TAT Technologies Reports Fourth Quarter and Full Year 2012 Results
GEDERA, Israel, March 22, 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 twelve month periods ended December 31, 2012.
Financial Highlights:
TAT announced revenues of $23.0 million and a net income of $0.4 million for the three months ended December 31, 2012 compared to revenues of $23.4 million with a net income of $0.1 million for the three months ended December 31, 2011 - an increase of approximately $0.3million in net income.
During the fourth quarter of 2012, revenues were impacted by (i) the decrease in revenues in the Heat Transfer Services and Products segment; (ii) similar revenues in the OEM of Heat Management Solutions segment; (iii) similar revenues in the OEM of Electric Motion Systems segment; partially offset by (iv) the increase in revenues in the MRO Services for Aviation Components segment.
Revenue breakdown by the operating segments for the three month and twelve month periods ended December 31, 2012 and 2011 was as follows:
Three Months Ended December 31,
% of
Change
Between
2012 2011 Periods
Revenues % of Revenues % of
in Total in Total
Thousands Revenues Thousands Revenues
Unaudited
Revenues
OEM of Heat
Management
Solutions $ 8,311 36.1% $ 8,424 36.0% (1.3)%
Heat Transfer
Services and
Products 7,167 31.1% 7,638 32.7% (6.2)%
MRO services
for Aviation
Components 5,776 25.1% 5,343 22.8% 8.1%
OEM of
Electric
Motion Systems 3,092 13.4% 3,103 13.3% (0.4)%
Eliminations (1,307) (5.7)% (1,118) (4.8)% 16.9%
Total revenues $ 23,039 100.0% $ 23,390 100.0% (1.5)%
Twelve Months Ended December 31,
% of
Change
Between
2012 2011 Periods
Revenues % of Revenues % of
in Total in Total
Thousands Revenues Thousands Revenues
Unaudited
Revenues
OEM of Heat
Management
Solutions $ 31,032 35.3% $ 30,020 35.2% 3.4%
Heat Transfer
Services and
Products 27,709 31.5% 27,603 32.3% 0.4%
MRO services
for Aviation
Components 22,442 25.5% 20,146 23.6% 11.4%
OEM of
Electric
Motion Systems 10,007 11.4% 11,658 13.6% (14.2)%
Eliminations (3,268) (3.7)% (4,030) (4.7)% (18.9)%
Total revenues $ 87,922 100.0% $ 85,397 100.0% 3.0%
For the twelve months ended December 31, 2012, TAT announced revenues of $87.9 million with a net loss of $1.5 million compared to revenues of $85.4 million with net loss of $1.0 million for the same period ended December 31, 2011 - an increase of 3.0% in revenues along with a $0.05 million increase in reported net loss. The net loss reported for the twelve month period ended December 31, 2012 is the result of a $1.0 million impairment charge of goodwill, recorded in the second quarter of 2012, in TAT's OEM for Electric Motion Systems operating segment and a $3.3 million impairment charge, also recorded in the second quarter of 2012, with respect to TAT's investment in FAvS. The net loss reported for the twelve month period ended December 31, 2011 was the result of a $5.76 million (before taxes) write down of inventories and impairment charges of long lived assets ($3.61 million, net of taxes). Excluding these impairment charges net income for the twelve month period ended December 31, 2012, was $2.8million compared to net income of $2.6 million for twelve month period ended December 31, 2011 - an increase of 10%.
During the twelve months of 2012, revenues were impacted by the increase in revenues in all our significant operating segments - the OEM of Heat Management Solutions segment, the Heat Transfer Services and Products segment and the MRO Services for Aviation Components segment; while revenues in the OEM of Electric Motion Systems operating segment significantly decreased due to growing weakness in the relevant defense markets. This decrease is a continuation of the decrease in revenues this segment had experienced during 2011.
Mr. Itsik Maaravi, TAT's President & CEO commented:
"The results of 2012 reflect the trend of continuing improvement Year over Year as we again increased revenues and gross margins compared to 2011 and 2010. These improvements are attributed to the increase in our marketing and sales efforts during 2011 and 2012 as well as to our rigorous and continuing activity in improving our production efficiency.
Increasing fuel costs continue to impact the commercial airline business environment by reducing airline profitability and offsetting the positive impact of growing air traffic. As a result, airlines are likely to defer MRO activities and utilize existing stock rather than maintaining inventory levels. On the other hand, we continue to witness positive indications from commercial OEMs in the aerospace industry that increase backlog of new airplanes and/or airborne platforms/systems. The defense market however continues to show weakness and is impacted by budget constraints in various countries, primarily in the USA.
