Form 6-K ELBIT SYSTEMS LTD For: Jan 12
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E-mailUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the Month of January 2017
_______________________
Commission File Number 000-28998
ELBIT SYSTEMS LTD.
(Translation of Registrant’s Name into English)
Advanced Technology Center, P.O.B. 539, Haifa 3100401, Israel
(Address of Principal Corporate Offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
x Form 20-F o Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934: o
o Yes x No
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-______________
Attached hereto and incorporated herein by reference as Exhibits 1,2 and 3, respectively, are the Registrant's Press Release dated January 12, 2017, the Unofficial English Translation of Elbit Systems Ltd. Monitoring Report – January 12, 2017 and the Consent of the Rating Agency dated January 12, 2017.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ELBIT SYSTEMS LTD. (Registrant) | |||
By: | /s/ Ronit Zmiri | ||
Name: | Ronit Zmiri | ||
Title: | Corporate Secretary | ||
Date: January 12, 2017
EXHIBIT INDEX
Exhibit No. | Description | |
1. | Registrant's Press Release dated - | January 12, 2017 |
2. | Unofficial English Translation of Elbit Systems Ltd. Monitoring Report - | January 12, 2017 |
3. | Consent of Rating Agency Dated - | January 12, 2017 |
 |  |
Exhibit 1
ELBIT SYSTEMS LTD. ANNOUNCES
MIDROOG LTD. REAFFIRMING RATING "Aa1"(LOCAL SCALE), WITH STABLE OUTLOOK, FOR ELBIT SYSTEMS’ SERIES "A" NOTES
Haifa, Israel, January 12, 2017 - Elbit Systems Ltd. (NASDAQ and TASE: ELST) ("Elbit Systems") announced today that Midroog Ltd., an Israeli rating agency ("Midroog"), reaffirmed Midroog's "Aa1" rating (on a local scale), with a stable outlook, of the Series "A" Notes issued by the Company in 2010 and in 2012.
Midroog's official report in Hebrew will be submitted by the Company to the Israel Securities Authority and the TASE. An unofficial English translation of Midroog's report will be submitted by the Company on Form 6-K to the U.S. Securities and Exchange Commission.
This press release shall not constitute an offer to sell or a solicitation of an offer to buy any Series "A" Notes.
Joseph Gaspar, Elbit Systems Executive Vice President and Chief Financial Officer, noted that the high rating awarded to Elbit Systems’ Company’s Notes attests to the Company’s long-term business stability and financial strength.
About Elbit Systems
Elbit Systems Ltd. is an international high technology company engaged in a wide range of defense, homeland security and commercial programs throughout the world. The Company, which includes Elbit Systems and its subsidiaries, operates in the areas of aerospace, land and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance ("C4ISR"), unmanned aircraft systems, advanced electro-optics, electro-optic space systems, EW suites, signal intelligence systems, data links and communications systems, radios and cyber-based systems. The Company also focuses on the upgrading of existing platforms, developing new technologies for defense, homeland security and commercial applications and providing a range of support services, including training and simulation systems.
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For additional information, visit: www.elbitsystems.com, follow us on Twitter or visit our official Youtube Channel
Contacts:
Company Contact: Joseph Gaspar, Executive VP & CFO Tel: +972-4-8316663 Dalia Rosen, VP, Head of Corporate Communications Tel: +972-4-8316784 Elbit Systems Ltd. | IR Contact: Ehud Helft Kenny Green GK Investor Relations Tel: 1-646-201-9246 |
This press release contains forward‑looking statements (within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended) regarding Elbit Systems Ltd. and/or its subsidiaries (collectively the Company), to the extent such statements do not relate to historical or current fact. Forward-looking statements are based on management’s expectations, estimates, projections and assumptions. Forward‑looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. These statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Therefore, actual future results, performance and trends may differ materially from these forward‑looking statements due to a variety of factors, including, without limitation: scope and length of customer contracts; governmental regulations and approvals; changes in governmental budgeting priorities; general market, political and economic conditions in the countries in which the Company operates or sells, including Israel and the United States among others; differences in anticipated and actual program performance, including the ability to perform under long-term fixed-price contracts; and the outcome of legal and/or regulatory proceedings. The factors listed above are not all-inclusive, and further information is contained in Elbit Systems Ltd.’s latest annual report on Form 20-F, which is on file with the U.S. Securities and Exchange Commission. All forward‑looking statements speak only as of the date of this release. The Company does not undertake to update its forward-looking statements.
