periodic pension cost:
|
||||||||||||
Service cost
|
$ | 8,205 | $ | 7,031 | $ | 6,694 | ||||||
Interest cost
|
6,361 | 5,858 | 5,427 | |||||||||
Expected return on Plans' assets
|
(5,512 | ) | (4,914 | ) | (3,915 | ) | ||||||
Amortization of prior service cost
|
104 | 95 | 97 | |||||||||
Amortization of transition amount
|
(147 | ) | (130 | ) | (120 | ) | ||||||
Amortization of net actuarial loss
|
1,988 | 1,769 | 2,282 | |||||||||
Total net periodic benefit cost
|
$ | 10,999 | $ | 9,709 | $ | 10,465 | ||||||
Additional information
|
||||||||||||
Accumulated benefit obligation
|
$ | 144,682 | $ | 112,643 | $ | 95,877 |
December 31,
|
||||||||
Weighted average assumptions:
|
2011
|
2010
|
||||||
Discount rate as of December 31
|
4.4 | % | 5.4 | % | ||||
Expected long-term rate of return on Plans' assets
|
7.3 | % | 7.3 | % | ||||
Rate of compensation increase
|
2.4 | % | 2.7 | % |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
2011
|
2010
|
|||||||
Asset Category
|
||||||||
Equity Securities
|
56.8 | % | 58.1 | % | ||||
Debt Securities
|
36.1 | % | 33.6 | % | ||||
Other
|
7.1 | % | 8.3 | % | ||||
Total
|
100.0 | % | 100.0 | % |
2011
|
2010
|
|||||||
Asset Category
|
||||||||
Equity Securities
|
56.0 | % | 60.0 | % | ||||
Debt Securities
|
41.2 | % | 37.0 | % | ||||
Other
|
2.8 | % | 3.0 | % | ||||
Total
|
100.0 | % | 100.0 | % |
Quoted Prices in Active Markets for Identical Assets
|
Significant Observable Inputs
|
Significant Unobservable Inputs
|
||||||||||||||
Asset Category
|
Total
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||||||
Cash
|
$ | 126 | $ | 126 | $ | - | $ | - | ||||||||
Cash Equivalents:
|
||||||||||||||||
Money Market Funds (a)
|
5,660 | - | 5,660 | - | ||||||||||||
Fixed Income Securities:
|
||||||||||||||||
U.S. Treasuries
|
9,075 | 3,841 | 5,234 | - | ||||||||||||
Corporate Bonds
|
1,160 | 1,160 | - | - | ||||||||||||
Mutual Funds (b)
|
19,299 | 19,299 | - | - | ||||||||||||
Equity Securities:
|
||||||||||||||||
U.S. Companies (c)
|
14,363 | 14,363 | - | - | ||||||||||||
International Companies (d)
|
2,916 | 2,916 | - | - | ||||||||||||
Mutual Funds (e)
|
27,015 | 27,015 | - | - | ||||||||||||
Real Estate
|
2,166 | 1,572 | 594 | - | ||||||||||||
Total
|
$ | 81,780 | $ | 70,292 | $ | 11,488 | $ | - |
|
(a) This category includes highly liquid daily traded cash-like vehicles.
|
|
(b) This category invests in highly liquid diverse mutual funds representing a diverse offering of debt issuance.
|
|
(c) This category represents common stocks that are traded on major exchanges.
|
|
(d) This change represents common stocks of companies domiciled outside of the U.S.; they can be represented by ordinary shares or ADRs.
