TAT Technologies Reports Year 2013 Second Quarter Results

GEDERA, Israel, Aug. 27, 2013 /PRNewswire/ -- TAT Technologies Ltd. (NASDAQ: TATT) ("the Company"), 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 six month periods ended June 30, 2013.

Financial Highlights:

TAT announced revenues of $21.9 million with a net income of $1.0 million for the three months ended June 30, 2013, compared to revenues of $22.1 million with a net loss of $4.2 million for the three months ended June 30, 2012. The net loss reported for 2012 second quarter was the result of a $1.0 million impairment charge of goodwill in TAT's OEM for Electric Motion Systems operating segment and a $3.3 million impairment charge with respect to TAT's investment in First Aviation Services Inc. ("FAvS"). Excluding the impairment charges recorded in the second quarter of 2012, net income for the three months ended June 30, 2013 increased by $0.9 million compared to the same period in 2012.

During the Second quarter of 2013, revenues were impacted by (i) the increase in revenues in the MRO Services for Aviation Components operating segment; (ii) the increase in revenues in the Heat Transfer Services and Products operating segment; (iii) similar revenues in the OEM of Heat Management Solutions operating segment; offset by (iv) the decrease in revenues in the OEM of Electric Motion Systems operating segment. This decrease is a continuation of the decrease in revenues this segment had experienced during 2012 and 2011.

Revenue breakdown by operating segments for the three month and six month periods ended June 30, 2013 and 2012, respectively, was as follows:

 




Three Months Ended June 30,




2013


2012


% of
Change Between Periods



Revenues
in
Thousands


% of
Total
Revenues


Revenues
in
Thousands


% of
Total
Revenues




Unaudited

Revenues











OEM of Heat Management Solutions


$          7,006


32.0%


$         7,036


31.8%


(0.4)%

Heat Transfer Services and Products


7,466


34.2%


7,104


32.1%


5.1%

MRO services for Aviation Components


6,168


28.2%


5,636


25.5%


9.4%

OEM of Electric Motion Systems


2,042


9.4%


2,677


12.1%


(23.7)%

Eliminations


(821)


(3.8)%


(326)


(1.5)%


151.8%

Total revenues


$         21,861


100.0%


$       22,127


100.0%


(1.2)%

 



Six Months Ended June 30,




2013


2012


% of
Change Between Periods



Revenues
in
Thousands


% of
Total
Revenues


Revenues
in
Thousands


% of
Total
Revenues




Unaudited


Unaudited



Revenues











OEM of Heat Management Solutions


$        13,722


31.6%


$       14,720


34.4%


(6.8)%

Heat Transfer Services and Products


14,607


33.7%


13,887


32.4%


5.2%

MRO services for Aviation Components


11,971


27.6%


10,639


24.9%


12.5%

OEM of Electric Motion Systems


3,992


9.2%


4,479


10.5%


(10.9)%

Eliminations


(902)


(2.1)%


(921)


(2.2)%


(2.1)%

Total revenues


$         43,390


100.0%


$       42,804


100.0%


1.4%

 

For the six months ended June 30, 2013, TAT announced revenues of $43.4 million with a net income of $2.7 million compared to revenues of $42.8 million with a net loss of $3.6 million for the six months ended June 30, 2012. The net loss reported for the six month period ended June 30, 2012 was the result of a $1.0 million impairment charge of goodwill in TAT's OEM for Electric Motion Systems operating segment and a $3.3 million impairment charge with respect to TAT's investment in FAvS. Excluding the impairment charges recorded in the second quarter of 2012, net income for the six months ended June 30, 2013 increased by $2.0 million compared to the same period in 2012.

During the six months ended June 30, 2013, revenues were impacted by (i) the increase in revenues in the MRO Services for Aviation Components operating segment; (ii) the increase in revenues in the Heat Transfer Services and Products operating segment; partially 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 - As mentioned above, this decrease is a continuation of the decrease in revenues this segment had experienced during 2012 and 2011.

Mr. Itsik Maaravi, TAT's President & CEO commented: 

"2013 Second quarter's trends in the Aerospace and Defense markets were similar to the trends shown in the beginning of the year. The commercial airlines markets continue to show an increase in passengers and to a lesser extent, in cargo air traffic while airlines profitability remains a challenge due to competitive environment and relatively high fuel prices. In addition, the MRO business shows steady flow with modest growth and commercial aerospace OEMs continue to report increasing revenues and backlog. On the other hand defense companies continue to show weakness and are waiting to understand uncertainties following budget constraints and sequestration which went into effect on March 1, 2013.