Elbit Systems Ltd., its logo, brand, product, service and process names appearing in this Press Release are the trademarks or service marks of Elbit Systems Ltd. or its affiliated companies. All other brand, product, service and process names appearing are the trademarks of their respective holders. Reference to or use of a product, service or process other than those of Elbit Systems Ltd. does not imply recommendation, approval, affiliation or sponsorship of that product, service or process by Elbit Systems Ltd. Nothing contained herein shall be construed as conferring by implication, estoppel or otherwise any license or right under any patent, copyright, trademark or other intellectual property right of Elbit Systems Ltd. or any third party, except as expressly granted herein.
Exhibit 2
Elbit Systems Ltd.
Monitoring Report | January 2017
(Unofficial English Translation)
Contacts:
Avi Ben-Noon, Head of Financial Institutions – Primary Rating Assessor
[email protected]
[email protected]
Sigal Issachar, VP, Head of Corporate Finance
Midroog |
Elbit Systems Ltd.
Outlook: Stable | Aa1.il | Series Rating |
Midroog affirms Elbit Systems Ltd. (“Elbit” or "the Company") Aa1.il series A notes rating. Rating Outlook is stable.
The notes rated by Midroog:
Series | ISIN | Rating | Outlook | Maturity |
A | 1119635 | Aa1.il | Stable | June 30, 2016 |
Summary of Rating Considerations
The rating is supported by the Company's leading business position in the Israeli defense industry and in niche defense segments around the world. The Company's positioning is based on a wide scope of operations, geographical diversification and broad product range, supporting stability of income over global defense budget cycles. The Company's relative advantages stem from its ability to develop relevant technological solutions in line with changes in the global defense industry, together with its strategic importance to the Israeli defense establishment. Over time, the Company's growth opportunities stem from the acquisition of companies and operations that contribute to synergy and enhance the added value to customers. Along with a positive track record in mergers and acquisitions, it enters into joint ventures with local players in the countries in which it operates. The Company has a substantial backlog of orders demonstrating a multi-year growth trend, and a stable backlog/sales ratio at about 2.0 over the last five years – a positive factor that contributes to good visibility of revenue generation capacity in the short and medium term. The growth foreseen in the world's most significant defense budget – that of the US Department of Defense, is expected to somewhat moderate the effects of the competition in the industry, but price pressures will remain high.
The global defense industry is characterized, in our opinion, by low-to-medium risk, and is positively affected by long demand cycles and high entry barriers. Over the last two years, security threats to western countries, geopolitical changes and various confrontations may spurr many countries to increase their defense budgets. As a result, the global defense industry is expected to demonstrate renewed growth in the coming years, after several years of erosion of defense budgets, with growth of 3%-5% foreseen in worldwide defense expenditure, according to Moody's forecasts.
In light of the business profile and the range of products on offer which support the present and future battlefield, the Midroog base scenario foresees growth of 3%-4% in the Company's backlog of orders in the short-to-medium term, bolstered by higher defense budgets. The Company's profitability is not notably high relative to the rating level, but notable for its stability, as reflected by the operating profit/income ratio (EBIT%), with profitability rates expected to remain unchanged, in our opinion, given the intensive competition and the need to invest in R&D and marketing. Midroog assesses the Company's ability to streamline as limited, in view of the need to maintain its technological advantages and high-quality manpower.
