TAT Technologies Reports Continued Improvement in Profitability and Revenue Growth in Q2 2017

Revenue growth of 13% in Q2/17 compare to Q2/16 and 14% in H1/17 compared to H1/16.

Company achieves Adjusted EBITDA of $2.4 million for the quarter compared with $1.2 million in Q2/16, an increase of 100% and $5.3 million for the first half of the year compared with $2.3 million in H1/16, an increase of 130%.

PR Newswire 13-Aug-2017 12:30 AM

GEDERA, Israel, Aug. 13, 2017 /PRNewswire/ -- TAT Technologies Ltd. (NASDAQ: TATT - News) ("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, 2017.

Key Financial Highlights:

  • Revenues for Q2 2017 were $26.6 million compared with $23.5 million in Q2 2016, a 13.2% growth. Revenues for H1 2017 were $53.6 million compared with $47.2 million in H1 2016, a 13.6% growth.
  • Profitability showed significant improvement, both quarter-over-quarter and first half-over-first half:
    • Adjusted EBITDA for Q2 2017 increased to $2.4 million compared with $1.2 million in Q2 2016, an increase of 100%. Adjusted EBITDA for H1 2017 increased to $5.3 million compared with $2.3 million in H1 2016, an increase of 130%.
    • The Company achieved GAAP net income of $0.6 million, or $0.07 per diluted share in Q2 2017, compared with a loss of $(2.5) million, or $(0.28) per diluted share, in Q2 2016.
    • Non-GAAP net income reached $0.8 million, or $0.09 per diluted share in Q2 2017, compared with a loss of $(0.1) million, or $(0.01) per diluted share in Q2 2016.
  • Last Twelve Months ("LTM") results for the period ended June 30, 2017 improved with revenues of $102.3 million compared to $90.8 million in the LTM period ended June 30, 2016, a growth of 12.7%. Adjusted EBITDA for the LTM period ended June 30, 2017 was $10.9 million compared to $2.5 million in the LTM period ended June 30, 2016, a growth of 336%.

Mr. Igal Zamir, CEO and President of TAT Technologies stated, "Our second quarter results reflect the continued implementation of the Company's plan to improve efficiencies and cost reduction. This is the fourth consecutive quarter in which we demonstrate consistent and significant improvement resulting from streamlining operations, leveraging additional synergies between our various business activities and having certain new marketing processes. In addition, we are systematically focusing on tenders that guarantee present profitability compared to those that characterized our past activities, as reflected in the change of our product mix."

Mr. Zamir added, "The aviation industry is benefiting from an increase in fleet sizes as well as passenger traffic on the one hand and low fuel prices on the other; we are working to leverage these trends in order to strengthen our business and competitive position. We are thrilled that the 14% sales growth was achieved concurrently with a decrease in operating expenses, resulting in Adjusted EBITDA doubling in the first six months of 2017 compared to the comparable period in 2016. The Adjusted EBITDA ratio also grew to more than 9% of total revenues during this period. We believe that our long term strategy will enable TAT to better utilize business opportunities and maintain our growth momentum."

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 7 and 11 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

Guy Nathanzon, CFOTAT Technologies Ltd.Tel: +972-8-862-8500 guyn@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,

2017

2016

(unaudited)

(audited)

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$ 20,096

$ 21,433

Short-term bank deposits

464

964

Accounts receivable, net

22,819

21,572

Other current assets and prepaid expenses

3,020

1,687

Inventory, net

36,406

39,269

Total current assets

82,805

84,925

NON-CURRENT ASSETS:

Investment in affiliates

1,164

1,019

Funds in respect of employee rights upon retirement

2,816

2,660

Deferred income taxes

1,032

896

Intangible assets, net

1,112

1,179

Property, plant and equipment, net

20,902

21,298

Total non-current assets

27,026

27,052

Total assets

$ 109,831

$ 111,977

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Accounts payable

7,120

8,406

Accrued expenses

9,453

9,836

Total current liabilities

16,573

18,242

NON CURRENT LIABILITIES:

Other long-term liabilities

176

151

Liability in respect of employee rights upon retirement

3,164

2,994

Deferred income taxes

1,790

1,938

Total non-current liabilities

5,130

5,083

Total liabilities

21,703

23,325

EQUITY:

Share capital

2,797

2,797

Additional paid-in capital

64,875

64,760

Treasury stock at cost

(2,088)

(2,088)

Accumulated other comprehensive loss

476

(73)

