Elbit Systems Ltd., the international high technology company, has reported its consolidated results for the fourth quarter and full year ended December 31, 2019.
In this release, the Company is providing US-GAAP results as well as additional non-GAAP financial data, which are intended to provide investors a more comprehensive understanding of the Company's business results and trends. For a description of the Company's non-GAAP definitions see page 6 below, "Non-GAAP financial data". Unless otherwise stated, all financial data presented is US-GAAP financial data.
Bezhalel (Butzi) Machlis, President and CEO of Elbit Systems, commented: “We are pleased with the solid revenue growth across all our major end-markets in 2019 and a record backlog that grew by 7% to over $10 billion for the first time.
To date we have not experienced a material impact on our ongoing business from the Covid-19 pandemic. However, we continue to monitor the situation, including its macro-economic impacts, and have initiated a series of measures to protect our employees while maintaining our ongoing commitments to our customers.
Looking forward into 2020 and beyond, Elbit Systems is a strong and stable business, with a healthy balance sheet and a broad long-term backlog that should support our globally diversified sales.”
Acquisition of Elbit Night Vision
On September 2019, we completed the acquisition of the night vision business of L3Harris Technologies (the Night Vision Business) for a purchase price of approximately $350 million. 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"). The financial results of ENV were included in our consolidated reports commencing the date of the acquisition.
In the fourth quarter of 2019, following the completion of the acquisition of ENV we recorded expenses of $55 million in our Cost of Revenues. These expenses were mainly related to inventory write-offs. The expenses were eliminated in the non-GAAP results due to their non-recurring nature.
Fourth quarter 2019 results:
Revenues in the fourth quarter of 2019 were $1,321.5 million, as compared to $1,077.8 million in the fourth quarter of 2018. Growth in the quarter was driven by the contributions of ENV and IMI Systems Ltd. ("IMI"), as well as growth in our legacy businesses.
Non-GAAP(*) gross profit amounted to $345.8 million (26.2% of revenues) in the fourth quarter of 2019, as compared to $306.7 million (28.5% of revenues) in the fourth quarter of 2018. GAAP gross profit in the fourth quarter of 2019 was $284.3 million (21.5% of revenues), as compared to $234.9 million (21.8% of revenues) in the fourth quarter of 2018. The gross profit in the fourth quarter of 2019 and 2018 included expenses of $55.0 and $66.6 million, respectively, related to the acquisition of ENV in 2019 and IMI in 2018.
Research and development expenses, net were $97.6 million (7.4% of revenues) in the fourth quarter of 2019, as compared to $73.0 million (6.8% of revenues) in the fourth quarter of 2018.
Marketing and selling expenses, net were $80.5 million (6.1% of revenues) in the fourth quarter of 2019, as compared to $73.5 million (6.8% of revenues) in the fourth quarter of 2018.
General and administrative expenses, net were $46.4 million (3.5% of revenues) in the fourth quarter of 2019, as compared to $49.8 million (4.6% of revenues) in the fourth quarter of 2018. The lower level of general and administrative expenses in the fourth quarter of 2019 resulted mainly from income related to settlement of litigation in the U.S.
Non-GAAP(*) operating income was $125.4 million (9.5% of revenues) in the fourth quarter of 2019, as compared to $112.5 million (10.4% of revenues) in the fourth quarter of 2018. GAAP operating income in the fourth quarter of 2019 was $63.6 million (4.8% of revenues), as compared to $38.6 million (3.6% of revenues) in the fourth quarter of 2018. GAAP operating income in the fourth quarter of 2019 and 2018 were reduced by $55 and $66.6 million, respectively, due to expenses related to the acquisitions of ENV and IMI.
Financial expenses, net were $16.4 million in the fourth quarter of 2019, as compared to $14.9 million in the fourth quarter of 2018. The increase in financial expenses in the fourth quarter of 2019 was mainly a result of the revaluation of lease liabilities.
Other expenses net were $1.6 million in the fourth quarter of 2019, as compared to $6.4 million in the fourth quarter of 2018. Other expenses in the fourth quarter of 2018 included expenses of $2.7 million related to the acquisitions of IMI.
Taxes on income were a tax benefit of $9.1 million in the fourth quarter of 2019, as compared to a tax expense of $3.9 million in the fourth quarter of 2018. The tax benefit in the fourth quarter of 2019 was related mainly to adjustments for prior years following tax assessments in the Company and some of its subsidiaries in Israel.
The net losses of affiliated companies and partnerships was $3.5 million in the fourth quarter of 2019, as compared to $11.4 million the fourth quarter of 2018. The loss in the fourth quarter of 2018 was mainly a result of a fair value re-evaluation of holdings in an affiliated company.
Net losses attributable to non-controlling interests was a loss of $0.3 million in the fourth quarter of 2019, as compared to income of $0.9 million in the fourth quarter of 2018.