|
|
(e) This category represents highly liquid diverse equity mutual funds of varying asset classes and styles.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
December 31
|
December 31
|
|||||||
2011
|
2010
|
|||||||
Change in Benefit Obligation:
|
||||||||
Benefit obligation at beginning of period
|
$ | 2,914 | $ | 2,419 | ||||
Service cost
|
252 | 208 | ||||||
Interest cost
|
152 | 138 | ||||||
Actuarial (gain) loss
|
(63 | ) | 216 | |||||
Employee contribution
|
19 | 21 | ||||||
Benefits paid
|
(129 | ) | (88 | ) | ||||
Benefit obligation at end of period
|
$ | 3,145 | $ | 2,914 | ||||
Change in Plan Assets:
|
||||||||
Fair value of plan assets at beginning of period
|
$ | - | $ | - | ||||
Employer contribution
|
110 | 67 | ||||||
Employee contribution
|
19 | 21 | ||||||
Benefits paid
|
(129 | ) | (88 | ) | ||||
Fair value of plan assets at end of period
|
$ | - | $ | - |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
Year ended December 31,
|
||||||||
2011
|
2010
|
|||||||
Accrued benefit cost, end of period:
|
||||||||
Funded status
|
$ | (3,145 | ) | $ | (2,914 | ) | ||
Unrecognized net actuarial loss
|
455 | 540 | ||||||
Unrecognized prior service cost
|
- | 74 | ||||||
Accrued benefit cost, end of period
|
$ | (2,690 | ) | $ | (2,300 | ) | ||
Amounts recognized in the statement of financial position:
|
||||||||
Accrued benefit liability, current
|
$ | (111 | ) | $ | (122 | ) | ||
Accrued benefit liability, non-current
|
(3,034 | ) | (2,792 | ) | ||||
Accumulated other comprehensive loss, pretax
|
455 | 614 | ||||||
Net amount recognized
|
$ | (2,690 | ) | $ | (2,300 | ) | ||
Components of net periodic pension cost (for period):
|
||||||||
Service cost
|
$ | 253 | $ | 208 | ||||
Interest cost
|
152 | 138 | ||||||
Amortization of prior service cost
|
74 | 150 | ||||||
Amortization of net actuarial loss
|
21 | 7 | ||||||
Total net periodic benefit cost
|
$ | 500 | $ | 503 | ||||
Assumptions as of end of period:
|
||||||||
Discount rate
|
3.78 | % | 5.32 | % | ||||
Health care cost trend rate assumed for next year
|
8.50 | % | 8.00 | % | ||||
Ultimate health care cost trend rate
|
5.00 | % | 5.00 | % |
1% increase
|
1% decrease
|
|||||||
Net periodic benefit cost
|
$ | 48 | $ | (42 | ) | |||
Benefit obligation
|
$ | 281 | $ | (250 | ) |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
A.
|
APPLICABLE TAX LAWS
|
|
(1)
|
Israeli Corporate Income Tax Rates
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
A.
|
APPLICABLE TAX LAWS (Cont.)
|
|
(2)
|
Measurement of taxable income under Israel’s Income Tax (Inflationary Adjustments) Law, 1985:
|
|
(3)
|
Tax benefits under Israel’s Law for the Encouragement of Industry (Taxes), 1969:
|
|
(4)
|
Tax benefits under Israel’s Law for the Encouragement of Capital Investments, 1959:
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
|
A.
|
APPLICABLE TAX LAWS (Cont.)
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
|
A.
|
APPLICABLE TAX LAWS (Cont.)
|
|
B.
|
NON – ISRAELI SUBSIDIARIES
|
|
C.
|
INCOME FROM CONTINUING OPERATIONS BEFORE TAXES ON INCOME
|
Year ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
Income before taxes on income:
|
||||||||||||
Domestic
|
$ | 95,226 | $ | 160,749 | $ | 186,444 | ||||||
Foreign
|
8,778 | 38,612 | 60,886 | |||||||||
$ | 104,004 | $ | 199,361 | $ | 247,330 |
|
D.
|
TAXES ON INCOME FROM CONTINUING OPERATIONS
|
Year ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
Taxes on income:
|
||||||||||||
Current taxes:
|
||||||||||||
Domestic
|
$ | 13,896 | $ | 26,842 | $ | 30,006 | ||||||
Foreign
|
1,328 | 16,616 | 15,350 | |||||||||
15,224 | 43,458 | 45,356 | ||||||||||
Adjustment for previous years:
|
||||||||||||
Domestic
|
2,009 | (3,889 | ) | (6,491 | ) | |||||||
Foreign
|
(2,308 | ) | 1,885 | 91 | ||||||||
(299 | ) | (2,004 | ) | (6,400 | ) | |||||||
Deferred income taxes:
|
||||||||||||
Domestic
|
(2,861 | ) | (10,303 | ) | (3,763 | ) | ||||||
Foreign
|
1,560 | (7,114 | ) | 2,916 | ||||||||
(1,301 | ) | (17,417 | ) | (847 | ) | |||||||
$ | 13,624 | $ | 24,037 | $ | 38,109 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
|
E.
|
UNCERTAIN TAX POSITIONS
|
2011
|
2010
|
|||||||
Balance at the beginning of the year
|
$ | 48,791 | $ | 33,348 | ||||
Additions related to interest
|
405 | 1,801 | ||||||
Additions based on tax positions taken during a prior period
|
5,336 | 6,022 | ||||||
Reduction related to tax positions taken during a prior period
|
(3,746 | ) | (4,252 | ) | ||||
Reductions related to settlement of tax matters
|
(4,684 | ) | (1,508 | ) | ||||
Additions based on tax positions taken during the current period
|
8,305 | 6,862 | ||||||
Reduction related to a lapse of applicable statute of limitation
|
(1,224 | ) | - | |||||
Additions related to acquisitions
|
- | 6,518 | ||||||
Balance at the end of the year
|
$ | 53,183 | $ | 48,791 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
|
F.
