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
[email protected]
SOURCE TAT Technologies Ltd
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