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TAT Technologies Reports Year 2012 Third Quarter Results

GEDERA, Israel, November 23, 2012 /PRNewswire/ --



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, 2012.

Financial Highlights:

TAT announced revenues of $22.1 million with a net income of $1.8 million for the three months ended September 30, 2012, compared to revenues of $20.7 million with a net loss of $3.3 million for the three months ended September 30, 2011 - an increase of 6.6% in revenues. The net loss reported for the 2011 third quarter 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 charges net profit for the 2011 third quarter was $0.3 million which reflects an increase of 440% in net income for the three months ended September 30, 2012 comparing to the corresponding period.

During the Third quarter of 2012, revenues were impacted by (i) the increase in revenues in the OEM of Heat Management Solutions segment; (ii) the increase in revenues in the OEM of Electric Motion Systems segment; (iii) the increase in revenues in the MRO Services for Aviation Components segment; (iv) partially offset by the decrease in revenues in the Heat Transfer Services and Products segment.  

Revenue breakdown by operating segments for the three month and nine month periods ended September 30, 2012 and 2011, respectively, was as follows:

                           Three Months Ended September 30,
                           2012                      2011              % of
                  Revenues        % of      Revenues        % of      Change
                     in          Total         in          Total      Between
                  Thousands     Revenues    Thousands     Revenues    Periods
                        Unaudited                 Unaudited
    Revenues
    OEM of Heat
    Management
    Solutions       $ 8,001        36.3%      $ 7,619        36.8%       5.0%
    Heat
    Transfer
    Services and
    Products          6,655        30.1%        6,892        33.3%     (3.4)%
    MRO services
    for Aviation
    Components        6,027        27.3%        5,019        24.2%      20.1%
    OEM of
    Electric
    Motion
    Systems           2,436        11.0%        2,027         9.8%      20.2%
    Eliminations    (1,040)       (4.7)%        (847)       (4.1)%      22.8%
    Total
    revenues       $ 22,079       100.0%     $ 20,710       100.0%       6.6%


                            Nine Months Ended September 30,
                                                                       % of
                                                                      Change
                                                                      Between
                           2012                      2011             Periods
                  Revenues        % of      Revenues        % of
                     in          Total         in          Total
                  Thousands     Revenues    Thousands     Revenues
                        Unaudited                 Unaudited
    Revenues
    OEM of Heat
    Management
    Solutions      $ 22,721        35.0%     $ 21,596        34.8%       5.2%
    Heat
    Transfer
    Services and
    Products         20,542        31.7%       19,965        32.2%       2.9%
    MRO services
    for Aviation
    Components       16,666        25.7%       14,803        23.9%      12.6%
    OEM of
    Electric
    Motion
    Systems           6,915        10.6%        8,555        13.8%    (19.2)%
    Eliminations    (1,961)       (3.0)%      (2,912)       (4.7)%    (32.7)%
    Total
    revenues       $ 64,883       100.0%     $ 62,007       100.0%       4.6%


For the nine months ended September 30, 2012, TAT announced revenues of $64.9 million with a net loss of $1.8 million compared to revenues of $62.0 million with net loss of $1.1 million for the nine months ended September 30, 2011 - an increase of 4.6% in revenues. The net loss reported for the nine month period ended September 30, 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 the $3.3 million impairment charge, also recorded in the second quarter of 2012, with respect to TAT's investment in FAvS (see further below). The net loss reported for the nine month period ended September 30, 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 profit for the nine months ended September 30, 2012, was $2.5 million similar to the net profit for nine months ended September 30, 2011.

During the nine months ended September 30, 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 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 CEO commented:  

"The results of the 2012 third quarter reflect the trend of continuous improvement Year over Year as we continued to increase revenues and gross margins compared to the corresponding periods in 2011. These improvements are attributed to the increase in our marketing and sales efforts during 2011 through 2012 as well as to our rigorous and continuing activity in improving our production flow and yields.

The increasing fuel costs continue to impact the Commercial Airlines business environment by reducing airlines' profitability and offsetting the positive impact of growing air traffic. As a result, airlines defer MRO activities and utilizing existing stock (destocking) 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 shows growing weakness and is impacted by budget constraints.

We are encouraged by our ability to maintain a steady growth in our key businesses while all of the above impacts our businesses. The weakness in the defense market which is mostly relevant to the OEM of Electric Motion Systems operating segment, resulted in a decrease of our revenues 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 the remainder of 2012 and 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)

                                               September
                                                  30,       September 30,
                                                  2012          2011
                     ASSETS
    Current Assets:
    Cash and cash equivalents                     $ 15,250       $ 28,452
    Short-term bank deposits                        10,100              -
    Marketable securities at fair value              1,800          2,469
    Short-term restricted deposits                   2,907          4,485
    Trade accounts receivable (net of
    allowance for doubtful accounts of $346
    and $ 2,447 as of September 30, 2012 and
    2011, respectively)                             19,076         17,180
    Other accounts receivable and prepaid
    expenses                                         4,719          7,814
    Inventories, net                                33,835         33,436
 
    Total current assets                            87,687         93,836
 
    Long-term assets:
    Investment in affiliated company                 1,804          5,139
    Funds in respect of employee right upon
    retirement                                       3,092          2,879
    Long-term deferred tax                           3,076          2,094
    Property, plant and equipment, net              12,637         12,745
    Goodwill, net                                        -          1,073
 