|
DEFERRED INCOME TAXES
|
Deferred (1)
Tax Asset (Liability)
|
||||||||||||
Total
|
Current
|
Non-current
|
||||||||||
As of December 31, 2011
|
||||||||||||
Deferred tax assets:
|
||||||||||||
Reserves and allowances
|
$ | 20,650 | $ | 15,939 | $ | 4,711 | ||||||
Inventory allowances
|
6,328 | 6,328 | - | |||||||||
Property, plant and equipment
|
2,421 | 1,087 | 1,334 | |||||||||
Other assets
|
22,415 | 10,242 | 12,173 | |||||||||
Net operating loss carry forwards
|
20,881 | 1,667 | 19,214 | |||||||||
72,695 | 35,263 | 37,432 | ||||||||||
Valuation allowance
|
(1,302 | ) | - | (1,302 | ) | |||||||
Net deferred tax assets
|
71,393 | 35,263 | 36,130 | |||||||||
Deferred tax liabilities:
|
||||||||||||
Intangible assets
|
(40,386 | ) | - | (40,386 | ) | |||||||
Property, plant and equipment
|
(16,024 | ) | - | (16,024 | ) | |||||||
Reserves and allowances
|
24,419 | - | 24,419 | |||||||||
(31,991 | ) | - | (31,991 | ) | ||||||||
Net deferred tax assets
|
$ | 39,402 | $ | 35,263 | $ | 4,139 | ||||||
As of December 31, 2010
|
||||||||||||
Deferred tax assets:
|
||||||||||||
Reserves and allowances
|
$ | 26,992 | $ | 19,776 | $ | 7,216 | ||||||
Inventory allowances
|
4,251 | 4,251 | - | |||||||||
Property, plant and equipment
|
4,858 | 1,187 | 3,671 | |||||||||
Other
|
4,530 | 2,116 | 2,414 | |||||||||
Net operating loss carry forwards
|
18,684 | 2,093 | 16,591 | |||||||||
59,315 | 29,423 | 29,892 | ||||||||||
Valuation allowance
|
(160 | ) | (160 | ) | - | |||||||
Net deferred tax assets
|
59,155 | 29,263 | 29,892 | |||||||||
Deferred tax liabilities:
|
||||||||||||
Intangible assets
|
(48,610 | ) | - | (48,610 | ) | |||||||
Property, plant and equipment
|
(12,463 | ) | - | (12,463 | ) | |||||||
Reserves and allowances
|
25,833 | - | 25,833 | |||||||||
(35,240 | ) | - | (35,240 | ) | ||||||||
Net deferred tax assets (liabilities)
|
$ | 23,915 | $ | 29,263 | $ | (5,348 | ) |
|
(1) The current deferred tax asset is included in other receivables and prepaid expenses.
|
|
(2) The non-current deferred tax asset is included in deferred income taxes, net.
|
|
(3) The non-current deferred tax liability is included in deferred income and tax liabilities, net.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands, except share data)
|
|
G.
|
As of December 31, 2011, Elbit Systems’ Israeli subsidiaries had estimated total available carry forward tax losses of approximately $89,323, and its non-Israeli subsidiaries had estimated available carry forward tax losses of approximately $26,066.
|
|
H.
|
Reconciliation of the actual tax expense as reported in the statements of operations to the amount computed by applying the Israeli statutory tax rate, is as follows:
|
Year ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
Income before taxes as reported in the consolidated statements of income
|
$ | 104,004 | $ | 199,361 | $ | 247,330 | ||||||
Statutory tax rate
|
24 | % | 25 | % | 26 | % | ||||||
Theoretical tax expense
|
$ | 24,961 | $ | 49,840 | $ | 64,306 | ||||||
Tax benefit arising from reduced rate as an “Approved and Privileged Enterprise” and other tax benefits (*)
|
(11,451 | ) | (20,528 | ) | (31,712 | ) | ||||||
Tax adjustment in respect of different tax rates for foreign subsidiaries
|
2,721 | 5,382 | 5,663 | |||||||||
Changes in carry-forward losses and valuation allowance
|
(125 | ) | (8,066 | ) | (1,506 | ) | ||||||
Increase in taxes resulting from non-deductible expenses
|
1,105 | 3,020 | 3,133 | |||||||||
Difference in basis of measurement for financial reporting and tax return purposes
|
(2,375 | ) | (3,370 | ) | 4,124 | |||||||
Taxes in respect of prior years (**)
|
(274 | ) | (2,003 | ) | (6,400 | ) | ||||||
Other differences, net
|
(938 | ) | (238 | ) | 501 | |||||||
Actual tax expenses
|
$ | 13,624 | $ | 24,037 | $ | 38,109 | ||||||
Effective tax rate
|
13.10 | % | 12.06 | % | 15.4 | % | ||||||
(*) Net earnings per share – amounts of the benefit resulting from the Approved and Privileged Enterprises
|
||||||||||||
Basic
|
$ | 0.27 | $ | 0.48 | $ | 0.75 | ||||||
Diluted
|
$ | 0.27 | $ | 0.47 | $ | 0.74 | ||||||
(**) Taxes in respect of prior years:
|
|
I.
