Tat Technologies (NASDAQ:TATTF)
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GEDERA, Israel, August 18 /PRNewswire-FirstCall/ -- TAT Technologies Ltd. (NASDAQ:TATTF), reported today its results for the three - month and six - month periods ended June 30, 2009.
TAT Technologies Ltd. (TAT), directly and through its subsidiaries, provides a variety of services and products to the military and commercial aerospace and ground defense systems industries. Such products and services primarily include the design, development, manufacture, maintenance and repair 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 broad range of electrical motion applications for airborne and ground systems.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Background
TAT operates under four operational segments: (i) Original Equipment Manufacturing or "OEM" of Heat Transfer products (ii) OEM of Electric Motion Systems (iii) Maintenance, Repair and Overhaul or 'MRO" services; and (iv) parts 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 and accordingly, the results in this segment for fiscal year 2008 are not compared with the previous years.
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's parts segment focuses on inventory management and sale of APU parts, propellers and landing gear. TAT offers parts services for commercial, regional and charter airlines and business aircraft owners.
Three Months ended June 30, 2009 compared with three months ended June 30, 2008
The following table reflects the geographic breakdown of TAT's revenues for each of the three month and six month periods ended June 30, 2009 and 2008:
Three Months Ended June 30.
____________________________________________________
2009 2008
________________________ ________________________
Revenues % of Revenues % of
in Total in Total
Thousands Revenues Thousands Revenues
________________________ ________________________
unaudited unaudited
Sources of
Revenues
North America $ 11,465 53.5 % $ 14,794 63.8 %
Europe 3,854 18.0 % 4,822 20.8 %
Israel 3,674 17.1 % 2,375 10.2 %
Asia 913 4.3 % 478 2.1 %
Other 1,526 7.1 % 731 3.1 %
___________ _________ ___________ _________
Total $ 21,432 100.00 % $ 23,200 100.00 %
=========== ========= =========== =========
Six Months Ended June 30.
____________________________________________________
2009 2008
________________________ ________________________
Revenues % of Revenues % of
in Total in Total
Thousands Revenues Thousands Revenues
________________________ ________________________
unaudited unaudited
Sources of
Revenues
North America $ 23,237 50.5 % $ 28,268 62.2 %
Europe 8,632 18.8 % 9,270 20.4 %
Israel 9,177 20.0 % 4,257 9.4 %
Asia 2,125 4.6 % 1,412 3.1 %
Other 2,804 6.1 % 2,236 4.9 %
___________ _________ ___________ _________
Total $ 45,975 100.00 % $ 45,443 100.00 %
=========== ========= =========== =========
TAT's revenues from its four principal lines of business for each of the three month and six month periods ended June 30, 2009 and 2008 were as follows:
Three Months Ended June 30.
____________________________________________________
2009 2008
________________________ ________________________
Revenues % of Revenues % of
in Total in Total
Thousands Revenues Thousands Revenues
________________________ ________________________
unaudited unaudited
Revenues
MRO services $ 11,736 54.8 % $ 13,225 57.0 %
OEM of Heat
Transfer products 7,018 32.7 % 6,918 29.8 %
Parts services 2,186 10.2 % 4,452 19.2 %
OEM of Electric
Motion Systems 2,278 10.6 % -- -- %
Eliminations (1,786) (8.3)% (1,395) (6.0)%
___________ _________ ___________ _________
Total revenues $ 21,432 100.00 % $ 23,200 100.00 %
=========== ========= =========== =========
Six Months Ended June 30.
