TAT Technologies Reports Year 2010 Third Quarter Results
GEDERA, Israel, November 24, 2010 /PRNewswire-FirstCall/ -- TAT Technologies Ltd. (NASDAQ: TATT - News), 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 nine month periods ended September 30, 2010.
Financial Highlights:
TAT announced revenues of $18.9 million and a net loss of $ 5.1 million for the three months ended September 30, 2010 compared to revenues of $18.8 million with net income of $1.2 million for the three months ended September 30, 2009. The net loss reported is the result of one time impairment charges of goodwill and intangible assets and write down of inventories, in TAT's MRO operating segment.
During the third quarter of 2010, revenues were impacted by (i) The contribution of the Parts services operations to FAvS (see 'Other Highlights' below); (ii) an increase in revenues in the MRO operations, excluding the Propellers MRO operations contributed to FAvS (see 'Other Highlights' below); (iii) a moderate increase in revenues in the OEM of Heat Transfer Products operations in Israel; and (iv) a moderate increase in revenues in the OEM of Electric Motion Systems operations in Israel. Total increase in reported revenues was 1% and excluding the Part services and Propellers MRO operations contributed to FAvS, an increase of 22%.
Revenue breakdown by the principal operational segments for the three-month and nine-month periods ended September 30, 2010 and 2009, respectively, was as follows:
Three Months Ended September 30.
2010 2009
Revenues % of Revenues % of
in Total in Total
Thousands Revenues Thousands Revenues
Unaudited Unaudited
Revenues
MRO services * $ 10,479 55.4 % $ 10,908 58.2 %
OEM of Heat
Transfer
products 6,437 34.0 % 6,039 32.2 %
Parts services
** 788 4.2 %
OEM of
Electric
Motion Systems 2,949 15.6 % 2,797 14.9 %
Eliminations (943) (5.0)% (1,777) (9.5)%
Total revenues $ 18,922 100.00 % $ 18,755 100.00 %
Nine Months Ended September 30.
2010 2009
Revenues % of Revenues % of
in Total in Total
Thousands Revenues Thousands Revenues
Unaudited Unaudited
Revenues
MRO services * $ 29,298 52.4 % $ 34,128 52.7 %
OEM of Heat
Transfer
products 20,630 36.9 % 20,737 32.0 %
Parts services
** 5,611 8.7 %
OEM of
Electric
Motion Systems 8,566 15.3 % 8,811 13.6 %
Eliminations (2,556) (4.6)% (4,557) (7.0)%
Total revenues $ 55,938 100.00 % $ 64,730 100.00 %
* Includes MRO services for Propellers only for the three month and nine month periods of year 2009 in the amount of $2,514 and $7,441 respectively. On December 4, 2009 this business was contributed to FAvS.
** Includes results only for the three month and nine month periods of year 2009 in the amount of $788 and $5,611, respectively. On December 4, 2009 this operational segment was contributed to FAvS.
For the nine months ended September 30, 2010, TAT announced revenues of $55.9 million with net loss of $ 4.3 million compared to revenues of $64.7 million with net income of $2.8 million for the same period ended September 30, 2009. As mentioned above, the net loss reported is the result of one time impairment charges of goodwill and intangible assets and write down of inventories, in TAT's MRO operating segment.
During the first nine months of 2010, revenues were impacted by (i) The contribution of the Parts services operations to FAvS (see 'Other Highlights' below); (ii) an increase in revenues in the MRO operations, excluding the Propellers MRO operations contributed to FAvS (see 'Other Highlights' below); and (iii) decrease of revenues in the OEM of Heat Transfer Products and in the OEM of Electric Motion Systems, both operated in Israel. Total decrease in reported revenues was 14% and excluding the Part services and Propellers MRO operations contributed to FAvS, an increase of 8%.
