TAT Technologies Reports Fourth Quarter and Full Year 2011 Results

GEDERA, Israel, March 22, 2012 /PRNewswire/ --

TAT  Technologies  Ltd. (NASDAQ: TAT), a leading provider of services and products to the commercial and military aerospace and ground defense industries, reported today its results for the three month and twelve month periods ended December 31, 2011.

Financial Highlights:

TAT announced revenues of $23.4 million and net income of $0.1 million for the three months ended December 31, 2011 compared to similar revenues of $23.8 million with a net loss of $3.1 million for the three months ended December 31, 2010.

During the fourth quarter of 2011, total revenues were impacted by (i) the increase in revenues in the Heat Transfer Services and Products operating segment; and (ii) the increase in revenues in the MRO Services for Aviation Components operating segment; offset by (iii) the decrease in revenues in the OEM of Heat Management Solutions operating segment; and (iv) the decrease in revenues in the OEM of Electric Motion Systems operating segment.  

Revenue breakdown by the operating segments for the three-month and twelve-month periods ended December 31, 2011 and 2010, respectively, was as follows:

                           Three Months Ended December 31,
                                                                                                             
                           2011                     2010             % of
                  Revenues        % of     Revenues        % of     Change
                     in          Total        in          Total     Between
                  Thousands     Revenues   Thousands     Revenues   Periods
                        Unaudited                Unaudited
    Revenues
    OEM of Heat
    Management
    Solutions       $ 8,424        36.0%     $ 9,021        37.9%     (6.6)%
    Heat
    Transfer
    Services and
    Products *        7,638        32.7%       6,872        28.9%     11.1%
    MRO services
    for Aviation
    Components *      5,343        22.8%       4,630        19.4%     15.4%
    OEM of
    Electric
    Motion
    Systems           3,103        13.3%       4,480        18.8%    (30.7)%
    Eliminations     (1,118)       (4.8)%     (1,186)       (5.0)%    (5.7)%
    Total
    revenues       $ 23,390       100.0%    $ 23,817       100.0%     (1.8)%


                          Twelve Months Ended December 31,
                                                                     
                                                                    
                                                                    
                           2011                     2010            % of 
                  Revenues        % of     Revenues        % of     Change
                     in          Total        in          Total     Between
                  Thousands     Revenues   Thousands     Revenues   Periods
                        Unaudited                Unaudited
    Revenues
    OEM of Heat
    Management
    Solutions      $ 30,020        35.2%    $ 29,651        37.2%      1.2%
    Heat
    Transfer
    Services and
    Products *       27,603        32.3%      24,469        30.7%     12.8%
    MRO services
    for Aviation
    Components *     20,146        23.6%      16,332        20.4%     23.4%
    OEM of
    Electric
    Motion
    Systems          11,658        13.6%      13,046        16.4%    (10.6)%
    Eliminations     (4,030)       (4.7)%     (3,743)       (4.7)%     7.7%
    Total
    revenues       $ 85,397       100.0%    $ 79,755       100.0%      7.1%


 

* As of January 1, 2011, TAT began reporting its operations based on four operating segments, after dividing its MRO Services operating segment into two separate operating segments: Heat Transfer Services and Products and MRO services for Aviation Components. Accordingly, the revenues and costs reported for the three months and twelve months periods ended December 31, 2010 for MRO Services operating segment were divided between these two new operating segments. Additionally, the operating segment name of 'OEM of Heat Transfer Products' was changed to 'OEM of Heat Management Solutions'.

For the twelve months ended December 31, 2011, TAT announced revenues of $85.4 million with net loss of $1.0 million compared to revenues of $79.8 million with net loss of $7.4 million for the same period ended December 31, 2010 - an increase of 7.1% in revenues along with a significant decrease in net loss of 86%. The net loss reported for the twelve months ended December 31, 2011 included a $5.76 million write down of inventories and impairment charges of long lived assets recorded in the third quarter of 2011, $5.46 million of which were in TAT's MRO Services for Aviation Components operating segment. Excluding thesecharges net income for the twelve months ended December 31, 2011 was $2.6 million (see further below under "Write down of inventory and impairment charges of long lived assets").