____________________________________________________
2009 2008
________________________ ________________________
Revenues % of Revenues % of
in Total in Total
Thousands Revenues Thousands Revenues
________________________ ________________________
unaudited unaudited
Revenues
MRO services $ 23,220 50.5 % $ 26,210 57.7 %
OEM of Heat
Transfer products 14,698 32.0 % 13,397 29.5 %
Parts services 4,823 10.5 % 8,587 18.9 %
OEM of Electric
Motion Systems 6,014 13.1 % -- -- %
Eliminations (2,780) (6.1)% (2,751) (6.1)%
___________ _________ ___________ _________
Total revenues $ 45,975 100.00 % $ 45,443 100.00 %
=========== ========= =========== =========
Revenues. Total revenues decreased to $21.4 million for the three months ended June 30, 2009 from $23.2 million for the three months ended June 30, 2008, a decrease of 7.6%. This decrease reflects increased revenues in the OEM operations due to organic growth in the OEM of Heat Transfer products segment, as well as revenues in the OEM of Electric Motion Systems segment derived from the Company's 70% controlled subsidiary, Bental, which did not exist during the second quarter of fiscal 2008; offset by decreased revenues in the MRO services segment and in the Parts services segment.
Cost of revenues. Cost of revenues decreased to $17.6 million for the three months ended June 30, 2009 from $18.3 million for the three months ended June 30, 2008, an decrease of 3.77%. The decrease in cost of revenues was primarily attributable to the decreased revenues in the MRO and Part services operations, off-set by additional cost related to Repair Center and Storefront agreements. Cost of revenues as a percentage of revenues after eliminating intercompany transactions was 82% in the three months ended June 30, 2009, compared to 79% for the three months ended June 30, 2008.
Research and development. Research and Development expenses were $0.2 million for the three months ended June 30, 2009, and are related to new products and technologies within the OEM operations in Israel. Research and Development expenses as a percentage of revenues was 1.0% in the three months ended June 30, 2009. TAT did not incur any material research and development expenses in the years ended December 31, 2008 and 2007. TAT does expect to continue to incur and record research and development expenses in coming years.
Selling and marketing expenses. Selling and marketing expenses were $1.1 million for the three months ended June 30, 2009, a slight increase compared to $1.0 million for the three months ended June 30, 2008. These expenses were attributable to increased expenses in the OEM operations off-set by decreased expenses in the MRO services and in lesser extent in the parts service segment. Selling and marketing expenses as a percentage of revenues were 5.2% for the three months ended June 30, 2009, compared to 4.4% for the three months ended June 30, 2008.
General and administrative expenses. General and administrative expenses were $2.8 million for the three months ended June 30, 2009, a slight decrease compared to $2.9 million for the three months ended June 30, 2008. This is primarily attributable to a one time expenses in 2008 associated with the retirement of certain management members off set by increased expenses in the OEM operations as a result of the consolidation of Bental operations commencing August 18, 2008. General and administrative expenses as a percentage of revenues slightly increased to 12.9% for the three months ended June 30, 2009 from 12.4% for the three months ended June 30, 2008.
Relocation Expenses. Relocation expenses were $0.1 million for the three months ended June 30, 2009, compared to none during the three months ended June 30, 2008, and are related to the relocation of the operations of TAT's Tulsa, Oklahoma based subsidiary Limco Airepair, Inc. ("Limco") to the location of its Piedmont Aviation Component Services, Inc. subsidiary in Kernersville, North Carolina. On July 28, 2009 the Company had determined not to go forward with the planned relocation
Operating income. For the three months ended June 30, 2009 there was an operating loss of $0.4 million from compared to an operating income of $1.0 million for the three months ended June 30, 2008. That reflects an increased gross and operational margins in the OEM operations due to improved margins in the OEM of Heat Transfer products segment, as well as operational income in the OEM of Electric Motion Systems segment derived from the company's 70% controlled subsidiary, Bental Industries Ltd. which did not exist during the second quarter of fiscal 2008; offset by decreased gross and operational margins in the MRO and in the Parts services segments in 2009 compared to 2008.
Financial income. Financial income for the three months ended June 30, 2009 was $0.6 million, compared to $0.5 million for the three months ended June 30, 2008 and was primarily attributable to hedging activities related to exchange rate between the U.S. dollar and the Israeli Shekel and interest received for short-term investments.
