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TAT Technologies Reports Year 2011 Third Quarter Results

GEDERA, Israel, November 29, 2011 /PRNewswire/ --

TAT Technologies Ltd. (NASDAQ: TATT), a leading provider of services and products to the commercial and military aerospace and ground defense industries, reported today its results for the three month and nine month periods ended September 30, 2011.

Financial Highlights:

TAT announced revenues of $20.7 million and a net loss of $3.3 million for the three months ended September 30, 2011, compared to revenues of $18.9 million with net loss of $5.1 million for the three months ended September 30, 2010 - an increase of  9.4% in revenues. The net loss reported for 2011 third quarter is the result of a non-recurring $5.76 million write down of inventories and impairment charges of long lived assets, $5.46 of which were in TAT's MRO Services for Aviation Components operating segment. Excluding these non-recurring charges net profit  for 2011 third quarter  was  $0.4   million.

During the Third quarter of 2011, revenues were impacted by (i) the increase in revenues in the OEM of Heat Management Solutions segment; (ii) the increase in revenues in the Heat Transfer Services and Products segment; (iii) the increase in revenues in the MRO Services for Aviation Components segment; (iv) partially offset by the decrease in revenues in the OEM of Electric Motion Systems segment.  

Revenue breakdown by the principal operational segments for the three-month and nine month periods ended September 30, 2011 and 2010, respectively, was as follows:

                             Three Months Ended September 30,
                                                                            % of
                                                                           Change
                                                                           Between
                            2011                        2010               Periods
                    Revenues         % of       Revenues         % of
                       in           Total          in           Total
                   Thousands       Revenues    Thousands       Revenues
                          unaudited                   Unaudited
    Revenues
    OEM of Heat
    Management
    Solutions     $      7,619         36.8 % $      6,437         34.0 %     18.4 %
    Heat
    Transfer
    Services and
    Products *           6,892         33.3 %        6,388         33.8 %      7.9 %
    MRO services
    for Aviation
    Components *         5,019         24.2 %        4,091         21.6 %     22.7 %
    OEM of
    Electric
    Motion
    Systems              2,027          9.8 %        2,949         15.6 %   (31.3) %
    Eliminations         (847)        (4.1) %        (943)        (5.0) %   (10.2) %
    Total
    revenues      $     20,710        100.0 % $     18,922        100.0 %      9.4 %
                              Nine Months Ended September 30,
                                                                            % of
                                                                           Change
                                                                           Between
                            2011                        2010               Periods
                    Revenues         % of       Revenues         % of
                       in           Total          in           Total
                   Thousands       Revenues    Thousands       Revenues
                          unaudited                   Unaudited
    Revenues
    OEM of Heat
    Management
    Solutions     $     21,596         34.8 % $     20,630         36.9 %      4.7 %
    Heat
    Transfer
    Services and
    Products *          19,965         32.2 %       17,597         31.5 %     13.5 %
    MRO services
    for Aviation
    Components *        14,803         23.9 %       11,701         20.9 %     26.5 %
    OEM of
    Electric
    Motion
    Systems              8,555         13.8 %        8,566         15.3 %    (0.1) %
    Eliminations       (2,912)        (4.7) %      (2,556)        (4.6) %     13.9 %
    Total
    revenues      $     62,007        100.0 % $     55,938        100.0 %     10.8 %

*  As of January 1, 2011,  TAT  began reporting its operations based on four operating segments, after dividing its MRO Services operating segment into two separate segments: Heat Transfer Services and Products and MRO services for Aviation Components. Accordingly, the revenues and costs reported for the three months and nine months periods ended September 30, 2010 for MRO Services operating segment were divided between these two new operating segments. Additionally, the operating segment name of 'OEM of Heat Transfer Products' was changed to 'OEM of Heat Management Solutions'.

For the nine months ended September 30, 2011, TAT announced revenues of $62 million with net loss of $1.1 million compared to revenues of $56 million with net loss of $4.3 million for the nine months ended September 30, 2010 - an increase of 10.8% in revenues. The net loss reported in 2011 third quarter is the result of a non-recurring write down of inventories and impairment charges of long lived assets recorded in the third quarter of 2011. Excluding these non-recurring charges net profit for the period was $2.5 million (see further below under "write down of inventory and impairment of intangible assets").

During the nine months ended September 30, 2011, revenues were impacted by (i) the increase in revenues in the Heat Transfer Services and Products segment; (ii) the increase in revenues in the MRO Services for Aviation Components segment; and (iii) the increase in revenues in the OEM of Heat Management Solutions segment. Revenues in the OEM of Electric Motion Systems segment for the nine months ended September 30, 2011 were similar to  the nine months ended September 30, 2010 however gradually during 2011 this segment experienced a gradual decrease in revenues due to weakness in the relevant markets.  

Write down of inventory and impairment  charges  of  long lived assets:

During the quarter ended September 30, 2011, the Company recorded a write down of inventory in the amount of $2.5 million (before off-set of taxes) under cost of revenues, attributable to inventory of the MRO for Aviation Components operating segment. The write down was due to management's estimation of the continued decline in future forecasted sales levels and profitability margins in certain product lines in this operating segment resulting from the weakness in these areas of business.

Although revenues in the MRO for Aviation Components operating segment have increased in the three and nine month periods of year 2011 compared to year 2010, profit margines were lower than anticipated. Accordinglly, the Company reviewed the MRO for Aviation Components' long lived assets for impairment by estimating the fair value of this segment's operations and the fair value of its specific long lived assets, and comparing those values to the carrying value of the assets. The Company concluded, based on this valuation, that certain fixed assets and intangible asset amount to $1.9 million and $1.1 million, respectively at its MRO for Aviation Components operating segment were impaired and that the intangible asset 'Customer Relations' at its OEM of Electric Motion Systems operating segment amount to $0.3 million was impaired. Accordingly, the Company recorded a $3.3 (before off-set of taxes) million impairment charge during the quarter ended September 30, 2011 to reflect the fair value of those long lived assets.

Dr. Shmuel Fledel, TAT's CEO commented:  

"The results of the third quarter were impacted by nonrecurring, write down of inventories and impairment charges of long lived assets. Excluding these charges, the third quarter of 2011 shows the continuation of TAT's improving trend in our dominant operating segments - the OEM of Heat Management Solutions and Heat Transfer Services and Products where during the quarter we increased our revenues and improved our margins, compared to the same period in 2010.   The third quarter also shows improved results in our MRO for Aviation Components operating segment where we successfully increased our revenues while significantly reducing operating loss on a 'Year to Date' basis. These improvements are attributable to the efforts we made during 2010 and 2011 in expanding our marketing and sales activities as well as in working rigorously to improve our production flow and yields.

During the second and the third quarters we experienced a decrease in revenues and margins in the OEM of Electric Motion Systems compared to the same periods in 2010, resulting from growing weakness in this segment, although on a 'Year to Date' basis, revenues were stable compared with the same period in 2010.

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