|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Ordinary Shares, nominal value
1.0 New Israeli Shekel per share
|
ESLT
|
The NASDAQ Global Select Market
|
|
|
|
Large accelerated filer
|
☒
|
Accelerated filer
|
☐
|
Non-accelerated filer
|
☐
|
Emerging growth company
|
☐
|
U.S. GAAP
|
☒
|
International Financial Reporting ☐
Standards as issued by the International
Accounting Standards Board |
Other ☐
|
|
|
Page
|
|
|
|
|
|
|
|
|
|
•
|
the scope and length of customer contracts;
|
•
|
governmental regulations and approvals;
|
•
|
changes in governmental budgeting priorities;
|
•
|
general market, political, health and economic conditions in the countries in which we operate or sell, including Israel and the United States among others;
|
•
|
the development and launch of our products, or their market acceptance;
|
•
|
our projected expenses and capital expenditures;
|
•
|
differences in anticipated and actual program performance, including the ability to perform under long-term fixed-price contracts;
|
•
|
the impact on our backlog from export restrictions by the Government of Israel;
|
•
|
our ability to achieve strategic goals from acquisitions of businesses and the risks associated with the integration of such businesses;
|
•
|
our ability to protect our proprietary information and avoid, withstand and/or recover from cyber attacks on our systems;
|
•
|
the effect of competitive products, technology and pricing;
|
•
|
our ability to attract, incentivize and retain key employees;
|
•
|
changes in applicable tax rates;
|
•
|
fluctuations in foreign currency exchange rates;
|
•
|
inventory write-downs and possible liabilities to customers from program cancellations due to political relations between Israel and countries where our customers may be located; and
|
•
|
the outcome of legal and/or regulatory proceedings.
|
|
Years Ended December 31,
|
||||||||||||||||||
|
(U.S. dollars in millions, except for per share amounts)
|
||||||||||||||||||
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
||||||||||
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenues
|
3,107.6
|
|
|
3,260.2
|
|
|
3,377.8
|
|
|
3,683.7
|
|
|
4,508.4
|
|
|||||
Cost of revenues
|
2,210.5
|
|
|
2,294.9
|
|
|
2,374.8
|
|
|
2,707.5
|
|
|
3,371.9
|
|
|||||
Gross profit
|
897.1
|
|
|
965.3
|
|
|
1,003.0
|
|
|
976.2
|
|
|
1,136.5
|
|
|||||
Research and development expenses, net
|
243.4
|
|
|
255.8
|
|
|
265.1
|
|
|
287.4
|
|
|
331.8
|
|
|||||
Marketing and selling expenses
|
239.4
|
|
|
271.0
|
|
|
280.2
|
|
|
281.0
|
|
|
301.4
|
|
|||||
General and administrative expenses
|
145.7
|
|
|
151.4
|
|
|
133.3
|
|
|
160.3
|
|
|
214.7
|
|
|||||
Other operating income, net
|
—
|
|
|
(17.6
|
)
|
|
—
|
|
|
(45.4
|
)
|
|
(33.0
|
)
|
|||||
Total operating expenses
|
628.5
|
|
|
660.6
|
|
|
678.6
|
|
|
683.3
|
|
|
814.9
|
|
|||||
Operating income
|
268.6
|
|
|
304.7
|
|
|
324.4
|
|
|
292.9
|
|
|
321.6
|
|
|||||
Financial expenses, net
|
(20.2
|
)
|
|
(23.7
|
)
|
|
(34.5
|
)
|
|
(44.1
|
)
|
|
(69.1
|
)
|
|||||
Other income (expenses), net
|
0.2
|
|
|
(1.7
|
)
|
|
(5.1
|
)
|
|
(11.4
|
)
|
|
(6.2
|
)
|
|||||
Income before taxes on income
|
248.6
|
|
|
279.3
|
|
|
284.8
|
|
|
237.4
|
|
|
246.3
|
|
|||||
Taxes on income
|
(46.2
|
)
|
|
(45.6
|
)
|
|
(55.6
|
)
|
|
(26.4
|
)
|
|
(19.4
|
)
|
|||||
Equity in net earnings (losses) of affiliated companies and partnerships
|
4.5
|
|
|
5.2
|
|
|
11.4
|
|
|
(2.2
|
)
|
|
1.8
|
|
|||||
Net income
|
206.9
|
|
|
238.9
|
|
|
240.6
|
|
|
208.8
|
|
|
228.7
|
|
|||||
Less: net income attributable to non-controlling interests
|
(4.4
|
)
|
|
(1.9
|
)
|
|
(1.5
|
)
|
|
(1.9
|
)
|
|
(0.8
|
)
|
|||||
Income attributable to Elbit Systems’ shareholders
|
202.5
|
|
|
237.0
|
|
|
239.1
|
|
|
206.9
|
|
|
227.9
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Basic net earnings per share
|
$
|
4.74
|
|
|
$
|
5.54
|
|
|
$
|
5.59
|
|
|
$
|
4.83
|
|
|
$
|
5.20
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Diluted net earnings per share
|
$
|
4.74
|
|
|
$
|
5.54
|
|
|
$
|
5.59
|
|
|
$
|
4.83
|
|
|
$
|
5.20
|
|
|
As of December 31,
|
|||||||||||||||||||
|
|
(U.S. dollars in millions, except for per share amounts)
|
||||||||||||||||||
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
||||||||||
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash, cash equivalents, short-term bank deposits and marketable securities
|
|
332
|
|
|
245
|
|
|
173
|
|
|
225
|
|
|
223
|
|
|||||
Working capital
|
|
645
|
|
|
527
|
|
|
522
|
|
|
369
|
|
|
499
|
|
|||||
Long-term deposits, marketable securities and other receivables
|
|
16
|
|
|
16
|
|
|
38
|
|
|
43
|
|
|
58
|
|
|||||
Long-term trade and unbilled receivables
|
|
152
|
|
|
190
|
|
|
295
|
|
|
297
|
|
|
259
|
|
|||||
Property, plant and equipment, net
|
|
450
|
|
|
474
|
|
|
496
|
|
|
687
|
|
|
767
|
|
|||||
Total assets
|
|
4,124
|
|
|
4,352
|
|
|
4,715
|
|
|
6,451
|
|
|
7,335
|
|
|||||
Long-term debt
|
|
166
|
|
|
—
|
|
|
120
|
|
|
468
|
|
|
440
|
|
|||||
Series A Notes, net of current maturities
|
|
227
|
|
|
171
|
|
|
125
|
|
|
56
|
|
|
—
|
|
|||||
Capital stock
|
|
274
|
|
|
274
|
|
|
274
|
|
|
276
|
|
|
424
|
|
|||||
Elbit Systems shareholders’ equity
|
|
1,391
|
|
|
1,560
|
|
|
1,708
|
|
|
1,832
|
|
|
2,141
|
|
|||||
Non-controlling interests
|
|
8
|
|
|
7
|
|
|
10
|
|
|
22
|
|
|
18
|
|
|||||
Total equity
|
|
1,399
|
|
|
1,567
|
|
|
1,718
|
|
|
1,854
|
|
|
2,160
|
|
|||||
Number of outstanding ordinary shares of NIS 1 par value (in thousands)
|
|
42,766
|
|
|
42,782
|
|
|
42,787
|
|
|
42,789
|
|
|
44,198
|
|
|||||
Dividends paid per ordinary share with respect to the applicable year
|
|
$
|
1.44
|
|
|
$
|
1.60
|
|
|
$
|
1.76
|
|
|
$
|
1.76
|
|
|
$
|
1.76
|
|
•
|
our pre-acquisition due diligence may fail to identify material risks;
|
•
|
significant acquisitions may negatively impact our financial results, including cash flow and financial liquidity;
|
•
|
significant goodwill assets recorded on our consolidated balance sheet from prior acquisitions are subject to impairment testing, and unfavorable changes in circumstances could result in impairment to those assets;
|
•
|
acquisitions may result in significant additional unanticipated costs associated with price adjustments or write-downs;
|
•
|
we may not integrate newly-acquired businesses and operations in an efficient and cost-effective manner;
|
•
|
relocation or combination of facilities of acquired businesses may be more costly or time consuming than planned;
|
•
|
we may fail to achieve the strategic objectives, synergies, cost savings and other benefits expected from acquisitions;
|
•
|
the technologies acquired may not prove to be those needed to be successful in our markets or may not have adequate intellectual property rights protection;
|
•
|
we may assume significant liabilities and exposures that exceed the enforceability or other limitations of applicable indemnification provisions, if any, or the financial resources of any indemnifying parties, including indemnity for tax or regulatory compliance issues, such as anti-corruption and environmental compliance, that may result in our incurring successor liability;
|
•
|
we may fail to retain key employees of the acquired businesses;
|
•
|
the attention of senior management may be diverted from our existing operations;
|
•
|
we may be exposed to potential shareholder claims if we acquire a significant interest in a publicly traded company; and
|
•
|
certain of our newly acquired operating subsidiaries in various countries could be subject to more restrictive regulations by the local authorities after our acquisition, including regulations relating to foreign ownership of, and export authorizations for, local companies.
|
•
|
structure our business, through joint ventures, teaming agreements and other forms of alliances, to reflect the competitive environment.
|
•
|
intellectual property laws in certain jurisdictions may be relatively ineffective;
|
•
|
detecting infringements and enforcing proprietary rights may divert management’s attention and company resources;
|
•
|
contractual measures such as non-disclosure agreements and confidentiality provisions may afford only limited protection;
|
•
|
our patents may expire, thus providing competitors access to the applicable technology;
|
•
|
competitors may independently develop products that are substantially equivalent or superior to our products or circumvent our intellectual property rights; and
|
•
|
competitors may register patents in technologies relevant to our business areas.
|
•
|
command, control, communications, computer,intelligence, surveillance and reconnaissance (C4ISR) and cyber systems;
|
•
|
electronic warfare and signal intelligence systems; and
|
|
2017
|
|
2018
|
|
2019
|
||||||
|
(U.S. dollars in millions)
|
||||||||||
Airborne systems
|
$
|
1,272
|
|
|
$
|
1,470
|
|
|
$
|
1,617
|
|
C4ISR systems
|
1,145
|
|
|
1,130
|
|
|
1,162
|
|
|||
Land systems
|
504
|
|
|
649
|
|
|
1,228
|
|
|||
Electro-optic systems
|
341
|
|
|
334
|
|
|
374
|
|
|||
Other (mainly non-defense engineering and production services)
|
116
|
|
|
101
|
|
|
127
|
|
|||
Total
|
$
|
3,378
|
|
|
$
|
3,684
|
|
|
$
|
4,508
|
|
|
2017
|
|
2018
|
|
2019
|
|
(U.S. dollars in millions)
|
||||
Israel
|
22%
|
|
20%
|
|
24%
|
North America
|
25%
|
|
27%
|
|
28%
|
Europe
|
23%
|
|
20%
|
|
18%
|
Asia-Pacific
|
20%
|
|
21%
|
|
23%
|
Latin America
|
6%
|
|
5%
|
|
4%
|
Others
|
5%
|
|
7%
|
|
3%
|
|
Israel(1)
|
|
U.S.(2)
|
|
Other Countries(3)
|
Owned
|
2,771,000 square feet
|
|
1,050,000 square feet
|
|
1,078,000 square feet
|
Leased
|
6,559,000 square feet
|
|
784,000 square feet
|
|
568,000 square feet
|
(1)
|
Includes offices, development and engineering facilities, manufacturing facilities, maintenance facilities, hangar facilities and landing strips in various locations in Israel. IMI's facilities are located in several facilities throughout Israel, of which 568,289 square feet are owned and 4,245,961 square feet are leased.
|
(2)
|
Includes mainly offices, development and engineering facilities, manufacturing facilities and maintenance facilities of Elbit Systems of America, primarily in Texas, New Hampshire, Florida, Alabama and Virginia. The facilities in Texas, New Hampshire, Alabama and Virginia are located on owned land totaling approximately 154 acres. 318,570 square feet of the leased facilities are sublet to a third party. In addition, there is a 942,344 square feet ground lease, of which 629,910 square feet are sublet to a third party. Universal Avionics Systems Corporation's (UASC) facilities are located in Arizona, Washington, Georgia and Kansas, of which 175,000 square feet are owned and 125,000 are leased.
|
(3)
|
Includes offices, design and engineering facilities and manufacturing facilities in Europe, Latin America and Asia-Pacific.
|
|
2017
|
|
2018
|
|
2019
|
||||||
|
(U.S. dollars in millions)
|
||||||||||
Total Investment
|
$
|
301.4
|
|
|
$
|
317.7
|
|
|
$
|
368.7
|
|
Less Participation*
|
(36.3
|
)
|
|
(30.3
|
)
|
|
(36.9
|
)
|
|||
Net Investment
|
$
|
265.1
|
|
|
$
|
287.4
|
|
|
$
|
331.8
|
|
|
*
|
See above “Government Rights in Data” and see below – “Conditions in Israel – Israel Innovation Authority and Investment Center Funding.”
|
•
|
adequate service of process has been made and the defendant has had a reasonable opportunity to be heard;
|
•
|
the judgment and its enforcement are not contrary to the law, public policy, security or sovereignty of the State of Israel;
|
•
|
the judgment was not obtained by fraud and does not conflict with any other valid judgment in the same matter between the same parties;
|
•
|
an action between the same parties in the same matter is not pending in any Israeli court at the time the lawsuit is instituted in the foreign court; and
|
•
|
the judgment is no longer subject to a right of appeal.
|
|
Year ended December 31,
|
|||||||||||||||||||
|
(in thousands of U.S. dollars except per share data)
|
|||||||||||||||||||
|
2019
|
|
2018
|
|
2017
|
|||||||||||||||
|
$
|
|
%
|
|
$
|
|
%
|
|
$
|
|
%
|
|||||||||
Total revenues
|
$
|
4,508,400
|
|
|
100.0
|
|
|
$
|
3,683,684
|
|
|
100.0
|
|
|
$
|
3,377,825
|
|
|
100.0
|
|
Cost of revenues
|
3,371,933
|
|
|
74.8
|
|
|
2,707,505
|
|
|
73.5
|
|
|
2,374,775
|
|
|
70.3
|
|
|||
Gross profit
|
1,136,467
|
|
|
25.2
|
|
|
976,179
|
|
|
26.5
|
|
|
1,003,050
|
|
|
29.7
|
|
|||
Research and development (R&D) expenses
|
368,652
|
|
|
8.2
|
|
|
317,690
|
|
|
8.6
|
|
|
301,382
|
|
|
8.9
|
|
|||
Less – participation
|
(36,895
|
)
|
|
(0.8
|
)
|
|
(30,338
|
)
|
|
(0.8
|
)
|
|
(36,322
|
)
|
|
(1.1
|
)
|
|||
R&D expenses, net
|
331,757
|
|
|
7.4
|
|
|
287,352
|
|
|
7.8
|
|
|
265,060
|
|
|
7.8
|
|
|||
Marketing and selling expenses
|
301,400
|
|
|
6.7
|
|
|
281,014
|
|
|
7.6
|
|
|
280,246
|
|
|
8.3
|
|
|||
General and administrative expenses
|
214,749
|
|
|
4.8
|
|
|
160,348
|
|
|
4.4
|
|
|
133,314
|
|
|
3.9
|
|
|||
Other operating income, net
|
(33,049
|
)
|
|
(0.7
|
)
|
|
(45,367
|
)
|
|
(1.2
|
)
|
|
—
|
|
|
—
|
|
|||
|
814,857
|
|
|
18.1
|
|
|
683,347
|
|
|
18.6
|
|
|
678,620
|
|
|
20.1
|
|
|||
Operating income
|
321,610
|
|
|
7.1
|
|
|
292,832
|
|
|
7.9
|
|
|
324,430
|
|
|
9.6
|
|
|||
Financial expenses, net
|
(69,072
|
)
|
|
(1.5
|
)
|
|
(44,061
|
)
|
|
(1.2
|
)
|
|
(34,502
|
)
|
|
(1.0
|
)
|
|||
Other expenses, net
|
(6,243
|
)
|
|
(0.1
|
)
|
|
(11,449
|
)
|
|
(0.3
|
)
|
|
(5,082
|
)
|
|
(0.2
|
)
|
|||
Income before taxes on income
|
246,295
|
|
|
5.5
|
|
|
237,322
|
|
|
6.4
|
|
|
284,846
|
|
|
8.4
|
|
|||
Taxes on income
|
(19,414
|
)
|
|
(0.4
|
)
|
|
(26,445
|
)
|
|
(0.7
|
)
|
|
(55,585
|
)
|
|
(1.6
|
)
|
|||
|
226,881
|
|
|
5.0
|
|
|
210,877
|
|
|
5.7
|
|
|
229,261
|
|
|
6.8
|
|
|||
Equity in net earnings of affiliated companies and partnerships
|
1,774
|
|
|
—
|
|
|
(2,222
|
)
|
|
(0.1
|
)
|
|
11,361
|
|
|
0.3
|
|
|||
Net income
|
$
|
228,655
|
|
|
7.4
|
|
|
$
|
208,655
|
|
|
6.6
|
|
|
$
|
240,622
|
|
|
7.1
|
|
Less – net income attributable to non-controlling interests
|
(798
|
)
|
|
—
|
|
|
(1,917
|
)
|
|
(0.1
|
)
|
|
(1,513
|
)
|
|
—
|
|
|||
Net income attributable to the Company’s shareholders
|
$
|
227,857
|
|
|
5.1
|
|
|
$
|
206,738
|
|
|
5.6
|
|
|
$
|
239,109
|
|
|
7.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted net earnings per share:
|
$
|
5.20
|
|
|
|
|
|
$
|
4.83
|
|
|
|
|
|
$
|
5.59
|
|
|
|
|
(*)
|
In 2018 we adopted the new revenue recognition accounting standard ASC 606, using the modified retrospective approach. The financial results of 2018 and 2019 are in compliance with ASC 606. Financial results for the year 2017 is presented in conformity with amounts previously disclosed under the prior revenue recognition standard, ASC 605. See above "Revenue Recognition" and Item 18. Financial Statements - Note 2T.
|
|
Year ended December 31,
|
||||||||
|
2019
|
|
2018
|
||||||
|
$ millions
|
|
%
|
|
$ millions
|
|
%
|
||
Airborne systems
|
1,617.2
|
|
|
35.9
|
|
1,470.1
|
|
|
39.9
|
C4ISR systems
|
1,161.5
|
|
|
25.8
|
|
1,130.1
|
|
|
30.7
|
Land systems
|
1,228.3
|
|
|
27.2
|
|
649.1
|
|
|
17.6
|
Electro-optic systems
|
374.4
|
|
|
8.3
|
|
333.9
|
|
|
9.1
|
Other (mainly non-defense engineering and production services)
|
127.0
|
|
|
2.8
|
|
100.5
|
|
|
2.7
|
Total
|
4,508.4
|
|
|
100.0
|
|
3,683.7
|
|
|
100.0
|
|
|
Notional
|
|
Unrealized
|
||
Forward
|
|
Amount*
|
|
Gain (Loss)
|
||
|
|
|
|
|
||
Buy US$ and Sell:
|
|
|
|
|
||
Euro
|
|
330.4
|
|
|
18.9
|
|
GBP
|
|
38.7
|
|
|
(1.0
|
)
|
Other various currencies
|
|
63.0
|
|
|
1.9
|
|
|
|
Notional
|
|
Unrealized
|
||
Forward
|
|
Amount*
|
|
Gain (Loss)
|
||
|
|
|
|
|
||
Sell US$ and Buy:
|
|
|
|
|
||
Euro
|
|
81.2
|
|
|
(3.7
|
)
|
GBP
|
|
9.3
|
|
|
0.2
|
|
Other various currencies
|
|
35.7
|
|
|
(0.7
|
)
|
|
*
|
Notional amount information is based on the foreign exchange rate at year end.
|
|
Up to
1 year
|
|
2-3 years
|
|
4-5 years
|
|
More than
5 years
|
||||
|
(U.S. dollars in millions)
|
||||||||||
1. Long-Term Debt Obligations(1)
|
138
|
|
|
203
|
|
|
237
|
|
|
—
|
|
2. Series A Notes(1)
|
56
|
|
|
—
|
|
|
—
|
|
|
—
|
|
3. Interest payment(2)
|
19
|
|
|
23
|
|
|
15
|
|
|
—
|
|
4. Operating Lease Obligations(3)
|
72
|
|
|
93
|
|
|
36
|
|
|
295
|
|
5. Purchase Obligations(3)
|
1,700
|
|
|
389
|
|
|
63
|
|
|
95
|
|
6. Other Long-Term Liabilities Reflected on the Company’s Balance Sheet under U.S. GAAP(4)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
7. Other Long-Term Liabilities(5)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
1,985
|
|
|
708
|
|
|
351
|
|
|
390
|
|
|
(1)
|
The above includes derivative instruments defined as hedge accounting - see Item 18. Financial Statements - Note 2Y.
|
(2)
|
All our long-term debt borrowings and Series A Notes bear interest at variable rates, which are indexed to LIBOR (plus a fixed spread). For long-term fixed rate borrowings (mainly Series A Notes) we use variable interest rate swaps, effectively converting our long-term fixed rate borrowings to long-term variable rate borrowings indexed to LIBOR. See also Item 18. Financial Statements - Notes 15 and 16. To estimate the scheduled interest payments related to Series A Notes, we applied the future expected interest rates that were used for calculating the fair value of our interest rate swap at the balance sheet date. To estimate the scheduled interest payments related to our other long-term debt obligations we used the LIBOR (plus a fixed spread) interest rates that were effective at the balance sheet date. The majority of our long-term debt obligations are scheduled to be repaid within a period of two - three years.
|
(3)
|
For further description of the Operating Lease Obligations see Item 18. Financial Statements – Note 9. For further description of the Purchase Obligations see above “Long-Term Arrangements and Commitments – Purchase Commitments” and see Item 18. Financial Statements – Note 21F.
|
(4)
|
The obligation amount does not include an amount of $846 million of pension and employee termination liabilities. See Item 18. Financial Statements – Notes 2R and 17. The obligation amount also does not include an amount of $53 million of tax reserve related to uncertain tax positions. See Item 18. Financial Statements – Note 18.
|
(5)
|
See below “Off-Balance Sheet Transactions”.
|
|
Years Ended December 31,
|
|||||||
|
2019
|
|
2018
|
|
2017
|
|||
|
|
|
|
|
|
|||
GAAP gross profit
|
1,136.5
|
|
|
976.2
|
|
|
1003.1
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Amortization of purchased intangible assets
|
22.0
|
|
|
19.1
|
|
|
22.2
|
|
Expenses related to acquisitions
|
55.0
|
|
|
66.6
|
|
|
—
|
|
Non-GAAP gross profit
|
1,213.5
|
|
|
1,061.9
|
|
|
1,025.3
|
|
Percent of revenues
|
26.9
|
%
|
|
28.8
|
%
|
|
30.4
|
%
|
|
|
|
|
|
|
|||
GAAP operating income
|
321.6
|
|
|
292.8
|
|
|
324.4
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Amortization of purchased intangible assets
|
36.1
|
|
|
26.5
|
|
|
28.6
|
|
Expenses related to acquisitions
|
55.0
|
|
|
66.8
|
|
|
—
|
|
Gain from change in holdings
|
(1.2
|
)
|
|
(45.4
|
)
|
|
—
|
|
Capital gain
|
(31.8
|
)
|
|
—
|
|
|
—
|
|
Non-GAAP operating income
|
379.7
|
|
|
340.7
|
|
|
353.0
|
|
Percent of revenues
|
8.4
|
%
|
|
9.2
|
%
|
|
10.5
|
%
|
|
|
|
|
|
|
|||
GAAP net income attributable to Elbit Systems’ shareholders
|
227.9
|
|
|
206.7
|
|
|
239.1
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Amortization of purchased intangible assets
|
36.1
|
|
|
26.5
|
|
|
28.6
|
|
Expenses related to acquisitions
|
55.0
|
|
|
66.8
|
|
|
—
|
|
Gain from changes in holdings
|
(1.2
|
)
|
|
(45.4
|
)
|
|
|
|
Capital gain
|
(31.8
|
)
|
|
—
|
|
|
—
|
|
Revaluation of investment measured under fair value option
|
(8.3
|
)
|
|
—
|
|
|
—
|
|
Impairment of investments
|
3.7
|
|
|
17.6
|
|
|
—
|
|
Non-operating foreign exchange loss
|
24.6
|
|
|
3.4
|
|
|
—
|
|
Tax effect and other tax items*
|
(8.2
|
)
|
|
(8.1
|
)
|
|
6.2
|
|
Non-GAAP net income attributable to Elbit Systems’ shareholders
|
297.8
|
|
|
267.5
|
|
|
273.9
|
|
Percent of revenues
|
6.6
|
%
|
|
7.3
|
%
|
|
8.1
|
%
|
|
|
|
|
|
|
|||
GAAP diluted net EPS
|
5.20
|
|
|
4.83
|
|
|
5.54
|
|
Adjustments, net
|
1.59
|
|
|
1.42
|
|
|
0.87
|
|
Non-GAAP diluted net EPS
|
6.79
|
|
|
6.25
|
|
|
6.41
|
|
|
*
|
Tax effect in 2017 included $10.9 million related to the tax reform in the U.S.
