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TAT Technologies Reports Second Quarter 2020 Results

·15 min read

GEDERA, Israel, Sept. 15, 2020 /PRNewswire/ -- TAT Technologies Ltd. (NASDAQ: TATT) ("TAT" or the "Company"), a leading provider of products and services to the commercial and military aerospace and ground defense industries, reported today its unaudited results for the three month and six month periods ended June 30, 2020.

Key Financial Highlights:

  • Revenues for Q2 2020 were $17.3 million compared with $25 million in Q2 2019. Revenues for the six-month period that ended on June 30, 2020 were $42 million compared with $46.9 million in the six-month period that ended on June 30, 2019.

  • Gross profit for Q2 2020 was $1.5 million (8.6% as a percentage of revenues) compared with $3.6 million (14.4% as a percentage of revenues) in Q2 2019. Gross profit for the six-month period that ended on June 30, 2020 was $6.1 million (14.5% as a percentage of revenues) compared with $6.8 million (14.5% as a percentage of revenues) in the six-month period that ended on June 30, 2019.

  • Adjusted EBITDA for Q2 2020 was 0.03 million compared with $1.7 million in Q2 2019. Adjusted EBITDA for the six-month period that ended on June 30, 2020 was $2.5 million compared with $3.1 million in the six-month period that ended on June 30, 2019.

  • Net loss was ($2.2) million, or loss of ($0.3) per diluted share in Q2 2020 compared with a net income of $0.13 million, or $0.02 per diluted share in Q2 2019. Net loss was ($1.8) million, or loss of ($0.2) per diluted share in H1 2020 compared with a net income of $0.2 million, or $0.03 per diluted share in H1 2019.

  • During Q2 of 2020 and H1 of 2020 TAT reported losses from discontinued operation of the JT8D engine blades coating in the amount of $1.4M and $1.7M respectively.

Mr. Igal Zamir, CEO and President of TAT Technologies stated, "The commercial aviation industry suffered greatly from the impact of the COVID-19 pandemic. During Q2 of 2020 we suffered from a decline in our revenues compared to Q2 2019, mainly due to decline in demand in our commercial MRO business. Other operations of the Company, such as military, OEM and cargo, remain stable.

The COVID-19 pandemic has significantly increased global economic and demand uncertainty, and has impacted TAT's businesses, operations and the aerospace sector as a whole. In response, the company has taken immediate actions to conserve cash and reduce costs. The financial impact of the COVID-19 pandemic cannot be reasonably estimated at this time. TAT will continue to consider and proactively implement cost and working capital efficiencies so that TAT can respond to these uncertain market conditions."

On a positive note, during Q2 2020, TAT managed to improve its cash flow from operations (cash flow from operations were $6.3M in Q2 2020 and $7.5M in H1 2020), and also secured new credit lines from banks that may be used by the Company in the near future to finance new investments opportunities.

Non-GAAP Financial Measures

To supplement the consolidated financial statements presented in accordance with GAAP, the Company also presents Adjusted EBITDA. The adjustments to the Company's GAAP results are made with the intent of providing both management and investors a more complete understanding of the Company's underlying operational results, trends and performance. Adjusted EBITDA is calculated as net income excluding the impact of: the Company's share in results of affiliated companies, share-based compensation, taxes on income, discontinued operation, financial (expenses) income, net, depreciation and amortization. Adjusted EBITDA, however, should not be considered as alternative to net income and operating income for the period and may not be indicative of the historic operating results of the Company; nor it is meant to be predictive of potential future results. Adjusted EBITDA is not measure of financial performance under generally accepted accounting principles and may not be comparable to other similarly titled measures for other companies. See reconciliation of Adjusted EBITDA in pages 13 below.

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 four segments: (i) Original equipment manufacturing ("OEM") of heat transfer solutions and aviation accessories through its Gedera facility; (ii) MRO services for heat transfer components and OEM of heat transfer solutions through its Limco subsidiary; (iii) MRO services for aviation components through its Piedmont subsidiary; and (iv) Overhaul and coating of jet engine components through its Turbochrome subsidiary. TAT controlling shareholders is the FIMI Private Equity Fund.