Financial expenses. Financial expense for the three months ended June 30, 2009 was $0.4 million, compared to $0.1 million for the three months ended June 30, 2008. In the three months ended June 30, 2009 financial expense was primarily resulted from changes in the exchange rate between the U.S. dollar and the Israeli Shekel, as well as interest payments on long-term loans. In the second quarter of 2008 financial expense was primarily resulted from changes in the exchange rate between the U.S. dollar and the Israeli Shekel.
Other Income (expenses). TAT had other expense of $0.4 million for the three months ended June 30, 2009 compared to insignificant other income for the three months ended June 30, 2008. Other expenses for the three months ended June 30, 2009 primarily resulted from a change in the fair value of unrealized forward transactions gains as of June 30, 2009.
Net income attributable to noncontrolling interest. TAT recognized a net loss attributable to noncontrolling interest of $ 0.3 million for the three months ended June 30, 2009 compared with a net income attributable to noncontrolling interest of $0.24 million for the three months ended June 30, 2008.
Taxes. Total tax income for the three months ended June 30, 2009 amounted to $0.1 million, compared to tax expense of $0.2 million for the three months ended June 30, 2008. The decrease in tax expense for the three months ended June 30, 2009 is primarily attributable to tax income in the operation in the U.S. due to decreased pretax income, off-set increased tax expenses in the operation in Israel.
Net income. For the three months ended June 30, 2009, net income was $0.6 million, compared with net income of $1.4 million for the three months ended June 30, 2008.
Six Months ended June 30, 2009 compared with Six months ended June 30, 2008
Revenues. Total revenues increased to $46.0 million for the six months ended June 30, 2009 from $45.4 million for the six months ended June 30, 2008, an increase of 1.2%. This increase reflects increased revenues in the OEM operations due to organic growth in the OEM of Heat Transfer products segment, as well as revenues in the OEM of Electric Motion Systems segment derived from the Company's 70% controlled subsidiary, Bental, which did not exist during the second quarter of fiscal 2008; offset by decreased revenues in the MRO services segment and in the Parts services segment.
Cost of revenues. Cost of revenues decreased to $35.4 million for the six months ended June 30, 2009 from $34.7 million for the six months ended June 30, 2008, an increase of 2%. The increase in cost of revenues was primarily attributable to the increased revenues in the OEM operations and by additional cost related to Repair Center and Storefront agreements affected retroactively in the MRO segment, off-set by the decreased revenues in the MRO and Part services. Cost of revenues as a percentage of revenues after eliminating intercompany transactions was 77% in the six months ended June 30, 2009, compared to 76% in the six months ended June 30, 2008, primarily as a result of the additional cost related to Repair Center and Storefront agreements, mentioned above.
Research and development. Research and Development expenses were $0.4 million for the six months ended June 30, 2009, and are related to new products and technologies within the OEM operations in Israel. Research and Development expenses as a percentage of revenues in this segment were 1% in the six months ended June 30, 2009. TAT did not incur any material research and development expenses in the years ended December 31, 2008 and 2007. TAT does expect to continue to incur and record research and development expenses in coming years.
Selling and marketing expenses. Selling and marketing expenses were $2.0 million for the six months ended June 30, 2009, a slight decrease compared to $2.1 million for the six months ended June 30, 2008. These expenses were attributable to increased expenses in the OEM operations off-set by decreased expenses in the MRO services and to a lesser extent in the parts service segment. Selling and marketing expenses as a percentage of revenues were 4.3% for the six months ended June 30, 2009, compared to 4.5% for the six months ended June 30, 2008.
General and administrative expenses. General and administrative expenses were $5.7 million for the six months ended June 30, 2009, similar to these expenses for the six months ended June 30, 2008. This is primarily attributable to a one time expenses in 2008 associated with the retirement of certain management members off set by increased expenses in the OEM operations as a result of the consolidation of Bental operations commencing August 18, 2008. General and administrative expenses as a percentage of revenues slightly decreased to 12% for the six months ended June 30, 2009 from 13% for the six months ended June 30, 2008.