|
Name
|
|
Age
|
|
Director
Since
|
|
Michael Federmann (Chair)
|
|
76
|
|
2000
|
|
Rina Baum
|
|
74
|
|
2001
|
|
Yoram Ben-Zeev
|
|
75
|
|
2014
|
|
David Federmann (Vice Chair)
|
|
45
|
|
2007
|
|
Dr. Yehoshua Gleitman (External Director)
|
|
70
|
|
2010
|
|
Moshe Kaplinsky (External Director)
|
|
63
|
|
2020
|
|
Dov Ninveh
|
|
72
|
|
2000*
|
|
Professor Ehood (Udi) Nisan
|
|
52
|
|
2016
|
|
Bilha (Billy) Shapira (External Director)
|
|
67
|
|
2019
|
|
Professor Yuli Tamir
|
|
66
|
|
2015
|
|
Name
|
|
Age
|
|
Position
|
Bezhalel Machlis
|
|
57
|
|
President and Chief Executive Officer
|
Elad Aharonson
|
|
46
|
|
Executive Vice President and General Manager – ISTAR Division
|
Jonathan Ariel
|
|
63
|
|
Executive Vice President and Chief Legal Officer
|
David Block Temin
|
|
64
|
|
Executive Vice President, Chief Compliance Officer and Senior Counsel
|
Haim Delmar
|
|
50
|
|
Executive Vice President and General Manager - C4I and Cyber Division
|
Joseph Gaspar
|
|
71
|
|
Executive Vice President and Chief Financial Officer
|
Zeev Gofer
|
|
67
|
|
Executive Vice President – Strategic and Business Development - North America
|
Dr. Shelly Gordon
|
|
59
|
|
Executive Vice President – Human Resources
|
Ran Kril
|
|
49
|
|
Executive Vice President - International Marketing and Business Development
|
Edgar Maimon
|
|
65
|
|
Executive Vice President and General Manager – EW and SIGINT Elisra Division
|
Ilan Pacholder
|
|
65
|
|
Executive Vice President – Mergers and Acquisitions and Financing
|
Yuval Ramon
|
|
54
|
|
Executive Vice President and Chief Operating Officer
|
Yoram Shmuely
|
|
59
|
|
Executive Vice President and General Manager – Aerospace Division
|
Yehuda Vered
|
|
62
|
|
Executive Vice President and General Manager – Land Division
|
Yehoshua Yehuda
|
|
53
|
|
Executive Vice President - Strategy and Chief Technology Officer
|
|
Salaries, Directors’ Fees Commissions and Bonuses
|
|
Pension, Retirement and Similar Benefits
|
||||
|
(U.S. dollars in thousands)
|
||||||
All directors (consisting of 10 persons)
|
$
|
535,000
|
|
(1)
|
$
|
—
|
|
All executive officers (consisting of 16 persons)
|
$
|
10,161
|
|
(2)(3)(4)
|
$
|
1,416
|
|
|
(1)
|
Directors Fees
|
(2)
|
2012 Phantom Bonus Retention Plan
|
(i)
|
In 2012, our Board approved a “Phantom” Bonus Retention Plan for Senior Officers (the 2012 Phantom Plan). The purpose of the 2012 Phantom Plan is to provide an incentive to retain applicable senior officers of Elbit Systems and certain of our subsidiaries by strengthening the alignment of the 2012 Phantom Plan recipients’ financial interests with those of the Company and our shareholders. Under the 2012 Phantom Plan, phantom bonus units were granted to executive officers within the framework of three consecutive yearly tranches, each such tranche comprised of an equal number of units which entitle the recipient the right to receive the financial benefit (Unit Benefits) deriving from increases in the value of the Company’s shares during the applicable periods, subject to certain restrictions. Unit Benefits are calculated separately for each tranche. The Unit Benefits accrual period for each tranche is three years from the respective grant date of the applicable bonus units.
|
(iv)
|
Except as otherwise provided in the 2012 Phantom Plan, entitlement to receipt of benefits is conditioned on the recipient remaining an employee of the Company. The benefits received under the 2012 Phantom Plan are subject to tax at the regular personal income tax rates.
|
(v)
|
We recorded amounts of approximately $0.4 million and $0.9 million in 2018 and 2019, respectively, as compensation costs related to grants to our executive officers under the 2012 Phantom Plan. See Item 18. Financial Statements – Note 22G.
|
(3)
|
2018 - Equity Incentive Plan for Executive Officers and Equity Plans in Other Entities Established by the Company
|
(1)
|
Bezhalel Machlis - President and CEO. Compensation costs recorded for Mr. Machlis in 2019 included: $1,043 in Salary Costs, $1,115 in Bonus Costs and $763 in Stock Options Costs. In March 2019, the Company’s shareholders approved the grant to Mr. Machlis of options to purchase 121,298 ordinary shares par value NIS 0.01 of Cyberbit Ltd., a privately held Israeli company in which we hold an interest (Cyberbit), at an exercise price of $7.62 per share. Mr. Machlis is also chair of Cyberbit's board. The grant is in accordance with the Cyberbit employee stock option plan for Cyberbit’s employees and “office holders” (Cyberbit ESOP). Subject to the terms of the Cyberbit ESOP, such options will expire within seven years from the grant date.
|
(2)
|
Yehuda Vered - Executive Vice President and General Manager - Land Division. Compensation costs recorded for Mr. Vered in 2019 included: $735 in Salary Costs, $331 in Bonus Costs and $452 in Stock Option Costs.
|
(3)
|
Joseph Gaspar - Executive Vice President and Chief Financial Officer. Compensation costs recorded for Mr. Gaspar in 2019 included: $710 in Salary Costs, $276 in Bonus Costs and $496 in Stock Options Costs.
|
(4)
|
Yoram Shmuely - Executive Vice President and General Manager - Aerospace Division. Compensation costs recorded for Mr. Shmuely in 2019 included: $702 in Salary Costs, $155 in Bonus Costs and $411 in Stock Option Costs.
|
(5)
|
Elad Aharonson - Executive Vice President and General Manager - ISTAR Division. Compensation costs recorded for Mr. Aharonson in 2019 included: $634 in Salary Costs, $116 in Bonus Costs and $411 in Stock Option Costs.
|
(A)
|
if that person is not a Relative of the controlling shareholder of that company and if that person (and each of that person’s Relatives, partners and employers), or any person to whom he or she is subordinated (directly or indirectly), or any entity controlled by that person, did not have, on the date of the person's appointment or at any time during the two years preceding that person’s appointment as an External Director, any "Affiliation" (as defined in the Companies Law) with any of:
|
(B)
|
if and so long as:
|
(C)
|
if and so long as:
|
(D)
|
if that person serves also as a member of the board of directors of another company, none of the external directors of that other company serves at the same time as a member of the board of directors of the respective company; and
|
(E)
|
if that person is not an employee of a securities authority or a stock exchange in Israel.
|
(i)
|
a senior position in the business management of any corporate entity with a substantial scope of business;
|
(ii)
|
a senior public office or a senior position in the public service sector; or
|
(i)
|
is recommended for re-election by one or more shareholders holding at least 1% of all voting rights of the relevant company, and has no affiliations as listed in Section 245(a1)(1)(c) of the Companies Law;
|
(ii)
|
is recommended for re-election by the board of directors of the relevant company; or
|
(iii)
|
proposes his or her nomination; and
|
(1)
|
the valuations and estimates used in connection with the financial statements;
|
(2)
|
the internal controls related to financial reporting;
|
(3)
|
the completeness and appropriateness of disclosure in the financial statements;
|
(4)
|
the accounting policy adopted and accounting treatment applied in the material matters of the company; and
|
(5)
|
valuations, including the assumptions and estimates underlying them, on which data in the financial statements is provided.
|
(1)
|
to recommend to the board of directors the compensation policy for the company’s Office Holders to be adopted by the company, and thereafter to recommend to the board of directors, once every three years, regarding any extension or modifications of such compensation policy that had been approved for a period of more than three years;
|
(2)
|
from time to time to recommend to the board of directors any updates required to the compensation policy and examine the implementation thereof;
|
(3)
|
to determine, with respect to the company’s Office Holders, whether to approve their Employment Terms; and
|
(4)
|
in certain situations described in the Companies Law, to determine whether to exempt Employment Terms of a candidate for the position of CEO of the company from the requirement to obtain shareholder approval.
|
Audit Committee:
|
|
Financial Statements
Review Committee:
|
|
Corporate Governance and Nominating Committee:
|
|
Compensation Committee:
|
|
|
|
|
|
|
|
Yehoshua Gleitman
|
|
Yehoshua Gleitman
|
|
Yoram Ben Zeev
|
|
Bilha (Billy) Shapira
|
(chair)
|
|
(chair)
|
|
(chair)
|
|
(chair)
|
Yoram Ben-Zeev
|
|
Yoram Ben-Zeev
|
|
Yehoshua Gleitman
|
|
Yoram Ben Zeev
|
Moshe Kaplinsky
|
|
Moshe Kaplinsky
|
|
Moshe Kaplinsky
|
|
Yehoshua Gleitman
|
Ehood (Udi) Nisan
|
|
Ehood (Udi) Nisan
|
|
Bilha (Billy) Shapira
|
|
Moshe Kaplinsky
|
Bilha (Billy) Shapira
|
|
Bilha (Billy) Shapira
|
|
|
|
|
Yuli Tamir
|
|
Yuli Tamir
|
|
|
|
|
|
Total
Employees
|
|
U.S.
Employees
|
||
2019
|
16,575
|
|
|
2,580
|
|
2018
|
16,149
|
|
|
2,001
|
|
2017
|
12,781
|
|
|
1,450
|
|
(a)
|
the average of the closing share price of Elbit Systems ordinary shares on the TASE, during the period of thirty (30) trading days preceding the date on which our Board approves the granting of the respective Options (Date of the Board Resolution) converted into the U.S. Dollars by applying the average representative U.S. dollar - NIS exchange rate during such thirty (30) trading days period; or
|
(b)
|
the closing share price of our ordinary shares on the TASE on the last trading date preceding the Date of the Board Resolution, converted into the U.S. Dollars by applying the representative U.S. dollar - NIS exchange rate.
|
(i)
|
the Date of the Board Resolution;
|
(ii)
|
the first trading day after a period of thirty (30) days has elapsed from the date the Plan is filed with the Israeli Tax Authorities; or
|
(iii)
|
where applicable, the date on which any additional corporate approvals required by Israeli law in connection with the Plan have been obtained.
|
•
|
beneficial ownership of more than 5% of our outstanding ordinary shares; and
|
•
|
the number of ordinary shares beneficially owned by all of our executive officers and directors as a group.
|
Name of Beneficial Owner
|
|
Amount Owned
|
|
Percent of Ordinary Shares(1)
|
||
Federmann Enterprises Ltd.
99 Hayarkon Street
Tel-Aviv, Israel
|
|
19,580,342
|
|
(2)
|
44.3
|
%
|
All executive officers and directors as a group (24 persons)
|
|
3,923
|
|
(3)
|
0.01
|
%
|
|
(1)
|
Based on 44,198,330 ordinary shares outstanding as of March 15, 2020.
|
(2)
|
Includes 3,836,458 ordinary shares held by Heris Aktiengesellschaft (Heris). Heris is owned, directly and indirectly, by Federmann Enterprises Ltd. (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 chair of Elbit Systems’ Board and the chair of the board and the chief executive officer of FEL. Therefore, Mr. Federmann controls, directly and indirectly, the vote of ordinary shares owned by Heris and FEL.
|
2017
|
$
|
1.76 per share
|
2018
|
$
|
1.76 per share
|
2019
|
$
|
1.76 per share
|
|
Nasdaq
|
|
TASE(*)
|
||||||||||||
|
High
|
|
Low
|
|
High
|
|
Low
|
||||||||
2015
|
$
|
89.87
|
|
|
$
|
58.63
|
|
|
$
|
90.22
|
|
|
$
|
59.04
|
|
2016
|
$
|
104.70
|
|
|
$
|
80.24
|
|
|
$
|
104.53
|
|
|
$
|
80.25
|
|
2017
|
$
|
152.65
|
|
|
$
|
99.96
|
|
|
$
|
152.67
|
|
|
$
|
99.61
|
|
2018
|
$
|
149.73
|
|
|
$
|
109.81
|
|
|
$
|
147.89
|
|
|
$
|
110.34
|
|
2019
|
$
|
167.75
|
|
|
$
|
112.16
|
|
|
$
|
167.51
|
|
|
$
|
111.69
|
|
|
Nasdaq
|
|
TASE(*)
|
||||||||||||
|
High
|
|
Low
|
|
High
|
|
Low
|
||||||||
|
|
|
|
|
|
|
|
||||||||
2017
|
|
|
|
|
|
|
|
||||||||
First Quarter
|
$
|
119.55
|
|
|
$
|
99.96
|
|
|
$
|
118.66
|
|
|
$
|
99.61
|
|
Second Quarter
|
$
|
127.16
|
|
|
$
|
113.14
|
|
|
$
|
126.07
|
|
|
$
|
110.83
|
|
Third Quarter
|
$
|
146.62
|
|
|
$
|
122.22
|
|
|
$
|
147.28
|
|
|
$
|
122.90
|
|
Fourth Quarter
|
$
|
152.65
|
|
|
$
|
131.35
|
|
|
$
|
152.67
|
|
|
$
|
130.98
|
|
|
|
|
|
|
|
|
|
||||||||
2018
|
|
|
|
|
|
|
|
||||||||
First Quarter
|
149.89
|
|
|
116.90
|
|
|
147.89
|
|
|
116.68
|
|
||||
Second Quarter
|
$
|
124.10
|
|
|
$
|
109.83
|
|
|
$
|
126.21
|
|
|
$
|
110.34
|
|
Third Quarter
|
135.49
|
|
|
112.72
|
|
|
135.49
|
|
|
113.49
|
|
||||
Fourth Quarter
|
$
|
126.19
|
|
|
$
|
109.81
|
|
|
$
|
126.80
|
|
|
$
|
107.57
|
|
|
|
|
|
|
|
|
|
||||||||
2019
|
|
|
|
|
|
|
|
||||||||
First Quarter
|
$
|
132.17
|
|
|
$
|
112.16
|
|
|
$
|
133.25
|
|
|
$
|
111.69
|
|
Second Quarter
|
$
|
159.12
|
|
|
$
|
133.28
|
|
|
$
|
159.80
|
|
|
$
|
128.39
|
|
Third Quarter
|
$
|
166.52
|
|
|
$
|
146.33
|
|
|
$
|
145.38
|
|
|
$
|
151.66
|
|
Fourth Quarter
|
$
|
167.75
|
|
|
$
|
154.77
|
|
|
$
|
167.51
|
|
|
$
|
154.69
|
|
|
|
|
|
|
|
|
|
||||||||
2020
|
|
|
|
|
|
|
|
||||||||
First Quarter (through March 15, 2020)
|
$
|
164.02
|
|
|
$
|
116.84
|
|
|
$
|
163.11
|
|
|
$
|
115.14
|
|
|
Nasdaq
|
|
TASE(*)
|
||||||||||||
|
High
|
|
Low
|
|
High
|
|
Low
|
||||||||
September 2019
|
$
|
166.52
|
|
|
$
|
154.33
|
|
|
$
|
165.73
|
|
|
$
|
152.40
|
|
October 219
|
$
|
166.14
|
|
|
$
|
160.15
|
|
|
$
|
165.39
|
|
|
$
|
159.06
|
|
November 2019
|
$
|
166.77
|
|
|
$
|
158.65
|
|
|
$
|
166.40
|
|
|
$
|
157.48
|
|
December 2019
|
$
|
167.75
|
|
|
$
|
154.77
|
|
|
$
|
167.51
|
|
|
$
|
154.69
|
|
January 2020
|
$
|
158.32
|
|
|
$
|
149.06
|
|
|
$
|
163.11
|
|
|
$
|
150.98
|
|
February 2020
|
$
|
164.02
|
|
|
$
|
144.09
|
|
|
$
|
163.93
|
|
|
$
|
145.13
|
|
|
(1)
|
approval of the board of directors - a transaction with an Office Holder, other than arrangements in connection with Employment Terms, or a transaction in which an Office Holder has a Personal Interest, where the audit committee has determined that such transaction is not an Extraordinary Transaction, unless the company’s articles of association provide otherwise;
|
(2)
|
approval of both the audit committee and the board of directors:
|
(i)
|
a transaction with an Office Holder, other than arrangements in connection with Employment Terms, or a transaction in which an Office Holder has a Personal Interest, where the audit committee has determined such transaction to be an Extraordinary Transaction;
|
(ii)
|
a material action or arrangement (unrelated to employment terms) that may otherwise be considered a breach of fiduciary duty by an Office Holder; or
|
(iii)
|
an Extraordinary Transaction of a public company with its controlling shareholder or with another person in which the controlling shareholder has a Personal Interest, including a private offering in which the controlling shareholder has a Personal Interest, as well as an agreement of a public company with its controlling shareholder or his or her Relatives, directly or indirectly, including through a company controlled by him or her, regarding the grant of services to the applicable company, as the case may be;
|
(3)
|
approval of both the compensation committee and the board of directors - an arrangement regarding Employment Terms of an Office Holder or of a controlling shareholder or his or her Relatives as Office Holders or employees of the company.
|
(1)
|
both the compensation committee and the board of directors re-discussed the relevant Employment Terms and decided to approve them despite the shareholders’ objection, based on detailed reasons; and
|
(2)
|
the company is not a “Public Pyramid Held Company”. A “Public Pyramid Held Company” is a public company that is controlled by another public company (including by a company that only issued debentures to the public), which is also controlled by another public company (including a company that only issued debentures to the public) that has a controlling shareholder.
|
(i)
|
breach of the Office Holder’s duty of care to the company or to another person;
|
(ii)
|
breach of the Office Holder’s duty of loyalty to the company, to the extent that the Office Holder acted in good faith and had reasonable basis to believe that the act would not prejudice the interests of the company; or
|
(iii)
|
monetary liabilities imposed on the Office Holder for the benefit of another person.
|
(i)
|
financial liability imposed on the Office Holder in favor of another person pursuant to a judgment, including a judgment in the course of settlement arrangements or an arbitrator’s award approved by a court;
|
(ii)
|
reasonable litigation expenses, including attorneys’ fees, incurred by the Office Holder in an investigation or proceeding that has concluded without an indictment being filed and without any monetary liabilities being imposed on the Office Holder in lieu of criminal proceedings or has concluded without the filing of any indictment but with the imposition of monetary liability in lieu of criminal proceedings in an offence that does not require proof of criminal intent or in connection with a monetary sanction; and
|
(iii)
|
reasonable litigation expenses, including attorneys’ fees, incurred by the Office Holder or imposed by a court in a proceeding instituted against the Office Holder by the company, on its behalf or by any other person, or in connection with criminal proceedings in which the Office Holder was acquitted, or as a result of a conviction for an offense that does not require proof of criminal intent.
|
(1)
|
a breach of duty of loyalty, except indemnification or insurance that provides coverage for a breach of a duty of loyalty to the company while acting in good faith and having reasonable basis to believe that such act would not prejudice the interests of the company;
|
(2)
|
a willful or reckless breach of duty of care, other than mere negligence;
|
(3)
|
an act done with the intent to unlawfully realize a personal gain;
|
(4)
|
a fine, monetary penalty or forfeiture imposed upon such Office Holder; or
|
(5)
|
certain monetary liabilities that are set forth in the Securities Law.
|
(1)
|
a breach of his or her duty of care to Elbit Systems or to another person;
|
(2)
|
a breach of his or her duty of loyalty to Elbit Systems, provided that the director or officer acted in good faith and had reasonable basis to assume that his or her act would not harm the interests of Elbit Systems;
|
(3)
|
a financial obligation imposed on him or her in favor of another person;
|
(4)
|
a payment that he or she is obligated to pay to an injured party as set forth in the relevant sections of the Securities Law;
|
(5)
|
expenses incurred by him or her in connection with certain administrative proceedings specified in the Securities Law, including reasonable litigation expenses (including attorneys’ fees); or
|
(6)
|
any other event for which insurance of a director or officer is or may be permitted.
|
(1)
|
a monetary liability imposed on the director or officer or paid by him or her in favor of a third party under a judgment, including a judgment by way of compromise or a judgment of an arbitrator approved by a court; provided however, that in case such undertaking is granted in advance it will be limited to events which, in the Board’s opinion, are foreseeable in light of the Elbit Systems’ actual activities at the time of granting the obligation to indemnify, and to a sum or under criteria as the Board deems reasonable under the circumstances, and the undertaking to indemnify will specify the aforementioned events and sum or criteria;
|
(2)
|
a payment imposed on him or her in favor of an injured party in the circumstances specified in the Securities Law;
|
(3)
|
reasonable litigation expenses (including attorneys’ fees), incurred by a director or officer as a result of an investigation or proceeding conducted against him or her by an authority authorized to conduct such investigation or procedure, provided that such investigation or procedure: (i) concludes without the filing of an indictment against the director or officer and without imposition of monetary payment in lieu of criminal proceedings; or (ii) concludes with imposing on the director or officer a monetary payment in lieu of criminal proceedings, provided that the alleged criminal offense in question does not require proof of criminal intent or was incurred by the director or officer in connection with a monetary sanction imposed by the Companies Law or the Securities Law;
|
(4)
|
expenses incurred by a director or an officer in connection with certain administrative proceedings set forth in the Securities Law, including reasonable litigation expenses (including attorneys’ fees);
|
(5)
|
reasonable litigation expenses (including attorneys’ fees), expended by the director or officer or imposed on him or her by the court for:
|
(i)
|
proceedings issued against him or her by or on Elbit Systems’ behalf or by a third party;
|
(ii)
|
criminal proceedings from which the director or officer was acquitted; or
|
(iii)
|
criminal proceedings in which he or she was convicted of an offense that does not require proof of criminal intent; or
|
(6)
|
any other liability or expense for which it is or may be permissible to indemnify a director or an officer.
|
(1)
|
a citizen or individual resident of the United States;
|
(2)
|
a corporation (or an entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or any political subdivision thereof (including the District of Columbia);
|
(3)
|
an estate whose income is subject to U.S. federal income taxation regardless of its source; or
|
(4)
|
a trust if: (A) a U.S. court is able to exercise primary supervision over the trust’s administration and (B) one or more U.S. persons have the authority to control all of the trust’s substantial decisions or (C) if it has a valid election in place to be treated as a U.S. person.
|
(1)
|
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of assets;
|
(2)
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made in accordance with authorizations of our management and directors; and
|
(3)
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
|
|
Page
|
Reports of Independent Registered Public Accounting Firm
|
F-2
|
Consolidated Balance Sheets
|
F-7
|
Consolidated Statements of Income
|
F-9
|
Consolidated Statements of Comprehensive Income
|
F-10
|
Consolidated Statements of Changes in Equity
|
F-11
|
Consolidated Statements of Cash Flows
|
F-14
|
Notes to Consolidated Financial Statements
|
F-16
|
Schedule II – Valuation and Qualifying Accounts
|
S-1
|
1.1
|
|
1.2
|
|
2.1
|
|
4.1
|
Description of the Terms of Office and Employment of the Company’s President and Chief Executive Officer(1)
|
4.2
|
Elbit Systems Ltd. 2018 Equity Incentive Plan for Executive Officers(2)
|
4.3
|
Elbit Systems Ltd. 2018 Compensation Policy for Executive Officers and Directors(3)
|
4.4
|
Summary of IMI Acquisition Agreements(4)
|
8
|
|
12.1
|
|
12.2
|
|
13.1
|
|
13.2
|
|
15.1
|
|
15.2
|
|
15.3
|
|
(1)
|
Filed as Exhibit 4.2 to Elbit Systems’ annual report on Form 20-F, filed with the SEC on March 22, 2016, and incorporated herein by reference.
|
(2)
|
Filed as Exhibit 99.1 to Elbit Systems’ Registration Statement on Form S-8 (No. 333-223785), for the registration of the underlying shares that may be issued upon exercise of options thereunder, filed with the SEC on March 20, 2018, and incorporated herein by reference.
|
(3)
|
Filed as Exhibit “A” to Elbit Systems’ proxy statement dated March 1, 2018, filed as Exhibit 1 to Elbit Systems’ Report of Foreign Private Issuer on Form 6-K, filed with the SEC on March 1, 2018, and incorporated herein by reference.
|
(4)
|
Filed as Exhibit 4.4 to Elbit Systems' annual report on Form 20-F, filed with the SEC on March 19, 2019.
|
|
ELBIT SYSTEMS LTD.
|
|
|
|
|
|
By:
|
/s/ BEZHALEL MACHLIS
|
|
Name:
|
Bezhalel Machlis
|
|
Title:
|
President and Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
|
Kost Forer Gabbay & Kasierer
144 Menachem begin St. Tel-Aviv 6492102, Israel |
Tel: +972-3-6232525
Fax: +972-3-5622555 ey.com |
|
Kost Forer Gabbay & Kasierer
144 Menachem begin St. Tel-Aviv 6492102, Israel |
Tel: +972-3-6232525
Fax: +972-3-5622555 ey.com |
Title
|
Revenue Recognition
|
Description of the Matter
|
As described in note 2 to the consolidated financial statements, the Company generated the majority of its revenues from long-term contracts with its customers for which the related performance obligations are primarily satisfied over time. The Company recognizes revenues on such contracts using the percentage-of-completion cost-to-cost measure of progress ("input method"). Under this method, the Company measures progress towards completion based on the ratio of costs incurred to date to the estimated total costs to complete the performance obligation(s) (referred to as the estimate-at-completion, or “EAC”).
The determination of contract EACs requires management to make significant estimates and assumptions to estimate contract revenues, costs and profit associated with its contracts with customers. At the outset of a long-term contract, the Company identifies risks to the achievement of the technical, schedule and cost aspects of the contract, estimates the consideration to be received, and monitors and assesses the effects of those risks on its estimates throughout the contract's life cycle. Significant changes in EAC estimates could have a material effect on the Company’s estimated revenue and gross profit recorded during the period under audit.
