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TAT Technologies Reports Third Quarter 2019 Results

GEDERA, Israel, Nov. 29, 2019 /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 nine months periods ended September 30, 2019.

Key Financial Highlights:

  • Revenues for Q3 2019 increased by 13% to $26.1 million compared with $23.2 million in Q3 2018.  Revenues for the nine-months period that ended on September 30, 2019 increased by 4% to $75.4 million compared with $72.4 million in the nine-months period that ended on September 30, 2018.
  • Gross profit for Q3 2019 increased by 40% to $4.2 million (16.3% of revenues) compared with $3.0 million (13.1% of revenues) in Q3 2018.  Gross profit for the nine-months period that ended on September 30, 2019 increased by 27% to $11.2 million (14.8% of revenues) compared with $8.8 million (12.2% of revenues) in the nine-months period that ended on September 30, 2018.
  • EBITDA for Q3 2019 increased by 100% to $2.0 million compared with $1.0 million in Q3 2018. EBITDA for the nine-months period that ended on September 30, 2019 increased by 380% to $4.8 million compared with $1.0 million in the nine-months period that ended on September 30, 2018.
  • GAAP net income was $0.16 million, or $0.02 per diluted share in Q3 2019 compared with a net loss of $0.5 million, or ($0.06) per diluted share in Q3 2018. GAAP net income was $0.34 million, or $0.04 per diluted share in the nine-months period that ended on September 30, 2019 compared with a net loss of $2.7 million, or ($0.30) per diluted share in the nine-months period that ended on September 30, 2018.

Mr. Igal Zamir, CEO and President of TAT Technologies stated, "We are pleased with the results of the recent nine months. Revenues continue to grow both on the MRO and OEM segments. TAT continues its improvements in all operational aspects and profitability."

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

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)



September 30,


December 31,

2019


2018


(unaudited)


 (audited)

ASSETS




CURRENT ASSETS:




Cash and cash equivalents

$                   16,815


$                   15,950

Accounts receivable, net

20,515


19,277

Other current assets and prepaid expenses

3,404


3,627

Inventory, net

41,686


38,605





Total current assets

82,420


77,459





NON-CURRENT ASSETS:




 Investment in affiliates

949


1,078

Funds in respect of employee rights upon retirement

1,372


2,253

 Deferred income taxes

230


162

Intangible assets, net

810


911

Property, plant and equipment, net

21,213


21,424

Operating lease right of use assets

6,779


-





Total non-current assets

31,353


25,828

Total assets

$                 113,773


$                 103,287





LIABILITIES AND EQUITY








CURRENT LIABILITIES:




Accounts payable

$                   10,779


$                   8,270

Accrued expenses

7,946


6,411

Operating lease liabilities

1,331


-





Total current liabilities

20,056


14,681





NON CURRENT LIABILITIES:




   Other long-term liabilities

82


180

Liability in respect of employee rights upon retirement

1,736


2,648

Deferred income taxes

1,259


1,484

Operating lease liabilities

5,772


-





 Total non-current liabilities

8,849


4,312

Total liabilities

28,905


18,993





EQUITY:




Share capital

2,809


2,809

Additional paid-in capital

65,526


65,535

Treasury stock at cost

(2,088)


(2,088)

Accumulated other comprehensive income (loss)

34


(206)

Retained earnings

18,587


18,244

Total shareholders' equity

84,868


84,294





Total liabilities and shareholders' equity

$                 113,773


$                 103,287





 

 

TAT TECHNOLOGIES AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share and per share data)







Three months ended


Nine months ended


Year ended


September 30,


December 31,


2019


2018


2019


2018


2018


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Audited)











Revenues:










Products

$      5,725


$         5,543


$    17,924


$   18,539


$    23,151

Services

20,351


17,642


57,454


53,835


70,027


26,076


23,185


75,378


72,374


93,178











Cost of goods:










  Products

4,853


5,752


15,037


18,733


23,807

  Services

16,983


14,399


49,166


44,838


60,980


21,836


20,151


64,203


63,571


84,787

Gross Profit

4,240


3,034


11,175


8,803


8,391











Operating expenses:










  Research and development, net

46


(35)


95


460


553

  Selling and marketing

1,329


1,171


3,803


3,806


4,913

  General and administrative

2,031


1,987


5,833


6,733


8,559

  Other loss

-


(1)


-


(1)


(4)


3,406


3,122


9,731


10,998


14,021

Operating income (loss)

834


(88)


1,444


(2,195)


(5,630)











Financial expenses, net

(159)


(58)


(543)


(39)


(102)











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

675


(146)


901


(2,234)


(5,732)











Taxes on income (tax benefit)

453


356


419


326


(1,464)











Income (loss) before equity investment

222


(502)


482


(2,560)


(4,268)











Share in results of affiliated companies

(65)


(42)


(139)


(102)


(140)











Net income (loss)

$     157


$       (544)


$      343


$      (2,662)


$     (4,408)











Basic and diluted income (loss) per share




















Net income (loss) per share

$      0.02


$       (0.06)


$    0.04


$       (0.30)


$         (0.5)











Weighted average number of shares 
     outstanding










 Basic

8,874,696


8,874,696


8,874,696


8,861,567


8,864,885

 Diluted

8,874,696


8,874,696


8,874,696


8,861,567


8,864,885











 

 

TAT TECHNOLOGIES AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)



Three months ended


Nine months ended


Year ended 



September 30,


December 31,



2019


2018


2019


2018


2018



(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Audited)