Relocation Expenses. Relocation expenses were $0.4 million for the six months ended June 30, 2009, compared to none during the six months ended June 30, 2008, and are related to the relocation of the operations of TAT's Tulsa, Oklahoma based subsidiary Limco Airepair, Inc. ("Limco") to the location of its Piedmont Aviation Component Services, Inc. subsidiary in Kernersville, North Carolina. On July 28, 2009 the Company had determined not to go forward with the planned relocation
Operating income. Operating income decreased to $2.1 million for the six months ended June 30, 2009 from $3.0 million for the six months ended June 30, 2008, a decrease of 31%. The decrease in operating income reflects decreased gross and operational margins in the MRO and in the Parts services segments in 2009 compared to 2008; offset by increased gross and operational margins in the OEM operations due to improved margins in the OEM of Heat Transfer products segment, as well as operational income in the OEM of Electric Motion Systems segment derived from the company's 70% controlled subsidiary, Bental Industries Ltd. which did not exist during the second quarter of fiscal 2008.
Financial income. Financial income for the six months ended June 30, 2009 was $1.1 million, compared to $1.0 million for the six months ended June 30, 2008 and was primarily attributable to hedging activities related to exchange rate between the U.S. dollar and the Israeli Shekel and to interest received for short-term investments.
Financial expenses. Financial expense for the six months ended June 30, 2009 was $1.3 million, compared to $0.3 million for the six months ended June 30, 2008. In the first six months of 2009 financial expense primarily resulted from changes in the exchange rate between the U.S. dollar and the Israeli Shekel, as well as interest payments on long-term loans. In the first six months of 2008 financial expense primarily resulted from changes in the exchange rate between the U.S. dollar and the Israeli Shekel.
Other Income (expenses). TAT had other expense of $0.1 million for the six months ended June 30, 2009 compared to insignificant other income for the six months ended June 30, 2008. Other expenses for the six months ended June 30, 2009 primarily resulted from a change in the fair value of unrealized forward transactions gains as of June 30, 2009.
Net income attributable to noncontrolling interest. TAT recognized a net loss attributable to noncontrolling interest of $0.1 million for the six months ended June 30, 2009 compared with a net income attributable to noncontrolling interest of $0.6 million for the six months ended June 30, 2008.
Taxes. Total tax expense for the six months ended June 30, 2009 amounted to $0.6 million, compared to $0.6 million for the six months ended June 30, 2008. The increase in tax expense for the six months ended June 30, 2009 is primarily attributable to increased tax expenses in the operation in Israel, off-set by decreased tax expenses in the operation in the U.S. due to decreased pretax income.
Net income. For the six months ended June 30, 2009, net income was $1.6 million, compared with net income of $2.9 million for the six months ended June 30, 2008.
Subsequent Event
On July 3, 2009 the Company resolved its commercial dispute with one of its key suppliers relating to its MRO business, whereby the Company will continue to act as a Storefront and Authorized Repair Center for an extended period through May 31, 2014. The Company performed preliminary allocation of the amount paid on July 3, 2009 to different components based on their estimated fair value. The residual amount of $1,550, net of tax benefit of $590, is being recognized as an expense in the second quarter and is assigned to the settlement of the dispute with the supplier for the period June 2006 until June 2009.
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, synergies, customer benefits, growth opportunities, financial improvements, expected expense savings and other benefits anticipated from the merger. 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 registration statement on form F-4, 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.