Retained earnings

22,068

23,256

Total shareholders' equity

88,128

88,652

Total liabilities and shareholders' equity

$ 109,831

$ 111,977

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,

2017

2016

2017

2016

2016

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Audited)

Revenues:

Products

$ 9,369

$ 7,941

$ 18,919

$ 16,010

$ 30,431

Services

17,199

15,589

34,730

31,154

65,363

26,568

23,530

53,649

47,164

95,794

Cost of goods:

Products

7,532

6,341

14,443

13,032

23,788

Services

13,993

12,794

28,606

25,802

52,969

21,525

19,135

43,049

38,834

76,757

Gross Profit

5,043

4,395

10,600

8,330

19,037

Operating expenses:

Researchand development, net

176

474

405

738

1,140

Selling and marketing

1,296

947

2,438

1,957

3,876

General and administrative

2,239

2,682

4,506

5,092

10,023

Other loss (income)

-

(4)

28

(3)

(138)

3,711

4,099

7,377

7,784

14,901

Operating income

1,332

296

3,223

546

4,136

Financial expenses, net

(100)

(13)

(272)

(32)

(154)

Income before taxes on income

1,232

283

2,951

514

3,982

Taxes on income

535

2,722

1,033

2,908

3,865

Income (loss) before equity investment

697

(2,439)

1,918

(2,394)

117

Share in results of affiliated companies

(86)

(14)

(106)

(14)

(55)

Net income (loss)

$ 611

$ (2,453)

$ 1,812

$ (2,408)

$ 62

Basic and diluted income (loss) per share

Net income (loss) per share

$ 0.07

$ (0.28)

$ 0.21

$ (0.27)

$ 0.01

Weighted average number of shares outstanding

Basic

8,828,444

8,828,444

8,828,444

8,828,444

8,828,444

Diluted

8,832,080

8,828,444

8,892,756

8,828,444

8,830,764

TAT TECHNOLOGIES AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

Three months ended

Six months ended

Year ended

June 30,

December 31,

2017

2016

2017

2016

2016

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Audited)

Net income (loss)

$ 611

$ (2,453)

$ 1,812

$ (2,408)

$ 62

Other comprehensive income

Net unrealized gains (losses) from derivatives

(227)

(173)

(324)

192

174

Reclassification adjustments for gains included in net income and inventory

336

(74)

873

(121)

(243)

Total other comprehensive income (loss)

$ 720

$ (2,700)

$ 2,361

$ (2,337)

$ (7)

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,

2017

2016

Reported net income (loss) on GAAP basis

$ 611

$ (2,453)

Adjustments:

Tax adjustments re non-GAAP adjustments (1)

-

2,360

Share in results of equity investment ofaffiliated company

86

14

Share based compensation

58

13

Non-GAAP net income (loss)

$ 755

$ (66)

Non-GAAP net income per share (loss)

$ 0.09

$ (0.01)

Weighted average number of shares outstanding

Basic

8,828,444

8,828,444

Diluted

8,832,080

8,828,444

(1) During the second quarter of 2016 the Company distributed dividend from its foreign subsidiaries earnings. As a result, the company accrued deferred tax liability due to actual distribution of earnings from foreign subsidiaries of the Company and due to the possibility of future distribution of earnings from such foreign subsidiaries.

TAT TECHNOLOGIES AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except share data)

TAT Technologies Ltd. Shareholders

Share capital

Accumulated

Number of shares issued

Amount

Additional paid-in capital

other comprehensive income (loss)

Treasury shares

Retained earnings

Total equity

BALANCE AT DECEMBER 31, 2014 (audited)

9,082,817

$ 2,793

$ 64,491

$ -

$ (2,088)

$ 20,345

$ 85,541

CHANGES DURING THE YEAR ENDED DECEMBER 31, 2015 (audited):

Comprehensive income (loss)

-

-

-

(4)

-

5,849

5,845

Share based compensation expenses

-

-

38

-

-

-

38

BALANCE AT DECEMBER 31, 2015 (audited)

9,082,817

2,793

64,529

(4)

(2,088)

26,194

91,424

CHANGES DURING THE YEAR ENDED DECEMBER 31, 2016 (audited):

Comprehensive income (loss)

-

-

-

(69)

-

62

(7)

Share based compensation expenses

-

-

105

-

-

-

105

Exercise of option

20,100

4

126

-

-

-

130

Dividend distributed

-

-

-

-

-

(3,000)