Over recent years the Company has presented strong and stable funds from operations (FFO), deriving from broad revenue diversification, reasonable profitability and moderate leverage. Coverage ratios are fairly rapid and have improved in the last few years due to a gradual decrease in debt, against a background of moderate acquisition activity and a certain increase in profitability. We estimate that in the short term the Company will maintain the present level of debt, and that in the absence of mergers and acquisitions,
January 12, 2017 | Elbit Systems Ltd. - Monitoring Report | 2 | |
Midroog |
the ratios of adjusted debt coverage to EBITDA and to FFO will be in the range of 1.2 to 1.5 and 1.4 to 1.9, respectively. In the medium-to-long term we take into account that the Company may funnel the FCF as well as a certain increase in debt to acquisitions, and expect the Company to maintain rapid coverage ratios that are commensurate with the rating. The rating is supported by good liquidity and financial flexibility due to liquid balances and substantial available credit lines relative to the annual debt service, as well as an expected positive FCF in the coming 12 months and ready access to financing sources.
The stable rating outlook is based on our assessment of an improvement in the Company's business environment, supporting its financial profile and preventing significant deviation from the forecast range.
Elbit Systems Ltd., Key Financial Figures (USD millions)
9M 2016 | 9M 2015 | FY 2015 | FY 2014 | FY 2013 | FY 2012 | FY 2011 | |
Revenues | 2,306 | 2,221 | 3,108 | 2,958 | 2,925 | 2,889 | 2,817 |
Operating profit (before other and/or nonrecurring income) | 194 | 191 | 269 | 241 | 239 | 203 | 116 |
% operating profit | 8.4% | 8.6% | 8.6% | 8.1% | 8.2% | 7.0% | 4.1% |
Net profit | 171 | 143 | 207 | 179 | 191 | 170 | 90 |
Adjusted debt* | 650 | 613 | 607 | 704 | 691 | 755 | 770 |
Adjusted debt/cap | 29% | 30% | 30% | 36% | 36% | 42% | 45% |
EBITDA | 283 | 281 | 391 | 363 | 369 | 342 | 266 |
FFO | 249 | 259 | 367 | 254 | 319 | 308 | 252 |
Adjusted debt/EBITDA | 1.7 | 1.6 | 1.6 | 1.9 | 1.9 | 2.2 | 2.9 |
Adjusted debt/FFO | 1.8 | 2.0 | 1.7 | 2.8 | 2.2 | 2.5 | 3.1 |
*Adjusted debt includes the fair value of the hedging component on shekel debt + excess of liabilities over compensation fund.
Detailed Rating Considerations
Moderate-to-low industry risk; expectations for growth in the global defense budget in the short-to-medium term
The scope of activity in the defense industry correlates highly with government defense budgets, which are characterized by relatively long cycles. A change in trend may occur due to unforeseen security confrontations (as has actually occurred in the last two years).
Moody's forecasts a 3%-5% increase in global defense expenditures in 2017-18, further to a moderate increase of 0.8% in 2015 following an extended contraction during 2011-2014. The forecast for defense budgets around the world is supported by an increase in the US defense budget, higher expenditures by NATO members as part of efforts to protect and guard national borders against the rise in geopolitical risks, ongoing confrontations and instability in the Middle East, tensions between Russia and the west, terror incidents in different geographical regions and isolationist tendencies in several key countries.
Recent developments in defense concepts, as reflected in the spending priorities set by the US Department of State and Western European defense budgets, which put greater emphasis on asymmetrical warfare in several parallel arenas, use of drones, intelligence, surveillance and patrolling and cyber warfare, support the Israeli defense industry which fills these needs. We foresee the possibility of continued growth in demand for rapid hi-tech systems, command and control systems, protective gear for the individual soldier, advanced electronic systems and homeland security equipment, at the expense of large military platforms.
The global defense industry is led by US and European giant corporations, which are closely linked to domestic government budgets. This is especially apparent among US corporations, which act as primary
January 12, 2017 | Elbit Systems Ltd. - Monitoring Report | 3 | |
Midroog |
contractors in defense projects of the US government, which accounts for approximately 40% of the global defense expenditure over time, whereas European corporations are more oriented towards global activity.
Competition in the industry has intensified in recent years, against the background of the contraction in defense budgets in recent years and ongoing M&A activity. The competition is mainly expressed in downward pressure on selling prices and a shorter time to market.
