PR Newswire | Nov 12, 2020 04:50PM EST

11/12 15:49 CST

TAT Technologies Reports Third Quarter 2020 Results GEDERA, Israel, Nov. 12, 2020

GEDERA, Israel, Nov. 12, 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 nine month periods ended September 30, 2020.

Key Financial Highlights:

* Revenues for Q3 2020 were $16.8 million compared with $24.8 million in Q3 2019. Revenues for the nine-month period that ended on September 30, 2020 were $58.8 million compared with $71.7 million in the nine-month period that ended on September 30, 2019. * Gross profit for Q3 2020 was $1.4 million (8.3% as a percentage of revenues) compared with $4.1 million (16.8% as a percentage of revenues) in Q3 2019. Gross profit for the nine-month period that ended on September 30, 2020 was $7.5 million (12.7% as a percentage of revenues) compared with $11 million (15.3% as a percentage of revenues) in the nine-month period that ended on September 30, 2019. * Adjusted EBITDA for Q3 2020 was (0.3) million compared with $2.2 million in Q3 2019. Adjusted EBITDA for the nine-month period that ended on September 30, 2020 was $2.2 million compared with $5.3 million in the nine-month period that ended on September 30, 2019. * Net loss was ($1.6) million, or loss of ($0.16) per diluted share in Q3 2020 compared with a net income of $0.15 million, or $0.02 per diluted share in Q3 2019. Net loss was ($3.4) million, or loss of ($0.37) per diluted share in the nine-month period that ended on September 30, 2020 compared with a net income of $0.3 million, or $0.04 per diluted share in the nine-month period that ended on September 30, 2019. * During Q3 2020 and the nine-month period that ended on September 30, 2020 TAT reported losses from discontinued operation of the JT8D engine blades coating in the amount of $0.1 million and $1.8 million, respectively.

Mr. Igal Zamir, CEO and President of TAT Technologies stated, "TAT reacted fast and effectively to the COVID 19 impact on the aerospace industry. In Q2 and Q3 of 2020 we adjusted the company's cost structure to the reduction in revenues during such period. We will continue to proactively monitor our cost structure and cash flow as the industry continues to manage the pandemic and its impact. Our strong balance sheet with net cash of over $19 million provides us the flexibility to serve our customers and in the same time maintain business development activities.

We are pleased that despite the pandemic, the company was able to continue its sales, marketing, and business development efforts with meaningful results. During the third quarter of 2020 we signed a 10- year contract with Honeywell for the repair of APU 331-2xx. This contract represents a substantial opportunity to increase our APU business. In order to support its execution, we will invest in machines and rotatable parts in the coming quarters to better support our clients.

In addition, we are proud that during the last six months we executed new, and renewed existing long-term agreements with MRO and OEM customers with potential aggregate revenues of $38 million for the coming years"

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-YairChief Financial OfficerTel: 972-8-862-8503ehudb@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,

2020 2019 (*)

(unaudited) (audited)

ASSETS

CURRENT ASSETS:

Cash and cash equivalents $ 24,106 $ 15,959

Accounts receivable, net 13,657 20,311

Other current assets and prepaid expenses 3,449 2,605

Inventory, net 40,100 43,327

Assets belong to discontinued operation - 1,839

Total current assets 81,312 84,041

NON-CURRENT ASSETS: 165 - Restricted deposit

Investment in affiliates 777 956

Funds in respect of employee rights upon retirement 1,164 1,404

Deferred income taxes - 228

Intangible assets, net 1,604 777

Property, plant and equipment, net 19,884 20,605

Operating lease right of use assets 7,320 6,664

Total non-current assets 30,914 30,634

$ 112,226 $ 114,675Total assets

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Accounts payable 8,118 11,823

Accrued expenses 6,313 7,393

Deferred income (government grant) 265 -

Operating lease liabilities 1,635 1,330

Liabilities belong to discontinued operation 260 158

Total current liabilities 16,591 20,704

NON CURRENT LIABILITIES:

