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TAT Technologies Reports Second Quarter 2019 Results

GEDERA, Israel, Aug. 29, 2019 /PRNewswire/ -- TAT Technologies Ltd. (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, 2019.

Key Financial Highlights:

  • Revenues for Q2 2019 were $26 million compared with $24.8 million in Q2 2018.  Revenues for the six-month period that ended on June 30, 2019 were $49.3 million compared with $49.2 million in the six-month period that ended on June 30, 2018.
  • Gross profit for Q2 2019 was $3.7 million (7.5% as a percentage of revenues) compared with $2.6 million (5.3% as a percentage of revenues) in Q2 2018.  Gross profit for the six-month period that ended on June 30, 2019 was $7 million (14.1% as a percentage of revenues) compared with $5.8 million (11.7% as a percentage of revenues) in the six-month period that ended on June 30, 2018.
  • EBITDA for Q2 2019 was $1.5 million compared with negative $(0.3) million in Q2 2018. Adjusted EBITDA for the six-month period that ended on June 30, 2019 was $2.8 million compared with $0.05 million in the six-month period that ended on June 30, 2018.
  • GAAP net income was $0.13 million, or $0.01 per diluted share in Q2 2019 compared with a net loss of $1.4 million, or $0.16 per diluted share in Q2 2018. GAAP net income was $0.2 million, or $0.02 per diluted share in H1 2019 compared with a net loss of $2.1 million, or $0.24 per diluted share in H1 2018.
  • Non-GAAP net income of $0.06 million, or $0.01 per diluted share in Q2 2019, compared with non-GAAP net loss of $1.2 million, or $0.14 per diluted share in Q2 2018. Non-GAAP net income of $0.22 million, or $0.02 per diluted share in H1 2019, compared with non-GAAP net loss of $1.9 million, or $0.21 per diluted share in H1 2018.

Mr. Igal Zamir, CEO and President of TAT Technologies stated, "I am pleased with the positive growth trend of profitability. During the second half of 2018 we initiated a cost cutting and efficient plan. We now benefit from the improvements in Gross Margin and EBITDA."

Non-GAAP Financial Measures

To supplement the consolidated financial statements presented in accordance with GAAP, the Company also presents a Non-GAAP presentation of Net Income and 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.  Non-GAAP Net Income excludes changes, income or losses, as applicable, related to one or more of the following: (1) share-based compensation expenses and/or (2) certain tax impact and/or (3) acquisition related expenses and/or (4) share in results of equity investment of affiliated companies. Adjusted EBITDA is calculated as net income before the Company's share in results and sale of equity investment of affiliated companies, share-based compensation, taxes on income, financial (expenses) income, net, and depreciation and amortization.  Non-GAAP Net Income and Adjusted EBITDA, however, should not be considered as alternatives to net income and operating income for the period and may not be indicative of the historic operating results of the Company; nor they are meant to be predictive of potential future results.  Non-GAAP Net Income and Adjusted EBITDA are not measures of financial performance under generally accepted accounting principles and may not be comparable to other similarly titled measures for other companies. See reconciliation of GAAP Net Income to Non-GAAP Net Income and Adjusted EBITDA in pages 9 and 12 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

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,

2019


2018


(unaudited)


(audited)

ASSETS




CURRENT ASSETS:




Cash and cash equivalents

$                   14,290


$                   15,950

Accounts receivable, net

22,481


19,277

Other current assets and prepaid expenses

3,675


3,627

Inventory, net

40,710


38,605





Total current assets

81,156


77,459





NON-CURRENT ASSETS:




 Investment in affiliates

1,014


1,078

Funds in respect of employee rights upon retirement

1,513


2,253

 Deferred income taxes

215


162

Intangible assets, net

844


911

Property, plant and equipment, net

20,929


21,424

Operating lease right of use assets

7,198


-





Total non-current assets

31,713


25,828

Total assets

$                 112,869


$                 103,287





LIABILITIES AND EQUITY








CURRENT LIABILITIES:




Accounts payable

$                   10,663


$                   8,270

Accrued expenses

6,753


6,411

Operating lease liabilities

1,311


-





Total current liabilities

18,727


14,681





NON CURRENT LIABILITIES:




   Other long-term liabilities

102


180

Liability in respect of employee rights upon retirement

1,870


2,648

Deferred income taxes

1,359


1,484

Operating lease liabilities

6,104


-





 Total non-current liabilities

9,435


4,312

Total liabilities

28,162


18,993





EQUITY:




Share capital

2,809


2,809

Additional paid-in capital

65,490


65,535

Treasury stock at cost

(2,088)