Other risk characteristics of the industry include: dependence on primary contractors – most defense companies act as subcontractors, in second or third supply tiers, exposing them, as subcontractors, to the competitive positioning of the primary contractors and reducing their pricing flexibility; large, protracted projects, most at a predetermined price, creating exposure to unexpected change in costs and a need for tight project management; a high component of wage costs and fixed overheads, including an R&D component, which weighs on profitability at times of reduced activity and impairs operational flexibility.
Strong business positioning and technological flexibility support a product range suited to the future battlefield concept
The Company's business profile is supported by a large scale of operations, with total sales of USD 3.2 billion in the last four quarters. Revenue is widely diversified over four principal operating segments: airborne systems (39% of revenues in the four quarters up to September 30, 2016); C4ISR systems (38%); land vehicle systems (11%), and electro optical systems (9%). The Company geographically diversified, with 80% of its revenues over the years deriving from exports (26% of sales in the four quarters up to September 30, 2016 derive from North America, and 18%, 19% and 13% from Europe, Latin America and Pacific Asia, respectively).
The business profile is further supported by a wide geographical spread and diversity of customers – apart from the Israeli Ministry of Defense, which is a significant customer – characterized by high financial strength and mostly by a long-term relationship with the Company. The Company's wide business diversification within the defense industry contributes to the stability of its revenues over the industry's economic cycle. The Company's ability to generate revenues is high, in our opinion, and supported by a product profile in the field of defense electronics that is suited to the challenges of the future battlefield, as discussed above, and to the expected growth in western defense budgets, and by relevant solutions for emerging markets with a high growth potential. The Company has relatively high R&D expenses, which support continued retention of its technological edge and ability to provide solutions suited to the needs of military and homeland security organizations. The Company has proven experience in mergers and acquisitions, creating synergy and enabling the business development of complementary technologies, while consolidating a strategy of penetration and focus on growing markets.
January 12, 2017 | Elbit Systems Ltd. - Monitoring Report | 4 | |
Midroog |
The Company has a good reputation, as well as senior strategic status in the Israeli defense establishment, which provides a testing ground for new products and technologies, and gives its products and services a good reputation in the world. . On the other hand, intensifying competition in the industry due to budget constraints in recent years and the Company's status as subcontractor in many export projects could adversely affect the pricing of future projects and consequent profitability, as well as product time to market, and cause as well schedule overruns.
Strong backlog conferring good revenue visibility, contrasted with unfavorable (although improved) profitability rates
The Company has a substantial backlog of orders amounting to USD 6,836 million as of September 30, 2016, up 4% from the end of 2015. The backlog/revenue ratio, which has stood at 2.0 in recent years, confers high visibility on revenues and provides good protection against unexpected changes in the business environment in the short-to-medium terms. The broad diversification of the backlog among geographical regions and different projects somewhat moderates the industry's cycle risk and supports revenue stability over the long term.
Profitability is moderate relative to the rating level, although gross and operating profitability rates are stable and have been trending upward in recent years, ranging between 28%-29% and 7.0%-8.6%, respectively, in 2012-2015. In our assessment, the Company's profitability is characterized by relatively low operating flexibility. The Company's technological advantage and ability to provide innovative and relevant solutions derive from its high expenses in R&D, which is a central component of the cost structure (the net R&D rate, excluding external participation in R&D, stands at an average of 7.7% in the last three years).
Midroog estimates that R&D costs will remain high in the short-to-medium term, in light of the Company's strategy to maintain its business positioning in the industry and its relative advantages. We consider the Company's streamlining capacity to be limited, in view of the need for retention of high-quality manpower and technological innovation, which contribute to its ability to compete in the industry, together with a continuous requirement for flexibility and the ability to provide dynamic solutions for changing needs.
The Midroog base scenario assumes a 3%-4% increase in revenues in the short-to-medium term, derived from the growth in the backlog in the past year as well as expectations for continued growth at a similar rate, based on our estimate of growth in aggregate global defense expenditure, taking into account the variance in our assessment for the different geographical regions. In addition, we assume continued strong competition, with increasing pressure to stay on schedule, adhere to budgets and shorten the time to market, which will necessitate continued investment in R&D and marketing.