For TAT, the results of 2013 second quarter reflect the continuation of the trend of improvement as we increased revenues, gross margins and operating margins compared to the first quarter of 2013. On a year-to-date basis, the first half of 2013 reflects higher revenues compared to the first half of 2012 while gross and operating margins were similar. We continue to increase our marketing and sales efforts and put an emphasis on strengthening our relations with leading players in the relevant markets, successfully develop new products for new customers and improving our production efficiency, the quality of our products and the responsiveness and support to our customers."

 


TAT TECHNOLOGIES AND ITS SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except share data)









June 30,


June 30,


December 31,

2013

2012

ASSETS






Current Assets:






Cash and cash equivalents

$              21,945


$              14,158


$            16,581

Short-term bank deposits

10,013


10,000


10,048

Marketable securities at fair value

-


1,900


-

Short-term restricted deposits

-


3,206


2,307

Trade accounts receivable (net of
     allowance for doubtful accounts
     of  $368 and $ 436 as of June
     30, 2013 and 2012, respectively)

17,969


20,111


20,930

Other accounts receivable and
     prepaid expenses

3,771


5,207


4,587

Inventories, net

33,494


31,711


33,031







Total current assets

87,192


86,293


87,484







Long-term assets:






Investment in affiliated company

2,362


1,668


1,264

Funds in respect of employee right upon
     retirement

3,514


2,965


3,318

Long-term deferred tax

1,435


2,787


2,535

Property, plant and equipment, net

13,160


12,141


12,910







Total Long-term assets

20,471


19,561


20,027







Total assets

$            107,663


$         105,854


$          107,511







 

LIABILITIES AND EQUITY












Current Liabilities:






Short term bank loan and current maturities of long-term loans

1,883


3,731


3,274

Trade accounts payables

6,156


6,649


5,373

Other accounts payable and accrued expenses

6,725


6,021


7,407







Total current liabilities

14,764


16,401


16,054







Long-term liabilities:






Long-term loans, net of current
     maturities

82


1,883


1,116

Other accounts payable

73


85


-

Liability in respect of employee rights
     upon retirement

4,069


3,540


3,815

Long-term deferred tax liability

863


1,344


1,490







Total long-term liabilities

5,087


6,852


6,421































 

EQUITY:






Share capital






Ordinary shares of NIS 0.9 par value –
     Authorized: 10,000,000 shares at 
     June 30, 2013 and 2012; Issued:
     9,073,043 shares at June 30, 2013
     and 2012; Outstanding: 8,798,570 and
     8,810,366 shares at June 30, 2013
     and 2012, respectively

2,790

2,790


2,790

Additional paid-in capital

64,412


64,402


64,410

Treasury stock, at cost, 274,473 and
     262,677 shares at June 30, 2013 and
     2012, respectively

(2,088)


(2,038)


(2,088)

Accumulated other comprehensive loss

(702)


(1,218)


(897)

Retained earnings

20,745


16,116


18,018

Total TAT Technologies shareholders' equity

85,157


80,052


82,233

Non controlling interest

2,655


2,549


2,803







Total equity:

87,812


82,601


85,036







Total liabilities and equity

$            107,663


$            105,854


$          107,511







 


TAT TECHNOLOGIES AND ITS SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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








Three months ended


Six months ended


Year ended


June 30,


June 30,


December 31,


2013


2012


2013


2012


2012











Revenues:










OEM of Heat Management Solutions

$       7,006


$       7,036


$     13,722


$    14,720


$         31,032

Heat Transfer Services and Product

7,466


7,104


14,607


13,887


27,709

MRO services for Aviation Components

6,168


5,636


11,971


10,639


22,442

OEM of Electric Motion Systems

2,042


2,677


3,992


4,479


10,007

Eliminations

(821)


(326)


(902)


(921)


(3,268)


21,861


22,127


43,390


42,804


87,922











Cost and operating expenses:










OEM of Heat Management Solutions

5,498


5,404


10,583


10,990


23,105

Heat Transfer Services and Products

5,293


5,020


10,404


10,049


19,671

MRO services for Aviation Components

5,053


4,163


9,769


8,537


19,044

OEM of Electric Motion Systems

1,712


2,288


3,673


3,999


8,043

Eliminations

(862)


(454)


(1,171)


(1,051)


(3,281)


16,694


16,421


33,258


32,524


66,582

Gross Profit

5,167


5,706


10,132


10,280


21,340











Research and development, net

215


501


503


675


1,152

Selling and marketing expenses

928


924


1,814


1,813


3,426

General and administrative expenses

2,794


2,755


5,458


5,750


11,487

Other expenses (income)

