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TAT Technologies Reports Year 2012 Second Quarter Results

GEDERA, Israel, August 23, 2012 /PRNewswire/ --

TAT Technologies Ltd. (NASDAQ: TATT - News), 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 six month periods ended June 30, 2012.

Financial Highlights:

TAT announced revenues of $22.1 million with a net loss of $4.2 million for the three months ended June 30, 2012, compared to revenues of $19.9 million with a net income of $0.6 million for the three months ended June 30, 2011 - an increase of 11.2% in revenues. The net loss reported for 2012 second quarter is the result of a $1.0 million impairment charge of goodwill in TAT's OEM for Electric Motion Systems operating segment and a $3.3 million impairment charge with respect to TAT's investment in First Aviation Services Inc. ("FAvS", see further below). Excluding the impairment charges net profit for 2012 second quarter was $0.1 million.

During the Second quarter of 2012, revenues were impacted by the increase in revenues in all significant operating segments - the OEM of Heat Management Solutions segment; the Heat Transfer Services and Products segment and the MRO Services for Aviation Components segment; while revenues in the OEM of Electric Motion Systems decreased due to growing weakness in the relevant defense markets. This decrease is a continuation of the decrease in revenues this segment had experienced during 2011.

Revenue breakdown by operating segments for the three month and six month periods ended June 30, 2012 and 2011, respectively, was as follows:

                             Three Months Ended June 30,
                                                                     % of
                                                                    Change
                                                                    Between
                           2012                     2011            Periods
                  Revenues        % of     Revenues        % of
                     in          Total        in          Total
                  Thousands     Revenues   Thousands     Revenues
                        Unaudited                Unaudited
    Revenues
    OEM of Heat
    Management
    Solutions       $ 7,036        31.8%     $ 6,337        31.8%     11.0%
    Heat
    Transfer
    Services and
    Products          7,104        32.1%       6,606        33.2%      7.5%
    MRO services
    for Aviation
    Components        5,636        25.5%       4,985        25.1%     13.1%
    OEM of
    Electric
    Motion
    Systems           2,677        12.1%       2,958        14.9%    (9.5)%
    Eliminations      (326)       (1.5)%       (992)       (5.0)%   (67.1)%
    Total
    revenues       $ 22,127       100.0%    $ 19,894       100.0%     11.2%
                              Six Months Ended June 30,
                                                                     % of
                                                                    Change
                                                                    Between
                           2012                     2011            Periods
                  Revenues        % of     Revenues        % of
                     in          Total        in          Total
                  Thousands     Revenues   Thousands     Revenues
                        Unaudited                Unaudited
    Revenues
    OEM of Heat
    Management
    Solutions      $ 14,720        34.4%    $ 13,977        33.8%      5.3%
    Heat
    Transfer
    Services and
    Products         13,887        32.4%      13,073        31.7%      6.2%
    MRO services
    for Aviation
    Components       10,639        24.9%       9,784        23.7%      8.7%
    OEM of
    Electric
    Motion
    Systems           4,479        10.5%       6,528        15.8%   (31.4)%
    Eliminations      (921)       (2.2)%     (2,065)       (5.0)%   (55.4)%
    Total
    revenues       $ 42,804       100.0%    $ 41,297       100.0%      3.6%

For the six months ended June 30, 2012, TAT announced revenues of $42.8 million with a net loss of $3.6 million compared to revenues of $41.3 million with a net income of $2.1 million for the six months ended June 30, 2011 - an increase of 3.6% in revenues. The net loss reported for the six month period ended June 30, 2012 is the result of the above mentioned $1.0 million impairment charge of goodwill in TAT's OEM for Electric Motion Systems operating segment and the $3.3 million impairment charge with respect to TAT's investment in FAvS (see further below). Excluding the impairment charges net profit for 2012 period was $0.7 million.

During the six months ended June 30, 2012, revenues were impacted by the increase in revenues in all our significant operating segments - the OEM of Heat Management Solutions segment, the Heat Transfer Services and Products segment and the MRO Services for Aviation Components segment; while revenues in the OEM of Electric Motion Systems significantly decreased due to growing weakness in the relevant defense markets. As mentioned above, this decrease is a continuation of the decrease in revenues this segment had experienced during 2011.

Impairment of goodwill:

While the Company performs its annual impairment test in September each year, or more frequently when events and circumstances indicate that impairment may have occurred, during the quarter ended June 30, 2012, management believed that there were indicators of impairment of goodwill in its OEM of Electric Motion System operating segment as of June 30, 2012, primarily due to a decline in future forecasted sales levels and profitability margins resulting from the continued weakness in the defense industry. Accordingly, the Company performed an impairment test of goodwill for this operating segment, with the assistance of a third party valuation. Based on the results of this test, the Company determined that the entire balance of goodwill included in this operating segment was impaired and recorded an impairment charge of $1.0 million.

Investment in FAvS:

In June, 2012, FAvS entered into a transaction with its controlling stockholder, Aaron Hollander ("Hollander"), pursuant to which FAvS borrowed $3 million from Hollander, secured by a third lien on the assets of FAvS. The loan bears interest at 10% and in addition Hollander was issued warrants to purchase shares of Class A Common Stock of FAvS, representing 15% of FAvS post-exercise shareholders' equity, at an exercise price of $7.00 per share.

Pursuant to the terms and conditions of the transaction, management believed that there were indicators of impairment with respect to TAT's investment in FAvS. Accordingly, the Company performed an impairment test of its investment in FAvS, with the assistance of a third party valuation. Based on the results of this test the Company determined that its investment in FAvS was impaired by $3.3 million. The impairment was due to a decline in FAvS' profitability margins and future forecasted sales levels.

Mr. Itsik Maaravi, TAT's CEO commented:  

"The results of 2012 second quarter reflect the continuation of the improving trend, Quarter over Quarter and from the previous quarter, in our most significant operating segments - the OEM of Heat Management Solutions and Heat Transfer Services and Products, as well as in our MRO for Aviation Components operating segment.  In each of these segments we continued to increase revenues and gross margins compared to the second quarter of 2011 and the first half of 2011. These improvements are attributable to the increase in our marketing and sales activities during 2010 and 2011 as well as to our rigorous and continuing activity to improve our production flow and yields.

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