January 12, 2017 | Elbit Systems Ltd. - Monitoring Report | 5 | |
Midroog |
Operating profit rates within this time range are expected to be in the range of 7.5%-8.5%. Along with the threat to profitability, we identify competitive pressure as well as a certain degree of exposure to exchange rate fluctuations.
Cash flow generation is expected to remain robust and stable, conferring coverage ratios commensurate with the rating level
According to the Midroog base scenario, the Company is expected to present operating profit (before other income) net of depreciation and amortization (EBITDA) of USD 390-400 million in 2016-2017 (USD 393 million in the four quarters up to September 30, 2016) and FFO of USD 320-340 million.
The Company recorded a decrease in its financial debt in recent years, attributable to more moderate M&A activity and lower investment needs relative to the operating cash flow. The amount of the financial debt also derives from working capital needs, which increased over the first three quarters of 2016, leading the Company to raise short-term credit with a resulting increase in debt. We assume that the Company will keep up the current level of dividend distributions to shareholders at a rate of 35% of the net profit, while making current investments of USD 90-100 million per year. We estimate that the Company will continue to make mergers and acquisitions as part of its growth and expansion strategy. The Midroog base scenario assumes that the Company will maintain the current level of debt in the short term, while accumulating cash from free cash flow (FCF); however, in the medium term the Company may increase the level of debt for financing its expansion.
We expect the adjusted coverage ratios to remain rapid and commensurate with the rating level, with the ratios of adjusted debt coverage to EBITDA and to FFO to stand at 1.2 to 1.5 and 1.4 to 1.9, respectively, during the period of the forecast.
The Company's leverage ratio and capital cushion are reasonable, and derive from an adjusted debt/cap ratio of 29.4% as of September 30, 2016. The leverage ratio supports the Company's ability to absorb unexpected nonrecurring losses. In our estimation, the capital cushion will continue to be built up from the accumulation of net profit beyond dividend payouts.
Favorable liquidity and financial flexibility
The Company's liquidity is supported by strong cash flows from operating activities, fairly moderate investment needs and substantial available credit. The Company also has substantial liquidity balances to meet volatile working capital needs, resulting from the project-based nature of its activity as well as significant scope of advance payments from customers. In our estimation (without assuming further significant acquisitions), the Company will generate in the coming 12 months a strong cash flow that will support the annual debt service and the liquidity buffers, also in view of a relatively undemanding amortization schedule.
The Company has high financial flexibility, in view of a moderate leverage level, diversified financing sources and ready access to financing entities. The Company meets several financial covenants to which it is committed with respect to its debts, with an adequate margin.
January 12, 2017 | Elbit Systems Ltd. - Monitoring Report | 6 | |
Midroog |
Rating Outlook
Factors that could lower the rating:
• | Continuing erosion in the Company's backlog, impairing its ability to generate revenues. |
• | Mergers and acquisitions that significantly increase the leverage ratio and slow the debt service coverage ratios. |
• | Extensive dividend distribution that increases the leverage ratio. |
About the Company
Elbit Systems Ltd. is an Israeli multinational company that engages directly and through subsidiaries in the development, manufacture, integration and marketing of electronic warfare systems for military air, sea and land use. The Company acts both as a primary contractor for solutions for armies and governments and as a supplier of products and systems to leading defense manufacturers around the world. The Company is 45.8% owned by Michael Federmann (as the ultimate owner), with the remaining percentage held by institutional investors and the public. The Company employs about 12,500 workers, mostly in Israel and the rest in subsidiaries around the world.
Rating History
January 12, 2017 | Elbit Systems Ltd. - Monitoring Report | 7 | |
Midroog |
Related Reports
Elbit Systems Ltd., Monitoring Report, January 2016
Rating Defense Companies, Methodology, February 2014
Midroog Rating Scale and Definitions
The reports are published on Midroog's website: www.midroog.co.il.