Auditing revenue recognition based on the percentage-of-completion cost-to-cost measure of progress method was complex due to the judgment involved in evaluating management's significant estimates and assumptions about project economics, schedule and technical feasibility, both at contract inception and throughout the contract's life cycle.
|
How We
Addressed the Matter in Our Audit
|
We obtained an understanding, evaluated the design and tested the operating effectiveness of relevant internal controls over the Company’s revenue recognition process. For example, we tested internal controls over management's preparation and periodic reviews of the EAC analyses and the significant assumptions underlying a contract's estimated value and estimated total EAC. We also tested internal controls that management executes to validate the accuracy and completeness of the underlying data used in management's EAC analyses.
To test the Company's EAC analyses, our audit procedures included, among others, obtaining an understanding of the contract and the contractual terms, evaluating, for a sample of contracts, the Company's historical ability to accurately estimate expected costs by comparing management's estimates of labor hours, subcontractor costs and materials required to complete the contract to actual results. We also verified costs incurred by comparing them to supporting documents and agreed key terms to contract documentation, including estimated contract value. In addition, we verified that the variances in costs incurred from projected costs are properly reflected in the EAC analyses.
|
Title
|
Valuation of assets acquired and liabilities assumed in the acquisition of Harris Night Vision Business
|
Description of the Matter
|
As described in note 1 to the consolidated financial statements, during the year ended December 31, 2019, the Company completed the acquisitions of the Night Vision business of L3Harris Technologies, for net consideration of $351.5 million. The transaction was accounted for as a business combination. The Company's accounting for the acquisition included determining the fair values of the identifiable assets acquired and liabilities assumed, which included a customer-relationship intangible asset.
Auditing the Company's determination of the customer-relationship intangible asset was complex due to the significant estimation required by management. The estimated fair value of the customer-relationship intangible asset at the acquisition date was $67 million. The complexity was primarily due to the sensitivity of the fair value to certain of the significant underlying assumptions. The Company primarily used a discounted cash flow model to measure the customer-relationship intangible asset. The significant assumptions used to estimate the value of the customer-relationship intangible asset included the discount rates and certain assumptions that form the basis of the projected financial information (e.g., revenue growth rates and operating profit margin). These significant assumptions are forward looking and could be affected by future economic and market conditions.
|
|
Kost Forer Gabbay & Kasierer
144 Menachem begin St. Tel-Aviv 6492102, Israel |
Tel: +972-3-6232525
Fax: +972-3-5622555 ey.com |
How We Addressed the Matter in Our Audit
|
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process for determining the fair value of the customer-relationship intangible asset. For example, we tested controls over management’s estimation process supporting the recognition and measurement of the intangible asset, including the review of the valuation model and significant assumptions used in the valuation model.
To test the estimated fair value of the customer-relationship intangible asset, we performed audit procedures that included, among others, evaluating the Company's selection of the appropriate valuation methodology, evaluating the significant assumptions used by management and testing the completeness and accuracy of the underlying data. We involved our valuation specialists to assist with our evaluation of the methodology used by the Company and significant assumptions included in the fair value estimates. For example, we compared the significant assumptions to current industry, market and economic trends, historical results of the acquired business and to other relevant third-party industry outlooks. We also performed sensitivity analyses of the significant assumptions to evaluate the effects on the estimated fair value.
|
Title
|
Defined Benefit Pension Plan Obligations
|
Description of the Matter
|
As described in Note 17, as of December 31, 2019, the Company’s aggregate defined benefit pension obligation was $843.3 million and exceeded the fair value of pension plan assets of $289.5 million, resulting in an unfunded defined benefit pension obligation of $553.8 million. The Company updates the estimates used to measure the defined benefit pension obligation and plan assets at year-end or upon a remeasurement event to reflect updated participant data, actuarial assumptions and actual return on plan assets, among others.
Auditing the defined benefit pension obligation was complex and required the involvement of specialists as a result of the judgmental nature of the significant actuarial assumptions such as discount rates, expected long-term rate of return on plan assets, future salaries increase and assumed mortality rates, used in the measurement process. These assumptions have a significant effect on the projected benefit obligation, with the discount rate being the most sensitive of those assumptions.
|
How We Addressed the Matter in Our Audit
|
We obtained an understanding, evaluated the design and tested the operating effectiveness of relevant internal controls over management's measurement and valuation of the defined benefit pension obligation. For example, we tested the internal controls over management’s review of the defined benefit pension obligation calculations, the significant actuarial assumptions and the data inputs provided to the actuaries.
To test the defined benefit pension obligation, our audit procedures included, among others, evaluating the methodology used, the significant actuarial assumptions described above and the underlying data used by the Company. For example, we confirmed the consistency of the actuarial assumptions used by management and evaluated that the change in the defined benefit pension obligation from the prior year was due to the effects of service cost, interest cost, actuarial gains and losses, benefit payments, contributions and new mortality assumptions. In addition, we involved our actuarial specialists to assist in evaluating management’s methodology for determining the discount rates and that the discount rates reflect the duration of the related benefit payments. To evaluate the reasonableness of future salary increases and the mortality assumptions, we assessed whether the information is consistent with publicly available information. We also tested the completeness and accuracy of the underlying data, including the participant data used in the actuarial calculations. To evaluate the expected return on plan assets, we assessed whether management’s assumption was consistent with a range of returns for a portfolio of comparative investments.
|
|
Kost Forer Gabbay & Kasierer
144 Menachem begin St. Tel-Aviv 6492102, Israel |
Tel: +972-3-6232525
Fax: +972-3-5622555 ey.com |
|
Kost Forer Gabbay & Kasierer
144 Menachem begin St. Tel-Aviv 6492102, Israel |
Tel: +972-3-6232525
Fax: +972-3-5622555 ey.com |
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
CONSOLIDATED BALANCE SHEETS
|
||
U.S. dollars (In thousands, except share data)
|
|
|
|
December 31,
|
||||||
|
Note
|
|
2019
|
|
2018
|
||||
|
|
|
|
|
|
||||
CURRENT ASSETS:
|
|
|
|
|
|
||||
Cash and cash equivalents
|
|
|
$
|
221,060
|
|
|
$
|
208,479
|
|
Short-term bank deposits and restricted deposits
|
|
|
2,213
|
|
|
16,447
|
|
||
Trade and unbilled receivables and contract assets, net
|
3
|
|
2,067,846
|
|
|
1,712,915
|
|
||
Other receivables and prepaid expenses
|
4
|
|
160,728
|
|
|
199,148
|
|
||
Inventories, net
|
5
|
|
1,219,920
|
|
|
1,141,996
|
|
||
Total current assets
|
|
|
3,671,767
|
|
|
3,278,985
|
|
||
|
|
|
|
|
|
||||
LONG-TERM INVESTMENTS AND RECEIVABLES:
|
|
|
|
|
|
|
|||
Investments in affiliated companies, partnerships and other companies
|
6
|
|
201,574
|
|
|
196,180
|
|
||
Long-term trade and unbilled receivables and contract assets
|
7
|
|
259,150
|
|
|
297,145
|
|
||
Premises evacuation receivable
|
1C(5)
|
|
—
|
|
|
365,436
|
|
||
Long-term bank deposits and other receivables
|
8
|
|
58,076
|
|
|
42,962
|
|
||
Deferred income taxes, net
|
18F
|
|
89,452
|
|
|
42,804
|
|
||
Severance pay fund
|
2R
|
|
287,104
|
|
|
278,732
|
|
||
|
|
|
895,356
|
|
|
1,223,259
|
|
||
|
|
|
|
|
|
||||
OPERATING LEASE RIGHT OF USE ASSETS
|
9
|
|
365,763
|
|
|
—
|
|
||
|
|
|
|
|
|
||||
PROPERTY, PLANT AND EQUIPMENT, NET
|
10
|
|
766,532
|
|
|
686,620
|
|
||
|
|
|
|
|
|
||||
GOODWILL
|
11
|
|
1,340,617
|
|
|
1,022,624
|
|
||
|
|
|
|
|
|
||||
OTHER INTANGIBLE ASSETS, NET
|
11
|
|
295,323
|
|
|
239,297
|
|
||
|
|
|
|
|
|
||||
TOTAL ASSETS
|
|
|
$
|
7,335,358
|
|
|
$
|
6,450,785
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
CONSOLIDATED BALANCE SHEETS
|
||
U.S. dollars (In thousands, except share data)
|
|
|
|
December 31,
|
||||||
|
Note
|
|
2019
|
|
2018
|
||||
|
|
|
|
|
|
||||
CURRENT LIABILITIES:
|
|
|
|
|
|
||||
Short-term bank credit and loans
|
12
|
|
$
|
208,399
|
|
|
$
|
208,821
|
|
Current maturities of long-term loans and Series A Notes
|
15,16
|
|
199,882
|
|
|
62,546
|
|
||
Operating lease liabilities
|
9
|
|
62,565
|
|
|
—
|
|
||
Trade payables
|
|
|
926,338
|
|
|
776,100
|
|
||
Other payables and accrued expenses
|
13
|
|
1,052,080
|
|
|
1,081,992
|
|
||
Contract liabilities (customer advances)
|
14
|
|
723,581
|
|
|
780,994
|
|
||
Total current liabilities
|
|
|
3,172,845
|
|
|
2,910,453
|
|
||
|
|
|
|
|
|
||||
LONG-TERM LIABILITIES:
|
|
|
|
|
|
|
|||
Long-term loans, net of current maturities
|
15
|
|
440,124
|
|
|
467,649
|
|
||
Series A Notes, net of current maturities
|
16
|
|
—
|
|
|
56,303
|
|
||
Employee benefit liabilities
|
2R
|
|
836,535
|
|
|
736,798
|
|
||
Deferred income taxes and tax liabilities, net
|
18F
|
|
114,419
|
|
|
78,677
|
|
||
Contract liabilities (customer advances)
|
14
|
|
62,830
|
|
|
175,890
|
|
||
Operating lease liabilities
|
9
|
|
323,287
|
|
|
—
|
|
||
Other long-term liabilities
|
20
|
|
225,478
|
|
|
170,607
|
|
||
Total long-term liabilities
|
|
|
2,002,673
|
|
|
1,685,924
|
|
||
|
|
|
|
|
|
||||
COMMITMENTS AND CONTINGENT LIABILITIES
|
21
|
|
|
|
|
|
|
||
|
|
|
|
|
|
||||
EQUITY:
|
22
|
|
|
|
|
|
|
||
Elbit Systems Ltd. equity:
|
|
|
|
|
|
|
|
||
Share capital:
|
|
|
|
|
|
|
|
||
Ordinary shares of 1 New Israeli Shekels (“NIS”) par value each; Authorized – 80,000,000 shares as of December 31, 2019 and 2018; Issued 44,198,330 shares as of December 31, 2019 and 2018, respectively; Outstanding 44,198,330 and 42,789,409 shares as of December 31, 2019 and 2018, respectively
|
|
|
12,742
|
|
|
12,348
|
|
||
Additional paid-in capital
|
|
|
411,568
|
|
|
263,556
|
|
||
Treasury shares – 1,408,921 as of December 31, 2018
|
|
|
—
|
|
|
(40,428
|
)
|
||
Accumulated other comprehensive loss
|
|
|
(144,963
|
)
|
|
(94,944
|
)
|
||
Retained earnings
|
|
|
1,862,059
|
|
|
1,691,921
|
|
||
Total Elbit Systems Ltd. equity
|
|
|
2,141,406
|
|
|
1,832,453
|
|
||
Non-controlling interests
|
|
|
18,434
|
|
|
21,955
|
|
||
Total equity
|
|
|
2,159,840
|
|
|
1,854,408
|
|
||
|
|
|
|
|
|
||||
TOTAL LIABILITIES AND EQUITY
|
|
|
$
|
7,335,358
|
|
|
$
|
6,450,785
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
CONSOLIDATED STATEMENTS OF INCOME
|
||
U.S. dollars (In thousands, except per share data)
|
|
|
|
Year ended December 31,
|
||||||||||
|
Note
|
|
2019
|
|
2018
|
|
2017
|
||||||
Revenues
|
2T, 23
|
|
$
|
4,508,400
|
|
|
$
|
3,683,684
|
|
|
$
|
3,377,825
|
|
Cost of revenues
|
|
|
3,371,933
|
|
|
2,707,505
|
|
|
2,374,775
|
|
|||
Gross profit
|
|
|
1,136,467
|
|
|
976,179
|
|
|
1,003,050
|
|
|||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|||
Research and development, net
|
24
|
|
331,757
|
|
|
287,352
|
|
|
265,060
|
|
|||
Marketing and selling, net
|
|
|
301,400
|
|
|
281,014
|
|
|
280,246
|
|
|||
General and administrative, net
|
|
|
214,749
|
|
|
160,348
|
|
|
133,314
|
|
|||
Other operating income, net
|
6C, 9D
|
|
(33,049
|
)
|
|
(45,367
|
)
|
|
—
|
|
|||
Total operating expenses
|
|
|
814,857
|
|
|
683,347
|
|
|
678,620
|
|
|||
|
|
|
|
|
|
|
|
||||||
Operating income
|
|
|
321,610
|
|
|
292,832
|
|
|
324,430
|
|
|||
Financial expenses, net
|
25
|
|
(69,072
|
)
|
|
(44,061
|
)
|
|
(34,502
|
)
|
|||
Other expense, net
|
26
|
|
(6,243
|
)
|
|
(11,449
|
)
|
|
(5,082
|
)
|
|||
Income before income taxes
|
|
|
246,295
|
|
|
237,322
|
|
|
284,846
|
|
|||
Income taxes
|
18D
|
|
(19,414
|
)
|
|
(26,445
|
)
|
|
(55,585
|
)
|
|||
|
|
|
226,881
|
|
|
210,877
|
|
|
229,261
|
|
|||
Equity in net earnings (losses) of affiliated companies and partnerships
|
6B
|
|
1,774
|
|
|
(2,222
|
)
|
|
11,361
|
|
|||
Net income
|
|
|
$
|
228,655
|
|
|
$
|
208,655
|
|
|
$
|
240,622
|
|
Less: net income attributable to non-controlling interests
|
|
|
(798
|
)
|
|
(1,917
|
)
|
|
(1,513
|
)
|
|||
Net income attributable to Elbit Systems Ltd.’s shareholders
|
|
|
$
|
227,857
|
|
|
$
|
206,738
|
|
|
$
|
239,109
|
|
|
|
|
|
|
|
|
|
||||||
Basic net earnings per share attributable to Elbit Systems Ltd.’s shareholders
|
22
|
|
$
|
5.20
|
|
|
$
|
4.83
|
|
|
$
|
5.59
|
|
Diluted net earnings per share attributable to Elbit Systems Ltd.’s shareholders
|
|
|
$
|
5.20
|
|
|
$
|
4.83
|
|
|
$
|
5.59
|
|
|
|
|
|
|
|
|
|
||||||
Weighted average number of shares used in computation of basic net earnings per share
|
|
|
43,787
|
|
|
42,789
|
|
|
42,786
|
|
|||
Weighted average number of shares used in computation of diluted net earnings per share
|
|
|
43,848
|
|
|
42,789
|
|
|
42,789
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
||
U.S. dollars (In thousands)
|
|
Year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Net income
|
$
|
228,655
|
|
|
$
|
208,655
|
|
|
$
|
240,622
|
|
|
|
|
|
|
|
||||||
Other comprehensive income (loss), net of tax:(*)
|
|
|
|
|
|
||||||
Foreign currency translation differences
|
7,362
|
|
|
(19,705
|
)
|
|
8,169
|
|
|||
Unrealized gains (losses) on derivative instruments, net of tax
|
9,965
|
|
|
3,805
|
|
|
(22,224
|
)
|
|||
Pension and other post-retirement benefit plans, net of tax
|
(66,806
|
)
|
|
7,970
|
|
|
(662
|
)
|
|||
Unrealized losses on available-for-sale marketable securities, net of tax
|
—
|
|
|
(11
|
)
|
|
(6
|
)
|
|||
|
(49,479
|
)
|
|
(7,941
|
)
|
|
(14,723
|
)
|
|||
Total comprehensive income
|
179,176
|
|
|
200,714
|
|
|
225,899
|
|
|||
Less: comprehensive income attributable to non-controlling interest
|
(1,338
|
)
|
|
(1,268
|
)
|
|
(2,261
|
)
|
|||
Comprehensive income attributable to Elbit Systems Ltd.’s shareholders
|
$
|
177,838
|
|
|
$
|
199,446
|
|
|
$
|
223,638
|
|
(*)
|
Other comprehensive income (loss), net of tax expenses in the amounts of $924, $2,175 and $5,199 for the years 2019, 2018 and 2017, respectively.
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
STATEMENTS OF CHANGES IN EQUITY
|
||
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
|
|||||||||||||||
Balance as of January 1, 2017
|
42,782,043
|
|
|
$
|
12,345
|
|
|
$
|
261,992
|
|
|
$
|
(72,181
|
)
|
|
$
|
1,398,112
|
|
|
$
|
(40,428
|
)
|
|
$
|
7,401
|
|
|
$
|
1,567,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Exercise of options
|
5,214
|
|
|
2
|
|
|
117
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
119
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Dividends paid
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(75,300
|
)
|
|
—
|
|
|
—
|
|
|
(75,300
|
)
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Other comprehensive income, net of tax expense of $5,199
|
—
|
|
|
—
|
|
|
—
|
|
|
(15,471
|
)
|
|
—
|
|
|
—
|
|
|
748
|
|
|
(14,723
|
)
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income attributable to non-controlling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,513
|
|
|
1,513
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income attributable to Elbit Systems Ltd.'s shareholders
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
239,109
|
|
|
—
|
|
|
—
|
|
|
239,109
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance as of December 31, 2017
|
42,787,257
|
|
|
$
|
12,347
|
|
|
$
|
262,122
|
|
|
$
|
(87,652
|
)
|
|
$
|
1,561,921
|
|
|
$
|
(40,428
|
)
|
|
$
|
9,662
|
|
|
$
|
1,717,972
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
STATEMENTS OF CHANGES IN EQUITY
|
||
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
|
|||||||||||||||
Balance as of January 1, 2018
|
42,787,257
|
|
|
$
|
12,347
|
|
|
$
|
262,122
|
|
|
$
|
(87,652
|
)
|
|
$
|
1,561,921
|
|
|
$
|
(40,428
|
)
|
|
$
|
9,662
|
|
|
$
|
1,717,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Cumulative effect of adoption of ACS Topic 606
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,433
|
)
|
|
—
|
|
|
—
|
|
|
(1,433
|
)
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Exercise of options
|
2,152
|
|
|
1
|
|
|
47
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
48
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
1,387
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,387
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Dividends paid
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(75,305
|
)
|
|
—
|
|
|
—
|
|
|
(75,305
|
)
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Minority interest related to IMI's acquisition
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,025
|
|
|
11,025
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Other comprehensive loss, net of tax expense of $2,175
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,292
|
)
|
|
—
|
|
|
—
|
|
|
(649
|
)
|
|
(7,941
|
)
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income attributable to non- controlling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,917
|
|
|
1,917
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income attributable to Elbit Systems Ltd.'s shareholders
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
206,738
|
|
|
—
|
|
|
—
|
|
|
206,738
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance as of December 31, 2018
|
42,789,409
|
|
|
$
|
12,348
|
|
|
$
|
263,556
|
|
|
$
|
(94,944
|
)
|
|
$
|
1,691,921
|
|
|
$
|
(40,428
|
)
|
|
$
|
21,955
|
|
|
$
|
1,854,408
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
STATEMENTS OF CHANGES IN EQUITY
|
||
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
|
|||||||||||||||
Balance as of January 1, 2019
|
42,789,409
|
|
|
$
|
12,348
|
|
|
$
|
263,556
|
|
|
$
|
(94,944
|
)
|
|
$
|
1,691,921
|
|
|
$
|
(40,428
|
)
|
|
$
|
21,955
|
|
|
$
|
1,854,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
3,994
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,994
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Issuance of treasury shares
|
1,408,921
|
|
|
394
|
|
|
144,018
|
|
|
—
|
|
|
—
|
|
|
40,428
|
|
|
—
|
|
|
184,840
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Dividends paid
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(57,719
|
)
|
|
—
|
|
|
(4,859
|
)
|
|
(62,578
|
)
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Other comprehensive loss, net of tax expense of $924
|
—
|
|
|
—
|
|
|
—
|
|
|
(50,019
|
)
|
|
—
|
|
|
—
|
|
|
540
|
|
|
(49,479
|
)
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income attributable to non- controlling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
798
|
|
|
798
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income attributable to Elbit Systems Ltd.'s shareholders
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
227,857
|
|
|
—
|
|
|
—
|
|
|
227,857
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance as of December 31, 2019
|
44,198,330
|
|
|
$
|
12,742
|
|
|
$
|
411,568
|
|
|
$
|
(144,963
|
)
|
|
$
|
1,862,059
|
|
|
$
|
—
|
|
|
$
|
18,434
|
|
|
$
|
2,159,840
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||
U.S. dollars (In thousands )
|
|
Year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
||||||
Net income
|
$
|
228,655
|
|
|
$
|
208,655
|
|
|
$
|
240,622
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|||
Depreciation and amortization
|
137,146
|
|
|
118,205
|
|
|
114,017
|
|
|||
Write-off impairment
|
3,692
|
|
|
13,334
|
|
|
—
|
|
|||
Stock-based compensation
|
3,994
|
|
|
1,387
|
|
|
13
|
|
|||
Amortization of Series A Notes discount (premium) and related issuance costs, net
|
(93
|
)
|
|
(92
|
)
|
|
(92
|
)
|
|||
Deferred income taxes and reserve, net
|
(15,059
|
)
|
|
13,724
|
|
|
28,774
|
|
|||
Loss (gain) on sale of property, plant and equipment
|
(34,154
|
)
|
|
2,080
|
|
|
(2,440
|
)
|
|||
Loss (gain) on sale of investments, remeasurement of investments held under fair value method and deconsolidation of subsidiary
|
(7,928
|
)
|
|
(41,822
|
)
|
|
1,358
|
|
|||
Equity in net (earnings) losses of affiliated companies and partnerships, net of dividend received(*)
|
8,526
|
|
|
17,929
|
|
|
(1,987
|
)
|
|||
Changes in operating assets and liabilities, net of amounts acquired:
|
|
|
|
|
|
|
|
|
|||
Increase in short and long-term trade and unbilled receivables and contract assets, net and prepaid expenses
|
(267,924
|
)
|
|
(89,099
|
)
|
|
(315,236
|
)
|
|||
Increase in inventories, net
|
(55,841
|
)
|
|
(117,221
|
)
|
|
(59,699
|
)
|
|||
Increase (decrease) in trade payables, other payables and accrued expenses
|
115,621
|
|
|
(89,956
|
)
|
|
63,273
|
|
|||
Severance, pension and termination indemnities, net
|
4,629
|
|
|
(31,363
|
)
|
|
2,003
|
|
|||
Increase (decrease) in contract liabilities (customer advances)
|
(174,582
|
)
|
|
185,898
|
|
|
30,287
|
|
|||
Net cash provided by operating activities
|
(53,318
|
)
|
|
191,659
|
|
|
100,893
|
|
|||
|
|
|
|
|
|
||||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|||
Purchase of property, plant and equipment and other assets
|
(137,604
|
)
|
|
(102,301
|
)
|
|
(107,880
|
)
|
|||
Acquisitions of subsidiaries and business operations (Schedule A)
|
(357,144
|
)
|
|
(504,447
|
)
|
|
(25,440
|
)
|
|||
Investments in affiliated companies and other companies
|
(8,567
|
)
|
|
(7,538
|
)
|
|
(4,964
|
)
|
|||
Proceeds from premises evacuation grants receivable
|
344,913
|
|
|
—
|
|
|
—
|
|
|||
Deconsolidation of subsidiary (Schedule B)
|
—
|
|
|
(2,873
|
)
|
|
—
|
|
|||
Proceeds from sale of property, plant and equipment
|
36,671
|
|
|
4,388
|
|
|
6,270
|
|
|||
Proceeds from sale of investments
|
—
|
|
|
—
|
|
|
12,067
|
|
|||
Investment in long-term deposits
|
(289
|
)
|
|
(183
|
)
|
|
(1,396
|
)
|
|||
Proceeds from sale of long-term deposits
|
251
|
|
|
82
|
|
|
176
|
|
|||
Investment in short-term deposits and available-for-sale marketable securities
|
(2,314
|
)
|
|
(10,361
|
)
|
|
(40,893
|
)
|
|||
Proceeds from sale of short-term deposits and available-for-sale marketable securities
|
17,294
|
|
|
30,363
|
|
|
46,491
|
|
|||
Net cash used in investing activities
|
(106,789
|
)
|
|
(592,870
|
)
|
|
(115,569
|
)
|
|||
|
|
|
|
|
|
||||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|||
Proceeds from exercise of options
|
—
|
|
|
48
|
|
|
119
|
|
|||
Issuance of treasury shares, net
|
184,840
|
|
|
—
|
|
|
—
|
|
|||
Repayment of long-term loans
|
(243,324
|
)
|
|
(775
|
)
|
|
(167,425
|
)
|
|||
Proceeds from long-term loans
|
350,000
|
|
|
342,528
|
|
|
118,623
|
|
|||
Repayment of Series A Notes
|
(55,532
|
)
|
|
(55,532
|
)
|
|
(55,532
|
)
|
|||
Dividends paid
|
(62,578
|
)
|
|
(75,305
|
)
|
|
(75,300
|
)
|
|||
Change in short-term bank credit and loans, net
|
(718
|
)
|
|
242,652
|
|
|
127,455
|
|
|||
Net cash used in financing activities
|
172,688
|
|
|
453,616
|
|
|
(52,060
|
)
|
|||
|
|
|
|
|
|
||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
12,581
|
|
|
52,405
|
|
|
(66,736
|
)
|
|||
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR
|
$
|
208,479
|
|
|
$
|
156,074
|
|
|
$
|
222,810
|
|
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR
|
$
|
221,060
|
|
|
$
|
208,479
|
|
|
$
|
156,074
|
|
|
|
|
|
|
|
||||||
(*) Dividends received from affiliated companies and partnerships
|
$
|
10,300
|
|
|
$
|
15,707
|
|
|
$
|
9,374
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||
U.S. dollars (In thousands )
|
SUPPLEMENTAL CASH FLOW ACTIVITIES:
|
|
|
|
|
|
||||||
|
Year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Cash paid during the year for:
|
|
|
|
|
|
||||||
Income taxes, net
|
$
|
12,850
|
|
|
$
|
26,463
|
|
|
$
|
47,707
|
|
|
|
|
|
|
|
||||||
Interest
|
$
|
35,301
|
|
|
$
|
30,304
|
|
|
$
|
16,139
|
|
Schedule A: Acquisitions of subsidiaries and business operations
|
Year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
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 )
|
$
|
15,056
|
|
|
$
|
(105,392
|
)
|
|
$
|
(10,454
|
)
|
Property, plant and equipment
|
32,770
|
|
|
200,115
|
|
|
672
|
|
|||
Other long-term assets
|
(2,537
|
)
|
|
386,101
|
|
|
—
|
|
|||
Goodwill and other intangible assets
|
334,126
|
|
|
550,115
|
|
|
50,185
|
|
|||
Deferred income taxes
|
1,204
|
|
|
(5,633
|
)
|
|
(3,543
|
)
|
|||
Employee benefit liabilities, net
|
(19,930
|
)
|
|
(382,871
|
)
|
|
—
|
|
|||
Long-term liabilities
|
(3,545
|
)
|
|
(126,963
|
)
|
|
(11,420
|
)
|
|||
Non-controlling interest
|
—
|
|
|
(11,025
|
)
|
|
—
|
|
|||
|
$
|
357,144
|
|
|
$
|
504,447
|
|
|
$
|
25,440
|
|
Schedule B: Deconsolidation of subsidiary
|
Year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Estimated net fair value of assets and liabilities that exited consolidation scope was as follows:
|
|
|
|
|
|
||||||
Working capital, net (excluding cash and cash equivalents)
|
$
|
—
|
|
|
$
|
2,514
|
|
|
$
|
—
|
|
Other long term liabilities
|
—
|
|
|
838
|
|
|
—
|
|
|||
Property, plant and equipment
|
—
|
|
|
(1,938
|
)
|
|
—
|
|
|||
Fair value of investment / interest retained
|
—
|
|
|
43,350
|
|
|
—
|
|
|||
Gain from deconsolidation
|
—
|
|
|
(41,891
|
)
|
|
—
|
|
|||
Deconsolidation of subsidiary's cash, net
|
$
|
—
|
|
|
$
|
2,873
|
|
|
$
|
—
|
|
A.