Impairment of goodwill, intangible assets and write down of inventory:
During the quarter ended September 30, 2010, the Company performed its annual impairment test of goodwill. Based on the results of this test, the Company determined that the goodwill included in the MRO Services segment, was impaired by $4.2 million. The impairment was due to a decline in future forecasted sales levels and profitability margins resulting from the weakness in the global aviation industry in general and to a greater extent in the U.S. In addition, the Company recorded a $3.5 million write down of inventory under cost of revenues, and an impairment of $0.48 million related to Intangible assets 'Customer Relations' (all said amounts are before off-set of taxes),
Other Highlights :
On December 4, 2009, the transaction between TAT's subsidiary, Piedmont Aviation Component Services LLC ("Piedmont"), and First Aviation Services, Inc. ("FAvS") was consummated. In connection with the transaction, among other things, Piedmont acquired 37% of FAvS common stock and $750,000 of its preferred stock, in exchange for the contribution of Piedmont's parts and propeller businesses. FAvS is a leading supplier of products and services to the aerospace industry worldwide, including the provisioning of aircraft parts and components, and supply chain management services. FAvS also performs overhaul and repair services for wheels, brakes and starter/generators, and builds custom hose assemblies. Simultaneously, FAvS acquired all of the assets of Kelly Aerospace Turbine Rotables ("KATR"), a provider of overhaul and repair services for landing gear, safety equipment, hydraulic and electrical components, brakes and hose assemblies for corporate, regional and military aircraft. Piedmont agreed to provide a one year guaranty of $7 million of the debt incurred by FAvS in connection with the KATR acquisition (see also further on, under Subsequent Events). TAT recorded a capital gain of $4.4 for the transaction during 2009 fourth quarter.
In April 2010, the Company was notified by FAvS, in which it hold 37% equity, that one of the customers of the propeller MRO business which had been contributed to FAvS by Piedmont (see "Other Highlights") was requesting reimbursement for damages purportedly caused to certain propellers. FAvS in turn advised the Company that it wanted the Company to reimburse it for any liability FAvS might incur to such customer. The controversy is in its early stage and it is unclear at this point what liability, if any, the Company might eventually incur. The Company has already provided a reserve of $350,000 with respect to this potential liability and as of the date hereof provided for an additional $350,000 reserve, for an aggregate reserve of $700,000.
In addition, FAvS reported that while it tests for impairment on an annual basis on December 31, 2010, or more frequently when events and circumstances indicate that an impairment may have occurred, it believes that there are indicators of impairment of goodwill in one of its reporting units as of September 30, 2010. FAvS is expected to complete its analysis of goodwill during fourth quarter 2010.
TAT's management performed an estimated impairment test of its equity investment in FAvS and estimated as of September 30, 2010, that no impairment charge should be recorded. There could be material adjustments to goodwill impairment when the impairment test is to be completed in the fourth quarter by FAvS. Any adjustments to goodwill impairment will be recorded in the Company's financial statements for the fiscal year ended December 31, 2010. The total amount of goodwill in the abovementioned FAvS reporting unit is $6.9 million.
Dr. Shmuel Fledel, TAT's CEO commented:
We are encouraged by global trends of increased traffic reported by airlines and we are witnessing a slow recovery in the demand for one stop shop services, which impact our business in the U.S. The results of the third quarter were impacted by non recurring, one time impairment charges of goodwill and intangible assets and write down of inventories. During the quarter we expanded marketing and sales activities and we also continue to work rigorously on improving our production flow and yields and we believe that our efforts will positively impact our financial results in the next quarters. TAT TECHNOLOGIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except share data)
September September
30, 30,
2010 2009
ASSETS
Current Assets:
Cash and cash equivalents $ 28,278 $26,098
Marketable securities 2,711 10,774
Restricted deposit 5,071 1,560
Trade accounts receivable (net of
allowance for doubtful accounts of $2,643
and $138 at September 30, 2010 and
September 30, 2009, respectively) 16,485 17,614
Inventories 31,739 37,011
Other accounts receivable and prepaid
expenses 8,415 4,955
Total current assets 92,699 98,012
Investment in affiliate 9,267 -
Funds in respect of employee right upon
retirement 2,751 2,567
Long-term deferred tax 1,160 160
Property, plant and equipment, net 14,036 14,802
Intangible assets, net 2,116 3,729
Goodwill 1,087 5,873
Total assets $123,116 $125,143
LIABILITIES AND EQUITY
Current Liabilities:
Current maturities of long-term loans 4,535 424
Trade accounts payables 6,913 6,888
