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.
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
(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).
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.
SOURCE TAT Technologies Ltd
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