(2,088)

Accumulated other comprehensive income (loss)

66


(206)

Retained earnings

18,430


18,244

Total shareholders' equity

84,707


84,294





Total liabilities and shareholders' equity

$                 112,869


$                 103,287





 

 

 

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,


2019


2018


2019


2018


2018


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Audited)











Revenues:










Products

$      6,299


$      6,160


$    12,199


$    12,996


$    23,151

Services

19,707


18,672


37,103


36,193


70,027


26,006


24,832


49,302


49,189


93,178











Cost of goods:










Products

5,088


6,451


10,183


12,981


23,807

Services

17,233


15,784


32,184


30,439


60,980


22,321


22,235


42,367


43,420


84,787

Gross Profit

3,685


2,597


6,935


5,769


8,391











Operating expenses:










Research and development, net

26


176


49


495


553

Selling and marketing

1,421


1,265


2,474


2,635


4,913

General and administrative

1,745


2,576


3,802


4,746


8,559

Other loss

-


-


-


-


(4)


3,192


4,017


6,325


7,876


14,021

Operating income (loss)

493


(1,420)


610


(2,107)


(5,630)











Financial income (expenses), net

(158)


21


(384)


19


(102)











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

335


(1,399)


226


(2,088)


(5,732)











Taxes on income (tax benefit)

154


(95)


(34)


(30)


(1,464)











Income (loss) before equity investment

181


(1,304)


260


(2,058)


(4,268)











Share in results of affiliated companies

(55)


(70)


(74)


(60)


(140)











Net income (loss)

$     126


$     (1,374)


$      186


$     (2,118)


$      (4,408)











Basic and diluted income (loss) per share




















Net income (loss) per share

$      0.01


$      (0.16)


$    0.02


$      (0.24)


$    (0.5)











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












 

 

TAT TECHNOLOGIES AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)



Three months ended


Six months ended

Year ended 


June 30,

December 31,


2019

2018


2019

2018

2018


(Unaudited)


(Unaudited)


(Unaudited)

(Unaudited)

(Audited)

















Net income (loss)

$     126


$     (1,374)

 

$     186


$     (2,118)

$      (4,408)

Other comprehensive income








Net unrealized income (losses) from derivatives

56


(288)

 

286


(348)

(672)

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

(30)


128

 

(14)


42

331

       Total other comprehensive income (loss)

$     152


$     (1,534)

 

$     458


$     (2,424)

$      (4,749)

 

 

 

TAT TECHNOLOGIES AND ITS SUBSIDIARIES

 

RECONCILIATION OF GAAP TO NON-GAAP RESULTS (UNAUDITED)

(In thousands, except share and per share data)



Three months ended


June 30,


2019


2018









Reported net income (loss) on GAAP basis

$     126


$     (1,374)

Adjustments:




Share in results of equity investment of affiliated company

55


70

Share based compensation

(117)


64

       Non-GAAP net income (loss)

$         64


$         (1,240)





       Non-GAAP net income (loss) per share

$           0.01


$           (0.14)





Weighted average number of shares outstanding




 Basic

8,874,696


8,862,473

 Diluted

8,874,696


8,862,473





 

 

 

TAT TECHNOLOGIES AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except share data)




TAT Technologies Ltd. Shareholders





 

Share capital













Number of shares issued


Amount


Additional paid-in capital


Accumulated other comprehensive income (loss)


Treasury shares


Retained earnings


Total equity
















BALANCE AT DECEMBER 31, 2016 (audited)


9,102,917


$           2,797


$      64,760


$             (73)


$            (2,088)


$           23,256


$           88,652

CHANGES DURING THE YEAR ENDED DECEMBER 31, 2017 (audited):















Comprehensive income


-


-


-


208


-


2,396


2,604

Share based compensation expenses


-


-


174


-


-


-


174

 Exercise of option


19,584


5


139


-


-


-


144

 Dividend distributed


-


-


-


-


-


(3,000)


(3,000)

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 loss


-


-


-


(341)


-


(4,408)


(4,749)

 Share based compensation expenses


-


-


272


-


-


-


272

 Exercise of options


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 SIX MONTHS ENDED JUNE 30, 2019 (unaudited):















Comprehensive income


-


-


-


272


-


186


458

 Share based compensation income


-


-


(45)


-


-


-


(45)

BALANCE AT JUNE 30, 2019 (unaudited)


9,149,169


$           2,809


$      65,490


$             66


$            (2,088)


$           18,430


$           84,707



















 

 