|
Final tax assessments have been received by the Company up to and including the tax year ended December 31, 2005 and by certain subsidiaries, for the years 2002 - 2007.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
|
A.
|
Derivative financial instruments are presented as other assets or other payables. For asset derivatives and liability derivatives, respectively, the fair value of the Company's outstanding derivative instruments as of December 31, 2011 and December 31, 2010 is summarized below:
|
Asset Derivatives (*)
|
Liability Derivatives (**)
|
|||||||||||||||
December 31,
2011
|
December 31,
2010
|
December 31,
2011
|
December 31,
2010
|
|||||||||||||
Derivatives designated as hedging instruments
|
||||||||||||||||
Foreign exchange contracts
|
$ | 9,908 | $ | 16,897 | $ | 23,914 | $ | 5,509 | ||||||||
Cross-currency interest rate swaps
|
8,877 | 20,377 | - | - | ||||||||||||
18,785 | 37,274 | 23,914 | 5,509 | |||||||||||||
Derivatives not designated as hedging instruments
|
||||||||||||||||
Foreign exchange contracts
|
4,847 | 2,044 | 1,363 | 2,710 | ||||||||||||
Options exchange contracts
|
- | 159 | 677 | 51 | ||||||||||||
$ | 4,847 | $ | 2,203 | $ | 2,040 | $ | 2,761 |
(*)
|
Presented as part of other assets.
|
(**)
|
Presented as part of other payables.
|
|
B.
|
The effect of derivative instruments on cash flow hedging and the relationship between income and other comprehensive income for the years ended December 31, 2011 and December 31, 2010 is summarized below:
|
Gain (Loss) Recognized
in Other Comprehensive
Income on Effective-
Portion of Derivative, net
|
Gain on Effective Portion
of Derivative Reclassified
from Accumulated Other
Comprehensive Income (*)
|
Ineffective Portion of Gain of
Derivative and Amount Excluded
from Effectiveness Testing
Recognized in Income (**)
|
||||||||||||||||||||||
December 31,
2011
|
December 31,
2010
|
December 31,
2011
|
December 31,
2010
|
December 31,
2011
|
December 31,
2010
|
|||||||||||||||||||
Derivatives designated as hedging instruments
|
||||||||||||||||||||||||
Foreign exchange contracts
|
$ | (13,914 | ) | $ | 20,002 | $ | 7,438 | $ | - | $ | 585 | $ | - | |||||||||||
Other
|
- | - | - | 10,115 | - | 2,034 | ||||||||||||||||||
$ | (13,914 | ) | $ | 20,002 | $ | 7,438 | $ | 10,115 | $ | 585 | $ | 2,034 | ||||||||||||
Derivatives not designated as hedging instruments
|
||||||||||||||||||||||||
Foreign exchange Contracts
|
$ | - | $ | - | $ | - | $ | - | $ | 461 | $ | 751 |
(*)
|
Presented as part of revenues/cost of sales
|
(**)
|
Presented as part of financial expenses
|
|
C.
|
The net effect of the cross-currency swaps was approximately $11,000 of losses, of which approximately $19,500 was offset against exchange rate difference, related to Series A Notes and approximately $8,500 was offset against interest expenses.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
|
D.
|
The notional amounts of outstanding foreign exchange forward contracts at December 31, 2011 and December 31, 2010, is summarized below:
|
Forward contracts
|
||||||||||||||||
Buy
|
Sell
|
|||||||||||||||
December 31,
|
December 31,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Euro
|
$ | 57,022 | $ | 16,076 | $ | 154,251 | $ | 240,830 | ||||||||
GBP
|
30,868 | 20,475 | 45,095 | 85,980 | ||||||||||||
NIS
|
654,105 | 114,284 | - | - | ||||||||||||
Other
|
14,073 | 30,412 | 34,120 | 54,572 | ||||||||||||
$ | 756,068 | $ | 181,247 | $ | 233,466 | $ | 381,382 |
Note 20 -
|
COMMITMENTS AND CONTINGENT LIABILITIES
|
|
A.
|
ROYALTY COMMITMENTS
|
|
B.
|
COMMITMENTS IN RESPECT OF LONG-TERM PROJECTS
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
Note 20 -
|
COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)
|
|
B.
|
COMMITMENTS IN RESPECT OF LONG-TERM PROJECTS (Cont.)
