Ehud Helft - GK Investor Relations Butzi Machlis - President and CEO Yossi Gaspar - Chief Financial Officer

Ladies and gentlemen, thank you for standing by. Welcome to Elbit Systems First Quarter 2015 Results Conference Call. All participants are at present in listen-only-mode. Following management's formal presentation, instructions will be given for the question-and-answer session. As a reminder, this conference is being recorded. You should have all received by now the company's press release. If you have not received it, please contact Elbit's Investor Relations team at GK Investor Relations or view it the News section of the company's website, www.elbitsystems.com. I would now like to hand over the call to Mr. Ehud Helft of GK Investor Relations. Ehud, please go ahead.

Thank you, Operator. Good day to everybody. On behalf of all the investors, I would like to thank Elbit Systems management for hosting this call. Joining us today on the call are Mr. Butzi Machlis, Elbit's President and CEO; and Mr. Yossi Gaspar, Elbit's Systems Chief Financial Officer. Yossi will begin by providing a discussion of the financial results for the first quarter of 2015, followed by Butzi, who will talk about some of the significant events during the quarter and beyond. We will then turn over the call for the question-and-answer session. Before we begin, I'd like to point out that the Safe Harbor statement in the company's press release issued earlier today also refers to the content of this conference call. And with that, I would like to turn over the call now to Yossi. Yossi, please.

Thank you, Ehud. Hello, everyone, and thank you for joining us today. Overall, we are pleased with our performance in the first quarter of 2015 marking continues growth in revenues, higher year-over-year backlog and improvements in profitability. I will now highlight and discuss some of the key figures and trends. Our first quarter of 2015, revenues were $706.6 million, an increase of 3.5%, compared with $682.6 million reported in the first quarter of 2014. In terms of revenue breakdown across our areas of operation in the quarter, Airborne Systems was 40%, C4ISR was 31%, Land systems was 18%, Electro-Optics was 7% and the rest was 4%. In terms of geographic breakdown in the first quarter, Israel was 19% of revenues, North America was 29%, Europe was 14%, Asia-Pacific was 25%, Latin America 12% and the rest of the world was 1%. Compared with the first quarter of last year, we saw a major increase in Land systems. This was primarily due to higher level of sales of Land systems in Asia-Pacific region. It is worth mentioning that the Land systems growth included electro-optic subsystems which resulted in a lower direct sales to end customers of the Electro-Optic systems. For the first quarter, our gross margin was 28.5%, compared with 28.3% as reported in the first quarter of last year. The non-GAAP gross margin was 29.2% in the first quarter of this year compared with 29.1% last year. Operating income in the first quarter was $59.8 million with an operating margin of 8.5%. This is compared with an operating income of $59.9 million and an operating margin of 8.8% in the first quarter of last year. I note that the first quarter of 2014 had -- we had an extraordinary other operating income, which was a non-cash accounting income due to a gain from change in holdings. This gain amounted approximately to $6 million. Excluding this extraordinary gain last year, operating income was $53.9 million, or an operating margin of 7.9%. The non-GAAP operating income in the first quarter of 2015 was $69.5 million, or 9.8% of revenues, compared with $65 million, or 9.5% of revenues, in the first quarter of 2014. In terms of breakdown of these expenses, our net R&D expenses for the first quarter of 2015 were 7.9% of revenues, compared with 7.2% in 2014. Marketing and selling expenses were 7.3% of revenues in the quarter, compared with 8.1% in the first quarter of 2014. Our G&A expenses in the first quarter were 4.9% of revenues, compared with 5.2% of revenues in the first quarter of 2014. Total operating expenses for the quarter were 20% of revenues, compared with 19.5% of revenues in 2014 or 20.4%, excluding the extraordinary noncash income last year. Financial expenses for the first quarter of 2015 were $5.7 million, compared with financial expenses of $4.7 million in the first quarter of last year. Consolidated net income in the first quarter of 2015 was $44.6 million, or net margin of 6.3%. This is compared with the net income of $48.2 million, or net margin of 7.1%, in the first quarter of 2014. Income per diluted share for the first quarter of this year was $1.04, as compared with $1.13, or excluding extraordinary income of $0.99 for the first quarter of last year. On a non-GAAP basis, net income in the quarter was $52.6 million or a net margin of 7.4%. This is compared with $51.9 million, or a net margin of 7.6% in the first quarter of last year. Non-GAAP diluted earnings per share were $1.23, compared to $1.22 for the first quarter of last year. Our backlog of orders at March 31, 2015 was $6.27 billion, 3.4% higher than the backlog at the end of the first quarter of 2014, which stood at $6.06 billion. Approximately 66% or $4.1 billion was of the current backlog, is scheduled to be performed during 2015 and 2016. Operating cash flow for the quarter was $83.9 million, as compared to $80.8 million in the same quarter last year. Finally, the Board of Directors declared the dividend of $0.35 per share for the first quarter of 2015. That ends my summary. And I shall now turn the call over to Mr. Machlis. Butzi, please?

Thank you, Yossi. Our first quarter results continued to demonstrate solid businesses with stable growth. Our topline grew by about 3.5% at the same rate as our [indiscernible]. Our overall margin profit was improved. During the quarter, we announced two awards that our U.S. subsidiary achieved. One was a contract with U.S. Marine Corp. for their new rugged Common Laser Range Finder-Integrated Capability, a lightweight system for the Marine, providing imaging, range finding and navigation solutions. We will also award the contract from Science Applications International Corporation, SAIC to install our Color Helmet Display and Tracking System on MH-60S Seahawk test aircraft for the U.S. Navy, providing pilots with both night and day capability to seek color flight instrument symbols on their helmet mounted display modules. Additionally, the line of sight tracking system enables the pilot to interact with the flight navigation system, improving pilot and co-pilot situational awareness. In summary, our businesses have continued to perform well. Looking further to the future, from a strategic perspective, we’ve stride ourselves on remaining a few steps ahead in adapting quickly to our industry trends. We aim to consistently develop the product that will be demanded for more defense and homeland security needs. And over a number of years, we have successfully navigated our industry trends. For example, we are early players in the UAS space as well as in C4ISR earlier. We currently seek in the area of both intelligence and cyber space sector who import is increasing and we see increased demand from our customers for these products and solutions. In April, we have published a new division called ISTAR, which is focused on providing our customers with a competitive range of advanced intelligence solutions in the aero, SC and homeland. This division does include our electro-optics in UAS operation. We also established a new wholly-owned subsidiary called CYBERBIT, which will spearhead our activities cyber space, both defense and commercial. Looking ahead, through both internal development efforts as well as through energetic acquisition, we intend to continue our efforts to remain ahead of and capitalize on industrial trends. With that, I will be happy to take your question.

Thank you. [Operator Instruction] : :

There are no further questions at this time. Before I ask Mr. Machlis to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available two hours after the conference ends. In the U.S., please call 1 (888) 326-9310. In Israel, please call 03-925-5900. And internationally, please call 9723-925-5900. A replay of the call will also be available at the company's website, www.elbitsystems.com. Mr. Machlis, would you like to make your concluding statement?

I would like to thank all our employees for their continued hard work. To everyone on the call, thank you for joining us today and for your continued support and interest in our company. Have a good day and goodbye.

Thank you. This concludes the Elbit Systems Limited first quarter 2015 results conference call. Thank you for your participation. You may go ahead and disconnect.