 

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,



2019


2018


2019

2018


2018



(Unaudited)


(Unaudited)


(Unaudited)

(Unaudited)


(Audited)

CASH FLOWS FROM OPERATING ACTIVITIES:










Net income (loss)


$   126


$   (1,374)


$   186

$   (2,118)


$      (4,408)

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




















Depreciation and amortization


1,078


1,029


2,148

2,037


4,185

Loss (gain) from change in fair value of derivatives


(20)


174


(254)

386


382

Provision for doubtful accounts


-


127


-

127


(347)

Share in results of equity investment of affiliated Company 


55


70


74

60


140

Share based compensation


(117)


64


(45)

119


272

Non cash finance expense


75


-


217

-


-

Liability in respect of employee rights upon retirement


(587)


(120)


(778)

(303)


(587)

Deferred income taxes, net


452


(231)


(178)

(55)


(102)

Changes in operating assets and liabilities:










    Decrease (increase) in trade accounts receivable


(1,534)


3,334


(3,204)

3,022


6,814

   Decrease (increase) in other current assets and prepaid
expenses


310


(848)


1,257

(748)


(1,575)

Decrease (increase) in inventory


472


2,352


(2,122)

88


161

    Increase (decrease) in trade accounts payable


1,197


(3,117)


2,534

(1,032)


(969)

    Increase (decrease) in accrued expenses


(661)


(2,058)


342

(1,892)


(1,920)

    Increase (decrease) in other long-term liabilities


(20)


101


(78)

79


34

Net cash provided by (used in) operating activities


$  826


$  (497)


$  99

$  (230)


$      2,080

CASH FLOWS FROM INVESTING ACTIVITIES:










Investment in affiliated company


(10)


-


(10)

-


(26)

Funds in respect of employee rights upon retirement


-


(65)


(22)

(22)


(22)

Proceeds from sale of property and equipment


-


-


-

7


7

Purchase of property and equipment


(780)


(735)


(1,727)

(2,185)


(4,270)

Maturities of short-term deposits






-

-


470

Cash flows used in investing activities


$  (790)


$  (800)


$  (1,759)

$  (2,200)


$   (3,841)

CASH FLOWS FROM FINANCING ACTIVITIES:










 Exercise of options


-


102


-

102


197

Cash flows provided by financing activities


$  -


$  102


$  -

$  102


$   197











Net increase (decrease) in cash and cash equivalents


36


(1,195)


(1,660)

(2,328)


(1,564)

Cash and cash equivalents at beginning of period


14,254


16,381


15,950

17,514


17,514

Cash and cash equivalents at end of period


$   14,290


$   15,186


$   14,290

$   15,186


$    15,950

 

 

 

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,


2019


2018

2019

2018

2018















Net income (loss)

$   126


$   (1,374)

$   186

$   (2,118)

$         (4,408)

Adjustments:







Share in results of equity investment
of affiliated companies

55


70

 

 

74

 

 

60

 

 

140

Taxes on income (tax benefit)

154


(95)

(34)

(30)

(1,464)

Financial expenses (income), net

158


(21)

384

(19)

102

Depreciation and amortization

1,126


1,029

2,196

2,037

4,185

Share based compensation

(117)


64

(45)

119

272

Adjusted EBITDA

$         1,502


$         (327)

$         2,761

$         49

$       (1,173)








 

 

Note to the financial statements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. The new standard establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU assets and lease liabilities on the balance sheet. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations. The Company adopted the new standard on January 1, 2019 using the modified retrospective transition method and did not restate comparative periods. The new standard provides a number of optional practical expedients in transition. The Company recognizes the lease expenses in the consolidated statements of Operations on a straight-line basis over the lease period.

Additionally, the Company did not separate lease and non-lease components for all of its leases. The Company elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. Instead, the Company will continue to recognize the lease payments for those leases in profit or loss on a straight-line basis over the lease term.

The most significant effects of adoption relate to (1) the recognition of new ROU assets and lease liabilities on its balance sheet for real estate operating leases; and (2) recording of Non-cash finance expenses on its statement of income.

The adoption of the standard resulted in recognition of $7.3 million of lease assets and lease liabilities as of January 1, 2019 on the Company's consolidated balance sheets. During the three months period ended June 30, 2019 and during the six months period ended June 30, 2019 the Company recorded non-cash finance expenses in the amount of $0.08 million and 0.22 million, respectively.

Contact:
Mr. Ehud Ben-Yair
Chief Financial Officer
Tel: +972-8-862-8503
ehudb@tat-technologies.com

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