We are encouraged by our ability to maintain a steady growth in our key businesses in spite of the adverse impacts of the trends described above. The weakness in the defense market which is also relevant to the OEM of Electric Motion Systems operating segment resulted in a decrease of our revenues and gross margins in this segment compared to 2011.
We continue to focus on our core capabilities and believe that our efforts will sustain the trend of improved performance for in 2013.
We are continuing to preserve a strong balance sheet with limited liabilities, strong working capital and sufficient financial assets to support the growth of our operations".
TAT TECHNOLOGIES AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except share data)
December
December 31, 31,
2012 2011
ASSETS
Current Assets:
Cash and cash equivalents $ 16,581 $ 26,232
Short-term bank deposits 10,048 -
Marketable securities at fair value - 1,900
Short-term restricted deposits 2,307 954
Trade accounts receivable (net of allowance for
doubtful accounts of $376 and $190 at December
31, 2012 and 2011, respectively) 20,930 20,621
Other accounts receivable and prepaid expenses 4,468 6,479
Inventories, net 33,031 31,303
Total current assets 87,365 87,489
Long-term assets:
Long-term restricted deposits - 2,300
Investment in affiliated company 1,264 5,020
Funds in respect of employee right upon
retirement 3,318 2,859
Long-term deferred tax 2,535 3,669
Property, plant and equipment, net 12,910 12,939
Goodwill, net - 1,042
Total Long-term assets 20,027 27,829
Total assets $ 107,392 $ 115,318
LIABILITIES AND EQUITY
Current Liabilities:
Current maturities of long-term loans 3,274 4,916
Trade accounts payables 5,373 5,073
Other accounts payable and accrued expenses 7,057 6,835
Total current liabilities 15,704 16,824
Long-term liabilities:
Long-term loans, net of current maturities 1,116 4,420
Other long-term liabilities - 86
Liability in respect of employee rights upon
retirement 3,815 3,414
Long-term deferred tax liability 1,490 1,413
Total long-term liabilities 6,421 9,333
EQUITY:
Share capital
Ordinary shares of NIS 0.9 par value -
Authorized: 10,000,000 shares at December 31,
2012 and 2011; Issued: 9,073,043 shares at
December 31, 2012 and 2011; Outstanding:
8,798,570 and 8,815,003 shares at December 31,
2012 and 2011, respectively 2,790 2,790
Additional paid-in capital 64,410 64,402
Treasury stock, at cost, 274,473 and 258,040
shares at December 31, 2012 and 2011,
respectively (2,088) (2,018)
Accumulated other comprehensive loss (897) (1,036)
Retained earnings 18,249 22,232
Total TAT Technologies Ltd. shareholders'
equity 82,464 86,370
Noncontrolling interest 2,803 2,791
Total equity: 85,267 89,161
Total liabilities and equity $ 107,392 $ 115,318
TAT TECHNOLOGIES AND ITS 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,
2012 2011 2012 2011
Revenues:
OEM of Heat Management
Solutions $ 8,311 $ 8,424 $ 31,032 $ 30,020
Heat Transfer Services
and Products 7,167 7,638 27,709 27,603
MRO services for
Aviation Components 5,776 5,343 22,442 20,146
OEM of Electric Motion
Systems 3,092 3,103 10,007 11,658
Eliminations (1,307) (1,118) (3,268) (4,030)
23,039 23,390 87,922 85,397
Cost and operating
expenses:
OEM of Heat Management
Solutions 6,256 6,270 23,105 22,660
Heat Transfer Services
and Products 4,925 5,801 19,671 20,173
MRO services for
Aviation Components 4,996 4,973 18,694 17,882
OEM of Electric Motion
Systems 2,464 2,524 8,043 9,388
Write down of inventory
and impairment charges
of long lived assets - - - 5,763
Eliminations (1,212) (1,127) (3,281) (3,884)
17,429 18,441 66,232 71,982
Gross Profit 5,610 4,949 21,690 13,415
Research and development
costs, net 313 143 1,152 786
Selling and marketing
expenses 830 958 3,426 3,439
General and
administrative expenses 3,233 2,939 11,487 10,949
Other expenses (income) (1) (44) 9 (169)
Impairment of goodwill - - 1,015 -
4,375 3,996 17,089 15,005
Operating income (loss) 1,235 953 4,601 (1,590)
Financial expenses (577) (630) (2,229) (2,203)
Financial income 560 296 2,048 1,823
Gain from dilution of
interests in affiliated
company - - - 240
Income (loss) before
income taxes 1,218 619 4,420 (1,730)
Taxes on income
(benefit) 309 363 2,205 (316)
Net income (loss) after
income taxes 909 256 2,215 (1,414)
Share in results of
affiliated company and
impairment of share in
affiliated company (540) (119) (3,756) 331
Net income (loss) 369 137 (1,541) (1,083)
Net loss (income)
attributable to
Noncontrolling interest (8) (20) 58 53
Net income (loss)
attributable to TAT
Technologies Ltd.
