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TAT Technologies Reports Year 2010 Third Quarter Results
Nov 24, 2010 (06:11 AM EST)


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
    msegal@ms-ir.com

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


SOURCE TAT Technologies Ltd