|
GENERAL
|
B.
|
SALES TO GOVERNMENTAL AGENCIES
|
C.
|
ACQUISITIONS AND INVESTMENTS
|
1.
|
In September 2019, ESA completed the acquisition of the night vision business of L3Harris Technologies (the "Night Vision Business") for a purchase price of approximately $351,500 subject to working capital adjustments. Located in Roanoke, Virginia, the Night Vision Business is engaged in the development, production and supply of night vision technology for the U.S. and allied military and security forces and for the U.S. federal homeland security market. Following the acquisition, the Night Vision Business operates as Elbit Night Vision (“ENV”).
|
|
Fair value
|
|
Expected useful lives
|
||
Net tangible assets and liabilities assumed (current and non-current), excluding cash and cash equivalents
|
$
|
29,287
|
|
|
|
Technology
|
37,000
|
|
|
8 years
|
|
Customer relationships
|
67,000
|
|
|
20 years
|
|
Customer backlog
|
6,500
|
|
|
3 years
|
|
Goodwill
|
211,727
|
|
|
|
|
|
$
|
351,514
|
|
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
C.
|
ACQUISITIONS AND INVESTMENTS (Cont.)
|
1.
|
Expenses related to the Night Vision Business acquisition and other non-recurring expenses:
|
Expense type
|
2019
|
||
Inventory write-off
|
$
|
54,713
|
|
Long-lived assets write-off
|
317
|
|
|
|
$
|
55,030
|
|
Expense category
|
|
||
Cost of revenue
|
$
|
55,030
|
|
2.
|
In January 2019, the Company completed the acquisition of a 100% of an Israeli affiliated company, previously held by the Company at 19%, for a purchase price of approximately $11,800, of which approximately $4,050 is contingent consideration, which may become payable on the occurrence of certain future events. Based on a PPA performed by an independent adviser, the purchase price was attributed mainly to goodwill (approximately $9,200) and to other intangible assets (approximately $2,700). The results of operation of the acquired company were consolidated in the Company's financial statements commencing on the date of acquisition. The effects of this acquisition on consolidated revenues and net income were immaterial. Pro-forma information was not provided due to immateriality. As of December 31, 2019, the contingent consideration was $3,545.
|
3.
|
In April 2018, the Company completed the acquisition of the assets and operations of the privately-owned U.S. company Universal Avionics Systems Corporation (“Universal”), for a total consideration of approximately $123,581. Universal is a developer and manufacturer of commercial avionics systems for the retrofit and forward-fit market for a wide range of fixed and rotary aircraft types.
|
|
Fair value
|
|
Expected useful lives
|
||
Net tangible assets and liabilities assumed (current and non-current), excluding cash and cash equivalents
|
$
|
52,509
|
|
|
|
Technology
|
21,128
|
|
|
15 years
|
|
Customer relationships
|
13,924
|
|
|
15 years
|
|
Trademark
|
4,960
|
|
|
20 years
|
|
Goodwill
|
31,060
|
|
|
|
|
|
$
|
123,581
|
|
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
C.
|
ACQUISITIONS AND INVESTMENTS (Cont.)
|
4.
|
In the second quarter of 2018, an Israeli subsidiary operating in the filed of commercial cybersecurity was deconsolidated following an investment by a third party, which holds certain substantial participation rights, resulting in loss of control over the subsidiary. As a result, the Company recognized in other operating income a net gain related to the revaluation of the shares held by the Company of approximately $42,000 (see Note 6C(1)). In addition, in the second quarter of 2018, a third party invested in a newly established Israeli subsidiary acting in the area of surgeon-centered visualization technologies, resulting in loss of control of the subsidiary because the third party investor holds certain substantial participation rights. As a result, the Company recognized in other operating income a net gain of approximately $3,500 related to revaluation of the shares held by the Company (see Note 6C(2)).
|
5.
|
On November 25, 2018, the Company completed the acquisition of 100% of the interests in an Israeli company, IMI Systems Ltd. and its subsidiaries (collectively: "IMI"), for a total nominal consideration of approximately $520,000 (approximately NIS 1,900 million).The consideration is comprised of the following: approximately $380,000 (approximately NIS 1,400 million) paid in cash, approximately $24,000 (approximately NIS 90 million) is contingent consideration recorded at fair value, subject to IMI achieving agreed performance goals, which may become payable on the occurrence of certain future events, and approximately $94,000 (approximately NIS 350 million) at present value are deferred payments to be paid in 2020 and 2022. As of December 31, 2019, the contingent consideration was approximately $26,400.
|
|
Preliminary estimated fair value
|
|
Adjustments
|
|
Fair value(*)
|
|
Average expected useful lives
|
||||||
Net tangible assets and liabilities assumed (current and non-current)
|
$
|
39,405
|
|
|
$
|
(12,846
|
)
|
|
$
|
26,559
|
|
|
|
Employees benefit liabilities, net
|
(386,101
|
)
|
|
(5,143
|
)
|
|
$
|
(391,244
|
)
|
|
|
||
Premises evacuation receivable
|
370,089
|
|
|
(14,927
|
)
|
|
$
|
355,162
|
|
|
|
||
Backlog
|
18,600
|
|
|
—
|
|
|
$
|
18,600
|
|
|
mainly 10
|
||
Technology
|
52,905
|
|
|
(34,114
|
)
|
|
$
|
18,791
|
|
|
mainly 8
|
||
Customer relationships
|
52,131
|
|
|
—
|
|
|
$
|
52,131
|
|
|
mainly 10
|
||
Goodwill
|
351,426
|
|
|
67,030
|
|
|
$
|
418,456
|
|
|
|
||
|
$
|
498,455
|
|
|
$
|
—
|
|
|
$
|
498,455
|
|
|
|
(*)
|
During 2019, the Company adjusted the PPA as a result of receiving certain information which existed as of the date of acquisition.
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
C.
|
ACQUISITIONS AND INVESTMENTS (Cont.)
|
5.
|
Goodwill represents the purchase price paid in excess of the fair value of net tangible and intangible assets acquired, and is attributable primarily to expected synergies, economies of scale and the assembled workforce of IMI.
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Proforma revenue
|
$
|
4,028,656
|
|
|
$
|
3,941,825
|
|
Proforma net income (loss)
|
$
|
(18,758
|
)
|
|
$
|
216,109
|
|
|
|
|
|
||||
Proforma earnings (loss) per share:
|
|
|
|
||||
Basic
|
$
|
(0.44
|
)
|
|
$
|
5.06
|
|
Diluted
|
$
|
(0.44
|
)
|
|
$
|
5.05
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
C.
|
ACQUISITIONS AND INVESTMENTS (Cont.)
|
Expense type
|
2018
|
||
Inventory write-off
|
$
|
43,487
|
|
Employees related costs(*)
|
12,709
|
|
|
Long-lived assets write-off
|
2,700
|
|
|
Intangibles write-off
|
5,520
|
|
|
Other
|
5,048
|
|
|
|
$
|
69,464
|
|
Expense category
|
2018
|
||
Cost of revenue
|
$
|
66,636
|
|
Marketing and selling
|
128
|
|
|
Other income
|
2,700
|
|
|
|
$
|
69,464
|
|
(*)
|
Employees related costs represent non-recurring expenses related to certain reorganizational activities, primarily related to one-time payments to certain Israeli subsidiaries' employees under collective bargaining agreements. In addition, other income includes impairment charges on one of the Company's affiliates that was assessed to be impaired given the more advanced IMI technology.
|
6.
|
In June 2017, the Company completed the acquisition of a 100% interest in a Canadian company for a purchase price of approximately $20,200, of which $10,500 is contingent consideration, which may become payable on the occurrence of certain future events. Based on a PPA performed by an independent adviser, the purchase price was attributed mainly to goodwill (approximately $9,500) and to other intangible assets (approximately $9,500). The results of operation of the acquired company were consolidated in the Company's financial statements commencing on the date of acquisition. The effects on consolidated revenues and net income were immaterial. Pro-forma information was not provided due to immateriality. During 2019, the Company reevaluated its contingent consideration and as of December 31, 2019 the contingent consideration was $6,622.
|
7.
|
In June 2017, the Company completed the acquisition of a 100% interest in a Brazilian company for a purchase price of approximately $23,000, of which approximately $9,700 is contingent consideration, which may become payable on the occurrence of certain future events. Based on a PPA performed by an independent adviser, the purchase price was attributed mainly to goodwill (approximately $15,600) and to other intangible assets (approximately $12,300). The results of operation of the acquired company were consolidated in the Company's financial statements commencing on the date of acquisition. The effects on consolidated revenues and net income were immaterial. Pro-forma information was not provided due to immateriality. As of December 31, 2019, the contingent consideration was $7,960.
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
|
|
Unrealized gains (losses) on derivative instruments
|
|
Unrealized gains (losses) on available-for-sale marketable securities
|
|
Unrealized gains (losses) with respect to pension and post-retirement benefit plans
|
|
Foreign currency translation differences
|
|
Total
|
||||||||||
Balance as of January 1, 2019
|
|
$
|
(3,158
|
)
|
|
$
|
—
|
|
|
$
|
(39,499
|
)
|
|
$
|
(52,287
|
)
|
|
$
|
(94,944
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
19,838
|
|
|
—
|
|
|
(60,161
|
)
|
|
6,822
|
|
|
(33,501
|
)
|
|||||
Amount reclassified from accumulated other comprehensive income (loss)
|
|
(9,873
|
)
|
|
—
|
|
|
(6,645
|
)
|
|
—
|
|
|
(16,518
|
)
|
|||||
Net current-period other comprehensive income (loss)
|
|
9,965
|
|
|
—
|
|
|
(66,806
|
)
|
|
6,822
|
|
|
(50,019
|
)
|
|||||
Balance as of December 31, 2019
|
|
$
|
6,807
|
|
|
$
|
—
|
|
|
$
|
(106,305
|
)
|
|
$
|
(45,465
|
)
|
|
$
|
(144,963
|
)
|
|
|
Unrealized gains (losses) on derivative instruments
|
|
Unrealized gains (losses) on available-for-sale marketable securities
|
|
Unrealized gains (losses) with respect to pension and post-retirement benefit plans
|
|
Foreign currency translation differences
|
|
Total
|
||||||||||
Balance as of January 1, 2018
|
|
$
|
(6,963
|
)
|
|
$
|
11
|
|
|
$
|
(47,469
|
)
|
|
$
|
(33,231
|
)
|
|
$
|
(87,652
|
)
|
Other comprehensive income (loss)
before reclassifications
|
|
(5,357
|
)
|
|
—
|
|
|
3,321
|
|
|
(19,056
|
)
|
|
(21,092
|
)
|
|||||
Amount reclassified from accumulated other comprehensive income (loss)
|
|
9,162
|
|
|
(11
|
)
|
|
4,649
|
|
|
—
|
|
|
13,800
|
|
|||||
Net current-period other comprehensive income (loss)
|
|
3,805
|
|
|
(11
|
)
|
|
7,970
|
|
|
(19,056
|
)
|
|
(7,292
|
)
|
|||||
Balance as of December 31, 2018
|
|
$
|
(3,158
|
)
|
|
$
|
—
|
|
|
$
|
(39,499
|
)
|
|
$
|
(52,287
|
)
|
|
$
|
(94,944
|
)
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
•
|
Raw materials using the average or FIFO cost method.
|
•
|
Work in progress:
|
•
|
Costs incurred on certain long-term contracts in progress, but for which control has not transferred to the customer, 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 the 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.
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
|
%
|
|
|
Buildings and leasehold improvements (*)
|
2-25
|
|
|
Instruments, machinery and equipment
|
5-33
|
|
|
Office furniture and other
|
7-33
|
|
|
Motor vehicles
|
6-20
|
|
(Mainly 15%)
|
(*)
|
Leasehold improvements are amortized generally over the term of the lease or the useful life of the assets, whichever is shorter.
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
|
Year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Cost of revenue, net
|
$
|
4,600
|
|
|
$
|
32,200
|
|
|
$
|
42,700
|
|
Percentage of cost of revenue(*)
|
0.14
|
%
|
|
1.19
|
%
|
|
1.79
|
%
|
|||
Net income
|
$
|
4,200
|
|
|
$
|
28,600
|
|
|
$
|
34,400
|
|
Diluted earning per share
|
$
|
0.10
|
|
|
$
|
0.67
|
|
|
$
|
0.80
|
|
(*)
|
Percentage of cost of revenue during 2019 and 2018 is excluding non-recurring acquisition related expenses recorded in cost of revenues. (See Note 1C(1) and 1C(5)).
|
|
Year ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
Revenue from sale of products
|
$
|
4,146,618
|
|
|
$
|
3,352,602
|
|
Service revenue
|
361,782
|
|
|
331,082
|
|
||
|
$
|
4,508,400
|
|
|
$
|
3,683,684
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
|
Year ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
Israel Government Authorities (1,2)
|
$
|
1,134,703
|
|
|
$
|
685,680
|
|
US Government (2)
|
800,345
|
|
|
635,150
|
|
||
Other Governments
|
2,121,164
|
|
|
2,004,947
|
|
||
Commercial sales and other
|
452,188
|
|
|
357,907
|
|
||
|
$
|
4,508,400
|
|
|
$
|
3,683,684
|
|
|
2019
|
|
2018
|
||||
Balance, at January 1
|
$
|
219,695
|
|
|
$
|
198,226
|
|
Cumulative effect from adopting ASC 606
|
—
|
|
|
337
|
|
||
Warranties issued during the year
|
58,298
|
|
|
64,723
|
|
||
Reduction due to expired warranties or claims during the year
|
(98,224
|
)
|
|
(84,593
|
)
|
||
Deconsolidation of subsidiary
|
—
|
|
|
(369
|
)
|
||
Additions resulting from acquisitions
|
1,554
|
|
|
41,371
|
|
||
Balance, at December 31
|
$
|
181,323
|
|
|
$
|
219,695
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
V.
|
RESEARCH AND DEVELOPMENT COSTS
|
W.
|
INCOME TAXES
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
Y.
|
DERIVATIVE FINANCIAL INSTRUMENTS
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
|
2018
|
|
Dividend yield
|
2.2
|
%
|
Expected volatility
|
20.9
|
%
|
Risk-free interest rate
|
2.7
|
%
|
Expected life (in years)
|
5.25
|
|
Forfeiture rate
|
0.6
|
%
|
Suboptimal factor
|
1.75
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
|
Fair value measurement at
|
||||||||||
|
December 31, 2019 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
|
|
|
|
|
|
||||||
Foreign currency derivatives and option contracts
|
$
|
—
|
|
|
$
|
23,886
|
|
|
$
|
—
|
|
Cross-currency interest rate swap
|
—
|
|
|
6,183
|
|
|
—
|
|
|||
Premises evacuation
|
—
|
|
|
—
|
|
|
30,867
|
|
|||
Investments elected to be accounted for using the fair value method
|
—
|
|
|
—
|
|
|
51,415
|
|
|||
Liabilities
|
|
|
|
|
|
||||||
Contingent purchase obligation
|
—
|
|
|
—
|
|
|
(147,086
|
)
|
|||
Foreign currency derivative and option contracts
|
—
|
|
|
(8,326
|
)
|
|
—
|
|
|||
Total
|
$
|
—
|
|
|
$
|
21,743
|
|
|
$
|
(64,804
|
)
|
|
Fair value measurement at
|
||||||||||
|
December 31, 2018 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
|
|
|
|
|
|
||||||
Foreign currency derivatives and option contracts
|
$
|
—
|
|
|
$
|
22,549
|
|
|
$
|
—
|
|
Cross-currency interest rate swap
|
—
|
|
|
4,378
|
|
|
—
|
|
|||
Investments elected to be accounted for using the fair value method
|
—
|
|
|
—
|
|
|
46,858
|
|
|||
Liabilities
|
|
|
|
|
|
||||||
Contingent purchase obligation
|
—
|
|
|
—
|
|
|
(136,984
|
)
|
|||
Foreign currency derivative and option contracts
|
—
|
|
|
(23,936
|
)
|
|
—
|
|
|||
Total
|
$
|
—
|
|
|
$
|
2,991
|
|
|
$
|
(90,126
|
)
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
(1)
|
In August 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities”, amending the eligibility criteria for hedged items and transactions to expand an entity’s ability to hedge non-financial and financial risk components. The new guidance eliminates the requirement to separately measure and present hedge ineffectiveness and aligns the presentation of hedge gains and losses with the underlying hedge item. The new guidance also simplifies the hedge documentation and hedge effectiveness assessment requirements. The amended presentation and disclosure requirements must be adopted on a prospective basis, while any amendments to cash flow and net investment hedge relationships that exist on the date of adoption must be applied on a “modified retrospective” basis, meaning a cumulative effect adjustment to the opening balance of retained earnings as of the beginning of the year of adoption. The new guidance was effective for the Company on January 1, 2019, and the adoption did not have a material impact on the Company’s consolidated financial statements.
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
(2)
|
In February 2016, the FASB issued ASU No. 2016-02, "Leases" (Topic 842), which requires lessees to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily depends on its classification as a finance or operating lease. However, unlike previous GAAP, which required only capital leases to be recognized on the balance sheet, the new guidance required both types of leases to be recognized on the balance sheet. The ASU is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. A modified retrospective transition approach is required in applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. If an entity chooses the second option, the entity must recast its comparative period financial statements and provide disclosures required by the new standard for the comparative periods.
|
(3)
|
In June 2018, the FASB issued ASU No. 2018-07, "Compensation - Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting", to simplify the accounting for non-employee share-based payment transactions by expanding the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from non-employees. Under the new standard, most of the guidance on stock compensation payments to non-employees would be aligned with the requirements for share-based payments granted to employees. This standard is effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within those annual reporting periods, with early adoption permitted. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.
|
(4)
|
In February 2018, the FASB issued ASU 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”, which allows for the elimination of the stranded income tax effects resulting from the enactment of the Tax Cuts and Jobs Act through a reclassification from accumulated other comprehensive income to retained earnings. The standard is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. The adoption of this guidance did not have a significant impact on the Company’s financial statements.
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
(1)
|
In January 2017, the FASB issued ASU 2017-04, "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment". ASU 2017-04 eliminates step two of the goodwill impairment test and specifies that goodwill impairment should be measured by comparing the fair value of a reporting unit with its carrying amount. Additionally, the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets should be disclosed. ASU 2017-04 is effective for annual or interim goodwill impairment tests performed in fiscal years beginning after December 15, 2019, and early adoption is permitted. The Company does not expect this ASU to have a material effect on its consolidated financial statements.
|
(2)
|
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments-Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments". This guidance replaces the current incurred loss impairment methodology. Under the new guidance, on initial recognition and at each reporting period, an entity is required to recognize an allowance that reflects its current estimate of credit losses expected to be incurred over the life of the financial instrument based on historical experience, current conditions and reasonable and supportable forecasts. In November 2018, the FASB issued ASU 2018-19, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses". The guidance will be effective beginning on January 1, 2020, including interim periods within that year and requires a modified retrospective transition approach through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. Under the modified retrospective method of adoption, prior year reported results are not restated. The Company has analyzed the impact of its financial instruments that are within the scope of this guidance, primarily trade and unbilled receivables and contract assets, net and expects that the cumulative adjustment to retained earnings will be immaterial on its consolidated financial statements.
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Trade and unbilled receivables (1)
|
$
|
1,030,372
|
|
|
$
|
968,064
|
|
Contract assets (2)
|
1,048,031
|
|
|
756,159
|
|
||
Less – allowance for doubtful accounts
|
(10,557
|
)
|
|
(11,308
|
)
|
||
|
$
|
2,067,846
|
|
|
$
|
1,712,915
|
|
(1)
|
Trade and unbilled receivables balances represents amounts for which the Company's right for consideration is unconditional. The balance also includes receivables from affiliated companies in the amounts of $78,115 and $97,588, as of December 31, 2019 and 2018, respectively.
|
(2)
|
Contract assets (unbilled receivables) include unbilled amounts typically resulting from sales under contracts for which over-time method of revenue recognition is utilized, and revenue recognized exceeds the amount billed to the customer. Contract liabilities include advance payments and billings in excess of revenue recognized.
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Prepaid expenses
|
$
|
45,545
|
|
|
$
|
66,137
|
|
Government institutions
|
62,398
|
|
|
80,928
|
|
||
Derivative instruments
|
23,886
|
|
|
22,549
|
|
||
Cross-currency interest rate swap
|
6,183
|
|
|
1,543
|
|
||
Right to use land and buildings
|
5,602
|
|
|
6,183
|
|
||
Other
|
17,114
|
|
|
21,808
|
|
||
|
$
|
160,728
|
|
|
$
|
199,148
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Cost incurred on long-term contracts in progress(*)
|
$
|
631,513
|
|
|
$
|
620,350
|
|
Raw materials
|
516,385
|
|
|
455,517
|
|
||
Advances to suppliers and subcontractors
|
106,142
|
|
|
87,788
|
|
||
|
1,254,040
|
|
|
1,163,655
|
|
||
Less -
|
|
|
|
|
|
||
Provision for losses on long-term contracts
|
34,120
|
|
|
21,659
|
|
||
|
$
|
1,219,920
|
|
|
$
|
1,141,996
|
|
(*)
|
Costs incurred to fulfill a contract in advance of the contract being awarded are included in inventories as work-in-process if the Company determines that those costs relate directly to a contract or to an anticipated contract that can be specifically identified and contract award is probable, the costs generate or enhance resources that will be used in satisfying performance obligations, and the costs are recoverable (referred to as pre-contract costs). Pre-contract costs that are initially capitalized in inventory are generally recognized as cost of revenues consistent with the transfer of control of the products and services to the customer. All other pre-contract costs, including start-up costs, are expensed as incurred. As of December 31, 2019 and 2018, $221,592 and $108,627 of pre-contract costs were included in inventory, respectively.
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
A.
|
INVESTMENTS IN AFFILIATED COMPANIES:
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Companies accounted for under the equity method (1)
|
$
|
141,594
|
|
|
$
|
144,435
|
|
Companies accounted for under the fair value method (2)
|
51,415
|
|
|
46,858
|
|
||
Companies accounted for at cost (3)
|
8,565
|
|
|
4,887
|
|
||
|
$
|
201,574
|
|
|
$
|
196,180
|
|
B.
|
INVESTMENTS IN COMPANIES ACCOUNTED FOR UNDER THE EQUITY METHOD:
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Company A (1)
|
$
|
77,298
|
|
|
$
|
73,001
|
|
Company B (2)
|
19,314
|
|
|
19,631
|
|
||
Company C (3)
|
23,940
|
|
|
25,259
|
|
||
Company D (4)
|
5,028
|
|
|
8,724
|
|
||
Company E (5)
|
4,800
|
|
|
8,266
|
|
||
Other
|
11,214
|
|
|
9,554
|
|
||
|
$
|
141,594
|
|
|
$
|
144,435
|
|
(1)
|
Company A is an Israeli partnership, held 50% by the Company and 50% by Rafael Advanced Defense Systems Ltd. (“Rafael”). Company A is engaged in the development and production of various thermal detectors and laser diodes. Company A is jointly controlled and therefore is not consolidated in the Company’s financial statements. During 2019 and 2018, the Company received dividends in the amount of $4,200 and $4,138, respectively, from Company A.
|
(2)
|
Company B is an Israeli company owned 50.00001% by the Company and 49.99999% by Rafael. Company B focuses mainly on commercial applications of thermal imaging and electro-optic technologies. The Company jointly controls Company B with Rafael, and therefore Company B is not consolidated in the Company’s financial statements.
|
(3)
|
Company C is a U.K. joint venture held 50% by a wholly-owned U.K. subsidiary of the Company and 50% by Kellogg Brown & Root Limited. Company C is engaged in the area of flight training systems. During 2019, the Company received a dividend in the amount of $6,100 from Company C.
|
(4)
|
Company D is a European company held 33% by the Company. Company D is engaged in the area of composite aerostructure parts manufacturing for commercial aircraft.
|
(5)
|
Company E is an Israeli company held 77% by the Company, and is engaged in developing energy solutions for civilian transportation applications. During 2017, an investor invested €2,500 (approximately $2,800) in exchange for an additional 3% ownership in Company E. During 2018, due to a revaluation prepared by an independent advisor, the Company recorded an impairment of its investment in Company E in the amount of $9,737.