shareholders $ 361 $ 117 $ (1,483) $ (1,030)
Earning per share
Basic and diluted net
income (loss) per share
attributable to
controlling interest $ 0.04 $ 0.01 $ (0.17) $ (0.12)
Weighted average number
of shares - basic and
diluted 8,798,570 8,815,003 8,808,075 8,815,003
Liquidity and Capital Resources
As of December 31, 2012, TAT had cash and cash equivalents and short-term bank deposits of $26.6 million and restricted cash of $2.3 million (such restricted cash was released on March 18, 2013, see further below under "Disposal of API by FAvS") , which equals $28.9 million of financial assets, compared with cash and cash equivalents $26.2 million, marketable securities of $1.9 million and restricted cash of $3.3 million, which equals $31.4 million of financial assets as of December 31, 2011. Financial assets, net of debt were $24.5 million in December 31, 2012 compared to $22.0 million in December 31, 2011
On May 21, 2012, TAT's Board of Directors approved a stock repurchase plan under Rule 10b5-1 of the Securities Exchange Act of 1934. The plan was for a period of 6 months (subject to extension) and provided for the purchase of shares in an aggregate amount of up to $0.5 million U.S. dollars. Such plan replaced and superseded a prior repurchase plan approved by TAT's Board of Directors on February 21, 2012. On November 21, 2012, the term of such stock repurchase plan ended. As of such date, the Company had purchased 16,433 shares for approximately $70 thousands (average of $4.29 per share) constituting less than 0.1% of TAT's issued shares.
On November 6, 2012, the Company made a prepayment of $775 thousands, on account of loans in the total original amount of $6.25 million received by the Company from an Israeli bank. The loans' balance prior to the prepayment was $3.3 million, following which its remaining balance was $2.5 million.
Grant of options
Following the approval of TAT's Audit committee and Board of Directors, on June 28, 2012, the Company's shareholders approved a plan (the "Plan") to grant up to 380,000 options ("Options") to purchase Ordinary shares, 0.9 NIS par value, of the Company to senior executives and certain members of the Board of Directors, at an exercise price of $6.5 per share. The Options vest over a three-year period (one-third each year), but the vesting of 50% of the Options is subject, in addition, to certain minimum shareholders' equity during a period of 4 years from the grant date. On August 21, 2012, pursuant to the Plan, TAT's Board of Directors approved the grant of 330,000 Options, which were granted on October 4, 2012 (out of which 45,000 options were forfeited on October 30, 2012 and additional 40,000 were forfeited on January 16, 2013).
Election of a new Chairman of the Board of Directors
At a meeting of the Board of Directors of the Company held on March 19, 2013, Mr. Zeev Birnboim was elected as the new Chairman of the Board of Directors, to serve in such capacity until the 2013 Annual General Meeting of the Company, expected to be held by the end of June.
Change of Control - Update
On March 15, 2013 the receiver of the Company's shares held by its previously controlling shareholders announced a tender to purchase such shares. Persuant to the tender all proposals to aquire such shares must be submitted no later than April 18, 2013. Finalization of such sale would result in a change of control of TAT.
Disposal of API by FAVS
On March 18, 2013 FAvS sold 97% of the stock of API, one of its subsidiaries, for a total purchase price of $16.5 million, out of which $15.9 million were used to repay debt. The sale resulted in FAvS retaining a 3% equity interest in the API business.
The transaction resulted in a loss from discontinued operations and write-down of the API business of $11.5 million which is included in the FAvS loss for the year ended December 31, 2012. On June 30, 2012, as a result of certain indications of impairment, TAT performed an impairment test on its investment in FAvS and as a result recorded an impairment charge of $3.3 million on its investment in FAvS (which relates to API as well and approximates its share in the abovementioned write-down). TAT also recorded its share in the losses of FAvS for the year ended on December 31, 2012 in the amount of $0.5 million.
Simultaneously with the transaction FAvS paid-off its Term Loan in the amount of $4 million thereby releasing the Letter of Credit provided by TAT to secure such loan. Accordingly the restricted deposit associated with the above Letter of Credit, was released as well.
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 world-wide distributor of products and services to the aerospace industry and 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.
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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