TAT Technologies Reports 2020 Results

Rhea-AI Summary

TAT Technologies Ltd. (NASDAQ: TATT) reported a significant decline in financial performance for the twelve months ended December 31, 2020. Total revenues dropped by 22.7% to $75.3 million from $97.4 million in 2019, primarily due to the COVID-19 pandemic's impact on the commercial aviation sector. Gross profit also decreased by 44.8% to $8.4 million, representing 11.2% of revenues. The company posted a GAAP net loss of $3.5 million, reversing the $1.5 million profit from 2019. Despite these challenges, TAT ended the year with a net cash balance of $16.2 million.

Positive

• Successful management of operating costs in response to market changes.
• Maintained a net cash balance of $16.2 million, showing effective working capital management.
• Entered two strategic agreements with Honeywell, expected to generate significant future revenues and position TAT as a premier MRO services provider.

Negative

• Total revenue decreased by 22.7% to $75.3 million due to the pandemic.
• Gross profit declined by 44.8% to $8.4 million, affecting overall profitability.
• GAAP net loss from continued operations was $3.5 million, reversing previous net income.

GEDERA, Israel, March 30, 2021 /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 audited results for the twelve months ended December 31, 2020.

Key Financial Highlights (*):

• Total revenues for the twelve months ended December 31, 2020 were $75.3 million compared to $97.4 million for the twelve months ended December 31, 2019, a decrease of 22.7%  The decrease in revenues was the result of the  COVID-19 pandemic outbreak which has significant effect on the commercial aviation industry.

 

• Gross profit for the twelve months ended December 31, 2020 were $8.4 million (11.2% of revenues) compared to $15.3 million (15.7% of revenues) for the twelve months ended December 31, 2019, a decrease of 44.8%. The decline in gross profit was mainly due to decrease in revenues and fixed charges on the COGS.

 

• Adjusted EBITDA for the twelve months ended December 31, 2020 was $1.1 million compared to $7.1 million for the twelve months ended December 31, 2019.

 

• GAAP net loss from continued operations for the twelve months ended December 31, 2020 was $3.5 million compared to GAAP net income of $1.5 million for the twelve months ended December 31, 2019. GAAP net income from continued operations for the twelve months ended December 31, 2020 included one-time expenses of approximately $0.8 million.

 

• Cash net of debt for December 31, 2020 was $16.2 million compared to $16.0 million for December 31, 2019. During 2020, the Company made significant capital investments related to the two large agreements with Honeywell. Nevertheless, the improvement in cash was mainly due to improved working capital management.
  
  * Financial results for fiscal year 2019 reclassified due to discontinued operation.

Mr. Igal Zamir, CEO and President of TAT Technologies stated, "2020 was a unique and challenging year for the aerospace industry and for TAT. TAT has reacted quickly in early 2020 to the changing environment and adjusted its cost structure to the new environment. We managed to conclude 2020 with positive EBITDA and slight increase in our net cash balance after making some meaningful investments related to the two new strategic agreements with Honeywell. These investments are reflected in the inventory and property, plant and equipment line items in our balance sheet. During 2020, we signed two strategic agreements with Honeywell that are related to MRO services to APU 331-200 and APU 331-500. We believe that such agreements position TAT (through its Piedmont subsidiary) as a global premier MRO services provider. We also believe that the Company would generate significant business and revenues from these two agreements. In addition, TAT has been working on other operational rationalization activities that are expected to yield significant cost savings starting from late 2021. We expect to enjoy the full impact of our above mentioned activities when the industry starts recovering from the COVID 19 crisis.

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, depreciation and amortization, inventory impairment from exit and dismissal activity and customers relationship write off. 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 page 11.

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 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 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.

 

 

