Elbit Systems (ESLT) Tops Q1 EPS by 9c, Revenues Miss

Elbit Systems (NASDAQ: ESLT) reported Q1 EPS of $1.63, $0.09 better than the analyst estimate of $1.54. Revenue for the quarter came in at $1.07 billion versus the consensus estimate of $1.1 billion.

• Backlog of orders at $10.8 billion
• Revenues at $1,071 million
• Non-GAAP net income of $72 million
• GAAP net income of $64 million
• Non-GAAP net EPS of $1.63
• GAAP net EPS of $1.44

Management Comment:

Bezhalel (Butzi) Machlis, President and CEO of Elbit Systems, commented: "In the first quarter we witnessed positive momentum across our markets, receiving more than $1.8 billion in orders from customers around the world. These orders contributed to a record backlog of $10.8 billion, growing by 8% over the last quarter of 2019, and providing Elbit Systems with good revenue visibility.

As a result of the COVID-19 pandemic, since March we have made significant changes to the way we work in order to protect the health and safety of our employees around the world, while at the same time maintaining business continuity in order to deliver our products and services to our customers as planned. This includes utilizing our healthy balance sheet to secure our supply channels and maintaining adequate levels of inventory to enable us to continue deliveries to customers."

Impact of the COVID-19 Pandemic on the Company:

The Coronavirus disease 2019 (COVID-19) was declared a pandemic by the World Health Organization in March 2020. COVID-19 has had significant negative impacts on the worldwide economy, resulting in disruptions to supply chains and financial markets, significant travel restrictions, facility closures and shelter-in-place orders in various locations. Elbit Systems is closely monitoring the evolution of the COVID-19 pandemic and its impacts on the Company's employees, customers and suppliers, as well as on the global economy.

As we reported on April 13, 2020, we have been taking a number of actions to protect the safety of our employees and maintain business continuity and our supply chain. We also reported on a number of activities where we are leveraging our technological capabilities to assist hospital staffs and other first responders protecting our communities from the impact of the pandemic. All of these actions remain ongoing.

The safety measures implemented across all our sites include increasing the number of manufacturing line shifts to enhance social distancing and encouraging employees to work from home where feasible.

We have initiated business continuity plans to meet our commitments to our customers. Where necessary we are working on finding alternative solutions for delivering our products to our customers on time, including chartering dedicated freighter aircraft.

During the first quarter of 2020 our business was not materially impacted by the pandemic. Subsequently, some of our businesses have begun to experience certain disruptions due to government directed safety measures, travel restrictions and supply chain delays. To date, the financial impact to us of these disruptions has not been material.

We have implemented a series of cost control measures to help limit the financial impact of the pandemic on the Company, in parallel to the measures we are taking to maintain business continuity and deliveries to our customers. Examples of such cost control measures include temporary reductions of salaries for certain employees, senior managers and executives, as well as directors' fees, reductions in discretionary spending and capital expenditures and the furlough of a small number of employees who have been unable to fulfill their tasks due to travel and other pandemic-related restrictions. We also are working on efficiency initiatives with a number of our suppliers. We are evaluating our operations on an ongoing basis in order to adapt to the evolving business environment.

We believe that as of March 31, 2020, Elbit Systems had a healthy balance sheet, adequate levels of cash and access to credit facilities that provide liquidity when necessary. We have given high priority to cash management and adequate cash reserves to run the business. During the first quarter we drew additional cash from our existing credit facilities to increase our financial flexibility. We have used part of our financial resources to secure our supply chain and build buffer stocks of inventory where required.

The extent of the impact of COVID-19 on the Company's performance will depend on future developments including the duration and spread of the pandemic, the measures adopted by governments to limit the spread of the pandemic and resulting actions that may be taken by our customers and our supply chain, all of which are uncertain. As noted in our annual report on Form 20-F, the preparation of financial reports such as our quarterly financial reports requires us to make judgments, assumptions, and estimates that affect the amounts reported in such reports. For our quarterly financial report for the quarter ended March 31, 2020, we considered the economic impact of the COVID-19 pandemic on our critical and significant accounting estimates. The expected impact of the COVID-19 pandemic did not have a material effect on our significant judgments, assumptions and estimates reflected in the report. However, our future results may differ materially from our estimates; and as events continue to evolve in connection with the COVID-19 pandemic, the estimates we use in future periods may change materially.

For earnings history and earnings-related data on Elbit Systems (ESLT) click here.

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