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
B.
|
INVESTMENTS IN COMPANIES ACCOUNTED FOR UNDER THE EQUITY METHOD (Cont.):
|
|
Year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Company A
|
$
|
8,497
|
|
|
$
|
11,340
|
|
|
$
|
9,579
|
|
Company B
|
(317
|
)
|
|
(2,077
|
)
|
|
1,734
|
|
|||
Company C
|
3,840
|
|
|
10,102
|
|
|
6,427
|
|
|||
Company D
|
(3,696
|
)
|
|
(6,275
|
)
|
|
(4,129
|
)
|
|||
Company E
|
(3,466
|
)
|
|
(9,737
|
)
|
|
—
|
|
|||
Other
|
(3,084
|
)
|
|
(5,575
|
)
|
|
(2,250
|
)
|
|||
|
$
|
1,774
|
|
|
$
|
(2,222
|
)
|
|
$
|
11,361
|
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Current assets
|
$
|
505,502
|
|
|
$
|
392,144
|
|
Non-current assets
|
146,975
|
|
|
131,636
|
|
||
Total assets
|
$
|
652,477
|
|
|
$
|
523,780
|
|
|
|
|
|
||||
Current liabilities
|
$
|
151,353
|
|
|
$
|
139,183
|
|
Non-current liabilities
|
259,404
|
|
|
145,501
|
|
||
Shareholders' equity
|
241,720
|
|
|
239,096
|
|
||
Total liabilities and equity
|
$
|
652,477
|
|
|
$
|
523,780
|
|
|
Year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Revenues
|
$
|
366,178
|
|
|
$
|
362,711
|
|
|
$
|
466,349
|
|
Gross profit
|
$
|
158,382
|
|
|
$
|
94,463
|
|
|
$
|
101,242
|
|
Net income
|
$
|
1,890
|
|
|
$
|
727
|
|
|
$
|
10,338
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
C.
|
INVESTMENTS ACCOUNTED FOR UNDER THE FAIR VALUE METHOD:
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Company F (1)
|
$
|
39,658
|
|
|
$
|
43,350
|
|
Company G (2)
|
7,162
|
|
|
3,476
|
|
||
Company H (3)
|
4,595
|
|
|
32
|
|
||
|
$
|
51,415
|
|
|
$
|
46,858
|
|
(1)
|
In May 2018, Company F, the Company's then wholly-owned subsidiary, which is engaged in the field of commercial cybersecurity, issued preferred shares to third party investors in return for an investment of $30,000, which reflected approximately 17% of the total outstanding share capital of the subsidiary. Although the Company holds more than 50% of the subsidiary's shares, it concluded that the rights of the preferred shareholders, as required by the investors, represent substantive participating rights because, in the aggregate, the rights entitle the investors to effectively participate in decisions that occur as part of the subsidiary’s ordinary course of business and are significant factors in directing and carrying out the activities of the business. Based on the above mentioned factors, the Company concluded that it no longer controls the subsidiary as it does not have the unilateral power to make decisions on the subsidiary's day-to-day operations, and therefore deconsolidated the subsidiary.
|
(2)
|
During 2018, the Company established Company G, based on its in-house developed visualization technology. This company is engaged in developing surgeon-centered visualization technologies. In June 2018, an international strategic investor invested $11,500 in preferred shares in exchange for 41% of Company G's ownership interest. Although the Company holds more than 50% of the subsidiary's shares, it concluded that the rights of the preferred shareholder, as required by the investor, represent substantive participating rights because, in the aggregate, the rights entitle the investor to effectively participate in decisions that occur as part of the subsidiary’s ordinary course of business and are significant factors in directing and carrying out the activities of the business. Based on the above mentioned factors, the Company concluded that it no longer controls the subsidiary as it does not have the unilateral power to make decisions on the subsidiary's day-to-day operations, and therefore deconsolidated the subsidiary.
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
C.
|
INVESTMENTS ACCOUNTED FOR UNDER THE FAIR VALUE METHOD (Cont.):
|
(3)
|
Company H is an Israeli company held 35% by the Company. During 2019, due to external investment in Company H, the Company recorded a gain of approximately $4,600 in its fair value. During 2018, the Company estimated the fair value of its holdings in Company H and recorded an impairment of approximately $5,100 in its fair value. (see Note 26).
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Trade and unbilled receivables
|
$
|
136,540
|
|
|
$
|
112,955
|
|
Contract assets (*)
|
122,610
|
|
|
184,190
|
|
||
|
$
|
259,150
|
|
|
$
|
297,145
|
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Prepaid expenses for land rights
|
$
|
15,473
|
|
|
$
|
19,429
|
|
Premises evacuation building input index receivable(1)
|
30,867
|
|
|
—
|
|
||
Cross-currency interest rate swap
|
—
|
|
|
2,835
|
|
||
Long-term receivables(2)
|
1,247
|
|
|
11,696
|
|
||
Deposits with banks and other long-term receivables (3)
|
10,489
|
|
|
9,002
|
|
||
|
$
|
58,076
|
|
|
$
|
42,962
|
|
(1)
|
During 2019, the Company sold the premises evacuation receivable to an Israeli bank and is still entitled to receive building inputs index adjustments on the base premises evacuation receivable, which is recorded as a financial asset measured at fair value (see Note 1C(5)).
|
(2)
|
As of December 31, 2018, included related legal expenses in the amount of $9,956 received during 2019 (see Note 21C).
|
(3)
|
Includes long-term balances of a non-qualified deferred compensation plan structured under Section 409A of the U.S. Internal Revenue Code in the amount of $9,064 and $7,531 as of December 31, 2019 and 2018, respectively (see Note 17).
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
|
|
|
December 31,
|
||
|
|
|
2019
|
||
|
|
|
|
||
Operating lease right of use assets
|
|
|
$
|
365,763
|
|
|
|
|
|
||
Current portion of operating lease liabilities
|
|
|
62,565
|
|
|
Non-current portion of operating lease liabilities
|
|
|
323,287
|
|
|
Total operating lease liabilities
|
|
|
$
|
385,852
|
|
|
|
|
|
||
Weighted average remaining lease term (years)
|
|
|
5.6
|
|
|
Weighted average discount rate
|
|
|
2.19
|
%
|
B.
|
For the year ended December 31, 2019, cash payments against operating lease liabilities totaled $76,500 and non-cash transactions totaled $92,500 to recognize operating assets and liabilities for new leases.
|
|
December 31,
|
||
|
2019
|
||
2020
|
$
|
71,771
|
|
2021
|
51,625
|
|
|
2022
|
40,830
|
|
|
2023
|
36,245
|
|
|
2024
|
33,779
|
|
|
2025 and thereafter
|
$
|
260,925
|
|
Total
|
$
|
495,175
|
|
Less - Imputed interest
|
109,323
|
|
|
Total operating lease liabilities
|
$
|
385,852
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
B.
|
Payments due under operating leases net of sublease amounts and non-cancellable future rentals under ASC 840 as of December 31, 2018, were as follows:
|
|
December 31,
|
||
|
2018
|
||
2019
|
$
|
65,540
|
|
2020
|
49,142
|
|
|
2021
|
28,311
|
|
|
2022
|
21,001
|
|
|
2023
|
11,373
|
|
|
2024 and thereafter
|
87,287
|
|
|
Total lease payments
|
$
|
262,654
|
|
C.
|
Expenses for the years ended December 31, 2019, 2018 and 2017 amounted to $77,880, $60,782 and $47,479, respectively.
|
D.
|
During 2019, the Company has recognized a net gain of approximately $31,815 related to sale and lease back of buildings by one of the Company Israeli subsidiary. This gain was recorded under "Other operating income, net".
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Cost (1):
|
|
|
|
||||
Land, buildings and leasehold improvements (2)
|
$
|
796,676
|
|
|
$
|
756,767
|
|
Instruments, machinery and equipment (3)
|
1,362,488
|
|
|
1,270,259
|
|
||
Office furniture and other
|
101,612
|
|
|
112,297
|
|
||
Motor vehicles and airplanes
|
51,890
|
|
|
55,947
|
|
||
|
2,312,666
|
|
|
2,195,270
|
|
||
Accumulated depreciation
|
(1,546,134
|
)
|
|
(1,508,650
|
)
|
||
Depreciated cost
|
$
|
766,532
|
|
|
$
|
686,620
|
|
(1)
|
Net of investment grants received (mainly for instruments, machinery and equipment) in the amounts of $12,461 and $15,492 as of December 31, 2019 and 2018, respectively.
|
(2)
|
Set forth below is additional information regarding the real estate owned or leased by the Company:
|
|
Israel(a)
|
|
U.S.(b)
|
|
Other Countries(c)
|
Owned
|
2,771,000 square feet
|
|
1,050,000 square feet
|
|
1,078,000 square feet
|
Leased
|
6,559,000 square feet
|
|
784,000 square feet
|
|
568,000 square feet
|
(a)
|
Includes offices, development and engineering facilities, manufacturing facilities, maintenance facilities, hangar facilities and landing strips in various locations in Israel.
|
(b)
|
Includes offices, development and engineering facilities, manufacturing facilities and maintenance facilities of ESA primary in Texas, New Hampshire, Florida, Alabama and Virginia.
|
(c)
|
Includes offices, design and engineering facilities and manufacturing facilities, mainly in Europe, Latin America and Asia-Pacific.
|
(3)
|
Includes equipment produced by the Company for its own use in the aggregate amount of $118,371 and $120,093 as of December 31, 2019 and 2018, respectively, and capitalized costs related to the new ERP system (see Note 2N).
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
A.
|
COMPOSITION OF IDENTIFIABLE INTANGIBLE ASSETS:
|
|
Weighted average useful lives
|
|
December 31,
|
||||||
|
|
||||||||
|
|
|
2019
|
|
2018
|
||||
Original cost:
|
|
|
|
|
|
||||
Technology
|
10
|
|
$
|
323,348
|
|
|
$
|
314,511
|
|
Customer relations
|
14
|
|
250,145
|
|
|
177,878
|
|
||
Trademarks and other
|
14
|
|
200,160
|
|
|
188,507
|
|
||
|
|
|
773,653
|
|
|
680,896
|
|
||
Accumulated amortization:
|
|
|
|
|
|
|
|||
Technology
|
|
|
221,855
|
|
|
206,567
|
|
||
Customer relations
|
|
|
104,343
|
|
|
93,519
|
|
||
Trademarks and other
|
|
|
152,132
|
|
|
141,513
|
|
||
|
|
|
478,330
|
|
|
441,599
|
|
||
Amortized cost
|
|
|
$
|
295,323
|
|
|
$
|
239,297
|
|
B.
|
AMORTIZATION EXPENSES
|
C.
|
AMORTIZATION EXPENSES FOR FIVE SUCCEEDING YEARS
|
2020
|
|
$
|
38,693
|
|
2021
|
|
35,521
|
|
|
2022
|
|
28,689
|
|
|
2023
|
|
25,013
|
|
|
2024
|
|
21,724
|
|
|
2025
|
and thereafter
|
145,682
|
|
|
|
|
$
|
295,323
|
|
D.
|
CHANGES IN GOODWILL
|
|
2019
|
||
Balance, at January 1
|
$
|
1,022,624
|
|
Additions (1)
|
288,029
|
|
|
Net translation differences (2)
|
29,964
|
|
|
Balance, at December 31
|
$
|
1,340,617
|
|
(1)
|
Additions related mainly to the ENV acquisition. See Notes 1C(1) and 1C(5).
|
(2)
|
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.
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
|
Interest %
|
|
December 31,
|
||||||
|
|
|
2019
|
|
2018
|
||||
Short-term loans
|
L + 0.75% , P - 0.7%
|
|
$
|
193,744
|
|
|
$
|
208,606
|
|
Short-term bank credit
|
P + 0.1%
|
|
14,655
|
|
|
215
|
|
||
|
|
|
$
|
208,399
|
|
|
$
|
208,821
|
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Payroll and related expenses
|
$
|
239,406
|
|
|
$
|
250,765
|
|
Provision for warranty and cost
|
186,109
|
|
|
228,236
|
|
||
Provision for vendors on accrued expenses
|
76,299
|
|
|
59,064
|
|
||
Provision for vacation pay (1)
|
69,811
|
|
|
68,273
|
|
||
Provision for losses on long-term contracts
|
96,591
|
|
|
97,013
|
|
||
Provision for income tax, net of advances
|
27,498
|
|
|
14,537
|
|
||
Provision for royalties
|
36,296
|
|
|
35,623
|
|
||
Other income tax liabilities
|
1,318
|
|
|
4,149
|
|
||
Value added tax (“VAT”) payable
|
22,910
|
|
|
11,460
|
|
||
Derivative instruments
|
8,326
|
|
|
23,936
|
|
||
Purchase obligations
|
23,984
|
|
|
43,137
|
|
||
Other (2)
|
263,532
|
|
|
245,799
|
|
||
|
$
|
1,052,080
|
|
|
$
|
1,081,992
|
|
(1)
|
Long-term provision for vacation pay - see Note 20.
|
(2)
|
Includes provisions for estimated future costs in respect of (1) unbilled services of certain third parties, (2) probable loss from claims (legal or unasserted) in the ordinary course of business and (3) damages caused by the items sold and claims as to the specific products ordered.
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Contract liabilities
|
$
|
786,411
|
|
|
$
|
956,884
|
|
Less -
|
|
|
|
|
|||
Contract liabilities presented under long-term liabilities
|
62,830
|
|
|
175,890
|
|
||
|
$
|
723,581
|
|
|
$
|
780,994
|
|
|
|
|
|
|
|
|
December 31,
|
||||||
|
Currency
|
|
Interest %
|
|
Years of maturity
|
|
2019
|
|
2018
|
||||
Long-term loans (*)
|
USD
|
|
L + 1.25% - 1.75%
|
|
2020-2024
|
|
$
|
568,550
|
|
|
$
|
458,550
|
|
|
NIS (**)
|
|
L + 0.8%
|
|
2021
|
|
8,256
|
|
|
10,636
|
|
||
|
Other
|
|
|
|
|
|
1,223
|
|
|
1,272
|
|
||
|
|
|
|
|
|
|
578,029
|
|
|
470,458
|
|
||
Less: current maturities
|
|
|
|
|
|
|
137,905
|
|
|
2,809
|
|
||
|
|
|
|
|
|
|
$
|
440,124
|
|
|
$
|
467,649
|
|
2020 - current maturities
|
$
|
137,905
|
|
2021
|
164,711
|
|
|
2022
|
37,905
|
|
|
2023 and after
|
237,508
|
|
|
|
$
|
578,029
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Series A Notes
|
$
|
60,764
|
|
|
$
|
112,060
|
|
Less – Current maturities
|
(61,977
|
)
|
|
(59,737
|
)
|
||
Carrying amount adjustments on Series A Notes (*)
|
1,167
|
|
|
3,842
|
|
||
Premium on Series A Notes, net
|
46
|
|
|
138
|
|
||
|
$
|
—
|
|
|
$
|
56,303
|
|
(*)
|
As a result of fair value hedge accounting, described below and in Notes 2Y and 2AA, the carrying amount of the Series A Notes is adjusted for changes in the interest rates.
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
|
|
December 31, 2019
|
||
2020
|
current maturities
|
$
|
55,533
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
1.
|
Defined Benefit Retirement Plan based on Employer’s Contributions
|
a)
|
ESA has four defined benefit pension plans (the “Plans”) which cover the employees of ESA’s three largest subsidiaries. During September, 2019, following the acquisition of the Night Vision Business, ESA accepted the transfer of sponsorship of the Pension Plan for Employees in the Night Vision Bargaining Unit which covers represented employees of ENV. Monthly benefits are based on years of 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 stocks, bonds and cash by a financial institution, as the investment manager of the Plans’ assets. The service cost component of net periodic pension and other post-retirement benefit plan expense is recorded in operating profit and is allocated between cost of sales and general and administrative expenses, depending on the responsibilities of the employees. The non-service cost components of net periodic pension and other post-retirement benefit plan expense (i.e., interest cost, expected return on plan assets, net actuarial gains or losses, and amortization of prior service cost or credits) are included in the line item Other (income) expense, net in the income statement. The measurement date for ESA subsidiaries' benefit obligation is December 31.
|
b)
|
IMI and subsidiaries have several post-employment benefit arrangements, which are based on collective agreements concluded with certain groups of employees before the privatization of IMI. According to these agreements, some groups of employees possess special retirement conditions and preferable rights for post-employment benefits that apply to employees who will terminate their employment in the event of relocation of plants as part of the post privatization restructuring of IMI and subsidiaries. The arrangements are determined according to the various existing formats of employment, seniority and other factors. The liabilities recognized in respect of these arrangements are calculated on an actuarial basis.
|
c)
|
The German Subsidiary, which is wholly-owned by the Company, 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.
|
d)
|
The Belgian Subsidiary, which is wholly-owned by the Company, 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.
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Changes in benefit obligation:
|
|
|
|
||||
Benefit obligation at beginning of year
|
$
|
628,424
|
|
|
$
|
267,141
|
|
Benefit obligation related to acquired companies
|
111,654
|
|
|
378,055
|
|
||
Service cost
|
18,305
|
|
|
8,391
|
|
||
Interest cost
|
19,723
|
|
|
9,631
|
|
||
Exchange rate differences
|
29,778
|
|
|
43
|
|
||
Amendments
|
3,689
|
|
|
—
|
|
||
Actuarial loss (gain)
|
90,847
|
|
|
(20,337
|
)
|
||
Benefits paid
|
(75,684
|
)
|
|
(7,560
|
)
|
||
Effect of curtailment
|
—
|
|
|
(6,940
|
)
|
||
Other adjustments
|
4,375
|
|
|
—
|
|
||
Benefit obligation at end of year
|
$
|
831,111
|
|
|
$
|
628,424
|
|
Changes in the Plans’ assets:
|
|
|
|
|
|||
Fair value of Plans’ assets at beginning of year
|
164,282
|
|
|
167,961
|
|
||
Benefit assets related to acquired companies
|
91,724
|
|
|
—
|
|
||
Actual return on Plans’ assets (net of expenses)
|
37,901
|
|
|
(11,121
|
)
|
||
Employer contribution
|
3,716
|
|
|
15,002
|
|
||
Benefits paid
|
(8,130
|
)
|
|
(7,560
|
)
|
||
Fair value of Plans’ assets at end of year
|
$
|
289,493
|
|
|
$
|
164,282
|
|
Accrued benefit cost, end of year:
|
|
|
|
|
|||
Funded status
|
(541,623
|
)
|
|
(464,142
|
)
|
||
Unrecognized net actuarial loss
|
123,736
|
|
|
60,141
|
|
||
Unrecognized prior service cost
|
8
|
|
|
24
|
|
||
|
$
|
(417,879
|
)
|
|
$
|
(403,977
|
)
|
Amount recognized in the statement of financial position:
|
|
|
|
|
|||
Accrued benefit liability, current
|
(37,158
|
)
|
|
(6,040
|
)
|
||
Accrued benefit liability, non-current
|
(504,465
|
)
|
|
(458,102
|
)
|
||
Accumulated other comprehensive income, pre-tax
|
123,744
|
|
|
60,165
|
|
||
Net amount recognized
|
$
|
(417,879
|
)
|
|
$
|
(403,977
|
)
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
|
Year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Components of the Plans’ net periodic pension cost:
|
|
|
|
|
|
||||||
Service cost
|
$
|
18,305
|
|
|
$
|
8,391
|
|
|
$
|
7,655
|
|
Interest cost
|
19,723
|
|
|
9,631
|
|
|
9,108
|
|
|||
Expected return on Plans’ assets
|
(13,507
|
)
|
|
(12,080
|
)
|
|
(10,203
|
)
|
|||
Amortization of prior service cost
|
16
|
|
|
64
|
|
|
64
|
|
|||
Amortization of net actuarial loss
|
4,809
|
|
|
5,884
|
|
|
6,161
|
|
|||
Total net periodic benefit cost
|
$
|
29,346
|
|
|
$
|
11,890
|
|
|
$
|
12,785
|
|
Additional information
|
|
|
|
|
|
|
|
|
|||
Accumulated benefit obligation
|
$
|
781,749
|
|
|
$
|
628,017
|
|
|
$
|
259,242
|
|
|
December 31,
|
||||
|
2019
|
|
2018
|
||
Weighted average assumptions:
|
|
|
|
|
|
Discount rate as of December 31
|
1.9
|
%
|
|
3.1
|
%
|
Expected long-term rate of return on Plans’ assets
|
7.2
|
%
|
|
7.1
|
%
|
Rate of compensation increase
|
0.6
|
%
|
|
3.0
|
%
|
|
2019
|
|
2018
|
||
Asset Category:
|
|
|
|
||
Equity Securities
|
67.2
|
%
|
|
61.3
|
%
|
Debt Securities
|
32.1
|
%
|
|
38.2
|
%
|
Other
|
0.7
|
%
|
|
0.5
|
%
|
Total
|
100.0
|
%
|
|
100.0
|
%
|
|
2019
|
|
2018
|
||
Asset Category:
|
|
|
|
||
Equity Securities
|
63.0
|
%
|
|
63.0
|
%
|
Debt Securities
|
36.0
|
%
|
|
36.0
|
%
|
Other
|
1.0
|
%
|
|
1.0
|
%
|
Total
|
100.0
|
%
|
|
100.0
|
%
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
|
|
|
Quoted Prices in Active Markets for Identical Assets
|
|
Significant Observable Inputs
|
|
Significant Unobservable Inputs
|
||||||||
|
Total
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
||||||||
Asset Category
|
|
|
|
|
|
|
|
||||||||
Cash
|
$
|
18
|
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Cash Equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money Market Funds (a)
|
1,899
|
|
|
1,899
|
|
|
—
|
|
|
—
|
|
||||
Fixed Income Securities:
|
|
|
|
|
|
|
|
||||||||
Mutual Funds (b)
|
93,149
|
|
|
93,149
|
|
|
—
|
|
|
—
|
|
||||
Equity Securities:
|
|
|
|
|
|
|
|
|
|||||||
International Companies (c)
|
6,016
|
|
|
6,016
|
|
|
—
|
|
|
—
|
|
||||
Mutual Funds (d)
|
188,411
|
|
|
188,411
|
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
289,493
|
|
|
$
|
289,493
|
|
|
$
|
—
|
|
|
$
|
—
|
|
a.
|
This category includes highly liquid daily traded cash-like vehicles.
|
b.
|
This category invests in highly liquid mutual funds representing a diverse offering of debt issuance.
|
c.
|
This category represents common stocks of companies domiciled outside of the U.S.; they can be represented by ordinary shares or ADRs.
|
d.
|
This category represents highly liquid diverse equity mutual funds of varying asset classes and styles.
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
2.
|
Retiree Medical Plan
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Change in Benefit Obligation:
|
|
|
|
||||
Benefit obligation at beginning of period
|
$
|
1,359
|
|
|
$
|
1,641
|
|
Service cost
|
81
|
|
|
71
|
|
||
Interest cost
|
51
|
|
|
50
|
|
||
Actuarial (gain) loss
|
(34
|
)
|
|
(353
|
)
|
||
Employee contribution
|
17
|
|
|
19
|
|
||
Benefits paid
|
(61
|
)
|
|
(69
|
)
|
||
Benefit obligation at end of period
|
$
|
1,413
|
|
|
$
|
1,359
|
|
Change in Plan Assets:
|
|
|
|
|
|||
Employer contribution
|
$
|
45
|
|
|
$
|
50
|
|
Employee contribution
|
16
|
|
|
19
|
|
||
Benefits paid
|
(61
|
)
|
|
(69
|
)
|
||
Fair value of Plan assets at end of period
|
$
|
—
|
|
|
$
|
—
|
|
|
Year ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
Accrued benefit cost, end of period:
|
|
|
|
||||
Funded status
|
$
|
(1,412
|
)
|
|
$
|
(1,359
|
)
|
Unrecognized net actuarial (gain) loss
|
(1,479
|
)
|
|
(1,610
|
)
|
||
Accrued benefit cost, end of period
|
$
|
(2,891
|
)
|
|
$
|
(2,969
|
)
|
Amounts recognized in the statement of financial position:
|
|
|
|
|
|
||
Accrued benefit liability, current
|
$
|
(86
|
)
|
|
$
|
(112
|
)
|
Accrued benefit liability, non-current
|
(1,326
|
)
|
|
(1,247
|
)
|
||
Accumulated other comprehensive gain, pretax
|
(1,479
|
)
|
|
(1,610
|
)
|
||
Net amount recognized
|
$
|
(2,891
|
)
|
|
$
|
(2,969
|
)
|
Assumptions as of end of period:
|
|
|
|
||
Discount rate
|
2.84
|
%
|
|
3.91
|
%
|
Health care cost trend rate assumed for next year
|
5.50
|
%
|
|
5.40
|
%
|
Ultimate health care cost trend rate
|
3.84
|
%
|
|
3.84
|
%
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
2.
|
Retiree Medical Plan (Cont.)
|
|
1% increase
|
|
1% decrease
|
||||
Net periodic benefit cost
|
$
|
17
|
|
|
$
|
(14
|
)
|
Benefit obligation
|
$
|
111
|
|
|
$
|
(99
|
)
|
3.
|
Defined Contribution Plan
|
4.
|
Non-Qualified Defined Contribution Plan
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
A.
|
APPLICABLE TAX LAWS
|
(1)
|
Israeli Corporate Income Tax Rates
|
(2)
|
Tax benefits under Israel’s Law for the Encouragement of Industry (Taxes), 1969:
|
(3)
|
Tax benefits under Israel’s Law for the Encouragement of Capital Investments, 1959 (Cont.):
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
A.
|
APPLICABLE TAX LAWS (Cont.)
|
(3)
|
Tax benefits under Israel’s Law for the Encouragement of Capital Investments, 1959 (Cont.):
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
A.
|
APPLICABLE TAX LAWS (Cont.)
|
(3)
|
Tax benefits under Israel’s Law for the Encouragement of Capital Investments, 1959 (Cont.):
|
1.
|
At least 20% of its employees are R&D employees engaged in R&D (or more than 200 R&D employees);
|
2.
|
Venture capital investments of NIS 8 million were previously made in the company; or
|
3.
|
Average annual growth over three years of 25% in sales or employees.