During the twelve months of 2011, total revenues were impacted by (i) the increase in revenues in the Heat Transfer Services and Products operating segment; (ii) the increase in revenues in the MRO Services for Aviation Components operating segment; and (iii) the increase in revenues in the OEM of Heat Management Solutions operating segment; partially offset by (iv) the decrease in revenues in the OEM of Electric Motion Systems operating segment. During 2011 this segment experienced a gradual decrease in revenues due to growing weakness in the relevant markets.  

Write down of inventory and impairment charges of long lived assets:

During the quarter ended September 30, 2011, the Company recorded a write down of inventory in the amount of $2.5 million (before off-set of taxes and not including impairment charges) under cost of revenues, attributable to inventory of the MRO services for Aviation Components operating segment. The write down was due to management's estimation of the continued decline in future forecasted sales levels and profitability margins in certain product lines in this operating segment resulting from the weakness in these areas of business.

Although revenues in the MRO services for Aviation Components operating segment increased in the three and nine month periods ended September 30, 2011 compared to year 2010, profit margins were lower than anticipated. Accordingly, the Company reviewed the MRO services for Aviation Components' long lived assets for impairment by estimating the fair value of this segment's operations and the fair value of its specific long lived assets, and comparing those values to the carrying value of the assets. The Company concluded, based on this valuation, that as of September 30, 2011 certain fixed assets and an intangible asset amount to $1.9 million and $1.1 million, respectively at its MRO for Aviation Components operating segment were impaired.

In addition, during the quarter ended September 30, 2011, due to management estimates of a continuing decline in sales levels in the OEM of Electric Motion Systems operating segment, resulting from the weakness in the Israeli defense market, the Company reviewed indications for impairment of certain identifiable assets in this operating segment. Accordingly, the Company reviewed these assets for impairment by estimating their fair value. As a result the Company concluded, as of September 30, 2011 that the intangible asset 'Customer Relations' at its OEM of Electric Motion Systems operating segment in the amount of $0.3 million was impaired.

Accordingly, the Company recorded a $3.3 million (before off-set of taxes and not including inventory write down) impairment charge during the quarter ended September 30, 2011 to reflect the fair value of the long lived assets mentioned above.

Mr. Itsik Maaravi, TAT's CEO commented:  

"The results of the 2011 fourth quarter reflect the continuation of the improving trend in our dominant operating segments - the OEM of Heat Management Solutions and Heat Transfer Services and Products. During this year we increased our revenues and improved our margins, compared to 2010. The fourth quarter also shows improved results in our MRO for Aviation Components operating segment in which we successfully increased our revenues while significantly reducing operating loss compared to 2010. These improvements are attributed to the increase in our marketing and sales activities during 2010 and 2011 as well as to our rigorous activity to improve our production flow and yields.

Year 2011 net loss was impacted bya write down of inventories and impairment charges of long lived assets. Excluding thesecharges net income for year 2011 was $2.6  million.

During 2011 we experienced a decrease in revenues and margins in the OEM of Electric Motion Systems compared to the same periods in 2010, resulting from growing weakness in this segment.

We are preserving a strong balance sheet with limited liabilities, impressive working capital and sufficient financial assets to support the growth of our operations.

We are encouraged by global trends of increased traffic reported by airlines and we believe we are witnessing a steady recovery in the demand for MRO services, as well as positive indications from OEMs in the aerospace and defense industries, which impact our businesses.

We continue to focus on our core capabilities while expanding our business offerings worldwide.

We believe that our efforts along with continued improvement in the global aviation industry, will sustain the improved trend line of our performance in 2012".


TAT TECHNOLOGIES AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except share data)

                                          December 31,    December 31,
                                              2011            2010
                   ASSETS
    Current Assets:
    Cash and cash equivalents                 $ 26,232        $ 27,037
    Marketable securities                        1,900           2,533
    Restricted deposit                           3,254           5,076
    Trade accounts receivable (net of
    allowance for doubtful accounts of
    $190 and $2,423 at December 31, 2011
    and December 31, 2010, respectively)        20,621          20,430
    Inventories                                 31,303          32,163
    Other accounts receivable and prepaid
    expenses                                     6,565           8,245
 
    Total current assets                        89,875          95,484
 
    Long-term assets:
    Investment in affiliate                      5,021           4,449
    Funds in respect of employee right
    upon retirement                              2,859           2,910
    Long-term deferred tax                       3,669           1,035
    Property, plant and equipment, net          12,853          14,443
    Intangible assets, net                           -           1,950
    Goodwill                                     1,042           1,156
 