|
|
C.
|
LEGAL CLAIMS
|
|
(1)
|
Elbit Systems and its subsidiaries are involved in legal claims arising in the ordinary course of business, including claims by employees, consultants and others. The Company’s management, based on the opinion of its legal counsel, believes that the financial impact for the settlement of such claims in excess of the accruals recorded in the financial statements will not have a material adverse effect on the financial position or results of operations of the Company.
|
|
(2)
|
In April 2011, the Company filed a lawsuit in the High Court of Justice of the United Kingdom against the Government of Georgia (the “Georgian Government”) in an amount of approximately $100,000 as a result of the Georgian Government’s failure to pay amounts due to the Company in connection with deliverable items under several contracts signed in 2007. In December 2011, the Company and the Georgian Government signed a settlement agreement. Under the settlement agreement the Company agreed to a full release of these claims in consideration for payment of approximately $35,000 by the Georgian Government as well as the return to the Company of certain equipment and sub-systems that were supplied in the past by the Company. During December 2011, the Company received $32,000 of the settlement amount and the balance is expected to be received during 2012. Subject to fulfillment of the settlement agreement, this matter will be brought to a close without having a material effect on the Company's financial results.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
|
C.
|
LEGAL CLAIMS (Cont.)
|
|
(3)
|
In December 2009, a claim in the amount of approximately $10,000 was filed in the District Court – Central District of Israel by Pinpoint Advance Corporation (“Pinpoint”) and four of its founders against two of the Company’s Israeli subsidiaries, Elbit Systems Holdings (1997) Ltd. and Kinetics, as well as against one of its officers, Jacob Gadot. Pinpoint is a special purpose acquisition company that was in negotiations with the Company and other Kinetics’ shareholders regarding the sale of shares in Kinetics during 2008. The transaction was not completed and negotiations were terminated. Pinpoint claims that the agreement was completed and thus entered into effect. Alternatively, Pinpoint claims that the Company’s decision not to complete the agreement was made in bad faith, and that under the circumstances Pinpoint and its founders are entitled to pecuniary compensation equal to their rights and entitlements under the alleged breached contract. The Company believes there is no merit to the allegations made in the claim and have responded accordingly to the Court. In March 2010, the Court requested the parties to attempt mediation, which was unsuccessful. The claim is in the preliminary proceedings stage.
|
|
(4)
|
In May 2009, Elbit Systems filed a claim in the U.S. District Court for the Southern District of Illinois against Credit Suisse Group (“CSG”). The complaint seeks to recover approximately $16,000 that Elbit Systems believes was fraudulently obtained by CSG and by its subsidiary Credit Suisse Securities (USA) from Tadiran Communications Ltd. (“Tadiran Communications”) in 2007 in connection with auction rate securities purchased by Tadiran Communications through CSG. In 2008, Tadiran Communication was merged into Elbit Systems, and Tadiran Communications’ activities are currently performed as part of Elbit Systems’ wholly-owned Israeli subsidiary ELSC. CSG filed a motion to dismiss the claim based on a release signed by Tadiran Communications in 2007. In December 2009, the case was moved to U.S. District Court for the Southern District of New York (the “Federal NY Court”). In July 2010, the Federal NY Court ordered the parties to continue discovery regarding the release and ruled that the meaning and scope of the release would be decided in a hearing on summary judgment rather than on a motion to dismiss. In February 2012, the Federal NY Court ruled in Elbit Systems’ favor on the summary judgment, and the case is proceeding to the discovery stage.
|
|
(5)
|
Between 2007 and January 2010, various claims were filed in the Federal NY Court and the Supreme Court of the State of New York, County of New York (“New York State Court”) by certain minority security holders of ImageSat International N.V. (“ImageSat”) against ImageSat, Israel Aerospace Industries Ltd. (“IAI”), Elbit Systems, Elbit Systems Electro-Optics Elop Ltd. (“Elop”) and certain current and former officers and directors of ImageSat. The former directors include, among others, Michael Federmann, Joseph Ackerman and Joseph Gaspar (currently Elbit Systems’ Board Chairman, Chief Executive Officer and Chief Financial Officer, respectively), who at various times in the past served as Elop’s nominee to ImageSat’s board of directors. 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. The claims contained various allegations that the defendants breached their fiduciary and/or contractual obligations to the detriment of the plaintiffs.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
|
C.
|
LEGAL CLAIMS (Cont.)
|
(6)
|
The Company is involved in other legal proceedings from time to time. Based on the advice of legal counsel, management believes such current proceedings will not have a material adverse effect on the Company’s financial position or results of operations.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
|
D.