(3,000)

BALANCE AT DECEMBER 31, 2016 (audited)

9,102,917

2,797

64,760

(73)

(2,088)

23,256

88,652

CHANGES DURING THE SIX MONTHS ENDED JUNE 30, 2017 (unaudited):

Comprehensive income

-

-

-

549

-

1,812

2,361

Dividend distributed

-

-

-

-

-

(3,000)

(3,000)

Share based compensation expenses

-

-

115

-

-

-

115

BALANCE AT JUNE 30, 2017 (unaudited)

9,102,917

$ 2,797

$ 64,875

$ 476

$ (2,088)

$ 22,068

$ 88,128

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,

2017

2016

2017

2016

2016

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Audited)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss) attributable to TAT Technologies Ltd. shareholders

$ 611

$ (2,453)

$ 1,812

$ (2,408)

$ 62

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

980

880

1,949

1,731

3,636

Loss on sale of property, plant and equipment

-

-

28

1

12

Interest from short-term bank deposits and restricted deposits

-

-

(11)

(24)

Loss (gain) from change in fair value of derivatives

(43)

5

(60)

(48)

(152)

Provision for doubtful accounts

19

-

38

43

(29)

Share in results and sale of equity investment of affiliated Company

86

14

106

14

55

Share based compensation

58

13

115

27

105

Liability in respect of employee rights upon retirement

68

(5)

170

13

123

Deferred income taxes, net

(342)

2,218

(284)

2,100

1,670

Changes in operating assets and liabilities:

Increase in trade accounts receivable

(1,820)

(2,060)

(1,285)

(3,497)

(2,392)

Decrease (increase) in other current assets and prepaid expenses

324

1,480

(618)

944

1,487

Decrease (increase) in inventory

1,407

(677)

2,672

(505)

(2,707)

Increase (decrease) in trade accounts payable

67

(551)

(1,371)

(124)

1,192

Increase (decrease) in accrued expenses

(1,613)

(207)

(383)

345

2,521

Increase (decrease) in other long-term liabilities

(11)

25

25

(122)

(38)

Net cash provided by (used in) operating activities

$ (209)

$ (1,318)

$ 2,914

$ (1,497)

$ 5,521

CASH FLOWS FROM INVESTING ACTIVITIES:

Investment in affiliated company

(164)

(13)

(251)

(13)

(905)

Funds in respect of employee rights upon retirement

(35)

117

(71)

(23)

2

Proceeds from sale of property and equipment

1

17

Purchase of property and equipment

(809)

(2,915)

(1,429)

(3,583)

(5,702)

Maturities of short-term deposits

500

-

500

2,000

7,182

Cash flows provided by (used in) investing activities

$ (508)

$ (2,811)

$ (1,251)

$ (1,618)

$ 594

CASH FLOWS FROM FINANCING ACTIVITIES:

Realization of contingency

-

-

-

-

(500)

Payment of cash dividend

(3,000)

-

(3,000)

-

(3,000)

Exercise of options

-

-

-

130

130

Cash flows provided by (used in) financing activities

$ (3,000)

$ -

(3,000)

$ 130

$ (3,370)

Net increase (decrease) in cash and cash equivalents

(3,717)

(4,129)

(1,337)

(2,985)

2,745

Cash and cash equivalents at beginning of period

23,813

19,832

21,433

18,688

18,688

Cash and cash equivalents at end of period

$ 20,096

$ 15,703

$ 20,096

$ 15,703

$ 21,433

TAT TECHNOLOGIES AND ITS SUBSIDIARIES

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

(In thousands)

Three months ended

Six months ended

Twelve months ended

June 30,

June 30,

June 30,

2017

2016

2017

2016

2017

2016

Net income (loss)

$ 611

$ (2,453)

$ 1,812

$ (2,408)

$ 4,282

$ 767

Adjustments:

Share in results and sale of equity investment of affiliated companies

86

14

106

14

147

268

Taxes on income

535

2,722

1,033

2,908

1,990

2,770

Financial expenses, net

100

13

272

32

394

132

Gain on bargain purchase

-

-

-

-

-

(4,833)

Depreciation and amortization

980

880

1,949

1,731

3,854

3,297

Share based compensation

58

13

115

27

193

50

Adjusted EBITDA

$ 2,370

$ 1,189

$ 5,287

$ 2,304

$ 10,860

$ 2,451

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SOURCE TAT Technologies Ltd

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