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
B.
|
NON-ISRAELI SUBSIDIARIES
|
C.
|
INCOME FROM CONTINUING OPERATIONS BEFORE TAXES ON INCOME
|
|
Year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Income before taxes on income:
|
|
|
|
|
|
||||||
Domestic
|
$
|
174,522
|
|
|
$
|
195,491
|
|
|
$
|
245,680
|
|
Foreign
|
71,773
|
|
|
41,831
|
|
|
39,166
|
|
|||
|
$
|
246,295
|
|
|
$
|
237,322
|
|
|
$
|
284,846
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
D.
|
TAXES ON INCOME
|
|
Year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Current taxes:
|
|
|
|
|
|
||||||
Domestic
|
$
|
28,613
|
|
|
$
|
17,805
|
|
|
$
|
24,070
|
|
Foreign
|
15,990
|
|
|
7,672
|
|
|
12,070
|
|
|||
|
44,603
|
|
|
25,477
|
|
|
36,140
|
|
|||
Adjustment for previous years:
|
|
|
|
|
|
|
|
||||
Domestic (*)
|
(20,688
|
)
|
|
(1,287
|
)
|
|
(2,481
|
)
|
|||
Foreign
|
26
|
|
|
(1,266
|
)
|
|
(1,849
|
)
|
|||
|
(20,662
|
)
|
|
(2,553
|
)
|
|
(4,330
|
)
|
|||
Deferred income taxes:
|
|
|
|
|
|
|
|
||||
Domestic
|
(391
|
)
|
|
5,387
|
|
|
12,700
|
|
|||
Foreign (**)
|
(4,136
|
)
|
|
(1,866
|
)
|
|
11,075
|
|
|||
|
(4,527
|
)
|
|
3,521
|
|
|
23,775
|
|
|||
Total taxes on income
|
$
|
19,414
|
|
|
$
|
26,445
|
|
|
$
|
55,585
|
|
|
|
|
|
|
|
||||||
Total:
|
|
|
|
|
|
||||||
Domestic
|
$
|
7,534
|
|
|
$
|
21,905
|
|
|
$
|
34,289
|
|
Foreign
|
11,880
|
|
|
4,540
|
|
|
21,296
|
|
|||
Total taxes on income
|
$
|
19,414
|
|
|
$
|
26,445
|
|
|
$
|
55,585
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
|
2019
|
|
2018
|
||||
Balance at the beginning of the year
|
$
|
59,944
|
|
|
$
|
55,087
|
|
Additions related to interest and currency translation
|
4,582
|
|
|
(1,241
|
)
|
||
Additions based on tax positions related to prior period
|
11,543
|
|
|
4,625
|
|
||
Reductions related to tax positions taken during a prior period
|
(152
|
)
|
|
119
|
|
||
Reductions related to settlement of tax matters
|
(40,648
|
)
|
|
(1,294
|
)
|
||
Additions based on tax positions taken during the current period
|
18,272
|
|
|
3,157
|
|
||
Reductions related to a lapse of applicable statute of limitation
|
(274
|
)
|
|
(509
|
)
|
||
Balance at the end of the year
|
$
|
53,267
|
|
|
$
|
59,944
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
F.
|
DEFERRED INCOME TAXES
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Deferred tax assets:
|
|
|
|
||||
Reserves and allowances
|
$
|
90,430
|
|
|
$
|
52,691
|
|
Property, plant and equipment
|
9,500
|
|
|
465
|
|
||
Operating lease right of use assets
|
32,866
|
|
|
—
|
|
||
Other assets
|
45,323
|
|
|
47,354
|
|
||
Net operating loss carry-forwards
|
65,491
|
|
|
63,945
|
|
||
|
243,610
|
|
|
164,455
|
|
||
|
|
|
|
||||
Valuation allowance
|
(154,158
|
)
|
|
(121,651
|
)
|
||
Net deferred tax assets
|
89,452
|
|
|
42,804
|
|
||
|
|
|
|
||||
Deferred tax liabilities:
|
|
|
|
||||
Intangible assets
|
(1,121
|
)
|
|
(2,640
|
)
|
||
Property, plant and equipment
|
(9,573
|
)
|
|
(10,132
|
)
|
||
Operating lease liabilities
|
(32,467
|
)
|
|
—
|
|
||
Reserves and allowances
|
(19,311
|
)
|
|
(10,110
|
)
|
||
|
(62,472
|
)
|
|
(22,882
|
)
|
||
Net deferred tax assets(*)
|
$
|
26,980
|
|
|
$
|
19,922
|
|
G.
|
CARRY-FORWARD TAX LOSSES
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
H.
|
RECONCILIATION
|
|
Year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Income before taxes as reported in the consolidated statements of income
|
$
|
246,295
|
|
|
$
|
237,322
|
|
|
$
|
284,846
|
|
Statutory tax rate
|
23.0
|
%
|
|
23.0
|
%
|
|
24.0
|
%
|
|||
Theoretical tax expense
|
$
|
56,648
|
|
|
$
|
54,584
|
|
|
$
|
68,363
|
|
Tax benefit arising from reduced rate as an “Approved, Privileged and Preferred Enterprise” and other tax benefits (*)
|
(22,073
|
)
|
|
(17,132
|
)
|
|
(15,749
|
)
|
|||
Tax adjustment in respect of different tax rates for foreign subsidiaries
|
(1,580
|
)
|
|
687
|
|
|
2,946
|
|
|||
Changes in carry-forward losses and valuation allowances
|
22
|
|
|
927
|
|
|
4,135
|
|
|||
Taxes resulting from non-deductible expenses
|
1,506
|
|
|
2,159
|
|
|
1,634
|
|
|||
Difference in basis of measurement for financial reporting and tax return purposes
|
6,609
|
|
|
(13,775
|
)
|
|
(3,257
|
)
|
|||
Taxes in respect of prior years (see Note 18D above)
|
(20,662
|
)
|
|
(2,553
|
)
|
|
(4,330
|
)
|
|||
Other differences, net
|
(1,056
|
)
|
|
1,548
|
|
|
1,843
|
|
|||
Actual tax expenses
|
$
|
19,414
|
|
|
$
|
26,445
|
|
|
$
|
55,585
|
|
Effective tax rate
|
7.88
|
%
|
|
11.14
|
%
|
|
19.51
|
%
|
|||
|
|
|
|
|
|
||||||
(*) Net earnings per share – amounts of the benefit resulting from the Approved, Privileged and Preferred Enterprises:
|
|
|
|
|
|
||||||
Basic and diluted
|
$
|
0.50
|
|
|
$
|
0.40
|
|
|
$
|
0.37
|
|
J.
|
FINAL TAX ASSESSMENTS
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
A.
|
FAIR VALUE OF DERIVATIVE INSTRUMENTS
|
|
Asset Derivatives (*)
|
|
Liability Derivatives (**)
|
||||||||||||
|
December 31,
|
|
December 31,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Derivatives designated as hedging instruments
|
|
|
|
|
|
|
|
||||||||
Foreign exchange contracts
|
23,820
|
|
|
22,327
|
|
|
7,489
|
|
|
22,637
|
|
||||
Cross-currency interest rate swaps
|
6,183
|
|
|
4,378
|
|
|
—
|
|
|
—
|
|
||||
|
$
|
30,003
|
|
|
$
|
26,705
|
|
|
$
|
7,489
|
|
|
$
|
22,637
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|||||||
Foreign exchange contracts
|
66
|
|
|
222
|
|
|
337
|
|
|
1,299
|
|
||||
|
$
|
66
|
|
|
$
|
222
|
|
|
$
|
337
|
|
|
$
|
1,299
|
|
(*)
|
Presented as part of other receivables and long-term other receivables.
|
(**)
|
Presented as part of other payables and long-term other payables.
|
B.
|
EFFECT ON CASH FLOW HEDGING
|
|
Gain (Loss) Recognized
in Other Comprehensive
Income on Effective-
Portion of Derivative, net
|
|
Gain (Loss) on of Derivative Reclassified from Accumulated Other Comprehensie Income (*),(**)
|
|
Amount Excluded from Effectiveness Testing Recognized in Income (***)
|
||||||||||||||||||
|
December 31,
2019 |
|
December 31,
2018 |
|
December 31,
2019 |
|
December 31,
2018 |
|
December 31,
2019 |
|
December 31,
2018 |
||||||||||||
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign exchange contracts
|
$
|
24,328
|
|
|
$
|
(6,249
|
)
|
|
$
|
13,057
|
|
|
$
|
10,180
|
|
|
$
|
5,447
|
|
|
$
|
2,726
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Foreign exchange contracts and other derivatives instruments
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(1,876
|
)
|
|
$
|
1,457
|
|
(*)
|
Presented as part of revenues/cost of revenue and equity in net earning of affiliated companies and partnerships.
|
(***)
|
As of December 31, 2019, this amount includes gains of $2,327 reclassified into earnings as a result of the discontinuance of cash flow hedges because it was probable that the original forecast transaction would not occur by the end of the originally specified time frame.
|
(***)
|
As of December 31, 2019, presented as part of revenues. As of December, 2018, presented as part of financial income (expenses), net.
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
C.
|
NET EFFECT OF CROSS-CURRENCY SWAPS
|
D.
|
FORWARD CONTRACTS
|
|
Forward contracts
|
||||||||||||||
|
Buy
|
|
Sell
|
||||||||||||
|
December 31,
|
|
December 31,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Euro
|
$
|
81,258
|
|
|
$
|
102,485
|
|
|
$
|
330,433
|
|
|
$
|
414,211
|
|
GBP
|
9,380
|
|
|
6,764
|
|
|
38,606
|
|
|
23,559
|
|
||||
NIS
|
—
|
|
|
598,200
|
|
|
—
|
|
|
—
|
|
||||
Other
|
35,662
|
|
|
41,467
|
|
|
63,093
|
|
|
57,266
|
|
||||
|
$
|
126,300
|
|
|
$
|
748,916
|
|
|
$
|
432,132
|
|
|
$
|
495,036
|
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Purchase obligations
|
$
|
132,504
|
|
|
$
|
128,739
|
|
Provision for vacation pay
|
33,094
|
|
|
31,310
|
|
||
Accrued expenses on evacuation(*)
|
41,805
|
|
|
—
|
|
||
Other
|
18,075
|
|
|
10,558
|
|
||
|
$
|
225,478
|
|
|
$
|
170,607
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
A.
|
ROYALTY COMMITMENTS
|
B.
|
COMMITMENTS IN RESPECT OF LONG-TERM PROJECTS
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
C.
|
LEGAL CLAIMS
|
D.
|
GUARANTEES
|
E.
|
COVENANTS
|
F.
|
CONTRACTUAL OBLIGATIONS
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
G.
|
FIXED LIENS
|
H.
|
LIEN ON APPROVED ENTERPRISES
|
A.
|
SHARE CAPITAL
|
B.
|
TREASURY SHARES
|
C.
|
2018 EQUITY INCENTIVE PLAN
|
(1)
|
Forty percent (40%) of the options are vested and exercisable from the second anniversary of the grant date;
|
(2)
|
An additional twenty percent (20%) of the options are vested and exercisable from the third anniversary of the grant date;
|
(3)
|
An additional twenty percent (20%) of the options are vested and exercisable from the forth anniversary of the grant date; and
|
(4)
|
The remaining twenty (20%) of the options are vested and exercisable from the fifth anniversary of the grant date.
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
C.
|
2018 EQUITY INCENTIVE PLAN (Cont.)
|
|
2019
|
|
2018
|
||||||||
|
Number of options
|
|
Weighted average exercise price
|
|
Number of options
|
|
Weighted average exercise price
|
||||
Outstanding - beginning of the year
|
965,000
|
|
|
128.48
|
|
|
—
|
|
|
—
|
|
Granted
|
—
|
|
|
—
|
|
|
965,000
|
|
|
128.48
|
|
forfeited
|
(60,000
|
)
|
|
128.91
|
|
|
—
|
|
|
—
|
|
Outstanding - end of the year
|
905,000
|
|
|
128.45
|
|
|
965,000
|
|
|
128.48
|
|
D.
|
OUTSTANDING OPTIONS AND COMPENSATION EXPENSES
|
|
Options outstanding
|
|||||||
Exercise price
|
Number of options
|
|
Weighted average
remaining contractual life (years) |
|
Weighted average
exercise price per share |
|||
$121.42 - $128.91
|
905,000
|
|
|
3.95
|
|
$
|
128.45
|
|
|
Year ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
Cost of revenues
|
$
|
3,424
|
|
|
$
|
1,189
|
|
General and administration expenses
|
570
|
|
|
198
|
|
||
|
$
|
3,994
|
|
|
$
|
1,387
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
E.
|
COMPUTATION OF EARNINGS PER SHARE
|
|
Year ended December 31, 2019
|
|
Year ended December 31, 2018
|
|
Year ended December 31, 2017
|
|||||||||||||||||||||||||||
|
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
|
$
|
227,857
|
|
|
43,787
|
|
|
$
|
5.20
|
|
|
$
|
206,738
|
|
|
42,789
|
|
|
$
|
4.83
|
|
|
$
|
239,109
|
|
|
42,786
|
|
|
$
|
5.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Employee stock options
|
—
|
|
|
61
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
3
|
|
|
|
|
|||||||
Diluted net earnings
|
$
|
227,857
|
|
|
43,848
|
|
|
$
|
5.20
|
|
|
$
|
206,738
|
|
|
42,789
|
|
|
$
|
4.83
|
|
|
$
|
239,109
|
|
|
42,789
|
|
|
$
|
5.59
|
|
F.
|
2018 PHANTOM BONUS RETENTION PLAN
|
|
Year ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
Cost of revenues
|
$
|
5,530
|
|
|
$
|
598
|
|
General and administration expenses
|
2,447
|
|
|
277
|
|
||
Marketing and selling
|
1,618
|
|
|
187
|
|
||
|
$
|
9,595
|
|
|
$
|
1,064
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
G.
|
2012 PHANTOM BONUS RETENTION PLAN
|
|
Year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Cost of revenues
|
$
|
426
|
|
|
$
|
985
|
|
|
$
|
10,199
|
|
General and administration expenses
|
1,160
|
|
|
1,225
|
|
|
13,948
|
|
|||
Marketing and selling
|
272
|
|
|
418
|
|
|
4,107
|
|
|||
|
$
|
1,858
|
|
|
$
|
2,628
|
|
|
$
|
28,254
|
|
H.
|
DIVIDEND POLICY
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
A.
|
REVENUES ARE ATTRIBUTED TO GEOGRAPHIC AREAS BASED ON LOCATION OF THE END CUSTOMERS AS FOLLOWS:
|
|
Year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
North America
|
$
|
1,260,487
|
|
|
$
|
979,165
|
|
|
$
|
827,608
|
|
Asia-Pacific
|
1,029,635
|
|
|
791,821
|
|
|
670,490
|
|
|||
Israel
|
1,064,789
|
|
|
740,232
|
|
|
741,873
|
|
|||
Europe
|
853,656
|
|
|
737,051
|
|
|
763,963
|
|
|||
Latin America
|
158,059
|
|
|
192,406
|
|
|
193,369
|
|
|||
Other
|
141,774
|
|
|
243,009
|
|
|
180,522
|
|
|||
|
$
|
4,508,400
|
|
|
$
|
3,683,684
|
|
|
$
|
3,377,825
|
|
B.
|
REVENUES ARE GENERATED BY THE FOLLOWING AREAS OF OPERATIONS:
|
|
Year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Airborne systems
|
$
|
1,617,243
|
|
|
$
|
1,470,082
|
|
|
$
|
1,272,075
|
|
C4ISR systems
|
1,161,480
|
|
|
1,130,092
|
|
|
1,144,789
|
|
|||
Land systems
|
1,228,348
|
|
|
649,141
|
|
|
503,878
|
|
|||
Electro-optic systems
|
374,359
|
|
|
333,855
|
|
|
341,215
|
|
|||
Other (*)
|
126,970
|
|
|
100,514
|
|
|
115,868
|
|
|||
|
$
|
4,508,400
|
|
|
$
|
3,683,684
|
|
|
$
|
3,377,825
|
|
C.
|
MAJOR CUSTOMER DATA AS A PERCENTAGE OF TOTAL REVENUES:
|
|
Year ended December 31,
|
||||
|
2019
|
|
2018
|
|
2017
|
IMOD
|
15%
|
|
13%
|
|
19%
|
D.
|
LONG-LIVED ASSETS BY GEOGRAPHIC AREAS:
|
|
Year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Israel
|
$
|
1,621,653
|
|
|
$
|
1,541,195
|
|
|
$
|
922,367
|
|
U.S.
|
501,985
|
|
|
245,865
|
|
|
147,255
|
|
|||
Other
|
278,834
|
|
|
161,481
|
|
|
178,497
|
|
|||
|
$
|
2,402,472
|
|
|
$
|
1,948,541
|
|
|
$
|
1,248,119
|
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
|
Year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Total expenses
|
$
|
368,652
|
|
|
$
|
317,690
|
|
|
$
|
301,382
|
|
Less - grants and participations
|
(36,895
|
)
|
|
(30,338
|
)
|
|
(36,322
|
)
|
|||
|
$
|
331,757
|
|
|
$
|
287,352
|
|
|
$
|
265,060
|
|
|
Year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Expenses:
|
|
|
|
|
|
||||||
Interest on long-term bank debt
|
$
|
(13,854
|
)
|
|
$
|
(13,718
|
)
|
|
$
|
(2,779
|
)
|
Interest on Series A Notes, net
|
(3,757
|
)
|
|
(5,494
|
)
|
|
(6,112
|
)
|
|||
Interest on short-term bank credit and loans
|
(10,576
|
)
|
|
(9,073
|
)
|
|
(8,432
|
)
|
|||
Guarantees
|
(10,600
|
)
|
|
(9,027
|
)
|
|
(7,105
|
)
|
|||
Loss from revaluation of lease liabilities and
exchange rate differences, net
|
(24,607
|
)
|
|
(3,362
|
)
|
|
(4,487
|
)
|
|||
Other
|
(9,635
|
)
|
|
(5,807
|
)
|
|
(7,148
|
)
|
|||
|
(73,029
|
)
|
|
(46,481
|
)
|
|
(36,063
|
)
|
|||
Income:
|
|
|
|
|
|
|
|
||||
Interest on cash, cash equivalents and bank deposits
|
1,595
|
|
|
1,115
|
|
|
751
|
|
|||
Other
|
2,362
|
|
|
1,305
|
|
|
810
|
|
|||
|
3,957
|
|
|
2,420
|
|
|
1,561
|
|
|||
|
$
|
(69,072
|
)
|
|
$
|
(44,061
|
)
|
|
$
|
(34,502
|
)
|
|
Year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Pension non-service cost(1)
|
$
|
(10,920
|
)
|
|
$
|
(3,794
|
)
|
|
$
|
(5,130
|
)
|
Revaluation of investment(2)
|
8,281
|
|
|
—
|
|
|
—
|
|
|||
Impairment of investment(3)
|
(3,692
|
)
|
|
(7,807
|
)
|
|
—
|
|
|||
Other
|
88
|
|
|
152
|
|
|
48
|
|
|||
|
$
|
(6,243
|
)
|
|
$
|
(11,449
|
)
|
|
$
|
(5,082
|
)
|
|
|
|
|
|
|
(1)
|
Pension non-service cost according to ASU 2017-07. See Note 2S.
|
(2)
|
During 2019, the Company recognized gain as a result of revaluation of two of its investments in affiliated companies.
|
(3)
|
During 2019, the Company recognized an impairment related to one of its investments (see Note 6C(1)). During 2018 the Company recognized an impairment related to two investments, an amount of approximately $5,100 is related to impairment of an investment measured under the fair value option (see Note 6C(3)), and an amount of $2,700 is related to an investment accounted under the cost method (see Note 1C(4)).
|
ELBIT SYSTEMS LTD. AND SUBSIDIARIES
|
||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||
U.S. dollars (In thousands, except per share data)
|
Transactions:
|
Year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Income -
|
|
|
|
|
|
||||||
Sales to related-party companies (*)
|
$
|
183,012
|
|
|
$
|
181,566
|
|
|
$
|
179,867
|
|
Participation in expenses
|
$
|
2,576
|
|
|
$
|
2,580
|
|
|
$
|
2,625
|
|
Cost and expenses -
|
|
|
|
|
|
|
|
||||
Supplies from related parties (**)
|
$
|
13,467
|
|
|
$
|
8,188
|
|
|
$
|
16,900
|
|
Balances:
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Trade receivables and other receivables (*)
|
$
|
73,076
|
|
|
$
|
103,035
|
|
Trade payables and advances (**)
|
$
|
23,518
|
|
|
$
|
33,868
|
|
(*)
|
A significant portion of the sales and balances include sales of helmet mounted cueing systems purchased from the Company by a 50%-owned subsidiary of ESA.
|
(**)
|
Includes mainly electro-optics components and sensors, purchased by the Company from a 50%-owned Israeli partnership, and electro-optics products purchased by the Company from another 50%-owned Israeli subsidiary.
|
|
|
Column A
|
|
Column B
|
|
Column C
|
|
Column D
|
|
Column E
|
|||||
Description
|
|
Balance at Beginning of Period
|
|
Additions (Charged to Costs and Expenses)
|
|
Deductions (Write-Offs and Actual Losses Incurred)
|
|
Additions Resulting from Acquisitions
|
|
Balance at End of Period
|
|||||
Year ended December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|||||
Provisions for Losses on Long-Term Contracts (*)
|
|
118,672
|
|
|
41,359
|
|
|
29,320
|
|
|
—
|
|
|
130,711
|
|
Provisions for Claims and Potential Contractual Penalties and Others
|
|
8,541
|
|
|
851
|
|
|
4,606
|
|
|
—
|
|
|
4,786
|
|
Allowance for Doubtful Accounts
|
|
11,308
|
|
|
1,105
|
|
|
1,856
|
|
|
—
|
|
|
10,557
|
|
Valuation Allowance on Deferred Taxes
|
|
121,651
|
|
|
22
|
|
|
—
|
|
|
32,485
|
|
|
154,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Year ended December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|||||
Provisions for Losses on Long-Term Contracts (*)
|
|
46,778
|
|
|
19,842
|
|
|
20,396
|
|
|
72,448
|
|
|
118,672
|
|
Provisions for Claims and Potential Contractual Penalties and Others
|
|
5,406
|
|
|
801
|
|
|
940
|
|
|
3,274
|
|
|
8,541
|
|
Allowance for Doubtful Accounts
|
|
9,585
|
|
|
1,548
|
|
|
1,813
|
|
|
1,988
|
|
|
11,308
|
|
Valuation Allowance on Deferred Taxes
|
|
7,326
|
|
|
1,401
|
|
|
473
|
|
|
113,397
|
|
|
121,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Year ended December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|||||
Provisions for Losses on Long-Term Contracts (*)
|
|
83,348
|
|
|
14,149
|
|
|
50,719
|
|
|
—
|
|
|
46,778
|
|
Provisions for Claims and Potential Contractual Penalties and Others
|
|
4,484
|
|
|
1,186
|
|
|
264
|
|
|
—
|
|
|
5,406
|
|
Allowance for Doubtful Accounts
|
|
7,416
|
|
|
2,541
|
|
|
372
|
|
|
—
|
|
|
9,585
|
|
Valuation Allowance on Deferred Taxes
|
|
6,605
|
|
|
798
|
|
|
77
|
|
|
—
|
|
|
7,326
|
|
(*)
|
An amount of $34,120 and $21,659 and $22,690 as of December 31, 2019, 2018 and 2017, respectively, is presented as a deduction from inventories, and an amount of $96,591 and $97,013 and $24,088 as of December 31, 2019, 2018 and 2017, respectively, is presented as part of other payables and accrued expenses.
|
1.
|
Name of Company:
|
Elbit Systems Ltd.
|
2.
|
Objectives of Company:
|
To engage in any objective permitted by law.
|
3.
|
Limitation of Shareholder Liability:
|
Shareholder liability is limited to payment of the nominal (par) value of unpaid issued share capital.
|
4.
|
Share Capital:
|
The share capital of the Company is 80,000,000 New Israeli Shekels (“NIS”), divided into 80,000,000 ordinary shares par value 1 NIS per share, which shares are equal in rights.
|
5.
