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 Companys 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.
All of the following revenues
data are before the elimination of inter-segment transactions.
Revenues from MRO services
decreased to $23.2 million for the six months ended June 30, 2009 from $26.2 million for
the six months ended June 30, 2008, a decrease of 11.4%. The decrease in MRO services
revenues in six months ended March 31, 2009 was primarily attributable to operational
issues incurred at our Tulsa facility including parts shortages and processing
difficulties.
Revenues from OEM of Heat Transfer
products segment
increased to $14.7 million for the six months ended June 30,
2009 from $13.4 million for the six months ended June 30, 2008, an increase of 9.7%. The
increase in that segments revenues was primarily attributable to increased sales to
existing customers.
Revenues from OEM of Electric
Motion Systems segment
were $6.0 million for the six months ended June 30, 2009, and
are attributable to the consolidation of Bental operations commencing from August 18,
2008.
Revenues from parts services
decreased to $4.8 million for the six months ended June 30, 2009 from $8.6 million for
the six months ended June 30, 2008, a decrease of 43.8%. The decrease in parts services
revenues was primarily attributable to a general decline in the part services market.
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 affected retroactively, mentioned above.
All of the following cost of
revenues data reflects the elimination of inter-segment transactions.
Cost of revenues for MRO
services
. Cost of revenues for MRO services slightly decreased to $20.7 million for
the six months ended June 30, 2009 from $20.8 million for the six months ended June 30,
2008. This is resulting primarily from the decreased revenues in this segment; however
there was additional cost incurred, related to a commercial dispute with regards to the
Companys Repair Center and Storefront agreements. Cost of revenues as a percentage
of revenues in this segment increased to 89% in the six months ended June 30, 2009 from
79% for the six months ended June 30, 2008, primarily as a result of product mix with
lower margin products sold during the six months ended June 30, 2009, increased production
costs in 2009, as well as additional cost related to Repair Center and Storefront
agreements, mentioned above.
Cost of revenues for OEM of Heat
Transfer products
. Cost of revenues for OEM Heat Transfer products increased to $9.8
million for the six months ended June 30, 2009 from $9.7 million for the six months ended
June 30, 2008, an increase of 1.2%, primarily as a result of increased revenues. Cost of
revenues as a percentage of revenues in this segment decreased to 67% in the six months
ended June 30, 2009, from 72% for the six months ended June 30, 2008, primarily resulting
from the incline in the exchange rate between the U.S. dollar and the Israeli Shekel that
resulted in decreased production expenses, as well as improved efficiency in the
production processes during 2009 compared with 2008.
Cost of revenues for OEM of
Electric Motion System
. Cost of revenues for OEM of Electric Motion Systems
segment were $3.8 million for the six months ended June 30, 2009, and are attributable to
the consolidation of Bental operations commencing from August 18, 2008. Cost of revenues
as a percentage of revenues in this segment was 64% in the six months ended June 30, 2009.
Cost of revenues for parts
services
. Cost of revenues for parts services decreased to $3.9 million for the six
months ended June 30, 2009 from $6.9 million for the six months ended June 30, 2008, a
decrease of 43.3%, primarily as a result of decreased parts revenues. Cost of revenues as
a percentage of revenues slightly increased to 81% in the six months ended June 30, 2009
from 80% for the six months ended June 30, 2008, primarily as a result of product mix with
lower margin products sold during the six months ended June 30, 2009. TAT expects that its
cost of revenues for parts services will vary from year to year and period to period due
to the high degree of volatility in this segment.
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 TATs 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 companys 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.
Liquidity and Capital
Resources
During the three months ended June
30, 2009, TAT received a $1.25 million loan from Bank Mizrahi (in addition to a $5 million
loan already received during 2008) to finance the acquisition of Bentals shares.
As of June 30, 2009 TAT had cash and
cash equivalents and short-term deposits of $19.1, in addition to marketable securities of
$21.8 million, as compared with cash and cash equivalents and short-term deposits of $17.2
million, in addition to marketable securities of $21.6 million, as of June 30, 2008.
Seasonality
TAT believes that the growth of its
business over the last three years has masked a historical seasonal trend in the MRO
services sector. Historically, TAT has seen many airlines decrease their maintenance
requirements in the peak air travel summer months and increase its maintenance
requirements in the winter months when air travel is not as great.
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 paid such supplier $3.6 million. 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.
TATs executive offices are
located in the Reem Industrial Park, Neta Boulevard, Bnei Ayish, Gedera 70750,
Israel, and TATs telephone number is 972-8-862-8500.
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
managements 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 companys 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,
2009
|
June 30,
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
June 30,
|
Six months ended
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
|
|
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
TAT TECHNOLOGIES LTD.
(Registrant)
By: /s/ Yaron Shalem
Yaron Shalem
Chief Financial Officer
|
Date: August 18, 2009
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