    Total current assets                        25,444          25,943
 
    Total assets                             $ 115,319       $ 121,427
 
           LIABILITIES AND EQUITY
 
    Current Liabilities:
    Current maturities of long-term loans        4,916           9,379
    Trade accounts payables                      5,073           7,679
    Other accounts payable and accrued
    expenses                                     6,835           7,964
 
    Total current liabilities                   16,824          25,022
 
    Long-term liabilities:
    Long-term loans, net of current
    maturities                                   4,420             859
    Other accounts payable                          86             109
    Liability in respect of employee
    rights upon retirement                       3,414           3,458
    Long-term deferred tax liability             1,413             868
 
    Total long-term liabilities                  9,333           5,294
 
    EQUITY:
    Share capital
    Ordinary shares of NIS 0.9 par value
    - Authorized: 10,000,000 shares at
    December 31, 2011 and 2010; Issued
    and outstanding: 9,073,043 and
    8,815,003 shares respectively at
    December 31, 2011 and 2010                   2,790           2,790
    Additional paid-in capital                  64,402          64,439
    Accumulated other comprehensive loss        (1,031)           (414)
    Treasury stock, at cost, 258,040
    shares at December 31, 2011 and 2010,
    respectively                                (2,018)         (2,018)
    Retained earnings                           22,228          23,262
    Total TAT Technologies shareholders'
    equity                                      86,371          88,059
    Noncontrolling interest                      2,791           3,052
 
    Total equity:                               89,162          91,111
 
    Total liabilities and equity             $ 115,319       $ 121,427
 


TAT TECHNOLOGIES AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited, in thousands, except share and per share data)

                             Three months ended        Twelve months ended
                                December 31,              December 31,
                             2011          2010          2011         2010
 
    Revenues:
    OEM of Heat Management
    Solutions                $ 8,424       $ 9,021      $ 30,020     $ 29,651
    Heat Transfer Services
    and Products *             7,638         6,872        27,603       24,469
    MRO services for
    Aviation Components *      5,343         4,630        20,146       16,332
    OEM of Electric Motion
    Systems                    3,103         4,480        11,658       13,046
    Eliminations              (1,118)       (1,186)       (4,030)      (3,743)
                              23,390        23,817        85,397       79,755
 
    Cost and operating
    expenses:
    OEM of Heat Management
    Solutions                  6,270         6,345        22,660       22,425
    Heat Transfer Services
    and Products *             5,801         5,322        20,173       18,005
    MRO services for
    Aviation Components *      4,973         3,873        17,882       14,631
    OEM of Electric Motion
    Systems                    2,524         3,517         9,388       10,092
    Write down of
    inventory and
    impairment charges of
    long lived assets              -             -         5,763        3,500
    Eliminations              (1,127)       (1,120)       (3,884)      (3,965)
                              18,441        17,937        71,982       64,688
    Gross Profit               4,949         5,880        13,415       15,067
 
    Research and
    development costs, net       143           192           786          651
    Selling and marketing
    expenses                     958           975         3,439        3,475
    General and
    administrative
    expenses                   2,939         4,103        10,949       12,832
    Other income                 (44)             -         (169)           -
    Impairment of goodwill
    and intangible assets          -             -             -        4,704
                               3,996         5,270        15,005       21,662
    Operating income
    (loss)                       953           610        (1,590)      (6,595)
 
    Financial expense           (630)         (311)       (2,203)      (1,681)
    Financial income             296           370         1,823        1,570
    Other expenses                 -          (200)            -         (200)
 
    Income (loss) before
    income taxes                 619           469        (1,970)      (6,906)
 
    Taxes on income
    (benefit)                    363        (1,378)         (316)      (4,153)
 
    Net income (loss)            256         1,847        (1,654)      (2,753)
    Gain from dilution of
    interests in
    affiliated company             -             -           240            -
    Share in results of
    affiliated company and
    impairment of share in
    affiliated company          (119)       (4,879)          331       (4,510)
    Net income (loss)            137        (3,032)       (1,083)      (7,263)
    Net loss (income)
    attributable to Non
    controlling interest         (20)          (26)           53         (123)
    Net income (loss)
    attributable to TAT
    Technologies
    shareholders               $ 117      $ (3,058)     $ (1,030)    $ (7,386)
    Earning per share
    Basic and diluted net
    income (loss) per
    share attributable to
    controlling interest      $ 0.01       $ (0.35)      $ (0.12)     $ (0.84)
 