|
Amendments to the Memorandum of Association:
|
The shareholders, at a General Meeting, may amend this Memorandum of Association, in whole or in part, by a vote of a majority of sixty-seven percent (67%) of the shares voted at the General Meeting, not taking into account abstentions.
|
1
|
INTERPRETATION
|
|
2
|
PUBLIC COMPANY
|
|
3
|
PERMISSIBLE OBJECTIVES
|
|
4
|
NAME AND REGISTERED OFFICE
|
|
5
|
SHARE CAPITAL
|
|
6
|
SHARE RIGHTS
|
|
7
|
SHARE REGISTER AND SHARE CERTIFICATES
|
|
8
|
SHARE WARRANTS, OPTIONS AND DEBENTURES
|
|
9
|
LIEN ON SHARES
|
|
10
|
REDEEMABLE SHARES AND WARRANTS
|
|
11
|
CALLS ON SHARES; FORFEIT OF SHARES
|
|
12
|
TRANSFER OF SHARES
|
|
13
|
TRANSMISSION OF SHARES ON DEATH, BANKRUPTCY OR DISSOLUTION
|
|
14
|
REGISTRATION OF COMPANY SECURITIES FOR TRADING ON SECURITIES EXCHANGES
|
|
15
|
BORROWING POWERS
|
|
16
|
DIVIDENDS AND RESERVES
|
|
17
|
CAPITALIZATION OF RESERVES
|
|
18
|
CONVENING OF GENERAL MEETINGS
|
|
19
|
PROCEEDINGS AT GENERAL MEETINGS
|
|
20
|
VOTING AT GENERAL MEETINGS; VOTING INSTRUMENTS
|
|
21
|
PROXY STATEMENTS
|
|
22
|
ROLE AND COMPOSITION OF THE BOARD OF DIRECTORS
|
|
23
|
ELECTION, APPOINTMENT AND REMOVAL OF DIRECTORS
|
|
24
|
EXTERNAL DIRECTORS
|
|
25
|
BOARD OF DIRECTORS MEETINGS
|
|
26
|
COMMITTEES OF THE BOARD OF DIRECTORS
|
|
27
|
PRESIDENT
|
|
28
|
SECRETARY
|
|
29
|
SIGNATURE AUTHORITY
|
|
30
|
ACCOUNTS
|
|
31
|
INDEPENDENT CERTIFIED ACCOUNTANTS
|
|
32
|
INTERNAL AUDITOR
|
|
33
|
NOTICES
|
|
34
|
INSURANCE, INDEMNITYAND EXEMPTION
|
|
35
|
RECONSTRUCTION AND WINDING-UP
|
|
36
|
AMENDMENTS TO ARTICLES
|
1.
|
INTERPRETATION
|
(a)
|
In these Articles of Association the following terms will have the meanings described below:
|
TERM
|
MEANING
|
|
(1)
|
Administrative
Proceeding
|
An administrative enforcement proceeding pursuant to Chapter H3, H4 or I1 of the Securities Law.
|
(2)
|
Annual Meeting
|
The annual General Meeting.
|
(3)
|
Articles
|
These Articles of Association, as may be amended from time to time.
|
(4)
|
Audit Committee
|
The audit committee of the Board of Directors established according to these Articles and the Law.
|
(5)
|
Board or
Board of Directors
|
The Company's supervisory governing board appointed according to these Articles and the Law.
|
(6)
|
Chairman of the Board of Directors
|
The chairman of the Board of Directors, appointed according to these Articles.
|
(7)
|
Company
|
Elbit Systems Ltd.
|
(8)
|
Companies Law
|
The [Israel] Companies Law - 1999, including any regulations and regulatory orders relating thereto, and any successor laws and regulations, as will be in effect from time to time.
|
(9)
|
Director
|
A member of the Company's Board of Directors.
|
(10)
|
Extraordinary Meeting
|
A General Meeting other than an Annual Meeting.
|
(11)
|
General Meeting
|
A meeting of the Company's Shareholders convened according to these Articles and the Law.
|
(12)
|
Independent Certified Accountants
|
The Company's independent certified accountants appointed according to these Articles and the Law.
|
(13)
|
Internal Auditor
|
The Company's internal auditor appointed in accordance with these Articles and the Law.
|
(14)
|
Law
|
The Companies Law and the Securities Law.
|
(15)
|
NIS
|
New Israeli Shekels.
|
(1)
|
Uncertificated Shares Shares that are only recorded on a Register of Shareholders and are not represented by a Share certificate.
|
(2)
|
Voting Instrument A written form for Shareholders to use, according to these Articles and the Law, in voting at General Meetings.
|
(3)
|
Writing A handwriting, typewriting, facsimile, print, e-mail and any other legally recognized form of communication that can be read.
|
(b)
|
In these Articles, unless the context otherwise requires, expressions defined in the Law will have the meanings so defined. In addition, words importing the singular will include the plural, and vice versa. Words importing the masculine gender will include the feminine, and words importing persons will include companies, partnerships, associations and all other legal entities. Days, months and years refer to the Gregorian calendar.
|
(c)
|
In the event that an Article is revised or a new Article is added to these Articles, which contradicts an original Article, the revised or added Article(s) will take precedence.
|
(d)
|
In any place in these Articles that specifies the provisions will apply according or subject to the provisions of the Law and/or any other law, the intention is to provisions of the Law and/or of any other law that are not elective, unless the context requires otherwise.
|
(a)
|
No limitations will apply to the transfer of its Shares.
|
(b)
|
The number of Shareholders is unlimited.
|
(c)
|
The Company may issue any form of its Shares or other securities to the public.
|
(d)
|
Liability of the Shareholders is limited to the payment of the nominal (par) value of the unpaid issued Share Capital of the Company.
|
(a)
|
The permissible objectives of the Company may include any objectives permitted by law.
|
(b)
|
The Company may contribute, from time to time, reasonable sums to worthy causes even if the cause is not within the specific scope of the Company's business.
|
(a)
|
The name of the Company is Elbit Systems Ltd.
|
(b)
|
The Registered Office will be at such place in Israel as the Board of Directors will from time to time select.
|
(a)
|
The Share Capital of the Company is NIS 80,000,000 (eighty million New Israeli Shekels) divided into 80,000,000 (eighty million) ordinary shares of NIS 1 nominal (par) value each.
|
(b)
|
The Company may, by a resolution of a Special Majority of Shareholders at a General Meeting:
|
(1)
|
increase the Share Capital, including by classes of Shares, as the General Meeting may determine; or
|
(2)
|
annul Share Capital that has not yet been issued, provided that the Company has no undertaking, including a provisional undertaking, to allot such Shares.
|
(c)
|
Subject to the provisions of the Law, the Company may, by a resolution of a majority of the Shareholders voting in a General Meeting without taking into account abstentions:
|
(1)
|
consolidate all or part of the Shares and/or divide them into Shares of a greater par value than the par value of the existing Shares;
|
(2)
|
split all or part of the Shares, by way of subdivision, into Shares of lesser par value than the par value of the existing Shares; or
|
(3)
|
decrease the capital or any reserve fund from redemption of capital.
|
(d)
|
In executing any resolution adopted according to Article 5(c) above, the Board may, at its discretion, resolve any related issues.
|
(e)
|
Subject to any contrary decision in a General Meeting resolution authorizing an increase in Share Capital, any new Share Capital will be subject to the same provisions regarding payment of calls, liens, title, forfeiture, transfer and otherwise as apply to the original Share Capital. Such General Meeting resolution may also determine that the new Shares, or any part of them, will first be offered, at par value or at a premium, to all the existing Shareholders in proportion to the par value of their Shares or may determine other provisions with regard to the issuance and allotment of the new Shares. However, in the absence of such a determination in the General Meeting resolution, the Board may allot such Shares as provided in Article 6(a) below.
|
(f)
|
If as a result of a consolidation or split of Shares authorized under these Articles, fractions of a Share will stand to the credit of any Shareholder, the Board is authorized at its discretion, to act as follows:
|
(1)
|
determine that fractions of Shares that do not entitle their owners to a whole Share, will be sold by the Company and that the consideration for the sale be paid to the beneficiaries, on terms the Board may determine;
|
(2)
|
allot to every Shareholder, who holds a fraction of a Share resulting from a consolidation and/or split, Shares of the class that existed prior to the consolidation and/or split, in a quantity that, when consolidated with the fraction, will constitute a whole Share, and such allotment will be considered valid immediately prior to the consolidation or split;
|
(3)
|
determine the manner for paying the amounts to be paid for Shares allotted in accordance with Article 5(f)(2) above, including on account of bonus Shares; and/or
|
(4)
|
determine that the owners of fractions of Shares will not be entitled to receive a whole Share in respect of a Share fraction or that they may receive a whole Share with a different par value than that of the fraction of a Share.
|
(a)
|
Subject to these Articles and to the terms of any General Meeting resolution creating new Shares, the allotment and issue of Shares will be as determined by the Board of Directors, who may allot and issue such Shares to persons on terms and conditions and at times as determined by the Board
|
(b)
|
Each Ordinary Share will entitle its owner to receive notices of, to attend and to cast one vote at a General Meeting.
|
(c)
|
The rights granted to Shareholders of any class of Shares issued with preferred or other rights will not, unless specifically provided by the terms of issue of the Shares of that class, be deemed to be changed by the creation or issue of other Shares of the same rank.
|
(d)
|
Unless otherwise provided for by the terms of issuance of a particular class of Shares, the Company may create or change rights, preferences, restrictions and provisions related to one or more of the classes of Shares, after receipt of the consent in writing of all Shareholders of the affected class, or a resolution passed at a General Meeting of such class, approved by a Special Majority of the Shareholders of the affected class. These Articles will apply, as applicable, to every such separate General Meeting of a class.
|
(e)
|
Treasury Shares will not carry voting or dividend rights while they remain in the Company's Treasury Share reserve. Conversion of Treasury Shares into Ordinary Shares or Ordinary Shares into Treasury Shares will be subject to approval of the Board of Directors and any applicable provisions of the Law.
|
(f)
|
The rights applicable to any Shares, whether in the original Share Capital or any increased Share Capital, may be changed according to the terms of these Articles.
|
(a)
|
The Company will maintain a Register of Shareholders according to the Law. The Company may maintain one or more branch registers of Shareholders, in Israel or another jurisdiction, which will be considered as part of the Register.
|
(b)
|
No person will be recognized by the Company as holding any Share under a trust unless he is so registered in the Register according to applicable provisions of the Law.
|
(c)
|
The Company will not be bound by or required to recognize, even when having notice, any right or interest in any Share other than rights or interests of the Shareholder duly registered in the Register or otherwise proven in accordance with these Articles and the Law.
|
(d)
|
Every person whose name duly appears as a Shareholder in the Register or who otherwise establishes proof of ownership in accordance with these Articles and the Law, upon written request, will have the right without payment to receive, within two (2) months after allotment or registration of transfer (unless the conditions of allotment or transfer provide for a longer period), a stamped certificate for all the Shares registered in his name. The certificate will specify the number of Shares for which it is issued. However, in case of joint Shareholders the Company will not be required to issue more than one certificate to all the joint Shareholders. Delivery of a certificate to any of the joint Shareholders will be sufficient delivery to all. Every certificate will be signed by a Director and countersigned by the Secretary or some other person nominated by the Board of Directors for that purpose. The Company may withhold the issue of Share certificates for Shares not fully paid up. In the case of Uncertificated Shares, within a reasonable time after the issuance or transfer of Uncertificated Shares, the Company or its agent shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on a Share certificate, including restrictions or limitations on the transfer, registering or voting of such Shares.
|
(e)
|
If any Share certificate, or written evidence of ownership of Uncertificated Shares, as applicable, will be defaced, worn out, destroyed or lost, it may be renewed following production of any evidence, provision of any indemnity and payment of any of the Company's out of pocket expenses as the Board of Directors will require. In case of defacement or wearing out, renewal will require delivery of the old certificate or written evidence of ownership of Uncertificated Shares, as applicable.
|
(f)
|
The Company may destroy Share certificates or written evidence of ownership of Uncertificated Shares, as applicable, which have been canceled if at least seven (7) years have passed from the
|
(a)
|
The Company will have a lien on every Share for all moneys, whether currently payable or not, called or payable in respect of that Share. However, the Board of Directors may at any time declare any Share to be wholly or partly exempt from the provisions of this Article. The Company's lien, if any, on a Share will extend to all dividends payable on that Share.
|
(b)
|
The Company may sell any Shares on which it has a lien at such time and manner as will be determined by the Board of Directors. However, if some sum on which there is a lien is currently payable, no sale will be made until fourteen (14) days after sending a notice in writing to the registered Shareholders, demanding payment of such sum and giving notice of the Company's intention to sell in default. To give effect to any such sale, the Board of Directors may authorize transfer of the Shares sold to the purchaser who will be registered as the holder of the Shares. The Company will receive the net proceeds of the sale which will be applied in payment of the sum then payable on the lien. The balance of the sale proceeds, if any, will be paid to the person holding the Shares immediately before the sale, subject to any lien for sums that were not currently payable for the Shares before the sale.
|
(a)
|
The Board of Directors may, in its discretion, from time to time authorize the amount and manner of the consideration to be given to the Company for Shares. The Board may also make calls on Shareholders for any moneys unpaid on their Shares. Each Shareholder will be liable to pay the amount of every call so made on him to the persons and at the times, places and installments specified by the Board. A call may be revoked or postponed as the Board may determine.
|
(b)
|
A call will be considered to have been made at the time the Board of Directors approves the resolution authorizing such call.
|
(c)
|
The joint Shareholders of a Share will be jointly and severally liable for the payment of all calls and related installments.
|
(d)
|
The Board of Directors may, at its discretion, authorize receipt of advances from any Shareholder relating to future calls on Shares. The Board may authorize interest to be paid as may be agreed with the advancing Shareholder.
|
(e)
|
Any sum that, by the terms of a Share, is payable on the Share's allotment or at any fixed date, will be considered to be a call duly made and payable on the date fixed for payment. In case of non-payment of such sum, the relevant provisions of these Articles will apply as if such sum were a call duly made and notified according to these Articles.
|
(f)
|
The Board of Directors may, on the issue of Shares, differentiate between the Shareholders as to the amount of calls to be paid and the times of payment.
|
(g)
|
If any Shareholder fails to pay all or part of any call or installment of a call on or before the day appointed for such payment, the Board of Directors may serve a notice on such Shareholder. The
|
(h)
|
When any Shares have been forfeited in accordance with these Articles, notice of the forfeiture will be promptly given to the Shareholder or to the person entitled to the Shares by transmission, as the case may be. An entry of such notice having been given and of the date of the forfeiture of the applicable Shares will be made in the Register. However, a forfeiture will not be invalid due to not giving such notice or making such entry in the Register.
|
(i)
|
Following a forfeiture, the Board of Directors may, at any time before the forfeited Share has been otherwise disposed of, revoke the forfeiture on terms determined by the Board.
|
(j)
|
Every forfeited Share may be sold or reallotted or otherwise disposed of, to any other person, on such terms as the Board of Directors may determine. Any forfeited Share held by the Company will be considered as a Treasury Share.
|
(k)
|
A person whose Shares have been forfeited will remain liable to pay to the Company all calls made and not paid on such Shares at the time of forfeiture, and interest thereon to the date of payment, in the same manner in all respects as if the Shares had not been forfeited. He will also remain liable to satisfy any claims and demands which the Company might have enforced regarding the Shares at the time of forfeiture, without any deduction or allowance for the value of the Shares at the time of forfeiture. However, if the Company chooses to sell the forfeited Shares then the net consideration accepted by the Company for such Shares will be deducted from the amount the person whose Shares have been forfeited is liable to pay the Company.
|
(l)
|
The forfeiture of a Share will cause the extinction at the time of forfeiture all claims and demands against the Company regarding the Share, and all other rights and liabilities relating to the Share as between the forfeiting Shareholder and the Company, except as provided by law.
|
(m)
|
A written declaration, that the declarant is a Director and that a Share has been duly forfeited according to these Articles and stating the date of forfeiture, will be conclusive evidence of the facts stated in the declaration against any persons claiming to be entitled to the forfeited Shares. Such declaration, together with the Company's receipt for the consideration, if any, given for the forfeited Shares on their sale or disposition, and a duly signed Share certificate, or in the case of Uncertificated Shares, proper written transfer or forfeit instructions, delivered to the purchaser will constitute good title to the Shares. Such purchaser will be registered as the holder of the Shares.
|
(a)
|
Subject to the restrictions in these Articles, Shares will be transferable. Every transfer must be in writing in any usual or common form, or in such other form as the Board of Directors may from time to time approve. The written form of transfer will be delivered to the Registered Office, accompanied by a true copy of the certificate of the Shares, or written evidence of ownership of the Uncertificated Shares, as applicable, to be transferred, and any other evidence as the Board may require to prove the title of an intending transferor.
|
(b)
|
The written form of transfer of a Share will be executed both by the transferor and the transferee. The transferor will be considered to remain the Shareholder until the name of the transferee is entered
|
(c)
|
The Board of Directors may decline to register any transfer of Shares, which have not been fully paid up.
|
(d)
|
The Board of Directors may determine a fee to be charged for registration of a transfer.
|
(e)
|
The registration of transfers may be suspended at such times and for such periods as the Board of Directors may determine, not to exceed thirty (30) days in any calendar year.
|
(a)
|
In the case of death, bankruptcy or dissolution of a Shareholder, that Shareholder's rightful successor in interest will be entitled to the Shareholder's Shares by transmission as provided in this Article.
|
(b)
|
If a deceased Shareholder was a joint Shareholder, his surviving joint Shareholder will be the successor in interest. If a deceased Shareholder was a sole Shareholder, or has no surviving joint Shareholders, the executors or administrators of the deceased, or in their absence the legally declared heirs, will be recognized by the Company as the successor in interest to the Shares. If the Shareholder was a legal entity declared bankrupt or otherwise declared dissolved, then its legally recognized successor in interest will be recognized by the Company as receiving title to the applicable Shares.
|
(c)
|
Nothing in these provisions will release the estate of a deceased Shareholder from any liability for any Shares held by the deceased Shareholder.
|
(d)
|
Any person becoming entitled to a Share in consequence of a Shareholder's death, bankruptcy or dissolution may, upon producing such evidence of title as the Board of Directors will require, be registered himself as a holder of the Share, or subject to provisions regarding transfers of Shares, transfer the same to some other person.
|
(e)
|
A person entitled to a Share by transmission will be entitled to receive, and may give a release for, any dividends or other moneys payable for the Share. However, he will not have the right to receive notices of, or to attend or vote at General Meetings or, except as provided above, to exercise any of the rights or privileges of a Shareholder unless and until he becomes a Shareholder of the applicable Shares.
|
(a)
|
The Board of Directors may approve dividends to be paid from time to time to the Shareholders according to the Shareholders' respective rights and may fix the record date and time for payment. The dividend will be reported to the next Annual Meeting.
|
(b)
|
Subject to any preferential or limited rights to receive dividends, all dividends will be declared and paid according to the amounts paid or credited as paid on the applicable Shares. All dividends will be apportioned and paid proportionately to the amounts paid or credited as paid on the Shares. However, a Share may be issued on terms providing that it will qualify for dividends only from a particular date.
|
(c)
|
No dividend will be paid other than out of surplus earnings as permitted by the applicable provisions of the Law relating to capital preservation and allocation. However, the Company may request a court to allow it to pay dividends under other terms permitted by the Law.
|
(d)
|
Dividends will be paid to Shareholders recognized by the Company in accordance with Article 7(c) above, at the time the dividend is declared, as the Shareholders for the Shares for which the dividend has been declared.
|
(e)
|
Notice of the declaration of any dividend, whether interim or otherwise, will be given to the entitled Shareholders in the manner described in these Articles for notices to Shareholders.
|
(f)
|
Unless otherwise directed by the Board of Directors, any dividend may be paid by check, warrant or bank transfer to the registered address of the person entitled, or in case of joint Shareholders to the one of them first named in the Register regarding the joint holding. The receipt of the person whose name on the date of the dividend declaration appears on the Register as the owner of any Share, or in the case of joint Shareholders, of anyone of such joint Shareholders, will be a good discharge to the Company of all payments made for such Share. All dividends unclaimed for up to seven (7) years after having been declared may be invested or otherwise used as directed by the Board for the benefit of the Company until claimed. After such time the Company will have no obligation to pay the unclaimed dividend. No unclaimed dividend or interest will bear interest against the Company.
|
(g)
|
The Board of Directors may deduct from any dividend payable to any Shareholder all sums of money, if any, then payable by him to the Company on account of calls or otherwise in relation to the Company Shares.
|
(a)
|
The Board of Directors may, from time to time, direct the setting aside out of the profits of the Company and the allocation to reserves of such sums as the Board may decide. All sums allocated to any such reserve will, at the discretion of the Board, be applicable for:
|
(1)
|
meeting contingencies;
|
(2)
|
the liquidation of any debt or liability of the Company;
|
(3)
|
maintaining any properties of the Company;
|
(4)
|
meeting losses on realization of, or writing down, investments (either individually or in the aggregate);
|
(5)
|
equalizing or paying dividends or bonus Shares; or
|
(6)
|
any other purpose to which Company profits may be properly applied.
|
(b)
|
All sums allocated to a reserve may, pending any other applications authorized by these Articles, be invested together with any other Company funds in the ordinary course of business and without it being necessary to distinguish between the investments of the reserves and investments of the other moneys of the Company or between investments of reserves of different types.
|
(c)
|
The Board of Directors may direct establishment of a capital reserve account and apply such account in any manner authorized by these Articles or by law.
|
(d)
|
Subject to any legal requirements, the General Meeting may at any time pass a resolution that any sum be capitalized, provided that it is:
|
(1)
|
not required for the payment or provision of any fixed preferential dividend;
|
(2)
|
not then allocated to any reserve fund or reserve account of the Company, including premiums received on the issue of any Shares, debentures or similar Company securities; and
|
(3)
|
undivided net profit held by the Company.
|
(e)
|
If a resolution as provided in Article 17(d) above is passed, the resolution will also provide that such sum be available for distribution and be appropriated as capital to the Shareholders in the proportion in which they would have been entitled to receive dividends and in such manner as the resolution
|
(f)
|
In accordance with the specific resolution adopted according to Articles 17 (d) and (e) above, the Board of Directors will apply such sum in paying up in full any unissued Shares in the Share Capital of the Company on behalf of the Shareholders. The Board will direct appropriation of such Shares and then distribution credited as fully paid up proportionally among such Shareholders in satisfaction of their Shares and interests in the capitalized sum. Alternatively, the Board will direct application of all or part of such sum on behalf of such Shareholders in paying up all or part of any uncalled balance that will then be unpaid regarding any issued Shares held by such Shareholders, or otherwise deal with such sum as directed by such resolution. Where difficulty arises in connection with any such distribution, the Board may resolve the matter as it sees fit.
|
(a)
|
General Meetings will be held at least once in every calendar year at the time and place, and with an agenda, as may be determined by the Board of Directors. Shareholders representing at least one percent (1 %) of the Company's voting power may request the Chairman of the Board to add appropriate items to a General Meeting agenda. Each such annual General Meeting will be called an "Annual Meeting", and any other Shareholders' meeting will be called an "Extraordinary Meeting".
|
(b)
|
Each Annual Meeting will take place no later than fifteen (15) months after the previous Annual Meeting, but no later than the end of the applicable calendar year. The Board may convene an Extraordinary Meeting whenever it finds it necessary.
|
(c)
|
The Board of Directors will convene an Extraordinary Meeting on receipt of a written request from any of:
|
(1)
|
two (2) Directors or twenty-five percent (25%) of the total number of, Directors;
|
(2)
|
one (1) or more Shareholders, holding at least five percent (5%) of the issued Share Capital and at least one percent (1%) of the Shareholders' voting power; or
|
(3)
|
one (1) or more Shareholders holding no less then five percent (5%) of the Company's issued voting Shares.
|
(d)
|
An Extraordinary Meeting requested under Article 18(c) above will be convened within fifty-six (56) days of submission of the Board's receipt of a proper written request to convene an Extraordinary Meeting. If the Board of Directors fails to convene such meeting within such time, then, the required Extraordinary Meeting may be convened, in the same manner as for other Extraordinary Meetings, by any of the Directors and/or by Shareholders (representing at least one-half of such Shareholders' voting rights), who requested the convening; provided it is convened no later than three (3) months after submission of the written request to the Board.
|
(e)
|
The Board of Directors will establish a record date in accordance with the requirements of the Law for Shareholders entitled to receive notice of and vote at a General Meeting.
|
(f)
|
A written notice of the convening of a General Meeting will be given, as required by the Law, at least twenty-one (21) days in advance. The notice will specify the place, date and time of the Meeting as well as other requirements specified in the Law. The place of the meeting will be in Israel. The date of any Extraordinary Meeting convened under Article 18(c) above will be not later than thirty-five (35) days after the date of the notice.
|
(a)
|
No business will be transacted at any General Meeting unless a quorum is present. The quorum at any General Meeting, except an Extraordinary Meeting convened in accordance with Article 18(c) above, will be at least two (2) Shareholders present in person, by Proxy or by a Voting Instrument and holding or representing between them at least one-third (1/3) of the issued voting Shares.
|
(b)
|
If within one-half (1/2) hour from the time appointed for the holding of a General Meeting a quorum
|
(c)
|
15the Board of Directors by notice to the Shareholders. If at such adjourned meeting a quorum is not present within one-half (1/2) hour from the time appointed for holding the adjourned meeting, then two (2) Shareholders representing at least ten percent (10%) of the Shareholders' voting power, present in person, by Proxy or by a Voting Instrument will be a quorum.