|
LEASE COMMITMENTS
|
2012
|
$ | 36,521 | ||
2013
|
25,310 | |||
2014
|
19,496 | |||
2015
|
12,564 | |||
2016
|
7,480 | |||
2017 and thereafter
|
14,913 | |||
$ | 116,284 |
|
E.
|
GUARANTEES
|
|
(1)
|
As of December 31, 2011, guarantees in the amount of approximately $1,039,500 were issued by banks on behalf of Company’s entities mainly in order to secure certain advances from customers and performance bonds.
|
|
(2)
|
Elbit Systems has provided, on a proportional basis to its ownership interest, guarantees for three of its investees in respect of credit lines granted to them by banks amounting to $5,700 as of December 31, 2011 (2010 - $7,000). The guarantees will exist as long as the credit lines are in effect. Elbit Systems would be liable under the guarantee for any debt for which the investees would be in default under the terms of the credit line. The fair value of such guarantees, as of December 31, 2011, was not material.
|
|
F.
|
COVENANTS
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
|
G.
|
CONTINGENT LIABILITIES AND GUARANTEES
|
|
H.
|
CONTRACTUAL OBLIGATIONS
|
|
I.
|
In order to secure bank loans and bank guarantees in the amount of $1,039,500 as of December 31, 2011, certain Company entities recorded fixed liens on most of their machinery and equipment, mortgages on most of their real estate and floating charges on most of their assets.
|
|
J.
|
A lien on the Company’s Approved Enterprises has been registered in favor of the State of Israel (see Note 18(A)(4) above).
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands, except share and share data)
|
A.
|
SHARE CAPITAL
Ordinary shares confer upon their holders voting rights and the right to receive dividends.
|
|
B.
|
2007 STOCK OPTION PLAN
|
(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.
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands, except share and per share data)
|
|
C.
|
A summary of Elbit Systems’ share option activity under the stock option plan is as follows:
|
2011
|
2010
|
2009
|
||||||||||||||||||||||
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
|
1,635,305 | $ | 35.96 | 1,858,250 | $ | 35.24 | 2,454,851 | $ | 33.96 | |||||||||||||||
Granted
|
63,300 | 50.74 | 28,000 | 52.23 | 58,500 | 50.33 | ||||||||||||||||||
Exercised
|
(226,965 | ) | 32.41 | (223,020 | ) | 32.53 | (619,451 | ) | 31.62 | |||||||||||||||
Forfeited
|
(20,750 | ) | 42.33 | (27,925 | ) | 31.91 | (35,650 | ) | 34.53 | |||||||||||||||
Outstanding – end of the year
|
1,450,890 | $ | 37.07 | 1,635,305 | $ | 35.96 | 1,858,250 | $ | 35.24 | |||||||||||||||
Options exercisable at the end of the year
|
1,292,806 | $ | 35.17 | 963,289 | $ | 34.70 | 586,626 | $ | 32.55 |
|
D.
|
The options outstanding as of December 31, 2011, have been separated into ranges of exercise prices, as follows:
|
Options outstanding
|
Options exercisable
|
|||||||||||||||||||||
Exercise price
|
Number
of
options
|
Weighted
average
remaining
contractual
life (years)
|
Weighted
average
exercise
price
per share
|
Number
of
options
|
Weighted
average
exercise
price
per share
|
|||||||||||||||||
$ 33.10 - $63.85 | 1,450,890 | $ | 1.27 | $ | 37.07 | 1,292,806 | $ | 35.17 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands, except share and per share data)
|
Year ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
Cost of revenues
|
$ | 924 | $ | 2,353 | $ | 2,397 | ||||||
R&D and marketing expenses
|
458 | 954 | 1,048 | |||||||||
General and administration expenses
|
614 | 1,904 | 1,689 | |||||||||
$ | 1,996 | $ | 5,211 | $ | 5,134 |
|
E.
|
The weighted average exercise price and fair value of options granted during the years ended December 31, 2011, 2010 and 2009 were:
|
Less than market price
|
||||||||||||
Year ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
Weighted average exercise price per share
|
$ | 50.74 | $ | 52.23 | $ | 50.33 | ||||||
Weighted average fair value per share on grant date
|
$ | 12.12 | $ | 11.99 | $ | 16.61 |
|
F.