TAT's activities in the area of OEM of heat transfer solutions and aviation accessories primarily include the design, development and manufacture of (i) broad range of heat transfer solutions, such as pre-coolers heat exchangers and oil/fuel hydraulic heat exchangers, used in mechanical and electronic systems on board commercial, military and business aircraft; (ii) environmental control and power electronics cooling systems installed on board aircraft in and ground applications; and (iii) a variety of other mechanical aircraft accessories and systems such as pumps, valves, and turbine power units.

TAT's activities in the area of MRO Services for heat transfer components and OEM of heat transfer solutions primarily include the MRO of heat transfer components and to a lesser extent, the manufacturing of certain heat transfer solutions. TAT's Limco subsidiary operates an FAA-certified repair station, which provides heat transfer MRO services for airlines, air cargo carriers, maintenance service centers and the military.

TAT's activities in the area of MRO services for aviation components include the MRO of APUs, landing gears and other aircraft components. TAT's Piedmont subsidiary operates an FAA-certified repair station, which provides aircraft component MRO services for airlines, air cargo carriers, maintenance service centers and the military.

TAT's activities in the area of overhaul and coating of jet engine components includes the overhaul and coating of jet engine components, including turbine vanes and blades, fan blades, variable inlet guide vanes and afterburner flaps.

For more information of TAT Technologies Ltd., please visit our web-site:

www.tat-technologies.com

Contact:

Mr. Ehud Ben-Yair
Chief Financial Officer
Tel: 972-8-862-8503
ehudb@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, the change of control that will occur on the sale by the receiver of the Company's shares held by our previously controlling stockholders, 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.

TAT TECHNOLOGIES AND ITS SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE SHEET

(In thousands)



June 30,


December 31,

2020


2019 (*)


(unaudited)


(audited)

ASSETS




CURRENT ASSETS:




Cash and cash equivalents

$ 26,036


$ 15,959

Accounts receivable, net

14,486


20,311

Other current assets and prepaid expenses

2,715


2,605

Inventory, net

41,885


43,327

Assets belong to discontinued operation

176


1,839





Total current assets

85,298


84,041





NON-CURRENT ASSETS:

Restricted deposit

163


-

Investment in affiliates

841


956

Funds in respect of employee rights upon retirement

1,259


1,404

Deferred income taxes

271


228

Intangible assets, net

355


777

Property, plant and equipment, net

21,021


20,605

Operating lease right of use assets

7,734


6,664





Total non-current assets

31,644


30,634

Total assets

$ 116,942


$ 114,675





LIABILITIES AND EQUITY








CURRENT LIABILITIES:




Accounts payable

8,999


11,823

Accrued expenses

7,308


7,393

Deferred income (government grant)

1,059


-

Operating lease liabilities

1,646


1,330

Liabilities belong to discontinued operation

327


158





Total current liabilities

19,339


20,704





NON CURRENT LIABILITIES:




Long-term loans

4,834


-

Other long-term liabilities

-


62

Liability in respect of employee rights upon retirement

1,610


1,751

Deferred income taxes

1,086


1,100

Operating lease liabilities

6,401


5,688





Total non-current liabilities

13,931


8,601





Total liabilities

$ 33,270


$ 29,305





EQUITY:




Share capital

2,809


2,809

Additional paid-in capital

65,650


65,573

Treasury stock at cost

(2,088)


(2,088)

Accumulated other comprehensive income

52


26

Retained earnings

17,249


19,050

Total shareholders' equity

83,672


85,370





Total liabilities and shareholders' equity

$ 116,942


$ 114,675





*Reclassified due to discontinued operation




TAT TECHNOLOGIES AND ITS SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share and per share data)



Three months ended


Six months ended


Year ended


June 30,


December 31,


2020


2019(*)


2020


2019(*)


2019(*)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Audited)











Revenues:










Products

$ 6,078


$ 6,299


$ 13,335


$ 12,199


$ 25,019

Services

11,280


18,695


28,672


34,711


72,460


17,358


24,994


42,007


46,910


97,479











Cost of goods:










Products

5,980


5,088


11,773


10,183


21,557

Services

9,871


16,247


24,143


29,913


60,622


15,851


21,335


35,916


40,096


82,179

Gross Profit

1,507


3,659


6,091


6,814


15,300











Operating expenses:










Research and development, net

33


22


70


56


113

Selling and marketing

980


1,323


2,057


2,324


4,929

General and administrative

1,586


1,624


3,713


3,502


7,654


2,599


2,969


5,840


5,882


12,696

Operating income (loss)

(1,092)