|
(d)
|
If the General Meeting adjourned is an Extraordinary Meeting convened in accordance to Article 18(c) above, then no business will be transacted at such adjourned Extraordinary Meeting unless a quorum is present comprised of:
|
(1)
|
one (1) or more Shareholders holding no less then five percent (5%) of the issued Share Capital and one percent (1%) of the voting power of the Company; or
|
(2)
|
one (1) or more Shareholders holding no less then five percent (5%) of the issued voting Shares.
|
(e)
|
Except as provided in these Articles and the Law, all business transacted at a General Meeting will be decided by a resolution adopted by a simple majority of the votes cast at the General Meeting, not taking into account abstentions.
|
(f)
|
The Chairman of the Board of Directors, will preside at any General Meeting, but if there will be no such Chairman, or if at any General Meeting he will not be present within fifteen (15) minutes after the time appointed for holding the meeting, or is unwilling to act as chairman, the Shareholders present will choose any Director to act as chairman of the meeting. If no Director is present, or if all the Directors present decline to take the chair, the Shareholders present will choose a Shareholder present to be chairman of the meeting.
|
(g)
|
The Chairman may, with the consent of any General Meeting at which a quorum is present, (and will if so directed by the meeting) adjourn the meeting from time to time and from place to place. Whenever a General Meeting is adjourned for twenty-one (21) days or more, notice of the adjourned General Meeting will be given in the same manner as for the original General Meeting. No Shareholder will have the right to any other notice of an adjournment or of the business to be transacted at any adjourned General Meeting other than the business which might have been transacted at the original General Meeting which was adjourned.
|
(a)
|
Subject to the applicable record date and any rights or restrictions then existing for a particular class of Shares, each Shareholder will have the right to vote who is present at a General Meeting either personally, by a Voting Instrument in such cases as required or permitted under the Law for voting by Voting Instrument, or by Proxy. A Shareholder may vote in respect of only part of his Shares, and he may vote in different ways in respect to portions of his Shares.
|
(b)
|
The vote may be by show of hands, by secret ballot, by Voting Instrument or by any other manner authorized by the Board of Directors consistent with the Law. A
|
(c)
|
A Proxy present at a General Meeting will have the same rights as a Shareholder with respect to voting at a General Meeting. A Proxy need not to be a Shareholder.
|
(d)
|
The vote of the senior of any joint Shareholders, whether in person, by Voting Instrument or by Proxy, will be accepted to the exclusion of the votes of other joint Shareholders. For the purpose of these Articles, seniority will be determined by the order in which the names appear in the Register.
|
(e)
|
An objection to a Shareholder's or a Proxy's right to vote in a General Meeting must be raised at the applicable meeting or adjourned meeting where that person was supposed to vote. The chairman of
|
(f)
|
A Shareholder that is a corporation or other form of legal entity will have the right to appoint a person to be its representative at any General Meeting. Such appointment. must be authorized in writing by the Board of Directors, president or general manager or similar body of such entity. The representative so appointed will have the right to exercise on behalf of the entity he represents all the powers that the entity itself might perform in connection with the General Meeting.
|
(g)
|
A Shareholder who has been declared legally incompetent or has otherwise had a legally appointed guardian, may, following a proof of appointment of a legal guardian or similar representative, vote at a General Meeting through such guardian or representative, whether in person, by Voting Instrument or by Proxy.
|
(h)
|
A vote by Proxy or a Voting Instrument will be considered valid even if there has been the death or declaration of incompetence of the appointee/signatory or the cancellation of the Proxy appointment or Voting Instrument or expiration of a Proxy appointment or Voting Instrument in accordance with any law, or the transfer of the Shares for which the Proxy appointment or Voting Instrument was given, unless the Company receives at the Registered Office, prior to a General Meeting, a written notice as specified below. For a Voting Instrument or Proxy appointment that has been provided to the Company for a specific General Meeting to be considered invalid, a written notice of cancellation of a Voting Instrument or Proxy appointment must be duly signed by the applicable Shareholder specifying the applicable Shares, the name of the Shareholder, legal representative or successor in interest and nature of the event invalidating the Proxy appointment or Voting Instrument. In the event of voting by a secret ballot or by Voting Instrument, a notice canceling the appointment of a Proxy will be valid it if is signed by the appointee/signatory and received at the Registered Office no later than one (1) hour before beginning the vote.
|
(i)
|
A Shareholder will have the right, where permitted or required by provisions of the Law relating to Voting Instruments, to vote by a Voting Instrument as an alternative to voting in person or by Proxy. In all applicable cases, the Voting Instrument will be sent to Shareholders before the applicable General Meeting no later then the time required in the Law.
|
(j)
|
A Shareholder has the right to vote by a separate Proxy with respect to each Share held by him, provided that each Proxy will have a separate letter of appointment containing the serial number of the Shares for which the Proxy is entitled to vote. If a specific Share is included in more than one (1) letter of appointment, then no Proxy will have the right to vote such Share.
|
(k)
|
An instrument appointing a Proxy which is not limited in time will expire twelve (12) months after the date of its execution. If the appointment is for a limited period, even if more than twelve (12) months, the instrument will be considered valid for the period specified in the instrument.
|
(l)
|
A Voting Instrument, letter of appointment of a Proxy, power of attorney or other instrument relating to voting at a General Meeting must be in writing. The form of the Voting Instrument or the form of appointing a Proxy will be in any appropriate form as may be determined by the Board of Directors. The signature of the appointor or voting Shareholder will be confirmed by a lawyer, notary, bank or in any other manner acceptable to the Board. The original or a copy of such confirmed instrument will be delivered to the Registered Office, or at such other place in Israel or abroad as the Board may direct from time to time, at least twenty-four (24) hours before the time appointed for the applicable original or adjourned General Meeting. Otherwise, that person will not be entitled to vote that Share through the instrument.
|
(a)
|
Subject to the applicable provisions of the Law, the Board of Directors, and in the case of a General Meeting in accordance with Article 18(c) above those Directors and Shareholders entitled to convene
|
(b)
|
The persons authorized to distribute Proxy Statements under Article 21(a) above may send additional Proxy Statements, similarly distributed, in response to any other solicitations forwarded to the Shareholders in connection with a General Meeting.
|
(a)
|
The Board of Directors will determine the policies of the Company and oversee the performance of the duties of the President. The duties of the Board will include, among others, any mandatory Board responsibilities specified in the Law. The Board will have all residual powers not granted under these Articles or by law to any other Company body.
|
(b)
|
The General Meeting may assume powers granted under these Articles or by Law to the Board of Directors. However, any decision to assume such powers must specify the matters and time period (which shall not be longer than the period required under the circumstances) for which such powers are assumed.
|
(c)
|
The number of Directors comprising the Board will be at least five (5) and not more than seventeen (17). Until otherwise determined by the Board or at a General Meeting, the number of Directors will be nine (9). The Board will include at least two (2) External Directors in accordance with the requirements of the Law. A Director need not to be a Shareholder. The President may serve as a Director in accordance with Article 27(c) below.
|
(d)
|
The compensation to the Directors will be approved at a General Meeting. The Directors will be entitled to be reimbursed for reasonable expenses incurred by them in carrying out Company business.
|
(e)
|
No Director, other than an External Director, will be disqualified due to holding any office in the Company or any affiliated entity of the Company other than the office of Internal Auditor or Independent Certified Accountant. A Director may also contract with the Company or an affiliated entity of the Company either as vendor, purchaser or otherwise, whether on his own behalf or as a director or representative of another entity. No such holding of office by a Director or such contract entered into by or on behalf of the Company in which a Director will be in any way interested will be voided, nor will any Director be liable to account to the Company for any profit arising from any such office, or contract by reason only of such Director holding that office or of the fiduciary relations so established.
|
(f)
|
A Director, other than an External Director, need not be a resident of the State of Israel.
|
(a)
|
Directors (except for External Directors who will be elected in accordance with Article 24 blow) will be elected annually by the Shareholders at the Annual Meeting. Directors will hold office until the conclusion of the next Annual Meeting or until their earlier removal or resignation. However, if no Directors are elected at an Annual Meeting, then the persons who served as Directors immediately prior to the Annual Meeting will continue to serve as Directors unless otherwise determined by the Annual Meeting or by the Board. Except as provided in Article 24 below regarding External Directors, Directors will be eligible for re-election.
|
(b)
|
A person nominated by the Board of Directors may be elected at the Annual Meeting or a General Meeting to the office of Director. However, a Shareholder entitled to vote at that Annual Meeting or General Meeting may nominate a candidate for Director by submitting a written notice to the Company at the Registered Office, no later than seven (7) days after the date notice is given of the meeting, signed by the Shareholder of his intention to propose at that meeting a candidate for Director to which is attached the written consent and resume of such nominee.
|
(c)
|
The Chairman of the Board of Directors will be appointed by the Board of Directors. Such Director will serve as Chairman of the Board of Directors until he ceases to hold the office of Director or until he is replaced by the Board of Directors.
|
(d)
|
The Board of Directors will have the power to appoint additional Directors, if the current number of Directors is less than nine (9) or other maximum number approved at a General Meeting or by the Board. Any Director so appointed will hold office until the conclusion of the next Annual Meeting, unless he is removed or resigns earlier. A Director will state the reasons for his resignation.
|
(e)
|
If the number of Directors is reduced below nine (9) or any other number that may be determined by the Board or a General Meeting, and until additional Directors are elected or appointed so that the number of Directors is nine (9) or such other number so determined by the Board or a General Meeting, the Board may continue to act.
|
(f)
|
Subject to the terms of any applicable agreement, a Director will be removed if he:
|
(1)
|
becomes bankrupt or enters into similar status;
|
(2)
|
becomes deceased or is declared legally incompetent;
|
(3)
|
resigns his office by notice in writing given to the Company; or
|
(4)
|
is removed by a resolution of a General Meeting.
|
(5)
|
Is no longer qualified to serve as a Director due to other reasons specified in the Law.
|
(g)
|
A Director may appoint a substitute director in his place. A substitute Director must be qualified under the Law to serve as a substitute Director, and if his appointment is for more than one meeting it will be subject to the approval of the Board. Such person may not act as a substitute Director for more than one (1) Director at the same time. The same rules, including compensation, will apply to a substitute Director as to the Director who appointed him, and the substitute Director may participate in Board and Board committee meetings in the same manner as the Director who appointed him. Subject to the Law, a Director who has appointed a substitute Director may revoke the appointment at any time. In addition, the office of a substitute Director will be vacated at any time that the office of the Director who appointed the substitute is vacated for any reason. Any appointment or revocation of the appointment of a substitute Director will be made by notice in writing to the substitute Director and the Company. The appointment or revocation, as the case may be, will become effective on the later of the date of receipt of the above notice or the date fixed in the notice.
|
(a)
|
The Board of Directors will include at least two (2) External Directors complying with the qualifications described in the Law.
|
(b)
|
An External Directors will be appointed by a majority vote at a General Meeting, provided that:
|
(1)
|
The majority vote at the General Meeting will include a majority of the total
|
(2)
|
The total number of the votes against the resolution appointing an External Director from among the shareholder referred to in paragraph (1) above, is not more than two percent (2%) of the overall voting rights in the Company.
|
(c)
|
The compensation and indemnification of expenses of External Directors will be in accordance with the applicable provisions of the Law.
|
(d)
|
An External Director will be appointed for a period of three (3) years and his office may be extended by a resolution of the General Meeting in accordance with the applicable provisions of the Law, for two additional periods of three (3) years each, and thereafter for additional periods of up to three (3) years each or such other period as may be permitted by and in accordance with the requirements of
|
(a)
|
The Board of Directors may meet, adjourn and otherwise regulate its meetings as it sees fit. However, the Board will meet at least once every three (3) months. Unless otherwise determined by the Board, the quorum for a Board meeting will be not less than half (1/2) of the then number of Directors.
|
(b)
|
Questions arising at any Directors' meeting will be decided by a majority of votes cast at the meeting. In cases of an equality of votes the Chairman of the Board will not have a second or casting vote.
|
(c)
|
Each Director will receive reasonable prior notice of a Board meeting. Such notice may be given by any means of communication as determined by the Secretary, including, among others, telephone or e-mail. Such notice will include the time and location of the meeting and a reasonable description of the meeting's agenda.
|
(d)
|
At the request of a Director, the Secretary will at any time summon a meeting of the Board. Reasonable advance notice of the time, place and agenda of each Board meeting will be given to each Director. In urgent circumstances, a majority of the Directors may waive such notice requirement.
|
(e)
|
Directors may participate in a Board meeting or a Board committee meeting by means of a telephone conference or other communications media, provided that all participating Directors can hear each other simultaneously. Participation by such means will be considered as presence in person at a meeting.
|
(f)
|
All acts done bona fide by any meeting of the Board or of a committee of the Board or by any person acting as a Director will be valid, even if it is later discovered that there was some defect in the appointment of any Director, or that any Director was disqualified.
|
(g)
|
The Board of Directors will cause proper minutes to be made of all General Meetings and of the proceedings of all meetings of Board of Directors and Board committee meetings. Such minutes purporting to be signed by the chairman of such meeting, or by the chairman of the next succeeding meeting, will be considered conclusive evidence of the facts stated in the minutes.
|
(a)
|
Subject to the applicable provisions of the Law regarding matters that the Board may not delegate to a committee, the Board of Directors may delegate any of its powers to committees consisting of at least three (3) Directors, including at least one (1) External Director. Any committee so formed will in the exercise of its powers conform to any directions given to it by the Board.
|
(b)
|
The Board of Directors may appoint a chairman for any committee, subject, if applicable, to qualification requirements of the Law. If no chairman is appointed by the Board of Directors for a particular committee, then such a committee may elect a chairman. If no such chairman is elected, or if at any meeting the chairman is not present within fifteen (15) minutes after the time appointed for holding the meeting, the committee members present may choose a committee member to be chairman of the meeting. Unless otherwise specifically directed by the Board of Directors or otherwise provided by the Law, the meetings and proceedings of any committee will be governed as applicable by the provisions in these Articles for regulating the meetings and proceedings of the Board.
|
(c)
|
A committee may meet and adjourn as its members may determine. Questions arising at any meeting will be determined by a majority of votes of the members present. In case of an equality of votes, the chairman of a committee will not have a second or casting vote.
|
(d)
|
The Board of Directors will appoint an Audit Committee composed of at least three (3) Directors qualified under the Law and under all other applicable laws, regulations and rules to serve on the Audit Committee including all External Directors. The Audit
|
(e)
|
The Board of Directors will appoint any additional committees if required under the Law and subject to the applicable requirements of the Law.
|
(f)
|
A resolution in writing signed by the Chairman of the Board and the Secretary will serve as evidence of a resolution passed at a duly convened meeting of the Board of Directors.
|
(a)
|
Subject to these Articles and the Law, the Board of Directors will from time to time appoint a President for such period, on such terms and with such powers as the Board may determine. The compensation of the President may be by salary or any other consideration as determined by the Board.
|
(b)
|
A President will be subject to the provisions of any contract between him and the Company, the terms of which will be approved by the Audit Committee (or by the Compensation Committee of the Board, subject to qualification requirements as applicable under the provisions of the Law) and by the Board of Directors.
|
(c)
|
The President may hold, while he is President, the office of a Director, if he is elected or appointed in accordance with the provisions of these Articles. If so elected the President is subject to the same provisions regarding resignation, removal and compensation as the other Directors. In regard to his position as President, the President will be appointed as provided in Article 27(a) above and may be removed by the Board of Directors. If he ceases to hold the office of President for any reason and at that time he serves as a Director, he will immediately cease to be a Director, unless otherwise determined by the Board of Directors. In any case, if the President does not serve as a Director, he will be entitled to attend any Board meeting.
|
(d)
|
Subject to the supervision of the Board of Directors, the President may exercise all managerial and executive powers of the Company and do on behalf of the Company all acts as may be exercised and done by the Company and that are not by the Law or by these Articles required to be exercised or done by other Company bodies. No resolution made by a General Meeting will invalidate any prior act of the President that would have been valid if such resolution had not been made.
|
(e)
|
Subject to applicable provisions of the Law and the specific or general approval of the Board, the President may delegate any of his powers to another person.
|
(f)
|
The Board of Directors may assume powers granted under these Articles or by law to the President, provided that such decision to assume power specifies the matters and time period (which shall not be longer than the period required under the circumstances) for which such powers are assumed.
|
(a)
|
The Board of Directors will cause the Company's books of accounts to be kept in accordance with legal requirements. The books of account will be kept at the Registered Office and will be open to the inspection of the Board of Directors and, as required by the Law, of the Shareholders.
|
(b)
|
The Company will issue financial statements as required by the Law and other applicable laws. The issued financial statements will be available for inspection by the Board of Directors and Shareholders
|
(a)
|
The Company will appoint Independent Certified Accountants at a General Meeting. The Independent Certified Accountants will hold office until the end of the next Annual Meeting. However, the Shareholders at a General Meeting may remove the Independent Certified Accountants or extend the term of appointment for up to three (3) years.
|
(b)
|
The fee of the Independent Certified Accountants for audit and non-audit services will be set and approved by the Board of Directors after receipt of the recommendations of the Audit Committee or the Financial Statements Review Committee to be determined by the Board of Directors), to be provided to the Board within a reasonable time before the Board's approval and reported to the next Annual Meeting.
|
(a)
|
(a) The Board of Directors, upon the recommendation of the Audit Committee, will appoint an Internal Auditor for the Company. Within the organizational structure of the Company the Internal Auditor will report to the President. The Internal Auditor may only be removed or replaced in accordance with the applicable provisions of the Law.
|
(b)
|
The Internal Auditor will submit a yearly audit plan for the approval of the Audit Committee. The Internal Auditor will also submit a yearly account of his findings to the Chairman of the Board of Directors, the President and the chairman of the Audit Committee.
|
(a)
|
A notice to a Shareholder may be served as a general notice to all Shareholders, by publication in a daily Hebrew newspaper appearing in Israel. The date of such newspaper publication will be considered as the date of service on all the Shareholders. The Board of Directors may also decide that notice be served on each Shareholder individually to his registered address by hand, by mail or by any other form of media or transmission permitted by law, to the registered address of each Shareholder, provided that such delivery and date thereof can be reasonably verified and recorded. A notice served on a Shareholder by mail will be considered as duly served the day after it was placed in the mail.
|
(b)
|
A notice to joint Shareholders may be given by the Company only to the Shareholder named first in the Register for the applicable Shares.
|
(c)
|
The Board of Directors may authorize other methods of notice to Shareholders that are consistent with the Law.
|
(d)
|
Notices of General Meetings will contain the information required by the Law.
|
(a)
|
Subject to the provisions of the Law, the Company may exempt in advance or retroactively, any Director or Company officer from any liability to the Company attributed to damage or loss caused by breach of the Director's or officer's duty of care owed to the Company.
|
(b)
|
Subject to the provisions of the Law, the Company may procure directors' and officers' liability insurance in respect of liability or payment, imposed on a Director or Company's officer as a result of an act carried out by him in his capacity as a Director or Company officer, with respect to each of the following:
|
(1)
|
breach of duty of care by any Director or Company officer owed to the Company or any other person;
|
(2)
|
breach of fiduciary duty by any Director or Company officer owed to the Company, provided that such Director or Company officer acted in good faith and had a reasonable basis to assume that the action would not harm the interests of the Company; or
|
(3)
|
a financial obligation imposed on a Director or Company officer in favor of another person; or
|
(4)
|
a payment which a Director or Company officer is obligated to pay to an injured party as set forth in section 52(54)(A)(1)(A) of the Securities Law; or
|
(5)
|
expenses incurred by a Director or a Company officer in connection with an Administrative Proceeding, including reasonable legal expenses, which term includes lawyer's fees; or
|
(6)
|
any other event for which director or officer liability insurance is or may be permitted.
|
(c)
|
Subject to the provisions of the Law, the Company may undertake in advance or retroactively to indemnify a Director or Company officer in respect of a liability, payment or expense as detailed in Article 34(d) below, imposed on him or incurred by him as a result of an act carried out in his capacity as a Director or Company officer.
|
(d)
|
An indemnity, as provided in Article 34(c) above, may be issued in respect of a liability, payment or expense as follows:
|
(1)
|
a monetary liability imposed on the Director or Company officer or paid by him in favor of a third party under a judgment, including a judgment by way of compromise or a judgment of an arbitrator approved by a court; provided, however, that in case such undertaking is granted in advance it will be limited to events which, in the Board’s opinion, are foreseeable in light of the Company’s actual activities at the time of granting the obligation to indemnify, and to a sum or criteria as the Board deems reasonable under the circumstances, and the undertaking to indemnify will specify the aforementioned events and sum or criteria;
|
(2)
|
a payment imposed on a Director or a Company officer in favor of an injured party as set forth in section 52(54)(A)(1)(A) of the Securities Law (as amended);
|
(3)
|
reasonable litigation expenses, including lawyer's fees, incurred by a Director or a Company officer as a result of an investigation or procedure conducted against him by an authority authorized to conduct such investigation or procedure, provided that such investigation or procedure (i) concludes without the filing of an indictment against the Director or Company officer and without imposition of a monetary payment in lieu of criminal proceedings, or (ii) concludes with imposing on the Director or Company officer monetary payment in lieu of criminal proceedings, provided that the alleged criminal offense in question does not require proof of criminal intent or incurred by a Director or Company officer in connection with a monetary sanction imposed by Law;
|
(4)
|
expenses incurred by a Director or a Company officer in connection with an Administrative Proceeding, including reasonable legal expenses, which term includes lawyer's fees; or
|
(5)
|
reasonable litigation expenses, including lawyers' fees, expended by the Director or Company officer or imposed on him by the court for:
|
(a)
|
proceedings issued against him by or on behalf of the Company or by a third party;
|
(b)
|
criminal proceedings from which he was acquitted; or
|
(c)
|
criminal proceedings in which he was convicted of an offense that does not require proof of criminal intent; or
|
(d)
|
any other liability or expense for which it is or may be permissible to indemnify a Director or a Company officer.
|
(e)
|
Subject to the provisions of the Law, the Company may issue an undertaking in advance or retroactively to indemnify any person, including a Director or a Company officer, who acts or acted on behalf of or at the request of the Company as a director or officer of another company in which the Company, directly or indirectly, is a shareholder, or in which the Company has any other interest. Such indemnity will be in respect of a liability, payment or expense as detailed in Article 34(d) above, imposed on him or incurred by him as a result of an act carried out by him in his capacity as a director or officer of the other company.
|
(f)
|
Subject to the provisions of the Law:
|
(1)
|
The Company may indemnify any employee or representative of the Company, who is not a Director or a Company officer, for any liability or expense paid or imposed on him in his capacity as a Company employee or representative in any legal proceedings, due to an act carried out by him in good faith in his capacity as Company employee or representative. However, such indemnity may not be given for a criminal indictment in which he was convicted in an offense that requires proof of criminal intent and the convicting judgment was not reversed on appeal or cannot be issued for an appeal.
|
(2)
|
The Company may issue an undertaking in advance to indemnify a Company employee or representative, who is not a Director or Company officer, or to indemnify him retroactively for any monetary liability imposed or that may be imposed on him in favor of any third party in respect of an act carried out by him in good faith in his capacity as a Company employee or representative.
|
(g)
|
Subject to the provisions of the Law, nothing in these Articles will limit the Company, in any manner, in entering into an agreement of liability insurance, or in granting an exemption or indemnification in respect of:
|
(1)
|
a Director or Company officer, or a director or officer of another company as provided in Article 34(e) above, to the extent that the insurance, exemption or indemnity is not prohibited by law; or
|
(2)
|
any person who is not a Director or Company officer, or a director of another company as provided in Article 34(e) above, including but not limited to employees and representatives of the Company or such other company.
|
(h)
|
Notwithstanding the above, any indemnification granted by the Company under this Article 34 shall not exceed 25% (twenty-five percent) of the Company's shareholders equity of the Company according to the most recent Company consolidated financial statements prior to the date of the indemnification payment.
|
(a)
|
If the Company will be wound up voluntarily the liquidators may, with the approval of a Special Majority of the Shareholders voting at a General Meeting, divide among the Shareholders any part of the Company's assets. Such approval may also vest any part of the Company's assets to trustees under trusts for the benefit of the Shareholders as the liquidators may determine.
|
(b)
|
On any sale of the Company or its assets through a liquidation or winding-up, a Special Majority of the Shareholders voting at a General Meeting may authorize the Board of Directors or liquidators to:
|
(1)
|
accept fully or partly paid up Shares, debentures, or other Company securities, whether registered in Israel or other jurisdictions, whether existing or contingent, for the purchase in whole or in part of Company property and, if the profits of the Company permit, distribute such Shares, securities or any other Company property among the Shareholders without requiring their realization, or vest the same in trustees for them; and/or
|
(2)
|
distribute or appropriate the Company's cash, Shares, other securities, benefits or property for the valuation of any such securities or property as so approved at the General Meeting. In such case, all Shareholders will be bound to accept any valuation on distribution so authorized, and will waive all rights in relation to such valuation, except where otherwise required by law.
|
1.
|
I have reviewed this annual report on Form 20-F of Elbit Systems Ltd.
|
2.
|
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report.
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
1.
|
I have reviewed this annual report on Form 20-F of Elbit Systems Ltd.
|
2.
|
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report.
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
|
March 25, 2020
|
|
|
|
By:
|
/S / BEZHALEL MACHLIS
|
|
|
Bezhalel Machlis
|
|
|
Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
|
|
By:
|
/s/ Kost Forer Gabbay & Kasierer
|
|
|
Kost Forer Gabbay & Kasierer
A member of Ernst & Young Global
|
|
By:
|
/s/ Kesselman & Kesselman
|
|
|
Kesselman & Kesselman
A member firm of PricewaterhouseCoopers
International Limited
|
|
By:
|
/s/ Somekh Chaikin
|
|
|
Somekh Chaikin
Certified Public Accountants (Israel)
A member firm of KPMG International
|