Long-term loans 4,841 -

Other long-term liabilities - 62

Liability in respect of employee rights upon retirement 1,451 1,751

Deferred income taxes 1,256 1,100

Operating lease liabilities 5,990 5,688

Total non-current liabilities 13,538 8,601

Total liabilities $ 30,129 $ 29,305

EQUITY:

Share capital 2,809 2,809

Additional paid-in capital 65,683 65,573

Treasury stock at cost (2,088) (2,088)

Accumulated other comprehensive income 19 26

Retained earnings 15,674 19,050

Total shareholders' equity 82,097 85,370

Total liabilities and shareholders' equity $ 112,226 $ 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 Nine months ended Year ended

September 30, December 31,

2020 2019(*) 2020 2019(*) 2019(*)

(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)

Revenues:

Products $ 4,822 $ $ 18,157 $ 17,924 $ 25,019 5,725

Services 11,995 19,059 40,667 53,770 72,460

16,817 24,784 58,824 71,694 97,479

Cost of goods:

Products 4,383 4,853 16,156 15,037 21,557

Services 11,036 15,757 35,179 45,668 60,622

15,419 20,610 51,335 60,705 82,179

Gross Profit 1,398 4,174 7,489 10,989 15,300

Operating expenses:

Research and development, net 62 39 131 96 113

Selling and marketing 920 1,225 2,986 3,549 4,929

General and administrative 1,813 1,860 5,542 5,362 7,654

2,795 3,124 8,659 9,007 12,696

Operating income (loss) (1,397) 1,050 (1,170) 1,982 2,604

Financial expenses, net (177) (144) (248) (517) (422)

Other expenses - - (21) - -

Income (loss) before taxes on income (tax (1,574) 906 (1,439) 1,465 2,182 benefit)

Taxes on income (tax benefit) (180) 469 (48) 464 631

Income (loss) before equity investment (1,394) 437 (1,391) 1,001 1,551

Share in results of affiliated companies (62) (65) (179) (139) (132)

Net income (loss) from continued operation $ (1,456) $ 372 $ (1,570) $ 862 $ 1,419

Loss from discontinued operation before (60) (230) (391) (564) (655) income taxes

Loss on disposal of discontinued operation (60) - (1,415) - - before income taxes

Benefit from income taxes - 15 - 45 42

Net loss from discontinued operation $ (120) $ (215) $ (1,806) (519) $ (613)

Net income (loss) $ (1,576) $ 157 $ (3,376) $ 343 $ 806

Basic and diluted income (loss) per share

Net income (loss) per share from continued $ (0.16) $ 0.04 $ (0.17) $ 0.1 $ 0.18 operation

Net loss per share from discontinued $ 0 $ (0.02) $ (0.2) $ (0.06) $ (0.07)operation

Net income (loss) per share $ (0.16) $ 0.02 $ (0.37) $ 0.04 $ 0.11

Weighted average number of shares outstanding

Basic 8,874,696 8,874,696 8,874,696 8,874,696 8,864,885

Diluted 8,874,696 8,874,696 8,874,696 8,874,696 8,864,885

*Reclassified due to discontinued operation

TAT TECHNOLOGIES AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

Three months ended Nine months ended Year ended

September 30, December 31,

2020 2019 2020 2019 2019

(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)

Net income (loss) $ (1,576) $ 157 $ (3,376) $ 343 $ 806

Other comprehensive income

Net unrealized income (loss) from derivatives (33) 72 (7) 358 372

Reclassification adjustments for gains (losses) - (104) 5 (118) (140) included in net income and inventory

Total other comprehensive income (loss) $ (1,609) $ 125 $ (3,378) $ 583 $ 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 $ $ (2,088) $ 22,652 $ 88,574 135

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 $ $ (2,088) $ 18,244 $ 84,294 (206)

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 NINE MONTHS ENDED SEPTEMBER 30, 2020 (unaudited):