Net income (loss)

$     157


$       (544)


$     343


$       (2,662)


$    (4,408)


Other comprehensive income











Net unrealized income (losses) from
derivatives

72


16


358


(332)


(672)


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

(104)


123


(118)


165


331


    Total other comprehensive income (loss)

$     125


$    (405)


$     583


$    (2,829)


$    (4,749)


 

 

 

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, 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)


$            8,244


$            84,294





















 

 

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, 2018 (audited)


9,149,169


$          2,809


$      65,535


$            (206)


$           (2,088)


$          8,244


$            84,294

CHANGES DURING THE NINE MONTHS ENDED
SEPTEMBER 30, 2019 (unaudited):















Comprehensive income


-


-


-


240


-


343


583

 Share based compensation income


-


-


(9)


-


-


-


(9)

BALANCE AT SEPTEMBER 30, 2019 (unaudited)


9,149,169


$           2,809


$      65,526


$             34


$           (2,088)


$           18,587


$            84,868

































Share capital













Number of shares issued


Amount


Additional paid-in capital


Accumulated other comprehensive income (loss)


Treasury shares


Retained earnings


Total equity
















BALANCE AT JULY 1, 2019 (unaudited)


9,149,169


$           2,809


$      65,490


$             66


$           (2,088)


$           18,430


$            84,707

CHANGES DURING THE THREE MONTHS 
ENDED SEPTEMBER 30, 2019 (unaudited):















Comprehensive income


-


-


-


(32)


-


157


125

 Share based compensation income


-


-


36


-


-


-


36

BALANCE AT SEPTEMBER 30, 2019 (unaudited)


9,149,169


$           2,809


$      65,526


$             34


$           (2,088)


$           18,587


$            84,868



















 

 

TAT TECHNOLOGIES AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)




Three months ended


Nine months ended


Year ended 



September 30,


December 31,



2019


2018


2019

2018


2018



(Unaudited)


(Unaudited)


(Unaudited)

(Unaudited)


(Audited)

CASH FLOWS FROM OPERATING ACTIVITIES:










Net income (loss)


$   157


$       (544)


$   343

$   (2,662)


$    (4,408)

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




















Depreciation and amortization


1,097


1,048


3,245

422


4,185

Loss (gain) from change in fair value of derivatives


(38)


35


(293)

(347)


382

Provision for doubtful accounts


-


(474)


-

102


(347)

Share in results of equity investment of affiliated Company 


65


42


139

165


140

Share based compensation


36


46


(9)

422


272

Non cash finance expense


107


-


324

-


-

Liability in respect of employee rights upon retirement


(134)


16


(912)

(287)


(587)

Deferred income taxes, net


(115)


181


(293)

126


(102)

Changes in operating assets and liabilities:










 Decrease (increase) in trade accounts receivable


1,965


2,015


(1,238)

5,036


6,814

Decrease (increase) in other current assets and prepaid 
     expenses


487


172


1,743

(576)


(1,575)

Decrease(increase) in inventory


(1,043)


(569)


(3,165)

(481)


161

      Increase (decrease) in trade accounts payable


56


1,042


2,590

10


(969)

      Increase (decrease) in accrued expenses


1,193


151


1,535

(1,741)


(1,920)

      Increase (decrease) in other long-term liabilities


(20)


(25)


(98)

54


34

Net cash provided by operating activities


$  3,813


$   3,136


$  3,911

$  2,906


$      2,080

CASH FLOWS FROM INVESTING ACTIVITIES:










Investment in affiliated company


-


-


(10)

-


(26)

Funds in respect of employee rights upon retirement


-


-


(22)

(22)


(22)

Proceeds from sale of property and equipment


-


-


-

7


7

Purchase of property and equipment


(1,287)


(1,177)


(3,014)

(3,362)


(4,270)

Maturities of short-term deposits






-

-


470

Cash flows used in investing activities


$  (1,287)


$   (1,177)


$  (3,046)

$  (3,377)


$   (3,841)

CASH FLOWS FROM FINANCING ACTIVITIES:










 Exercise of options


-


95


-

197


197

Cash flows provided by financing activities


$  -


$   95


$  -

$  197


$   197











Net increase (decrease) in cash and cash equivalents


2,525


2,054


865

(274)


(1,564)

Cash and cash equivalents at beginning of period


14,290


15,186


15,950

17,514


17,514

Cash and cash equivalents at end of period


$   16,815


$    17,240


$   16,815

$   17,240


$    15,950

 

 

TAT TECHNOLOGIES AND ITS SUBSIDIARIES

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

(In thousands)



Three months ended

Nine months ended

Year ended


September 30,

September 30,

December 31,


2019


2018

2019

2018

2018















Net income (loss)

$   157


$   (544)

$   343

$   (2,662)

$        (4,408)

Adjustments:







Share in results of equity investment 
     of affiliated companies

65


42

 

 

139

 

 

102

 

 

140

Taxes on income (tax benefit)

453


356

419

326

(1,464)

Financial expenses, net

159


58

543

39

102

Depreciation and amortization

1,145


1,048

3,341

3,085

4,185

   Share  based compensation

36


46

(9)

165

272

Adjusted EBITDA

$        2,015


$        1,006

$        4,776

$        1,055

$       (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 September 30, 2019 and during the nine months period ended September 30, 2019 the Company recorded non-cash finance expenses in the amount of $0.11 million and $0.32 million, respectively.

SOURCE TAT Technologies Ltd