Other accounts payable and accrued
expenses 6,173 3,577
Total current liabilities 17,621 10,889
LONG-TERM LIABILITIES:
Long-term loans, net of current maturities 6,413 7,432
Other accounts payable 31 -
Liability in respect of employee rights
upon retirement 3,317 3,215
Long-term deferred tax liability 1,987 1,264
11,748 11,911
EQUITY:
Share capital
Ordinary shares of NIS 0.9 par value -
Authorized: 10,000,000 shares at September
30, 2010 and 2009; Issued and outstanding:
9,073,043 and 8,815,003 shares
respectively at September 30, 2010;
8,887,566 shares at September 30, 2009. 2,790 2,790
Additional paid-in capital 64,429 64, 371
Accumulated other comprehensive loss (694) (934)
Treasury stock, at cost, 258,040 and
185,477 shares at September 30, 2010 and
2009, respectively (2,018) (1,422)
Retained earnings 26,319 34,313
Total TAT Technologies shareholders'
equity 90,826 99,118
Noncontrolling interest 2,921 3,225
Total equity: 93,747 102,343
Total liabilities and equity $123,116 $125,143
TAT TECHNOLOGIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands, except share and per share data)
Three months ended Nine months ended
September 30, September 30
2010 2009 2010 2009
Revenues:
MRO services $ 10,479 $ 10,909 $ 29,298 $ 34,128
OEM - Heat Transfer
products 6,437 6,039 20,630 20,737
OEM - Electric Motion
Systems 2,949 2,797 8,566 8,811
Parts services - 788 - 5,611
Eliminations (943) (1,777) (2,556) (4,557)
18,922 18,756 55,938 64,730
Cost and operating
expenses:
MRO services 8,611 9,222 24, 142 29,942
OEM - Heat Transfer
products 5,309 3,831 16,079 13,626
OEM - Electric Motion
Systems 2,252 1,749 6,418 5,572
Parts services - 1,444 - 5,351
Write down of
inventory 3,500 - 3,500 -
Eliminations (908) (1,725) (2,688) (4,542)
18,765 14,521 47,451 49,949
Gross Profit 157 4,235 8,487 14,781
Research and
development costs 132 125 459 497
Selling and marketing
expenses 834 804 2,500 2,792
General and
administrative
expenses 2,754 3,348 8,029 9,053
Impairment of
goodwill and
intangible assets 4,704 4,704
Relocation Expenses - 20 - 426
8,424 4,297 15,692 12,768
Operating income
(loss) (8,267) (62) (7,205) 2,013
Financial expense (283) (118) (1,370) (1,397)
Financial income 544 205 1,200 1,349
Other income, net - 127 - 271
Income (loss) before
income taxes (8,006) 152 (7,375) 2,236
Taxes on income
(benefit) (2,977) (1,582) (2,775) (966)
Net income (loss) (5,029) 1,734 (4,600) 3,202
Share in results of
affiliated company (50) - 369 -
Net income
attributable to Non
controlling interest (6) (571) (97) (431)
Net income (loss)
attributable to TAT
Technologies
shareholders $(5,085) $1,163 $(4,328) $2,771
Earning per share
Basic net income per
share $(0.58) $0.13 $(0.49) $0.38
Diluted net income
per share $(0.58) $0.13 $(0.49) $0.38
Weighted average
number of shares -
basic 8,815,003 9,012,767 8,815,003 7,369,603
Weighted average
number of shares -
diluted 8,815,003 9,021,682 8,817,226 7,379,771
Subsequent Event
In connection with the transaction with FAvS (see "Other Highlights" above), on October 1, 2010, Limco-Piedmont agreed to extend a guarantee for $6.6 million regarding a debt incurred by FAvS in connection with the KATR acquisition, by providing a letter of credit to the lender for FAvS. The guaranty is for a period of 15 months ending December 31, 2011 and its amount is reduced as such debt amortizes. Limco-Piedmont was also granted a second lien on the assets of FAvS to secure the repayment obligations of FAvS in the event that the letter of credit is drawn upon. Limco-Piedmont also entered into an intercreditor agreement with the lender to FAvS which will subordinate Limco-Piedmont's claims if the letter of credit is drawn upon to the obligations of FAvS to the lender.
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 three operational segments: (i) OEM of Heat Transfer products (ii) OEM of Electric Motion Systems; and (iii) MRO services, each with the following characteristics.
TAT's activities in the area of OEM of Heat Transfer products primarily relate to the (i) design, development, manufacture and sale of 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; and (ii) manufacture and sale of environmental control and cooling systems 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 relate to the design, development, manufacture and sale of a broad range of electrical motor applications for airborne and ground systems. TAT activities in this segment commenced with the acquisition of Bental in August 2008.
TAT's MRO services include the remanufacture, overhaul and repair of heat transfer equipment and other aircraft components, APUs, propellers and landing gear. TAT's Limco subsidiary operates FAA certified repair stations, which provide aircraft component MRO services for airlines, air cargo carriers, maintenance service centers and the military.
TAT also holds 37% in 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.
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: http://www.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.
Contact:
Miri Segal-Scharia
MS-IR LLC
Tel: +1-917-607-8654
[email protected]
Yaron Shalem - CFO
TAT Technologies Ltd.
Tel: +972-8-862-8500
[email protected]
SOURCE TAT Technologies Ltd
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