690


251


932


2,604











Financial expenses, net

(234)


(150)


(74)


(372)


(422)

Other expenses

(21)


-


(21)


-


-











Income (loss) before taxes on income (tax
benefit)

(1,347)


540


156


560


2,182











Taxes on income (tax benefit)

(510)


168


156


(5)


631











Income (loss) before equity investment

(837)


372


-


565


1,551











Share in results of affiliated companies

(17)


(55)


(115)


(74)


(132)











Net income (loss) from continued operation

$ (854)


$ 317


$ (115)


$ 491


$ 1,419











Loss from discontinued operation before
income taxes

(13)


(205)


(331)


(334)


(655)

Loss on disposal of discontinued operation
before income taxes

(1,375)


-


(1,335)


-


-

Benefit from income taxes

-


14


-


29


42

Net loss from discontinued operation

$ (1,388)


$ (191)


$ (1,686)


(305)


$ (613)











Net income (loss)

$ (2,242)


$ 126


$ (1,801)


$ 186


$ 806











Basic and diluted income (loss) per share




















Net income (loss) per share from continued
operation

$ (0.1)


$ 0.04


$ (0.01)


$ 0.06


$ 0.18

Net loss per share from discontinued operation

$ (0.16)


$ (0.02)


$ (0.19)


$ (0.03)


$ (0.07)

Net income (loss) per share

$ (0.26)


$ 0.02


$ (0.2)


$ 0.03


$ 0.11











Weighted average number of shares
outstanding










Basic

8,874,696


8,862,473


8,874,696


8,855,251


8,864,885

Diluted

8,874,696


8,862,473


8,874,696


8,855,251


8,864,885











*Reclassified due to discontinued operation

TAT TECHNOLOGIES AND ITS SUBSIDIARIES


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


(In thousands)





Three months ended


Six months ended


Year ended



June 30,


December 31,



2020


2019


2020


2019


2019



(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Audited)













Net income (loss)

$ (2,242)


$ 126


$ (1,801)


$ 186


$ 806


Other comprehensive income











Net unrealized income from derivatives

129


56


21


286


372


Reclassification adjustments for gains (losses)
included in net income and inventory

-


(30)


5


(14)


(140)


Total other comprehensive income (loss)

$ (2,113)


$ 152


$ (1,775)


$ 458


$ 1,038













TAT TECHNOLOGIES AND ITS SUBSIDIARIES




CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


(In thousands, except share data)












TAT Technologies Ltd. Shareholders




















Share capital




Accumulated
















other










Number of




Additional paid-


comprehensive


Treasury


Retained






shares issued


Amount


in capital


income (loss)


shares


earnings


Total equity


















BALANCE AT DECEMBER 31, 2017 (audited)


9,122,501


$ 2,802


$ 65,073


$ 135


$ (2,088)


$ 22,652


$ 88,574


CHANGES DURING THE YEAR ENDED
DECEMBER 31, 2018 (audited):
















Comprehensive income


-


-


-


(341)


-


(4,408)


(4,749)


Share based compensation expenses


-


-


272


-


-


-


272


Exercise of option


26,668


7


190


-


-


-


197


BALANCE AT DECEMBER 31, 2018 (audited)


9,149,169


$ 2,809


$ 65,535


$ (206)


$ (2,088)


$ 18,244


$ 84,294


CHANGES DURING THE YEAR ENDED
DECEMBER 31, 2019 (audited):
















Comprehensive loss


-


-


-


232


-


806


1038


Share based compensation expenses


-


-


38


-


-


-


38


BALANCE AT DECEMBER 31, 2019 (audited)


9,149,169


$ 2,809


$ 65,573


$ 26


$ (2,088)


$ 19,050


$ 85,370


CHANGES DURING THE SIX MONTHS ENDED
JUNE 30, 2020 (unaudited):
















Comprehensive income (loss)


-


-


-


26


-


(1,801)


(1,775)


Share based compensation income


-


-


77


-


-


-


77


BALANCE AT JUNE 30, 2019 (unaudited)


9,149,169


$ 2,809


$ 65,650


$ 52


$ (2,088)


$ 17,249


$ 83,672


TAT TECHNOLOGIES AND ITS SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)




Three months ended


Six months ended


Year ended



June 30,


December 31,



2020


2019(*)


2020

2019(*)


2019(*)



(Unaudited)


(Unaudited)


(Unaudited)