    Weighted average
    number of shares -
    basic and diluted      8,815,003     8,815,003     8,815,003    8,815,003
 


* As of January 1, 2011, TAT began reporting its operations based on four operating segments, after dividing its MRO Services operating segment into two separate operating segments: Heat Transfer Services and Products and MRO services for Aviation Components. Accordingly, the revenues and costs reported for the three months and twelve months periods ended December 31, 2010 for MRO Services operating segment were divided between these two new operating segments. Additionally, the operating segment name of 'OEM of Heat Transfer Products' was changed to 'OEM of Heat Management Solutions'.

Settlement Agreement with First Aviation Services, Inc.

In order to settle the commercial dispute that existed between TAT's subsidiary, Piedmont, and FAvS, on June 30, 2011 Piedmont and FAvS entered into a Settlement Agreement and Release (the "Settlement Agreement"). Pursuant to the Settlement Agreement, each party fully released the other party and acknowledged that the settlement was a compromise of disputed claims and was not to be construed as an admission of liability or wrongdoing.  In addition, each party agreed not to disparage the other and Piedmont paid an aggregate of $700,000 to FAvS (which amount had been fully reserved during 2010).

Simultaneously with the execution of the Settlement Agreement, Mr. Aaron Hollander ("Mr. Hollander"), the Chief Executive Officer and controlling stockholder of FAvS, purchased 166,113 shares of Class A Common Stock of FAvS at a price of $18.06 per share (share amount and price per share adjusted as result of a 1 for 20 reverse stock split), for an aggregate amount of $3 million, which was higher than FAvS book value recorded in Piedmont's books, while diluting Piedmont's interest in FAvS from 36.6% to 30.3% (30.02% as of December 31, 2011). In addition, Piedmont agreed to extend its guarantee for the bank debt incurred by FavS to fund the AeTR transaction, as described above.

The Stockholders Agreement entered into in 2009 between Piedmont and Mr. Hollander was also amended to delete the reciprocal drag along rights and to provide that Piedmont may designate one member to the Board of Directors of FAvS (rather than the two members provided in the original agreement).  Finally, the Rights Agreement entered into in 2009 between Piedmont and FAvS was amended so that Piedmont's right to approve certain material corporate actions by FAvS has been limited to the right to approve contracts or agreements with affiliates of FAvS.  The amendment also provided that the approval of Piedmont would not be required if FAvS seeks to raise additional capital from Mr. Hollander as long as the consideration that was paid by Mr. Hollander was not less than the consideration that would have been paid by a third-party in an arms-length transaction and would have been a fair, equitable and reasonable consideration under the circumstances.

In connection with the Settlement Agreement and the dilution in Piedmont's interest in FAvS, the Company recorded, at June 30, 2011, a gain in the amount of $0.24 million related to the $3 million capital investment in FAvS by Mr. Hollander which was at a higher share price than recorded at Piedmont books.

Seasonality

None

Subsequent Event

None

 

TAT's executive offices are located in the Re'em Industrial Park, Neta Boulevard, Bnei Ayish, Gedera 70750, Israel, and TAT's telephone number is +972-8-862-8500.

Safe Harbor for Forward-Looking Statements

This press release contains forward-looking statements which include, without limitation, statements regarding possible or assumed future operation results. These statements are hereby identified as "forward-looking statements" for purposes of the safe harbor provided by the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties that could cause our results to differ materially from management's current expectations. Actual results and performance can also be influenced by other risks that we face in running our operations including, but are not limited to, general business conditions in the airline industry, changes in demand for our services and products, the timing and amount or cancellation of orders, the price and continuity of supply of component parts used in our operations, and other risks detailed from time to time in the company's filings with the Securities Exchange Commission, including, its annual report on form 20-F and its periodic reports on form 6-K. These documents contain and identify other important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements. Stockholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update publicly or revise any forward-looking statement.

For more information of TAT Technologies, please visit our web-site:  http://www.tat-technologies.com

Yaron Shalem - CFO
TAT Technologies Ltd.
Tel: +972-8-862-8500
yarons@tat-technologies.com

SOURCE TAT Technologies Ltd




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