|
Computation of basic and diluted net earnings per share:
|
Year ended
December 31, 2011
|
Year ended
December 31, 2010
|
Year ended
December 31, 2009
|
||||||||||||||||||||||||||||||||||
Net income
to shareholders
of ordinary
shares
|
Weighted
average
number
of
shares (*)
|
Per
Share
amount
|
Net income
to shareholders
of ordinary
shares
|
Weighted
average
number of
shares (*)
|
Per
Share
amount
|
Net income
to shareholders
of ordinary
shares
|
Weighted
average
number
of
shares (*)
|
Per
Share
amount
|
||||||||||||||||||||||||||||
Basic net earnings
|
$ | 90,288 | 42,764 | $ | 2.11 | $ | 183,498 | 42,645 | $ | 4.30 | $ | 214,947 | 42,305 | $ | 5.08 | |||||||||||||||||||||
Effect of dilutive securities:
|
||||||||||||||||||||||||||||||||||||
Employee stock options
|
- | 367 | - | 572 | - | 678 | ||||||||||||||||||||||||||||||
Diluted net earnings
|
$ | 90,288 | 43,131 | $ | 2.09 | $ | 183,498 | 43,217 | $ | 4.25 | $ | 214,947 | 42,983 | $ | 5.00 |
|
G.
|
SHARE REPURCHASE PROGRAM
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
|
H.
|
In December 2007, Elbit Systems U.S. Corp ("ESC"), a wholly-owned U.S. subsidiary of Elbit Systems, adopted a Stock Appreciation Rights Plan for Non-Employee Directors of ESA (the "SAR Plan"). ESC is the major shareholder of ESA. The purpose of the SAR Plan is to facilitate the retention of qualified and experienced persons to serve as "Non-Employee Directors" of ESA by providing them additional financial incentives. A "Non-Employee Director" is a director of ESA who is not an officer or employee of ESA, or any of its affiliated companies.
Under the Plan, the Board of ESC may grant Stock Appreciation Rights ("SARs") from time to time to Non-Employee Directors of ESA. A SAR is a right that, in accordance with the terms of the SAR Plan, entitles the holder to receive, on the exercise date of the SAR, cash in an amount equal to the excess of the "Fair Market Value" of the "Stock" corresponding to the SAR at the time of exercise of the SAR over the "Initial Value of the Stock". "Stock" means Elbit Systems ordinary shares. Each SAR corresponds to a share of Stock. "Fair Market Value" with respect to the Stock means the closing price of the Stock on the Nasdaq on the applicable date. "Initial Value" of a SAR means the Fair Market Value of one share of Stock on the grant date of the SAR.
A SAR may only be exercised after it becomes vested. 25% of any SAR's granted are exercisable on the first anniversary from the grant date and an additional 25% on each of the three subsequent anniversaries. The maximum term of a SAR is five years from the grant date.SAR's do not provide any rights as a shareholder in the Stock.
|
|
A summary of Elbit Systems' SAR activity under the plan is as follows:
|
Year ended December 31, 2011
|
||||||||
Number of options
|
Weighted average
Exercise price per share
|
|||||||
Outstanding – beginning of the year
|
30,000 | $ | 58.64 | |||||
Granted
|
- | - | ||||||
Outstanding – end of the year
|
30,000 | $ | 58.64 | |||||
Rights vested at the end of the year
|
20,250 | $ | 59.36 |
|
I.
|
DIVIDEND POLICY
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
|
A.
|
Revenues are attributed to geographic areas based on location of the end customers as follows:
|
Year ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
Europe
|
$ | 545,509 | $ | 541,749 | $ | 728,232 | ||||||
U.S.
|
890,352 | 843,985 | 813,460 | |||||||||
Israel
|
697,771 | 650,956 | 627,251 | |||||||||
Other (*)
|
683,833 | 633,443 | 663,494 | |||||||||
$ | 2,817,465 | $ | 2,670,133 | $ | 2,832,437 |
|
B.
|
Revenues are generated by the following areas of operations:
|
Year ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
Airborne systems
|
$ | 969,446 | $ | 791,111 | $ | 693,229 | ||||||
Land vehicles systems
|
405,294 | 363,245 | 449,712 | |||||||||
C4ISR systems
|
996,382 | 1,019,068 | 1,168,848 | |||||||||
Electro-optic systems
|
300,158 | 368,808 | 406,396 | |||||||||
Other (*)
|
146,185 | 127,901 | 114,252 | |||||||||
$ | 2,817,465 | $ | 2,670,133 | $ | 2,832,437 |
|
C.
|
Major customer data as a percentage of total revenues:
|
Year ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
Israeli Ministry Of Defense
|
23 | % | 23 | % | 21 | % | ||||||
U.S. Government
|
8 | % | 7 | % | 6 | % |
|
D.
|
Long-lived assets by geographic areas:
|
Year ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
Israel
|
$ | 875,935 | $ | 985,953 | $ | 753,477 | ||||||
U.S.