-


(4)


(7)


10


9

Impairment of  goodwill

-


1,015


-


1,015


1,015


3,937


5,191


7,768


9,263


17,089

Operating income

1,230


515


2,364


1,017


4,251











Financial expenses

(262)


(811)


(623)


(1,094)


(2,229)

Financial income

262


428


591


970


2,048











Income before income taxes

1,230


132


2,332


893


4,070











Taxes on income

452


1,063


935


1,331


2,086











Net income (loss) after income taxes

778


(931)


1,397


(438)


1,984











Share in results of affiliated company and
impairment of share in affiliated company

187


(3,312)


1,098


(3,352)


(3,756)











Net income (loss)

965


(4,243)


2,495


(3,790)


(1,772)











Net loss attributable to Non controlling interest

54


44


232


174


58











Net income (loss) attributable to TAT Technologies shareholders

$       1,019


$     (4,199)


$       2,727


$   (3,616)


$        (1,714)











Earning per share










Basic and diluted net income (loss) per share attributable to controlling interest

$       0.12


$       (0.48)


$       0.31


$     (0.41)


$     (0.19)











Weighted average number of shares – basic and diluted

8,798,570


8,815,003


8,798,570


8,815,003


8,808,075

Resignation and Election of Chairman of the Board of Directors

At the meeting of the Board of Directors of the Company, held on August 26, 2013, Mr. Zeev Birnboim has resigned as Chairman of the Board of Directors of the Company effective immediately. Mr. Birnboim advised the Board that his resignation was not as a result of any disagreement with the Company. At that meeting, the Board of Directors of the Company has elected Mr. Samual Vlodinger as the new Chairman of the Board of Directors, effective immediately. Mr. Vlodinger is a senior partner with FIMI Opportunity Funds, the new controlling shareholder of TAT.

Seasonality

In the OEM industry in general and in TAT's OEM businesses in particular, the majority of customers operate based on annual budgets and tend to utilize during the fiscal fourth quarter the remaining balance of any un-used budgets. This trend is more typical with customers from the defense industry. Accordingly, TAT is more likely to generate increased revenues in the OEM businesses (such as TAT's OEM of Heat Management Solutions and OEM of Electric Motion Systems) during the fiscal fourth quarter. The aviation industry is known for its highest traffic in the third quarter, primarily attributable to summer vacations. As a result, during the fiscal third quarter, airlines tend to postpone, to the extent possible, maintenance and repair of their aircraft to minimize aircraft grounding. Accordingly, TAT is more likely to notice decreased revenues in the MRO businesses (such as TAT's MRO for Aviation Components and Heat Transfer Services and Products) during the fiscal third quarter with recovery during subsequent quarters. 

About TAT Technologies LTD

TAT Technologies LTD is a leading provider of services and products to the commercial and military aerospace and ground defense industries.

TAT operates under four segments:  (i) Original Equipment Manufacturing or "OEM" of Heat Management Solutions (ii) OEM of Electric Motion Systems (iii) Heat Transfer Services and Products and (iv) Maintenance, Repair and Overhaul or "MRO" services of Aviation Components.

TAT's activities in the area of OEM of Heat Management Solutions primarily include the design, development, manufacture and sale of (i) a broad range of heat transfer components (such as heat exchangers, pre-coolers and oil/fuel hydraulic coolers) used in mechanical and electronic systems on-board commercial, military and business aircraft; (ii) environmental control and cooling systems on board aircraft and for ground applications; and (iii) a variety of other electronic and mechanical aircraft accessories and systems such as pumps, valves, power systems and turbines.

TAT's activities in the area of OEM of Electric Motion Systems primarily include the design, development, manufacture and sale of a broad range of electrical motor applications for airborne and ground systems.

TAT's activities in the area of Heat Transfer Services and Products include the maintenance, repair and overhaul of heat transfer equipment and in a lesser extent, the manufacturing of certain heat transfer products. TAT's Limco subsidiary operates FAA certified repair station, which provides heat transfer MRO services and products for airlines, air cargo carriers, maintenance service centers and the military.

TAT's activities in the area of MRO services for Aviation Components include the maintenance, repair and overhaul of APUs, Landing Gear and other aircraft components. TAT's Piedmont subsidiary operates an FAA certified repair station, which provides aircraft component MRO services for airlines, air cargo carriers, maintenance service centers and the military.

TAT also holds approximately 30% of the equity of First Aviation Services, a one-stop-shop for MRO services (wheels, breaks, propellers and landing gear) for the General Aviation Industry.

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.

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

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

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.

SOURCE TAT Technologies Ltd.



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