General Information
Date of rating report: | January 12, 2017 |
Date of last revision of the rating: | January 11, 2016 |
Date of first publication of the rating: | May 13, 2010 |
Rating commissioned by: | Elbit Systems Ltd. |
Rating paid for by: | Elbit Systems Ltd. |
January 12, 2017 | Elbit Systems Ltd. - Monitoring Report | 8 | |
Midroog |
Local Long-Term Rating Scale
Aaa.il | Issuers or issues rated Aaa.il demonstrate, in Midroog's judgment, the strongest creditworthiness relative to other domestic issuers. |
Aa.il | Issuers or issues rated Aa.il demonstrate, in Midroog's judgment, very strong creditworthiness relative to other domestic issuers. |
A.il | Issuers or issues rated A.il demonstrate, in Midroog's judgment, above-average creditworthiness relative to other domestic issuers. |
Baa.il | Issuers or issues rated Baa.il demonstrate, in Midroog's judgment, average creditworthiness relative to other domestic issuers and may possess certain speculative characteristics. |
Ba.il | Issuers or issues rated Ba.il demonstrate, in Midroog's judgment, below-average creditworthiness relative to other domestic issuers and may possess speculative characteristics. |
B.il | Issuers or issues rated Ba.il demonstrate, in Midroog's judgment, weak creditworthiness relative to other domestic issuers and possess speculative characteristics. |
Caa.il | Issuers or issues rated Caa.il demonstrate, in Midroog's judgment, very weak creditworthiness relative to other domestic issuers and possess very significant speculative characteristics. |
Ca.il | Issuers or issues rated Ca.il demonstrate, in Midroog's judgment, extremely weak creditworthiness and are very near default, with some prospect for recovery of principal or interest. |
C.il | Issuers or issues rated C.il demonstrate, in Midroog's judgment, the weakest creditworthiness and are typically in default, with little prospect for recovery of principal or interest. |
Note: Midroog appends numerical modifiers 1, 2, and 3 to each rating category from Aa.il to Caa.il. The modifier 1 indicates that the bond ranks in the higher end of its rating category, which is denoted by letters; the modifier 2 indicates that it ranks in the middle of its rating category, and the modifier 3 indicates that the bond ranks in the lower end of its rating category, which is denoted by letters.
January 12, 2017 | Elbit Systems Ltd. - Monitoring Report | 9 | |
Midroog |
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This document, including this paragraph, is copyrighted by Midroog, and are protected by copyright and by intellectual property law. This document may not be copied, scanned or photocopied, amended, distributed, duplicated, translated or displayed for any purpose whatsoever, commercial or otherwise, without advance written consent from Midroog.
Caveat regarding the limitations of a rating and the risks of relying on a rating, and caveats and reservations in respect to the activity of Midroog Ltd. and the information appearing on its website
Ratings and/or publications by Midroog are subjective opinions about future relative credit risks of entities relative to their credit obligations, debts and/or debt-like financial instruments that apply on the date of their publication, and as long as Midroog has not changed the rating or has withdrawn from it. Midroog's publications may contain assessments based on quantitative models of credit risks, as well as related opinions that served it in the rating process. Ratings and publications by Midroog do not constitute a statement about the accuracy of the facts at the time of the publication or in general. Midroog makes use of rating scales to issue relative prognoses of credit risks and/or entities risks and/or the risks of financial assets according to definitions detailed in the scale itself. The choice of a symbol to reflect credit risk reflects solely a relative assessment of that risk. Midroog defines credit risk as the risk that an entity may fail to meet its contractual financial obligations on schedule and estimated financial loss given default. Midroog's ratings do not address any other risk, such as risks relating to liquidity, market value, change in interest rates, and fluctuation in prices or any other element that influences the capital market.