    Total Long-term assets                          20,609         23,930
 
    Total assets                                 $ 108,296      $ 117,766
 
             LIABILITIES AND EQUITY
 
    Current Liabilities:
    Current maturities of long-term loans            4,168          6,371
    Trade accounts payables                          7,210          6,465
    Other accounts payable and accrued
    expenses                                         6,139          5,656
 
    Total current liabilities                       17,517         18,492
 
    Long-term liabilities:
    Long-term loans, net of current
    maturities                                       1,176          5,240
    Other accounts payable                              85            115
    Liability in respect of employee rights
    upon retirement                                  3,599          3,481
    Long-term deferred tax liability                 1,428          1,011
 
    Total long-term liabilities                      6,288          9,847
 
    EQUITY:
    Share capital
    Ordinary shares of NIS 0.9 par value -
    Authorized: 10,000,000 shares at
    September 30, 2012 and 2011; Issued:
    9,073,043 shares at September 30, 2012
    and 2011; Outstanding: 8,805,270 and
    8,815,003 shares at September 30, 2012
    and 2011, respectively                           2,790          2,790
    Additional paid-in capital                      64,402         64,460
    Treasury stock, at cost, 267,773 and
    258,040 shares at September 30 2012 and
    2011, respectively                             (2,059)        (2,018)
    Accumulated other comprehensive loss           (1,196)          (768)
    Retained earnings                               17,888         22,110
    Total TAT Technologies shareholders'
    equity                                          81,825         86,574
    Non controlling interest                         2,666          2,853
 
    Total equity:                                   84,491         89,427
 
    Total liabilities and equity                 $ 108,296      $ 117,766
 


TAT TECHNOLOGIES AND ITS 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,
                                2012          2011       2012          2011
 
    Revenues:
    OEM of Heat Management
    Solutions                   $ 8,001       $ 7,619   $ 22,721      $ 21,596
    Heat Transfer Services
    and Product                   6,655         6,892     20,542        19,965
    MRO services for Aviation
    Components                    6,027         5,019     16,666        14,803
    OEM of Electric Motion
    Systems                       2,436         2,027      6,915         8,555
    Eliminations                (1,040)         (847)    (1,961)       (2,912)
                                 22,079        20,710     64,883        62,007
 
    Cost and operating
    expenses:
    OEM of Heat Management
    Solutions                     5,859         5,724     16,849        16,390
    Heat Transfer Services
    and Products                  4,697         4,871     14,746        14,372
    MRO services for Aviation
    Components                    5,161         4,769     13,698        12,909
    OEM of Electric Motion
    Systems                       1,580         1,735      5,579         6,864
    Write down of inventory
    and impairment charges of
    long lived assets                 -         5,763          -         5,763
    Eliminations                (1,018)         (815)    (2,069)       (2,757)
                                 16,279        22,047     48,803        53,541
    Gross profit (loss)           5,800       (1,337)     16,080         8,466
 
    Research and development,
    net                             164           180        839           643
    Selling and marketing
    expenses                        783           715      2,596         2,481
    General and
    administrative expenses       2,504         2,985      8,254         8,010
    Other expenses (income)           -         (125)         10         (125)
    Impairment of goodwill            -             -      1,015             -
                                  3,451         3,755     12,714        11,009
    Operating income (loss)       2,349       (5,092)      3,366       (2,543)
 
    Financial expense             (439)         (929)    (1,652)       (1,573)
    Financial income                399           552      1,488         1,527
    Gain from dilution of
    interests in affiliated
    company                           -             -          -           240
 
    Income (loss) before
    income taxes                  2,309       (5,469)      3,202       (2,349)
 
    Taxes on income                 565       (1,948)      1,896         (679)
 
    Net income (loss) after
    income taxes                  1,744       (3,521)      1,306       (1,670)
 
    Share in results of
    affiliated company and
    impairment of share in
    affiliated company              136           167    (3,216)           450
 
    Net income (loss)             1,880       (3,354)    (1,910)       (1,220)
 
    Net loss (income)
    attributable to Non
    controlling interest          (108)            70         66            73
 
    Net income (loss)
    attributable to TAT
    Technologies shareholders   $ 1,772     $ (3,284)  $ (1,844)     $ (1,147)
 
    Earning per share
    Basic and diluted net
    income (loss) per share
    attributable to
    controlling interest         $ 0.20      $ (0.37)   $ (0.21)      $ (0.13)
 
    Weighted average number
    of shares - basic and
    diluted                   8,805,270     8,815,003  8,808,591     8,815,003


Liquidity and Capital Resources

As of September 30, 2012, TAT had cash and cash equivalents and short-term bank deposits of $25.3 million, marketable securities of $1.8 million and restricted cash of $3.0 million, which equals $30.1 million of financial assets, compared with cash and cash equivalents and short-term deposits of $28.4 million, short term investments and marketable securities of $2.5 million and restricted cash of $4.5 million, which equals $35.4 million of financial assets as of September 30, 2011. Financial assets, net of debt were $24.7 million in September 30, 2012 compared to $23.8 million in September 30, 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. As of September 30, 2012, the Company had purchased 9,733 shares for approximately $41 thousands (average of $4.19 per share) constituting less than 0.1% of TAT's issued shares. On November 21, the term of such stock repurchase plan ended. As of such date, the Company had purchased 16,433 shares for approximately $71 thousands (average of $4.32 per share).

On November 6, 2012, the Company made a prepayment of $775 thousands, on account of loans in the total amount of $6.25 million received by the Company from an Israeli bank, 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).

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.  

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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