(Unaudited)


(Audited)

CASH FLOWS FROM OPERATING ACTIVITIES:










Net income (loss)


$ (2,242)


$ 126


$ (1,801)

$ 186


$ 806

Net income (loss) from continued operations


(854)


317


(115)

491


1,419

Adjustments to reconcile net income (loss) to net cash
provided by operating activities:




















Depreciation and amortization


1,030


1,058


2,028

2,043


4,292

Loss (gain) from change in fair value of derivatives


(88)


(20)


21

(254)


(311)

Provision for doubtful accounts


1


-


206

-


38

Share in results of equity investment of affiliated Company


17


55


115

74


132

Share based compensation


37


(117)


77

(45)


38

Non cash finance expense


188


63


(49)

217


354

Liability in respect of employee rights upon retirement


(13)


(587)


(141)

(778)


(897)

Deferred income taxes, net


(369)


452


(57)

(178)


(450)

Deferred revenues (government grant)


1,059


-


1,059

-


-

Changes in operating assets and liabilities:










Decrease (increase) in trade accounts receivable


6,332


(1,622)


6,242

(3,226)


(2,037)

Decrease (increase) in other current assets and prepaid
expenses


(641)


310


69

1,257


2,500

Decrease (increase) in inventory


1,653


407


1,372

(2,133)


(5,740)

Increase (decrease) in trade accounts payable


(178)


1,192


(3,220)

2,639


3,349

Increase (decrease) in accrued expenses


(1,862)


(661)


(85)

342


982

Decrease in other long-term liabilities


(49)


(20)


(62)

(78)


(118)

Net cash provided by operating activities


$ 6,263


$827


$ 7,460

$ 371


$ 3,551

CASH FLOWS FROM INVESTING ACTIVITIES:










Investment in affiliated company


-


(10)


-

(10)


(10)

Funds in respect of employee rights upon retirement


-


-


-

(22)


-

Proceeds from sale of property and equipment


(22)


-


(22)

-


-

Increase in long-term deposits


(163)




(163)

-


-

Purchase of property and equipment


(861)


(746)


(1,759)

(1,693)


(3,269)

Cash flows used in investing activities


$ (1,046)


$ (756)


$ (1,944)

$ (1,725)


$ (3,279)

CASH FLOWS FROM FINANCING ACTIVITIES:










Proceeds from long-term loans received


4,834


-


4,834

-


-

Cash flows provided by financing activities


$ 4,834


$ -


$ 4,834

$ -


$ -





















Cash flows from discontinued operations:










Net loss from discontinued operation


$ (1,388)


$ (191)


$ (1,686)

(305)


$ (613)

Net cash provided by operating activities


998


190


1,413

33


484

Net cash used in investing activities


-


(34)



(34)


(134)

Net cash used in discontinued operations


$ (390)


$ (35)


$ (273)

(306)


$ (263)











Net increase (decrease) in cash and cash equivalents


9,661


36


10,077

(1,660)


9

Cash and cash equivalents at beginning of period


16,375


14,254


15,959

15,950


15,950

Cash and cash equivalents at end of period


$ 26,036


$ 14,290


$ 26,036

$ 14,290


$ 15,959


*Reclassified due to discontinued operation

TAT TECHNOLOGIES AND ITS SUBSIDIARIES


RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA (NON-GAAP)

(UNAUDITED)

(In thousands)



Three months ended

Six months ended

Year ended


June 30,

June 30,

December 31,


2020


2019(*)

2020

2019(*)

2019(*)















Net income (loss)

$ (2,242)


$ 126

$ (1,801)

$ 186

$ 806

Adjustments:







Share in results of equity investment of
affiliated companies

17


55

115

74

132

Taxes on income (tax benefit)

(510)


168

156

(5)

631

Financial expenses, net

234


150

74

372

422

Other expenses

21


-

21

-

-

Depreciation and amortization

1,089


1,120

2,124

2,139

4,394

Net loss from discontinued operations

1,388


191

1,686

305

613

Share based compensation

37


(117)

77

(45)

38

Adjusted EBITDA

$ 34


$ 1,693

$ 2,452

$ 3,026

$ 7,036


*Reclassified due to discontinued operation

Cision
Cision

View original content:http://www.prnewswire.com/news-releases/tat-technologies-reports-second-quarter-2020-results-301131428.html

SOURCE TAT Technologies Ltd