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Defense Markets Summary
Elbit Systems

Aug. 14, 2007: Strong sales brought Elbit Systems (NASDAQ: ESLT) to record the highest level of revenues per quarter ($468 million), in the second quarter of 2007, increased 36% over previous year Q2. According to Joseph Ackerman, President and CEO the company demonstrated an organic growth that amounted to more than 20% and, including the new acquisition, the overall growth was 36%.


The growth is partially attributed to the completion of acquisition of Tadiran Communications, for which the company used $27.1 million in cash, totally eroding a potential net profit of $23.7 million, into a loss of $0.7 million. The bottom line In the first half of 2007 the company generated $130 in cash. Relying on a backlog of orders set at a record $4.2 billion, Elbit Systems is set to continue to prosper from a growing demand for aerospace and defense electronics.

July 26, 2007: Elbit Systems Ltd. completed the acquisition of UK based Ferranti Technologies (Group) Limited ("FTL"). Elbit acquired FTL's entire share capital for £15 million (approximately US$31 Million). FTL is the second acquisition Elbit made in the UK. Together with U-TacS, a UAV Systems company established with Thales UK and UEL, the UAV engines' company, the acquisition will strengthen the Group's presence in the European and UK important market. FTL designs and manufactures electronic, power and control solutions for aerospace and defense systems

March 2007: Elbit Systems is reporting today its 2006 results, reporting 42% increase in revenue to $1.52 billion, doubling the profit to $72.2 million (EPS: $1.72). The By December 31, 2006 its backlog soared to $3.79 billion, a slight increase from $3.35 billion reported in 2005.

Elisra's Diffuses the Magic Touch

While Elbit's gross profit for the fourth quarter of 2006 was higher than the fourth quarter of 2005, ($100.2 million, as compared to $78.4 million in Q4/2005). The Q4/06 gross profit margin in reduced to 21.4%, from 24.4% in the fourth quarter of 2005. In 2006 Elbit Systems included the results of the Elisra Group it acquired in 2006, an addition which increased revenues but eroded profits, hence reducing the gross profit margin by 3.8 percentage points. This effect was diffused in the annual report, with 2006 full year gross profit margin reported at 24.5%, down from 26.1% in 2005. Again, this decline is attributed to Elisra's performance. Gross profit for the year ended December 31, 2006 was $373.5 million, as compared to gross profit of $279.8 million in 2005.

It should be noted that 2005 was not just another year in the history of Elbit Systems. It was a stormy year, where the company 'digested' three acquisitions, of Elisra, Tadiran Communications Ltd and Sandel Avionics in the USA. When tracing the company's performance before the merger, the numbers tell a positive story of consistent growth and stabilization, after a stormy year reflected by write offs charged on three acquisitions - Israeli Tadiran Communications and Elisra and Sandel in the USA. With these events behind it, Elbit is positioned to sustain its growth at an even higher pace, provided that its forthcoming consolidation with Tadiran Communications will also prove positive.

President and CEO of Elbit Systems, Joseph Ackerman is not illusive about these facts and is determined to turn Elisra and Tadiran which is yet to be included in 2007 reports into contributors, rather than liabilities to the group. "Our results were achieved despite the negative impact from Elisra's financial performance, and we intend to continue the Elisra turn-around in 2007, making it a contributor to our financial results, while maintaining our growth and profitability patterns“. Despite its difficulties, Elisra turned a record backlog in 2006 and merged its three subsidiaries into a single operating unit, and, as it continues to improve this year, it will be positioned to further improve its performance in 2007.

“We see the results of our continued investments in R&D and in developing leading edge technologies." said Akerman, "These technologies and our proven track record enabled us to win prestigious and important contracts and to further enhance our network of customers and business partners. I believe that the results of all these efforts will be reflected in our performance in 2007 and beyond as we continue the execution of our growth strategy both organically and through selective acquisitions”.

While Elbit Systems began its operations in Israel (32% of its sales are generated in its domestic market), it has become a "multi-domestic" entity, investing in growing local entities in several markets considered strategic to its growth. These include North America, where lbit generated over sales of US$600 million in the past year, in Latin America (Brazil), Eastern Europe (Romania) and Asia.



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