TAT TECHNOLOGIES AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands)
			December 31,
			2020		2019 (*)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents			$       24,128		$       15,959
Accounts receivable, net of allowance for credit losses of $306      thousands as of December 31, 2020			11,355		20,311
Inventory, net			41,223		43,327
Other current assets and prepaid expenses			2,737		2,605
Assets belong to discontinued operation			-		1,401
Total current assets			79,443		83,603
NON-CURRENT ASSETS:
Restricted deposit			176		-
Investment in affiliates			771		956
Funds in respect of employee rights upon retirement			1,186		1,404
Deferred income taxes			566		228
Property, plant and equipment, net			25,737		20,605
Operating lease right of use assets			6,767		6,664
Intangible assets, net			1,475		389
Assets belong to discontinued operation			-		826
Total non-current assets			36,678		31,072
Total assets			$     116,121		$     114,675
			December 31,
			2020		2019(*)
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current maturities of long-term loans			$         1,477		$             -
Credit line from bank			3,000		-
Accounts payable			12,222		11,823
Accrued expenses			6,691		7,393
Operating lease liabilities			1,614		1,330
Liabilities belong to discontinued operation			179		158
Total current liabilities			25,183		20,704
NON-CURRENT LIABILITIES:
Long-term loans			3,489		-
Other long-term liabilities			-		62
Liability in respect of employee rights upon retirement			1,410		1,751
Deferred income taxes			-		1,100
Operating lease liabilities			5,758		5,688
Total non-current liabilities			10,657		8,601
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 13)
Total liabilities			35,840		29,305
EQUITY:
Ordinary shares of NIS 0.9 par value: Authorized: 13,000,000 shares at December 31, 2020 and at  December 31, 2019; Issued: 9,854,696 shares at December 31, 2020  and at December 31, 2019; Outstanding: 8,874,696 shares at  December 31, 2020 and at December 31, 2019			2,809		2,809
Additional paid-in capital			65,711		65,573
Treasury shares, at cost, 274,473 shares at December 31, 2020 and 2019			(2,088)		(2,088)
Accumulated other comprehensive income (loss)			128		26
Retained earnings			13,721		19,050
Total shareholders' equity			80,281		85,370
Total liabilities and shareholders' equity			$       116,121		$       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)
		Year ended December 31,
				2020		2019(*)				2018(*)
Revenue:
Products				$    22,739		$    25,019				$    23,151
Services				52,620		72,460				64,570
				75,359		97,479				87,721
Cost of revenue:
Products				20,751		21,557				23,807
Services				46,173		60,622				55,969
				66,924		82,179				79,776
Gross profit				8,435		15,300				7,945
Operating expenses:
Research and development, net				185		113				458
Selling and marketing				4,369		4,929				4,754
General and administrative				7,612		7,654				7,901
Other expense (income)				315		-				(4)
				12,481		12,696				13,109
Operating income (loss)				(4,046)		2,604				(5,164)
Financial expenses				(999)		(1,270)				(1,555)
Financial income				229		848				1,467
Income (loss) before taxes on income (tax benefit)				(4,816)		2,182				(5,252)
Taxes on income (tax benefit)				(1,517)		589				(1,464)
Income (loss) before share of equity investment				(3,299)		1,593				(3,788)
Share in results of equity investment of affiliated companies				(185)		(132)				(140)
Net income (loss) from continued operation				$    (3,484)		$    1,461				$    (3,928)
*Reclassified due to discontinued operation.

  

 

 

			Year ended December 31,
			2020		2019(*)		2018(*)
Net loss from discontinued operation			$  (1,845)		$  (655)		$   (480)
Net income (loss)			$   (5,329)		$   806		$       (4,408)
Net income (loss) per share basic and diluted from continued operation			$    (0.39)		$    0.17		$    (0.45)
Net loss per share basic and diluted from discontinued operation			$    (0.21)		$ (0.07)		$    (0.05)
Net income (loss) per share basic and diluted			$    (0.6)		$   0.1		$    (0.5)
Weighted average number of shares outstanding:
Basic			8,874,696		8,874,696		8,864,885
Diluted			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)
			Year ended December 31,
			2020		2019(*)		2018(*)
Net income (loss)			$      (5,329)		$    806		$      (4,408)
Other comprehensive income (loss), net
Net unrealized gains (losses) from derivatives			232		372		(672)
Reclassification adjustments for gains from   derivatives included in net income			(130)		(140)		331
Total other comprehensive income (loss)			$      102		$      232		$      (341)
Total comprehensive income (loss)			$      (5,227)		$      1,038		$      (4,749)
*Reclassified due to discontinued operation.

 

 

TAT TECHNOLOGIES AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except share data)
		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, 2017		9,102,917			$             2,802		$        65,073		$            135		$           (2,088)		$            22,652					$            88,574
CHANGES DURING THE YEAR ENDED DECEMBER 31, 2017:
Comprehensive income (loss)		-			-		-		(341)		-		(4,408)					(4,749)
Share based compensation		-			-		272		-		-		-					272
Exercise of options		19,584			7		190		-		-		-					197
BALANCE AT DECEMBER 31, 2018		9,122,501			$            2,809		$       65,535		$            (206)		$            (2,088)		$            18,244					$            84,294
CHANGES DURING THE YEAR ENDED DECEMBER 31, 2018:
Comprehensive income		-			-		-		232		-		806					1,038
Share based compensation		-			-		38		-		-		-					38
BALANCE AT DECEMBER 31, 2019		9,149,169			$            2,809		$       65,573		$            26		$            (2,088)		$            19,050					$            85,370
CHANGES DURING THE YEAR ENDED DECEMBER 31, 2019:
Comprehensive income (loss)		-			-		-		102		-		(5,329)					(5,227)
Share based compensation		-			-		138		-		-		-					138
BALANCE AT DECEMBER 31, 2020		9,149,169			$            2,809		$       65,711		$            128		$            (2,088)		13,721					$            80,281

