Revenues at Elbit Systems Ltd., the international defense electronics company, increased by 11.5% to $728.3 million in the second quarter of 2009, as compared to $653.2 million in the second quarter of 2008.

This increase was primarily due to an increase in revenues from C4ISR systems as a result of increased sales of communication equipment and unmanned air vehicle systems mainly in Israel, and was partly offset by a reduction in land systems related equipment sales, mainly in the U.S.

"We have made significant investments in developing new markets while enhancing the potential in existing key markets, such as our recent joint venture with General Dynamics aimed at capturing the great potential of the UAV market in the U.S.," said Joseph Ackerman, CEO of Elbit Systems. "Consistent with our M&A strategy we recently entered into agreements to acquire interests in Mikal and BVR. These acquisitions will contribute to the company's growth and support our continued participation in large-scale projects that offer our customers more comprehensive and advanced solutions."

Gross profit increased by 7.2% to $211.9 million (29.1% of revenues) in the second quarter of 2009, as compared with gross profit of $197.7 million (30.3% of revenues) in the second quarter of 2008. The lower gross profit percentage primarily resulted from a significant reduction in revenues from short turn-around orders, mainly in the U.S. during the second quarter of 2009 as compared to the second quarter of 2008. Short turn-around orders generally have contributed to improvement in overall gross margins.

"We also continue to pursue our R&D strategy in order to maintain our technological edge." said Ackerman. The Israeli Ministry of Transportation's recent decision to equip all of the Israeli commercial aviation fleets with C-MUSIC systems, which we developed for protection from enemy missiles, represents a successful example of our R&D strategy. We see market potential for installation of C-MUSIC systems aboard the commercial aircraft fleets of other countries as well."

Net research and development ("R&D") expenses were $53.0 million (7.3% of revenues) in the second quarter of 2009, as compared to $38.1 million (5.8% of revenues) in the second quarter of 2008. The higher level of R&D expenses in the current quarter reflects increased spending on R&D projects to maintain and further advance the company's technologies, in accordance with its long-term plans.

Net financial income was $11.4 million in the second quarter of 2009, as compared to net financial expenses of $12.4 million in the second quarter of 2008. The net financial income was mainly due to the company's hedging activity, which reduced the company's exposure to changes in the value of U.S. dollar versus the shekel. While the weakening of the dollar against the shekel negatively impacted the company's gross and operating income, it increased the value of the company's currency hedge derivatives in shekels.

Taxes on income were $14.0 million (effective tax rate of 19.3%) in the second quarter of 2009, as compared to taxes on income of $3.8 million (effective tax rate of 7.9%) in the second quarter of 2008. The change in the effective tax rate was attributable mainly to the mix of the tax rates in the various jurisdictions in which the company's entities generate taxable income.

Net income attributable to non-controlling interests was $2.5 million in the second quarter of 2009, as compared to $16.2 million in the second quarter of 2008. The decrease in net income attributable to non-controlling interests was mainly a result of the company's purchase during the second quarter of 2009 of the remaining 49% of Kinetics shares not then owned by the Company.

Net income attributable to the Company's ordinary shareholders increased by 91.7% to $59.7 million (8.2% of revenues) for the second quarter of 2009, as compared with $31.2 million (4.8% of revenues) in the second quarter of 2008.

Diluted net earnings per share attributable to the company's ordinary shareholders were $1.39 for the second quarter of 2009, as compared with $0.73 for the second quarter of 2008, an increase of 90.4%.

The Company's backlog of orders totaled $5,096 million as of June 30, 2009, as compared with $5,030 million as of December 31, 2008. Approximately 66% of the current backlog is due to orders from outside Israel. Approximately 69% of the current backlog is scheduled to be performed during the second half of 2009 and 2010.

Operating cash flow was $93.6 million in the first half of 2009, as compared to $129.8 million in the first half of 2008. The decrease in the operating cash flow was mainly a result of a reduction in the overall amount of advances received from customers.