|
208,640 | 225,217 | 185,134 | |||||||||
Other
|
196,105 | 89,345 | 69,400 | |||||||||
$ | 1,280,680 | $ | 1,300,515 | $ | 1,008,011 |
Year ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
Total expenses
|
$ | 288,668 | $ | 268,578 | $ | 245,812 | ||||||
Less – grants and participations
|
(47,576 | ) | (34,447 | ) | (29,060 | ) | ||||||
$ | 241,092 | $ | 234,131 | $ | 216,752 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
|
U.S. dollars (In thousands)
|
Year ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
Expenses:
|
||||||||||||
Interest on long-term bank debt
|
$ | (7,214 | ) | $ | (6,968 | ) | $ | (8,723 | ) | |||
Interest on Series A Notes
|
(5,753 | ) | (4,395 | ) | - | |||||||
Interest on short-term bank credit and loans
|
(3,802 | ) | (1,699 | ) | (1,445 | ) | ||||||
Gain (loss) on marketable securities
|
(2,464 | ) | - | 1,292 | ||||||||
Gain (loss) from exchange rate differences and capitalization
|
7,565 | (9,094 | ) | (699 | ) | |||||||
Other
|
(10,839 | ) | (4,330 | ) | (12,260 | ) | ||||||
(22,507 | ) | (26,486 | ) | (21,835 | ) | |||||||
Income:
|
||||||||||||
Interest on cash, cash equivalents and bank deposits
|
2,579 | 3,224 | 3,020 | |||||||||
Other
|
6,359 | 2,011 | 3,230 | |||||||||
8,938 | 5,235 | 6,250 | ||||||||||
$ | (13,569 | ) | $ | (21,251 | ) | $ | (15,585 | ) |
Year ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
Gain from sale of Mediguide shares (*)
|
$ | - | $ | 12,809 | $ | 1,105 | ||||||
Other
|
1,909 | 450 | (647 | ) | ||||||||
$ | 1,909 | $ | 13,259 | $ | 458 |
(*)
|
Gain from the sale of Mediguide Inc. shares to St. Jude Medical in 2008, recognized during 2008, 2009 and 2010.
|
Transactions:
|
Year ended December 31,
|
|||||||||||
2011
|
2010
|
2009
|
||||||||||
Income -
|
||||||||||||
Sales to affiliated companies (*)
|
$ | 20,256 | $ | 33,124 | $ | 39,929 | ||||||
Participation in expenses
|
$ | 3,923 | $ | 3,955 | $ | 4,217 | ||||||
Cost and expenses -
|
||||||||||||
Supplies from affiliated companies (**)
|
$ | 44,840 | $ | 57,339 | $ | 64,058 |
Balances:
|
December 31,
|
|||||||
2011
|
2010
|
|||||||
Trade receivables and other receivables (*)
|
$ | 21,696 | $ | 20,970 | ||||
Trade payables (**)
|
$ | 17,767 | $ | 30,955 |
(*)
|
The significant sales and balances include sales of helmet mounted cueing systems purchased from the Company by VSI.
|
(**)
|
Includes electro-optics components and sensors, purchased by the Company from SCD, and electro-optics products, purchased by the Company, from Opgal.
|
ANNUAL GENERAL MEETING OF SHAREHOLDERS OF
ELBIT SYSTEMS LTD.
November 27, 2012
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL:
The Notice of Meeting, Proxy Statement, Proxy
Card
are available at www.elbitsystems.com
Please
sign, date and mail
your proxy card in the
envelope provided as soon
as possible.
↓ Please detach along perforated line and mail in the envelope provided. ↓
■ | 00033333333000000000 4 | 112712 |
ANY PROXIES PREVIOUSLY GIVEN ARE HEREBY REVOKED. | ||||||||||
THE UNDERSIGNED HEREBY ACKNOWLEDGE(S) RECEIPT OF THE NOTICE OF SHAREHOLDER’S ANNUAL GENERAL MEETING AND ACCOMPANYING PROXY STATEMENT. | ||||||||||
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE S | ||||||||||
1. | RE-ELECTION OF DIRECTORS: | FOR | AGAINST | ABSTAIN | ||||||
A. Moshe Arad | £ | £ | £ | |||||||
B. Avraham Asheri | £ | £ | £ | |||||||
C. Rina Baum | £ | £ | £ | |||||||
D. David Federmann | £ | £ | £ | |||||||
E. Michael Federmann | £ | £ | £ | |||||||
F. Yigal Ne’eman | £ | £ | £ | |||||||
G. Dov Ninveh | £ | £ | £ | |||||||
2. | RE-APPOINTMENT OF KOST, FORER, GABBAY & KASIERER, A MEMBER OF ERNST & YOUNG GLOBAL, AS THE COMPANY’S INDEPENDENT AUDITOR FOR THE FISCAL YEAR 2012 AND UNTIL THE CLOSE OF THE NEXT SHAREHOLDERS’ ANNUAL GENERAL MEETING | £ | £ | £ | ||||||
To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. | £ |
Signature of Shareholder | Date: | Signature of Shareholder | Date: |
■ | Note: | Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. | ■ |
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