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Nor do the ratings and/or publications issued by Midroog constitute investment advice or financial advice, nor do they address the appropriateness of any given investment for any specific investor, or constitute a recommendation for investment of any type whatsoever relying on the rating. Midroog issues ratings on the assumption that anybody making use of the information therein and of the ratings will exercise due caution and conduct the appropriate tests required himself and/or through authorized professionals, in order to personally assess the merit of any investment in a financial asset that he is thinking of buying, holding or selling. Every investor should obtain professional advice in respect to his investments, to the applicable law, and/or to any other professional issue. Any rating or other opinion that Midroog issues should be considered as just one component in any investment decision by the user of information contained in this document or by anybody on his behalf, and accordingly, any user of information contained in Midroog ratings and/or publications and/or in this document must study and reach an assessment of the merit of investment on his behalf regarding any issuer, guarantor, bond or other financial instrument he intends to hold, buy or sell. "Investor" – an investor in a financial asset that has been rated, or in a financial asset of a rated corporation.
All the information contained in Midroog ratings and/or publications, and on which it relied (hereinafter: "the Information") was delivered to Midroog by sources that it considers credible, inter alia the rated entity. Midroog is not responsible for the accuracy of the Information and presents it as provided by the sources. Midroog exercises all reasonable means, to the best of its understanding, to assure that the Information is of quality and of adequate extent and that it originates from sources Midroog considers to be credible, including when relying on information received from independent third parties, if and when appropriate. However, Midroog does not carry out audits and cannot therefore verify or certify the Information.
General reviews that Midroog publishes are not intended for use in assessing investments of any kind, but to provide general information and/or data in Midroog's possession, under the limitations set forth above in respect to the Information that served in their preparation. The provisions of these reviews do not constitute part of any methodology by which Midroog works. Midroog may deviate from anything said in a general review and change its position regarding its provisions at any time. Nothing said in any general review shall be viewed, treated or relied on as an opinion or advice in any way. A general review does not constitute part of Midroog's professional methodology. It reflects the personal opinion of the author of the document, and does not necessarily reflect Midroog's opinion.
Subject to the Law, Midroog, its directors, its officers, its employees and/or anybody on its behalf involved in the rating shall not be held responsible under law, for any damage and/or loss, financial or other, direct, indirect, special, consequential, associated or related, incurred in any way or in connection with the Information or a rating or a rating process, including not issuing a rating, including if they were advised in advance of the possibility of damage or a loss as said above, including but not confined to (a) any loss of profit in present or future, including the loss of other investments opportunities; (b) any loss or damage caused consequential to holding, acquisition and/or selling of a financial instrument, whether it is a subject of a rating issued by Midroog or not; (c) any loss or damage caused consequential to the relevant financial asset, that was caused, inter alia and not exclusively, as a result of or in respect to negligence (except for fraud, a malicious action or any other action for which the law does not permit exemption from responsibility) by directors, officers, employees and/or anybody acting on Midroog's behalf, whether by action or omission.
Midroog hereby declares that most of the issuers of financial assets that it rates, or entities for whose issue a rating was conducted, undertook to pay Midroog for the rating prior to the rating process. Midroog maintains policy and procedures in respect to the independence of the rating and the rating processes.
Midroog is a subsidiary of Moody's (hereinafter: "Moody's"), which owns 51% of Midroog's shares. However, Midroog's rating processes are independent and separate from Moody's and are not subject to approval by Moody's. Midroog has its own policies and procedures and its rating committee is independent in its discretion and decisions.
A rating issued by Midroog may change as a result of changes in the information on which it was based and/or as a result of new information and/or for any other reason. Updates and/or changes in ratings are presented on Midroog’s website at www.midroog.co.il, which also has additional information on Midroog’s Policies and/or the operation of its rating committee.
January 12, 2017 | Elbit Systems Ltd. - Monitoring Report | 10 | |
Exhibit 3
CONSENT OF RATING AGENCY
We consent to the incorporation by reference in the Registration Statement on
Form S-8 No. 333-139512 pertaining to employees’ stock option plan of Elbit Systems Ltd. (the “Company”) of the reference to our “Aa1il” rating (Israeli Rating Scale) and of the unofficial translation of our Monitoring Report dated January 11, 2017, with respect to the Series A Notes issued by the Company, included in this current report on Form 6-K.
/s/ Sigal Issachar
Sigal Issachar, VP
Midroog Ltd
Tel-Aviv, Israel,
January 12, 2017.
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