Comprehensive (loss) - - - (7) - (3,376) (3,383)

Share based compensation expenses - - 110 - - - 110

BALANCE AT SEPTEMBER 30, 2020 9,149,169 $ 2,809 $ 65,683 $ 19 $ (2,088) $ 15,674 $ 82,097 (unaudited)

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,

2020 2019(*) 2020 2019(*) 2019(*)

(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss) $ (1,576) $ 157 $ (3,376) $ 343 $ 806

Net income (loss) from continued operations (1,456) 372 (1,570) 862 1,419

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

Depreciation and amortization 1,079 1,077 3,107 3,185 4,292

Loss (gain) from change in fair value of derivatives (14) (38) 7 (293) (311)

Provision for doubtful accounts (73) - 133 - 38

Share in results of equity investment of affiliated Company 62 65 179 139 132

Share based compensation 33 36 110 (9) 38

Non cash finance expense 57 107 (48) 324 354

Liability in respect of employee rights upon retirement (159) (134) (300) (912) (897)

Deferred income taxes, net 441 (115) 384 (293) (450)

Deferred revenues (government grant) (794) - 265 - -

Changes in operating assets and liabilities:

Decrease (increase) in trade accounts receivable 787 1,714 7,027 (1,510) (2,037)

Decrease (increase) in other current assets and prepaid (729) 486 (605) 1,743 2,500 expenses

Decrease (increase) in inventory 1,674 (1,314) 3,039 (3,531) (5,740)

Increase (decrease) in trade accounts payable 307 82 (2,913) 2,722 3,349

Increase (decrease) in accrued expenses (995) 1,193 (1,080) 1,535 982

Decrease in other long-term liabilities - (20) (62) (98) (118)

Net cash provided by operating activities $ 220 $3,511 $ 7,673 $ 3,864 $ 3,551

CASH FLOWS FROM INVESTING ACTIVITIES:

Investment in affiliated company - - - (10) (10)

Funds in respect of employee rights upon retirement - - - (22) -

Proceeds from sale of property and equipment - - (22) - -

Increase in long-term deposits (2) (165) - -

Purchase of property and equipment (1,253) (1,287) (3,012) (2,980) (3,269)

Purchase of intangible assets (950) (950)

Cash flows used in investing activities $ (2,205) $ (1,287) $ (4,149) $ (3,012) $ (3,279)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from long-term loans received - - 4,841 - -

Cash flows provided by financing activities $ - $ - $ 4,841 $ - $ -

Cash flows from discontinued operations: $ (120) $ (215) $ (1,806) (519) $ (613)Net loss from discontinued operation

Net cash provided by operating activities 175 516 1,588 566 484

Net cash used in investing activities - - (34) (134)

Net cash used in discontinued operations $ 55 $ 301 $ (218) 13 $ (263)

Net increase (decrease) in cash and cash equivalents (1,930) 2,525 8,147 865 9

Cash and cash equivalents at beginning of period 26,036 14,290 15,959 15,950 15,950

Cash and cash equivalents at end of period $ 24,106 $ 16,815 $ 24,106 $ 16,815 $ 15,959

*Reclassified due todiscontinued operation

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,

2020 2019(*) 2020 2019(*) 2019(*)

Net income (loss) $ (1,576) $ 157 $ (3,376) $ 343 $ 806

Adjustments:

Share in results of equity investment of 62 65 179 139 132 affiliated companies

Taxes on income (tax benefit) (180) 469 (48) 464 631

Financial expenses, net 177 144 250 517 422

Other expenses - - 21 - -

Depreciation and amortization 1,060 1,144 3,250 3,322 4,394

Net loss from discontinued operations 120 215 1,806 519 613

Share based compensation 33 36 110 (9) 38

Adjusted EBITDA $ (304) $ 2,230 $ 2,192 $ 5,295 $ 7,036

*Reclassified due to discontinued operation

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SOURCE TAT Technologies Ltd