 

 

 

TAT TECHNOLOGIES AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
		Year ended December 31,
		2020		2019(*)		2018(*)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)		$      (5,329)		$      806		$      (4,408)
Net income (loss) from continued operations		(3,484)		1,461		(3,928)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		4,065		4,292		4,065
Loss on sale of property, plant and equipment		-		-		-
Loss (gain) from change in fair value of derivatives		(34)		(311)		382
Non cash finance expense		566		354		-
Change in provision for doubtful accounts		(8)		38		(347)
Share in results of affiliated companies		185		132		140
Share based compensation		138		38		272
Liability in respect of employee rights upon retirement		(341)		(897)		(587)
Impairment of intangible assets		298		-		-
Deferred income taxes, net		(1,438)		(450)		(102)
Changes in operating assets and liabilities:
Decrease (increase) in trade accounts receivable		9,472		(2,037)		6,477
Decrease (increase) in other current assets and prepaid expenses		310		2,500		(1,575)
Decrease (increase) in inventory		1,868		(5,740)		381
Increase (decrease) in trade accounts payable		(5,336)		3,349		(1,137)
Increase (decrease) in accrued expenses		(252)		982		(1,920)
Increase (decrease) in other long-term liabilities		(62)		(118)		34
Net cash provided by operating activities from continued operation		$      5,947		$      3,593		$      2,155
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in affiliated company		-		(10)		(26)
Funds in respect of employee rights upon retirement		-		-		(22)
Proceeds from sale of property and equipment		-		-		7
Purchase of property and equipment		(3,894)		(3,269)		(4,270)
Purchase of intangible assets		(1,513)		-		-
Maturities of deposits		-		-		470
Net cash used in continued investing activities		$   (5,407)		$   (3,279)		$   (3,841)

 

 

			Year ended December 31,
			2020			2019(*)			2018(*)
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term credit received from banks			3,960			-			-
Proceeds from long-term loans received			3,692
Exercise of options			-			-			197
Net cash provided by continued financing activities			7,652			-			197
CASH FLOWS FROM DISCONTINUED ACTIVITIES:
Net loss from discontinued operation			(1,845)			$   (655)			$   (480)
Net cash provided by operating activities			1,998			484			405
Net cash used in investing activities			-			(134)			-
Net cash provided by (used in) discontinued activities			153			$   (305)			(75)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH			8,345			9			(1,564)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR			15,959			15,950			17,514
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF YEAR			24,304			15,959			15,950
SUPPLEMENTARY INFORMATION ON INVESTING ACTIVITIES NOT INVOLVING CASH FLOW:
Purchase of property, plant and equipment on credit		$           6,575				$           942				$           523
Additions of operating lease right-of-use assets and operating lease liabilities		$           1,756				$           648				-
Supplemental disclosure of cash flow information:
Interest paid		$          (3)				$          (28)				$          (10)
Income taxes received (paid), net		$          (3)				$           673				$     (1,087)

 

 

 

TAT TECHNOLOGIES AND ITS SUBSIDIARIES
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA (NON-GAAP)  (UNAUDITED)
(In thousands)
	December 31,		December 31,
	2020		2019 (*)
	(audited)		(audited)
Net income (loss)	$                   (5,329)		$                        806
Adjustments:
Share in results of equity investment of affiliated companies	185		132
Taxes on income (tax benefit)	(1,517)		589
Financial expenses, net	770		422
Other expenses	315		-
Depreciation and amortization	4,259		4,394
Net loss from discontinued operation	1,845		655
Share base compensation	138		38
Exit and disposal activity	450		-
Adjusted EBITDA	1,116		7,036

 

*Reclassified due to discontinued operation

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.

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

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SOURCE TAT Technologies Ltd

FAQ

What were TAT Technologies' total revenues for 2020?

TAT Technologies reported total revenues of $75.3 million for the twelve months ended December 31, 2020.

How much did TAT Technologies' gross profit decline in 2020?

TAT Technologies' gross profit declined by 44.8%, totaling $8.4 million for 2020.

What was TAT Technologies' net loss in 2020?

TAT Technologies reported a GAAP net loss of $3.5 million from continued operations for 2020.

What strategic agreements did TAT Technologies enter into in 2020?

TAT Technologies signed two strategic agreements with Honeywell related to MRO services for APU 331-200 and APU 331-500.

What is TAT Technologies' outlook following the Honeywell agreements?

TAT expects to generate significant business and revenues from its strategic agreements with Honeywell as the industry recovers from COVID-19.