TAT TECHNOLOGIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30, June 30,
2009 2008
_______ _______
ASSETS
Current Assets:
Cash and cash equivalents $ 19,108 $17,273
Marketable securities 21,773 21,632
Trade accounts receivable (net of
allowance for doubtful accounts of $198
and $220 at June 30, 2009 and June 30,
2008, respectively) 18,317 16,576
Inventories 34,660 33,997
Other accounts receivable and prepaid
expenses 5,424 4,778
_______ _______
Total current assets 99,282 94,256
Funds in respect of employee right upon
retirement 3,550 4,685
Property, plant and equipment, net 14,877 12,737
Investment in affiliated company -- 5,590
Intangible assets, net 1,897 1,491
Goodwill 5,829 4,814
_______ _______
Total assets $125,435 $123,573
======= =======
LIABILITIES AND EQUITY
Current Liabilities:
Current maturities of long-term loans 154 --
Trade accounts payables 5,783 8,519
Other accounts payable and accrued
expenses 6,413 3,912
_______ _______
Total current liabilities 12,350 12,431
_______ _______
LONG-TERM LIABILITIES:
Long-term loans, net of current maturities 6,353 5,000
Liability in respect of employee rights
upon retirement 4,226 4,853
Long-term deferred tax liability 1,016 564
_______ _______
11,595 10,417
_______ _______
EQUITY:
Share capital
Ordinary shares of NIS 0.9 par value -
Authorized: 10,000,000 shares at June 30,
2009 and 2008; 6,552,671 issued shares and
6,548,021 outstanding shares at June 30,
2009 and 6,542,671 issued and outstanding
shares at June 30, 2008, 2,204 2,202
Additional paid-in capital 39,730 39,397
Accumulated other comprehensive loss (1,307) (36)
Treasury stock, at cost, 4,650 shares at
June 30, 2009 (26) -
Retained earnings 33,150 34,187
_______ _______
Total shareholders equity 73,751 75,750
_______ _______
Noncontrolling interest 27,739 24,975
_______ _______
Total equity: 101,490 100,725
_______ _______
Total liabilities and equity $125,435 $123,573
======= =======
TAT TECHNOLOGIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share data)
Three months ended Six months ended
June 30, June 30,
____________________ ____________________
2009 2008 2009 2008
_______ _______ _______ _______
Revenues:
MRO services $ 11,736 $ 13,225 $ 23,220 $ 26,210
OEM - Heat Transfer
products 7,018 6,918 14,698 13,397
OEM - Electric Motion
Systems 2,278 -- 6,014 --
Parts services 2,186 4,452 4,823 8,587
Eliminations (1,786) (1,395) (2,780) (2,751)
_______ _______ _______ _______
21,432 23,200 45,975 45,443
_______ _______ _______ _______
Cost and operating
expenses:
MRO services 11,228 11,154 20,721 20,778
OEM - Heat Transfer
products 4,803 4,898 9,795 9,679
OEM - Electric Motion
Systems 1,509 -- 3,823 --
Parts services 1,867 3,588 3,907 6,894
Eliminations (1,800) (1,343) (2,817) (2,632)
_______ _______ _______ _______
17,607 18,297 35,429 34,719
_______ _______ _______ _______
Gross Profit 3,825 4,903 10,546 10,724
_______ _______ _______ _______
Research and development
costs 207 -- 372 --
Selling and marketing
expenses 1,110 1,128 1,988 2,060
General and administrative
expenses 2,762 2,755 5,705 5,662
Relocation Expenses 122 -- 406 --
_______ _______ _______ _______
Operating income (376) 1,020 2,075 3,002
_______ _______ _______ _______
Financial expense (473) (105) (1,279) (341)
Financial income 634 464 1,144 990
Other (expenses) income,
net 353 -- 144 --
_______ _______ _______ _______
Income before income taxes 138 1,379 2,084 3,651
Income taxes (125) 168 616 557
_______ _______ _______ _______
Net income 263 1,211 1,468 3,094
Share in results of
affiliated company -- 434 -- 434
less: Net loss (income)
attributable to
noncontrolling interest 287 (241) 140 (625)
_______ _______ _______ _______
Net income attributable to
controlling interest $ 550 $ 1,404 $ 1,608 $ 2,903
======= ======= ======= =======
Basic net income per share
attributable to
controlling interest $ 0.08 $ 0.21 $ 0.24 $ 0.44
Diluted net income per
share attributable to
controlling interest $ 0.08 $ 0.21 $ 0.24 $ 0.44
Weighted average number
of shares - basic 6,548,021 6,542,671 6,550,346 6,542,671
Weighted average number
of shares - diluted 6,549,273 6,556,606 6,551,598 6,556,847
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.
DATASOURCE: TAT Technologies Ltd
CONTACT: 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.